Renewable Corn-Ethanol and Energy Security

Abstract:     
Though corn-ethanol is promoted as renewable, models of the production process assume fossil fuel inputs. Moreover, ethanol is promoted as a means of increasing energy security, but there is little discussion of the dependability of its supply. This study investigates the sensibility of promoting corn-ethanol as an automobile fuel, assuming a fully renewable production process. We then use historical data to estimate the supply risk of ethanol relative to imported petroleum. We find that devoting 100% of U.S. corn to ethanol would displace 3.5% of gasoline consumption and the annual supply of the ethanol would be inherently more risky than that of imported oil. Finally, because large temperature increases can simultaneously increase fuel demand and the cost of growing corn, the supply responses of ethanol producers to temperature induced demand shocks would likely be weaker than those of gasoline producers.

Keywords: Ethanol, Sustainability, Energy Security, Risk

JEL Classifications: Q20, Q42

Working Paper Series