The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions
April 2009
Unless otherwise indicated, all years referred to in this report are calendar years.
On the cover: Cornfield, copyright JupiterImages;bowl of breakfast cereal, photo by Scott Bauer,courtesy of the U.S. Department of Agriculture; and grocery store and traffic, images by Maureen Costantino.
Preface
The production and use of ethanol in the United States have been steadily increasing since 2001, boosted in part by long-standing production subsidies. That growth has exerted upward pressure on the price of corn and, ultimately, on the retail price of food, affecting both individual consumers and federal expenditures on nutritional support programs. It has also raised questions about the environmental consequences of replacing gasoline with ethanol.
This Congressional Budget Office (CBO) analysis, which was prepared at the request of Representatives Ron Kind, Rosa DeLauro, and James McGovern, examines the relationship between increasing production of ethanol and rising prices for food. In particular, CBO estimated how much of the rise in food prices between April 2007 and April 2008 was due to an increase in the production of ethanol and how much that increasein prices might raise federal expenditures on food assistance programs. CBO also examined how much the increased use of ethanol might lower emissions of greenhouse gases. In keeping with CBO’s mandate to provide objective, impartial analysis, the report contains no recommendations.
The report was written by Ron Gecan and Rob Johansson of CBO’s Microeconomic Studies Division and Kathleen FitzGerald of CBO’s Budget Analysis Division under the guidance of Joseph Kile, David Moore, and Sam Papenfuss. Within CBO, Robert Dennis, Terry Dinan, David Hull, Robert Shackleton, Natalie Tawil, and Thomas Woodward (who has since left the agency) provided helpful comments, as did Joseph Cooper, Ephraim Leibtag, and Paul Wescott of the Department of Agriculture; Ralph Heimlich of Agricultural Conservation Economics; Tim Searchinger of Princeton University; and Michael Wang of Argonne National Laboratory. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.)
Leah Mazade edited the study, and Sherry Snyder proofread it. Maureen Costantino designed the cover and, with the assistance of Allan Keaton, prepared the study for publication. Lenny Skutnik printed the initial copies, Linda Schimmel handled the print distribution, and Simone Thomas prepared the electronic version for CBO’s Web site.
Contents
Ethanol Production in the United States
Ethanol Production and Consumption Under Subsidies, Tariffs, and Mandates
Ethanol Production and Food Prices
The Impact of Higher Corn Prices on the Cost of Food
Ethanol, Food Prices, and Federal Food Assistance
Supplemental Nutrition Assistance and the Federal Child Nutrition Programs
The Special Supplemental Assistance Program for Women, Infants, and Children
Ethanol Production and Greenhouse-Gas Emissions
Greenhouse-Gas Emissions During a Fuel’s Life Cycle
1. The Supply and Uses of Corn in the United States
2. Federal Spending for Selected Food Assistance Programs
2. Components of Consumers’ Expenditures on Farm Foods, 2006
