Specifically, the RFS is designed to reduce these emissions  by increasingly replacing petroleum-based fuels with biofuels that have  lower associated greenhouse gas emissions released throughout their  lifecycle. Types and Volumes of Biofuels to Be Blended under the RFS

The RFS established statutory requirements for the amount of biofuels  that must be blended into gasoline. Given  current production levels, most experts we interviewed told us that  advanced biofuel production cannot achieve the statutory targets of 21  billion gallons by 2022. The Missouri, Oregon, and Washington  mandates were put into effect in 2008. Available Evidence and Analysis Indicate That the RFS Was Likely Associated with Modest Gasoline Price Increases outside the Midwest and Modest Decreases within the Midwest

Evidence from studies, interviews with experts, and our analysis suggest  that the nationwide RFS was likely associated with modest price  increases outside of the Midwest. Likely variations in these gasoline price  effects depended, in part, on state-by-state variation in the costs to  transport and store ethanol. For example, the Midwest was already  producing and blending ethanol, so it had lower transportation costs and  had already built necessary storage infrastructure. These states incurred new transportation and storage  infrastructure costs, which likely resulted in higher gasoline prices  compared to those in the Midwest states or states that had not yet begun  to blend ethanol. Specifically,  the RFS may have (1) increased transportation and storage costs in  regions outside the Midwest, and, (2) caused an initial increase in refining  investment costs that over the long term reduced refining costs for  gasoline. Figure 2  illustrates U.S. ethanol production in 2005, before the RFS became  effective. In addition, the RFS may also have affected retail gasoline prices by  increasing storage costs in certain regions. We believe this is because once all locations  had made the infrastructure investments and most gasoline blendstock  produced was consistent with blending ethanol then there would be two  continuing effects: (1) the transportation and blending costs of ethanol,  which would tend to push retail prices higher and depend on the distance  traveled and the modes of transport, and (2) the lower cost of producing  lower octane blendstock. The former effect might dominate for locations  far from the production source of ethanol and for which more costly  modes of transport were used while the lower blendstock costs might  dominate for locations close to the production source of ethanol, those  that have low transportation costs, or both. Our Analysis of State Ethanol Mandates Also Found Gasoline Price Decreases in the Midwest and Increases Elsewhere

We studied the effects of ethanol blending mandates in the five states  that had such mandates prior to and including 2008; these mandates are  similar to but preceded the RFS ethanol blending mandates on retail  gasoline prices. Specifically, during  the period we studied, when the ethanol mandates in Minnesota and  Missouri were in effect, our model estimates that, all else remaining  equal, retail gasoline prices were lower by approximately 8 and 5 cents  per gallon in these states, respectively, than they would have been  without the mandates. By contrast, when the ethanol mandates in Hawaii,  Oregon, and Washington were in effect, our model estimates that, all else  remaining equal, retail gasoline prices were higher by approximately 8, 2,  and 6 cents per gallon in these states, respectively, than they would have  been without the mandates. The one peer-reviewed study we identified  that estimated the effects of the MTBE ban on gasoline prices found that  in locations required to blend ethanol because of state MTBE bans, retail  gasoline prices increased by 3 to 6 cents per gallon in non-Midwestern  states, with larger price increases during times of high ethanol prices  relative to crude oil prices. The RFS Has Likely Had a Limited Effect on Greenhouse Gas Emissions to Date and Is Unlikely to Meet Its Future Greenhouse Gas Emissions Reduction Goals

Most of the experts we interviewed generally agreed that to date the RFS  has likely had a limited effect, if any, on greenhouse gas emissions. Further, the RFS is unlikely to meet the greenhouse gas emissions  reduction goals envisioned for the program through 2022. Regarding meeting RFS greenhouse  gas emission reduction goals through 2022, as we reported previously,  although advanced biofuels, such as cellulosic ethanol, achieve greater  greenhouse gas reductions than conventional biofuels, such as corn- starch ethanol, the latter are likely to continue to account for most of the  biofuel blended into domestic transportation fuels under the RFS because  they are economical to produce while most advanced biofuels are not. The RFS’s reliance on corn-starch ethanol to fill biofuel mandates has  limited the ability of the RFS to reduce greenhouse gas emissions. Specifically, as we reported in November 2016, most of the biofuel  blended to date has been conventional corn-starch ethanol, which has a  smaller potential to achieve greenhouse gas reductions compared with  advanced biofuels. Furthermore, because the RFS has not been responsible for all of the  ethanol used in the United States since the program took effect, not all  greenhouse gas reductions associated with ethanol use have been the  result of the RFS. Historical Prices of RINs, Concerns regarding Their Effects on Fuel Prices, and EPA’s Actions to Mitigate These Concerns

As mentioned previously, EPA uses RINs to regulate compliance with the  RFS. Historical RIN Prices

