Renewable Fuel Standards Could Lead to $13 Billion Increase in Farm Income
Posted: 03-02-2010 : RESEARCH TRIANGLE PARK, N.C.

RESEARCH TRIANGLE PARK, N.C. — New renewable fuel standards could lead to more than $13 billion increase in net farm income, according to a new study by researchers at RTI International and Texas A&M University.

The study (titled RFS2 Final Rule Life Cycle Analysis Supplemental Materials), funded by the U.S. Environmental Protection Agency, analyzed the economic impacts of new EPA renewable fuels standards designed to lessen the United States' dependence on foreign oil and reduce greenhouse gas emissions (referred to as RFS2). The new standards require that, by 2022, transportation fuel sold in the United States must contain at least 36 billion gallons of renewable fuel.

According to the report, the renewable fuel standards will substantially increase farm income but will also increase consumers' food costs. Based on EPA calculations using study results, food costs would increase by an average of about $10 per person annually by 2022.

"The increased food costs associated with further expanding renewable fuels production to reach the volumes required under RFS2 are relatively small," said Robert Beach, Ph.D., senior economist in the Environmental, Technology and Energy Economics Program at RTI and the report's lead author. "Because the majority of the required production increase for renewable fuels will come from cellulosic feedstocks, like switchgrass and corn stalks, that have no competing use as food, there will be less of an impact on food costs than would increasing the use of corn or other starch or sugar-based feedstocks."

The report did note that there would be increases in the prices of key feedstocks for renewable fuels production such as corn and soybeans that are expected to affect livestock feed costs. U.S. exports of agricultural commodities are also expected to decline due to increased domestic demand and higher prices.

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