The Pros and Cons of Ethanol

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Ethanol is a biofuel that has caused a great deal of debate over recent years. It is a cleaner burning fuel making it better for the environment than gasoline, but it has drawbacks. Ethanol solves one problem, but it could create other, critical and unintended issues.

Ethanol Production

Ethanol production is a process of extracting sugar from corn. Ethanol is a cleaner burning fuel when compared with gasoline that fuels automobiles and other engines.

The byproduct of ethanol production can be employed as feed for animals. The sludgy byproduct of the ethanol refining process is rich in protein and adds nutritional value to animal feed. The fact that there is utility in the leftovers from ethanol production lowers the price of animal feeds because the processed corn has two uses rather than one. 

The world requires a tremendous amount of energy every day, so ethanol has become an important biofuel in the United States and around the world. Studies indicate that a gallon of ethanol produces 33 percent to 67 percent more energy than it takes to produce that gallon of ethanol, therefore it is an efficient fuel. Higher estimates come from sources like the USDA that could have a vested interest in promoting corn-based ethanol in the U.S. given their ties to the agricultural sector.

While ethanol appears to produce more energy than it takes to grow corn and convert it to ethanol, it still takes energy to produce the biofuel.

Studies show that ethanol has a carbon footprint of about 20 – 30 percent less than gasoline, which makes it more attractive and healthy choice for the environment. One problem with ethanol is its effect on the price of corn at times.

Market Influences of Ethanol

About 40 percent of corn produced in the US is consumed in ethanol production.

It is a huge number considering that the U.S. is the world's largest producer of corn. The USDA has projected that 36 percent of corn demand from 2012 to 2021 will go to ethanol. The ethanol requirement has a direct impact on the price of the grain.

Corn prices averaged around $2.50 for much of the 1980s and 1990s, but things changed starting in 2000 when ethanol production skyrocketed. Since then there have been massive price spikes in corn, with the price trading to all-time highs in 2011 and some of the price appreciation was the result of corn-based ethanol demand. 

Corn prices are volatile, and so are oil and gas prices, but there are arguments that ethanol has also influenced oil and gasoline prices. Approximately 10 percent of the fuel that fills our gas tanks is ethanol. If gasoline, a petroleum product, did not contain ethanol, demand for oil would increase, and gasoline prices would probably be higher. Since corn and gasoline are both volatile commodities, price changes in one market directly influence the other given the link between the grain and petroleum product. 

Ethanol and Corn Subsidies

Ethanol producers received generous subsidies of 45 cents per gallon of ethanol produced prior to 2012.

However, there was no slowdown in ethanol production after that year. There continues to be a great deal of debate over government required ethanol in gasoline and subsidized corn production for the biofuel in the U.S. 

Decision on Ethanol

There are two sides to the ethanol debate. One one hand, ethanol is a cleaner burning fuel than gasoline, and it lowers the price of gas at the pumps so long as corn prices are low. On the other hand, the amount of corn used in producing ethanol impacts all consumers. The price of corn is likely higher than it would be without the ethanol requirement. 

Farmers that produce corn will become more important than ever considering the world could face major food shortages in the future. Ethanol remains an important biofuel that is the product of corn in the United States.

Clean energy is one of the primary reasons for the rise of ethanol, but there are other alternatives such as natural gas, solar and wind power which are cleaner than petroleum and long-term environmental solutions.

The Ethanol Mandate and Politics

Ethanol is a highly political topic in the United States when it comes to the mandate as a gasoline additive. There are likely to be variations in the mandate depending upon which political party, Democrat or Republican is in power over time. One thing is for sure, the environmental benefits of ethanol will always be a topic of debate in the U.S. Ethanol is also an important fuel source in other nations. In Brazil, the world’s largest producer of sugar cane, sugar-based ethanol is an important biofuel that powers many automobiles.