Renewable Fuel Standard Waiver Options During the Drought of 2012

The Environmental Protection Agency is under pressure from livestock groups and some rural lawmakers to suspend the federal ethanol mandate to offset the impact of this year's severe drought. (Read the Harvest Public Media story "Livestock producers want less corn in your gas.")

Now, a new report from the Food and Agricultural Policy Research Institute  (FAPRI) at the University of Missouri estimates the effects of a waiver on agricultural and biofuel markets. It's a rather complicated picture filled with caveats. But in summary, FAPRI says:

* The effects of a 2012-13 mandate waiver might be greater in 2013-14 than in the year of the waiver. Rising mandates, combined with blend-wall limitations on ethanol expansion, suggest that the mandates will tend to become increasingly binding over time.

* Lack of information regarding RINs -- which are generated when biofuels are blended for domestic use, and are used by blenders to prove that they meet mandates -- complicates projections. 

* Trade can offset some impacts of various waiver options.  For example, if the U.S. imports less ethanol (because of a waiver of the advanced mandate), then world price is lower and the U.S. is likely to export less conventional ethanol.