As Government Decisions Loom, Ethanol Fights for its Life

June 22, 2010

Congress, the EPA and environmental groups may be on the verge of seriously curtailing corn ethanol adoption in the United States. This week, the EPA again decided to postpone a decision on whether to increase the maximum allowable blend of ethanol in regular gasoline from 10 to 15 percent. Automakers have been fighting the increase for some time, claiming that it could cause engine damage. The EPA says it needs more time to study the issue.

The Renewable Fuels Association—one of several lobbying arms of the ethanol industry—issued a harsh rebuke of the decision, calling the EPA’s postponement “shameful” and “a dereliction of duty.”

Judgment Day for Ethanol

The EPA isn’t the only government body that the ethanol industry is relying on. By the end of 2010, several of the programs and regulations that keep the corn ethanol industry afloat will expire unless Congress acts to extend or replace them.

First, there are the so-called “blender’s credits” given out to oil companies for mixing ethanol into their gasoline, which make up the bulk of the subsides for the past five years but are set to expire at the end of 2010. Those credits have helped pump $17 billion into the industry since 2005, but since gasoline producers are already required by law to blend ethanol into their product, the subsidy is largely redundant.

There’s also the matter of a $0.60 per gallon tariff on imported ethanol that effectively keeps all of the ethanol sold in the United States domestically produced. Brazil, which is the world’s second leading ethanol producer, recently lifted its biofuels tariff in the hopes that the United States would do the same. Unless Congress decides to take action by the end of the year, the tariff is set to expire, opening up the market to imports.

With all of the challenges facing American corn ethanol, you can probably imagine why two months ago the industry launched a six month, $2.5 million ad buy aimed at building public support for the fuel. The campaign is intended to buttress the sector’s ever-increasing lobbying activity on Capitol Hill as it attempts to navigate what is perhaps the most critical time in its history. Unfortunately for producers, the political climate in Washington has many politicians nervous about having to justify to voters a new round of subsidies and protections for a technology that is having an increasingly difficult time justifying its existence.

But How Much Does it Really Cost?

Last week, the Environmental Working Group piled on to a growing mountain of criticism of the corn ethanol industry in a study titled “Driving Under the Influence: Corn Ethanol and Energy Security.” Past studies have found that ethanol use and production actually increase carbon emissions instead of cutting them and that growing corn for energy production raises food prices.

The EWG’s report focussed on cost and effectiveness of ethanol subsidies over the past five years. It’s chief findings:

  • Between 2005 and 2009, the United States government spent $17 billion on ethanol subsidies.
  • During that period of time, ethanol contributed just 0.6 miles per gallon in average increased fuel economy.
  • Last year, the United States replaced 7.2 billion gallons of gasoline with 10.6 billion gallons of ethanol at a cost of $4.8 billion to taxpayers. The cost for 2010 is expected to total $5.4 billion.
  • Due to the amount of energy required to produce corn ethanol, just 4 percent of the energy in each gallon of E10 blended gasoline comes from corn—the rest comes from fossil fuels.

The EWG called for the elimination of a provision in the 2007 Energy Independence act that mandates the blending of corn ethanol with gasoline and the cessation of tax credits for the industry when they expire at the end of the year.


Posted in Fuels, Incentives and Laws, News
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  • Samie

    Ethanol be gone….

    Long-term research, not short-term fuel schemes. Corn ethanol has been sticking around because politicians want to pander to corn producing states. We will see but the O administration is suppose to pander again to the ethanol industry like the last admin. Congress may yet again do the same unless budget hawks get their say…. Trading fuels for fuels is not a good idea, unless you can produce ethanol in a renewable way (algae???). No tariffs will reduce the price of ethanol to the consumer but on the other-side we get imported ethanol that is not controlled by U.S. farming practices or environmentally appropriate, that is the growing, fertilizing, and harvesting.

  • ex-EV1 driver

    I’m ok with ethanol if:
    - all fertilizer is organic and accounted for
    - all energy required to ferment it comes from bio-fuel as well
    - irrigation can only come from the rain that hits the fields
    - all vehicles used in the transportation burn ethanol as well.
    - no other non-renewable energy sources are used in its production and transportation
    I suspect that this is impossible.

  • Charles

    ex-EV1 driver, I hope you do not mind if I use your idea.

