Q&A with Greg Gelles and Joseph Smith
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A Kummer College newsletter addressing current events of economic, technological, geopolitical, risk and regulatory affairs of goods and services.
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Welcome to the first Price Points newsletter with the Kummer College! This month, Dean Jim Sterling interviewed Dr. Greg Gelles,
emeritus professor of economics and Dr. Joseph Smith, professor of chemical and biochemical engineering.
In this Q&A, Dr. Sterling explores the economics, environmental impact and future of ethanol production in America.
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Joe, can you give a brief history of ethanol production in the U.S.?
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Ethanol was first used as an automotive fuel in the 1920’s and 30’s. In early 2000, ethanol demand grew significantly due to energy security concerns and the U.S.’s increased dependence on imported oil. Environmental concerns related to Methyl tert-butyl ethers (MTBEs), used as fuel oxygenate, created additional demand.
In 2007, President Bush signed the Energy Independence and Security Act with the goal of increasing renewable fuel production to 36 billion gallons by 2022.
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Greg, to what extent is the ethanol market sustained by federal subsidies?
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Steve Murphy, POET’s Laddonia plant manager, said that direct farm subsidies for U.S. ethanol blenders ended in 2011 although some states (including Missouri) still have a $0.05 per gallon incentive for blends less than 10% (for example, E15) but this “blenders credit” is paid to refiners, not ethanol producers. Steve also said there is a federal tax credit of 45 cents per gallon of ethanol when blended with gasoline.
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Joe, is corn the main raw material used worldwide in making ethanol?
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Today, over 80% of the world’s ethanol production occurs in the U.S. and Brazil. While most of the U.S. ethanol is derived from corn, Brazil produces most of their ethanol from sugar cane. Recently, Brazil has begun growing more corn and have constructed new corn ethanol plants similar to the U.S. plants.
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Greg, in modern day ethanol plants, what other products are made?
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During our plant visits to Laddonia, we witnessed the hybridization of POET’s ethanol production. Today, they produce animal feed (distillers’ grain), as well as corn oil, dry ice and electricity (used to power the plant with excess sold back to their provider). Producing multiple products has increased their economic performance.
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Joe, has the growth in the ethanol industry had a positive economic impact on rural America?
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The local economic impact of POET’s Ladonnia plant is clear. This plant has created 50 high paying jobs and increased corn demand from local farmers. The ethanol market has had a positive economic impact on the total U.S. economy as well. In 2024, the Renewable Fuels Association concluded that in 2023 about 72,400 U.S. jobs were directly associated with the ethanol industry with an additional 322,000 indirect jobs supported by the industry.
They reported that the industry generated $32.5 billion in household income and contributed just over $54.2 billion to the nation’s GDP.
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Kummer College of Innovation, Entrepreneurship, and Economic Development
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Missouri University of Science and Technology
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