Biofuels and agriculture: a past perspective and uncertain future

Abstract

The US corn ethanol industry has grown from virtually nothing in the early 1980s to over 14 billion gallons in 2011. Subsidies have been an important impetus for the industry, and they have existed in one form or another throughout the life of the industry. This paper provides (1) a brief look at the history of the linkages between energy and agriculture and how they have changed with biofuels; (2) a review of some of the major impacts of the US corn ethanol program; and (3) analysis of prospective impacts of cellulosic biofuels. There is no doubt that biofuels have brought about a new era for global agriculture. Historically, the prices of agricultural and energy products moved in response to supply and demand factors relevant to each market, but moved largely independent of one another. Corn ethanol has changed that, and today there is a link between crude oil and corn that is driven by the demand side. Since agricultural commodity prices are linked both on the demand and supply sides, the corn–crude oil link spills over to other agricultural commodities as well. Development of cellulosic biofuels has been much slower than hoped. The feedstocks are more expensive than initially believed. Conversion technologies remain uncertain and expensive. There are many uncertainties through the cellulosic supply chain, and government policy remains uncertain as well. Thus, the future of the cellulosic biofuels industry is, at this point, an open question.

Keywords:

•  corn ethanol
• cellulosic biofuels
• agriculture
• industry
• government policy
• renewable energy

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