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Published: July 2011
Supplies of ethanol have increased tremendously in the last few years, mainly for use as a source of renewable fuel. Ethanol is usually made by the fermentation of a carbohydrate (starch, sugar or cellulose) to the alcohol, followed by distillation and other processing to make it suitable for use as a fuel, solvent, chemical feedstock or for alcoholic beverage consumption. Most ethanol (approximately 70% of global production) is derived from the fermentation of sugar crops, including sugarcane, sugar beets or molasses. Brazil and many tropical countries use sugarcane or molasses, while France, the largest producer in Europe, uses mainly sugar beets. The United States and eastern Canada use mainly corn kernels; in western Canada, wheat is the main feedstock. In China, corn, cassava and sweet potatoes are used. In Italy, ethanol is produced from waste from wine manufacture.
Considerable research is being focused on developing processes that can produce ethanol from low-cost, nonfood feedstocks. The industry is hoping to develop economical cellulosic ethanol, derived from the fermentation of cheap forms of biomass.
The following pie chart shows world consumption of ethanol:
The United States accounts for an increasing amount of the world market. Biofuels regulations enacted in 2007 require an increasing level of ethanol added to the nation's gasoline supply. In late 2009, ethanol began to account for about 10% of gasoline (referred to as E-10). At this point, the "blend wall" was reached; the U.S. EPA has not allowed higher concentrations for fear of performance, warranty and other issues. In 2010, production increased but demand flattened, leading to greater exports. The United States increased shipments to the European Union and Brazil. In late 2010, the EPA started allowing the use of E-15 (15% ethanol) in vehicles newer than the 2001 model year. In the chemical market, ethanol is being used in increasing amounts to make ethyl tert-butyl ether (ETBE) for the export market.
Supplies of ethanol in Brazil became tight in 2010 because of higher demand, high sugar prices (which motivated farmers to process sugarcane to make sugar instead of ethanol), and unfavorable weather conditions. Brazil had been the leading global exporter of ethanol until 2009. Brazil was the leading importer to the United States, but this ceased in 2010 as Brazilian ethanol production dropped. Brazil was depending on demand increasing in the United States to export its surplus ethanol (either directly or indirectly through Caribbean reprocessors), but as of early 2011, trade between the countries is balanced.
Any long-term global forecast is speculative, as actual growth will depend on a number of economic and technical factors, as well as possible changes in legislative and regulatory policy. Government mandates may be changed and/or waivers granted. The United States set goals for long-term use of ethanol in 2005 and proceeded to revise them upwards in 2007. There is no assurance that regulations will always be enforced, as there has been resistance to mandates in Japan, India, Thailand, the Philippines and other countries, which may force governments to change policies. The industry continues to have vocal critics that question the wisdom of providing subsidies to ethanol that may not provide the economic and environmental benefits that its proponents claim.
Developments in technology will also influence ethanol demand; if processes can be developed that allow economical production of cellulosic ethanol, the market will grow strongly. The United States set goals for use of cellulosic ethanol and other "advanced" biofuels in 2007, but at the same time, has waivers in place to change the mandates if the technology cannot be developed economically and without harming the environment.
Other than fuel, the markets for most other uses of ethanol are much less dynamic. The market for beverage alcohol, in particular, is a mature one, with declines expected for some countries. Production of ETBE has grown significantly in Brazil and the United States, mainly for export to Europe and Asia. The market for industrial alcohol, meanwhile, is growing in line with the GDP in many countries.