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Chris Ricardo Kenneth Robin Atsuro

What is Used to Produce Ethanol?

Bio-ethanol is obtained from the conversion of carbon based feedstock. - Sugar-Containing Plant Materials Corn, Sugar Cane, etc. - Wood Based Wasted Materials Industrial Wasted Materials

Corn (Most Used in the United States) Sugar cane (Used for Transportation Fuel in Brazil)
Two Ways to Produce Commercial Ethanol

Production Process of Ethanol form Sugar-Containing Plant Materials

Wet Mill Process Dry Mill Process

Illustration of Ethanol Production Process form Corn

Production Process of Ethanol form Agricultural Residues

Produced from Wood wastes Urban trash Rice and wheat straws
Other agricultural residues

This is still under Development for Commercial Use.

Ethanol Environmental Issues Facts:

26.1lbs of corn = 1gallon of ethanol
140 gallons of fossil fuels are needed to plant, grow, and harvest 1 acre of corn

Pros of Ethanol
Reduces toxic emissions by 30% Reduces carbon dioxide greenhouse gases by over 35% compared to gasoline Not likely to accumulate in environment Ethanol fuel contains more oxygen so it burns cleaner Decrease harmful tailpipe emissions and increase fuel octane rating

Carbon Cycle

Cons of Ethanol
Fundamental input yield problem 70% more energy is required to produce ethanol that the energy that actually is in ethanol Jacobson computer study May rise levels of nitrogen oxides produces as gasoline emissions

Sugar cane ethanol vs. corn ethanol

Sugar cane ethanol is cheaper to produce 30% cheaper to produce than corn Brazils sugar cane based ethanol production is actually more efficient than the U.S. ethanol production Burning of sugar cane fields creates environmental effects

In the End
Our environmental system in which corn is being produced is being rapidly degraded Groundwater effects Erosion effects Mileage effects Environmental damages add another 23 cents per gallon

Foreign Oil Dependency

How dependent are we currently on imported oil? What needs to be done to be independent? Where are we now in the fight against dependency? What does the future hold for our dependency?

How dependent are we currently on foreign oil?

2/3 of the world oil supply is located in the volatile middle east The U.S. spends 50 billion dollars a year to protect our middle east oil supply The U.S. has spent 130 billion dollars in the last thirty years in oil subsidies to major oil industries. The U.S. imports 13 million barrels of oil per day.

What would it take to eliminate our dependence on foreign oil?

Lower cost methods of manufacturing ethanol. Increases in technology to improve crop yields and decrease the amount of energy it takes to create ethanol. In order to replace the energy content from the oil we import, we would have to produce 177 billion gallons of ethanol.

Where are we now in the fight against dependency?

Currently there are 110 ethanol plants across the country. Located mostly in the midwest. Today ethanol reduces the need to import 128,000 barrels of oil/ MTBE. Still lots of work to be done since we are importing 13 million. Right now we are producing around 5-6 billion gallons of ethanol. (Not very close to the 177 billion we need).

Feasibility of significantly reducing use of foreign oil with ethanol

U.S. produces 42 percent of the world's corn, 282.3 million metric tons To replace all U.S. oil imports, we need to increase fuel production by approximately 177 billion gallons of crude oil per year, which is converted to about 84 billion gallons of gasoline How much ethanol is the U.S. capable of producing? Assume 50% of all U.S. corn production goes to ethanol: 282.3/2 million metric tons = 310.5 billion lbs. 26.1 lbs. of corn = 1 gallon of ethanol 310.6 billion lbs. / 26.1 lbs. = 11.9 billion gallons of ethanol 14.2% of gasoline derived from imported oil

Upshot: If we allocate 50% of all U.S. corn to ethanol production we will replace 6.7% of imported oil, 14.2% of gasoline from imported oil

Where we are now (Cont.)

Our production process right now is very energy inefficient. Just recently has the amount of BTUs put into making ethanol exceeded the amount of BTUs created from the ethanol. The current conversion ratio is 1 BTU of input creates 1.3 BTUs worth of ethanol energy. Compared to the gasoline ratio of 1 BTU of input creates 4.5 BTUs of gasoline energy. So right now gasoline is more energy efficient that ethanol.

