Calls from some lawmakers for the EPA to waive the Renewable Fuel Standard for the rest of 2012 “will not make it rain in Indiana or meaningfully lower corn prices,” said Renewable Fuels Association President and CEO Bob Dinneen.
“Calls to waive any or all of the the RFS from the livestock lobby, oil industry, or their allies in Congress are not only premature, but void of justification,” said Dinneen. “The RFS contains a great deal of flexibility allowing obligated parties to meet RFS requirements in a variety of ways other than blending physical gallons of ethanol. The market is taking advantage of this flexibility as domestic ethanol demand for corn has fallen nearly 15 percent and production has dropped in the last six weeks. Simply put, the RFS is working and knee-jerk reactions to acts of God will not provide the kind of relief some are seeking.”
According to academic research and RFA analysis, some 2.5 billion ethanol credits, known as Renewable Identification Numbers (RINs), are currently “in the bank.” These RINs were “banked” in years past as refiners used more ethanol than was required by the RFS. Should ethanol production be short this year, refiners can use these excess credits to show compliance with the RFS. By substituting paper RINs for physical gallons of ethanol, demand for corn by ethanol producers would fall.
“This year’s weather has been more than challenging for farmers and ranchers across the country. However, waiving the RFS will not make it rain in Indiana, bring pastures to life in the Plains, or meaningfully lower corn prices,” said Dinneen. “The pressure relief valves of the RFS are working today, easing demand for corn from ethanol while still allowing obligated parties to comply with RFS requirements. The fact of the matter is that grain will be produced – both here in the U.S. and across the globe. The question will be how much and ultimately the market will ration demand. Ethanol producers have been the first to respond to these market signals by reducing output.”