Increased Corn Prices Threaten Ethanol Fuel’s Long Term Viability

Ethanol, long viewed as the darling of the biofuels industry, has experienced several hiccups as of late. A lingering drought in the American Midwest has caused water shortages throughout the “corn belt”, wreaking havoc on corn crops, driving up the price of ethanol fuel and jeopardizing its long-term viability.

Increased costs and dwindling demand have already caused some 10 percent of the nation’s ethanol plants to halt production. According to the USDA, the record-high corn prices could spike by as much as 19 percent throughout 2013.

Ethanol’s relationship with the public is, shall we say, complicated. Many politicians and environmental groups argue that the bio-fuel is not as sustainable as it may sound – it causes increased food prices and requires significant land use. Some scientists also say that up to six times more energy is used to make ethanol than the finished fuel actually contains.

“People tend to think of ethanol and see an endless cycle: corn is used to produce ethanol, ethanol is burned and gives off carbon dioxide, and corn uses the carbon dioxide as it grows,” said UC Berkeley geoengineering professor, Tad Patzek, in a 2005 interview with San Francisco Chronicle. “But that isn't the case. Fossil fuel actually drives the whole cycle.”

That is not to say ethanol itself is such a filthy fuel. While actual emissions vary with engine design, ethanol on average emits 40 percent less carbon monoxide, 10 percent less nitrogen oxide, 80 percent less sulfate and produces 15 percent fewer volatile organic compounds than gasoline.

Ethanol-powered vehicles date back to the 19th century when Henry Ford designed a car that ran solely on the corn-based fuel. Believe it or not, the original Model T was designed to operate on either ethanol or gasoline. While more than 90 percent of U.S. ethanol production comes from corn, it also can be made from potatoes, wood, waste paper, wheat, brewery waste and many other agricultural products and food wastes.

Pure ethanol is almost never used for transportation – usually it is mixed with gasoline. The most common blend for light-duty vehicles is called E85, which is 85 percent ethanol and 15 percent gasoline. Heavy-duty trucks tend to use E95, which is, you guessed it, 95 percent ethanol and 5 percent unleaded gasoline. Another popular blend for heavy-duty trucks is E93 – ethanol blended with 5 percent methanol and 2 percent kerosene. There is even such a thing as “gasohol,” or E10, which uses ethanol as a 10 percent mixer.

Not so long ago, with the threat of peak oil appearing to loom on the horizon, ethanol was seen as a good way to stretch out the world’s gasoline supply, as it is bio-based and therefore fully renewable. For the past decade, the U.S. government has required all gasoline to contain at least 10 percent biofuel and encouraged ethanol adoption with a 45 cents per gallon tax credit, which expired at the end of 2011.

The ethanol industry received another boost in 2007 when Congress passed The Renewable Fuel Standard, which mandated the gasoline industry to increase the amount of blended biofuels in gasoline to 15 percent.

Midwestern farmers such as those in Missouri saw an economic boom from these pro-ethanol policies, which gave them lucrative new markets for their corn crops. The subsequent explosion of new ethanol plants created thousands of jobs.

Once the recession hit, overall demand for gasoline (and ethanol) shrank, revealing the ethanol industry for what it was – a fat cat dependent on state subsidies for survival. The oversupply of ethanol has resulted in thousands of filled barrels sitting in storage facilities across the Midwest, waiting for enough gasoline to be blended with.

While ethanol may or may not be on its way out, a more feasible alternative could be with “cellulosic” biofuels synthesized from non-food sources such as wood, grasses or the inedible parts of plants. If further developed and then scaled up, these second-generation biofuels could become the sustainable fuel solution we have been looking for.

Based in San Francisco, Mike Hower is an Associate Editor at Sustainable Brands and writes about companies and organizations engaged in sustainability strategy, clean technology and social entrepreneurship. As a natural politico, he has a soft spot for anything related to public policy and the intersection of business and government, which he also blogs about on SustySavvy.com. Contact him at mikehower@gmail.com. You  also can connect with him on LinkedIn or follow him on Twitter (@mikehower).