Its introduction came on the heels of the Democrats retaking control of Congress and they left their mark on the revised mandate by tying participation of biofuel pathways to specific greenhouse gas emission reduction thresholds relative to gasoline, thereby introducing an environmental protection component to the mandate.
President Bush signed the bill containing the RFS2 into law at the end of the year.
While I left a short answer in the comments to that article, the mandate's importance to the future prospects of the entire corn ethanol industry merits a more detailed consideration of how the industry could be expected to fare under such a political scenario.A withdrawal of government support would have a large impact on both diversified producers such as ADM (NYSE: ADM) and Valero (NYSE: VLO) and independents such as Green Plains, Inc., Pacific Ethanol (NASDAQ: PEIX), and REX American Resources (NYSE: REX).For example, SA contributor Dirk Leach asked: Have you considered that a Republican Congress and potentially a Republican administration in 2017 might undo the ethanol subsidies and fuel mandate.The idea to use corn for fuel was born a long time ago when we thought oil was getting scarce and oil was expensive.Ethanol consumption leaped in subsequent years as blenders rapidly turned to it as an alternative fuel oxygenate and MTBE replacement.
Consumption increased so quickly, in fact, that the original Renewable Fuel Standard [RFS1], which Congress had also passed in 2005 as a response to concerns over consumption of Middle Eastern petroleum and contained an escalating ethanol blending mandate, was obsolete almost immediately following its creation (see figure). In 2007, Congress began work on a successor to the RFS1 that is now known as the revised Renewable Fuel Standard [RFS2].Most of the co-authors on the aforementioned paper published a subsequent analysis of biofuel-induced deforestation and found their original deforestation result to be very sensitive to several poorly-quantified assumptions.Most importantly, the observational data has contrasted sharply with the prediction: Brazilian deforestation has fallen by 83% since 2004 even as U. corn ethanol production has increased by more than 200% over the same period (see figure).In addition to the environmental protection component, the RFS2 was also notable in that it contained large increases to the required blending volumes but capped corn ethanol's contribution at 15 billion gallons beginning in 2015.Almost immediately the new mandate ran into strong opposition from environmentalists.Today's ethanol industry has been largely shaped by U. legislation at the federal level and, as such, a negative policy environment would likely result in substantial losses to shareholders. ethanol policy came of age under the administration of President George W. In 2004, the state of California banned the use of methyl tertiary butyl ether [MTBE] as a fuel oxygenate due to concerns that it was leaching from fuel tanks and contaminating drinking water supplies.