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Roles for Evolving Markets, Policies, and Technology Improvements in U.S. Corn Ethanol Industry Development

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  • Gallagher, Paul W.

Abstract

This article reviews changes in markets, technologies, and policies that affect corn ethanol profit - ability and industry expansion. Historically, the corn ethanol industry was stimulated by high petrofuel prices, successful corn and processing technology improvements, and government incentives, such as a blenders’ tax credit and mandated markets defined by the leaded fuel ban and reformulated fuel. Presently, the corn ethanol industry has expanded slightly beyond the point of a normal capital return, which is defined by limits on corn resource availability and ethanol marketing infrastructure. A renewable fuel standard, included in a recent energy law, may eventually define minimum consumption levels for ethanol and, implicitly, production levels for corn ethanol. Poten - tially impending marketing changes, such as voluntary E20 (20 percent ethanol) sales or expanded sales of E85-equipped automobiles, may expand ethanol markets. Potential technology advances include growth of corn yields, corn-processing improvements for lower costs or higher revenue, and development of a corn-stover (leaves and stalks)–based biomass industry. Government policies to induce biomass-fuel capacity investment are economically justified and probably necessary if biofuel industry development remains a public priority. Still, more efficient policy approaches could be developed.

Suggested Citation

  • Gallagher, Paul W., 2009. "Roles for Evolving Markets, Policies, and Technology Improvements in U.S. Corn Ethanol Industry Development," ISU General Staff Papers 200901010800001495, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200901010800001495
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    References listed on IDEAS

    as
    1. Paul Gallagher & Donald Johnson, 1999. "Some New Ethanol Technology: Cost Competition and Adoption Effects in the Petroleum Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 89-120.
    2. Amani Elobeid & Simla Tokgoz & Dermot J. Hayes & Bruce A. Babcock & Chad E. Hart, 2006. "Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The," Center for Agricultural and Rural Development (CARD) Publications 06-bp49, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. Gallagher, Paul W. & Shapouri, Hosein & Price, Jeffrey, 2006. "Welfare maximization, pricing, and allocation with a product performance or environmental quality standard: Illustration for the gasoline and additives market," International Journal of Production Economics, Elsevier, vol. 101(2), pages 230-245, June.
    4. Gallagher, Paul W. & Shapouri, Hosein, 2009. "Improving Sustainability of the Corn-Ethanol Industry," ISU General Staff Papers 200901010800001492, Iowa State University, Department of Economics.
    5. Gallagher, Paul W. & Shapouri, Hosein & Price, Jeffrey & Schamel, Guenter & Brubaker, Heather, 2003. "Some Long-Run Effects of Growing Markets and Renewable Fuel Standards on Additives Markets and the U.S. Ethanol Industry," Staff General Research Papers Archive 10648, Iowa State University, Department of Economics.
    6. Gallagher, Paul W. & Shapouri, Hosein & Price, Jeffrey & Schamel, Guenter & Brubaker, Heather, 2003. "Some long-run effects of growing markets and renewable fuel standards on additives markets and the US ethanol industry," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 585-608, September.
    7. Gallagher, Paul W. & Brubaker, Heather & Shapouri, Hosein, 2005. "Plant size: Capital cost relationships in the dry mill ethanol industry," ISU General Staff Papers 200506010700001442, Iowa State University, Department of Economics.
    8. Paul W. Gallagher & Daniel M. Otto & Mark Dikeman, 2000. "Effects of an Oxygen Requirement for Fuel in Midwest Ethanol Markets and Local Economies," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 22(2), pages 292-311.
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    10. Gallagher, Paul & Schamel, Guenter & Shapouri, Hosein & Price, Jeff & Dikeman, Mark & Brubacker, Heather, 2001. "The Effects of MTBE Bans on Ethanol Production, Feed Markets, and the Iowa Economy," ISU General Staff Papers 200106300700001343, Iowa State University, Department of Economics.
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    15. Gallagher, Paul W. & Otto, Daniel & Shapouri, Hosein & Price, Jeff & Schamel, Guenter & Dikeman, Mark & Brubaker, Heather, 2001. "The Effects of Mtbe Bans on Ethanol Production, Feed Markets, and Local Economies," Staff General Research Papers Archive 2004, Iowa State University, Department of Economics.
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