Grain & Sugar Ethanol Fact Sheet Grain-to-Ethanol Production The grain-to-ethanol process starts by separating, cleaning, and milling starchy feedstock, such as corn. The starch is converted to sugar using a high-temperature enzyme process. The sugar is then fermented to alcohol using yeasts and other microbes. A final step purifies the ethanol to the desired concentration and usually removes all the water to produce “anhydrous ethanol” that can be blended with gasoline. Sugar-to-Ethanol Production In producing ethanol from sugar crops, the crops must be processed to remove the sugar. The sugar is then fermented to alcohol using yeasts and other microbes. A final step purifies the ethanol and removes the water. In the sugar cane process, the crushed stalk of the plant, the “bagasse,” consisting of cellulose and lignin, an be used for process energy in the manufacture of ethanol, reducing the fossil fuel requirements and greenhouse gas emissions of sugar-to-ethanol production. Current Market Overview Worldwide consumption of biofuel is expected to increase by 3-6 times current levels by 2030, meeting 4-7% of road- transport fuel demand. World production is expected to grow between 7-9% per year, from 20 Mtoe in 2005 to Mtoe by Corn-to-Ethanol Costs in the U.S. Sugar-to-Ethanol Costs in Brazil Ethanol production costs vary widely across countries, mainly due to the wide range of crop types, land and labor costs, processing technologies, climate, and government policies. Higher oil prices have made biofuels more competitive with oil-based fuels, but further cost reductions are needed for most biofuels to be able to compete effectively without subsidies. The Benefits and Costs of Biofuels Increasing the use of biofuels would yield net benefits globally. The benefit-cost evaluation is dominated by several difficult-to- quantify benefits, while costs are dominated by fairly well- quantified- and often fairly high- production costs. Estimating the value of the benefits is one of the most difficult and uncertain aspects of biofuels analysis. But without such analysis, there is a tendency to focus on the costs. Potential Benefits and Costs of Biofuels Potential BenefitsPotential Costs Energy SecurityHigher Fuel Costs Lower GHG EmissionsHigher Crop Prices Reduced air pollutionLand Use Change Vehicle PerformanceLoss of Biodiversity Rural/Agriculture DevelopmentIncreased Fertilizer Use Waste ReductionCompetition for Water Resources Key Drivers in the U.S. Ethanol is increasingly used as a substitute for MTBE, a gasoline oxygenate. Implicated as a carcinogen and groundwater contaminant, MTBE is being phased out under the 2005 Energy Bill. The U.S. EIA estimates that ethanol demand will increase to 1 billion gallons per year by the end of the first year of the phase out. Federal tax credit of $0.052 per gallon for E10- an effective tax credit of $0.52 per gallon of ethanol. U.S. corn growers are protected by an import tariff of $0.54 per gallon. U.S. federal and state fleets of vehicles are required to operate a percentage of the vehicles on alternative fuels. The Clean Cities Program, a voluntary measure under the 1992 Energy Policy Act, works to create local markets for alternative fuel vehicles. Generous federal subsidies to corn and soybean growers. Grain-based ethanol costs on average $0.30/litre after production subsidies, so that it is competitive with gasoline at an average crude price of between $65-$70 per barrel. Increased agricultural productivity could help lower costs. Sugar cane-based ethanol, produced mainly in developing countries with warm climates, is much cheaper to produce (approximately $0.20/litre), making it an increasingly cost- effective alternative to petroleum fuels.