The Coming Slow Fade of America’s Corn Ethanol Industry – CleanTechnica

---

Support CleanTechnica’s work through a Substack subscription or on Stripe.

---

The story of the United States corn ethanol industry is a story about a sector that grew rapidly under a very specific set of policy, technology and market conditions. It filled a gap when gasoline demand was rising, when climate policy focused on incremental change, and when EVs were still a niche. It became a major part of the Midwestern political economy. It shaped land use patterns. It supported thousands of farmers and dozens of rural communities built around steady demand for transport fuel. That world is shifting and the signals point toward a twenty year horizon that looks very different from the previous twenty, with very significant implications for the Midwest’s economies and likely politics.

Corn ethanol grew from a small program focused on oxygenates into a national industry producing over 16 billion gallons annually, about 48 million metric tons. The Renewable Fuel Standard created guaranteed demand by requiring refiners to blend increasing amounts of ethanol into gasoline. Direct subsidies through the Volumetric Ethanol Excise Tax Credit helped expand capacity. By the late 2000s the industry had become large enough to hold political weight in Iowa, Illinois, Minnesota and Nebraska. Ethanol plants became anchor employers. Farmers gained a new buyer that consumed nearly 40% of the national corn crop. The system became predictable and self reinforcing. All gasoline sold in the country now has about 10% ethanol added, with some higher blends available in some places. Once direct subsidies expired, the mandate and a large fleet of internal combustion vehicles kept the industry stable. That stability is now being tested by structural changes in transportation and energy.

The first challenge appears in the gasoline market itself. EIA data from 2015 through 2019 shows finished motor gasoline stabilizing at roughly 140 billion gallons a year. The post pandemic rebound never reached that range again. By 2024 gasoline demand had slipped below pre pandemic levels even though the population was larger than in 2019. The shift is not a statistical quirk. Efficiency gains, hybrid penetration and improved powertrain design are pushing gasoline demand down. Even modest EV adoption affects fuel consumption more than most people expect because each EV replaces an entire household’s gasoline demand, not a small slice of it. Hybrid and work from home models that are common after COVID also inhibit demand. Gasoline peaks are rarely jagged events. They plateau and then begin slow but durable declines. Ethanol demand sits inside that shrinking pool. Rising blend rates cannot compensate if the base declines year after year.

E15, a blend of 15% ethanol and 85% gasoline, creates a small lift for producers, but there is no serious national move toward E30 or higher mid level blends. The political energy behind E15 has come from arguments about supply expansion and consumer cost, not carbon intensity or long term strategy. E30 requires different infrastructure and testing. It requires automakers to warrant engines for higher blends. It requires retail investments that stations are reluctant to make without guarantees. None of that is materializing. States like California and New York now permit E15, but these decisions were framed as cost and supply flexibilities rather than a new energy direction. Ethanol sits in these states as an accepted part of the gasoline era, not a central element of long term climate policy. In markets that matter most for future trends the direction is clear. The strategic focus is electrification.

California and New York are often treated as outliers in national conversations. They are not outliers. They are lead indicators in vehicle transition. California’s advanced clean cars policy will push new car sales toward 100% zero emission by 2035. New York has adopted the same path. These are affluent states with large populations and lots of cars. Higher ethanol blends in these states amount to small adjustments on the margins of a system that is already pivoting toward EVs. As EV shares rise in coastal states, gasoline consumption falls in absolute terms. Even if some drivers hold on to older vehicles for longer, the weight of new sales changes the slope of long term demand. These states represent enough vehicles that their choices influence national averages. Ethanol fits into their near term fuel mix, but it is not shaping their long term direction.

Export markets, something that grew in recent years, see similar headwinds. In the past few years US ethanol exporters have enjoyed strong demand from Canada, the UK and parts of Southeast Asia. These markets are shifting. Canada is tightening its clean fuel regulations and increasing its EV penetration. The UK and EU have sustainability criteria that limit long term expansion of food based biofuels. India is building a domestic ethanol industry using sugarcane and grain feedstocks. Brazil is expanding corn ethanol capacity of its own. OECD and FAO analyses project that most future global ethanol growth will be met domestically rather than through imports. They also project that total global ethanol trade will remain only a small fraction of production. Export contraction is more likely than export growth, and the rest of the world is moving faster to EVs and now, with Trump’s tariffs, moving away from dependency on US imports.

The ethanol to jet pathway appeared to be the most promising new outlet, but it depends heavily on regulatory certainty. Alcohol to jet fuel can meet ASTM standards and blend seamlessly with petroleum jet. Airlines are interested in any supply that can help them meet long term climate pledges. The economics are fragile. Production costs remain higher than petroleum jet. Carbon intensity scoring determines eligibility for tax credits, and it requires both farming changes and capture and sequestration of CO2 from fermenters to achieve sufficiently low intensity. Those credits require stable policy. The removal of the sustainable aviation fuel bonus credit at the end of 2025 under Trump omnibus bill shifted the economics significantly. The reduction from a potential $1.75 a gallon credit to a $1.00 credit cut the margin for most proposed projects. Developers now face a shorter policy horizon, more uncertainty and capital markets that are increasingly sensitive to policy volatility. Some high profile projects have already stalled or been rescoped. Ethanol to jet remains a possible growth area but it is not a firm foundation for the entire industry.

