Achieving the Sustainability
Goals of the Bioeconomy:
Policy Choices
Dr. Madhu Khanna
University of Illinois, Urbana-Champaign
Steps Towards a Sustainable Bioeconomy
1.
Biofuels and bio-products
competitive with fossil fuels.
2.
Optimize production to reduce
competition for arable land across
food, feed, and fuel production.
3.
Enhance fuel feedstock production
on marginal land for efficient land
use.
4.
Optimize feedstock production for
the provisioning of ecosystem
services, providing clean air and
water, as well as healthy soils and
habitat.
What Does a Future With 16 Billion Gallons of
Cellulosic Biofuel in 2022 Look Like?
Greenhouse Gas Savings
with the RFS (B MT)

6% lower GHG emissions with RFS

9 million out of 12 million acres of
energy grasses are on marginal land.
2.3
12% lower GHG emissions with RFS
+ cellulosic tax credit
2.1



2.2
2
Even with 1.2% to 1.8% increase in
Vehicle Miles Traveled
1.9
Without a significant increase in
food crop prices
1.7
1.8
2007
2012
No policy
2017
RFS
2022
RFS+CBPTC
Economic and Policy Challenges to
Sustainable Biofuels

Need high yielding, low carbon, low input, dedicated energy crops,
and also make use of residues and waste feedstocks

Need cost-competitive conversion technology

Policies Options for Supply Chain Development:
•
Incentives for production of feedstocks for farmers
•
R&D and low cost innovation loans to improve conversion technology
•
Ease blending constraints by incentivizing flex fuel vehicles and
related infrastructure
•
Renewable fuel standards that assure demand by blenders
Many Feedstock Choices for Next Generation Biofuels
Willow
Agave
Miscanthus
Corn Stover
300 Acre Energy Farm at University of Illinois
Miscanthus
Switchgrass
High Yield Feedstocks that Achieve Sustainability
Goals Are a Win-Win
Biofuel Yield: Gallons per Acre
(Dwivedi et al., 2015)
1000
800
600
400
200
0
Corn ethanol
Sugarcane
Wheat straw
ethanol
Stover
ethanol
Switchgrass
ethanol
Miscanthus Energy Cane
ethanol
Choose Feedstocks that Can Grow on Low Quality Soil
(Dwivedi et al., 2015)
Effect of Soil Quality on Yields (Metric tons/ha )
30
Miscanthus
25
Switchgrass
20
15
10
5
0
Talladega, AL
Marion, IL
Adams, IN
High Quality Soil
Talladega, AL
Marion, IL
Low Quality Soil
Adams, IN
Trade-off Between Cost and GHG Savings
with Alternative Cellulosic Biofuels
Corn Stover
results in a
50%- 90%
Savings of
GHG for each
Unit of
Production
Switchgrass
results in
100% - 130%
GHG, but the
Unit Cost of
Production is
More
Variable.
Miscanthus
produces
140% - 170%
Savings of
GHG for each
Unit of
Production
(Dwivedi et al., 2015)
Ecosystem Service Provisioning
Water Quality Impacts
Nitrates
• Energy grass nitrate
loads = only 10% of total
corn nitrate loads after 4
years of establishment
• Corn stover can reduce
nitrate loading but
increase erosion and
sediment run off.
• Limits on stover removal
rate are critical for ES
provisioning.
Smith et al., 2010
Fuel Cost Trends and Cellulosic Biofuels

Cost of corn ethanol declined by 45% as production increased 17-fold since 1983

Cost of sugarcane ethanol declined by 70% as production increased 30-fold since 1979

Can we observe a similar trend with technology forcing policies for cellulosics?
Reduction in Cost due to Learning by Doing for Corn and Sugarcane Ethanol
Chen and Khanna, 2012
Corn
Ethanol Cost
Sugarcane
Ethanol Cost
Risky Business – Barriers to Low Carbon High Yield
Feedstocks
High rates of time preference for farmers

Perennials: Long term time commitment

Establishment lags: 1-5 years

High upfront costs and foregone income – liquidity constraints
$ per acre
600
400
200
0
-200
-400
-600
-800
-1000
-1200
-1400
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Corn
Miscanthus
Net returns at $50 per ton of biomass
Miscanthus
Low risk
(0, 0.55]
(0.55, 0.7]
(0.7, 0.85]
(0.85, 1]
(1, 1.5]
Legend
(1.5,
2]
-81.241677 - -30.000000
-29.999999
(2,
2.5] - -20.000000
-19.999999 - -10.000000
>-9.999999
2.5 - 0.000000
0.000001 - 10.000000
High risk
10.000001 - 20.000000
20.000001 - 30.000000
30.000001 - 140.484825
< -30
-30 to -20
-20 to -10
-10 to -0
0 to 10
10 to 20
20 to 30
> 30
Switchgrass
Legend
< -30
Miao and Khanna, 2014
-30 - -20
Legend
Legend
0
>3
000
Risk Premium $ per ton
0 10
0
0
0
0
0 2
2
-3
--3 -1 0
< 30 20
0 10 20
-1
-
000
Yield Risk Relative to Corn
Biomass Crop Assistance Program

Provides establishment cost share subsidies for perennial energy
crops

Covers the opportunity cost of land during establishment years

Offsets disincentives due to low biomass price, liquidity constraints
and high discount rates
2014 Farm Bill Policy

However, funding in the Farm Bill 2014 is limited to $25 million a
year for 5 years

Enough incentive for cellulosic feedstocks?
 Up
to half could be spent on crop and forest residues
Reaping the Benefits of Advanced Biofuels Through Policy
Near Term


Credibly implemented RFS
Certainty of demand needed to stimulate investment
Cellulosic Biofuel Production Tax Credit
Increase the competitiveness of cellulosic biofuels relative to corn ethanol
Could increase share of cellulosic biofuel beyond 16 billion gallons
Longer term


National Low Carbon Fuel Standard
Create performance based incentives for continuous improvement in lowering carbon intensity.
RFS: Treats all biofuels from cellulosic feedstocks with carbon intensity <60% of gasoline, but
they are not the same.
May not encourage the high cost but low carbon intensive biofuels
Carbon Price/Cap-and-Trade
Effective as a supplement to change mix of fuels and induce fuel conservation
LCFS Implementation Experience from California:
Affecting the Mix of LC Fuels
Summary: Policy Choices

A credible RFS is critical to induce continued development of
advanced biofuels along with demand side policies to increase
biofuel consumption

Supplementing it with Low Carbon policies like an LCFS/carbon price
would provide the signal to transition to biofuels that provide multidimensional environmental benefits

Policies like BCAP aimed at incentivizing farmers to convert land to grow
energy crops by reducing upfront costs.

Other accompanying policies to mitigate unintended consequences such as
leakage and shuffling of fuel, indirect land use change and other adverse
environmental or social impacts.
Questions?
Based on research with:

Ruiqing Miao

Weiwei Wang

Puneet Dwivedi

Tara Hudiburg

Melannie Hartman

William Parton

Evan Delucia

Steve Long

Deepak Jaiswal
Email: khanna1@illinois.edu
http://ace.illinois.edu/directory/madhu-khanna