Clinton campaign studying alternative to U.S. ethanol mandate

[August 04, 2016]  By Valerie Volcovici and Rory Carroll

WASHINGTON/SAN FRANCISCO (Reuters) - Democratic U.S. presidential candidate Hillary Clinton's campaign has solicited advice from California regulators on how to revamp a federal regulation requiring biofuels like corn-based ethanol be blended into the nation's gasoline supply, according to campaign and state officials.

The move is the clearest sign yet that, if elected, Clinton would seek to adjust the regulation, called the Renewable Fuel Standard, possibly hurting her chances in corn-growing states like Iowa where she faces a tough battle against Republican rival Donald Trump in the Nov. 8 election.

The Renewable Fuel Standard, created by Congress in 2005, mandates that transportation fuel sold in the United States contain a minimum volume of renewable fuels.

It was intended to cut greenhouse gas emissions and expand the U.S. renewable fuels sector while lowering reliance on imported oil. It is opposed by the oil industry and environmentalists and has been criticized as a mere subsidy to corn producers.

Clinton advisers have contacted the California Air Resources Board (CARB) to discuss whether a policy like California's Low Carbon Fuel Standard, a market-based system rather than a mandate, could be applied at a national level to replace or augment the Renewable Fuel Standard, and other issues, CARB officials said.

Mary Nichols, head of the CARB, said she discussed the state's regulations with Clinton advisers.

While a backer of the Low Carbon Fuel Standard, Nichols said she told Clinton's advisers they could avoid political backlash by focusing on other carbon-reduction strategies instead, such as expanding electric vehicle sales and cleaning up emissions from coal-fired electricity.

Nichols did not provide further details on the discussions.

A Clinton campaign official, who asked not to be named, confirmed the discussions with CARB but gave no further details.

A campaign spokesman, Tyrone Gayle, said the campaign has been seeking advice from "a diverse set of stakeholders." He added that the Clinton campaign "does not support replacing the RFS with a national low-carbon fuel standard” but did not elaborate.

Former Obama administration climate and energy adviser Heather Zichal said on the sidelines of the Democratic National Convention in Philadelphia last week that the Renewable Fuel Standard was broken, but that a Clinton administration could make "modifications" to fix it.

"Mandates aren't necessarily a perfect way to regulate," Zichal said at the event.

The U.S. corn lobby hopes to convince both Clinton and Trump to uphold the regulation, which requires a doubling of U.S. biofuels use to 36 billion gallons per year by 2022, when congressionally mandated volume targets are set to expire. The program is designed to last indefinitely after that.

Democratic presidential nominee Hillary Clinton speaks at Fort Hayes Metropolitan Education Center in Columbus, Ohio, U.S., July 31, 2016. REUTERS/Aaron P. Bernstein

Environmentalists, anti-hunger activists and the oil sector have called for the rule to be repealed or changed because they say it raises food and fuel costs without delivering the emissions reductions that it was intended to achieve.

MARKET-BASED SYSTEM

The California regulation, a key part of the state's effort to combat climate change, requires a 10 percent reduction in the carbon intensity of transportation fuels by 2020, but leaves it up to companies to decide how to reach that target.

California enacted the Low Carbon Fuel Standard in 2007 targeting oil refiners and distributors that sell in the state's market. It angered Midwestern ethanol interests because the regulation counts the carbon dioxide footprint of transporting biofuels into the state for blending, effectively blocking many of those imports. Oil companies have complained that the regulation is costly.

Clinton in May expressed support for the federal Renewable Fuel Standard in an opinion piece published in an Iowa newspaper, but said it could be improved.

Clinton's openness to overhauling the Renewable Fuel Standard appears to contrast with Trump's position. During the state-by-state battle for the Republican presidential nomination, Trump said he supported the biofuel mandates set out in the Renewable Fuel Standard.

Corn and ethanol industry lobbyists said they have been talking with both the Clinton and Trump campaigns to argue in favor of the Renewable Fuel Standard.

(Additional reporting by Joe White in Detroit and Chris Prentice in New York; Editing by Will Dunham and Leslie Adler)

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