Cellulosic Biofuels: Analysis of Policy Issues for Congress

Cellulosic Biofuels: Analysis of
Policy Issues for Congress
Updated November 25, 2008
Tom Capehart
Specialist in Agricultural Policy
Resources, Science, and Industry Division

Cellulosic Biofuels:
Analysis of Policy Issues for Congress
Cellulosic biofuels are produced from cellulose derived from renewable
biomass. They are thought by many to hold the key to increased benefits from
renewable biofuels because they are made from low-cost, diverse, non-food
feedstocks. Cellulosic biofuels could also potentially decrease the fossil energy
required to produce ethanol, resulting in lower greenhouse gas emissions.
Cellulosic biofuels are produced on a very small scale at this time — significant
hurdles must be overcome before commercial-scale production can occur. The
renewable fuels standard (RFS), a major federal incentive, mandates 100 million
gallons per year (mgpy) of cellulosic biofuels use in 2010. After 2015, most of the
increase in the RFS is intended to come from cellulosic biofuels, and by 2022, the
mandate for cellulosic biofuels will be 16 billion gallons. Whether these targets can
be met is uncertain. Research is ongoing, and the cellulosic biofuels industry may
be on the verge of rapid expansion and technical breakthroughs. However, at this
time, only two small refineries are scheduled to begin production in 2009, and an
additional nine are expected to commence production by 2011 for total output of 300
mgpy per year, compared with an RFS requirement of 500 mgpy in 2012.
The federal government, recognizing the risk inherent in commercializing this
new technology, has provided loan guarantees, grants, and tax credits in an effort to
make the industry competitive by 2012. In particular, the Food, Conservation, and
Energy Act of 2008 (the 2008 farm bill, P.L. 110-246) supports the nascent cellulosic
industry through authorized research programs, grants, and loans exceeding $1
billion. The enacted farm bill also contains a production tax credit of $1.01 per
gallon for ethanol produced from cellulosic feedstocks. Private investment, in many
cases by oil companies, also plays a major role in cellulosic biofuels research and
Three challenges must be overcome if the RFS is to be met. First, cellulosic
feedstocks must be available in large volumes when needed by refineries. Second,
the cost of converting cellulose to ethanol or other biofuels must be reduced to a level
to make it competitive with gasoline and corn-starch ethanol. Third, the marketing,
distribution, and vehicle infrastructure must absorb the increasing volumes of
renewable fuel, including cellulosic fuel mandated by the RFS.
Congress will continue to face questions about the appropriate level of
intervention in the cellulosic industry as it debates both the risks in trying to pick the
winning technology and the benefits of providing start-up incentives. The current tax
credit for cellulosic biofuels expires in 2012, but its extension may be considered
during the 111th Congress. Congress may continue to debate the role of biofuels in
food price inflation and whether cellulosic biofuels can alleviate its impacts. Recent
congressional action on cellulosic biofuels has focused on the definition of renewable
biomass eligible for the RFS, which is considered by some to be overly restrictive.
To this end, legislation has been introduced to expand the definition of renewable
biomass eligible under the RFS.

In troduction ......................................................1
The Renewable Fuel Standard: A Mandatory Usage Mandate...........2
Challenges Facing the Industry...................................3
Cellulosic Feedstock Supplies........................................3
Crop Residues............................................5
Prairie Grasses............................................5
Forest Sources of Biomass...................................6
Secondary and Tertiary Feedstocks............................6
Feedstock Issues...............................................7
Volumes Required.........................................7
Impacts on Food Supplies...................................8
Multi-Year Crop Cycles.....................................9
Extracting Fuel from Cellulose: Conversion............................9
Production Processes...........................................9
Acid Hydrolysis..........................................10
Enzymatic Hydrolysis.....................................10
Thermochemical Gasification and Pyrolysis....................11
Distribution and Marketing.........................................12
Distribution Bottlenecks.......................................12
The Blend Wall..............................................12
Economic and Environmental Issues..................................13
Economic Efficiency..........................................13
Energy Balance..............................................13
Greenhouse Gas Emissions.....................................14
Private Investment................................................15
Federal Cellulosic Biofuels Policies..................................15
Direct Federal Spending on R&D................................16
Federal-Private Partnerships................................16
Renewable Energy Provisions in the 2008 Farm Bill (P.L. 110-246).....17
Tax Credit for Cellulosic Biofuels (Section 15321)..............17
Ethanol Tariff Extension (Section 15333)......................18
Agricultural Bioenergy Feedstock and Energy Efficiency Research
and Extension Initiative (Section 7207)....................18
Bioenergy Program for Advanced Biofuels (Section 9005)........18
Biomass Crop Assistance Program (Section 9011)...............18
Forest Biomass for Energy (Section 9012).....................19
Biorefinery Assistance (Section 9003).........................19
Biomass Research and Development Initiative (Section 9008)......19
Energy Improvement and Extension Act of 2008 (P.L. 110-343)........20
Expansion of the Allowance for Cellulosic Ethanol Property
(Division B, Section 201)..............................20

