Issues in Raising Allowable Ethanol-Gasoline Blends to E-15 or Higher for Conventional Vehicles

AgMRC Renewable Energy Newsletter
August 2009

  Robert Wisner
  Professor of Economics and Energy Economist
  Ag Marketing Resources Center
  Iowa State University
  rwwisner@iastate.edu

 

In several previous articles, we have pointed out that the ethanol industry faces an emerging U.S. “blending wall”.(1)  The industry currently has two markets:

1. a blend of 10% ethanol and 90% gasoline for conventional vehicles and
2. 85% ethanol-15% gasoline for flex-fuel vehicles.

The blending wall represents an approximate maximum market size for ethanol in the next few years as a U.S. motor fuel unless higher blends than E-10 are allowed for conventional gasoline-powered vehicles.  The reason for this is that the E-85 market is greatly limited by the relatively small percentage of flex-fuel vehicles in the current U.S. automobile and light-truck fleet.  It is also limited by the need to lower E-85 pump prices by about 25% vs. unleaded gasoline to make the E-85 competitive because of its lower fuel mileage.  As the average U.S. ethanol-gasoline blend nears 10%, the blending wall will become a major constraint on industry growth unless the E-10 limit for conventional vehicles is increased.  The blending wall is expected to be reached in the next two or three years, if not sooner.

Unless the allowable blend is raised, the blending wall is almost certain to prevent reaching the higher levels of ethanol required to be used by the December 2007 Energy Independence and Security Act.(2)  If the allowable blend is not increased, it is almost certain to not only halt construction of corn-starch ethanol plants but also to greatly curtail or halt investment in a cellulose ethanol industry.  For these reasons, the ethanol industry and its supporters are strongly encouraging a policy to raise the allowable blend rate.  At first glance, the issue of raising the average ethanol blend from E-10 to E-15 would seem like a simple, straight-forward process.  However, it is much more complex than it might appear.

A recent web search indicated that articles supporting an increase in the maximum blend outnumber those opposing an increase by probably at least 95 to 5.  Even so, a careful look at available research-based information indicates the issue of raising the allowable blend for conventional vehicles is not without strong controversy.  Issues involved include the following:

• Impacts on beef, pork, dairy, and poultry producers from additional growth in corn demand

• Impacts on consumer food prices

• Trade policy issues as the size of the subsidized U.S. ethanol industry expands

• Impacts on air pollution equipment of older non-flex-fuel vehicles

• Impacts on non-road equipment such as engines for boats, lawn mowers, conveyors, portable generators, etc.

• Impacts on air quality

• Impacts on human health

• Impacts on growth of the ethanol fuels industry if the allowable blend is not raised

• Impact on investments in next generation biofuels technology development and production

• Impacts on greenhouse gas emissions

• Impacts on food price variability and availability of grain supplies for foreign customers

In this article, we will provide an overview of some of the differing viewpoints and concerns related to these issues.  For a more thorough analysis, links are provided in the references section of this article to the studies discussed in this article.

The Case for Raising the Allowable Blend

As we have indicated above, future growth of the ethanol industry depends heavily on whether higher ethanol blends than E-10 are allowed for non-flex-fuel vehicles.  Several university studies have been commissioned by the ethanol industry to test the various affects of higher blends on automobiles of varying ages.  For example, a South Dakota State University study indicated that mid-level blends may actually give better fuel mileage than E-10 and regular unleaded gasoline.(3)  Results from this study suggest more research on the optimum level of ethanol-gasoline blend is needed since the results are different than those from some other studies.  These results are contrary to those of the U.S. Department of Energy.  A Minnesota State University study showed no adverse effects of ethanol on fuel systems of conventional automobiles.(4)  Another Minnesota State University study funded by the ethanol industry, showed no major concerns about engine performance, durability, and emissions.(5)

The need for higher ethanol blends than E-10 for conventional vehicles is especially important for the future of the ethanol industry and current policy efforts to encourage alternatives to petroleum fuels.  Without intermediate blends such as E-15 or perhaps E-20 or E-25, it is unlikely that the future government mandates for higher ethanol use to be reached.  However, failure to reach these higher mandates or providing a waiver for the mandates would risk stopping the emergence of the cellulosic ethanol industry before few if any commercial-size plants are developed. 

For the longer term, failure to allow for mid-range ethanol-gasoline blends would likely encourage the development of other energy alternatives such as butanol, compressed natural gas, compressed land-fill gas, cellulose-based fuels made from non-fermentation processes, and electric vehicles.  Butanol is a liquid fuel that is an alternative to ethanol.  It can be transported in petroleum product pipelines, does not reduce fuel mileage vs. gasoline, and does not require engine modifications.  Some researchers and industry sources indicate it may be possible in the future to modify corn-starch ethanol plants to produce butanol.  However, the optimum size of plant may be considerably larger than that of current ethanol plants.  Other technologies in the development stage offer possibilities of converting starch, cellulose, and other renewable feedstocks to fuels equivalent to gasoline.  Commercial application of these technologies appears to be several years away.

