Urbanchuck finds substantial economic impact from ethanol in 2010

By Susanne Retka Schill | February 28, 2011

More than 70,000 direct jobs are provided by the U.S. ethanol industry in the agriculture, manufacturing and services sectors, and when total economic activity is considered more than 400,000 jobs are created, according to a study by Cardno Entrix economist John Urbanchuck, commissioned by the Renewable Fuels Association.

Released in late February at the time of RFA’s National Ethanol Conference, the report gives a snapshot of the economic impact of the industry in 2010. As with employment, the direct impact on income by the ethanol industry is limited to the manufacturing and construction sectors, but the most significant impact is to increase the income to farmers, according to Urbanchuck’s report.

The ethanol industry used 4.6 billion bushels of corn in 2010, valued at more than $18 billion. “The ethanol industry is a major source of support for agricultural output and farm income,” the reports says. “In the absence of an ethanol industry, demand for corn would fall, prices would decline and farmers would plant and produce less corn.” Urbanchuck’s analysis estimates the farm income effects of ethanol production, showing a direct income impact in agriculture of $448 million in 2010, but indirect impacts of $17.68 billion.  

The income impact, direct and indirect, from ethanol amounts to $36 billion, the report finds. On top of that is the impact on the nation’s gross domestic product of $53.6 billion  for the spending for annual operations, construction of new capacity and research and development. That translates into nearly $8.6 billion of the revenue received by the federal treasury in 2010 and state revenue of $4.8 billion. The estimated cost of the two primary federal tax incentives, the blenders credit and small ethanol producer credit, was just over $6 billion in 2010.

Urbanchuck also calculated the amount of foreign oil displaced by ethanol production. The equivalent of 13 percent of total U.S. crude oil imports, or 445 million barrels, were displaced by ethanol production—valued at $34 billion in 2010. “This is money that stays in the American economy,” the report says.

The full report, with an explanation of the methodology and full charts is available on the RFA website.