By Ron Paul, ,
Published November 29, 2017
President Trump and EPA Administrator Scott Pruitt will have an opportunity in coming weeks to increase manufacturing jobs and bolster U.S. exports by simply cutting back on the red tape of the Renewable Fuel Standard (RFS).
Although every source of energy – wind, solar, renewable, carbon-based and the rest – has a place on the market, the RFS includes a government-imposed requirement mandating that a specified amount of renewable fuels are mixed into at least 15 billion gallons of America's diesel fuel and gasoline annually.
Refiners blend ethanol made from corn into fuel to meet this RFS requirement, and as a result farmers who grow corn and politicians from corn-growing state support the RFS. More corn is produced in Iowa than any other state.
No one said that draining the swamp would be easy. While lobbyists and officials representing corn states have been fighting President Trump’s EPA every step of the way, I am still hopeful that the White House will make the decision that benefits the economy at large.
To satisfy Washington bureaucrats, refineries and distributors must either produce the mix of fuel containing ethanol on their own; purchase credits – called Renewable Identification Numbers (RINs) from someone who can blend it; or import renewables from overseas that qualify for RINs credits.
For the many who cannot afford to mix themselves, purchasing the RINs – "Big Brother Compliance Certificate" of sorts from another company – suffices. These smaller refineries are not buying a tangible product; rather, just the ability to comply with the RFS on their regulatory forms.
Since it is difficult to blend to meet the RFS's requirements, many small refiners at the mercy of large refiners. They must purchase RINs credits from them. The price of the credits constantly fluctuates.
A price hike of 200 percent came just from February to August. In many instances, the big winners from this policy are not corn farmers, but hedge fund managers. Sen. Ted Cruz, R-Texas, pointed out that "when RINs prices are highest, corn prices are often lowest," suggesting that RINs are the darling of Wall Street, not corn states.
Iowa Governor Kim Reynolds left for Texas on Nov. 14 – what she called "hostile territory" – to lobby for the removal of Sen. Cruz's hold on a Department of Agriculture nomination. Cruz promptly sent a letter to her clarifying his motives.
Cruz noted that he is far from an enemy of Iowa; he is just trying to look out for the long-term interests of the country, all while remaining open to finding a "mutually beneficial outcome."
While I am sure many Republicans would love to see the RFS repealed entirely – myself included – some have proposed a simple compromise that would seemingly benefit even the ethanol lobby: allow exported renewables made within our borders to count towards the RINs compliance system.
According to one columnist at US News, this amendment has the potential to increase U.S. exports by 1.2 gallons and create over 26,000 U.S. jobs, allowing "the U.S. to achieve its goal of 15 billion gallons of blended fuel in a way much more compatible with the free market."
It would shock me if this opportunity to beat back the RFS red tape did not at least intrigue the Trump administration. I support free trade, but there is a clear policy issue when a burdensome government mandate forces the country to prioritize foreign imports while shutting off many American exports artificially. That is exactly what is occurring under the current RINs program.
Some believe that members of the Trump administration fear amending the RFS would upset residents of Midwestern states. But contrary to what the ethanol lobby wants you to believe, it does not speak on behalf of any state.
For example, it is important to remember that like me, Sen. Cruz managed to win the Iowa presidential caucus because he convinced the Hawkeye State that less, not more, government intervention is the key to unleashing the economic growth needed to raise wages and boost employment.
The last few years have proven that wishy-washy politics do not play well with voters. Let’s hope the Trump administration does what is in the best interest of the American economy rather than entertain the bidding of a few politically well-connected special interests.