Legislative Changes in the RFS Volume...........................20
Expanding Biomass Eligible under the RFS........................21
Time Frame for Cellulosic Biofuels Production.........................22
List of Figures
Figure 1. Renewable Fuel Standard Under EISA.........................2
Figure 2. Annual Biomass Resource Potential According to USDA..........8
List of Tables
Table 1. Cellulosic Feedstock Sources.................................4
Table 2. Basic Steps Required to Produce Ethanol ......................10

Cellulosic Biofuels:
Analysis of Policy Issues for Congress
Cellulosic biofuels are produced from cellulose1 derived from renewable
biomass feedstocks such as corn stover (plant matter left in the field after harvest),
switchgrass, wood chips, and other plant or waste matter. Current production
consists of a few small scale pilot projects — and significant hurdles must be
overcome before industrial-scale production can occur.
Ethanol produced from corn starch and biodiesel produced from vegetable oil2
(primarily soybean oil) are currently the primary U.S. biofuels. High oil and
gasoline prices, environmental concerns, rural development, and national energy
security have driven interest in domestic biofuels for many years. However, the
volume of fuel that can be produced using food crops without causing major market
disruptions is limited; to fulfill stated goals, biofuels must also come from non-food
sources. Proponents see cellulosic biofuels as a potential solution to these challenges
and support government incentives and private investment to hasten efforts towards
commercial production. Some federal incentives — grants, loans, tax credits, and
direct government research — attempt to push cellulosic biofuels technology to the
marketplace. Demand-pull mechanisms such as the renewable fuel standard (RFS)
mandate the use of biofuel blends — creating an incentive for the development of a
new technology to enter the marketplace.
In contrast, petroleum industry critics of biofuel incentives argue that
technological advances such as seismography, drilling, and extraction continue to
expand the fossil-fuel resource base, which has traditionally been cheaper and more
accessible than biofuel supplies. Other critics argue that current biofuel production
strategies can only be economically competitive with existing fossil fuels in the
absence of subsidies if significant improvements to existing technologies are made
or new technologies are developed. Until such technological breakthroughs are
achieved, critics contend that the subsidies distort energy markets and divert research
funds from the development of other renewable energy sources not dependent on
internal combustion technology, such as wind, solar, or geothermal, which offer
potentially cleaner, more bountiful alternatives. Still others debate the rationale
behind policies that promote biofuels for energy security, questioning whether the
United States could ever produce and manage sufficient feedstocks of starches,

1 Cellulose is the structural component of the primary cell wall of green plants.
2 For more information on these fuels, see CRS Report RL33290, Fuel Ethanol: Background
and Public Policy Issues, by Brent D. Yacobucci, and CRS Report RS21563, Biodiesel Fuel
and U.S. Agriculture, by Randy Schnepf.

sugars, vegetable oils, or even cellulose to permit biofuel production to meaningfully
offset petroleum imports. Finally, there are those who argue that the focus on
development of alternative energy sources undermines efforts to score energy savings
through lower consumption.
The Renewable Fuel Standard: A Mandatory Usage Mandate
Principal among the cellulosic biofuels goals to be met is a biofuels usage
mandate — the renewable fuel standard (RFS) as expanded by the Energy
Independence and Security Act of 2007 (EISA, P.L. 110-140, Section 202) — that
includes a specific carve-out for cellulosic biofuels.3 The RFS is a demand-pull
mechanism that provides a stimulus (mandate) that can be met using a wide array of
technologies and fuels. Although most of the RFS is expected to be met using corn
ethanol initially, over time the share of advanced (non corn-starch derived) biofuels
in meeting the mandate increases. The RFS mandate for cellulosic biofuels begins
at 100 million gallons per year in 2010 and rises to 16 billion gallons per year in 2022
(Figure 1). This mandate represents a prodigious challenge to the biofuels industry
in light of the fact that no commercial production of cellulosic biofuels yet exists.
Figure 1. Renewable Fuel Standard Under EISA