In our March 2014 report on petroleum refining, we noted that the RFS  had increased compliance costs for the domestic petroleum refining  industry or individual refiners. We reported that, according to the U.S.  Energy Information Administration, corn-based ethanol RIN prices were  low—from 1 to 5 cents per gallon from 2006 through much of 2012— because it was generally economical to blend up to or above the level  that the RFS required. However, in 2013, prices for these RINs increased  to over $1.40 per gallon in July before declining to about 20 cents per  gallon as of mid-November. Since our March 2014 report, corn-starch ethanol RIN prices have  experienced periods of volatility. All three experts  stated that if RINs have any effect on prices it is small, while two of those  experts also asserted that it was possible that RINs had no effect on  prices at all. For retail  gasoline, EPA made the same argument as experts and stakeholders  cited above. Our past work, as well as EPA  analysis, has identified several issues of concern with RINs, including  possible fraud in the market and concerns about the effect on small  refiners, price volatility, and the point of obligation. Agency Comments and Our Evaluation

We provided a draft of this report to the Departments of Agriculture and  Energy, and to the Environmental Protection Agency, for review and  comment. First, USDA disagreed with GAO’s conclusion that the RFS has had a  limited effect, if any, on reducing greenhouse gas emissions. The objective of our work was to  address the effect to date on greenhouse gas emissions that has been  specifically attributable to the RFS, not whether blending ethanol into the  nation’s fuel supply has effects on greenhouse gas emissions. We report  that the RFS is not the only reason that ethanol is used in the fuel supply,  and that ethanol would have been produced and used in the United  States, even without the RFS. Second, USDA criticized our methodology, which reported experts’ views  on the effect of the RFS on greenhouse gas emissions. More specifically, we reviewed much of the literature on this subject, and  used the literature, along with referrals from other experts and  recommendations from the National Academy of Sciences for prior GAO  work, to assist in selecting experts whose expertise included knowledge  of the relevant and most recent research on the issue. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: Lists of Experts GAO Interviewed

To determine what is known about the effect that the Renewable Fuel  Standard (RFS) has had to date on 1) retail gasoline prices in the United  States and 2) greenhouse gas emissions, we conducted semistructured  interviews with 18 experts with expertise on these topics. Econometric Model

In order to develop evidence of the likely effects of the Renewable Fuel  Standard (RFS) on the incremental adoption of ethanol blending by states  as RFS targets grew, we developed an econometric model to analyze the  effect state ethanol mandates on retail gasoline prices. Hence, below, we examine instead  the (incremental) effect on state-level retail gasoline prices of state  ethanol mandates that are effective at a time when the RFS was requiring  relatively low levels of ethanol blending nationwide. permanent differences in a state’s average gasoline prices across  months. We did not directly estimate the effect of the RFS on prices.
Why GAO Did This Study

Congress established the RFS in 2005 and expanded it 2 years later. The RFS generally mandates that transportation fuels—typically gasoline and diesel—sold in the United States contain increasing amounts of biofuels. In addition, the RFS is designed to reduce greenhouse gas emissions by replacing petroleum-based fuels with biofuels expected to have lower associated greenhouse gas emissions. The most common biofuel currently produced in the United States is corn-starch ethanol, distilled from the sugars in corn. EPA uses RINs associated with biofuels blended with petroleum-based fuels to regulate compliance with the program.
In 2014, GAO found that refiners' costs for complying with the RFS had increased, and in 2016, GAO found that greenhouse gas emissions are unlikely to be reduced to the extent anticipated because production of advanced biofuels—which reduce greenhouse gas emissions more than corn-starch ethanol—has not kept pace with the yearly increases or the target of 21 billion gallons by 2022 called for by the statute. GAO was asked to review additional issues related to the effects of the RFS.
This report examines what is known about (1) the effect the RFS has had to date on retail gasoline prices in the United States and (2) the RFS's effect on greenhouse gas emissions and whether the RFS will meet its goals for reducing those emissions. The report also provides information about RINs.
To address the likely effects of the RFS on gasoline prices, GAO reviewed studies and interviewed experts and industry stakeholders, and conducted a statistical analysis of state ethanol mandates that were similar to the mandates of the RFS. GAO selected the experts based on their published work and recognition in the professional community. GAO selected stakeholders representing a range of perspectives, including stakeholders from the renewable fuels, petroleum, and agricultural industries, as well as from environmental groups.
Because the RFS was implemented on a nationwide basis at the same time that other factors, such as the global price of crude oil and domestic demand for retail gasoline, were affecting retail gasoline prices across the nation, it is not possible to directly isolate and measure the effect the RFS had on gasoline prices nationwide given data available to GAO. Instead GAO developed and extensively tested an econometric model that estimated the effects on retail gasoline prices of state ethanol mandates. These state mandates are similar to the RFS but were put in place voluntarily by states before the RFS led to widespread ethanol blending in every state. This model estimated how ethanol mandates affected gasoline prices in these five states. These estimates suggest the RFS likely had effects in states that did not have state-wide mandates. These states incrementally blended ethanol because of the increasing volumes of ethanol required to be blended nationally by the RFS.
Regarding the RFS's effect on greenhouse gas emissions, GAO interviewed 13 experts in government and academia. GAO selected these experts based on their published work, prior GAO work, and recommendations from other experts.
During the course of the work, GAO gathered information on the topic of RINs through interviews, a review of relevant literature, and prior GAO work.
GAO makes no recommendations in this report. In commenting on a draft of this report, USDA disagreed with GAO's finding that the RFS has had a limited effect on greenhouse gas emissions, citing research on the effects of ethanol on reducing emissions generally. GAO reported on the specific effects of the RFS on emissions. USDA also criticized GAO's methodology using experts' views. GAO employed that method to reach consensus among those with a range of perspectives. DOE and EPA did not comment on the draft report.

