Ethanol Facts: Economy

The growing ethanol industry provides a significant contribution to the American economy, creating new high-paying jobs, increasing market opportunities for farmers, generating additional household income and tax revenues, and stimulating capital investment.

FACT: In 2009, the U.S. ethanol industry helped support nearly 400,000 jobs in all sectors of the economy.
Source: Contribution of the Ethanol Industry to the Economy of the United States

FACT: In 2009, ethanol contributed $53.3 billion to GDP, added $16 billion to household income, and displaced the need for 364 million barrels of oil.
Source: Contribution of the Ethanol Industry to the Economy of the United States

FACT: By increasing the demand for corn, and thus raising corn prices, ethanol helps to lower federal farm program costs.

In a January 2007 statement, the USDA Chief Economist stated that farm program payments were expected to be reduced by some $6 billion due to the higher value of a bushel of corn.

FACT: Ethanol refineries serve as local economic power houses.

While the national economic impact of ethanol production is impressive, small and rural communities with ethanol facilities nearby see a much more dramatic economic boost. An average 100 million gallon per year ethanol biorefinery provides the following economic benefits to the local economy:

  • The goods and services bought and sold as a result of the operation of the ethanol facility add $367 million to the local GDP.
  • The economic activity resulting from the ethanol biorefinery help create more than 2,400 new jobs across all sectors. Those include 50 at the biorefinery and more than 1,300 in the agricultural sector.
  • The increase in good paying jobs as a result of the facility boosts local household incomes by more than $100 million.

Source: "Contribution of the Ethanol Industry to the Economy of the United States," LECG, LLC, Feb 2008.

FACT: The federal ethanol program generates revenue for the U.S. Treasury.

The federal ethanol incentive, which is available to gasoline marketers and oil companies (not ethanol producers) as an incentive to blend their gasoline with clean, domestic, renewable ethanol, is a cost-effective program. It actually returns more revenue to the U.S. Treasury than it costs, due to increased wages and taxes and reduced unemployment benefits and farm program payments, while at the same time holding down the price of gasoline and helping the American farmer.

In 2009, the combination of increased GDP and higher household income generated an estimated $8.4 billion in tax revenue for the Federal government and nearly $7.5 billion of additional tax revenue for state and local governments.  The estimated cost of the two major Federal incentives in 2009, the Volumetric Ethanol Excise Tax Credit (VEETC) and Small Ethanol Producer Credit, totaled $5.0 billion.  Consequently, the ethanol industry generated a surplus of $3.4 billion for the Federal treasury.  Source: Contribution of the Ethanol Industry to the Economy of the United States

The federal ethanol program was established following the OPEC oil embargoes of the 1970s, which exposed our dangerous dependence on imported oil. As an alternative to petroleum, ethanol directly displaces imported oil and reduces tailpipe emissions while helping to bolster the domestic economy. Yet today we import more petroleum than ever before. With rising crude oil prices and increasing international instability, incentives for production and use of domestic ethanol are critical.

We have subsidized the oil industry substantially since the early 1900s, and continue to do so. In fact, according to the General Accounting Office in an October 2000 report, the oil industry has received over $130 billion in tax incentives just in the past 30 years - dwarfing the roughly $11 billion provided for renewable fuels. During this time, U.S. oil production has fallen while annual U.S. ethanol production has grown dramatically.