The Hidden Costs of Ethanol

By Sophie Harrington

For the last few years, biofuels have been a hot topic in the discussion of alternative fuel sources. The addition of ethanol to fuel, in particular, has helped spur the industry on. In the United States, 3.75 billion gallons of ethanol are required to be blended into petrol supplies.

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Credit: Seth Anderson

However, as ethanol began to be added to petrol supplies, significant concerns were raised regarding the effect on corn prices. The initially small size of ethanol production failed to have much of an effect on corn prices as a whole. However, dramatic increases in the industry size have reached the point where ethanol is expected to soon become the predominant use for corn in the U.S., overtaking livestock feed.

The Food and Agriculture Administration (FAO) has claimed that the increasing demand for ethanol has drastically raised the prices of maize worldwide, nearly tripling between 2002 and 2012. In the United States, the Renewable Food Standard has been critical in driving the growth of the biofuels industry, primarily ethanol, by requiring a minimum fraction of petrol to be made up of biofuels. According to some reports, if only 10.6% of global corn production was diverted towards ethanol rather than towards food production, a 68% rise in global corn prices would be expected.

While certain groups have argued that the purported link between ethanol production and rising corn prices is merely a symptom of rising food prices as a whole, significant concerns have been raised regarding the effect of biofuel production on food security across the world.

Debate is currently ongoing in the US regarding the fate of the new Renewable Fuel Standard. Cuts to biofuel requirements are being considered, supported particularly by the oil lobby. Biofuel lobbyists are contending that removing federal support from the industry would only serve to increase reliance on foreign fuel and hurt investment in the industry. The revisions include a cut of between 1.25 and 2.25 billion gallons of the ethanol required to be blended into fuel.

Many have pointed towards second-generation biofuels as the answer to the food conundrum. After all, developing fuel from non-food crops would eliminate the concern that biofuels were driving up prices. Yet research into other sources of biofuels has yet to present alternatives with the same yield and profit margin as ethanol. Whether or not the changes to the Renewable Fuel Standard go into effect could potentially have a dramatic impact not only on the price of corn worldwide, but also on the research funding provided to second-generation biofuels.

For more information, see the Heritage Foundation’s report on the Renewable Fuel Standard.

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