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Ethanol Continues to Contribute to Economy

RFA report notes COVID-19 was a major disruptor for industry in 2020

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The U.S. ethanol industry continues to fuel jobs and create income, according to an economic impact study released by the Renewable Fuels Association (RFA).

The U.S. ethanol industry was slammed by the COVID-19 pandemic in 2020, says the study. The impact of the pandemic overshadowed most other issues facing the industry during the year. The widespread shelter-at-home orders in the spring essentially shut the U.S. economy down, people stopped driving and both gasoline and ethanol demand fell sharply.

Ethanol producers responded to the collapse in demand by reducing operating rates, shutting plants, and idling capacity. According to the Renewable Fuels Association 45 percent of industry capacity was idled in April and May 2020. By year end roughly two dozen facilities were idle, and the industry was operating on an approximately 85 percent capacity utilization rate.

The weak and unsettled demand conditions undercut investment in the industry in 2020. While total capacity increased as capital expenditures in 2019 came online, relatively little new expenditures for expansion were made during 2020. Additionally, biofuels research and development activities were curtailed by COVID-related closures both in the public and private sectors.

The two other major factors impacting the ethanol industry in 2020 were weak export demand and regulatory issues. Both were overshadowed by the pandemic but nonetheless acted as a drag on the ethanol industry.

Despite the disruptive effects of the COVID pandemic, economic and regulatory challenges in 2020, the ethanol industry continued to make a significant contribution to the economy in terms of job creation, generation of tax revenue, and displacement of crude oil and petroleum products.

The importance of the ethanol industry to agriculture and rural economies is particularly notable. A return to growth and expansion of the ethanol industry through the application of new technologies and feedstocks will enhance the industry’s position as the original creator of green jobs and will enable America to make further strides toward reducing greenhouse gas emissions and positively dealing with climate change.

Read the report here.

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