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Ethanol fuel in the United States

Current interest in ethanol fuel in the United States mainly lies in bio-ethanol, produced from corn, but there has been considerable debate about how useful bio-ethanol will be in replacing fossil fuels in vehicles. Concerns relate to the large amount of arable land required for crops, as well as the energy and pollution balance of the whole cycle of ethanol production. Recent developments with cellulosic ethanol production and commercialization may allay some of these concerns.

Ethanol currently constitutes only a small fraction of the United States' fuel supply, but domestic production capacity has more than doubled since 2001, to over 4.5 billion gallons per year. Most cars on the road today in the U.S. can run on blends of up to 10% ethanol, and motor vehicle manufacturers already produce vehicles designed to run on much higher ethanol blends. Portland, Oregon, recently became the first city in the United States to require all gasoline sold within city limits to contain at least 10% ethanol. “Flexible-fuel” cars, trucks, and minivans can use gasoline and ethanol blends ranging from pure gasoline up to 85% ethanol (E85). By mid-2006, there were approximately six million E85-compatible vehicles on U.S. roads.

The Renewable Fuels Association counts 113 U.S. ethanol distilleries in operation and another 78 under construction. Ethanol production is likely to soar over the next several years, since the Energy Policy Act of 2005 set a renewable fuels standard mandating 7.5 billion gallons of annual domestic renewable-fuel production by 2012. President Bush eventually seeks to generate a western-hemisphere dominated industry that can produce as much as 35 billion gallons (130 billion liters) a year, equal to the entire world's production as of 2007.

Expanding ethanol industries provide jobs in plant construction, operations, and maintenance, mostly in rural communities.

Ethanol has less energy than an equivalent volume of gasoline, but can be produced from domestic renewable sources such as corn, sugar beets and sugar cane. There are also industrial processes which use ethanol as an intermediate or final product, mouthwash for example. Companies that serve industrial users of ethanol have been observing the green movement and have found ways to collect and reprocess ethanol. For instance, Veolia, an environmental services company, has been a pioneer in the field of gathering waste ethanol and producing it from other resources. This is a new alternative to the low yielding corn production. Waste ethanol is cleaned up through distillation, which increases the alcohol content to match ethanol produced from corn. Ethanol is also produced from off specification alcoholic beverages and through the fermentation process of other off specification beverages and products such as out-of-date cola syrup. The resulting liquids are processed through the fermentation and distillation equipment. All the packaging, plastic, aluminum, steel, cardboard and wood pallets, is recycled. The final ethanol product is sold back in to the ethanol market where much of it is used as fuel. In the United States, the newest ethanol recovery plant opened in Medina, Ohio, in July 2008, by Veolia Environmental Services, confirming the green movement in alternative fuel production

History of ethanol in the US

In 1826, Samuel Morey, experimented with a prototypical internal combustion engine that used ethanol (combined with turpentine and ambient air then vaporized) as fuel. At the time, his discovery was overlooked mostly due to the success of steam power. And while ethanol was known of for decades, it received little attention as a fuel until 1860 when Nicholas Otto began experimenting with internal combustion engines. In 1859, oil was found in Pennsylvania which provided a new supply of fuel for the United States. A popular fuel in the U.S. before petroleum was a blend of alcohol and turpentine called "camphene", also known as "burning fluid." With the discovery of a ready supply of oil, kerosene's popularity grew.

in 1896, Henry Ford designed his first car, the "Quadricycle" to run on pure ethanol. Then in 1908, he produced the famous Ford Model T capable of running on gasoline, ethanol or a combination of both. Ford continued to advocate for ethanol as fuel even during the prohibition, but cheaper oil caused gasoline to prevail.

Gasoline containing up to 10% ethanol has been in increasing use in the United States since the late 1970s. The demand for ethanol fuel produced from field corn was spured by the discovery that methyl tertiary butyl ether (MBTE) was contaminating groundwater. MBTE use as a oxygenate additive was widespread due to mandates of the Clean Air Act amendments of 1992 to reduce carbon monoxide emissions. As a result, MTBE use in gasoline was banned in almost 20 states by 2006. There was also concern that widespread and costly litigation might be taken against the U.S. gasoline suppliers, and a 2005 decision refusing legal protection for MBTE, opened a new market for ethanol fuel, the primary substitute for MBTE. At a time when corn prices were around US$ 2 a bushel, corn growers recognized the potential of this new market and delivered accordingly. This demand shift took place at a time when oil prices were already significantly rising. By 2006, about 50 percent of the gasoline used in the U.S. and more than 85 percent of Hawaii’s gasoline contains ethanol at different proportions.

