Agricultural Economic Report No. (AER-585) 58 pp

April 1988

Ethanol: Economic and Policy Tradeoffs

Federally supported ethanol use is one alternative for meeting environmental, energy security, and agricultural objectives. Additional expansion of the industry depends on a continuation of current favorable conditions, including extension of the Federal gasoline tax exemption. Under current conditions, ethanol should be able to compete with other additives as an octane enhancer. Expansion of the ethanol industry would increase ethanol's contribution to improving energy security, reducing air quality problems associated with carbon monoxide, and increasing corn prices. The report provides a basis for assessing the tradeoffs in using ethanol to meet national objectives.

Keywords: Ethanol, energy, production costs, energy security, environmental quality, Clean Air Act, octane enhancers, farm income, future technology

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