Opportunity for Profitable Investments in Cellulosic Biofuels
Research efforts to allow large-scale conversion of cellulose into biofuels are being undertaken in the US and EU. These efforts are designed to increase logistic and conversion efficiencies, enhancing the economic competitiveness of cellulosic biofuels. However, not enough attention has been paid to the future market conditions for cellulosic biofuels, which will determine whether the necessary private investment will be available to allow a cellulosic biofuels industry to emerge. We examine the future market for cellulosic biofuels, differentiating between cellulosic ethanol and â€˜drop-in' cellulosic biofuels that can be transported with petroleum fuels and have equivalent energy values. We show that emergence of a cellulosic ethanol industry is unlikely without costly government subsidies, in part because of strong competition from conventional ethanol and limits on ethanol blending. If production costs of drop-in cellulosic biofuels fall enough to become competitive, then their expansion will not necessarily cause feedstock prices to rise. As long as local supplies of feedstocks that have no or low-valued alternative uses exist, then expansion will not cause prices to rise significantly. If cellulosic feedstocks come from dedicated biomass crops, then the supply curves will have a steeper slope because of competition for land.
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|Date of creation:||08 Feb 2012|
|Date of revision:|
|Publication status:||Published in Energy Policy, February 2011, vol. 39 no. 2, pp. 714-719|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
Phone: +1 515.294.6741
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Web page: http://www.econ.iastate.edu
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"Economic Potential of Biomass Based Fuels for Greenhouse Gas Emission Mitigation,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 24(4), pages 291-312, April.
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- Amani Elobeid & Simla Tokgoz & Dermot J. Hayes & Bruce A. Babcock & Chad E. Hart, 2006.
"Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The,"
Center for Agricultural and Rural Development (CARD) Publications
06-bp49, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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- Amani Elobeid & Simla Tokgoz & Dermot J. Hayes & Bruce A. Babcock & Chad E. Hart, 2006. "Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The," Food and Agricultural Policy Research Institute (FAPRI) Publications 06-bp49, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
- Petrolia, Daniel R., 2006. "The Economics of Harvesting and Transporting Corn Stover for Conversion to Fuel Ethanol: A Case Study for Minnesota," Staff Papers 14213, University of Minnesota, Department of Applied Economics.
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