    I’m ok with ethanol if:
    - all fertilizer is organic and accounted for (ie. not flushed into the Gulf of Mexico)
    - all energy required to ferment it comes from renewables
    - irrigation can only come from the rain that falls on the farm
    - all vehicles used in the planting and harvesting use bio-fuel
    - all USA produced ethanol is treated equally, no preference for corn or some other feed stock
    - My tax dollars buy us less dependence on fossil fuel

    You can substitute bio-diesel for ethanol in the above and you will have my feelings about bio-diesel as well as ethanol.

    I suspect that this is possible, but not really going to happen.

  • ex-EV1 driver

    Charles,
    Good build upon my ideas. I concur.
    I’m not as concerned with bio-diesel since my understanding is that diesel-capable oils may take less energy to process than the fermentation and distillation required for ethanol and methanol production – although I’m not knowledgeable enough in these processes to be sure.
    I suppose we should constrain the 4th bullet to use bio-fuel meeting the rest of the bullets as well.

  • John P

    Big oil was subsidized $550 billion dollars in 2009 via tax breaks and credits. Exxon Mobile didn’t pay a single cent in taxes…..

  • Indymw

    I am so sick of listening to the anti ethanol crowd. Someday maybe people will get serious about elimination of fossil fuels and quit nitpicking apart the most viable solution we currently have. Ethanol isn’t the best solution but it is the ONLY one that is economically viable right now. The peace and love contingent at the EWG are looking for Utopian solutions to energy creation….most of which are years if not decades away. Meanwhile they are carrying the water for the oil industry by continually bashing ethanol as a reasonable alternative; at least until better alternatives become economically and technically viable. All this hand wringing about subsidies for ethanol…..its ridiculous…how much do they think it costs tax payers to fight wars in the middle east, protect oil shipping lanes, and clean up gigantic oil spills??? There are huge surpluses of corn every year so the feed stock is not a problem, the energy efficiencies get better all the time through innovation, and we have a delivery infrastructure in place….in short it works…could it work better…of course…but that doesn’t mean we should just stop it until something else happens to come along.

  • Bill Sykes

    Ethanol is not a good solution; however, it’s the only viable alternative fuel at the present time. Corn is not a good feedstock; however, it’s the one that works best presently, and America has the production facilities in place and operating today.

    We need to keep ethanol flowing as research progresses for better production, and for better biofuels. Unfortunately, both (useage & research) require funding in order to get us down the road – pun intended. The destination is worth the trip.

  • DC

    Let ethanol die. All that entire “industry” is, is yet another form of corporate welfare for american agri-giants. Your country cannot afford to(keep!) pursueing non-solutions like ethanol, hydrogen etc. The entire notion of useing the massively wasteful and inefficent industrial FARM system to produce a fuel that itself, is not especially efficent and only marginally less polluting is perverse.

  • Anonymous

    I’d say reduce funding but not eliminate. just enough to keep research only

  • Nasdram

    So you want to cut subsides to ethanol. Why not cut those to the oil industry first.
    Sure, it would be great if next year everyone would be driving electric with the electricity from green sources but that is more than utopiean. Without ethanol, the need for oil will no doubt increase. Also, flex fuel is a cheap alternative to gasoline cars that most people can afford. Or we could drill more and more, have more spills and leaks all over the world (spills are very common, but unless they happen near a western country noone cares)

    Besides, currently the first plants for secon generation ethanol are opening up lowering the impacts on corn as production is ramped up.
    If price of food is a concern, stop eating beef. That is by far a greater contributor to prices of corn(worldwide, not only US). Also, corn used for ethanol can still be used as feedstock. Maybe farmers could also start to plan on those fields that have gone out of production since the 70′s?

    As for subsedise, maybe it would be worthwhile to look up what the US has saved in subsides due to higher corn prices that it pays to corn farmers. sadly i can#t find my source for the numbers anymore.

  • Sukamadek

    Ethanol is not necesarrily terrible, but Corn ethanol makes absolutely no sense. It takes as much energy to grow, process and transport as it provides so the more Corn ethanol we make the more dependent we remain on fossil fuels. And the more it costs us. Sugar ethanolo does not have the same problem but we don’t grow sugar so we pretend.

  • Samie

    Reading most of the comments above, I clearly think people take a personal individualistic approach in dreaming up non-realities or expectations when it comes to imports, futures markets, & politics of ethonal. Another fault is that people will want to do anything to move away from our petroleum based economy, they fail to see the hidden problems or cost associated with some fuel schemes. This is dangerous and not smart that is without think of the long-term consequences.

