Controversies Continue to Swirl over Corn Ethanol

(page 2 of 2)

That means the maximum amount of ethanol in gasoline will be just over 12 billion gallons. Yet, the ethanol industry already has the capacity to make 11 billion gallons, and more plants are planned. Plus, ethanol from cellulosic sources is expected to hit the market in a few years.

Where will all that ethanol beyond the 12 billion gallons a year go? Nowhere, as long as gasoline is limited to E10. This blend-wall problem is already making it even harder to get financing for new ethanol facilities than it would otherwise be because of the credit crisis.

That's why corn growers and ethanol producers are lobbying fiercely for an increase in the percentage of ethanol allowed in gasoline. Even a small boost to E12 (12% ethanol) would give the industry relief and breathing room. "If we could expand the gallons going into the marketplace, lenders would notice, and credit would flow," says Weinzierl.

But it's a tough sell. The push for higher ethanol blends prompted a quick and powerful counterattack. Allowing a higher percentage of ethanol in gasoline is "an ill-considered approach…[that is] contrary to scientific integrity and potentially harmful to our environment, public health, and consumers," argued a coalition of dozens of oil and gas producers, food companies, environmental groups, and other organizations in late March.

Changes in Land Use

The outcome of this battle? Still uncertain.

And if that's not enough, the industry faces yet another challenge. In an effort to combat global warming, both California and the federal Environmental Protection Agency are developing so-called low-carbon fuel standards. The idea is to put limits in overall carbon emissions from fuels. Under these new standards, the fuel that's allowed to be sold will have to have lower carbon emissions than pure gasoline does.

The new studies of the industry's energy use show that corn ethanol does indeed cut carbon emissions compared with gasoline. But these analyses neglect one crucial detail. There's a huge controversy over whether the use of corn (or other crops) for fuel causes the conversion of land elsewhere in the world to cropland. The assumption is that new cropland is needed to make up for the loss to the food supply from the corn diverted to ethanol. And if tropical rainforest is cut down to grow soybeans, for instance, the extra emissions from deforestation swamp the reductions in emissions from using more ethanol.

The industry argues that estimates of such indirect changes in land use should not be included in calculations of the carbon contents under the low carbon fuel standards—and that the current estimates are way too high anyway.

But so far, both California and the EPA are planning to include these land use changes. If the industry loses this battle, then the long-term prospects for corn ethanol will grow even dimmer.

Carey is a senior correspondent for BusinessWeek in Washington.