Note that the CBO study is about the subsidy for all biofuels, but in 2009, 94% of the 11.5 billion gallons of biofuel produced in the U.S. was ethanol.
The CBO report includes some useful numbers on the energy in gasoline and ethanol:
- One gallon of gasoline contains 125,000 BTUs of energy.
- One gallon of ethanol contains 85,000 BTUs of energy.
- You thus need 1.48 gallons of ethanol to get the same amount of energy as you can get from one gallon of gasoline.
- By current techniques, ethanol producers burn 11,000 BTUs of petroleum fuel to produce each gallon of ethanol.
- An ethanol producer thus needs to put 1.69 gallons of ethanol on the market to replace the energy from one gallon of gasoline at the pump and petro-fuel taken off the market to make that ethanol.
Harvard's Professor Mankiw asks an interesting question: if our goal is to reduce gasoline consumption, might we not do so more cheaply and in a better targeted fashion simply by adding a dollar-per-gallon tax to gasoline and charging those who keep consuming rather than levying additional income tax on all taxpayers?
Bonus note on energy: CBO says that corn ethanol production and use emits maybe 15%–20% less carbon dioxide than gasoline per 125,000 BTUs of fuel made available at the pump. Cellulosic ethanol production and use beats gasoline on CO2 emissions by well over 80%. In other words, cellulosic ethanol promises one-fifth the carbon footprint of corn ethanol.