Why We Need a Strong Renewable Fuel Standard

by | Apr 28, 2011

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Politicians and consumers alike are expressing surprise that oil has topped $100 a barrel and stayed there. But they shouldn’t. A median line drawn through oil price changes over the past two decades points directly at $100 per barrel. Energy prices have been steadily pushed higher by countries competing for resources to fuel growing economies and increasing consumer demand. Oil’s deceptively low price in 2009 came only after the longest economic recession since the end of World War II.

Continued reliance on petroleum threatens our economic, energy and national security. We need to follow through on the national goal of reducing reliance on oil – particularly in transportation – and for that we need biofuels. In short, the United States must remain committed to the Renewable Fuel Standard (RFS) because it provides the guiding policy and necessary support for the industry to begin bringing innovative new technologies for advanced and cellulosic biofuels to the marketplace.

Energy security is imperative for new jobs and economic growth. Uncertainty over future energy supplies and prices can undermine businesses’ confidence in making the investments needed for growth and job creation, significantly hampering continued recovery from the recent recession. High oil prices could also undermine the buying confidence of consumers forced to spend more of their paychecks at the pump, fueling a downward spiral of business confidence in growth.

The United States must hurry the future in developing alternatives to oil use in transportation. It’s unlikely that the free market by itself can direct the resources needed to commercialize vital and innovative new technologies without a consistent, forward-looking federal policy as a guide. A recent study in the journal Environmental Science & Technology shows that it could take 131 years for alternatives to fully displace oil if we rely solely on the free market. Global oil would run out years before alternatives are fully developed, the study authors show.

Cellulosic and advanced biofuels can in the near future increase energy security, provide economic development opportunities, and reduce greenhouse gas emissions. A study by Bio Economic Research Associates, “U.S. Economic Impact of Advanced Biofuels Production: Perspectives to 2030,” shows that building advanced biofuel biorefineries could create hundreds of thousands of new jobs throughout the economy. The direct annual contribution to U.S. economic growth could reach $37 billion by 2022.

The RFS is the consistent, forward-looking energy policy needed to expand the market for advanced and cellulosic biofuels and give clear signals to companies and investors that innovative technologies will have every opportunity to succeed. The Environmental Protection Agency’s careful implementation of the standard provides assurance that these biofuels will be used in the transportation fuel market. It also provides price certainty to motivate investment in cellulosic biofuels.

The RFS has been very successful at spurring innovation. The advanced biofuels industry has made significant progress in bringing technology to the point of commercial-scale development. The key missing ingredient has been the financing required to build new, large-scale biofuel production facilities. Every company has been hard pressed to secure investments and loans during the recession. But with the RFS in place, advanced biofuel companies have made significant investments, starting or planning more than 70 advanced and cellulosic biorefineries across the United States. The industry is growing at a rate faster than many predicted it would, and the technology developments will be on full display at BIO’s upcoming World Congress on Industrial Biotechnology and Bioprocessing, in Toronto, May 8-11.

Because competition for tight supplies in worldwide oil markets is expected to continue, cellulosic and advanced biofuels can offer investors a more certain return. Crude oil prices are projected to continue an upward trajectory through 2035, according to the U.S. Energy Information Administration (EIA). On the other hand, continued innovation in cellulosic and advanced biofuels will drive their costs down.

Advanced biofuels can protect us from future oil price shocks, which promise to get worse over time. Enduring federal commitment to the RFS is vital to driving private investment toward research, development and deployment of innovative new technologies. Congress and the Obama administration must maintain the RFS to help turn innovation into solid economic and energy achievements.

Brent Erickson is Executive Vice President of Biotechnology Industry Organization’s Industrial & Environmental section.

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