Issues of Concern for Animal Agriculture

A year ago, with a much stronger global economy and much higher energy prices, a big issue of biofuels critics was its alleged negative impact on food costs, and to some extent food availability to developing-world consumers.  Various articles have indicated these concerns have been exaggerated.(6)  The food price impact so far in the U.S. has been largely through costs of foods processed directly from grain, such as breakfast cereals and products using corn sweeteners.  However, the entire U.S. animal agriculture sector has been suffering from record or near-record negative returns that are attributable to the more than doubling of feed costs in the last few years.  The industry points out that the 2.43 billion bushel growth in the ethanol industry since 2004-05 is equivalent to a severe drought that would have reduced U.S. corn production by 20% after adjusting for the increase in U.S. corn plantings.  It also points out that growth of biofuels production greatly increases the vulnerability of the animal agriculture sector to future crop production problems in the U.S. or other parts of the world.  A closely related issue from the industry perspective is that the full impact of biofuels on U.S. consumer food prices has not yet been experienced because of long biological lags involved in down-sizing animal numbers in response to severely depressed returns and extreme financial losses.  Livestock industry economists anticipate that an eventual down-sizing will occur and will result in significant increases in the prices of red-meat, poultry, and dairy products.
   
Concerns of Global Warming Proponents

As we noted in recent articles, indirect land use impacts from biofuels production have become a major issue for environmentalists who focus on global warming, biodiversity, and related issues.  Models currently being used to evaluate impacts of ethanol on greenhouse gas (GHG) emissions show a large negative impact from indirect land use effects.  Indirect land use impacts are said to occur if more land needs to be brought into production somewhere else as an offset when an acre of cropland is converted from feed and food use to biofuels production.  For those who are concerned about indirect land use impacts on GHG emissions, allowing a higher ethanol blend for conventional vehicles would be seen as accelerating the potential indirect land use impacts.

The Processes for Approval of Higher Ethanol Blends

The U.S. Environmental Protection Agency (EPA) has been given authority to insure that motor fuels and motor-fuel blends meet emissions requirements of the Clean Air Act.(7)  With this authority, EPA must provide a waiver to any new fuel that is not “substantially similar” to existing fuels before it can be approved for use.  The waiver is contingent on the EPA Administrator’s determination that the fuel will not cause or contribute to a failure of any emission control device or system over the useful life of the motor vehicle, the motor vehicle engine, non-road engine or non-road vehicle in which it is used.(8)  The waiver requires testing and evaluation of four main items: tailpipe emissions, evaporative emissions, compatibility of materials, and drivability.(9)

Emissions Impacts & Durability of Emissions Controls

Air quality and vehicle emissions have been health concerns for many years.  The American Lung Association, in testimony before Congress this year, expressed concern that the use of mid-level ethanol blends may increase ozone problems and cause associated negative health problems.(10) 

Several recent studies indicate ethanol blends moderately above E-10 would increase emissions of acetaldehyde in all engines.  One example is a report from an Oak Ridge National Laboratory that examined impacts on legacy vehicles from use of blends ranging from E-10 to E-30.  The report shows that most work until very recently has focused on E-20 blends, with little on no analysis of E-15.(11)  EPA studies of E-20 reviewed in the report showed that on average, its use in assorted brands of fuel-injected 1990 to 1992 vehicles typical of many vintage vehicles lowered CO emissions by an average of 22.3% when compared with straight gasoline (E-0).  However, nitrous oxide (NOx) emissions were double those of E-0 for two of the vehicles and increased by an average of 31.9%.(12)  Both the EPA work and an Australian study indicated that E-20 blends reduced carbon dioxide (CO2) emissions when compared to E-0.

An Australian study using five pairs of 2001 automobiles representative of those used in both Australia and the U.S. showed similar results.  Its study, using the same procedures as EPA, showed total hydrocarbon emission (THC) reductions of 30% when compared with E-0, along with a 29% reduction in NO.(13)  NOx emissions increased by an average of 48%.  The Australian vehicles were later models than in the EPA study. They were purchased new for the study and driven 4,000 miles before testing.  The EPA cars had been in service and presumably had significantly more initial miles than those in the Australian study.

