Ethanol: The Promise And The Peril – Report

Publication, Agriculture, Robert Sopuck


Manitoba has an established ethanol industry, and the Government of Manitoba is exploring whether to expand it. Ethanol is produced from wheat, in Manitoba, by means of fermentation. The ethanol is then blended with gasoline to produce ethanol-blended gasoline (EBG).

About 90 million litres of EBG are consumed a year in Manitoba. Other products produced at Manitoba’s ethanol facility include “distillers dry grain,” used as a high protein cattle feed.

Both the economics and the environmental benefits and impacts of the ethanol industry are controversial issues. Some have contested the economic efficiency of producing ethanol, that the process requires more energy than the final product contains. More recent studies have shown that there is indeed a small gain. The environmental effects, both positive and negative, are difficult to calculate and to quantify. But Manitoba’s gasoline market is so small in relation to the whole world that no matter happens here, it will have little or no significant effect either way.

There are three models for producing ethanol:

  1. Stand alone ethanol production facilities, which are the most risky and expensive
  2. Integrated facilities that produce other products. Examples include “wet mash”, which can be fed to cattle in adjacent feedlots, or “nutraceuticals,” starch or other products from grain that can be sold separately.
  3. Integrated facilities that produce “dry mash” which can be exported as a high protein feed.

Clearly, ethanol facilities should be designed to produce a wide range of products, rather than ethanol alone.

The main risks of expanding ethanol production are price collapse and the capitalizing of subsidies into prices. Direct subsidies and price supports should be avoided. Subsidies will spur the conversion of more feed grain into ethanol. Since Manitoba does not produce enough feed for its growing livestock industry, subsidies will exacerbate the feed shortage.

Mandating EBG use in Manitoba and supporting this industry with increasing subsidies would be counter-productive and should not be considered.

Full Text of Policy Series No. 12 (PDF, 11 pgs)