An occasional publication of economic research and commentary that centers on a regional or national issue, often with emphasis on the Eighth Federal Reserve District. Written for a generally informed readership.
APRIL 2009 Vol. 5, No. 1
Economics of Ethanol: Costs, Benefits, and Future Prospects of Biofuels
Proceedings of a conference co-hosted by the Federal Reserve Bank of St. Louis and the Weidenbaum Center on the Economy, Government, and Public Policy and the International Center for Advanced Renewable Energy & Sustainability, Washington University in St. Louis, November 14, 2008.
The U.S. Ethanol Industry
Ethanol is vital to achieving greater American energy independence. It is today’s only viable and available fuel that can be substituted for gasoline. Unlike oil, ethanol is renewable—it will never run out.
Roles for Evolving Markets, Policies, and Technology Improvements in U.S. Corn Ethanol Industry Development
This article reviews changes in markets, technologies, and policies that affect corn ethanol profitability and industry expansion. Historically, the corn ethanol industry was stimulated by high petro-fuel prices, successful corn and processing technology improvements, and government incentives, such as a blenders’ tax credit and mandated markets defined by the leaded fuel ban and reformulated fuel. Presently, the corn ethanol industry has expanded slightly beyond the point of a normal capital return, which is defined by limits on corn resource availability and ethanol marketing infrastructure.
Economic and Environmental Impacts of U.S. Corn Ethanol Production and Use
For many years, U.S. policy initiatives and incentives have favored the production of ethanol from corn. The goals have been to increase corn prices and farmer income, enhance rural employment through encouragement of value-added businesses, increase energy security, and produce additives and/or fuels capable of reducing tailpipe pollutants and greenhouse gases.
The Impact of the Ethanol Boom on Rural America
Since 2005, surging U.S. ethanol production has helped reshape the rural economy. Ethanol production has increased nonfarm activity in many rural communities. Moreover, increased ethanol production contributed to rising crop prices, increased net returns, and a jump in cropland values both nationally and regionally. However, rising crop prices cut livestock revenues by boosting feed costs.