Environmental Advantages of Agricultural Products

by Stephen R. Crutchfield, Agricultural Economist and Section Leader, Environmental Quality Valuation, ERS, USDA, Washington, DC.

American farmers help feed and clothe the Nation and the world with the crops they raise and the raw materials they supply to create manufactured products. With the increasing emphasis on "green" farming, America's farmers are helping to protect the environment as well, by reducing the potentially harmful effects of farm chemicals and soil erosion on the quality of our natural resources and food supply.

Agriculture also plays a more innovative role in promoting environmental quality by supplying "environmentally friendly" products that can substitute for polluting products, such as petroleum products. Agricultural products can help the environment is several ways. Some agricultural products, like ethanol made from corn or biomass crops, can serve as substitutes for nonrenewable petroleum products and help reduce our dependence on fossil fuels. In addition, biofuels like corn-based ethanol can help improve air quality when they replace conventional gasoline.

The 1990 amendments to the Clean Air Act have focused public attention on ways to reduce the Nation's air pollution problem. Using ethanol-blended fuels rather than conventional gasoline can help reduce certain types of air pollution. This would create economic benefits by reducing the health-care costs associated with exposure to polluted air. However, some tradeoffs may be necessary; increasing acreage to corn to provide feedstock for ethanol production may increase soil erosion and water quality problems resulting from agricultural chemicals. Some of these negative effects could be reduced by using new "biomass" crops that would provide feedstock for ethanol production with smaller effects on water quality than those produced by growing additional corn.

Ethanol Blends Reduce Carbon Monoxide Emissions

Motor vehicles fueled by petroleum-based fuels such as gasoline or diesel oil emit gasses and toxic compounds that contribute to air pollution. When ethanol is blended with conventional gasoline, emissions of some of these pollutants can be cut down. For example, the most common formulation of ethanol fuel in use today is 10 percent ethanol and 90 percent gasoline. When this fuel, commonly called E-10, is used in place of conventional gasoline, auto emissions of carbon monoxide (CO) are reduced by 15 to 20 percent, depending on the age of the vehicle and the type of fuel system used. Chemical properties of ethanol also permit refiners to leave out some chemicals used to raise gasoline octane. Accordingly, switching from conventional gasoline to E-10 reduces emissions of potentially dangerous compounds such as benzene and butadiene.

On the other hand, switching from conventional gasoline to E-10 may increase evaporative emissions. Careful blending of ethanol with gasoline, or use of newer, less polluting forms of conventional gasoline as base stock may reduce or eliminate these evaporative emissions. Other fuel formulations, such as 85 percent (E-85), reduce both CO and ozone-related exhaust emissions, and may prove useful in the future if vehicles designed to burn them become available at competitive cost. Alternatively, ETBE (Ethyl tertiary butyl ether), which is 42 percent ethanol, can also be used to reduce CO without design modifications to existing automobiles.

Clean Air Act Amendments May Stimulate Demand for Ethanol-Blended Fuels

Recent changes in air quality laws establish new air quality guidelines and regulations to reformulate gasoline in order to reduce air pollution. In areas where CO pollution is a problem, motor vehicle fuels will be required to have a higher oxygen content to reduce CO emissions. Adding ethanol to gasoline increases its oxygen content, so this legislation is expected to increase the demand for ethanol-blended fuels in areas where CO is a problem. As of 1989, about 51 million people lived in areas not meeting CO standards.

In areas not meeting ozone standards, gasoline will have to be reformulated beginning in 1995. Reformulated gasoline must contain higher levels of oxygen, reduce toxics, and reduce emissions of ozone-forming compounds by 15 percent. Nine cities with the worst ozone pollution will be required to allow only reformulated gasoline beginning January 1, 1995. However, there are provisions for other, less polluted areas to "opt in" to the program. Some analysts have estimated that 60 percent of the Nation's gasoline will be reformulated by the year 2000.

Other provisions of the amendments, such as the "clean fuels" fleet program, may stimulate research and development for fuels such as E-85, which have an even higher ethanol content. Over the long term, with advances in vehicle technology and fuel refining techniques, the market for ethanol-blended fuels is expected to grow. This year USDA will purchase 19 E-85 cars for the agency fleet.

Ethanol-Blended Fuels May Create Benefits by Improving Air Quality, but the Fuel Costs Must Be Considered as Well

To properly evaluate the tradeoffs of using ethanol-blended fuels versus conventional gasoline, we need to compare different fuel formulations on the basis of their cost-effectiveness. In weighing these environmental benefits and costs, it is important to keep in mind the relative production and other costs of the different fuel formulations. Table 1 shows how different fuel formulations change auto emissions, compared to conventional gasoline. We consider, in addition to E-10, reformulated gasoline (gasoline that meets EPA standards for ozone reduction), reformulated E-10 (ethanol blended with reformulated gasoline), and MTBE blends (MTBE is a petroleum product blended into gasoline to reduce emissions of CO and volatile organic compounds, or VOC's).

Note: E-10 is 10 percent ethanol and 90 percent conventional gasoline. MTBE is 11 percent Methyl tertiary butyl ether and 89 percent conventional gasoline. Reformulated E-10 is 10 percent ethanol and 90 percent reformulated gas. Estimates of emissions changes are derived from EPA studies and independent research reports.

While reformulated gasoline and reformulated E-10 generate environmental benefits, they also cost more than either conventional gasoline, E-10, or 11 percent MTBE. Table 2 summarizes the cost differences among different fuels. Based on historical prices, E-10 costs 6.7 cents per gallon more than conventional gasoline, assuming 10 percent ethanol at a cost of $1.25 per gallon. MTBE costs less than ethanol, and so 11 percent MTBE fuels have a lower price premium (3.4 cents per gallon) when compared with conventional gas. However, E-10 contains more oxygen than 11 percent MTBE blends and this reduces carbon monoxide emissions by a greater amount. Reformulated gasoline and reformulated E-10 have a higher cost differential ( 16 cents per gallon and 21 cents per gallon, respectively, when compared with conventional gas), but they also have greater environmental benefits.