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The ethanol market in the United States is undergoing a rapid increase, affecting many sectors of the national economy. Consensus among all stakeholders is that priority must be given to the development of cellulosic ethanol and other technologies capable of delivering a safe and effective biofuel, to address the growing US energy security dilemma. The development of a new biofuels market that will combine ethanol production from traditional and innovative crops with new alternative fuel technology presents exciting opportunities and challenges. This paper examines the current developments in the ethanol market - both economic and political - and attempts to show where the synergies lie between US producers' best strategies and achieving energy security.
Hester is the author of numerous articles published in Oil and Gas Journal, Estey Centre Journal, and the Journal of Canadian Petroleum Technology; as well as chapters in edited volumes; and is a frequent contributor to a variety of newspapers including The Globe and Mail and the Calgary Herald. [...] Given that estimates for the 2001-2005 period are not available, a "back of the envelope" calculation was made by multiplying the total ethanol production of 13.9 billion gallons by the tax credit of $0.51 to arrive at the rough figure of $7 billion. [...] Informed estimates are that ethanol plant costs of US$100 million have almost doubled in the last two years.10 In the absence of an existing pipeline gathering and transportation infrastructure, part of the expense is attributed to the need to build appropriate rail transportation terminals in each plant. [...] A comprehensive discussion of these two plants can be found in a recently published article by Chad Hart and Miguel Carriquiry.14 The Road Ahead Central to the issues facing policymakers and producers are the projections for 2007/2008 and 2008/2009 increases in ethanol production and the associated impact this would have on the acreage dedicated to the corn harvest. [...] Worthy of note are the efforts of Vinod Koshla, the founder of Sun MicroSytems, now turned venture capitalist and the nation's number one advocate for ethanol, especially cellulosic ethanol.24 There is plenty of evidence that the increased funding can bring cellulosic ethanol to markets in less than the ten years most scientists believe is feasible.
Here is unique information about ethanol, cellulosic ethanol, and E85 fuels from the DOE. Contents: Part 1: Handbook for Handling, Storing, and Dispensing E85; Part 2: Understanding the Growth of the Cellulosic Ethanol Industry. E85 Handbook: This document serves as a guide for blenders, distributors, sellers, and users of E85 as an alternative motor fuel. It provides basic information on the proper and safe use of E85 and offers supporting technical and policy references. E85 is an alternative motor fuel authorized by the Energy Policy Act (EPAct) of 1992, Section 301(2). As defined by EPAct, E85 is composed of 85% fuel grade ethanol and 15% hydrocarbons in the gasoline boiling range. Ethanol is a renewable, domestically produced fuel that can be made from grains, such as corn or wheat, or from biomass or cellulose sources, such as prairie grass and agricultural, forestry, or municipal waste matter. Several research studies show that E85 has the potential to substantially reduce petroleum fuel use and greenhouse gas emissions (GHGs). Driven by increasing gasoline prices, the market for E85 is growing. With consumer demand for alternative fuel vehicles (AFVs) increasing, auto manufacturers are working to produce more flexible fuel vehicles (FFVs), which are capable of operating on E85 or gasoline or a combination of the two. As of May 2010, there were 8.35 million FFVs on U.S. roads, and automakers were planning to produce several million more each year. FFVs are available in most vehicle classes, including sedans, minivans, trucks, and sport utility vehicles. The number of E85 fueling stations is growing rapidly nationwide. As of June 2010, there were 2,051 retail stations (out of 162,000 nationwide) offering E85 across the country. Several key factors affecting E85 growth and acceptance were recently addressed. The U.S. Environmental Protection Agency (EPA) issued a guidance document to states defining a process by which they could determine whether "Stage II" gasoline vapor recovery equipment would be required for new E85 pumps. In October 2007, Underwriters Laboratories, Inc., (UL) established standardized testing procedures for E85 fuel dispensers that address the unique properties of alcohol fuels when blended with gasoline. This testing standard (UL Subject 87A) was updated in August 2009. In addition, UL announced equipment listed for E85 use in June 2010. Cellulosic Ethanol Industry: This report identifies, outlines, and documents a set of plausible scenarios for producing significant quantities of lignocellulosic ethanol in 2017. These scenarios can provide guidance for setting government policy and targeting government investment to the areas with greatest potential impact. A prototype version of the Biomass Scenario Model (BSM) was used to develop the scenarios. The analysis underlying the scenario-generation exercise focuses on understanding the impact of two types of proposed government policies on the deployment of cellulosic biofuels technologies: Policies focused on reducing operating costs associated with cellulosic ethanol production. These policies include payments to feedstock producers and subsidies associated with production of cellulosic ethanol. Policies focused on reducing capital costs associated with cellulosic ethanol production. These policies include capital subsidies for construction of full-scale cellulosic ethanol production plants.
The U.S. ethanol industry is lobbying hard for an extension of existing ethanol import tariffs and blenders tax credits before they expire at the end of 2010. The purpose of this study is to examine the likely consequences on the U.S. ethanol industry, corn producers, taxpayers, fuel blenders, and fuel consumers if current policy is not extended. Impacts of different ethanol policies in both 2011 and 2014 were estimated. Estimates were obtained by developing a new stochastic model that calculates market-clearing prices for U.S. ethanol, Brazilian ethanol, and U.S. corn. The model is stochastic because market-clearing prices are calculated for 5,000 random draws of corn yields and wholesale gasoline prices. Key assumptions in this study are that the strong growth in flex-fuel vehicles in Brazil continues; intermediate ethanol blends with few restrictions are implemented in U.S. markets in 2014; U.S.
Throughout 2011, several pieces of legislation aimed at modifying U.S. ethanol policy have been proposed in Congress. The current policy debate focuses on whether to leave the mandate for corn and sugarcane based ethanol at 15 billion gallons per year or to lower it. This study assesses the effects of proposed ethanol legislation by evaluating both the historical effects of U.S. ethanol policy and approximating the outcomes of currently proposed legislation. Historical effects are assessed following Luchansky and Monks (2009) and lengthening the monthly data series to 1994 to 2009, further controlling for autocorrelation and adding explanatory variables to control for the ethanol blender's credit and environmental policies encouraging ethanol use. The study finds there was a structural break in the U.S. ethanol industry in 2002 and that the interaction of environmental policies and a 186 percent increase in the retail gasoline price from 2002 to 2008 drove the rapid expansion in the U.S. ethanol industry starting in 2002 (U.S. Energy Information Administration, 2011f). The effects of proposed legislation are assessed using an Equilibrium Displacement Model (EDM). The classic EDM is expanded to determine whether or not policy outcomes diverge when using a linear versus a non-linear approximation procedure. Results suggest outcomes of current policy proposals for U.S. ethanol producers and corn farmers are determined by the ethanol mandate. In contrast, policy prescription outcomes for ethanol consumers and foreign ethanol producers are jointly determined by the mandate, subsidy and tariff. However, no economically significant differences resulted from using the linear versus the non-linear approximation procedure. This study finds that the future of the U.S. ethanol industry will be jointly determined by the level of the U.S. ethanol mandate and long-run retail gasoline prices.