Oth e r30
Bio-diesel C e llu lo s ic20a
15Billion G
C o r n -s ta r c h10
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: EISA, (P.L. 110-140, Section 202)
Note: Corn-starch ethanol volume is a cap, whereas other categories are floors.
The RFS also mandates maximum lifecycle greenhouse gas emissions for
cellulosic biofuels. Lifecycle greenhouse gas emissions encompass emissions4 at all
levels of production, from the field to retail sale, including emissions resulting from
land use changes, that is, the clearing of forests for cropland due to increased energy
3 For more information on the RFS, see CRS Report RL34265, Selected Issues Related to
an Expansion of the Renewable Fuel Standard (RFS), by Brent D. Yacobucci and Tom
4 Greenhouse gases include carbon dioxide, methane, and nitrous oxide (CO2, CH4, and N2O

crop production elsewhere. Under the law, GHG emissions for cellulosic biofuels
qualifying for the RFS are limited to 60% of the GHG emissions from extracting,
refining, distributing, and consuming gasoline.
Challenges Facing the Industry
Cellulosic biofuels have potential, but there are significant hurdles to overcome
before competitiveness is reached. In his 2007 State of the Union Address, President
Bush announced the “Twenty in Ten” initiative, calling for the rapid expansion of
renewable biofuels production as a major part of an effort to reduce U.S. gasoline use
by 20% through biofuels and conservation. This goal was given substance in
December 2007, when Congress passed EISA, mandating the RFS for the use of
specific volumes of renewable biofuels through 2022 and setting a goal of
commercial-scale cellulosic biofuels production by 2012.
This report provides background on the current effort to develop industrial-
scale, competitive technology to produce biofuels from cellulosic feedstocks. It
outlines the three major challenges faced in the context of the RFS: (1) feedstock
supply, (2) extraction of fuel from cellulose, and (3) biofuel distribution and
marketing issues. It then examines the current role of government (in cooperation
with private industry) in developing that technology. Finally, the report reviews the
role of Congress with respect to the emerging cellulosic biofuels industry, reviews
recent congressional actions affecting the industry, and discusses key questions
facing Congress.
Cellulosic Feedstock Supplies
Feedstocks used for cellulosic biofuels are abundant and diverse and are of
immense potential to the industry. One major advantage of cellulosic biofuels over
corn-starch ethanol is that they can be derived from potentially inexpensive
feedstocks that can be produced on marginal land.5 Corn, on the other hand, is a
resource-intensive crop that requires significant use of chemicals, fertilizers, and
water, and is generally grown on prime farmland.
Cellulose, combined with hemicellulose and lignin, provides structural rigidity
to plants and is also present in plant-derived products such as paper and cardboard.
Feedstocks high in cellulose come from agricultural, forest, and even urban sources
(see Table 1). Agricultural sources include crop residues and biomass crops such as
switchgrass; forest sources include tree plantations, natural forests, and cuttings from
forest management operations. Municipal solid waste, usually from landfills, is the
primary urban source of renewable biomass.

5 Breaking the Link between Food and Biofuels, Bruce A. Babcock, Briefing Paper 08-BP

53, July 2008.

