Global Ethanol Mandates Provide Opportunities for U.S. Ethanol Exports

The United States is the world’s largest exporter of ethanol, providing 30 percent of global exports in 2016. Half of those exports went to countries that have historically imported ethanol from the United States (Brazil, Canada, and the European Union (EU). These countries have long-standing mandates to blend ethanol with gasoline for fuel use; however, they also have rules that have the potential to limit future U.S. ethanol exports. Canada and the EU have carbon emission standards that could block U.S. corn-based ethanol, while Brazil has recently implemented trade barriers primarily aimed at the United States. At the same time, however, an increasing number of countries have established mandates to raise their ethanol use. By 2016, the United States, Brazil, the EU, and 26 other countries had ethanol mandates, while others use ethanol without an official requirement. Many of these countries will have difficulty meeting ambitious mandates with domestic production. This suggests that the United States may have an opportunity to expand its ethanol exports to new markets.

To illustrate how ambitious some of the ethanol targets are, ERS researchers estimated the 2020-21 ethanol supply and use for eight countries that have medium-term blend targets (the percent of ethanol in the ethanol-gasoline blend). For these countries—Argentina, Canada, China, Colombia, India, Japan, the Philippines, and Thailand—researchers calculated the average expected ethanol-blended gasoline consumption, production, and exports in 2020-21, based on the average growth rates between 2012 and 2014. Imports were estimated to be the amount needed by each country to meet ethanol consumption mandates after accounting for domestic production and exports. Thailand, Colombia, and Argentina have, perhaps, the most potential to reach their medium-term targets. These countries have production capacity that meets their domestic consumption, and ethanol imports play a small role in achieving their targets. Several others—China, India, Japan, the Philippines, and Canada—would need to raise their current blending rates to reach their goals, with India and China needing the largest increases. If these countries are going to meet their ethanol-use targets, there will likely be a significant opportunity for U.S. exporters to fill the gap not provided by domestic production.

Many countries will need to increase ethanol imports if they are to meet targets

Country	Current blend rate (percent)	Medium-term target blend rate (percent)	Estimated medium-term gasoline fuel consumption (million gallons)	Estimated medium-term ethanol consumption (million gallons)	Estimated medium-term ethanol production (million gallons)	Estimated medium-term net ethanol imports needed to meet target (million gallons)
Argentina	10.7	12	2,734	373	450	0
Canada	6.3	10	11,615	1,291	471	819
China	3	10	47,072	5,230	873	4,357
Colombia	7.7	8	1,996	174	159	15
India	3	10	11,980	1,331	540	791
Japan	1.4	4.5	12,223	576	0	576
Philippines	10	20	1,801	450	120	330
Thailand	12.6	15	3,481	614	575	39
Note: Except the US, expected gasoline consumption is based on the 2020 and 2021 average consumption data taken from each countries' GAIN reports shown in the reference. Expected biofuel productions are estimated based on 2012-15 data from GAIN reports using linear estimation technique, sometimes we adjust the intercepts. The expected biofuel consumption is the amount of biofuel that will be blended with gasoline or diesel that get us the targeted blend rates. Net imports are based on the difference between consumption and production, keeping the ending stock levels similar with the current ones. US data are taken from EIA (2016a; 2016b). Brazilian ethanol consumption is projected to include 3500 million gallons of a hydrous ethanol in 2020/21. *EPA sets annual standards for total renewable fuels in terms of fuel volumes, we change the target blend to percentage for analytical purpose (see EPA, 2016). Source: USDA, Economic Research Service calculations using data from USDA, Foreign Agricultural Service GAIN reports.