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Corn Ethanol Subsidies

Corn-based ethanol is the primary form of ethanol fuel produced in the United States. It is usually blended with petroleum gasoline as an oxygenate at 10-15% (B10 or B15), though some vehicles can use an 85% blend (E85).

Corn ethanol is made from corn through industrial fermentation and distillation. The two processes commonly used to transform corn into ethanol are dry and wet milling. They start out differently, but are otherwise the same.

Making Corn Ethanol

In dry milling, the corn kernels are dried and then milled into a flour. In wet milling, the corn grains are steeped in sulfuric acid and water to separate grain components before grinding.

Dry milling simplifies the production process, but wet milling has the valuable byproduct of corn oil which can be sold at market.

In both cases, the corn in a slurry mix is then processed through separators to remove fiber, gluten, and starch and steep the corn's sugars into alcohol. This is then proofed (distilled) and fermented.

Subsidization of Corn Ethanol in the U.S.

Ethanol blenders in the U.S. receive tax credits at a rate of forty-five cents ($0.45) per gallon plus an additional ten cents per gallon on the first 15 million gallons produced annually. These are based on the Energy Policy Act of 2005 and the Food, Conservation, and Energy Act of 2008. Tax credits for ethanol production date as early as the 1970s in the U.S.

According to the Congressional Budget Office, biofuel tax credits accounted for about $6 billion in credits in 2009, most of that ($5.16B) for corn ethanol.

Controversy Surrounding Corn Ethanol

Ethanol as a fuel is viable from many sources and many argue that using corn is inefficient and wasteful. It also interferes with feed stocks for humans and livestock.

Further, the tax credits amount to a hidden tax at the gas pump, it is argued, and this coupled with the fact that ethanol has a lower energy value than regular gasoline means that vehicles burning partial ethanol are actually getting lower efficiency, thus using more fuel and so costing the driver more money.

The arguments against corn ethanol are many, but largely ignored by lawmakers from the Midwest whose constituents rely heavily on corn ethanol subsidies to keep corn prices high.

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