Table 1. Cellulosic Feedstock Sources
Agricultural crop residuesCrop residues — stover, straw, etc.
Agricultural commercial cropsPerennial prairie grasses
Forest woody biomassLogging residues from conventional
harvest operations and forest
management and land clearing
Removal of excess biomass from
timberlands and other forest lands
Fuelwood from forest lands
Perennial woody crops
Agricultural or forest processing by-Food / feed processing residues
productsPulping (black) liquor from paper mills
Primary and secondary wood
processing mill residues
UrbanMunicipal solid waste
Packaging wastes and construction
Source: CRS.
Cellulosic feedstocks may have some environmental drawbacks. Some crops
suggested for biomass are invasive species when planted in non-native environments.
Municipal solid wastes may likely require extensive sorting to segregate usable
material and may also contain hazardous material that is expensive to remove. In
general, calculation of the estimated cost of biofuels production does not reflect
environmental or related impacts, but such impacts are relevant to overall
consideration of biofuels issues.
Biomass feedstocks are bulky and difficult to handle, presenting the industry
with a major challenge. Whether feedstocks are obtained from agriculture or forests,
specialized machinery would need to be developed to harvest and handle large
volumes of bulky biomass. For instance, harvesting corn for both grain and stover
would be more efficient with a one-pass machine capable of simultaneously
segregating and processing both — a combination forage and grain harvester.
Currently, machines such as these are being developed to handle biomass crops, but
few are commercially available.6 Storage facilities capable of keeping immense
volumes in optimal conditions must also be developed, if an industry is to grow.

6 Growing and Harvesting Switchgrass for Ethanol Production in Tennessee, Clark D.
Garland, Tennessee Biofuels Initiative, University of Tennessee Institute of Agriculture, UT
Extension SP-701a.

Crop Residues. Crop residues are by-products of production processes (such
as producing grain), and so their production costs are minimal. Corn stover7 and rice8
and wheat straw are abundant agricultural residues with biomass potential. Among
different residues, corn stover has attracted the most attention for biofuels
production. When harvesting stover, sufficient crop residue must be left in place to
prevent erosion and maintain soil fertility. Up to 60% of some residuals can be
removed without detrimental soil nutrition or erosion effects. Results from early
trials suggest the potential ethanol yield from corn stover (not including the grain
harvested, which could be used for feed or fuel) is approximately 180 gallons of
ethanol per acre. This compares with roughly 425 gallons of corn-starch ethanol9
(from grain) and 662 gallons per acre of sugar cane (in Brazil), when grown as
dedicated energy crops.10
Prairie Grasses. Perennial prairie grasses include native species, which were
common before the spread of agriculture, and non-indigenous species, some of which
are now quite common. Switchgrass is a native perennial grass that once covered
American prairies and is a potential source of biomass. Its high density and native
immunity to diseases and pests have caused many to focus on its use as a cellulosic
feedstock. According to research at the University of Tennessee, the 10-foot tall
grass, if harvested after frost, will produce for 10 to 20 years. However, like other
perennials, switchgrass takes some time to establish — according to field trials, in
the first year of production, yields are estimated at 30% (two tons per acre) of the full
yield potential. In the second year, yield is about 70% (five tons per acre), and in the
third year yields reach full potential at seven tons per acre,11 the equivalent of 50012
to 1,000 gallons of ethanol.13
Miscanthus is another fast-growing perennial grass. Originally from Asia, it is
now common in the United States. Miscanthus produces green leaves early in the
planting season and retains them through early fall, maximizing the production of
biomass.14 Like switchgrass, it grows on marginal lands with minimal inputs.

7 Corn stover consists of the cob, stalk, leaf, and husk left in the field after harvest.
8 Bioenergy Feedstock Information Network, Biomass Resources, [http://bioenergy.
9 USDA Economic Research Service, Ethanol Reshapes the Corn Market, Amber Waves,
April 2006, [http://www.ers.usda.gov/AmberWaves/April06/Features/Ethanol.htm].
10 Cellulosic Ethanol: A Greener Alternative, by Charles Stillman, June 2006,
[ ht t p: / / www.cl eanhoust on.or g/ ener gy/ f e at ur es/ e t hanol 2.ht m] .
11 Growing and Harvesting Switchgrass for Ethanol Production in Tennessee, Clark D.
Garland, Tennessee Biofuels Initiative, University of Tennessee Institute of Agriculture, UT
Extension SP-701a.
12 Ibid.
13 “DuPont Danisco and University of Tennessee Partner to Build Innovative Cellulosic
Ethanol Pilot Facility,” press release, Nashville, TN, July 23, 2008.
14 Science News, “Giant Grass Miscanthus Can Meet US Biofuels Goal Using Less Land
Than Corn Or Switchgrass,” Science Daily, August 4, 2008, [http://www.sciencedaily.com/

