New Study Touts Benefits of Renewable Fuels

December 6, 2001

The Renewable Fuels Association (RFA), National Corn Growers Association (NCGA), and National Biodiesel Board (NBB) have issued a new analysis of the economic and energy security impacts of implementing a renewable fuels standard (RFS) of 6.6 billion gallons by 2011, increasing to 8.8 billion gallons by 2016. The report claims that implementing an RFS will increase energy security, stimulate the U.S. economy and increase farm income.

"At a time when ‘energy security' and ‘economic stimuli' are objectives of the highest priority for our country, this new study clearly outlines that implementing an RFS will make great strides toward achieving both goals," said Bob Dinneen, president of the RFA. "The Congress is engaged in an important debate about how to stimulate our economy and reduce our growing dependence on imported oil. Implementing an RFS is a win-win on both issues. America's farmers are ready, willing, and able to provide a meaningful contribution toward our energy security."

The report, An Economic Analysis of Legislation for a Renewable Fuels Requirement for Highway Motor Fuels, was completed by economist John Urbanckuk, executive vice president of AUS Consultants. Urbanckuk studied the impact of increasing the renewable content of motor vehicle fuels (such as ethanol or biodiesel) from current levels to 4% by 2016. Implementing such an RFS would lead to the use of 5.8 billion gallons of ethanol in 2011 and 7.6 billion gallons of ethanol in 2016.

The report finds that crude oil imports would be reduced by 2.9 billion barrels by 2016 (an average of 302 million barrels annually). This would lower America's dependence on imported oil to 65%, compared to the 70% projected by the U.S. Department of Energy, in 2016.

Decreasing oil imports reduces the U.S. trade deficit by $63.4 billion through 2016. Also, 300,000 new U.S. jobs would be created by 2016, U.S. household income would increase $71 billion by 2016 and the demand for corn used to produce ethanol would increase from roughly 650 million bushels currently to 2.5 billion bushels in 2016. The demand for soybeans used to produce biodiesel would increase from 51 million bushels currently to 318 million bushels in 2016.

Corn prices would increase an average of 28 cents per bushel or 11.1% over the baseline, and soybean prices would increase an average of 68 cents per bushel or 11.8% over the baseline.

Net farm income would increase an average of $6.6 billion annually or 14.4% over the baseline, and direct government payments to farmers would be reduced by $7.8 billion through 2016.

"We have a real opportunity to stop the growth in imported energy," said Dinneen. "The ethanol industry is prepared to build on our growth of the last two years. We urge Congress to take this historic opportunity to enhance energy independence, boost farm income, and promote a renewable, clean-burning fuel - ethanol. We can no longer afford to blindly follow the failed policies of the past. Enacting a meaningful RFS is a bold step toward a better future."