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Biofuels have been an important aspect of the United States' energy portfolio for over a century, but the modern ethanol industry did not reach maturity until the mid-2000s

Summary​

Biofuels have been part of the US energy landscape since the 1890s, with ethanol playing a central role. After declining post-WWII, biofuels resurged as a result of the 1970s energy crisis through legislation like the Energy Tax Act and Clean Air Act Amendments. The modern ethanol industry matured in the mid-2000s, producing 18 billion gallons annually from ~191 plants using ~30 million acres of land. Aims at creating an advanced biofuel industry have been hampered by the ethanol "blend wall" which limits the amount of ethanol that can be blended into the US gasoline supply.

Biofuels have been a key part of the United States' energy portfolio for a number of years, with their largest impact in the transportation sector. When referring to biofuels, we will mainly be referring to ethanol unless otherwise stated.

The early history of biofuels​

Biofuels have been present since the early history of motorized automobiles, with the first vehicle designed by Henry Ford of the Ford Motor Company, the quadricycle, being built to run on pure ethanol way back in 1896. The first mass-produced motor vehicle, the Ford Model T, was considered a flexible fuel vehicle which was able to run on ethanol, gasoline, or a combination of the two. The requirement for ethanol rose during World War I when annual demand was over 50 million gallons. Throughout the 1940s, gasohol (the term used to describe a mixture of gasoline and alcohol) became prominent, with it being offered in over 2,000 gas stations. Ethanol production was important during World War II; however, its usage was mostly related to non-fuel requirements. The termination of World War II and the peacetime expansion of the fossil fuel industry made ethanol production nearly obsolete, with almost no availability of fuel ethanol in the United States up until the 1970s 1.

The resurgence of ethanol​

After the oil shocks and subsequent energy crisis of the 1970s, the first legislation relating to ethanol passed in the form of the 'Energy Tax Act,' which provided tax exemption to gasoline with an alcohol content greater than 10% by volume. Through the 1980s, still only 10 ethanol facilities were in operation nation wide, producing approximately 50 million gallons of ethanol per year, the same volume as 7 decades prior. To boost this, the Energy Securities Act was passed, which offered loans of up to $1 million to small-scale ethanol operations to cover construction costs, and tariffs were applied to ethanol imports. By the mid-1980s, 163 ethanol plants were in operation, but this number drastically dropped over the coming years, with only 74 ethanol plants remaining, producing a combined 595 million gallons of ethanol per year. In 1992, the Clean Air Act Amendments passed to combat the destructive effects of ozone and carbon monoxide pollution by mandating the usage of oxygenates in fuels, which could be achieved by the addition of Methyl Tertiary Butyl Ether (MTBE), Ethyl Tertiary Butyl Ether (ETBE), or ethanol into regular gasoline. Throughout the late 1990s and early 2000s, many regulations were passed to ban the use of MTBE, which was being found to contaminate water supplies, increasing the demand for ethanol in gasoline. 2005 saw the most consequential change to the ethanol and biofuel industry with the passing of the Energy Policy Act, which regulated that there be a minimum requirement of renewable fuel in the nation's gasoline supply through the Renewable Fuels Standard (RFS) 1 2.

The modern ethanol industry​

The modern ethanol industry reached maturity around the midpoint of the 2000s where improvements to resource usage and efficiency allowed significant jumps in production. The initial fuel mandate of the Energy Policy Act, known as RFS1, set out a goal of 7.5 billion gallons of ethanol to be produced using corn-derived ethanol and this goal was easily achieved by 2012 3. The mid-2000s also saw the emergence of the first negative effects of the biofuels market on food prices. The rapid and significant transfer of US corn crop from food to ethanol production has been attributed as one of the drivers of the 2007 – 2008 food crisis that saw civil unrest in many of the affected countries 3 4. The concerns relating to impacts on the global food market, as well as growing awareness of the questionable carbon dioxide emission benefits of corn-derived ethanol led to the passing of the Energy Independence and Security Act of 2007 (EISA) which introduced the revised renewable fuel standard (RFS2) that set out lofty goals for the usage of lignocellulosic (cellulosic) biofuels derived from nonedible biomass, along with other advanced biofuels, calling for 8.5 billion gallons to be produced by 2019 and 16 billion gallons by 2022. Unlike the goals of the RFS1 mandate, the RFS2 mandate turned into a near complete failure due to a range of overambitions and constantly amended policy decisions that broke investor confidence 3 5. Additionally, the emergence of what is known as the ethanol 'blend wall' began appearing, meaning that the market was saturated when advanced biofuels were starting to be researched and introduced 6. The blend wall is effectively the upper threshold of how much ethanol can be consumed by the US transportation market. Because gasoline in the United States follows the E10 mandate (10% ethanol by volume), when this is achieved no more ethanol can enter the domestic market. Most cars in the United States designed in the past two decades are able to run on an E15 (15% ethanol) blend, however, the adoption of an E15 mandate would require costly modification to the majority of gas stations 7.

Current Ethanol Facts in the United States​

MetricValueSource
Yearly production capacity18,010 million gallons per year8
Number of plants in operation~1918
Land usage for ethanol production~30 million acres9

Sources​

Footnotes​

  1. U.S. Energy Information Administration. (2008). Energy timelines: Ethanol. https://www.eia.gov/kids/history-of-energy/timelines/ethanol.php#:~:text=The%20Energy%20Security%20Act%20of,projects%3B%20and%20purchase%20agreements%20for ↩ ↩2

  2. U.S. Department of Energy. (n.d.). Summary of federal tax incentives for alcohol fuels. Alternative Fuels Data Center. https://afdc.energy.gov/files/pdfs/2755.pdf ↩

  3. Breetz, H. L. (2020). Do big goals lead to bad policy? How policy feedback explains the failure and success of cellulosic biofuel in the United States. Energy Research & Social Science, 69, 101755. https://doi.org/10.1016/j.erss.2020.101755 ↩ ↩2 ↩3

  4. Timilsina, G. R., & Shrestha, A. (2011). How much hope should we have for biofuels? Energy, 36(4), 2055–2069. https://doi.org/10.1016/j.energy.2010.08.023 ↩

  5. Brown, T. R. (2019). Why the cellulosic biofuels mandate fell short: A markets and policy perspective. Biofuels, Bioproducts and Biorefining, 13(5), 889–898. https://doi.org/10.1002/bbb.1987 ↩

  6. Peplow, M. (2014). Cellulosic ethanol fights for life. Nature, 507(7490), 152–153. https://doi.org/10.1038/507152a ↩

  7. IRENA (2019), Advanced biofuels. What holds them back?, International Renewable Energy Agency, Abu Dhabi, ISBN 978-92-9260-158-4 ↩

  8. U.S. Energy Information Administration. (2025). U.S. fuel ethanol plant production capacity. https://www.eia.gov/petroleum/ethanolcapacity/ ↩ ↩2

  9. Sturchio, M. A., Gallaher, A., & Grodsky, S. M. (2025). Ecologically informed solar enables a sustainable energy transition in US croplands. Proceedings of the National Academy of Sciences, 122(17), e2501605122. https://doi.org/10.1073/pnas.2501605122 ↩