Weighing the Impact of Ethanol Use

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Weighing the Impact of Ethanol Use

WASHINGTON -- The pros and cons of increased ethanol use are the subjects of debate, according to figures revealed by the nonpartisan Congressional Budget Office (CBO), and recently reported by The Associated Press.

The CBO expects food stamps and child nutrition programs to cost up to $900 million more this year because of increased ethanol use. Higher use of the corn-based fuel additive accounted for about 10 to 15 percent of the rise in food prices between April 2007 and April 2008.

The CBO said other factors, such as skyrocketing energy costs, have had an even greater effect than ethanol on food prices. CBO economists estimate that increased costs for food programs overall due to higher food prices will be about $5.3 billion this budget year.

Ethanol's impact on future food prices is uncertain, the report said, because an increased supply of corn has the potential to eventually lower food prices.

Roughly one-quarter of corn grown in the United States is now used to produce ethanol, and overall consumption of ethanol in the country hit a record high last year, exceeding 9 billion gallons, according to the CBO. It took nearly 3 billion bushels of corn to produce ethanol in the United States last year—an increase of almost a billion bushels over 2007.

The demand for ethanol was one factor that increased corn prices, leading to higher animal feed and ingredient costs for farmers, ranchers and food manufacturers. Some of that cost is eventually passed to consumers, since corn is used in many food products.

Several affected groups have banded together to oppose tax breaks and federal mandates for the fuel. They said the report shows the unintended consequences of ethanol, the AP reported.

"As startling as these figures are, they do not even tell the story of the toll higher food prices have taken on working families, nor the impact higher feed prices have had on farmers in animal agriculture who have seen staggering losses and job cuts and liquidation of livestock herds," the Grocery Manufacturers Association, American Meat Institute, National Turkey Federation and National Council of Chain Restaurants said in a statement.

Supporters of ethanol disagreed, saying the report was good news.

"The report released by the Congressional Budget Office confirms what we've known for some time: The impact of ethanol production on food prices is minimal and that energy was the main driver in the rise of food prices," said Tom Buis, CEO of Growth Energy, an ethanol industry group.

Ethanol producers asked the Environmental Protection Agency last month to increase the amount of ethanol refiners can blend with gasoline from a maximum of 10 percent to 15 percent, which could boost the demand for ethanol by as much as 6 billion gallons a year. They said raising that cap would create thousands of new jobs.
Agriculture Secretary Tom Vilsack has said he believes the administration could move quickly to raise the cap to at least 12 percent or 13 percent, but the EPA has not yet decided.

The report also looked at ethanol's effects on greenhouse gas emissions, concluding that over time ethanol's benefits over gasoline could diminish. The report says the use of ethanol reduced gasoline consumption by about 4 percent last year and reduced the gases blamed for global warming from the burning of gasoline by less than 1 percent. But the clearing of cropland and forests to produce more ethanol could more than offset those reductions, the AP reported.

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