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Ethanol is an alternative fuel produced from starch contained in grains such as corn, grain sorghum, barley and sugarcane through a fermentation and distillation process that converts starch to sugar and then to alcohol (ethanol). Most ethanol in the U.S. is made from corn because it is a relatively low-cost source of starch that can easily be converted into sugar, fermented and distilled into ethanol. Federal subsidies that encourage the production and consumption of corn-based ethanol are also a major factor. Ethanol can be blended with gasoline to create E85, a blend of 85 percent ethanol and 15 percent gasoline. Flex fuel vehicles are designed to run on any mixture of gasoline or ethanol with up to 85 percent ethanol.

Ethanol can also be produced from cellulosic biomass such as wheat straw, corn stalks (called stover), sawdust, rice hulls, paper pulp, wood chips, energy cane, sorghum, miscanthus grass and switchgrass, all of which contain cellulose and hemicellulose, which can be converted into sugars and then fermented into ethanol.

The rapid rise in ethanol production is providing an economic stimulus for U.S. agriculture because corn makes up 90% of the feedstock used to produce ethanol. By 2013 the price of corn is projected to be up about 30 cents per bushel, or 12 percent, and the estimates that net farm income will increase by approximately $1.4 billion (2.3%) over that same period.

According to the Renewable Fuels Association, the U.S. ethanol fuel production totaled 6.48 billion gallons in 2007, more than 34% over 2006 production and far above the 4.7 billion gallons of renewable fuel required by the Energy Policy Act of 2005 (EPAct 2005). Currently there are 143 U.S. ethanol refineries with the combined capacity to produce 13.4 billion gallons per year of ethanol fuel, well above that required by the new standard. The industry is also building another 57 biorefineries and expanding seven existing biorefineries, an effort that will boost ethanol production capacity by another 5.2 billion gallons. And those capacity additions are yielding economic benefits, too, as a new report concludes that the ethanol fuel industry created nearly 240,000 new jobs in 2007 and added $47.6 billion to the nation’s gross domestic product.

While most ethanol plants are situated in the Midwest corn belt (Illinois, Iowa, Nebraska, Minnesota and Indiana), several Texas ethanol plants are under construction in the Panhandle and Central Texas. Industry experts estimate that in 2008, Texas ethanol plants produced 500 million gallons of ethanol.

As a result of EPAct 2005, more than 400 E85 pumps were installed nationwide, offering a renewable fuel containing E85 (85 percent ethanol and 15 percent petroleum) to consumers and fleets with flexible-fuel vehicles. Unless the industry experiences a downturn and some production capacity goes uncompleted or unused, the ethanol fuel industry should easily exceed the Renewable Fuel Standard (RFS) requirements.

In Texas, ethanol (E85) is available to the public as a motor fuel at 33 locations. The Alternative Fuels and Advanced Vehices Data Center (AFDC) provides a searchable database of alternative fuel stations.

The Stamp of Approval

All cars built since the 1970s are fully compatible with up to 10% ethanol (also referred to as “gasohol”) in the mixture. Every major automaker in the world approves the use of E-10 Unleaded in their vehicles.

Green and Clean

Many areas of the country use ethanol to meet EPA clean air standards. E-85 has the highest oxygen content of any transportation fuel, making it burn cleaner than gasoline with as much as 39 to 46 percent fewer greenhouse gas emissions.

A March 2007 DOE study found that greenhouse gas emissions from corn-based ethanol are 18 to 28 percent lower than those from gasoline, while cellulosic ethanol greenhouse gas emissions are 87 percent lower.

Ethanol is biodegradable without harmful effects on the environment.

Ethanol production will continue its upward surge as consumers continue their demand for competitively-priced alternative fuels and vehicles, and as policy makers respond with incentives that encourage both businesses and consumers.

Indy 500 Revs Up With Corn

While ethanol’s power, acceleration and cruise speed are comparable to those of gasoline, pure ethanol has an octane rating of 113, considerably higher than gasoline, which ranges from 86 to 94. E85 fuel typically has 100-plus octane ratings.

Pure ethanol is used in many racing leagues because of these high-performance qualities.

