Agricultural Economics Department

 

Date of this Version

Winter 1-9-2009

Comments

Published in Energy Policy 37:4 (April 2009), pp. 1309–1316; doi: 10.1016/j.enpol.2008.11.022 Copyright © 2008 Elsevier Ltd. Used by permission.

Abstract

Continuation of policy support for the US corn ethanol industry is being debated due to doubts about the greenhouse gas effects of the industry and the effects of the industry on food prices. Yet there is no publicly available data on the economic and technical performance of the current generation of plants, which constitute the overwhelming majority of the industry. This study helps to fill that gap. Seven recently constructed ethanol plants in seven Midwest US states provided details on input requirements and operating costs during 2006 and 2007. Results show that technical performance is substantially better than current estimates available in the literature. Average net operating returns exceeded capital costs during the survey period, but price changes by mid-2008 reduced these margins to near zero. While the economic performance of the industry is currently viable, this study demonstrates that it can be threatened by current price trends, and certainly would be in the absence of current subsidies.

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