ETHANOL AND
THE CANADIAN ECONOMY


Critics of ethanol for use as a transportation fuel have emphasized its present production cost (about 35-45 cents per litre) relative to that of “refinery-gate” gasoline (about 19-24 cents per litre).

However, such a perspective ignores:

  1. The high octane-blending value of ethanol, making it an excellent alternative to other octane enhancers with known or suspected health dangers which are now used widely in Canadian gasoline. Ethanol can substitute for aromatic hydrocarbons, which include the carcinogen benzene (the U.S. Clean Air Act limits benzene to 1%, and total aromatic hydrocarbons to 25%, as of January 1995). Ethanol can also replace MMT. By further refining petroleum, the octane level of gasoline is raised, but this requires major capital expenditures and results in a lower yield of gasoline per barrel of petroleum crude. Both of these would add significantly to the cost of gasoline.
  2. Canada’s growing dependence on imported light crude oil needed for gasoline and diesel fuel manufacture. Government of Canada estimates show that in 1995, Canada imported about 82 million litres of light crude oil per day (by tankers) to meet transportation fuel needs. This is even with the added supply created by new mega-project developments. This importation results in several billion dollars flowing out of the country each year, and fewer jobs for Canadians.
  3. The cost (financial and environmental) of mega-projects for enhancing Canadian domestic supplies of light crude oil. Fuel ethanol compares favourably, in both capital and operating costs of production, to Hibernia and tar-sands projects, which have received major governmental assistance and investment.
  4. The net economic benefit of a domestic ethanol industry. If ethanol were used in 50% of Canadian gasoline, it is projected that 3,000-6,000 jobs would be created in the next 15-year period. Investments in, and spin-offs from, ethanol benefit Canada’s economy directly.
  5. The abundant, and renewable, supply of Canadian grain available for fuel ethanol production. If use of fuel ethanol were to increase so that ethanol was present in all Canadian gasoline at 10% concentration, Canada would still remain one of the world’s major grain-exporting countries. And the potential exists to make fuel ethanol from a wide range of other biological materials such as forestry and municipal wastes, available in every Canadian province.
  6. The by-product of ethanol production from grain, which is a high-protein livestock feed ingredient. It could be used to replace Canadian imports of high-protein feeds, and is worth about $200 million annually.
  7. The effect of adding ethanol to gasoline on environmental quality, including reduced air toxins, reduced carbon monoxide, reduced ozone formation, and the potential to reduce net carbon dioxide emissions to the atmosphere.
  8. Many societal costs associated with petroleum energy, such as respiratory and other health problems, crop yield losses and damage to vegetation, environmental disasters (e.g., tanker mishaps), etc. These are not fully accounted for in the price of gasoline. By comparison, renewable ethanol produced by sustainable agricultural practices can stabilize farm income, reducing overall government support payments to agriculture.


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