Beyond the RFS: The Environmental and Economic Impacts of Increased Grain Ethanol Production in the U.S.

The Renewable Fuel Standard (RFS) passed as part of Energy Policy Act (EPACT) of 2005 mandates that the U.S. produce 7.5 billion gallons of ethanol per year by 2012, but market conditions suggest that this level of production may be significantly exceeded by that year.

In this brief we use an agricultural production model integrated with a biophysical simulation model to examine what the likely economic and environmental impacts will be from increasing corn production to meet that ethanol demand. For economics, we look at impacts on commodity prices, farm income, and government expenditure on support payments, while for the environment we look at impacts on nutrient loading, erosion, and greenhouse gas emissions from agriculture. Our results suggest that although ethanol has the potential to provide benefits in terms of net GHG emissions, farm income, and reduced government support for agriculture, there are soil and water quality implications that must be addressed.