    To expand ethanol, all tariffs need to be eliminated. Cheaper questionable farming practices from other countries will have unintended consequences & at some point needs to flood the U.S. ethanol market. Markets would need a fuel flex system and any sustainable, or organic practices would need to be eliminated to reduce price.

    Ethanol would need to move away from land based crops. Algae or some other form that requires less land needs to be produced (that is on a mass scale). This is where people fail to connect the dots with oil because land crops for fuel if expanded on a mass scale will only produce geopolitical problems, possible authoritative governments, environmental problems, oppressed women rights, price shocks from weather patterns, and expensive military & diplomacy operations to secure the fuel. Oh does that sound somewhat familiar?

    Look, be realistic about fuel schemes it would be one thing to say Walmart should have 90% of their products produced and made in the U.S. but we all know that’s a joke. Instead of creating new problems just to try to solve the petro one lets be smart and think long-term instead of reacting to the events of the day…..

  • Nasdram

    From what i could find in terms of studies on the energy balance of generating ethanol from corn, there is one study that is the source of the Ethanol Production Using Corn, Switchgrass, and Wood; Biodiesel Production Using Soybean and Sunflower David Pimentel and Tad W. Patzek Natural Resources Research, Vol. 14, No. 1, March 2005 doi:10.1007/s11053-005-4679-8

    But this study relies on certain assumptions. For example a complete replacement of gasoline by corn ethanol which would mean byproducts cannot be absorbed by the market.
    to quote a Science article:
    “Two of the studies stand out from the others
    because they report negative net energy values
    and imply relatively high GHG emissions and
    petroleum inputs (11, 12). The close evaluation
    required to replicate the net energy results showed
    that these two studies also stand apart from the
    others by incorrectly assuming that ethanol
    coproducts (materials inevitably generated when
    ethanol is made, such as dried distiller grains with
    solubles, corn gluten feed, and corn oil) should
    not be credited with any of the input energy and
    by including some input data that are old and
    unrepresentative of current processes, or so
    poorly documented that their quality cannot be
    evaluated (tables S2 and S3). “
    http://rael.berkeley.edu/sites/default/files/EBAMM/FarrellEthanolScience012706.pdf

    The above article clearly shows that both GHG and petroleum used are less, a fair amount less in the case of petroleum used.

    So unless you can show a different study that uses right assumptions about the energy balance, i would say that view is antiquated.
    If this is worth the subsidies is another discussion but at least one should do away with “corn ethanol has a negative energy balance”.

    I do agree that we should go forward to second and third generation biofuels and those only as a transition. But at the moment, corn ethanol is a viable alternative. In countries with higher gas taxes (maybe a way for the US as well?) it can also survive without subsidizing it.

  • Mike Massey

    Our country is very good at growing corn. We Americans produce 2.8 gal per corn bushel and 3.2 gallons of milk from the distillers grain per bushel after ethanol production. God forgive those who bad mouth our American economy, corn ethanol, and have chosen to believe in Arab controlled Big Oil company high paid oil lobbyists who stuff the pockets of both politicians and academic researchers. If you all come to the farm and just see what we can do on the farm you would be amazed. But your all disconnected to nature and have no understanding of what makes America tick. I can’t blame you, your ignorant. The grain portion of corn is only half of the energy collected by the corn plant. Corn stubble can be made into ethanol – they call it cellulosic ethanol.

    We need a level playing field where the costs per btu of oil is matched with the costs per btu of the entire corn plant. You will find that corn wins everytime unless the cost of the U.S. military is stationed in Iowa protecting corn fields. You just cannot beat corn. The oil industry fears corn ethanol and will successfully kill it as did JD Rockefellar did with the support of Prohibition. I think Americans are smarter than the anti-ethanol brigade. But time will tell. Everytime Americans diss their farmers they get in heaps of trouble. And now is the time for Americans to demand choice – choice at the pump. Place a blender pump at all fuel stations and require e-85 compatible vehicles and let Americans decide their own fate. Lets see who wins. Drop all subsidies on both oil and ethanol and lets see who wins. Corn everytime and Big Oil knows it. Big Oil will fight farmers until the end of time. We need a Prohibition of crude oil and then things will turn around. What is fair is fair. Time to turn off oil like they did with ethanol during Prohibition. We’ll adapt just like we did without ethanol in the 20′s.