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The Economics of Renewable Fuels

Every year, our economy loses more than $300 billion dollars, the equivalent of $1,000 for every American, to imported oil. Oil imports make up about 60 percent of the U.S. trade deficit and are equivalent to half of our national defense budget.

In 2009, the renewable fuel industry contributed $53.3 billion to the nation’s GDP and generated $8.4 billion in federal tax revenues. What’s more, the US biofuels industry is responsible for creating and supporting 400,000 jobs in this country, according to recent economic studies, approximately 60,000 of which are directly related to ethanol production. Direct job creation from advanced biofuels production could reach 29,000 by 2012 and rise to 190,000 by 2022. Direct economic output from the advanced biofuels industry is estimated to rise to $5.5 billion in 2012 and rise to $37 billion by 2022.

Read more about the economics of renewable fuels:

Saving Money At the Pump

A 2011 Center for Agricultural and Rural Development (CARD) study by economists at Iowa State University and the University of Wisconsin found that increased ethanol use kept wholesale gasoline prices $0.89/gallon lower than they would have been otherwise in 2010. Accordingly, increased blending of ethanol resulted in American drivers saving an average of some $34 billion annually during the last decade.

Read the report from the Center for Agricultural and Rural Development:

Beyond Imported Oil

In 2010, ethanol production reached 13 billion gallons, reducing petroleum imports by more than 300 million barrels.

Download the US Department of Energy report:

Foods vs. Fuel: Biofuels and Our Food Costs

Some people fear that demand for corn ethanol will drive up food prices. Analyzing the components of our food dollar, the USDA has concluded that just 11.6 cents of each dollar a family spends on food makes its way back to the farm. That is down from USDA’s 2008 estimate of 20 cents, the last time food manufacturers sought to blame ethanol for rising food prices.

So, if the farm value of each food dollar is actually decreasing, what is driving American food bills higher? The simple answer is energy. 

According to the USDA, nearly 33 percent of each food dollar is spent on energy-intensive areas including processing, packaging and transportation, plus actual energy costs. That makes this sector the second largest contributor to food prices – only trailing labor costs. As labor costs tend to be more stable and predictable, the volatility in energy prices will continue to facilitate periods of sticker shock at the checkout counter.

In addition, a study released by Informa Economics shows there is no statistical evidence to support the argument that growth in ethanol production is driving consumer food prices higher. The study concludes that corn prices would be considered a statistically insignificant variable in determining what drives the food consumer price index.

Read more about biofuels and food costs:

Carbon Reductions from Renewable Fuels

In 2010, the production and use of 13 billion gallons of ethanol in the U.S. reduced CO2-equivalent greenhouse gas emissions by 21.9 million tons, the equivalent of removing 3.5 million cars and pickups from America’s roadways

A recent study published in Yale University’s Journal of Industrial Ecology found that greenhouse gas emissions from ethanol are “…equivalent to a 48% to 59% reduction compared to gasoline, a twofold to threefold greater reduction than reported in previous studies.”

Creating Healthier Air with Flex Fuel

Flex Fuel E85 is a blend of 85% Ethanol & 15% gasoline and is recognized as an official “clean air choice” by the American Lung Association because it reduces tailpipe emissions of nitrogen oxides, VOCs and particulates by 10-20 percent.

Read more from the American Lung Association:

Ethanol’s Energy Balance

Ethanol offers a lot more energy than it takes to produce. Analysis released by the US Department of Agriculture in June 2010 concluded that one unit of fossil energy used in the corn ethanol production process results in 2.3 units of energy in the form of ethanol.

On the other hand, researchers at the Department of Energy’s Argonne National Laboratory found that it takes 1.23 units of fossil energy to produce one unit of energy in the form of gasoline. In other words, it’s gasoline—not ethanol—that has the negative energy balance.

Read more about ethanol’s energy balance:

Biodiesel and Clean Diesel Technology Engines

Biodiesel blends up to B20 (20% biodiesel) can be safely run in diesel engines without any conversion or change in maintenance. A study from the National Renewable Energy Laboratory (NREL) has shown that even the latest in “Clean Diesel Technology” is compatible with B20 without impact to the engine or the emission control system.

Creating Healthier Air with Biodiesel

Studies conducted by the US Environmental Protection Agency (EPA) and the Department of Energy’s National Renewable Energy Laboratory (NREL) show vehicles using biodiesel can reduce emissions of toxic air pollutants such as diesel particulate matter and hydrocarbons, such as volatile organic compounds – the precursors to ozone formation.

Additional information from Puget Sound Clean Air Agency:

America’s Renewable Fuel Goals

Our country has made a commitment to reduce our dependence on petroleum through the use of renewable fuels, specifically requiring that domestic use of renewable fuels is increased to 36 billion gallons per year by 2022.

The US has 16.2 billion gallons of renewable fuel capacity today: 13.5 billion in first generation ethanol, generally operating near nameplate capacity, and 2.7 billion gallons in biodiesel capacity.

To fulfill the renewable fuel standard by 2022, the nation needs an additional 20 billion gallons in capacity, and the answer lies in advanced biofuels that utilize non-food sources such as agricultural waste, cellulosic crops and advanced production biomass technologies such as algae.

Read more from the US EPA and the Environmental Defense Fund:

California’s Greenhouse Gas Emissions Goals

The California Air Resources Board, the California Energy Commission and the S.D. Bechtel Foundation funded a study to extend the energy outlook to 2050, which found that biofuels will continue to play an important role in the state’s energy mix as it works to reduce its greenhouse gas emissions to 80 percent below 1990 levels by 2050.

According to that report, “California’s Energy Future - The View to 2050,” first-generation biofuels contribute to the goal of reducing GHG emissions by producing 40 to 50 percent fewer emissions than fossil fuels.

“Biofuels are an important component of our future reduced-emission fuel use, and the state can benefit from advancing technology and developing a sustainable supply of biomass,” the authors stated in a report summary.

Read the entire study:

Advanced Biofuel Projects in the US

More than 110 planned and operating projects in 30 states are looking to build an advanced biofuels and products industry. Biofuels Digest’s project tracking database is projecting that global advanced biofuels capacity will reach 4 billion gallons by 2015.

There is over 1 billion tons of non-food cellulosic biomass in America today, creating the potential for 80 billion gallons of fuel, which would replace more than 50% of the gasoline that we use today.

Read more about future biofuels projects:

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