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Corn (Most Used in the United States) Sugar cane (Used for Transportation Fuel in Brazil)
Two Ways to Produce Commercial Ethanol
Pros of Ethanol
Reduces toxic emissions by 30% Reduces carbon dioxide greenhouse gases by over 35% compared to gasoline Not likely to accumulate in environment Ethanol fuel contains more oxygen so it burns cleaner Decrease harmful tailpipe emissions and increase fuel octane rating
Carbon Cycle
Cons of Ethanol
Fundamental input yield problem 70% more energy is required to produce ethanol that the energy that actually is in ethanol Jacobson computer study May rise levels of nitrogen oxides produces as gasoline emissions
In the End
Our environmental system in which corn is being produced is being rapidly degraded Groundwater effects Erosion effects Mileage effects Environmental damages add another 23 cents per gallon
Upshot: If we allocate 50% of all U.S. corn to ethanol production we will replace 6.7% of imported oil, 14.2% of gasoline from imported oil
Blending ethanol with gasoline at a 10% level will reduce the retail price of conventional regular gasoline by 5%, or by 6.6 cents per gallon. Currently ethanol receives 52 cents per gallon exemption from federal excise taxes on motor fuel.
The RFS is expected to increase farm-level corn price by 16 cents per bushel on average over the next decade (or 6.6%) compared to a non-RFS baseline. Soybeans prices are expected to average 29 cents per bushel (or 5.4%) more than would be the case without RFS.
The USDA estimates of food input costs as a percentage of retail prices are incorporated into this study, and are as follows: Cereal and bakery items: input costs represent 4% of the price paid by consumers Beef: input costs represent 48% of the price paid by consumers Pork: input costs represent 27% of the price paid by consumers Chicken (fryers): input costs represent 50% of the price paid by consumers Dairy products: input costs represent 38% of the price paid by consumers Fats and oils: input costs represent 15% of the price paid by consumers All other (including fruits and vegetables) were assumed to not be impacted by a sustained increase in the price of corn
For example, with Chicken: 40% of input costs due to feed 66% of feed costs due to corn 50% of retail price due to input costs 13% (20%) of retail price due to corn (all feed) If double the price of corn (all feed), maximum price increase for chicken is 13% (20%)
After 2002
What caused the jump in ethanol production after 2002?
MTBE (Methyl tertiary-butyl ether), an oxygenate added to gasoline, is found to have toxic components which are ending up in peoples drinking water. Ethanol is a clean substitute for MTBE.
After 2005
Ethanol gets another boost.
Energy Policy Act introduces Renewable Fuel Standards (RFS) program.
Requires 4 billion gallons of ethanol to be blended with gasoline by 2006 and 7.5 billion gallons by 2012.
What next?
Do we still need an ethanol subsidy of 51 cents per gallon? Do we still need an ethanol subsidy at all? Can ethanol compete with gasoline on its own?
Is Ethanol competitive?
With the price of oil soaring, ethanol is looking more and more attractive. So attractive that maybe a subsidy is no longer needed. Ethanol is now being produced faster than it can be used, causing a surplus of ethanol.