In 2000, 29.9 billion liters of ethanol were produced worldwide (13). The majority of the production comes from Brazil and the United States. In 2003, 2.8 billion gallons of ethanol were produced in the United States alone (2). Production in 2005 is expected to be approximately 4.0 billion gallons of ethanol (8). The top four producers of ethanol are Iowa (575 million gallons per year), Illinois (523 million gallons per year), Minnesota (486 million gallons per year), and Nebraska (454 million gallons per year). These four states produce approximately 72% of the total ethanol for the United States. The demand for ethanol is approximately divided into 68% fuel, 21% industry, and 11% food and beverages (3). Over 95% of the fuel ethanol produced in the United States was used to make E10, however, a small portion is used for the ever-increasing E85 market.

In comparison, 120 billion gallons of gasoline are sold in the United States each year (2) while only 2.8 billion gallons of ethanol are produced, so the United States does not produce enough ethanol for all gasoline sold to be E10 (maximum ethanol concentrations allowed by the U. S. Environmental Protection Agency) (4). Currently, E10 represents 8% to 10% of the total gasoline sales in the United States (4). This ethanol production shortage is likely to be a major problem as MTBE is phased out and there is more demand for ethanol as an oxygenate. This increase in demand will likely result in a dramatic increase in production of ethanol in the United States.

Ethanol is a controversial fuel. The Renewable Fuels Association states that the ethanol fuel market adds $4.5 billion to farm revenue yearly, employs almost 200,000 people, and increases state tax revenue by $450 million (14). In the United States, there are four federal tax incentives for ethanol sold for fuel: (1) excise tax exemption, (2) blender’s tax credit, (3) income tax credit for businesses producing or selling ethanol, and (4) small-producers tax credit for farm co-ops. The first tax benefit is $0.52 per gallon, but the fourth tax benefit is only $0.10 per gallon. Over 30 states have also implemented tax incentives for ethanol as fuel. Most range from $0.20 to $0.40 per gallon. Although many argue assump­tions and data, researchers at Cornell University have calculated that a gallon of ethanol requires 29% more energy to produce than it contains as fuel (15). It has also been argued that ethanol production increases environmental degradation, because corn causes more soil erosion than any other farm crop (15). Although soil erosion is an issue, the environmental impacts of ethanol are considerably less than the toxic MTBE. The latest results from the U. S. Department of Agri­culture contradict researchers at Cornell University and show that corn ethanol is energy efficient and contains 34% more energy than is required to produce ethanol (16). Part of this dramatic increase in energy efficiency is due to lower energy use in the fertilizer industry and advances in fuel conversion technology over the last decade (16). Similar energy efficiency data has been shown by several other researchers (16-19).

Cost of production of ethanol is a function of plant location, feedstock, production scale, and end use. The choice of feedstock depends on the country. Brazil has used sugar cane as their primary feedstock. France has attempted to use Jerusalem artichokes, but later found that sugar beets and wheat were better for ethanol production. Sweden uses its surplus of wheat to produce the ethanol for their 6% ethanol-blended gasoline. However, in the United States, corn has been determined to be one of the best feedstocks. Approximately, 2.5 gallons of ethanol are produced from every bushel of corn (16), but the corn yield per acre varies as a function of state, along with the fertilizer and irrigation needs in that region. In a corn-based ethanol industry, the cost of the corn is approximately 50-60% of the cost of production of the ethanol (20). It is predicted that the cost of production of ethanol will decrease by $0.11 per liter over the next 10 years due to genetic engineering (21). Currently, the cost of production of ethanol from corn is $0.88 per gallon versus $1.50 gallon from cellulose-based biomass (22). As gas prices rise, the cost of ethanol and ethanol blends becomes more com­petitive with gasoline.