Current trends

U.S. fuel ethanol
production and imports
(2001-2007)
(Millions of U.S. liquid gallons)
Year Production Imports Demand
2001 1,770 n/a n/a
2002 2,130 46 2,085
2003 2,800 61 2,900
2004 3,400 161 3,530
2005 3,904 135 4,049
2006 4,855 653 5,377
2007 6,500 450 n/a
Note: Demand figures includes stocks change
and small exports in 2005

The world's top ethanol producers in 2006 were the United States with 4.855 billion U.S. liquid gallons and Brazil with 4.49 bg. The United States, together with Brazil accounted for 70 percent of all ethanol production, with total world production of 13.5 billion gallons (40 million tonnes). When accounting just for fuel ethanol production in 2007, the U.S. and Brazil are responsible for 88% of the 13.1 billion gallons total world production.

By 2007, the U.S. ethanol production industry consisted of 115 plants operating in nineteen states. The nearly 7 billion gallons production of these plants was a 38% increase over the previous year, and surpassed Brazil as the worlds largest ethanol producer in 2005. Dozens more plants are under development and due to come on line in 2008 and 2009, increasing U.S. production capacity to nearly 12 billion gallons.

Most cars on the road today in the U.S. can run on blends of up to 10% ethanol, and motor vehicle manufacturers already produce vehicles designed to run on much higher ethanol blends. In 2007, Portland, Oregon, recently became the first city in the United States to require all gasoline sold within city limits to contain at least 10% ethanol. As of January 2008, three states - Missouri, Minnesota, and Hawaii - require ethanol to be blended with gasoline motor fuel. Florida made mandatory such blends by the end of 2010. Many cities are also required to use an ethanol blend due to non-attainment of federal air quality goals.

Ford, Chrysler, and GM are among the automobile companies that sell flexible-fuel vehicles that can run gasoline and ethanol blends ranging from pure gasoline up to 85% ethanol (E85), and by 2008 almost any type of automobile and light duty vehicles is available in the market with the flex-fuel option, including sedans, vans, SUVs and pick-up trucks. By mid-2008, there were more than seven million E85-compatible vehicles on U.S. roads, though actual used of E85 fuel is limited, not only because the ethanol fueling infrastructures is limited, but also, as found by a 2005 survey, 68% of American flex-fuel car owners were not aware they owned an E85 flex. This is due to the fact that the exterior of flex and non-flex vehicles look exactly the same; there is no sale price difference between them; the lack of consumer's awareness about E85s; and also the decision of American automakers of not putting any kind of exterior labeling, so buyers can be aware they are getting an E85 vehicle. In contrast, all Brazilian automakers clearly mark FFVs with badging or a high quality sticker in the exterior body, with a text that is some variant of the word Flex. As of 2007, many new FFV models in the US now feature a yellow cap to close the fueling line to remind drivers of the E85 capabilities, and GM is also using badging with the text "Flexfuel/E85 Ethanol" to clearly mark the car as an E85 FFV.

E-85 flex-fuel vehicles are becoming increasingly common in the Midwest, where corn is a major crop and is the primary feedstock for ethanol fuel production. A major restriction hampering sales of E85 flex vehicles or fulling with E85, is the limited infrastructure available to sell E85 to the public, as by July 2008 there were only 1,706 gasoline filling stations selling E85 to the public in the entire US, with a great concentration of E85 stations in the Corn Belt states, lead by Minnesota with 353 stations, the most that any other state, followed by Illinois with 181, and Wisconsin with 114.

The Renewable Fuels Association counts 113 U.S. ethanol distilleries in operation and another 78 under construction, with capacity to produce 11.8 billion gallons within the next few years. The Energy Information Administration (EIA) predicts in its Annual Energy Outlook 2007 that ethanol consumption will reach 11.2 billion gallons by 2012, outstripping the 7.5 billion gallons required in the Renewable Fuel Standard that was enacted as part of the Energy Policy Act of 2005.

Expanding ethanol (and biodiesel) industries provide jobs in plant construction, operations, and maintenance, mostly in rural communities. According to the Renewable Fuels Association, the ethanol industry created almost 154,000 U.S. jobs in 2005 alone, boosting household income by $5.7 billion. It also contributed about $3.5 billion in tax revenues at the local, state, and federal levels.