In other work on aviation I have projected that global passenger and cargo demand will not keep rising on historic 4% annual curves, but will flatten as China’s growth slows, remote work persists and population peaks. In that scenario fossil kerosene peaks around 2030 below 2019 levels and then declines over the rest of the century as batteries and biofuels take over most of the energy demand for flights. Electric flight will be cheaper, 1,000 km hybrid electric turboprop ranges mostly on batteries viable, while international flights with sustainable aviation fuels will be more expensive. While the USA has the highest passenger kilometers per resident the world by a hefty margin, 60% to 70% are in the range to be electrified, and ticket price differential will favor those flights with more traffic. Globally, high speed rail is removing passengers from airplane seats, and global population growth is already slowing, with the flight heavy west seeing aging demographics.

All of these factors will reduce the demand for liquid fuels for aviation. Biokerosenes including ethanol to jet bridge the remaining long haul missions across existing airframes. The result is a long tail of liquid fuel use concentrated almost entirely in intercontinental aviation by 2100, with short haul and regional services fully electrified and many small airports revived as electric regional mobility hubs.

I have also argued that personal transportation in the United States is uniquely hard to decarbonize compared to Europe or China because of structural choices made after World War II. Cheap oil, racialized planning and deliberate dispersion policies pushed people into very low density suburbs and weakened passenger rail so thoroughly that Americans now rely on very large cars and frequent domestic flights for basic mobility. Cars and light trucks account for well over half of US transport emissions and road vehicles of all sizes contribute more than 80% of the sector total, yet the country still lags peers on EV adoption and transit investment.

That combination of extreme sprawl, large vehicles, weak rail and entrenched highway infrastructure means the United States has to push harder on both electrification and urban form just to get to the starting line that other rich countries are already standing on. It also means that in the United States, liquid fuels for cars and aviation stay in the picture longer than they would in a denser, rail oriented system, which is one more reason to expect corn ethanol and other biofuels to face a long, messy transition instead of a clean break. But it doesn’t mean that electrification won’t eat internal combustion fuel demand for lunch, it just means it will be a more leisurely meal.

Marine fuels are sometimes presented as a major opportunity, but here too the outlook is not for growth and ethanol is not the molecule of choice. Starting with demand, 40% of all shipping tonnage is of fossil fuels, and that is in structural decline. Another 15% is raw iron ore, usually steaming to the same ports coal is headed to. That too is in structural decline with renewable electricity based derusting of iron ore to make iron much more viable nearer to coal mines, increasing the value while reducing the tonnage of exports. Global steel demand is also in decline, as China has finished the massive infrastructure boom and is entering a lower maintenance cycle as the developed world did in the second half of the 20th Century. Other countries have access to cheap software and mass timber that significantly reduces steel demand in new buildings, and aren’t going to be building the massive factors, heavy industry and ports that China did. Structurally, 55% of total shipping tonnage is in decline.

Further, electrification is coming for shipping as well. 700 unit container ships with swappable containerized batteries are servicing 1,000 km routes on the Yangtze in China. 2,100 passenger fully electric ferries are on order and being tested in the water already. Hybridization of ocean going ships is almost inevitable as the economics of dirt cheap batteries, clean and inexpensive electrons, and much more costly biofuels radically alter current assumptions. The combination results in much less shipping fuel in the future than today. It’s not a growth market looking in desperation for ethanol.

US corn ethanol rhetoric points to large shipping companies experimenting with multi fuel blends that include ethanol. The global shipping sector will use enormous amounts of fuel even with declines and small blend shares imply large potential ethanol volumes. The caveat is that shipping is already moving toward biomethanol and electrification. Those energy carriers offer better energy density or simpler handling and are aligned with long term zero carbon strategies. Trials that include ethanol are exploratory. There is no regulatory anchor for ethanol in shipping comparable to the mandates in road transport in the early 2000s. There is also a competitive disadvantage. Sugarcane ethanol from more tropical regions has a lower carbon intensity than US corn ethanol and fits more comfortably within international carbon accounting. Marine fuels might absorb some gallons, but they do not plausibly absorb the multi billion gallon gap created by declining road fuel use.

Chemical feedstocks are a real but limited opportunity. Ethanol can serve as a platform for ethylene, acetic acid and other industrial chemicals. Some companies in Brazil already operate this way at commercial scale. These markets value carbon intensity, traceability and stable supply. They do not require the volumes that road transport does. Even optimistic scenarios for ethanol based chemicals only absorb one or two billion gallons. The gap between that figure and current fuel use is too large to bridge.

