Roles for evolving markets, policies, and technology improvements in U.S. corn ethanol industry development

Paul W. Gallagher

Regional Economic Development, 2009, issue Apr, 12-33

Abstract: This article reviews changes in markets, technologies, and policies that affect corn ethanol profit-ability 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. A renewable fuel standard, included in a recent energy law, may eventually define minimum consumption levels for ethanol and, implicitly, production levels for corn ethanol. Potentially impending marketing changes, such as voluntary E20 (20 percent ethanol) sales or expanded sales of E85-equipped automobiles, may expand ethanol markets. Potential technology advances include growth of corn yields, corn-processing improvements for lower costs or higher revenue, and development of a corn-stoves (leaves and stalks)-based biomass industry. Government policies to induce biomass-fuel capacity investment are economically justified and probably necessary if biofuel industry development remains a public priority. Still, more efficient policy approaches could be developed.

Keywords: Energy development - United States; Biomass energy - United States (search for similar items in EconPapers)
Date: 2009
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