Richard Epstein has written about “government by waiver,” and its pernicious effects. We’ve had numerous examples of late, from the Obamacare waivers, to the suspension of the employer mandate, to yesterday’s decision to exempt Congressional staff from Obamacare. Yesterday also brought news of another administrative version of Emily Litella’s (and Nirvana’s!) “Nevermind”: the EPA is easing renewable fuel standards that had wreaked havoc in the gasoline market, and driven prices for Renewable Information Numbers “RINs” from pennies to nearly a dollar per gallon:
The Environmental Protection Agency, which administers the mandate, has said it will reduce total required volumes in its forthcoming proposal for 2014. It also extended the compliance deadline for 2013 by four months to June 30 of next year.
We’ve seen this movie before. Congress passes expansive feel-good legislation that is at complete odds with economic reality. Those who have to deal with economic reality importune the executive branch and administrative agencies for relief, and some sort of relief is granted. (As another example, CFTC has also granted various forms of relief for some of the Frankendodd craziness.)
In the case of RINs, Congress demanded that refiners utilize far more renewable fuels (such as ethanol) than is feasible, given the installed base of auto engines which can only utilize 10 percent ethanol fuels. Refiners could purchase unused renewable fuel credits (RINs) accumulated in past years when renewables usage exceed the then-lower mandated levels, but these are running out, and the renewable requirement was increasing even more for 2014. Thus, the price of RINs had rocketed higher and there was risk that there wouldn’t be near enough for 2014. The regulations also favored exports of gasoline because exported gas does not count towards renewables requirements.
So EPA stepped in and gave relief. Because Congress couldn’t be bothered to worry its little head about minor details like the ability of the engines in hundreds of millions of autos to use the amount of ethanol it, in its infinite wisdom, decreed.
This is perverse in many ways. It encourages rent seeking, at times to the point of corruption, or at least highly dubious political favoritism and dealing. It empowers unelected bureaucrats who are difficult enough to hold accountable as it is, and who are often pursuing ideological agendas, and who can use their leverage to advance those agendas. It allows Congress to avoid being held responsible for, let alone accountable for, its careless legislating: why take care in attempting to anticipate perverse effects when there’s someone there to clean up your mess? It creates substantial uncertainty that discourages investment and hiring. We end up with a thicket of ad hoc responses to legislative pipe dreams that lead to further problems that lead to more ad hoc responses and on and on.
In some respects, the RIN fiasco is the least of the renewable mandate’s sins. Ethanol is a disaster on many dimensions, economic and environmental. These problems are bad enough, but the EPA’s action is emblematic of a broader problem with the mega-legislation of the Bush-Obama years. The legislation is unworkable, and compels delegation of considerable discretion to largely unaccountable administrators. It undermines the rule of law and makes the US more like a natural state-or banana republic.