U.S. Environmental Protection Agency (EPA) Administrator Lisa Jackson signed a notice on November 16, 2012, declining to waive the renewable fuel standard (RFS) established under the Clean Air Act. The action came in response to petitions filed by five states and several other entities asserting that the recent drought, combined with a federally mandated requirement for ethanol use, was affecting state economies by making feed corn for livestock unduly expensive. According to the notice, EPA can waive the minimum renewable fuel standards when “implementation of the RFS volume requirements would severely harm the economy of a State, a region or the United States.”
Using an Iowa State University model, EPA determined that it was unlikely that waiving the RFS would reduce ethanol production and thus that a waiver would not likely affect corn prices. EPA said that in only 11 percent of its modeled scenarios were corn prices affected, and the average impact in those scenarios was about 58 cents per bushel. The overall average modeled price change was 7 cents per bushel, when the modeled scenarios in which no change occurred were included. EPA calculated that the impact of either a 7-cent or 58-cent price reduction would yield a 0.04 percent to 0.35 percent decrease in the food consumer price index, with an average per household food expenditure reduction of between $2.59 and $22.68 in 2012/2013. Concluding that this did not constitute a threat of severe harm to any state’s or region’s economy, EPA denied the waiver requests.