For the first time in the race’s 95-year history, cars in the 2006 Indy 500 burned a fuel that is 10 percent ethanol and 90 percent methanol. In 2007, the Indy series switched permanently to 100 percent ethanol.

Barriers to Ethanol Use

For ethanol to realistically compete with gasoline as a viable alternative fuel, several factors must be in place: supplies must be large and readily available; cost must remain competitive with gasoline; and transitional costs (from gasoline to ethanol) must be reduced. Though ethanol’s benefits outweigh the downsides, these are some issues that challenge ethanol’s immediate, widespread use.


Because it is less expensive to produce ethanol close to the feedstock source, most ethanol plants are situated in the Midwest corn belt (Illinois, Iowa, Nebraska, Minnesota and Indiana) due to the close proximity of the feedstock.

Unlike petroleum and gasoline, ethanol absorbs water and chemicals. For that reason, ethanol cannot travel through the established pipelines and tanks that move petroleum products without picking up excess water and dissolving solids left by gasoline. Ethanol also corrodes pipelines, making the fuel unusable.

To remain uncontaminated, ethanol must be transported by land separately from gasoline and blended with gasoline just before distribution. The further a region is from the corn belt, the higher the shipping costs and the higher the price at the pumps. This is a major reason for the push to develop technology that can economically produce ethanol from cellulosic vegetation.

Spreading the Wealth

The ethanol fuel industry created nearly 240,000 new jobs in 2007 and added $47.6 billion to the nation’s gross domestic product. Rural and agricultural communities greatly benefit from the increase in ethanol refineries.


The lack of infrastructure for shipping and blending ethanol with gasoline adds cost to the end product and eats away at profits.

In addition, only a small portion of the 168,000 service stations in the U.S. pump E85. Even with E85 incentives in place, the scarcity of E85 fueling stations means that most flexible fuel vehicle (FFV) owners end up filling their tanks with gasoline instead of ethanol.

Increased demand for ethanol has created a tight ethanol market in some areas. Distribution may be temporarily limited by production capacity as well as the cost and difficulties involved in moving very large volumes of ethanol on demand.

Cost Efficiency

While current tax incentives mean the price for E85 may be less per gallon than regular unleaded gasoline, mileage also is lower. Typically vehicles consume 1.4 gallons of E85 for every gallon of regular gasoline they would otherwise use. However, even with its tax incentives ethanol is often more expensive than gasoline.

Flexible Fuel Vehicles

Many people are surprised to learn that flexible fuel vehicles (FFV) are not necessarily more expensive than a conventional vehicle. Special materials are required for fuel lines, hoses, valves, gaskets and fuel tanks due to the corrosive properties of ethanol. But the cost does not add a great deal to the manufacture of the FFV, and automakers do not typically pass the cost on to consumers.

Limited Uses

Due to its physical properties, ethanol is generally limited to gasoline blends for passenger vehicles and light trucks, while heavy-duty vehicles are diesel-fueled. Current researchers are experimenting with E-diesel, a blend of fuel ethanol and petroleum diesel.

In addition, E85 has a higher freezing temperature than gasoline, causing cold start problems in severe cold weather. For that reason, ethanol content is lowered to a minimum of 70 percent ethanol in freezing weather conditions.

In addition, the alcohol in ethanol corrodes aluminum. Repeated exposure to E85 corrodes the metal and rubber parts in older engines (pre-1988) designed primarily for gasoline. For this reason, flexible-fuel vehicle components must be made of of stainless steel and E85 pumps must be modified or manufactured with stainless steel to prevent corrosion.

Food Versus Fuel

There is a growing "food versus fuel" debate as the cost for corn spirals upward due to high demand. High corn prices are good for farmers, but bad for livestock producers and consumers, because so many products are made from corn. Texas has a large livestock industry, and high feed prices affect it.

How Far Will An Acre Get You?

Each bushel of corn (56 lbs.) can produce up to 2.5 gallons of ethanol fuel. One acre of land planted with corn can yield enough ethanol to take a car 5,000 miles, getting 17.5 miles to the gallon. Sugarcane will take you 15,000 miles.

Environmental Concerns

Ethanol helps to clean up our environment by reducing tailpipe carbon monoxide emissions by up to 30%; exhaust volatile organic compounds (VOC) emissions by 12%; particulate matter (PM) emissions by at least 25%. Ethanol is also biodegradable, so accidental spills pose few risks to the environment.

