Ethanol

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Ethanol is a clear, colorless, liquid biofuel that is blended with gasoline and used as a transportation fuel. In 2016, approximately 364.9 billion gallons of ethanol were produced in the United States. As of October 2016, approximately 67 percent of ethanol produced in the United States came from six states: Iowa, Nebraska, Illinois, Minnesota, Indiana, and South Dakota.

As of May 2017, federal policies existed to support the production of ethanol. These policies included the Renewable Fuel Standard, a policy mandating that some transportation fuels be blended with a required amount of biofuels such as ethanol. The sections below outline the policy debate over the Renewable Fuel Standard from the perspectives of proponents and opponents of the policy.

Background

An ethanol plant near Marcus, Iowa

Ethanol is a clear, colorless biofuel that is produced by the fermentation of biomass feedstock, particularly plant sugars. These sugars are found in grains—such as corn, sorghum, and barley—as well as potato skins, rice, sugarcane, sugar beets, and yard clippings. The feedstock is first grown, collected, and delivered to ethanol production facilities. One bushel of corn (56 pounds of corn) can yield approximately 2.7 gallons of fuel ethanol.

Ethanol is primarily produced in the United States from starch-based crops like corn through dry- or wet-mill processing. During the dry-milling process, corn is ground into flour that is then fermented into ethanol.

Ethanol is then blended into gasoline to make types of fuel, including E10 (gasoline with 10 percent ethanol), E15 (gasoline with 15 percent ethanol), and E85 (gasoline with 85 percent ethanol), and transported to gas stations by truck. Ethanol has less energy per gallon than gasoline depending on the percentage of ethanol in the fuel blend.

Production and consumption

In 2016, approximately 364.9 billion gallons of ethanol were produced in the United States. As of October 2016, approximately 67 percent of ethanol produced in the United States came from six states: Iowa, Nebraska, Illinois, Minnesota, Indiana, and South Dakota. Iowa and Nebraska accounted for one-third of the ethanol production capacity in the United States as of October 2016.

The chart below shows fuel ethanol production (in blue) and consumption (in brown) in the United States from 1981 to 2016 (in thousands of barrels).

U.S. fuel ethanol production (blue) and consumption (brown) from 1981 to 2016

Federal policies

As of May 2017, federal policies existed to support the production of ethanol. These policies included the Renewable Fuel Standard, which is described below.

Renewable Fuel Standard

Congress passed the Renewable Fuel Standard (RFS) as part of the Energy Policy Act of 2005. Congress passed the law to address high energy prices and the increase in U.S. imports of oil. The RFS is a program mandating that transportation fuels contain a minimum amount of biofuel, an amount that increases annually. The program is administered by the U.S. Environmental Protection Agency (EPA). In 2005, Congress set a target of adding 4 billion gallons of renewable fuel to the U.S. gasoline supply by 2006 with a target of 7.5 billion gallons of renewable fuels by 2012. In 2004, gasoline sold in the United States contained 3.4 billion gallons of renewable fuels. The program is enforced by requiring oil refiners and gasoline and diesel fuel importers to create and/or sell biofuel blends. These entities either must meet targets set by the EPA or trade credits with companies that produce more than the required amount of biofuel.

Source: U.S. Environmental Protection Agency

The first version of the program was called RFS1. The Energy Independence and Security Act of 2007 established a program called RFS2. RFS2 raised the target of the previous program to 36 billion gallons of renewable fuels to be produced annually by the year 2022. The second iteration of the program also created classifications for different types of renewable fuels. These classifications included cellulosic biofuel, biomass-based diesel, advanced biofuel, and renewable fuel. In addition, the act mandated volume requirements for each type. Each fuel type was required to emit fewer carbon dioxide emissions.

On May 18, 2016, the EPA set a 2017 biofuel requirement of 18.8 billion gallons, an increase of 700 million gallons of renewable fuel from the 2016 requirement. The 2017 goal set by the EPA was lower than the target set by Congress in the 2007 statute, which mandated 24 billion gallons of biofuels by the year 2017—5.2 billion gallons more than the 2017 goal. According to assistant administrator for the EPA’s Office of Air and Radiation Janet McCabe, "Despite significant increases in renewable fuel use in the United States, real-world constraints, such as the slower than expected development of the cellulosic biofuel industry and constraints in the marketplace needed to supply certain biofuels to consumers, have made the timeline laid out by Congress impossible to achieve." The final version of the rule is available here.