Reduced petroleum imports and costs

One rationale given for extensive ethanol production in the U.S. is its benefit to energy security, by shifting the need for some foreign-produced oil to domestically-produced energy sources. Production of ethanol requires significant energy, but current U.S. production derives most of that energy from coal, natural gas and other sources, rather than oil. Because 66% of oil consumed in the U.S. is imported, compared to a net surplus of coal and just 16% of natural gas (2006 figures), the displacement of oil-based fuels to ethanol produces a net shift from foreign to domestic U.S. energy sources.

According to a 2008 analysis by Iowa State University, the growth in US ethanol production has caused retail gasoline prices to be US $0.29 to US $0.40 per gallon lower than would otherwise have been the case.

Cellulosic ethanol

In his State of the Union Address on January 31, 2006, President George W. Bush stated, “We'll also fund additional research in cutting-edge methods of producing ethanol, not just from corn, but from wood chips and stalks or switchgrass. Our goal is to make this new kind of ethanol practical and competitive within six years.” The U.S. Department of Energy released a report on July 7, 2006 with an ambitious new research agenda for the development of cellulosic ethanol as an alternative to gasoline. The 200-page scientific roadmap cites recent advances in biotechnology that have made cost-effective production of ethanol from cellulose, or inedible plant fiber, an attainable goal, with federal loan guarantees for new cellulosic biorefineries. The report outlines a detailed research plan for developing new technologies to transform cellulosic ethanol - a renewable, cleaner-burning, and carbon-neutral alternative to gasoline - into an economically viable transportation fuel. The Department of Energy has invested in research on enzymatic, thermochemical, acid hydrolysis, hybrid hydrolysis/enzymatic, and a variety of other approaches toward achieving success in discovering an efficient and low cost method of converting cellulose to ethanol.

President Bush's 2007 budget earmarked $150 million for the research effort - more than double the 2006 budget in favor of the cellulosic lobby. Taxpayers and consumers are already shouldering part of the cost: each gallon of ethanol sold is subsidized by a 51-cent/gallon federal tax credit paid to U.S. producers. These subsidies, along with state incentive programs, cost the nation over $2 billion a year, leading legislators to pledge to invest in cellulosic ethanol. Another dampening factor is the short term loss of income to American refiners of crude oil. The U.S. market is especially lucrative, sometimes earning its refiners $30 or more on every barrel of crude oil they refine. Exxon Mobil Corp. earned $1.3 billion in its refining arm in the second quarter, up 11% from a year before. The expectation, over the long run, is that the U.S. economy would more than earn its share back if our primary source of energy were manufactured and processed in the United States, but individual companies could be adversely affected.

Sugar-based ethanol

fuel ethanol
imports by country (2002-2007)
(Millions of U.S. liquid gallons)
Country 2007 2006 2005 2004 2003
188.8 433.7 31.2 90.3 0
75.2 66.8 36.3 36.6 39.3
73.3 38.5 23.7 5.7 6.9
42.7 24.8 10.0 0 0
39.3 35.9 33.4 25.4 14.7

Technologically, the process of producing ethanol from sugar is simpler than converting corn into ethanol. Converting corn into ethanol requires additional cooking and the application of enzymes, whereas the conversion of sugar requires only a yeast fermentation process. The energy requirement for converting sugar into ethanol is about half that for corn. A 2006 USDA report found that at the current market prices for ethanol, converting sugarcane, sugar beets and molasses to ethanol would be profitable.

Sugarcane production in the United States occurs in Florida, Louisiana, Hawaii, and Texas. The first three plants to produce sugar cane-based ethanol are expected to go online in Louisiana by mid 2009. Sugar mill plants in Lacassine, St. James and Bunkie were converted to sugar cane-based ethanol production using Colombian technology in order to make possible a profitable ethanol production. These three plants will produce 100 million gallons of ethanol within five years.

In March 2007, "ethanol diplomacy" was the focus of President George W. Bush's Latin American tour, in which he and Brazil's president, Luiz Inacio Lula da Silva, were seeking to promote the production and use of sugar cane based ethanol throughout the Caribbean Basin. The two countries also agreed to share technology and set international standards for biofuels. The Brazilian sugar cane technology transfer will permit various Central American, such as Honduras, El Salvador, Nicaragua, Costa Rica and Panama, several Caribbean countries, and various Andean Countries tariff-free trade with the U.S. thanks to existing concessionary trade agreements. The expectation is that using Brazilian technology for refining sugar cane based ethanol, such countries could become exporters to the United States in the short-term.

