The Senate's preposterous new ethanol bill.

The conventional wisdom debunked.
June 26 2007 3:09 PM

The Great Corn Con

The Senate's preposterous new ethanol bill.

E85 Fuel. Click image to expand.
An ethanol pump at a gas station

The ethanol madness continues! Last week, the Senate passed an energy bill mandating the production of 36 billion gallons of ethanol per year by 2022—a sevenfold increase over current levels. Senators congratulated themselves for their environmental foresight. The president, a biofuels advocate, has enthusiastically endorsed the ethanol surge. But it's almost certainly a fantasy, since no one in Washington seems to have thought for five minutes about where or how that much ethanol could be produced.

There are two domestic sources for that ethanol in such quantities: corn or cellulose. (Sugar cane is an excellent feedstock for ethanol, but the United States grows relatively small amounts of cane, particularly when compared with Brazil, the world's largest producer.)

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Let's look at corn first. The Senate's ethanol mandate will increase the consumption of corn, the single most subsidized crop in America. In 2005 alone, according to the Environmental Working Group, corn subsidies totaled $9.4 billion. By increasing ethanol production—and thus corn production and consumption—the mandate will likely cost taxpayers extra billions both in the form of higher subsidy payments and higher food costs. But set aside the budget concerns for a practical one. How much ethanol can be produced from corn?

According to the U.S. Department of Agriculture, distillers can produce about 2.7 gallons of ethanol per bushel of corn. In 2006, U.S. farmers produced about 10.5 billion bushels of the grain. So, even if Congress mandated that all of America's corn be turned into ethanol, it would yield only about 28.3 billion gallons, far less than the mandated volume. And, clearly, most of America's corn is still going to be used for animal feed, family barbecues, and high-fructose corn syrup.

So, let's assume that only half of U.S. corn gets used for ethanol production. That would provide about 14 billion gallons of the 36 billion gallons demanded by the Senate. The other 22 billion gallons of alcohol will have to come from cellulosic ethanol—a fuel that can be made from cornstalks, wood chips, or grass (that legendary "switch grass" that President Bush likes to talk about). But cellulosic ethanol is like the tooth fairy: Many people believe in it, but no one ever actually sees it.

Last year, former Vice President Al Gore claimed that cellulosic ethanol will "be a huge new source of energy, particularly for the transportation sector. You're going to see it all over the place." In his 2006 State of the Union speech, President Bush announced increased federal funding for cellulosic ethanol research with the goal of making "this new kind of ethanol practical and competitive within six years." Former CIA Director James Woolsey is among the most vociferous boosters of the fuel. Back in 1999, in an article published in Foreign Affairs, he and Sen. Richard Lugar, an Indiana Republican, declared that cellulosic ethanol would "democratize the world's fuel market."

Maybe. But there's no reason to expect that the cellulosic ethanol industry will be able to grow fast enough to supply the 22 billion gallons in question.

Developing an ethanol production system based on biomass will likely take decades. It took more than 25 years of federal subsidies before corn ethanol production reached 5 billion gallons per year. In fact, it took 13 years just to get to 1 billion gallons. Given the massive investments required for new distilleries, storage tanks, and transportation networks, it's reasonable to assume that it will take at least that long for cellulosic ethanol to reach similar production levels. And yet, the Senate expects the cellulosic ethanol business will grow to be four times as large as the corn ethanol sector is today, and do so in just 15 years.

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