Global Ethanol Mandates Provide Opportunities for U.S. Ethanol Exports

The United States is the world’s largest exporter of ethanol, providing 30 percent of global exports in 2016. Half of those exports went to countries that have historically imported ethanol from the United States (Brazil, Canada, and the European Union (EU). These countries have long-standing mandates to blend ethanol with gasoline for fuel use; however, they also have rules that have the potential to limit future U.S. ethanol exports. Canada and the EU have carbon emission standards that could block U.S. corn-based ethanol, while Brazil has recently implemented trade barriers primarily aimed at the United States. At the same time, however, an increasing number of countries have established mandates to raise their ethanol use. By 2016, the United States, Brazil, the EU, and 26 other countries had ethanol mandates, while others use ethanol without an official requirement. Many of these countries will have difficulty meeting ambitious mandates with domestic production. This suggests that the United States may have an opportunity to expand its ethanol exports to new markets.

To illustrate how ambitious some of the ethanol targets are, ERS researchers estimated the 2020-21 ethanol supply and use for eight countries that have medium-term blend targets (the percent of ethanol in the ethanol-gasoline blend). For these countries—Argentina, Canada, China, Colombia, India, Japan, the Philippines, and Thailand—researchers calculated the average expected ethanol-blended gasoline consumption, production, and exports in 2020-21, based on the average growth rates between 2012 and 2014. Imports were estimated to be the amount needed by each country to meet ethanol consumption mandates after accounting for domestic production and exports. Thailand, Colombia, and Argentina have, perhaps, the most potential to reach their medium-term targets. These countries have production capacity that meets their domestic consumption, and ethanol imports play a small role in achieving their targets. Several others—China, India, Japan, the Philippines, and Canada—would need to raise their current blending rates to reach their goals, with India and China needing the largest increases. If these countries are going to meet their ethanol-use targets, there will likely be a significant opportunity for U.S. exporters to fill the gap not provided by domestic production.

This article is drawn from:

Beckman, J.
& Nigatu, G.
(2017). Global Ethanol Mandates: Opportunities for U.S. Exports of Ethanol and DDGS.
U.S. Department of Agriculture, Economic Research Service.
BIO-05.

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