Policies, learning-by-doing played important role in reducing ethanol costs

Science Codex
Posted On: April 12, 2012 - 3:30pm

CHAMPAIGN, Ill. — A new study from the University of Illinois concludes that learning-by-doing, stimulated by increased ethanol production, played an important role in inducing technological progress in the corn ethanol industry. It also suggests that biofuel policies, which induced ethanol production beyond the free-market level, served to increase the competitiveness of the industry over time.

The study, co-written by Madhu Khanna, a professor of agricultural and consumer economics at Illinois, and Xiaoguang Chen, of the U. of I. Energy Biosciences Institute, quantifies the role that factors such as economies of scale, learning-by-doing, induced technological innovation as a result of rising input prices and trade-induced competition played in reducing the processing costs of corn ethanol in the U.S. by 45 percent while also increasing production volumes seventeen-fold from 1983 to 2005.

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