an overview of the u.s. ethanol industry: implications for consumers consumer issues conference...
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An Overview of the U.S. Ethanol Industry: Implications for Consumers
Consumer Issues ConferenceUniversity of Wyoming
Tim Burkink, Ph.D.University of Nebraska at Kearney
September 25, 2008
References Available Upon Request
Recent Headlines “Ethanol Sows Enthusiasm in the Heartland”
Beacon News
“Ethanol and Its Many Consequences” LA Times
“Corn Prices Soar, Pushing Up Cost of Food Globally” WSJ
“EPA Report Questions Value of Ethanol in Terms of Smog” AP
“Rural Boon or Corn-Doggle?” Rocky Mountain News
Ethanol Ethanol, an alcohol-based petroleum-
alternative fuel, is made by fermenting grain or other carbohydrates (sugar cane, sorghum) Ethanol and by-products
97% of U.S. ethanol is made from corn Other cellulose feedstocks are suitable but not
yet economically viable
Ethanol as Fuel Over 90% of U.S. ethanol is used as fuel Although ethanol and gasoline can be blended in any
proportion, in the U.S. it is largely: 10% ethanol & 90% gasoline 85% ethanol & 15% gasoline (E85)
Blends with high ethanol content require modifications in the automobile (flexible fuel vehicle) Sensor to detect ethanol/gasoline ration Corrosion resistant fuel tank & lines
U.S. Gasoline Usage 141 billion gallons per year If all U.S. corn were made into ethanol, it
would produce 31 billion gallons per year Mandating 10% ethanol in all gasoline would
require that nearly half of the U.S. corn crop be processed into ethanol, given current technology
Subsidies for Ethanol Production $0.51/gallon federal excise tax/tax credit
Amounts to 5.1 cents/gallon for 10% blend 43 cents/gallon for E-85
Between 2001 and 2006, ethanol traded $0.41/gallon premium to gasoline
In August, ethanol was $0.35/gallon less than gasoline (Nebraska Energy Office)
Mandated Ethanol Use 2007 federal energy bill mandates use of 36
billion gallons of renewable fuels by 2022 20 billon gallons from non-corn based substances
Ethanol production was 6.5 billion gallons in 2007
Model of the Ethanol System
Food: Prices & Availability
Rural Economic Development
Agricultural Producers
Agricultural Suppliers
Technology
Government Policy
Energy dependenceGeopolitical instabilityIncrease in price of oilGlobal warmingCorn availability
Initiators of Change
Ethanol Production
Rapid increase in ethanol production
Increased demand for corn
Rapid rise in price of corn
Increased bidding for acres by all users of land
Natural Environment
Impact on Food: Prices and Availability
Demand for ethanol contributes to higher prices for corn, other crops, beef, eggs, etc.
World-wide grain stocks at historic lows
Compounded by global economic growth
Food prices increasing around the world 75% increase between 2000
and 2007 (The World Bank)
Impact on the Environment Most studies conclude GHS emissions are
reduced (Argonnne National Lab. 2005)
Some conflicting conclusions (Pimental an Patzek 2005)
More corn -> more fertilizer -> more pollution
Less crop rotation Water usage Conversion of fragile lands from CRP to
production
Impact on Rural Development Rising agriculture land values
17% in Nebraska New plant investment
$59-$112 million per plant Job creation Tax revenues The next boomtowns?
Winners and Losers Winners
Land owners Rural labor By-product users
Losers Consumers in the developing world
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