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Fuel ethanol : background and public policy issues

In light of changing regulatory and legislative arena, ethanol as a motor fuel has taken on a pivotal role in bringing together often conflicting environmental and energy security interests. Ethanol is produced from biomass (mainly corn) and is mixed with gasoline to produce cleaner-burning fuel called "gasohol" or "E10." The market for fuel ethanol is heavily dependent on federal incentives and regulations. A major impetus to the use of fuel ethanol has been the tax incentive for its use. Ethanol is expensive relative to gasoline, but it is subject to a federal tax incentive of 52 center per gallon. This exemption brings the cost of ethanol, which is higher than that of conventional gasoline and other oxygenates, within reach of the cost of competitive alternatives. In addition, there are other incentives such as a small ethanol producers tax credit. It has been argued that the fuel ethanol industry could scarcely survive without these incentives. The Clean Air Act requires that ethanol or another oxygenate be mixed with gasoline in areas with excessive carbon monoxide or ozone pollution. The resulting fuels are called oxygenated gasoline (oxyfuel) and reformulated gasoline (RFG), respectively. Using oxygenates, vehicle emissions of volatile organic compounds (VOCs) have been reduced by 17%, and toxic emissions have been reduced by approximately 30%. However, there has been a push to change the oxygenate requirements for two reasons. First, methyl tertiary butyl ether (MTBE), the most common oxygenate, has been found to contaminate groundwater. Second, it is argued that emissions could be reduced to similar levels through the use of clean burning gasoline that does not contain oxygenates. Uncertainties about future oxygenate requirements, as both federal and state governments consider changes, have raised concerns among farm and fuel ethanol industry groups and have prompted renewed congressional interest. Without the current regulatory requirements and incentives, or something comparable, much of ethanol's market would likely disappear. Expected changes to the reformulated gasoline requirements could either help or hurt the prospects for fuel ethanol (subsequently affecting the corn market), depending on the regulatory and legislative specifics. As a result, significant efforts have been launched by farm interests, the makers of fuel ethanol, agricultural states, and the manufacturers of petroleum products to shape regulatory policy and legislation. Ethanol played a key role in the debate over omnibus energy legislation in the 108th Congress. The stalled energy bill (H.R. 6) would have required the use of 5 billion gallons of renewable fuel (including ethanol) by 2012. It is likely the issue will be raised again in the 109th Congress. This report provides background concerning various aspects of fuel ethanol, and a discussion of the current related policy issues.

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  • "Report for Congress"@en
  • "CRS report for Congress"
  • "CRS report for Congress"@en
  • "CRS issue brief for Congress"@en

