Production and policy

1. Production

The production of ethanol from corn is one of the first value-added processes. With the fundamental stepskept unchanged, this process has been upgraded to improve efficiency for the past three decades. There are two types of processes: Wet-milling and dry-milling, the major difference between which is in the process of corn at the beginning.

a. Wet-milling

Wet milling is large-scale, capital-intensive and produces many products apart from fuel ethanol such as corn syrup, biodegradable plastics, food additives such as citric acid and xanthan gum, corn oil (cooking oil), and animal feed. This type of ethanol process is called “wet” because the first step involves soaking the grain in water to soften the corn. After that, the starch, fiber, and germ are separated to be made into different products. In particular, corn oil is extracted from corn germs. The gluten is dried and processed to be sold as poultry feed. The remaining components including the starch can then be either fermented into ethanol, or dried and sold as dried or modified corn starch, or processed into corn syrup.

b. Dry-milling

In the dry-milling, the whole grain is ground into flour without separating different components of the corn. After processes of liquefaction (cooker), Saccharifiction which breaks down the corn starch into simple sugar (glucose), the corn mash is fermented into ethanol. After fermentation, the liquid portion of the corn mash contains about 8-12 % ethanol by weight which then is separated under “distillation” process. The unfermentable portions or distiller’s grains with soluble (DGS) are subsequently used to feed animals.

2. Production in the U.S. 

Ethanol is predominantly produced from corn in the U.S. This corn-based ethanol was first commercialized in the 1970s due to the oil price hikes resulted from the two global oil crises.

Ethanol Production in the U.S. (1980-2010)
Data from Renewable Fuels Association

After a smooth start in the 1970s, ethanol experienced a slow growth in the 1980s and 1990s due to declining oil prices as well as the its controversial negative environmental impacts such as increased tailpipe emissions of volatile organic compounds (VOCs) which can lead to urban smog. However, ethanol production’s growth was robust throughout the 2000s, particularly after the demise of MTBE, ethanol’s rival as an oxygenated fuel additive due to its high lead content causing water contamination. Another factor of this dramatic growth is the Energy Policy Act of 2005 that mandated a specific volume of ethanol production.

The U.S. became the world largest ethanol fuel producer in 2005 when it surpassed Brazil with approximately four billion gallons. Since then, the U.S. ethanol production has increased rapidly and tripled in 2010. The U.S and Brazil account for approximately 90% of the world ethanol production. For only ten years, production expanded seven-folds from 1.6 billion gallons in 2000 to 13.2 billion in 2010. The number of ethanol plants nearly quadrupled from 54 in 2000 to 189 plants in 2010. As of January 2012, there are 209 ethanol plants in the country. Plant size and capacity are also improving rapidly with annual production capacity of 1.748 billion gallons in 2000 to nearly 15 billion gallons in 2012( Renewable Fuels Association).

3. Policy in the U.S. 

Government subsidies at every point of ethanol’s supply chain

In the U.S., ethanol production has been driven by different federal and state policies that aim to offer both ethanol consumption and production incentives. Since the beginning of ethanol commercialization in the 1970s, the U.S. government has offered a tax exemption for gasohol (gasoline that is blended with ethanol) from the federal motor tax. This consumption incentive was extended and changed with different levels (ranging from 40 cents to 54 cents per gallon) of the credit from its inception of the Energy Policy Act of 1978 until December, 2011 when both Congress and the White House reached the agreement of the end of this subsidy. In order to capture all the benefits from this tax credits for domestic producers, during this period, Congress imposed a tariff on imported ethanol (mainly low-cost sugarcane ethanol from Brazil). This tariff was also repealed in 2011.

On the production side, the government also gave a host of tax credits and generous loans to ethanol producers. Notably, in 2004, ethanol blenders can receive tax credit of 45 cents per gallon of ethanol mixed with gasoline. Small ethanol producers receive an additional 10 cents on the first 15 million US gallons produced.

By 2005, MTBE, a gasoline-derivative that served as an oxygenate fuel additive similar to ethanol had been banned in every state in the U.S. due to its water contamination problems. Since then, ethanol has become the single oxygenate additive needed to decrease the tailpipe carbon monoxide emissions. In addition, ethanol production expansion has been supported by U.S. energy policy initiatives. The Energy Policy Act of 2005 instituted the renewable fuels standards which required the use of 7.5 billion gallons of renewable energy by 2012. The Energy Independence and Security Act of 2007 raised the RFS to 36 billion gallons of annual renewable fuel use by 2022, including 15 billion gallons of conventional biofuels (predominantly corn ethanol) by 2015.

History of U.S. Ethanol Policy

However, there has been very limited R&D subsidy specifically corn-based ethanol, even during its early years.  R&D subsidies tend to focus on higher generations of ethanol which utilize feedstock that is more energy-efficient than ethanol and/or has little impact to the food security.

(Huong Nguyen)

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