A useful way to think about the next twenty years is through scenario analysis. In a reference case based on current federal policy and modest EV adoption, ethanol production holds roughly flat. Blend rates climb slightly. Exports remain steady. SAF adds a small amount of extra demand. The industry looks a lot like today with slightly more pressure at the margins. In a moderate case, EV adoption accelerates in line with global patterns. Gasoline demand falls 30% to 40%. Blend rates rise toward E15 but go no further. Exports plateau. SAF struggles with policy instability. Ethanol production falls 20% to 35%. In a high transition case, EVs scale quickly across the United States, coastal states accelerate their mandates and global automotive supply chains deliver lower cost EVs faster than expected. Export markets build domestic production. SAF policy remains unstable. Ethanol production falls on the order of 40% to 50%. None of these numbers are precise forecasts, but they describe reasonable envelopes for planning.

The regional economic effects of even a moderate contraction will be significant. Ethanol plants anchor many rural communities. They form part of the basis that supports grain handlers, trucking firms and equipment dealers. A reduction in ethanol demand reduces local corn prices and affects land values. Farmers will shift into other crops or adjust rotations but that takes time. Some ethanol plants will diversify into higher value co products like protein concentrates or biochemicals. Others will close or consolidate. The transition will not be even across the Midwest. Plants with access to low carbon electricity, carbon capture pathways or diversified product streams will adapt more readily. Plants with high operating costs or limited access to low carbon inputs will struggle.

Most of the communities built around corn-ethanol plants are not affluent today. They are generally stable, middle-income rural towns whose economies depend on agriculture, a few industrial anchors and a small service base. Ethanol plants raise local incomes relative to purely farming counties because they add processing jobs, support a network of trucking, maintenance and engineering firms and strengthen corn prices within a 30 to 60 mile radius. That effect improves household earnings and local tax revenue, but it does not turn these areas into high-income regions. Many of the counties with the heaviest ethanol concentration still have below-average median household incomes compared to national figures, lower population growth and limited economic diversification. Ethanol plants provide stability rather than affluence, which is why the prospect of long-term demand decline matters so much. If the primary industrial buyer in an already thin local economy begins to shrink, the communities around it have little buffer and fewer alternative employers to absorb the shift. The combination has the potential to mean a further rural hollowing out and depopulation.

There is a credible, long-run possibility that declining corn ethanol demand could open the door to large scale rewilding in parts of the Midwest, but it would occur unevenly without strong federal and state guidance, and only under certain economic conditions. A significant share of the land used for continuous corn today is not prime cropland. Much of it sits on marginal soils, areas prone to erosion, floodplains, former prairie that was brought under cultivation during the ethanol boom, or regions where profitability depends on high fertilizer inputs and steady local buyers. When an ethanol plant closes or reduces intake by half, the weakest ground becomes hard to justify financially. Farmers faced with lower local corn prices, higher transport costs to reach distant markets, and lower returns per acre often transition marginal parcels first. That transition can take the form of reduced tillage, grassland restoration, enrollment in conservation programs or leasing land to wildlife agencies or private conservation groups. Federal conservation programs already have waiting lists in many states, and a sustained decline in corn demand would increase interest in enrolling acres that no longer generate reliable profits.

Rewilding does not mean a full return to tallgrass prairie across entire counties. It usually begins with patches of land taken out of annual row cropping and converted to mixed grasses, wetlands or riparian buffers. Over time, these areas provide habitat, improve water quality and reduce nutrient runoff. In regions with chronic flood risks or groundwater stress, reverting portions of corn acreage to natural cover can also ease public infrastructure costs. Some landowners will see value in carbon markets if those markets become more credible. Others will partner with conservation organizations that combine ecological restoration with recreational or grazing leases. There will still be strong agricultural production on the best land, but the overall mosaic shifts. A sustained 40% to 50% decline in ethanol demand over twenty years would gradually release millions of acres from strict commodity production pressure, and a portion of those acres would flow into rewilding because it becomes the most rational economic choice for land that cannot compete well in a post ethanol landscape.

There are viable paths forward for many producers. Some will invest in carbon capture to lower their fuel’s measured carbon intensity. Some will pursue biorefinery strategies that treat ethanol as one output in a broader product mix. Others will explore partnerships in chemicals, specialty proteins or green ammonia. The industry that emerges will be leaner and more varied than the one that grew under the Renewable Fuel Standard. The skill sets, infrastructure and experience inside these companies are valuable in new energy and materials markets. The question is how fast they can pivot.

The large scale conditions that supported corn ethanol for two decades are changing. The global automotive industry is electrifying. Regulatory frameworks in major importing countries are turning toward zero emission vehicles and low carbon fuels with strict sustainability criteria. Domestic gasoline demand is softening in ways that will continue and likely accelerate. The policy foundation for ethanol to jet remains unstable. These factors add up to a long term environment where a contraction of the US corn ethanol sector is more plausible than continued growth. A decline of 20% to 50% is a reasonable planning range depending on how quickly EVs scale and how successfully producers diversify. The next twenty years will test the industry’s ability to adapt to a world where road fuels are no longer the primary engine of energy demand.