With the high cost of gasoline and the push for renewable energy there has been an increasing commitment to produce more ethanol to displace gasoline in fueling the engines of the American Dream. With more ethanol plants coming on line every day, some people are questioning the cost of ethanol.
Monetary Costs
There are a number of different ways to measure cost. One can add up the dollar cost of inputs to the production and easily derive the cost per gallon. This can then be compared to the sale price of ethanol (plus any government incentives) to determine whether it is profitable to manufacture and sell ethanol. It would seem that a large number of new ethanol producers have made these calculation and determined that they can profitably sell ethanol given the current prices of gasoline at about $3.00 per gallon and a federal ethanol subsidy of $0.51 per gallon; only time will tell if they have adequately calculated all of the costs of the input to their systems.
The other side of the dollar cost of ethanol is the cost of the government incentives. Those incentives are not limited to the federal subsidy; they also include tax breaks given to producers to build their facilities in a given locale and government spending on utilities to support those plants. The decision to pay for these subsidies is a political decision that should be informed by the other costs.
Environmental Costs
While there have been some complaints about emissions at ethanol plants (Des Moines Register, 6-3-08), there is no inherent reason that these facilities should be any more polluting than any other fuel burning facility with proper emission controls. Plants that use fossil fuels for the required energy input will have higher environmental costs (CO2, NOx, and SOx emissions); with coal being the dirtiest and natural gas being the cleanest. These costs can be avoided almost entirely by using biogas or partially avoided by burning biomass (Wang, Environmental Research Letters, 2007) for the energy source.
The other environmental costs are associated with corn production. Corn requires nitrogen fertilizer and the pollution associated with fertilizer run-off has caused algae blooms in nearby waterways (Lambrecht, Press & Dakotan, 6-15-07). There is also the air pollution associated with the use of farm equipment burning fossil fuels. Marginal farmland is now being returned to agricultural production to feed the increased need for corn with the attendant loss of soil and ground cover. Many of these environmental costs can be drastically reduced when cellulosic ethanol production becomes a viable source for this fuel.
Energy Costs
If the energy required to produce the ethanol is greater than the useable energy derived from ethanol in its end use, it becomes difficult to justify the production of ethanol regardless of the other costs. These calculations are complex and the results depend on the assumptions that are used. Two researchers, Pimentel (Natural Resources and Research, 2003) and Patzek (Critical Reviews in Plant Sciences, 2004), report numbers indicating that the energy used to produce ethanol is higher than the energy gained from burning ethanol, while two other researchers, Shapouri (The Energy Balance of Corn Ethanol, 2002) and Wang (Fuel-cycle fossil energy use and greenhouse gas emissions of fuel ethanol produced from U.S. Midwest corn, 1997), report the opposite results from their calculations. Further work is needed to refine these results.
Currently the costs of ethanol production are relatively high; without various government subsidies they would be too high. As gasoline costs increase, raising the market price of ethanol and more facilities use renewable fuels for their production energy, the costs associated with ethanol production should come down.
