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Corn Ethanol Faces an Uncertain Future

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Ethanol recently survived its most direct challenge yet when the EPA rejected Texas Gov. Rick Perry’s request to halve this year’s ethanol mandate, but that doesn’t mean the biofuel’s detractors are going away.

A quarter of this year’s U.S. corn crop went toward producing ethanol that was blended into gasoline tanks across the country. Next year, fuel could eat up as much as a third of the crop. The price of a bushel of corn hit record highs this summer ($8 a bushel in June) before leveling off at around $6 a bushel. The high cost of corn has affected food prices across the board, but it hit especially hard among the grain-consuming livestock industries.

The ethanol industry still has a good number of defenders who blame other factors, such as rising demand in India and China, drought in Australia’s growing regions and high oil prices, for driving corn through the roof.

Yet a recent study done by Purdue University found that ethanol was directly responsible for at least a dollar per barrel of the rising cost. Furthermore, given that even ethanol producers acknowledge that the nation’s cars will never run solely off of corn, many scientists, politicians and average citizens have begun to question the wisdom of putting food into our fuel tanks.

Even though the federal subsidy for ethanol will decline from 51 cents per gallon to 45 cents this year, it’s clear that E85 ethanol fuel cannot compete with regular unleaded gasoline without government support. It burns less efficiently than gasoline, so it ends up costing drivers the same or more. For instance, AAA’s average cost for E85 today is $3.03, but its price adjusted for efficiency is $3.99 — more than 30 cents more than a gallon of regular gas.

Legislation has been floating around to reduce subsidies faster, but economists speculate that even if the government eliminated all support, corn prices would only fall 13% initially. It would take two years or more before consumers saw reduced food prices.

However, cellulosic ethanol and other biofuels made using wastewood or switchgrass haven’t gained prominence as fast as many thought they would. We’re still years away from either production method reaching the levels of corn ethanol.

Golden Image of Corn-Based Ethanol Shows Some Erosion (USA Today)

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