Policy debate

The policy debate over the Renewable Fuel Standard requiring the blending of biofuels such as ethanol with gasoline has focused on the policy's purported economic and environmental benefits. Proponents of the policy argue that supporting ethanol will result in fewer carbon dioxide emissions, which proponents link to potentially human-caused climate change. Other proponents argue that the policy helps create jobs and encourages consumers to switch to gasoline blended with ethanol. Opponents of the policy argue that they divert corn, soybean, and other crops to biofuel production, which leads to higher food prices for consumers. Other opponents argue that the policy has not increased ethanol production as intended and has not led to reduced carbon dioxide emissions.

Proponents

Proponents of the Renewable Fuel Standard argue that biofuels like ethanol produce fewer carbon dioxide emissions when they are used. These proponents contend that federal and state policies should support fuels that produce less carbon dioxide in order to address potentially human-caused climate change, which these proponents link to fuels with greater carbon content, such as oil, coal, and natural gas. Some proponents support policies in addition to the Renewable Fuel Standard in order to incentivize biofuel production. These policies include direct funding, tax incentives, government-based loans and loan guarantees. The Natural Resources Defense Council, an environmental advocacy group, argues that the federal Renewable Fuel Standard and state-level standards are successful at incentivizing producers of motor fuel to increase their production of biofuels like ethanol and incentivizing consumers to use more biofuel-blended gasoline.

A sample of biodiesel made from soybeans

Industry proponents, including biofuel industry groups, argue that the Renewable Fuel Standard helps create jobs, reduces the need to import oil and natural gas, and helps meet energy needs brought on by a growing population. The Advanced Biofuels Association, a biofuel industry advocacy group, argues that Congress should maintain the Renewable Fuel Standard and loan programs for biofuels like ethanol as well as continue tax incentives for the biofuel industry so as to provide certainty of the industry's future to private investors.

Other proponents support the production and use of biofuels like ethanol but argue in favor of additional regulations on its production. The Iowa Chapter of the Sierra Club, an environmental advocacy group, argues that regulations should be enacted to limit the potential environmental effects of biofuel production. These regulations include state monitoring of underground aquifers used to withdraw water for biofuel production, increased water use permit fees for biofuel industries that withdraw larger amounts of water, rules for disposing of leftover materials (such as distiller grains) after ethanol is produced, and regulations limiting the loss of soil due to ethanol production.

Opponents

Opponents of the Renewable Fuel Standard and other policies supporting ethanol, argue that these policies inflate the demand for biofuels like ethanol and result in higher prices for corn, soybeans, and other biomass used in biofuel production. According to these opponents, this results in higher food prices by diverting biomass from food production to biofuel production. The Heritage Foundation, a conservative policy organization, argues that the indirect effects of the Renewable Fuel Standard include shifting the costs of biofuel production to vehicle users and the food and agricultural industries and concentrating the economic benefits to biofuel industries.

Other opponents of the RFS argue that it is unsuccessful at meeting its goals to expand biofuel and ethanol production and use and to reduce carbon dioxide emissions. According to a November 2016 from the U.S. Government Accountability Office (GAO), there is limited production for secondary biofuels, such as ethanol and biodiesel, to be blended in gasoline than previously estimated and less potential for expanded ethanol and biodiesel production through the year 2022. According to the GAO report, high production costs are the primary factor of the limited biofuel production. Further, the report found that the RFS would likely not meet its goal of reducing carbon dioxide emissions due to the limited production. The Competitive Enterprise Institute, a free market policy organization that opposes the RFS, argues that the GAO report provides evidence that the Renewable Fuel Standard has been unsuccessful at meeting its policy goals and thus should be repealed.

Some opponents argue that other factors play a greater role in reducing carbon dioxide emissions than the Renewable Fuel Standard and similar policies. These opponents argue that increased natural gas production from 2007 to 2015 has led to greater adoption of natural gas-fired electrical generating units, which produce fewer carbon dioxide emissions than oil or coal-fired generating units. Mark J. Perry, a professor of economics at the University of Michigan and an economist at the American Enterprise Institute, a free market policy group, argued in 2013 that the 12.4 percent decline of energy-related carbon dioxide emissions in the United States from 2007 to 2013 (according to the U.S. Energy Information Administration) should be attributed to the increase in natural gas production beginning in 2007 and the adoption of natural gas-fired units to generate electricity.

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See also

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  Biofuels

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  Biomass

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  Gasoline prices

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  Glossary of energy terms