However, growing corn requires a significant amount of water, fertilizer and pesticides, which can have a negative impact on the environment.

Cellulosic Ethanol

Many of the issues with traditional grain-based ethanol can be addressed by cellulosic energy technology.

Cellulosic ethanol is an environmentally friendly and renewable transportation fuel produced from a wide array of feedstocks. The materials being considered can be categorized as:

  • agricultural wastes like corn stover and bagasse;
  • industrial and municipal solid wastes like paper sludge;
  • forest industrial wastes like sawdust; and
  • energy crops like switchgrass or hybrid poplars.

All of these feedstocks are abundant and relatively inexpensive, and they can help to lower the cost of producing ethanol and provide stability to supply and price. In addition:

  • Many potential cellulosic energy crops are drought-tolerant and use less water than corn.
  • Cellulosic ethanol uses waste products or crops grown specifically for energy purposes, so it does not impact the price of other food and products.
  • Feedstocks for cellulosic ethanol are diverse and widespread, reducing transportation costs.

While the refining process for cellulosic ethanol is more complex than that of corn-based ethanol, cellulosic ethanol yields a greater net energy benefit and results in much lower greenhouse gas emissions.

Public and private funding for new research in cellulosic biofuels is increasing. Recent breakthroughs in biotechnology have brought scientists to the threshold of competitively-priced ethanol refined out of cellulosic biomass, such as agricultural and forestry residues, municipal wastes, and fast-growing, dedicated energy crops. Although cellulosic materials are less expensive than corn, they are more costly to convert to ethanol because of the extensive processing required.

The general consensus is that cellulosic ethanol technology is within 5 to 10 years of being fully commercialized. Once cellulosic ethanol enters the marketplace, the cars of the future may indeed be running on the wastes of cities and farms all across America.

Additional Resources

For details on federal and state legislation and it’s effect on the ethanol industry, refer to the Legislation and Funding page for Biomass.

For a review of the rapid expansion of ethanol as it affects increased corn production and higher prices go to the “Ethanol” chapter in the Texas Comptroller’s 2008 Energy Report.

“An Economic Examination of Potential Ethanol Production in Texas”, (Texas A & M University’s Department of Agricultural Economics, 2003) is a report commissioned by SECO to provide a broad overview of ethanol production and to evaluate its potential as an economic development strategy for Rural Texas. This abbreviated version of the full report includes the Executive Summary and the Summary and Conclusions.


The Renewable Fuels Association (RFA) is the national trade association for the U.S. ethanol industry.

The American Coalition for Ethanol (ACE) is a national non-profit organization of more than 700 members in 43 states, including ethanol producers, farmers, investors, commodity organizations, businesses supplying goods and services to the industry, rural electric cooperatives and others supportive of the increased production and use of ethanol across America.


The U.S. Department of Energy provides the The Alternative Fuels and Advanced Vehicles Data Center with links to alternative fuel portals and vehicle information.

Ethanol Producer Magazine is one of the major trade publications in the ethanol industry.

Other Publications

The 2009 Fuel Economy Guide is produced by the EPA and DOE to help car buyers choose the most fuel-efficient vehicle that meets their needs.

“Breaking the Biological Barriers to Cellulosic Ethanol” (DOE, 2005) cites recent advances in biotechnology that have made cost-effective production of ethanol from cellulose, or inedible plant fiber, an attainable goal.

Growing Energy (pdf) is a Natural Resources Defense Council study that explores how biofuels can help end America’s dependence on foreign oil.

The AAA Fuel Gauge Report is updated daily by Oil Price Information Service (OPIS) with average national, state and local prices for gasoline, diesel and E-85. It includes an average "BTU-adjusted E-85 price" that accounts for the fact that E-85 delivers approximately 25 percent less energy content per gallon than gasoline.

The Ethanol Industry Outlook is published each year by the RFA.

“Outlook for Biomass Ethanol Production and Demand”, DOE’s Energy Information Administration.

“Biofuels in the U.S. Transportation Sector” Originally published in the DOE, Energy Information Administration’s Annual Energy Outlook 2007, February 2007, Washington, DC.

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