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  • "In light of changing regulatory and legislative arena, ethanol as a motor fuel has taken on a pivotal role in bringing together often conflicting environmental and energy security interests. Ethanol is produced from biomass (mainly corn) and is mixed with gasoline to produce cleaner-burning fuel called "gasohol" or "E10." The market for fuel ethanol is heavily dependent on federal incentives and regulations. A major impetus to the use of fuel ethanol has been the tax incentive for its use. Ethanol is expensive relative to gasoline, but it is subject to a federal tax incentive of 52 center per gallon. This exemption brings the cost of ethanol, which is higher than that of conventional gasoline and other oxygenates, within reach of the cost of competitive alternatives. In addition, there are other incentives such as a small ethanol producers tax credit. It has been argued that the fuel ethanol industry could scarcely survive without these incentives. The Clean Air Act requires that ethanol or another oxygenate be mixed with gasoline in areas with excessive carbon monoxide or ozone pollution. The resulting fuels are called oxygenated gasoline (oxyfuel) and reformulated gasoline (RFG), respectively. Using oxygenates, vehicle emissions of volatile organic compounds (VOCs) have been reduced by 17%, and toxic emissions have been reduced by approximately 30%. However, there has been a push to change the oxygenate requirements for two reasons. First, methyl tertiary butyl ether (MTBE), the most common oxygenate, has been found to contaminate groundwater. Second, it is argued that emissions could be reduced to similar levels through the use of clean burning gasoline that does not contain oxygenates. Uncertainties about future oxygenate requirements, as both federal and state governments consider changes, have raised concerns among farm and fuel ethanol industry groups and have prompted renewed congressional interest. Without the current regulatory requirements and incentives, or something comparable, much of ethanol's market would likely disappear. Expected changes to the reformulated gasoline requirements could either help or hurt the prospects for fuel ethanol (subsequently affecting the corn market), depending on the regulatory and legislative specifics. As a result, significant efforts have been launched by farm interests, the makers of fuel ethanol, agricultural states, and the manufacturers of petroleum products to shape regulatory policy and legislation. Ethanol played a key role in the debate over omnibus energy legislation in the 108th Congress. The stalled energy bill (H.R. 6) would have required the use of 5 billion gallons of renewable fuel (including ethanol) by 2012. It is likely the issue will be raised again in the 109th Congress. This report provides background concerning various aspects of fuel ethanol, and a discussion of the current related policy issues."@en
  • "Ethanol plays a key role in policy discussions about energy, agriculture, taxes, and the environment. In the United States it is mostly made from corn; in other countries it is often made from cane sugar. Fuel ethanol is generally blended in gasoline to reduce emissions, increase octane, and extend gasoline stocks. Recent high oil and gasoline prices have led to increased interest in alternatives to petroleum fuels for transportation. Further, concerns over climate change have raised interest in developing fuels with lower fuel-cycle greenhouse-gas emissions. Supporters of ethanol argue that its use can lead to lower emissions of toxic and ozone-forming pollutants, and greenhouse gases, especially if higher-level blends are used. They further argue that ethanol use displaces petroleum imports, thus promoting energy security. Ethanol's detractors argue that various federal and state policies supporting ethanol distort the market and amount to corporate welfare for corn growers and ethanol producers. Further, they argue that the energy and chemical inputs needed to turn corn into ethanol actually increase emissions and energy consumption, although most recent studies have found modest energy and emissions benefits from ethanol use relative to gasoline. The market for fuel ethanol is heavily dependent on federal incentives and regulations. Ethanol production is encouraged by a federal tax credit of 51 cents per gallon. This incentive allows ethanol -- which has historically been more expensive than conventional gasoline -- to compete with gasoline and other blending components. In addition to the above tax credit, small ethanol producers qualify for an additional production credit. It has been argued that the fuel ethanol industry could scarcely survive without these incentives. In addition to the above tax incentives, the Energy Policy Act of 2005 (P.L. 109- 58) established a renewable fuels standard (RFS). This standard requires the use of 4.0 billion gallons of renewable fuels in 2006, increasing each year to 7.5 billion gallons in 2012. Most of this requirement will likely be met with ethanol. In the United States, approximately 5.4 billion gallons of ethanol were consumed in 2006. Thus, the RFS will likely lead to a doubling of the U.S. ethanol market between 2005 and 2012. Some analysts believe that this program could have serious effects on gasoline suppliers, leading to somewhat higher fuel prices. The Senate-passed energy bill, H.R. 6, would expand this mandate to 13.2 billion gallons in 2012 and 36 billion gallons in 2022. Further, by 2022, the bill would mandate the use of 21 billion gallons of "advanced biofuels," defined as "fuel derived from renewable biomass other than corn starch." House energy legislation that may come to the floor the week of July 30, 2007, could address the RFS and other ethanol-related issues. Other issues of Congressional interest include support for purer blends of ethanol as an alternative to gasoline (as opposed to a gasoline blending component), promotion of ethanol vehicles and infrastructure, and imports of ethanol from foreign countries. This report supersedes CRS Report RL30369, Fuel Ethanol: Background and Public Policy Issues (available from author)."
