Thursday, February 12, 2009

Ethanol vs. Food (Part Deux)

A legitimate question is whether the RFS is actually "binding." See below (again, thanks to John Anderson):

The purple line represents the production of ethanol. As we can see, the RFS created in '02 was not "binding," so Congress thought it would be a good idea to increase it. In '05, it was increased and was much closer to being binding, so Congress thought, "what the heck, let's increase it again." By the '07 - '08 period, it the RFS became binding.

The upshot...early on, the RFS was not binding and ethanol production was highly driven by crude prices and other considerations as suggested by studies in my earlier post. But...