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Great Achievements in Central Planning: Cellulosic Biofuel

Ezra Klein's Vox.com has inspired me to explain the world in one chart (see below).

Over the years, we’ve ridiculed Congress’s cellulosic biofuel mandates and associated penalties (for example, here and here) which were enacted as part of the Renewable Fuel Standard in 2007. Cellulosic biofuel is mostly ethanol sourced not from corn but from switchgrass, wood pellets and other non-food sources. Refiners who missed mandated targets of cellulosic biofuel were required to purchase credits to cover their shortfall. Effectively, it was a fine.

Problem was, cellulosic technology was slow to make it out of the lab and into commercial plants. As the Energy Information Administration has noted, biofuel production costs are higher than fossil fuels and market resistance is the same as ethanol from other sources. Back in 2010, when the EPA started levying its penalties, cellulosic ethanol was unavailable because no plants were producing it.

A court decision in early 2013 found the EPA mandate-setting process "did not take neutral aim at accuracy" and "was an unreasonable exercise of agency discretion." Forced by the court, the EPA reduced the 2013 target to 6 million gallons from the original 1.0 billion gallons. Just this week, the EPA retroactively reduced the 2013 mandates to the amount actually produced (810,185 gallons), effectively negating the penalty.

(For those keeping score, actual production for 2013 was a whopping 0.08% of the original goal. Or to put another perspective on 810,185 gallons, the U.S. consumes that volume of beer roughly every hour.)

The picture is even more ridiculous for 2014 (see chart). The original mandate called for production/consumption of 1.75 billion gallons. Since the court decision, the target has been cut to a still-quite-ridiculous 17 million gallons. Through the first quarter, actual production has been just 75,000 gallons; a neutral observer might agree that we have a way to go.

The target volume for 2022 is 16 billion gallons.

Cellulosic biofuel is a case of the Congress thinking it could create a market presence for a product by sheer force of will and legislation. Bad idea.

Cross-posted.

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