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Transportation Energy

Ethanol

Fuel ethanol is made by fermenting and distilling simple sugars. The biggest use of the fuel ethanol in the U.S. is as an additive in gasoline to reduce air pollution, prevent early ignition, and extend gasoline stocks. In its purer form, it can be used in specially designed cars as an alternative to gasoline. Supporters of ethanol emphasize that expansion of its use would reduce pollutants and promote energy security. Opponents argue that the production of ethanol is more than or as harmful as gasoline use, and that federal and state subsidies of ethanol production distort the market and unfairly benefit corn growers and ethanol producers. Concerns about energy security extend to ethanol because it is dependent crops that are susceptible to threats such as drought and high prices.

Consumption: Ethanol consumption accounts for about 2% of fuel consumption, including as an additive to gasoline and diesel. In 2001 domestic ethanol consumption was 1.8 billion gallons per year. By 2005 consumption had more than doubled to 4 billion gallons per year. Approximately 99% of fuel ethanol consumed in the U.S. is "gasohol" (blends of gasoline with up to 10% ethanol). About 1% is consumed as E85, an alternative to gasoline.

Supply: Corn constitutes about 90% of the feedstock for ethanol production in the U.S. The other 10% is largely grain sorghum, barley, wheat, cheese whey and potatoes. The USDA estimated that in the 2005-2006 corn marketing year, about 1.6 billion bushels of corn would be used to produce about 4.3 billion gallons of fuel ethanol. In early 2006, estimates projected that the U.S. could produce about 4.4 billion gallons per year and that capacity could grow to 6.3 billion gallons per year by the end of 2006. Ethanol is currently being produced in Illinois, Iowa, Nebraska, Minnesota and Indiana. The top three producers of ethanol are Archer Daniel Midland (ADM), VeraSun Energy Corporation, and Aventine Renewable Energy. The top ten producers account for approximately 41% of production capacity.

Cellulosic Feedstocks: Cellulosic feedstock could provide a low-cost means of producing ethanol. Cellusoic materials include paper and rice hulls, switchgrass and fast growing trees which could be harvested solely for fuel production. Improving the viability of cellulosic ethanol by reducing production costs could help make ethanol a more cost effective and competitive alternative to gasoline. President Bush supported this goal in his 2006 State of the Union Address.

Legislative Initiatives: Recently, Congress has been interested in ethanol issues such as (1) Reformulated Gasoline Program (RFG) oxygenate requirements; (2) renewable fuel standards; (3) "boutique fuels" (specific formulations of alternative fuels); (4) alcohol fuel tax incentives; (5) ethanol imports through Caribbean Basin Initiative (CBI) countries; (6) fuel economy credits for dual fuel vehicles; and (7) the role of biofuels in the upcoming Farm Bill.

This issue brief does not represent the viewpoint of the Energy Initiative or the positions of its individual members. This summary provides merely a starting point for the working group's education and discussion of the issue. To learn more about the working groups click here.