Sixty billion gallons by 2030: economic and agricultural impacts of ethanol and biodiesel expansion.

Under the ETH60 Scenario, the targeted production of ethanol can be achieved for the years 2010, 2020, and 2030. The targeted goals of 1 billion gallons of biodiesel by the year 2012 and 1.6 billion gallons by 2030 can also be achieved. The amounts of ethanol that would be derived from the various feedstocks under the three scenarios are shown in table 1. Under the ETH60 Scenario, through 2012, corn grain continues to be the base of ethanol production. In subsequent years, with the commercial introduction of cellulose-to-ethanol technology, the increase of corn grain for ethanol slows down and remains flat after 2020 at around 14 billion gallons per year. Initially cellulose to ethanol conversion relies on wood residues, but as dedicated energy crops come into commercial production, they become the dominant feedstocks. By 2030, even holding corn grain to ethanol plants at near capacity, less than one in four gallons of ethanol are projected to be derived from corn grain.

Under the ETH60CA Scenario, use of corn reaches a peak in 2012, but with cellulose-to-ethanol technology introduction declines to less than 8 billion gallons by 2030. This suggests excess production capacity in corn grain to ethanol will appear in 2013, and corn grain ethanol plants will likely convert to cellulose or exit the industry. By 2030, the corn grain ethanol industry adjusts, and less than one in six gallons of ethanol are projected to be derived from corn grain.

For the ETH60CACD Scenario, in which commercial introduction of cellulose-to-ethanol technology is delayed, use of corn for ethanol will not peak until 2015 at just under 18 billion gallons. After the peak year, there will be a significant reduction in the use of grain corn, resulting in excess capacity. With a delay in introduction of cellulose-to-ethanol technology, the impacts on the corn grain ethanol industry by 2030 are dampened slightly, about 120 million gallons or about 1.4%, as compared with cellulose-to-ethanol technology introduction in 2012. Also, by 2030, the contribution of corn residues is more significant than under the other two scenarios. Ethanol from corn stover is about 36% higher than the ETH60 Scenario and 12% higher than the ETH60CA Scenario.

In the years beyond 2012, most of the growth in biodiesel production is projected to come from yellow grease and tallow, rather than soybeans. By 2030, 1 billion gallons of biodiesel comes from soybeans, while 0.6 billion gallons is derived from yellow grease and tallow. An alternative target of 2 billion gallons of biodiesel was considered, but to reach this target using soybeans as a feedstock required a price above $8 per bushel.

With a major change in ethanol feedstocks and overall growth in feedstock use, land use patterns would change. For example, under the ETH60 Scenario, dedicated energy crops reach about 34.4 million acres by the year 2030, from very low levels in 2007. Pasture declines from 56.5 million acres to 24.3 million by 2030. Corn acreage increases from 81 million acres and then declines with the introduction of cellulose-to-ethanol technology to around 83 million acres in 2030. About 32.2 million acres of cropland in pasture would return to hay, dedicated energy crops, and other crop production. Acreage planted to soybeans decreases from 73.3 million acres in 2007 to 62.7 million in 2030.

The projected changes in prices of major crops away from baseline levels are shown in table 2. For the ETH60 Scenario, the price estimates indicate that corn, wheat, and soybeans experience a significant price impact. The price impact for corn peaks during the highest period of corn demand for grain ethanol. For the ETH60CA and ETH60CACD Scenarios, the increases in corn prices by 2030 are slightly dampened compared with the ETH60 Scenario, 10 cents per bushel and 2 cents per bushel lower, respectively. With the introduction of cellulose-to-ethanol technology, positive pressure on corn prices is reduced and land is released for production of soybeans. Because the corn grain ethanol industry adjusts under the ETH60CA or ETH60CACD Scenarios, soybean price increases above baseline are lower than under the ETH60 Scenario.

The various sectors within the livestock industry react differently to higher feed prices. Cattle sector impacts are quite different when compared with hog and poultry sector impacts. A reduction in cattle inventories leads to higher prices that offset the sector's increased production costs and reduces the total expenditures on feed. Dried distillers grains (DDG's) can be more heavily incorporated into cattle rations compared with hog or poultry rations.

Under the ETH60 Scenario, there is a projected cumulative increase in net farm income of $210 billion during 2007-30. With these increases in net farm income, decreases in loan deficiency and countercyclical payments are projected. Cumulative reductions in loan deficiency payments and countercyclical payments are projected at nearly $1 billion and $7.8 billion. Hence, the projected cumulative reduction in government payments is $8.7 billion compared with the baseline.

The geographic distribution of cellulosic feedstock production in 2030 for the ETH60 Scenario is presented in figure 1. As shown in figure 1, by 2030, a wide geographic area of the United States contributes cellulosic feedstock. Dedicated energy crops production is concentrated in the Southeast, Southern Plains, and Northern Plains, while corn stover is concentrated in the Midwest.

[FIGURE 1 OMITTED]

Under the ETH60 Scenario, by 2030, a total of $110 billion (2006 dollars) annually is directly generated in the economy via purchasing inputs, adding value to those inputs and supplying biofuels to the nation, with $25 billion from the agricultural sector and $85 billion from the renewable energy sector. About 236,000 jobs are added directly to the agricultural sector, and 58,000 jobs are added directly to the biofuels sector. Including indirect impacts, the estimated economic impacts are $368 billion per year creating an estimated 2.4 million jobs.

Conclusions

The analyses performed indicate that the U.S. agriculture is in a position to play a significant role as a source of energy. For the entire period through 2030, the cumulative displacement could be as high as 10.48 billion barrels of oil, causing a potential reduction in imports of $629 billion. In addition to the ethanol, by 2030, 1.6 billion gallons of biodiesel per year could be produced. Overall, for the period 2007-30, the estimated accumulated gains in net farm income are over $210 billion, and the accumulated potential savings in government payments are estimated to be $150 billion. Due to the geographic decentralization of the production of feedstock, economic gains are projected to accrue in the majority of regions of the country. Significant expansion beyond 60 billion gallons per year would likely require expansion of the region suitable for the production of bioenergy crops, the ability to convert other pastureland (beyond cropland in pasture) into energy crops, allowing the use of Conservation Reserve Program (CRP) acreage for feedstock production, increasing short-rotation wood crops in the Northeast and Northwest regions, increasing yields above those assumed in the analysis, and/or increasing the efficiency of cellulose-to-ethanol conversion. Further research should examine the agricultural, environmental, and economic impacts of changes in one or more these factors.

The Promise and Challenge of Bioenergy (Francis Epplin, Oklahoma State University, Organizer)

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