Auto Manufacturers have been required to warrant the emissions control systems for 120,000 miles.  In the Australian study, the vehicles were driven 50,000 miles and re-tested for emissions.  Due to higher catalytic converter temperatures, the study found that emissions equipment deteriorated more rapidly with E-20 than with E-0 because of elevated catalyst temperatures.  Three out of five test vehicles showed increases in THC and CO emissions vs. the E-0 vehicles that also had been driven for 50,000 miles.  Four out of 5 of the vehicles using E-20 had higher NOx emissions than the 5 vehicles using E-0. In the initial tests, all vehicles had shown total hydrocarbon emission (THC) reductions and 4 out of 5 had shown reductions in CO emissions vs. the same models using E-0.  These results support concerns of the automobile industry regarding warranties of emissions control systems.  However, the studies were for E-20 vs. E-0.  The intermediate blend being considered by EPA at this time is E-15 vs. E-10.  Results from these studies suggest that more research is needed, focusing specifically on comparable impacts from E-15 vs. E-10.  Updated work by this same organization reported in February 2009 utilizing E-10, E-15, and E-20 blends continued to show reductions in THC and CO emissions for all blends vs. E-0.  On average, NOx emissions showed no change vs. E-0, although 5 to 7 of the individual 16 test vehicles showed increases in NOx emissions.(14)  The test vehicles were not tested for the full vehicle life.

Toxic Emissions

The Australian and EPA studies both indicated that formaldehyde emissions were not significantly changed by E-20 when compared to E-0.  However, emissions of acetaldehydes were increased considerably, mainly during cold-start operations.  EPA considers both of these emissions to be likely carcinogens.  In the Australian study, emissions of benzene, hexane, and toluene decreased, although slight increases appeared to occur in 1,3-butadiene and xylene.(15)  EPA found similar results when testing five 1983-1990 model vehicles with E-10.(16)  The updated Oak Ridge study showed increases in both formaldehyde and acetaldehydes emissions.(17)

Emissions from Permeation

Permeation emissions are those occurring through seals, plastic fuel lines, hoses, plastic fuel tanks, and the charcoal evaporative fuel control canister.  The few carbureted automobiles and light trucks still on the road may also have this type of emissions through carburetors.  A study commissioned by the California Air Resources Board indicated increasing ethanol blends tend to raise the evaporative emissions some, although the results were not statistically significant.(18)  Results varied depending on whether the vehicles tested had plastic or metal tanks and fuel lines.  The one flex-fuel vehicle tested had lower permeation emissions with E-85 than with lower ethanol blends.  This type of emission was lower for E-20 than for E-10.

Feedstock Blending Issues

For some markets, gasoline-ethanol blends require the formulation of a specific type of gasoline to insure that the Reid Vapor Pressure (RVP) meets EPA requirements.  RVP indicates the ability of the fuel to vaporize.  As the ethanol blend increases, the required gasoline blend stock may need to be changed to meet current regulations.  The preferred location for this type of blending reportedly is at petroleum refineries and would tend to represent a small volume of the plant’s total output.  If the refinery is faced with producing several different types of ethanol-gasoline blends, cost issues may be involved both at the petroleum refinery and in additional transportation costs for shipping ethanol to the refinery rather than to a gasoline distribution center.(19) 

Non-road Engines

In a number of states at this time, gasoline users have a choice between E-10 and E-0.  However, in others states the fuel labels on retail pumps do not identify ethanol blends and users thus cannot distinguish between E-10 and E-0.  In a few states, California and Minnesota for example, ethanol use in gasoline is mandated.  As a result, ethanol blend impacts on non-road engines are an issue.  This category of engines includes those used on lawn mowers, garden tillers, grass trimmers, chain saws, tractors, generators, outboard motors, and a wide range of commercial applications. 

Very limited research has been done on the impact of mid-level ethanol-gasoline blends for non-road engines.  The Australian study noted above did testing on small outboard motors, with the results showing increases in NOx emissions.(20)  Oak Ridge National Laboratory and the U.S. Department of Energy (DOE) conducted a pilot study on 28 off-road engines representing different engine classes.(21)  These classes represented only 4 out of 900 different classes identified by EPA, so they are a small sample of engines actually in use.  THC and CO emissions decreased with ethanol blends, although NOx emissions increased.  The idle speed of hand-held trimmers increased, which might raise safety issues with automatic clutches.  For more details, see the full report.

Summary and Implications

The future of the ethanol industry will depend heavily on whether ethanol-gasoline blends higher than E-10 are allowed to be used in non-flex-fuel vehicles.  Without an increase in the allowable ethanol blend percentage, the industry’s production will soon reach a blending wall that it will be very difficult to move above for several years.  That in turn will make it nearly impossible for ethanol to reach the goals set for it by Congress and the President.  Current laws mandate a steady increase in the amount of ethanol to be blended in the nation’s gasoline supply each year from now until 2022.  At the end of this period, 35 billion gallons of ethanol are mandated to be blended with gasoline nation-wide.  With recent consumption levels, that is equivalent in gallons (in gallons of ethanol but not energy) to about 25% of the nation’s gasoline use.

