Renewable Fuel Standard
Potential Economic and Environmental
Effects of U.S. Biofuel Policy
Public Release
October 4, 2011
Renewable Fuel Volume Consumption Mandated
by RFS2
40
Billions of Gallons
35
30
Total = 36
Cellulosic biofuels
Advanced biofuels
Biomass-based diesel
Conventional biofuels
16
25
20
4
1
15
10
15
5
0
Year
Source: Energy Independence and Security Act of 2007
Definitions of Renewable Fuels in RFS2
• Conventional biofuel: ethanol derived from corn starch with a
life-cycle greenhouse-gas (GHG) emission reduction of at least
20% compared to petroleum-based gasoline and diesel.
• Biomass-based diesel: fuels must achieve life-cycle GHGemission reduction of at least 50% compared to petroleumbased diesel.
• Advanced biofuels: renewable fuels (excluding conventional
biofuel) that achieve life-cycle GHG-emission reduction of at
least 50%.
• Cellulosic biofuels: fuels derived from any cellulose,
hemicellulose, or lignin from renewable biomass that achieve
life-cycle GHG-emission reduction of at least 60%.
Statement of Task
• Describe biofuels produced in 2010 and projected to be produced
and consumed by 2022 using RFS-compliant feedstocks
primarily from U.S. forests and farmland.
• Review model projections and other estimates of the relative
effects of increasing biofuels production as a result of RFS2 on
the prices of:
–  Land, food, feed, and forest products.
–  Imports and exports of relevant commodities.
–  Federal revenue and spending.
• Discuss the potential environmental harm and benefits of biofuels
production and the barriers to achieving the RFS2 consumption
mandate.
Study Committee Members
Lester B. Lave1 (Chair)*, Carnegie Mellon University
Ingrid (Indy) C. Burke (Cochair)‡, University of Wyoming
Wallace E. Tyner (Cochair)‡, Purdue University
Virginia H. Dale, Oak Ridge National Laboratory
Kathleen E. Halvorsen, Michigan Technological University
Jason D. Hill, University of Minnesota
Stephen R. Kaffka, University of California, Davis
Kirk C. Klasing, University of California, Davis
1Member
of the Institute of Medicine
*Chair until May 9, 2011
‡Chair from May 9, 2011
Study Committee Members
Stephen J. McGovern, PetroTech Consultants
John A. Miranowski, Iowa State University
Aristides (Ari) Patrinos, Synthetic Genomics Inc.
Jerald L. Schnoor2, University of Iowa
David B. Schweikhardt, Michigan State University
Theresa L. Selfa, State University of New York, Syracuse
Brent L. Sohngen, Ohio State University
J. Andres Soria, University of Alaska, Fairbanks
2Member
of the National Academy of Engineering
Finding: RFS2 may be ineffective policy for
reducing global GHG emissions
The effect of biofuels on GHG emissions depends on:
• Types of feedstock to be produced.
• Management practices used to produce feedstocks
(for example nutrient management).
• Types of at land-use or land-cover changes occurred
in the process (including direct and indirect land-use
and land-cover changes).
Environmental Effects of Producing Biofuels
to Meet RFS2
• Environmental effects depend on
o  feedstock type,
o  site-specific factors,
o  feedstock production management practices,
o  land condition prior to feedstock production, and
o  conversion yield.
• Effects of increasing biofuel production on air quality, water
quality, water quantity and consumptive use, soil, and
biodiversity are uncertain and
o  can be local, regional, or global
Environmental Effects of Producing Biofuels
to Meet RFS2
• Air pollutants (particulate matter, ozone, and sulfur
oxides) -- likely to increase with increasing ethanol
production and use.
• Water quality -- deteriorated as corn production
increased; effect of achieving RFS2 uncertain.
• Consumptive water use -- range of estimates much
wider than petroleum-based fuels; 2.9–1,500 gallons
per gallon of gasoline equivalent for biofuels and 1.9–
6.6 gallons per gallon of gasoline equivalent for
petroleum-based fuels.
Finding: RFS2 cellulosic fuel mandate
unlikely to be met in 2022
• No commercially viable biorefineries exist, to date, for
converting lignocellulosic biomass to fuels.
• Aggressive deployment, in which the capacity build
rate doubles the historic capacity build rate of corngrain ethanol, necessary to produce 16 billion gallons
of cellulosic biofuels by 2022.
• Policy uncertainties could deter investors from
aggressive deployment.
Finding: Only in an economic environment
characterized by high oil prices, technological
breakthroughs, and a high implicit or actual
carbon price would biofuels be cost-competitive
with petroleum-based fuels.
• Biofuel Breakeven Model used to estimate:
o  The minimum price that biomass suppliers would be
willing to accept for a dry ton of biomass delivered to
the biorefinery gate.
o  The maximum price that processors would be willing
to pay to at least break even.
Gap between supplier s price and processor s price is negative for all
types of cellulosic biomass likely to be produced in 2022.
Price Gap Between Biomass Suppliers and Processors
Cellulosic Feedstock
Corn Stover in
Corn-Soybean Rotation
Supplier s
Price
Processor s
Price
Price Gap
(Per Dry Ton)
Price Gap
(Gallon of
Ethanol)
$92
$25
$67
$0.96
Alfalfa
$118
$26
$92
$1.31
Switchgrass in the
Midwest
$133
$26
$106
$1.51
Short Rotation Woody
Crops
$89
$24
$65
$0.93
Forest Residues
$78
$24
$54
$0.77
Source: Examples from committee analysis in BioBreak model. Price of Oil $111/barrel. Biomass
yield 70 gallons of ethanol per dry ton.
• Price gap for cellulosic feedstock could be closed
under other market circumstances:
–  Price of oil reaches $191 per barrel.
–  A price is placed on carbon that makes cellulosic
biofuels more cost-competitive.
–  Government subsidy payments increase to cover
price gap.
–  Government biofuel mandates are enforced.
Economic Effects of
Increasing Biofuel Production
• Land prices will increase because of increased
demand for food and feedstock production.
• Food-based biofuel is one of many factors that has
contributed to upward price pressure on agricultural
commodities, food, and livestock feed.
• Competition with existing markets will increase wood
product prices if woody biomass contributes heavily
to biofuel feedstock.
Economic Effects of
Increasing Biofuel Production
• Changes in trade in agricultural commodities have so
far been buffeted by the decline in the value of the
U.S. dollar.
• Imports of wood products will likely increase, imports
of oil will decrease slightly, and exports of livestock
products will decrease slightly.
• Federal budget outlays would increase because of
spending on subsidy payments, grants, loans, and
loan guarantees and because of foregone revenue
from biofuel tax credits.
Barriers to Achieving RFS2
• High cost of producing cellulosic biofuels compared to
petroleum-based fuels.
• Uncertainties related to market conditions and
government support programs (for example, EPA
waiver).
• Blend wall and transportation infrastructure if large
amount of biofuels for meeting RFS2 is be met by
ethanol.
• Other environmental and social barriers.
Thank you. Report is available online at
www.nap.edu.