What GAO Found

Effect on prices. Evidence from studies, interviews with experts, and GAO's analysis suggest that the nationwide Renewable Fuel Standard (RFS) was likely associated with modest gasoline price increases outside of the Midwest and that these price increases may have diminished over time. Variations in these gasoline price effects likely depended, in part, on state-by-state variation in the costs to transport and store ethanol. For example, the Midwest was already producing and blending ethanol when the RFS came into effect, so that region had lower transportation costs and had already invested in necessary storage infrastructure. Other regions began blending ethanol later to meet the RFS's requirements, thereby incurring new transportation and storage infrastructure costs that resulted in gasoline prices that were several cents per gallon higher than they otherwise would have been.
In addition, experts told GAO that the RFS caused an initial increase in refining investment costs that, over the long term, reduced refining costs for gasoline. Specifically, once all locations had made the infrastructure investments and most gasoline blendstock produced was consistent with blending ethanol then there would be two continuing effects: (1) the transportation and blending costs of ethanol, which would tend to push retail prices higher and depend on the distance traveled and the modes of transport, and (2) the lower cost of producing lower octane blendstock. The former effect might dominate for locations far from the production source of ethanol and for which more costly modes of transport were used, while the lower blendstock costs might dominate for locations close to the production source of ethanol and/or those that have low transportation costs.
GAO's analysis of the effect that state ethanol mandates had on gasoline prices also showed gasoline price effects that differed in the Midwest and elsewhere. Specifically, during the period GAO studied, when the ethanol mandates in Minnesota and Missouri were in effect, all else remaining equal, retail gasoline prices were lower by about 8 and 5 cents per gallon in these states, respectively, than they would have been without the mandates. In contrast, when the ethanol mandates in Hawaii, Oregon, and Washington were in effect, GAO's model showed that retail gasoline prices were higher by about 8, 2, and 6 cents per gallon, respectively, than they would have been without the ethanol mandates. These results suggest that the RFS likely had gasoline price effects in other states that did not have state-wide ethanol mandates but that incrementally began blending ethanol as a result of increasing RFS requirements that by around 2010 had led to almost all gasoline sold in the United States being blended with 10 percent ethanol.
Effect on greenhouse gas emissions. Most of the experts GAO interviewed generally agreed that, to date, the RFS has likely had a limited effect, if any, on greenhouse gas emissions. According to the experts and GAO's prior work, the effect has likely been limited for reasons including: (1) the reliance of the RFS to date on conventional corn-starch ethanol, which has a smaller potential to reduce greenhouse gas emissions compared with advanced biofuels, and (2) that most corn-starch ethanol has been produced in plants exempt from emissions reduction requirements, likely limiting reductions early on when plants were less efficient than they are today.
Further, the RFS is unlikely to meet the greenhouse gas emissions reduction goals envisioned for the program through 2022. Specifically, GAO reported in November 2016 that advanced biofuels, which achieve greater greenhouse gas reductions than conventional corn-starch ethanol, have been uneconomical to produce at the volumes required by the RFS statute so the Environmental Protection Agency (EPA) has waived most of these requirements (see figure).
Renewable identification numbers. EPA uses renewable identification numbers (RINs) to regulate industry compliance with RFS requirements for blending biofuels into the nation's transportation fuel supply. In GAO's March 2014 report on petroleum refining, GAO noted that the RFS had increased compliance costs for the domestic petroleum refining industry or individual refiners. GAO reported that corn-based ethanol RIN prices had been low—from 1 to 5 cents per gallon from 2006 through much of 2012—but in 2013, RIN prices increased to over $1.40 per gallon in July before declining to about 20 cents per gallon as of mid-November 2013. Since the March 2014 report, corn-ethanol RIN prices have experienced more periods of volatility. Most experts and stakeholders GAO interviewed recently stated that RINs had either a small effect on prices or no effect on prices, though a few disagreed. Finally, GAO's past work, as well as EPA analysis, has identified several issues of concern with RINs, including possible fraud in the market and concerns about the effect on small refiners, price volatility, and the point of obligation.