The Economic Impact of Biofuels Production

1
The Economic Impact of Biofuels Production

• Dr. Matthew C. Roberts
• Assistant Professor
• Agricultural, Environmental and Development
  Economics
• The Ohio State University

2
What are Biofuels?

• Ethanol
• Corn, Barley, Sorghum, Cheese Whey, Sugars
• Cellulosic Wood Pulp, Corn Stover, etc.
• Biodiesel
• Vegetable Oils Soybean, Sunflower, Palm, etc.
• Post-Consumer Oils Yellow Grease
• Animal Fats and Wastes

3
Why Do Biofuels Matter?

• Inputs are produced locally, increasing demand
  for Ohio and US production.
• Displaces imported fuels/feedstocks.
• Reduces trade imbalances.
• Outputs can be consumed locally.
• In 2003, Ohio was the 3rd largest ethanol user.
• 183m gallons ethanol requires 67m bu corn.
• Ohio produced 500m bu of corn in 2005.

4
Economic Impacts of Ethanol Minnesota

• In 2002, MN had 14 ethanol plants making 300m
  gal.
• Directly employed 356 people.
• Indirectly employed 1,285 people.
• Induced employment of 921.
• Total Employment Impact 2,562 people
• Total Output Impact 587m
• At present, MN has 450m gal of capacity.

Source Minnesota Department of Agriculture
5
Economic Impacts of Ethanol Iowa

• In 2004, IA had 14 plants with 864m gal capacity
• Total Employment Impact 3,704 people
• Revenue of 2.6bn
• Revenue injected into local economies 2.4bn
• Almost all of the corn and labor plus 44 of
  other expenses are purchased in-state.
• Iowas dry mill industry delivers about 2.40 in
  added value for each bushel of corn it processes.

Source Otto Gallagher, Iowa State University,
2004
6
Economic Impacts of Ethanol South Dakota

• In 2004, SD had 10 ethanol plants making 420m
  gal.
• Used 145m bushels of corn.
• Raised average SD corn price by 10-12c/bu
• Directly employed 473 people.
• Indirect employment impact of 1,756 jobs.
• Induced employment impact of 743 jobs.
• Total Employment Impact 2,972 jobs
• Total Output Impact 1.05bn
• Total Value Added 255m

7
Potential Impact in Ohio

• Increased Industrial Production in Rural Areas
• Most Production Facilities are Farmer-owned
• Dividends remain locally, further boosting rural
  economies.
• Increased amount of value-add from corn soybean
  processing remains in-state.
• Fuel price price volatility is lowered
• Lower transport costs
• Closer supplies

8
Potential Impact on the US

• Increased rural development
• Decreased trade deficit
• 1/3 of US trade deficit is oil-related
• Reduced volatility of fuel prices
• Reduced GHG emissions