Raising the maximum allowable blend for conventional vehicles is a complex issue.  It is vital for the future of the ethanol industry and investment in cellulose ethanol technology.  However, the law requires that numerous variables be considered before doing so, including impacts on vehicle performance & durability of automotive emission systems, emissions of various non-toxic and toxic gasses, and impacts on greenhouse gas emissions.  Various research reports indicate emissions of many exhaust gas components would be reduced with a higher ethanol blend, although NOx emissions and some toxic emissions reportedly are exceptions.  Studies from Australia indicate higher ethanol blends may shorten the life of automotive emissions equipment because of the higher combustion heat involved.  Available research appears to leave several gaps in information including the need for more research on impacts on off-road engines and on the durability of automotive emissions equipment. 

Groups outside the ethanol industry that have expressed concerns about raising the allowable blend to E-15 include a wide range of interests.  Those with concerns include the livestock, poultry, dairy, and food manufacturing industries, greenhouse gas control proponents who are concerned about indirect land use impacts, and health-related organizations that are concerned about adverse effects of ozone on human health.

References

1  Robert Wisner, Biofuels economist, Wild Cards for the Ethanol Industry, July 2009, Ethanol Blending Economics, the Expected "Blending Wall" and Government Mandates, January 2009.

2 Energy Independence and Security Act of 2007

3 South Dakota State University study of mid-range ethanol-gasoline blends.

4 Erin Voegele “MSU [Minnesota State University] studies E20 effects on fuel pumps, sending units”, Web exclusive posted April 7, 2009.

5 Bruce Jones, 9/26/2005, Technical Issues of Increased Ethanol Blends, Minnesota Center for Automotive Research, Minnesota State University, Mankato, Minnesota, Governor’s Ethanol Coalition, Presentation.

6  AgMRC Renewable Energy Newsletter articles on Food vs. Fuel: Ethanol: How Significant is it in Higher Food Prices & the World Food Crisis?, June 2008; Domestics Perspectives on Food versus Fuel, July 2008;  International Perspectives on Food and Fuel, August 2008.

7 Clean Air Act of February 2004 and http://epw.senate.gov/envlaws/cleanair.pdf

8 Ibid.

9 Ibid.

10 Testimony of A. Blakeman Early, Presented on behalf of The American Lung Association Before the Senate Environment and Public Works Committee Subcommittee on Clean Air and Nuclear Safety Wednesday, April 1, 2009.

11  R. Bechtold, J. F. Thomas, S. P. Huff, J. P. Szybist, T. J. Theiss, B. H. West, M. Goodman, and T. A. Timbario: Technical Issues Associated with the Use of Intermediate Ethanol Blends (>E10) in the U.S. Legacy Fleet: Assessment of Prior Studies, 2007, ORNL/TM-2007/37, Oak Ridge National Laboratory, Managed by University of Tennessee-Battelle for the U.S. Department of Energy.

12 Ibid., pp. 27-28.

13 Orbital Engine Company, Market Barriers to the Uptake of Biofuels Study—A Testing Based Assessment to Determine Impacts of a 20% Ethanol Gasoline Fuel Blend on the Australian Passenger Vehicle Fleet, report to Environment Australia, March 2003 and Orbital Engine Company, Market Barriers to the Uptake of Biofuels Study, Testing Gasoline Containing 20% Ethanol (E20), Phase 2B Final Report to the Department of the Environment and Heritage, Australia, May 2004.

14 Keith Knoll, Brian West, Wendy Clark, Ronald Graves, John Orban, Steve Przesmitzki, and Timothy Theiss, Effects of Intermediate Ethanol Blends on Legacy Vehicles and Small Non-Road Engines, Report 1 – Updated February 2009, NREL/TP-540-43543 and NORNL/TM-2008/117. Oak Ridge National Laboratory, Managed by University of Tennessee-Battelle for the U.S. Department of Energy and National Renewable Energy Laboratory, Golden, Colorado.

15 Bechtold, Op. Cit., p. 32.

16 Ibid., p. 32-33.

17 Ibid.

18 Fuel Permeation From Automotive Systems: E0, E6, E10, E20, and E85—Final Report, Coordinating Research Council, 3650 Mansell Road, Suite 140, Alpharetta, GA 30022, December 2006.

19 Bechtold, Op. Cit., p.40-45. and J. Herzog, “Federal Clean Fuel Standards,” presented at the API Annual Pipeline Conference, April, 2007.

20 Orbital Engine Company, Op. Cit.

21 Knoll, Op. Cit.