Corn and Cellulosic Ethanol Fight for Viability, Government Favor

Nebraska Senator Ben Nelson is calling for the EPA to move quickly on increasing the allowable blend of corn ethanol in gasoline by 50 percent, saying that regulatory agency has studied the issue “to death,” and that delays on the ruling have “put energy security at risk.” Meanwhile, the EPA has proposed a reduction in the federal cellulosic ethanol blend mandate, saying that the infrastructure doesn’t exist yet to meet targets. This news comes on the heels of a string of setbacks that have hit the American biofuels industry of late, leading to questions about whether it will ever make good on the promise it was once considered to hold.

More Money, More Problems

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President Bush’s 2006 State of the Union speech helped to put biofuels on the map in the United States.

It’s been more than four years since then-President George W. Bush told the country in his State of the Union speech that it would soon be using corn, wood chips and switch grass to power its automobiles. Biofuels, Bush said, would play a major role in helping to replace 75 percent of foreign oil imports with renewable fuels by 2025. Since then, United States government has doled out more than $17 billion dollars to help get biofuels off the ground and into our gas tanks.

Today, the industry is in a state of flux. While corn ethanol has enjoyed early success, the political climate is beginning to shift against it despite numerous powerful allies and millions of dollars in annual lobbying and advertising spending. The EPA has delayed a ruling that would increase the allowable level of ethanol in gasoline from 10 to 15 percent, and many of the tax credits and subsidies that the industry depends upon are set to expire at the end of the year.

Cellulosic ethanol has also enjoyed a great deal of government support. Hundreds of millions of dollars have been invested in research and loans to help get factories built and operating, but the fuel has yet to make a ripple in the market. POET, one of the nation’s largest biofuels companies has been promising to start large-scale production for years, but has gradually pushed back the opening of its facility from 2009 to 2012.

While the cost of cellulosic ethanol is expected to drop significantly once production increases, there simply aren’t enough factories operating to ensure that it ever will. For that reason, the EPA has already been forced to cut a 2007 mandate by 94 percent, to just 6.5 million gallons per year, beginning in 2011. Now looks like even that goal will not be met in time for next year.

Pros, Cons and Unknowns

Both corn and cellulosic ethanol come with their own list of hurdles and downsides. Corn ethanol is a proven technology that is relatively cheap and easy to produce. Unfortunately, most research into the life cycle emissions of the fuel indicate that it represents a negligible improvement over petroleum—if any. Furthermore, the corn ethanol industry depends on an array of lucrative government mandates and subsidies to stay afloat. Last year the United States produced 10.6 billion gallons of ethanol—replacing 7.2 billion gallons of gasoline—but spent nearly $5 billion incentivizing its use. As a result, many scientists and environmental groups have argued that corn ethanol should be abandoned entirely in favor of more promising and sustainable technologies.

Cellulosic ethanol is another story. The fuel is derived not from the sugars in plants like corn and sugar cane, but from cellulose, which is inedible and can be gathered from existing waste products. Though it contains a much lower energy density than sugar, cellulose can potentially be grown pretty much anywhere and in ways that don’t compete with the food supply or deplete the soil. Furthermore, a 2008 study by the Argonne National Laboratory found that life cycle emissions from cellulosic ethanol could represent an 85 percent improvement over gasoline. For that reason, it enjoys much greater support from the environmentalist community.

Of course, obstacles to cellulosic ethanol adoption abound. Like its sugary sibling, what little exists of the cellulosic ethanol industry is there almost entirely because of government subsidies and investment. Private loans are hard to come by, with banks almost universally refusing to touch the technology because it is unproven and could disappear overnight if it falls out of favor with the government or if a more established alternative fuel emerges as a “winner” in the race to replace gasoline.


  • Samie

    Lets skip opening up state & federal wildlife areas and potential farming/private landowner property that is in voluntary land conservation programs for the sake of getting excited over growing ethanol “anywhere”.

    “A recent study done by the University of Tennessee reported that as many as 100 million acres (400,000 km2, or 154,000 sq mi) of cropland and pasture will need to be allocated to switchgrass production in order to offset petroleum use by 25 percent.[46]“http://en.wikipedia.org/wiki/Cellulosic_ethanol
    Above this quote is a study done by the U.S. Departments of Energy and Agriculture in 2005 that contradicts the UT claim but one must remember that there is/was a bias to promote the agro industry within this agency partly due to political agendas. Speaking of political agendas the EPA is trying to delay the report until after the fall elections which is better b/c politicians will pander to corn producing states by mandating more ethanol be produced and consumed by consumers.

    Unless we can harness cellulosic waste in landfills or use algae, I don’t see the point of this “alternative energy” Especially given the amounts of subsidies spent, poor development within market forces, and potential/reality of ethanol coming in from other countries within the next 10 years.

  • TD

    Yeah.

    Those promises about replacing 75% of oil by some date are just the usual idle promises made by the last 7 Presidents including the current occupant. Take a look a SOTU speeches all the way back to Richard M. Nixon. They all promise to get us off of oil by some date conveniently far in the future so that it is not their problem. Really why bother to even write about SOTU promises they aren’t worth the ink.

  • Samie

    Agree TD
    Vague, oversimplified political promises are just that. We as Americans fall for this every 2-4 years or we believe in propaganda spread by 24-hour news networks. Shame if you ask me but that is what you get with a two party system, lobbyist who write legislation, and political ideologies that are selective or not followed under convenient circumstances. Short-term economics always trumps long-term planning and short-term hardship that would stem from things like ending all subsidies on petroleum or mandating higher CAFE standards.

    If you are for ethanol, I don’t see what return the taxpayers have gotten for all the subsidies dumped into corn ethanol. Using conservative principles tells me that if private businesses do not want to invest in the ethanol industry after almost twenty years of federal incentives then we must end all government subsidies and mandates now and let market forces work towards greater achievements without government help.

  • zach

    My personal prediction is that these ethanol incentives will be extended and everything will be business as usual. It’ll be interesting to see what bill they end up tacking it onto in the middle of the night though.

  • TD

    Yes, you can take it to the bank that none of the deficit hawks in the Farm belt like Ben Nelson and Byron Dorgan will ever agree to a cut in farm subsidies.

  • Jignesh

    You are doing great job.

    Thanks a ton.

  • Ben

    It baffles me that corn and cellulosic ethanol are both far cheaper than the fuel we put in our cars yet they are still not viable. As much as we all hate subsidies, they are on an unleval playing field with oil subsidies in the 100s of billions each year. I would like to keep the 500,000 current jobs in the ethanol industry and to see it grow 10 fold in the next 10 year. It would be the best thing for our economy and our childrens future.