Many biological materials like plants or animal fats can be made into fuels that power vehicles, ships, and aircraft, while producing up to 90% less greenhouse gases than their petroleum-based equivalents.1 Like domestic oil drilling, adding these home-grown products to America’s fuel mix strengthens our GDP2 and reduces our reliance on foreign petroleum.3 Federal tax incentives and demand-drivers like the Renewable Fuel Standard (RFS) helped increase production from 1.8 billion gallons of ethanol and biodiesel in 2001 to 14.9 billion gallons in 2011.4 To continue its expansion, the industry will require additional private investment in advanced biofuel technologies, as well a clear regulatory path for bringing new technologies to the market.
Though the U.S. biofuels industry was built around corn ethanol, producers have been turning their attention toward higher-performing technologies since 2007.5 Cellulosic biofuels, for instance, take advantage of non-food feedstocks—like grasses, wood, and corncobs—that generate 50-90% less GHG emissions per gallon than basic corn ethanol.6 Some of these feedstocks are waste products that would otherwise go unused, while others can be grown on marginal lands unsuitable for growing other crops. All told, the U.S. could sustainably harvest enough of these cellulosic materials to produce 37 billion gallons of low-emissions domestic fuel,7 enough to replace over one quarter of the gasoline consumed nationwide in 2011.8 The Midwest and South are particularly rich in cellulosic materials, giving them additional opportunities for economic development.9 Cellulosic fuel technologies are just now reaching commercialization. To increase production levels and lower the cost curve, biofuels producers will need additional access to capital.
Cellulosic feedstocks can be used to produce a variety of advanced fuels. Still, many of the earliest cellulosic facilities will produce ethanol.10 Unfortunately, America is fast approaching the “blend wall”—the point at which the blending of additional ethanol into our gasoline will require specifically designed vehicles and separate infrastructure for distribution and fueling.11 Overcoming this hurdle will require greater production of “drop-in” biofuels. These fuels are nearly identical to their petroleum-based equivalents at a molecular level, and can be blended with petroleum products at any concentration while still delivering the environmental benefits of ethanol.12
Increasing production of drop-in fuels from cellulosic feedstocks will require the U.S. biofuels industry to overcome multiple challenges. Producers will need to attract substantial amounts of private investment in order to initiate and expand their operations. The RFS guarantees a market for advanced biofuels, which helps lower risk and attract investors. But meeting the law’s aggressive targets will require an additional $80 billion for new facilities, feedstock supply chains, and fuel distribution.13 Even if producers secure financing, they must still navigate a complex federal regulatory process designed to ensure that their fuels meet the GHG emissions standards set by the RFS.14 Delays in obtaining this regulatory approval from EPA, known as a “pathway”, can interfere with the business models of these fledgling companies, making them less likely to reach profitability and expansion.
Federal policy should encourage investment in advanced biofuels, particularly in fuels that are compatible with standard engines, pipelines, and fueling equipment. It should also reduce the amount of time required to introduce new technologies to the market.