Ethanol in Agriculture and the Environment

The use of ethanol, or grain alcohol, a potential alternative highoctane fuel source, could help the United States reach three major policy goals: improved environmental quality, enhanced energy security, and stabilized farm income (see box, "Ethanol as a Fuel"). Recent events have refocused public attention to ethanol's role in these policy goals. Last year, the 1990 Amendments to the Clean Air Act became law, requiring States to meet pollution standards. Ethanol, splash-blended with gasoline (splashblended means it is mixed at the wholesaler), increases the amount of oxygen in gasoline, which reduces carbon monoxide emissions. The blend also reduces emissions of toxic chemicals that are known to cause cancer. Also last year, Iraq's invasion of Kuwait disrupted world oil markets. Ethanol, produced from domestically grown grains, could displace some imported crude oil and refined oil products. Finally, current U.S. budgetary concerns have led policy-makers to reduce Federal support to the agricultural sector. Ethanol creates an additional market for corn, reducing farm commodity program payments. However, splash-blended ethanol has limitations. It increases some volatile organic compounds that are limited under the 1990 Amendments to the Clean Air Act. Also, the quantity of ethanol produced is unlikely to be sufficient to contribute significantly to national energy supplies in the near term. And to produce ethanol requires government tax exemptions to make it competitive with gasoline.