Today, the USDA has released an updated version of its report, “Effects of Increased Biofuels on the U.S. Economy in 2022,” The report examines how meeting the RFS2 would affect various key components of the U.S. economy. What is not debated is that the rise in biofuel production using cost-savings technologies, along with petroleum price increases, will bring about benefits for the economy. However, the report notes that actual benefits (or costs) to the U.S. economy very much depends on future oil prices and the future of tax credits. Should oil prices stabilize, or even decrease from current levels and should the tax credits continue, then benefits to the economy would diminish.
More specifically the study examines the potential effects of the RFS-2 on the U.S. economy as measured by gross domestic product (GDP), household income and consumption, price and quantity of energy fuels, and agricultural production and trade. The researches compare the U.S. economy in 2022 with and without the RFS2.
Overall the study findings were positive. The report concludes, “If biofuel production technology advances and petroleum prices continue to rise as projected, the RFS-2 could benefit the U.S. economy. U.S. household consumption would rise because of higher real wages, increased household income, and lower import prices. By substituting domestic biofuels for imported petroleum, the United States would pay less for imports overall and receive higher prices for exports, providing a gain for the economy from favorable terms of trade. Improved technology and increased investment would enhance the ability of the U.S. economy to expand.”
Click here to download a full copy of the report.