Researchers at Iowa State University will evaluate the costs and benefits of ethanol expansion, how it affects rural communities in the Upper Mississippi River basin as part of a $676,722 biofuels research grant.
The grant, awarded to research partner Southern Illinois University, recently was announced as part of the $17.5 million Biomass Research and Development Initiative, administered jointly through USDA and the U.S. Department of Energy.
The project is a collaborative effort between Southern Illinois University's Department of Agribusiness and ISU's Center for Agricultural and Rural Development and ISU's Department of Economics. ISU will investigate how corn-based ethanol production can be designed and implemented efficiently to achieve both economic and environmental benefits in this major ag region.
Crop prices, rotations, water quality
The study is considered the first to attempt a simultaneous assessment of the impacts of corn-based ethanol expansion on crop prices, cropping patterns, water quality and regional economic indicators.
The study will capitalize on resources developed at ISU, including pricing models for corn, which will be applied to ethanol plants and markets. The study will also use models that estimate the effects of changing land use and management practices on water quality and the environment; and methods for estimating economic benefits of ethanol production in terms of created jobs, increased household income, and tax revenue generated.
ISU economics professor Catherine Kling, one of the lead investigators, says it is important to have science-based information to guide decisions as demand continues to grow for alternative and sustainable energy sources.
"While the Midwest has some great opportunities when it comes to growing biomass for energy, we also need to understand more about the interplay between crops, energy and our environment," said Kling. "This project is meant to improve that understanding with some solid scientific measures."
The collaboration of experts in various disciplines and among different agencies is a hallmark of the research funded under this USDA-DOE initiative. The funding is intended to accelerate discovery and implementation of biobased fuels and reduce U.S. dependence on fossil fuels.
Another study to look at impact on trade
USDA has given $275,000 in research funds to ISU's Center for Agricultural and Rural Development to provide estimates of the impact on farmers, consumers and international trade from increased energy production from agriculture.
"This research is critical for national leaders who are making decisions about investments in renewable fuels," says Bruce Babcock, director of CARD and professor of economics. "Right now people are asking how high the price of corn is going to go and what higher corn prices mean for the competitiveness of U.S. livestock producers and our ability to meet export demand. This research will help to provide answers to these questions."
Currently, estimates of how much energy can be obtained from ag sources are based simply on projections of trends and estimates of current and planned biofuel facilities. The approach taken by CARD analysts and collaborators will be to calculate the break-even prices of energy feedstocks and then use these prices to determine the amount of feedstock that will be produced in the long run.
Which ag sources most profitable?
For example, for any given price of crude oil, the expected market value for unleaded gasoline can be calculated. The analysts can find the market price that would make E85 ethanol an equal substitute to gasoline for flex-fuel vehicle owners. Using this ethanol price, they can calculate the corn price that ethanol facilities can pay while still covering their costs of production. Then they can estimate how much corn U.S. agriculture would produce at the given corn price.
With this method, the analysts intend to estimate supply curves for cellulosic feedstock and biodiesel derived from oilseeds, as well as for corn-based ethanol. The resulting information should be useful in determining which agricultural energy sources would be profitable to develop under a given set of incentives and energy prices and which resources would not be profitable for energy development under those conditions.
The project also includes an assessment of how shifts of agricultural commodities to energy sources might affect trade and what the implications may be of financial investment in ethanol and biodiesel facilities for income and employment in rural America.