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PwC: Fuel Standard Could Cost Restaurants Billions

The use of corn-based ethanol required by the federal Renewable Fuel Standard mandate has dramatically distorted the market and increased costs throughout the food supply chain to the tune of billions of dollars, according a report by PricewaterhouseCoopers, for the National Council of Chain Restaurants.

NCCR commissioned PwC to study the potential cost and economic impact of the RFS, which requires ethanol to be blended into gasoline, on the chain restaurant industry. In Federal Ethanol Policies and Chain Restaurant Food Costs, PwC estimated the impact under several scenarios and concluded that the RFS mandate could cost chain restaurants up to $3.2 billion annually, with quick-service restaurants witnessing cost increases upward of $2.5 billion, and full-service restaurants seeing increases upward of $691 million.

“The RFS mandate artificially inflates the price of corn, which increases costs throughout the system, from cattlemen and poultry and pork producers to dairy farmers and restaurant operators,” NCCR executive director Rob Green said. One owner of a four-unit Wendy’s franchise estimates that the mandate is costing him $20,000 to $30,000 per restaurant, according to the NCCR.

However, Brent Erickson, executive vice president of the Biotechnology Industry Organization’s industrial and environmental section, said that the NCCR report ignores a recent EPA study in which 89 percent of 500 modeled scenarios found that the law had no impact on demand for ethanol and by extension corn and food prices. The EPA said that the other 11 percent of scenarios were both “very unlikely” and small, Erickson said.

Earlier this month, the EPA rejected requests to waive the federal RFS, effectively disagreeing with states and industry groups that argued the mandate was pushing up corn prices following a catastrophic drought that ruined crops in the Midwest. The agency, which based its decision on economic analyses and modeling done in conjunction with the US Department of Agriculture and Department of Energy, concluded the mandate would not cause severe economic harm. An analysis with the USDA showed that, on average, waiving the Renewable Fuel Standard would only reduce corn prices by about one percent.

A report released by Environmental Entrepreneurs in September showed that biofuel production capacity increased from 437 million gallons in 2011 to more than 685 million gallons in 2012. By 2015, the industry has the potential to produce 1.6 billion to 2.6 billion gallons of renewable fuel, the report forecasts.

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3 thoughts on “PwC: Fuel Standard Could Cost Restaurants Billions

  1. More bad news for those of you who eat food.
    Did you know that it takes over 1,400 gal of fresh water to produce just one gal of ethanol used for fuel?
    More than 1 gal of diesel, plus natural gas to distill the mash multiple times, to make one gal of ethanol?
    It takes more energy than it contains, to ship ethanol to CA?
    Ethanol reduces mpg by over 17% vs gasoline.
    Ethanol produces aldehydes when burned, which cause cancer.
    Keep up the good work.

  2. California CARB fuel was close to zero ethanol in our fuel in 1992..

    1992 fuel price about $1.40 per gallon.

    Ethanol push from fed EPA and friends pushed ethanol to 5.6% and we paid more for our fuel.

    Fed EPA and Big oil refiners pushed the oxygenate to 10% and we paid more.

    Now BP GMO fuel is pushing for over $1.00 in corporate welfare with 15% of the fuel market while cutting back Oil and refining

    Will BP GMO fuel patents generate credit trade income from the Big oil industry with the Queen Mother help.

    The Queen banker friends may want a share.

    So. how big does California ethanol bill need to be to qualify for the EPA waiver?

    Can Mary Nichols and Governor Brown support a BP GMO fuel ethanol waiver? Motorcycle, Classic car, Lawn tool engines, Boat, & the beef just might like a choice of fuel ethanol opinion, a waiver. Can Governor Brown use the 10th amendment to support California Waiver.

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