In 2007, Jamaica, El Salvador, Trinidad & Tobago and Costa Rica exported together to the U.S. a total of 230.5 million gallons of sugar cane-based ethanol, representing 54.1% of U.S. fuel ethanol imports. Brasil began exporting ethanol to the U.S. in 2004 and exported 188.8 million gallons representing 44.3% of U.S. ethanol imports in 2007. The remaining imports that year came from Canada and China.

Comparison with Brazilian ethanol

Brazil's sugar cane-based ethanol industry is more efficient than the U.S. corn-based industry. Sugar cane ethanol has an energy balance 7 times greater than ethanol produced from corn. Brazilian distillers are able to produce ethanol for 22 cents per liter, compared with the 30 cents per liter for corn-based ethanol. U.S. corn-derived ethanol costs 30% more because the corn starch must first be converted to sugar before being distilled into alcohol. Despite this cost differential in production, the U.S. does not import more Brazilian ethanol because of U.S. trade barriers corresponding to a tariff of 54-cent per gallon – a levy designed to offset the 51-cent per gallon blender's federal tax credit that is applied to ethanol no matter its country of origin. One advantage U.S. corn-derived ethanol offers is the ability to return 1/3 of the feedstock back into the market as a replacement for the corn used in the form of Distillers Dried Grain.

Comparison of key characteristics between
the ethanol industries in the United States and Brazil
Characteristic Units/comments
Feedstock Sugar cane Maize Main cash crop for ethanol production, the US has less than 2% from other crops.
Total ethanol production (2007) 5,019.2 6,498.6 Million U.S. liquid gallons
Total arable land 355 270(1) Million hectares.
Total area used for ethanol crop (2006) 3.6 (1%) 10 (3.7%) Million hectares (% total arable)
Productivity per hectare 6,800-8,000 3,800-4,000 Liters of ethanol per hectare. Brazil is 727 to 870 gal/acre (2006), US is 321 to 424 gal/acre (2003-05)
Energy balance (input energy productivity) 8.3 to 10.2 times 1.3 to 1.6 times Ratio of the energy obtained from ethanol/energy expended in its production
Estimated greenhouse gas emission reduction 86-90%(2) 10-30%(2) % GHGs avoided by using ethanol instead of gasoline, using existing crop land.
Estimated payback time for greenhouse gas emission 17 years(3) 93 years(3) Brazilian cerrado for sugar cane and US grassland for corn. Land use change scenarios by Fargione et al.
Flexible-fuel vehicle fleet (autos and light trucks) 6.2 million 7.3 million As of August 2008 for both Brazil (FFVs use any blend up to E100); and the US (FFVs use E85 only).
Ethanol fueling stations in the counrty 33,000 (100%) 1,700 (1%) As % of total fueling gas stations in the country. Brazil for 2006, U.S. as July 2008 and total of 170,000
Ethanol's share within the gasoline market 50%(4) 4% As % of total consumption on a volumetric basis. Brazil as of April 2008. US as of December 2006.
Cost of production (USD/gallon) 0.83 1.14 2006/2007 for Brazil (22¢/liter), 2004 for U.S. (35¢/liter)
Government subsidy (in USD) 0 (5) 0.51/gallon U.S. as of 2008-04-30. Brazilian ethanol production is no longer subsidized.(5)
Import tariffs (in USD) 0 0.54/gallon As of April 2008, Brazil does not import ethanol, the U.S. does
Notes: (1) Only contiguous U.S., excludes Alaska. (2) Assuming no land use change. (3) Assuming direct land use change. (4) Including diesel-powered vehicles, ethanol represented 18% of the road sector
fuel consumption in 2006. (5) Brazilian ethanol production is no longer subsidized, but gasoline is heavily taxed favoring ethanol fuel consumption (~54% tax). By the end of July 2008, the average gasoline retail
price at the pump in Brazil was USD 6.00 per gallon, while the average US price was USD 3.98 per gallon. The latest gas retail price increase in Brazil occurred in late 2005, when oil price was at USD 60 per barrel.

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References

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