CBO Report Adds More Questions To The Benefits Of Ethanol From Corn

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Apr 9: Following on the heels of a major scientific study of biofuels’ impact on the global environment that questioned the value of ethanol production from both corn and cellulosic sources [See WIMS 4/7/09], the Congressional Budget Office (CBO) has come to similar conclusions and provides new information on the costs of ethanol production from corn.

The CBO study released April 9 -- The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions -- finds that ethanol from corn has contributed to a 10-15 percent increase in food prices between April 2007 and April 2008 [Correction: accounted for about 10 percent to 15 percent of the rise in food prices between April 2007 and April 2008]; would add $600-$900 million to the Food Stamp program in fiscal year 2009; and would reduce greenhouse gas emissions from the transportation sector by less than 1 percent. CBO also notes that land use changes resulting from increased production of ethanol could more than offset any reduction in greenhouse-gas emissions. The scientific study goes further and indicates that, “The policy of using ethanol to reduce reliance on the fossil fuels that cause global warming is self-defeating because ethanol production actually increases net greenhouse gas emissions.”

While the CBO study indicated that the use of cellulosic ethanol, made from wood, grasses, and agricultural plant wastes rather than corn, might reduce greenhouse-gas emissions more substantially; the Scientific Committee on Problems of the Environment (SCOPE) study even questioned the value of cellulosic production. Robert Howarth, professor of ecology and environmental biology at Cornell University and the Project Chair for the SCOPE study said, “The SCOPE report agrees the cellulosic ethanol is better, but not better enough. The efficiency of making the ethanol is simply too low, requiring too much land and too much input of material.” The report suggests that biomass that does not compete with food production can be used much more efficiently (and therefore with less environmental impact) through direct combustion to generate electricity and heat, rather than being converted to liquid fuels such as ethanol.

The CBO report indicates that the use of ethanol in gasoline has increased substantially over the past decade. Currently, most ethanol in the United States is produced from domestically grown corn, and the rapid rise in the fuel’s production and usage means that roughly one-quarter of all corn grown in the United States is now used to produce ethanol. U.S. consumption of ethanol last year exceeded 9 billion gallons -- a record high. Mandates for increased usage included in the Energy Independence and Security Act of 2007 (EISA) are slated to keep ethanol production high in the future and call for ramping up to 36 billion gallons per year by 2022.

The CBO report also indicates the costs relating to federal subsidies for ethanol production. According to the report since 1978, firms that blend ethanol with gasoline have received a tax incentive from the federal government. The incentive has been adjusted periodically; today, ethanol blenders receive a tax credit of 45 cents for each gallon of ethanol blended into the supply of gasoline. The subsidy has helped keep ethanol competitive with gasoline, even when prices for corn are high. In 2007, the cost of the credit in forgone federal tax revenues was $3 billion.

The CBO report relies on research conducted at Argonne National Laboratory (ANL) to compare the life cycle of ethanol v. gasoline. CBO says that research, which has been widely accepted by federal agencies, found that the use of corn ethanol as it is
currently produced -- using coal-fired and natural gas-fired plants -- reduces life-cycle greenhouse-gas emissions by about 20 percent when compared with the use of gasoline. Calculated on the basis of the volume of ethanol used in the United States last year, that percentage reduction is equivalent to about 14 million metric tons of carbon dioxide and equivalent gases, or CO2e. That amount is about 0.7 percent of the total greenhouse-gas emissions generated in the transportation sector during 2008.

Access the complete 26-page CBO analysis (click here). Access a recent Senate hearing website for links to opening statements, all testimony and a webcast on the Renewable Fuels Standard (click here). Access the SCOPE report preface, and links to an executive summary, and individual chapters of the report (click here). [*Energy/Biofuels]