Tuesday, April 21, 2015

The Costs and Benefits of Ethanol

By Randall Holcombe • Wednesday March 18, 2015 2:49 PM PDT • 9 Comments

Here’s a back-of-the-envelope calculation on how much the mandate to require ethanol in motor fuel costs consumers, and benefits farmers.  This article notes that in 2000 about 5% of the corn crop went to the production of ethanol, and by 2013, 40% of the corn crop was devoted to ethanol production. The increased demand for corn resulted in a doubling of the per bushel price of corn.

The U.S. Department of Agriculture says in 2011 the total value of the corn crop was $63.9 billion, and that there were 400,000 corn farms in the United States. Because the price of corn has doubled due to the mandate, half of that revenue, or $31.95 billion, is a transfer from consumers to corn farmers in the form of higher prices.  Dividing that $31.95 billion cost among 319 million Americans, the cost to each American from the ethanol mandate is just about $100 a year. That includes not only the price of ethanol, but the higher price of corn in all its other uses......To Read More....

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