The Environmental Protection Agency (EPA) cannot impose a mandate for a non-existent product and then punish companies for failing to use said non-existent product, the U.S. Court of Appeals for the D.C. Circuit ruled.
That non-existent product? Cellulosic biofuels, a type of ethanol made from non-food sources such as wood chips, switchgrass, and non-edible feedstock.
The court ruled that the EPA can set renewable fuel production standards as a means to stimulate economic development, but it cannot punish companies who fail to meet those standards.
“Do a good job, cellulosic fuel producers. If you fail, we’ll fine your customers,” the judges wrote.
In 2007, the EPA mandated that 250 million gallons of cellulosic biofuels be produced in 2011 and 500 million gallons in 2012. The problem was that no company could make the product commercially viable, so the EPA lowered its 2012 goal to 8.65 million gallons. Even that didn’t help, because absolutely zero gallons were produced in 2010 and 2011. Companies did manage to produce 22,000 gallons in 2012, but that still meant it was commercially non-existent.
The lack of a product forced the oil industry to pay fines of more than $6 million for failing to use the non-existent biofuels. As you can imagine, this cost was then passed on to consumers.
The mandate was supposed to spur investment in the cellulosic biofuels industry, but as Heritage’s Nick Loris points out:
The fact that cellulosic [biofuel] production is nowhere near providing industrial-scale quantities of fuel demonstrates the government’s inability to determine what is commercially viable and beneficial for consumers.
It all goes back to the government thinking that it can pick winners and losers in the energy industry. It fails every time. The best course of action would be to remove mandates like the one for cellulosic biofuels and ethanol, as well as the energy-specific tax credits, and allow the market’s consumers to do what they do best—pick the most effective energy source.