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Abstract

Fuel ethanol production has increased steadily in the United States since the 1980s, when it was given impetus by the need to reduce energy dependence on foreign supplies. The momentum has continued as production costs have fallen, and as the U.S. Clean Air Act has specified a percentage of renewable fuels to be mixed with gasoline. The fraction of annual U.S. corn production used to make ethanol rose from around 1 percent in 1980 to around 20 percent in 2006, and ethanol output rose from 175 million gallons to about 5.0 billion gallons over the same period. New technologies that may further increase cost savings include coproduct development, such as recovery of high-value food supplements, and cellulosic conversion. High oil prices may spur the risk-taking needed to develop cellulose-to-ethanol production. Developments such as dry fractionation technology, now commercially viable, may alter the structure of the industry by giving the cheaper dry-grind method an edge over wet milling. Dry milling requires smaller plants, and local farmer cooperatives could flourish as a result. Though improvements in processing and technology are important, however, the fluctuating price of inputs such as corn, the cost of energy alternatives, and environmental developments play larger roles in the fortunes of the industry.

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