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Drake Journal of Agricultural Law

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Since 2005, in the face of rising oil and gasoline prices, many Americans have looked to plant-based fuels, particularly ethanol, as the "answer" to our energy dilemmas. Section III examines the issues connected specifically to ethanol, how market forces as well as government subsidies have worked to make corn-based ethanol economically viable at times, why that viability has been lost in recent months even with subsidies, and further, why ethanol from corn on the scale the legislation demands is impractical. Clearly it would be technically possible to produce the mandated 15 billion gallons of ethanol, and distilling capacity will nearly reach that level shortly, but the economics of corn-derived ethanol suggest that, absent massive subsidies or coercion, this effort will not be economically sound for producers or consumers. (Indeed, high capital costs are an issue for the mandated innovation of cellulosic ethanol, and part of the reason that technology is not yet considered economically viable.) ... The federal subsidy is still 51 cents per gallon, equivalent to $ 1.43 per bushel (assuming 2.8 gallons per bushel), although as noted earlier there may be state subsidies as well. Major meat producing firms as well as users of corn-based products such as high fructose corn syrup, have noted the impacts on their businesses and in turn lobbied against fulfillment of the larger corn ethanol mandates.


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