The end of ethanol: Future-proofing Minnesota’s cropland
Imagine: It's the year 2050. As you're getting ready to leave home for the evening, you quickly make a few taps on your electronic device. Moments later, an autonomous, fully electric vehicle arrives at your door to whisk you off toward your destination.
The electric vehicle transition is already underway, and it has huge implications for American farms (not to mention opportunities for water quality). In the electrified world of 2050, demand for corn ethanol will have plummeted. And the agricultural economy will be nothing like the one we know today.
Disruptive innovation
The saying goes that the Stone Age did not end because we ran out of rocks, but because we found something better.
History is full of era-defining innovations: The horse-drawn buggy was replaced by the car. Quills were replaced by typewriters, which were replaced by computers. Landlines became cell phones, which became smartphones. These kinds of disruptions at once create and destroy, ushering old products and industries into the dust bin of history while replacing them with newer ones.
A new kind of highly disruptive innovation has arrived: electric and autonomous vehicles.
Electric and autonomous vehicles
Whether it’s a hybrid, plug-in hybrid or all-electric, the demand for electric vehicles (EVs) is climbing as prices drop and consumers look for ways to save money at the pump (and to save the planet).
First introduced more than 100 years ago, electric cars are rising in popularity today. Advancements in electric powertrains and battery efficiency have brought hybrid and fully electric vehicle technology to market throughout the world.
Electric vehicles, while more expensive upfront, are cleaner, quieter and cheaper to maintain. Most importantly, they are a vital tool in addressing climate change. By some estimates, transitioning all the light-duty vehicles in the U.S. to EVs could lower the carbon pollution from the transportation sector by as much as 20 percent.
Meanwhile, autonomous vehicles — long the subject of science fiction — have arrived after a curious journey of their own. In the early 2000s, Congress charged DARPA (Defense Advanced Research Projects Agency) with the task of developing unmanned vehicles — primarily to reduce combat risks to soldiers and pilots.
DARPA’s Grand Challenges helped bring self-driving vehicles off of the science-fiction pages and into reality on U.S. roads. Today, many new cars use at least some elements of autonomous technology like lane assist, parking assist and collision prevention. And some fully electric self-driving vehicles are already on the roads.
Together, these advancements are ushering in a new era of disruptive innovation for both the transportation and agricultural industry — because the cars of the future won’t use ethanol.
Ethanol and king corn
In the U.S., more land is devoted to corn than any other crop — about 97 million acres (roughly the size of California). Ethanol refineries are a massive market for all that corn: The U.S. consumed approximately 14 billion gallons of corn ethanol as a gasoline additive in 2017 alone.
In Iowa, where corn is king, ethanol consumes roughly 40% of its annual corn crop. Minnesota, Indiana, Illinois, Ohio and others aren’t far behind. But times are changing.
The end of ethanol?
As vehicle engines transition from internal combustion technology to electric, it’s likely that overall demand for ethanol will evaporate in the coming decades.
While the first signs of industry decline are already here, how long does ethanol have before it becomes truly obsolete?
That’s a $100-billion question and projections vary.
The International Energy Agency projects 125 million electric vehicles worldwide by 2030, with numbers as high as 220 million by 2030 under optimistic policy scenarios. Conversely, Bloomberg’s 2018 Electric Vehicle Outlook anticipates just 11 million EVs in 2025, 30 million in 2030 and 60 million in 2040.
Several factors help explain the variance in projections:
- Policy innovation: A growing list of national and local policy goals and incentives are popping up across the globe (including here in Minnesota), paired with an ever-growing list of manufacturer commitments to the EV transition.
- Technology advancements: New innovations in battery technology and manufacturing efficiency are driving down the costs of new EVs.
- Consumer adoption rates: As new technologies become faster and more user-friendly, adoption rates tend to accelerate. A recent Forbes article stated it this way: "While it took approximately 50 years for electricity to be adopted by 60% of US households, it took cell phones only about 10 years and … smartphones only about five years to reach the same penetration."
Regardless of just how quickly the transition will happen, it's now clear that the largest market for our nation’s most prominent crop will soon become obsolete. Paired with climate volatility, changing diet preferences, trade uncertainty, and rural depopulation, the shift toward electric vehicles could soon have an extraordinary impact on the crops we'll grow in the future.
Diversifying crops to maintain farm prosperity
This existential challenge to corn will change the face of agricultural production in Minnesota, but thoughtful planning and action can put us back in the driver's seat. At FMR, we’re working with agribusinesses, crop researchers, farmers and scientists to build markets for the next generation of Minnesota crops — ones that don’t rely so heavily on ethanol as their end-product.
Such perennial crops and winter annuals (or cover crops) like those being developed through the University of Minnesota’s Forever Green Initiative, are much better for water quality, soil health and habitat.
But just as importantly, these new cropping systems can fill the economic void left by the end of ethanol. Investing in these cropping systems now is vital to the long-term outlook for our state’s rural economic growth and prosperity and for our river.
Looking forward
Just as corn didn’t become king overnight, we know that diversifying our croplands will take time. But we also know that change will come no matter what, as ethanol’s grip on our cropland comes to an end.
By working with farmers, agribusinesses, researchers and conservation groups, we hope to usher in an orderly, fair and profitable transition to a more diverse cropping system in the years to come — one that supports our land, water, wildlife and people for generations.
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