What does the future hold for our energy independence?

President Bush has a goal of making cellulosic ethanol practical within six years. Another goal set forth by the president is that by 2025 we could eliminate our imported oil by 75 percent. To reach these goals we need to significantly lower the costs of production over the next six to ten years. Once these costs are minimized all thats left is ramping up production.

Blending ethanol with gasoline at a 10% level will reduce the retail price of conventional regular gasoline by 5%, or by 6.6 cents per gallon. Currently ethanol receives 52 cents per gallon exemption from federal excise taxes on motor fuel.

The RFS is expected to increase farm-level corn price by 16 cents per bushel on average over the next decade (or 6.6%) compared to a non-RFS baseline. Soybeans prices are expected to average 29 cents per bushel (or 5.4%) more than would be the case without RFS.

The USDA estimates of food input costs as a percentage of retail prices are incorporated into this study, and are as follows: Cereal and bakery items: input costs represent 4% of the price paid by consumers Beef: input costs represent 48% of the price paid by consumers Pork: input costs represent 27% of the price paid by consumers Chicken (fryers): input costs represent 50% of the price paid by consumers Dairy products: input costs represent 38% of the price paid by consumers Fats and oils: input costs represent 15% of the price paid by consumers All other (including fruits and vegetables) were assumed to not be impacted by a sustained increase in the price of corn

For example, with Chicken: 40% of input costs due to feed 66% of feed costs due to corn 50% of retail price due to input costs 13% (20%) of retail price due to corn (all feed) If double the price of corn (all feed), maximum price increase for chicken is 13% (20%)

Ethanol Policy: Past - Present - Future Why Subsidize Ethanol?

Attempt to correct market failure , that is: The free hand of the market alone cannot provide an optimal solution regarding energy security and green house gas emissions. The intention of a subsidy, in the case of ethanol, was to support an industry that could reduce the severity of both of these market failures.

When did it all start?

From 1978 to present there has been a fixed subsidy of 40 - 60 cents per gallon of Ethanol produced.
Provided by the Energy Tax Act as an attempt to encourage alternative and renewable fuels to wean the U.S. off crude oil. And after 1990 to maintain cleaner air.

Has the subsidy worked?

Ethanol production has increased steadily from1980 to 2002.

QuickTime an d a TIFF (Uncompressed) decompressor are need ed to see this picture .

After 2002
What caused the jump in ethanol production after 2002?
MTBE (Methyl tertiary-butyl ether), an oxygenate added to gasoline, is found to have toxic components which are ending up in peoples drinking water. Ethanol is a clean substitute for MTBE.

After 2005
Ethanol gets another boost.
Energy Policy Act introduces Renewable Fuel Standards (RFS) program.
Requires 4 billion gallons of ethanol to be blended with gasoline by 2006 and 7.5 billion gallons by 2012.

What do ethanol producers have going for them at this point?

1. A 51 cent per gallon subsidy. 2. Demand from MTBE substitution.
3. RFS of 7.5 billion gallons by 2012.

What next?
Do we still need an ethanol subsidy of 51 cents per gallon? Do we still need an ethanol subsidy at all? Can ethanol compete with gasoline on its own?

Is Ethanol competitive?
With the price of oil soaring, ethanol is looking more and more attractive. So attractive that maybe a subsidy is no longer needed. Ethanol is now being produced faster than it can be used, causing a surplus of ethanol.

What about rural economies?

Without more policy promoting ethanol there will be a natural barrier to growth in the industry. (Eric Washburn, American Coalition for Ethanol) Senate passed bill increasing ethanol mandate to 36 billion gallons by 2022, with 15 billion gallons coming from corn.
The Wall Street Journal

Possible Policy Alternatives

A variable subsidy that changes with respect to oil prices. ( oil prices increase, Ethanol subsidy decreases) Stop subsidizing corn based ethanol and focus on cellulose based ethanol.