For the most part, agriculture has worked hard to promote pro-ethanol policies to build a new market. The effort has been quite successful in driving commodity prices higher as the result of a demand market. But if those policies change, as they sometimes do, are ethanol and the corn market vulnerable?

Ironically, agriculture has had a lot of doubts about the issue of global warming, but the promotion of ethanol has benefited as the result of advocates of alternative fuels, bio-fuels, and those who prefer to reduce the impact of petroleum on the environment. In the category of politics and environmental issues making strange bedfellows, Cornbelt farmers and the global warming sector are in the same political camp that has pushed upward the target for ethanol production and use. And currently 90% of alternative fuels used in the US is an ethanol blend from corn.

But Iowa State ag economist Bruce Babcock and his colleagues have expressed concerns in the current issue of the Iowa Ag Review that shifting political policies may melt ethanol demand along with glaciers and Polar ice. While federal policy focuses on promoting biofuels, a new California policy says the biofuels must have a 10% reduction in carbon content by 2020, and that goes well beyond federal requirements. Babcock and colleagues say ethanol is in a good position if it does indeed reduce carbon. But there are many variations to the calculations, as well as definitions, and just what all is included in the proof.

Babcock rhetorically asks if the expansion of corn production to produce ethanol reduce the buildup of greenhouse gases? He says if the answer is yes, then corn based ethanol may qualify as a low-carbon fuel, but if not then the California requirement (and there could be others) will threaten the future of ethanol. It all starts with the planting of corn, followed by its refining into ethanol, and concluding with its use as a motor fuel. The analysis also includes US and foreign land use changes that can be attributed to expansion of corn acres.

Ethanol and gasoline can be easily compared in terms of energy, carbon release, and other yardsticks. But Babcock says the decision on whether ethanol is a low carbon fuel must also consider the impact on other crops and their acreage, as well as the impact on other uses of corn, “The two most important determinants of greenhouse gas emissions per gallon of ethanol in the agricultural phase are the yield per acre of land and the amount of nitrogen fertilizer used. And both of these are influenced by whether corn is grown after soybeans or after corn.” They calculate that increased production of corn to meet the ethanol demand requires more nitrogen and its production causes ethanol to be charged with higher carbon emissions. When the corn is refined into ethanol, the energy required at the refinery causes more greenhouse gases, but ethanol should not be charged with all of that, since distillers’ grains also are produced.

On the issue of land use, corn production gets a credit from the fact that soybeans are not produced on that acre which would otherwise be a charge for carbon emissions. If corn is grown on virgin land, it has to be charged with releasing more carbon than if it were going to be produced on typically tilled land, and even on CRP land. But so far, the increased corn acreage has only been at the cost of other crops, and not bringing new land into production. However, with less US soybean acreage resulting from more ethanol demand, the higher prices have resulted in more South American production and more virgin land being planted to a crop.

While Babcock’s crop production and refinery calculations indicate corn-based ethanol reduces greenhouse gas emissions, this conclusion is neutralized by soybean expansion into virgin grass and timberlands in South America. To keep ethanol in a positive light for greenhouse gas emissions, the impact will depend on the type of energy used at ethanol refineries, whether distillers’ grains are sold wet or dry, and the type of land that is used to plant the increased acreage for corn. Babcock says the ethanol refinery will probably make the first decision on energy prices. The second decision depends on the siting of cattle feedlots and local zoning laws. And the last issue is beyond control of the ethanol industry, but could be impacted by USDA policies on CRP contracts. Babcock’s team says the whole issue of whether ethanol is a low carbon fuel may depend on foreign cropping practices.

Summary:
Ethanol is seen as an alternative biofuel designed to replace petroleum, but if public policies require fuels to emit low quantities of carbon dioxide and greenhouse gases, there is a question whether ethanol can meet than requirement. While corn production and refining calculations can be made that indicate ethanol is a low carbon fuel, the deciding factor may depend on soybean acreage expansion in South America, as well as land use policies in the US that allow additional corn acreage.