That means subsidies: $7 billion in 2010 alone, once tax credits, tariffs and other incentives are added together. In fact, between 1980 and 2000 the U.S. government has devoted some $19 billion in tax breaks alone to the ethanol-from-corn effort, according to the U.S. Government Accountability Office, and ethanol subsidies per liter of the biofuel have often been larger than the total cost of a liter of gas the biofuel replaced. A significant portion of the profits made by agribusiness giants like Poet or Archer Daniels Midland—which, along with oil company Valero, are responsible for the bulk of ethanol produced in the U.S.—can be attributed to this government largesse with taxpayer dollars.
But even setting subsidies aside—after all, every energy source in use in the U.S. today continues to receive federal tax benefits, among other incentives—there's the simple economic cost of building all those corn mills, stainless steel fermentation tanks and other infrastructure needed to churn out ethanol on the tremendous scale of transportation fuels.
"In biofuels, because of the energy density and limits of collection, we're talking about very small facilities, maybe 40 million gallons a year," says Jeffrey Jacobs, vice president of the Biofuels and Hydrogen Business Unit for Chevron Technology Ventures, the research and development investment fund of the California-based oil company. In fact, the U.S. Department of Agriculture (USDA) estimates that the nation would need 528 biorefineries—the U.S. currently has 204 strictly corn starch–to-ethanol plants today—and $168 billion in infrastructure investment to meet its current biofuel goals. "That's going to take decades to build as well."
Plus, there's the energy cost of old-fashioned distilling, often supplied by burning fossil fuels like natural gas, where the broth is boiled to separate ethanol from the soup of water and yeast in which it has been fermented. After all that trouble, a gallon of ethanol fuel will only drive a car two thirds as far as a gallon of gasoline—it is a less energy-dense fuel—although it does help gasoline to burn without producing suffocating carbon monoxide, the original reason it was blended into the fuel supply.
As the USDA noted in a report on gasohol in 1986: ethanol "cannot be justified on economic grounds" and "had no long-term prospect for survival without massive new government assistance." More recently, the Congressional Research Service noted in a report last October that if the entire all-time record U.S. corn crop of 2009 was used to make ethanol—it would only replace roughly 18 percent of national gasoline use. "Expanding corn-based ethanol to significantly promote U.S. energy security is likely to be infeasible," the researchers wrote.
And then there are the environmental impacts, both direct and indirect. For example, fertilizer runoff from Midwestern corn fields promote algal blooms in the Gulf of Mexico that, in turn, create vast oxygen-deprived "dead zones". And, growing more corn in the U.S. means the nation produces less soy, which drives up the price of that bean, thereby causing farmers in Brazil to clear more Amazon rainforest to plant more of the staple. That means massive greenhouse gas emissions, notes agricultural expert Timothy Searchinger of Princeton University. "We can't get to a result with corn ethanol where we can generate greenhouse gas benefits."
That was the environmental reason to pursue a biofuel like ethanol in the first place—it theoretically balances the CO2 absorbed by the plant when it is grown with the CO2 released when the fuel is burned. But the U.S. ethanol industry is merely taking a crop that is already grown anyway—corn—and converting it to a fuel that is burned. That means the growth of the plant is not using additional CO2 to counterbalance the CO2 emitted when the fuel made from that plant is burned, Searchinger notes. "It's an offset," he says. "It's a very expensive way to have a very small effect." In fact, the Congressional Budget Office (CBO) estimates that it costs $750 in subsidies for ethanol for every ton of CO2 saved.