The Rise of Ethanol in Rural America

Ethanol could suddenly become the gasoline additive of choice in America. As policymakers debate the future path of U.S. energy policy, they face added concerns for public safety and America’s growing dependence on foreign oil. The outcome of these debates could spell the end for MTBE (methyl tert i a ry butyl ether) as a fuel additive—and have important implications for the future of the ethanol industry in rural America. Because ethanol is produced mainly from corn, an expanding ethanol industry would give an economic lift to many farmers. New ethanol plants would also create jobs, raise incomes, increase tax revenues, and offer new investment opportunities to some rural communities. Whether rural America will tap these economic benefits depends on two factors—the future course of public policy and the nation’s willingness to pay for renewable fuels. CENTER FOR THE STUDY OF RURAL AMERICA Federal Reserve Bank of Kansas City