  • "Ethanol plays a key role in policy discussions about energy, agriculture, taxes, and the environment. In the United States it is mostly made from corn; in other countries it is often made from cane sugar. Fuel ethanol is generally blended in gasoline to reduce emissions, increase octane, and extend gasoline stocks. Recent high oil and gasoline prices have led to increased interest in alternatives to petroleum fuels for transportation. Further, concerns over climate change have raised interest in developing fuels with lower fuel-cycle greenhouse-gas emissions. Supporters of ethanol argue that its use can lead to lower emissions of toxic and ozone-forming pollutants, and greenhouse gases, especially if higher-level blends are used. They further argue that ethanol use displaces petroleum imports, thus promoting energy security. Ethanol's detractors argue that various federal and state policies supporting ethanol distort the market and amount to corporate welfare for corn growers and ethanol producers. Further, they argue that the energy and chemical inputs needed to turn corn into ethanol actually increase emissions and energy consumption, although most recent studies have found modest energy and emissions benefits from ethanol use relative to gasoline. The market for fuel ethanol is heavily dependent on federal incentives and regulations. Ethanol production is encouraged by a federal tax credit of 51 cents per gallon. This incentive allows ethanol -- which has historically been more expensive than conventional gasoline -- to compete with gasoline and other blending components. In addition to the above tax credit, small ethanol producers qualify for an additional production credit. It has been argued that the fuel ethanol industry could scarcely survive without these incentives. In addition to the above tax incentives, the Energy Policy Act of 2005 (P.L. 109- 58) established a renewable fuels standard (RFS). This standard requires the use of 4.0 billion gallons of renewable fuels in 2006, increasing each year to 7.5 billion gallons in 2012. Most of this requirement will likely be met with ethanol. In the United States, approximately 5.4 billion gallons of ethanol were consumed in 2006. Thus, the RFS will likely lead to a doubling of the U.S. ethanol market between 2005 and 2012. Some analysts believe that this program could have serious effects on gasoline suppliers, leading to somewhat higher fuel prices. The Senate-passed energy bill, H.R. 6, would expand this mandate to 13.2 billion gallons in 2012 and 36 billion gallons in 2022. Further, by 2022, the bill would mandate the use of 21 billion gallons of "advanced biofuels," defined as "fuel derived from renewable biomass other than corn starch." House energy legislation that may come to the floor the week of July 30, 2007, could address the RFS and other ethanol-related issues. Other issues of Congressional interest include support for purer blends of ethanol as an alternative to gasoline (as opposed to a gasoline blending component), promotion of ethanol vehicles and infrastructure, and imports of ethanol from foreign countries. This report supersedes CRS Report RL30369, Fuel Ethanol: Background and Public Policy Issues (available from author)."@en
  • "Ethanol plays a key role in policy discussions about energy, agriculture, taxes, and the environment. In the United States it is mostly made from corn; in other countries it is often made from cane sugar. Fuel ethanol is generally blended in gasoline to reduce emissions, increase octane, and extend gasoline stocks. Recent high oil and gasoline prices have led to increased interest in alternatives to petroleum fuels for transportation. Further, concerns over climate change have raised interest in developing fuels with lower fuel-cycle greenhouse-gas emissions. Supporters of ethanol argue that its use can lead to lower emissions of toxic and ozone-forming pollutants, and greenhouse gases, especially if higher-level blends are used. They further argue that ethanol use displaces petroleum imports, thus promoting energy security. Ethanol's detractors argue that various federal and state policies supporting ethanol distort the market and amount to corporate welfare for corn growers and ethanol producers. Further, they argue that the energy and chemical inputs needed to turn corn into ethanol actually increase emissions and energy consumption, although most recent studies have found modest energy and emissions benefits from ethanol use relative to gasoline. The market for fuel ethanol is heavily dependent on federal incentives and regulations. Ethanol production is encouraged by a federal tax credit of 51 cents per gallon. This incentive allows ethanol -- which has historically been more expensive than conventional gasoline -- to compete with gasoline and other blending components. In addition to the above tax credit, small ethanol producers qualify for an additional production credit. It has been argued that the fuel ethanol industry could scarcely survive without these incentives. In addition to the above tax incentives, the Energy Policy Act of 2005 (P.L. 109- 58) established a renewable fuels standard (RFS). This standard requires the use of 4.0 billion gallons of renewable fuels in 2006, increasing each year to 7.5 billion gallons in 2012. Most of this requirement will likely be met with ethanol. In the United States, approximately 3.4 billion gallons of ethanol were consumed in 2004. Thus, the RFS will likely lead to a doubling of the U.S. ethanol market by 2012. Some analysts believe that this program could have serious effects on gasoline suppliers, leading to somewhat higher fuel prices. Thus, the Environmental Protection Agency's implementation of the program will likely be of continuing concern to Congress. Other issues of Congressional interest include support for purer blends of ethanol as an alternative to gasoline (as opposed to a gasoline blending component), promotion of ethanol vehicles and infrastructure, and imports of ethanol from foreign countries. This report supersedes CRS Report RL30369, Fuel Ethanol: Background and Public Policy Issues (available from author). It will be updated as events warrant."

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  • "Fuel ethanol : background and public policy issues"
  • "Fuel ethanol : background and public policy issues"@en
  • "Fuel ethanol background and public policy issues"@en
  • "Fuel ethanol background and public policy issues"

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