IHOFX | Ethanol


Ethanol, also called ethyl alcohol, pure alcohol, grain alcohol, or drinking alcohol, is a volatile, flammable, colorless liquid. It is a psychoactive drug and one of the oldest recreational drugs. Best known as the type of alcohol found in alcoholic beverages, it is also used in thermometers, as a solvent, and as a fuel. In common usage, it is often referred to simply as alcohol or spirits.

Ethanol is produced both as a petrochemical, through the hydration of ethylene and, via biological processes, by fermenting sugars with yeast. Which process is more economical depends on prevailing prices of petroleum and grain feed stocks.

The largest single use of ethanol is as a motor fuel and fuel additive. More than any other major country, Brazil relies on ethanol as a motor fuel. Gasoline sold in Brazil contains at least 25% anhydrous ethanol. Hydrous ethanol (about 95% ethanol and 5% water) can be used as fuel in more than 90% of new cars sold in the country. The USA uses Gasohol (max 10% ethanol) and E85 (85% ethanol) ethanol/gasoline mixtures. Ethanol may also be utilized as a rocket fuel, and is currently in lightweight rocket-powered racing aircraft.

Consumption of ethanol as a fuel now accounts for more than 85% of total global consumption. Hydrous ethanol can be used as a direct replacement for gasoline in specially designed vehicles such flex-fuel vehicles, or blended with gasoline as anhydrous ethanol, at various levels depending on local mandates. The majority of modern vehicles are able to run on blends up to 10% ethanol (E-10) without any engine modifications. The dramatic growth in ethanol consumption as a fuel has been driven by political, economic, and social agendas that have sought to:

  • Reduce national dependencies and expenditure on fossil fuels
  • Reduce the emission of greenhouse gases (GHG)
  • Develop new economies based on indigenous resources
  • Stimulate employment and economies in rural areas
  • Generate innovation and technology for future generations

To encourage demand, governments have provided various incentives, subsidies, protectionist policies, and legislative policies such as fuel mandates.


The USA has mandated 164 billion liters per year of ethanol in petrol blends by 2022. In the major markets of Brazil and the United States where ethanol is an important part of the fuel mix, consumption is growing by around 10% per year.

The European Union aims to replace 10% of each EU member state’s transport fuels with renewable fuels like ethanol by 2020. The Nordic countries are at the forefront of this, with Sweden for example aiming for their transport industry to be completely free of fossil fuels by 2030.

Several Asian nations are also implementing biofuels targets; China, for example, has a mandate of 10% ethanol by 2020, and Thailand has a national biofuels policy of 20% of its fuels by the end of 2018.