What is ethanol, and why is it such a big deal? And should we act to preserve an established program important to farmers, rural America and environmentalists, or look for other ways that make better economic sense? We want to know what you think.
For several decades, we have watched a sometimes animated debate about ethanol – the alcohol made from plants such as corn and sugarcane that the government has mandated we add to gasoline used by the cars and other vehicles we drive every day. We built a big processing industry to produce ethanol, mostly from the corn that the United States produces so well and so abundantly.
On the surface, it seemed to make a lot of sense. It used a renewable resource. It helped us reduce dependence on foreign oil imports. It was supposed to be good for the air and our environment. It helped prop up corn prices and injected a lot of money into the rural economy.
But over the years, I couldn’t help but have this not-so-vague sense that something might not be quite right. More and more scientists popped up to debate the so-called environmental benefits. Engineers warned of the effects of ethanol on machinery. Lower-cost petroleum costs made ethanol increasingly non-economic. Experts argued the whole system might have net energy costs more than net energy gains. In addition, producing ethanol costs more to the environment than saving it.
To add to my unease, it simply bothered me enormously that we were devoting four of every 10 acres of the corn we produce to feeding machines, not people or animals. I kept asking myself a lot of questions. Is ethanol still the right thing to do? Have changes in the world around us made ethanol less appealing and less practical? Am I being told the complete story, or only a story cranked out by a well-funded, aggressive PR machine?
What’s the real story behind ethanol today?
What is ethanol, anyway?
In simple terms, ethanol is a form of alcohol – a volatile liquid produced from the natural fermentation of sugars. It’s been around for literally thousands of years, often used as a recreational beverage – also known as moonshine. It’s made from a very wide variety of plants – anything containing the starch and cellulose that provide sugars for fermentation.
Sugarcane is a common source material in production of ethanol in South America and other locations.
But in America, by far the most common source is good old corn.
Several decades ago, with growing concern everywhere about both our dependence on foreign energy sources and the protection of our environment, lawmakers found a way to make corn a part of the public-policy response. Lawmakers rushed to bring a vibrant ethanol industry to life. Tax breaks, subsidies, grants, loan guarantees – all these and more emerged to stimulate ethanol production. Farmers responded by making investments in a productive capacity. Investors poured massive amounts of money into new processing plants, handling equipment, and other necessary production tools.
Today, the ethanol industry appears to be on shaky ground. Competing commodity prices made the raw material for ethanol processes that much less competitive, tightening their operating margins. Lower gas prices have cut demand for ethanol substantially. Production plants, key economic cornerstones of rural communities, are seeking new markets or new products to produce. Some are closing down, and many are up for sale.
At the same time, the United States has stepped up its energy independence with fracking and other energy-development initiatives. Pandemic stay-at-home orders added to the problem by drastically reducing gasoline demand. By April 2020, production had dropped by almost half from its peak earlier in the year. Almost a third of ethanol plants had shut down, and another third were operating on reduced schedules.
What’s the right future for ethanol?
Ethanol critics argue for radical change – or an end to the program. To critics, ethanol’s day has passed and we should be glad.
- Ethanol is non-economic and a drain on taxpayers. Even in the heyday of our fight to reduce dependence on foreign oil imports, we still had to pay ethanol producers (not the farmers) tens of billions in all sorts of subsidies and incentives to keep them afloat.
- With oil prices below the cost of ethanol, ethanol no longer lowers gas prices. Our domestic energy production picture and global markets tell us we don’t need to mandate the addition of a more expensive component to gasoline.
- A 10-percent ethanol blend in our gasoline may actually hinder rather than help fuel economy. The biofuels industry has long claimed that the ethanol blend can boost mileage by 1-3 percent. But some reports – including figures from the Department of Energy’s Office of Energy Efficiency and Renewable Energy – contend the 10-percent ethanol blend can reduce fuel economy by 3-4 percent, and a 15 percent blend by as much as 4-5 percent. We could be adding as much as $10 billion to the fuel bill for American consumers, according to the Institute for Energy Research.
- The energy gains from ethanol are illusory. Some studies contend that it takes as much as 29 percent more energy to produce a gallon of ethanol than to produce a gallon of gasoline. The energy needed to refine ethanol may be greater than the energy it delivers.
- Ethanol artificially raises commodity prices, and the prices consumers pay for food. Analysts at the Congressional Budget Office estimate that consumers may pay an additional $3.5 billion for food as a result of the program and its effect on commodity prices.
- It’s more about politics than anything else. The ethanol program had at its core a desire to provide an appealing economic opportunity for a group very important to politicians seeking rural votes, especially in key primary election states.
But there’s another side to the debate. Ethanol supporters challenge many of the criticisms and point to other critical considerations. Supporters of ethanol say the rural economy needs ethanol more than ever – and so do food consumers, even if they don’t realize it.
- We’re in too deep to quit now. Our country has made massive commitments to the ethanol industry, in good faith. We have invested literally billions of dollars in plants and equipment, and in the production tools and systems we need to serve a huge market for a crop critical to farmers and our economy. Farmers have built ethanol into their production and marketing plans and their budgeting. We just can’t let that investment go down the tubes.
- Farmers need a vibrant ethanol industry for their economic security. Rural communities need the money generated by the industry up and down Main Street America. Investors need to know they can continue to place their money – and faith – in building a multifaceted agricultural system.
- The ethanol industry is about a lot more than energy. By-products from its production have multiple other uses – such as livestock feed additives, other forms of alcohol, and other potential fuels, not to mention things like hand sanitizer and disinfectants. There is more at stake here for consumers than just fuel for our cars and other vehicles.
- Economic risks to farmers and rural America from Covid make ethanol more important than ever. We need to make the investment – government and taxpayer dollars – necessary to preserving this critical element of our farm economy. We need to do that just as much as we need to keep Main Street restaurants and other businesses alive during a pandemic, using the same government tools and resources. In comparison to what we are spending to deal with Covid-19, the ethanol program is small change.
- The energy picture can change quickly. The global and national energy picture isn’t carved in stone. The fracking industry is on edge because of low prices. Oil markets are in turmoil. The global economy eventually will open up and begin growing again – and energy demand will grow with it.
- We must protect our environment in every way we can. Cutting greenhouse emissions should be a priority, and ethanol can help us do exactly that. Ethanol has real, important advantages over petroleum, reducing greenhouse gas emissions by 39 percent compared to those of traditional gasoline. That alone makes the industry worth special effort to preserve it.
- We should exploit our natural advantages. Producing ethanol from corn is another way to exploit the natural advantage the United States has in producing corn. U.S. farmers are the most productive corn farmers in the world. Maintaining an ethanol industry just helps us use that capability to our advantage.
- Consumers need the healthy farm sector ethanol helps provide. Ethanol provides the economic support needed to keep many of the 400,000 farmers who grow corn in business. It helps them make the necessary investments in producing crops critical to our food system, and in the technology and equipment needed to drive continuing improvements in operational efficiency – and the lower food costs that come with them.
So which way forward?
We asked what you thought is the best solution: maintain the current ethanol program…or disassemble it? Below are your responses, and some of you even offered some alternative solutions worthy of serious consideration. Stay tuned to see your ideas implemented into our next ethanol post…it’s already in the works.