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History of Ethanol Production and Policy

The Energy Information Agency (2005) describes the history of ethanol. Ethanol’s first use was to power an engine in 1826, and in 1876, Nicolaus Otto, the inventor of the modern four-cycle internal combustion engine, used ethanol to power an early engine. Ethanol also was used as a lighting fuel in the 1850s, but its use curtailed when it was taxed as liquor to help pay for the Civil War. Ethanol use as a fuel continued after the tax was repealed, and fueled Henry Ford’s Model T in 1908. The first ethanol blended with gasoline for use as an octane booster occurred in the 1920s and 1930s, and was in high demand during World War II because of fuel shortages.

Today’s ethanol industry began in the 1970s when petroleum-based fuel became expensive and environmental concerns involving leaded gasoline created a need for an octane. Corn became the predominant feedstock for ethanol production because of its abundance and ease of transformation into alcohol. Federal and state subsidies for ethanol helped keep the fuel in production when ethanol prices fell with crude oil and gasoline prices in the early 1980s. This also helped spawn the “Minnesota Model” for ethanol production, in which farmers began producing ethanol to add value to their corn (Bevill, 2008). The Minnesota Model was an agreement between local public and private parties who work to keep profits in the community by providing jobs (and the economic benefits associated with population) and adding value to agricultural products while strengthening rural communities. Ethanol’s use as an oxygenate to control carbon monoxide emissions, encouraged increased production of the fuel through the decade and into the 1990s.

With the phasing out of Methyl Tertiary Butyl Ether (MTBE) as an oxygenate and a desire to decrease dependence on imported oil and increase the use of environmentally friendly fuels, ethanol’s demand increased dramatically. In 2005, the first Renewable Fuels Standard (RFS) became law as part of the United States’ energy policy (Renewable Fuels Association, 2005a). It provided for ethanol production of four billion gallons in 2006 with an increase to seven and one-half billion gallons by 2012 (Renewable Fuels Association, 2005a). Since that time, The Energy Independence and Security Act of 2007 signed by President Bush requires renewable fuel usage to increase to 36 billion gallons annually by 2022 (Renewable Fuels Association, 2008b). The new RFS which currently guides national ethanol policy states that only 15 billion gallons of production should be produced from corn grain (starch) —the remaining 22 billion should come from other advanced and cellulosic feedstock sources.


Bevill, K. 2008. “Building the ‘Minnesota Model’.” Ethanol Producer Magazine, April, pp. 114-120.


Cole Gustafson, North Dakota State University

Filed under: Ethanol

NDSU, Dept. 7620

P.O. Box 6050

Fargo, ND  58108-6050

Phone: 701.231.7261

Fax: 701.231.1008

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