Saturday, June 16, 2007

Ethanol and Biofuels: Agriculture,Infrastructure, and Market Constraints Related to Expanded Production

Ethanol and Biofuels: Agriculture,Infrastructure, and Market Constraints Related to Expanded Production

| Brent D. Yacobucci, Specialist in Energy Policy, Resources, Science, and Industry Division | Randy Schnepf, Specialist in Agricultural Policy Resources, Science, and Industry Division | Congessional Research Service | March 16, 2007 | RL33928 |

High petroleum and gasoline prices, concerns over global climate change, and the desire to promote domestic rural economies have greatly increased interest in biofuels as an alternative to petroleum in the U.S. transportation sector. Biofuels, most notably corn-based ethanol, have grown significantly in the past few years as a component of U.S. motor fuel supply. Ethanol, the most commonly used biofuel, is blended in nearly half of all U.S. gasoline (at the 10% level or lower in most cases). However, current biofuel supply represents less than 4% of total gasoline demand. While recent proposals have set the goal of significantly expanding biofuel supply in the coming decades, questions remain about the ability of the U.S. biofuel industry to meet rapidly increasing demand. Current U.S. biofuel supply relies almost exclusively on ethanol produced from Midwest corn. In 2006, 17% of the U.S. corn crop was used for ethanol production.

To meet some of the higher ethanol production goals would require more corn than the United States currently produces, if all of the envisioned ethanol was made from corn. Due to the concerns with significant expansion in corn-based ethanol supply, interest has grown in expanding the market for biodiesel produced from soybeans and other oil crops. However, a significant increase in U.S. biofuels would likely require a movement away from food and grain crops. Other biofuel feedstock sources, including cellulosic biomass, are promising, but technological barriers make their future uncertain. Issues facing the U.S. biofuels industry include potential agricultural "feedstock" supplies, and the associated market and environmental effects of a major shift in U.S. agricultural production; the energy supply needed to grow feedstocks and process them into fuel; and barriers to expanded infrastructure needed to deliver more and more biofuels to the market.

This report outlines some of the current supply issues facing biofuels industries, including the limitations on agricultural feedstocks, infrastructure constraints, energy supply for biofuel production, and fuel price uncertainties.

There is continuing interest in expanding the U.S. biofuel industry as a strategy for promoting energy security and environmental goals. However, there are limits to the amount of biofuels that can be produced and questions about the net energy and environmental benefits they would provide. Further, rapid expansion of biofuel production may have many unintended and undesirable consequences for agricultural commodity costs, fossil energy use, and environmental degradation. As policies are implemented to promote ever-increasing use of biofuels, the goal of replacing petroleum use with agricultural products must be weighed against these other potential consequences.

Introduction ..... 1
Issues with Corn-Based Ethanol Supply ..... 3
Overview of Long-Run Corn Ethanol Supply Issues ..... 3
Agricultural Issues ..... 4
Feed Markets ..... 5
Exports .... 5
Food vs. Fuel ..... 6
Energy Supply Issues ..... 6
Energy Balance ..... 6
Natural Gas Demand ..... 7
Energy Security ..... 7
Infrastructure and Distribution Issues ..... 8
Distribution Issues ..... 8
Higher-Level Ethanol Blends .... 9
Sugar Ethanol ..... 10
Biodiesel ..... 11
Cellulosic Biofuels ..... 11
Conclusion ..... 12

List of Tables
Table 1. U.S. Production of Biofuels from Various Feedstocks .... 3


1 comment:

Redneck Christmas Elf said...

Not to deny or argue that Corn based ethanol is a bad thing, cellulosic ethanol seems to have much better possibilities than corn.