Economic Impacts of Biofuel Development

The impact of biofuel development should be significant to the economy of any nation that successfully deploys it. By becoming more energy self-sufficient, the balance of trade of otherwise energy-dependent nations should improve dramatically - as it has in Brazil.

However, the impact on the economy of the region producing the biofuels is even more impressive. Iowa was one of the most energy dependent states in the Union. Now, because of corn ethanol, it is one of the most energy independent. The state's economy has improved, schools are better, and land prices are higher - not because of ethanol subsidies, but because of the invigorating impact of the formation of new business ventures and the production of a valuable product to export.

Now a new report from researchers from North Dakota State University, published on the Agricultural Marketing Resource Center website, measures the statewide impact of the corn ethanol industry in North Dakota and projects the economic impact of cellulosic ethanol production on the Midwest and Great Plains states. Of course, the feedstocks for cellulosic ethanol are not only to be found in this region. It is not too much of a stretch to believe that these impacts could be duplicated, if not surpassed, in other regions of the country (and the world) where feedstocks are abundant and the need is greatest.

Summary findings from their report are excerpted below...

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Economic Impacts of Biofuel Development

by Nancy M. Hodur, Research Scientist and Larry Leistritz, Professor of North Dakota State University

In recent years, the most prevalent type of new agricultural processing ventures in the Midwest and Great Plains states has been corn ethanol plants. Like other types of agricultural processing, these biofuel ventures have generally received widespread support, and numerous studies have addressed their contributions to local or regional economies. The rapid growth of the corn-based ethanol industry shows the potential for biofuels. However for biofuels to make a substantial contribution to the domestic liquid fuel supply, the industry must expand beyond corn-based ethanol. Accordingly, substantial resources have been devoted in both the public and private sector to the research and development of cellulosic biomass conversion. Much work has focused on technical issues, and several studies have examined potential biomass feedstock supplies. However, one aspect of biomass conversion to liquid fuels that has received very little attention is its potential as an economic development stimulus for rural areas with high biomass production potential and how that potential compares to the economic impact of corn based ethanol.

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North Dakota and other “biomass belt” states are particularly well placed to capture the economic impact of an emerging biomass industry as plants will undoubtedly be located near the feedstock source. The potential economic development contributions of an emerging biofuels industry are particularly significant because many of the areas where such an industry could concentrate have in the not-distant-past faced adverse economic and demographic trends. The rural, agricultural counties of the western Corn Belt and northern Great Plains have experienced long term trends of farm consolidation, leading to fewer and larger farms. In the absence of major nonfarm employers, many counties have experienced substantial out-migration and population losses.

Farm households have also become more dependent on off-farm employment. In North Dakota, during the period 1993-2007, off-farm wages and salaries of farm households more than doubled, growing from $6,847 in 1993 to over $16,000 in 2007. An emerging biofuels industry could offer new jobs that would help to support rural communities and farm households and provide the kind of economic stimulus many agriculturally dependent areas have been seeking. Further, the sheer scope of the potential development, with capital cost of $34 billion and annual regional operational expenditures of over $10 billion, suggests that a biofuels industry could also substantively change the economic and demographic makeup of some Midwest and Great Plains counties.

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technorati bioenergy, biofuels, ethanol, cellulosic, decentralization