Antitrust gambit shows why biofuel mandates must end

Sept. 2, 2013
With a ludicrous antitrust initiative, US senators from Iowa and Minnesota show why the federal Renewable Fuels Standard (RFS) needs repeal instead of repair.

With a ludicrous antitrust initiative, US senators from Iowa and Minnesota show why the federal Renewable Fuels Standard (RFS) needs repeal instead of repair.

Successful repair requires an accurate assessment of the problem. Sens. Charles Grassley (R-Iowa) and Amy Klobuchar (D-Minn.) won't have any of that.

"Faced with growing competition from the new sources of fuel promoted by the RFS, the oil industry has publicly stated their goal of repealing the RFS," the senators said in a letter requesting investigations by the Department of Justice and Federal Trade Commission. "At the same time, we have heard reports that oil companies are taking steps to undermine the efforts to distribute renewable fuels that could help meet the RFS requirements."

To call this assessment inaccurate is charitable.

The oil industry's complaint isn't about competition. It's about the impossibility of complying with mandates that benefit only corn growers and distillers, of which Iowa and Minnesota have many.

A rising statutory requirement for corn-based ethanol in gasoline soon will exceed market capacity. A requirement for advanced biofuel far exceeds supply of the required material, mainly ethanol from cellulose.

Legislative adjustment of the mandates might seem in order. For two reasons, adjustment wouldn't solve the problem.

Self-interest dominates the politics of ethanol. For example, boosters of the fuel additive are pushing for an increase in the 10% blending limit to make room in the flat gasoline market. Manufacturers of small engines and most automakers oppose the move, fearful of damage to their products from fuel with elevated concentrations of alcohol. Oil companies know they'll receive blame if that happens.

That's not anticompetitive behavior. It's legitimate concern for consumer interests, something for which the ethanol industry and its political supporters never earn high marks.

The other reason mandate adjustment won't fix the broken program is that the very existence of mandates represents the central problem.

Mandates reward uneconomic opportunism, hurt consumers, and—as Grassley and Klobuchar show—debase politics. They need to end.