Research in Illinois shows miscanthus can produce 2 ½ times the volume of ethanol
(about 1,100 gallons) per acre as corn — under proper conditions.15
At South Dakota State University, field trials with mixtures of native grasses
produced biomass yields slightly lower than switchgrass monocultures, but suggest
that such mixtures result in better soil health, improved water quality, and better
wildlife habitat.16 Similar research at the University of Minnesota with mixtures of
18 native prairie species resulted in biomass yields three times greater than
Forest Sources of Biomass. Forest resources for biomass include naturally
occurring trees, residues from logging and other removals, and residue from fire
prevention treatments. Extracting and processing forest biomass can be expensive
because of poor accessibility, transportation, and labor availability. More efficient and
specialized equipment than currently exists is needed for forest residual recovery to
become cost effective.18
Commercial tree plantations (perennial woody crops) are another source of
woody biomass. Compared to prairie grasses, perennial woody crops such as hybrid
poplar, willow, and eucalyptus trees, are relatively slow to mature and require
harvesting at long intervals (2-4 year intervals for willow or 8-15 years for poplar).
Using specialized equipment, harvesting usually occurs in the winter, when trees are
converted to chips on site and then transported to the refinery for processing. Some
trees, such as willow, re-sprout after cutting and can be harvested again after a few19
years. An acre of woody biomass (i.e., hybrid poplar) yields an estimated 700
gallons of biofuel on an annual basis.20
Secondary and Tertiary Feedstocks. Secondary and tertiary feedstocks are
derived from manufacturing (secondary) or consumer (tertiary) sources. In many
cases their use as feedstocks recovers value from low- or negative-value materials.

14 (...continued)
releases/2008/07/080730155344.htm] .
15 Ibid.
16 Perennial Bioenergy Feedstocks Report to Chairman Collin Peterson — House
Agriculture Committee, April 5, 2007, North Central Bio-economy Consortium.
17 Carbon-Negative Biofuels from Low-Input High-Diversity Grassland Biomass, by David
Tilman, Jason Hill, and Clarence Lehman, Science, December 8, 2006: vol. 314, p. 1598.
18 Biomass as a Feedstock for a Bioenergy and Bioproducts Industry: The Technical
Feasibility of a Billion-Ton Annual Supply, Environmental Sciences Division, Oak Ridge
National Laboratory, 2005, [http://feedstockreview.ornl.gov/pdf/billion_ton_vision.pdf],
19 IAE Bioenergy, Sustainable Production of Woody Biomass for Energy, March 2002,
[ h t t p : / / www.energycommi ssion.org/ files/finalReport / IV .4.c%20-%20Cellulosic%20
20 “Fast-Growing Trees Could Take Root as Future Energy Source,” press release of Purdue
University Study funded by DOE, [http://www.purdue.edu/UNS/html4ever/2006/060823.
Chapple.poplar.html ].

Food and feed processing residues such as citrus skins are major agricultural residues
often suitable as renewable biomass. Residues from wood processing industries such
as paper mills or from feed processing are major secondary sources. Tertiary sources
include urban wood residues such as construction debris, urban tree trimmings,
packaging waste, and municipal solid waste. One ton of dry woody biomass produces
approximately 70 gallons of biofuels.21
Feedstock Issues
Volumes Required. Ethanol plants are intended to operate 24/7, that is, year-
round with only a brief temporary stoppage for maintenance. As a result,
accumulating and storing enough feedstock to supply a commercial-scale refinery
producing 10-20 mgpy per year would require as much as 700 tons of feedstock a day
— nearly the volume of 900 large round bales of grass or hay — or about 240,000
tons annually.22 In contrast, a 100 mgpy corn ethanol plant requires about 2,500 tons
of corn per day, but corn is much denser and easier to handle than most renewable
biomass sources.23 The U.S. Department of Energy (DOE) is currently focusing
research efforts on harvest and collection, preprocessing, storage and queuing,
handling, and transportation of feedstocks.24 These are major challenges facing an
emerging biofuels industry due to the sheer bulk of the biomass and divergent growth
cycles of different biomass crops. Pelletizing and other methods for compressing
feedstocks reduce transportation costs but increase processing costs. According to a
Purdue University study, the total per ton costs for transporting biomass 30 miles
range from $39 to $46 for corn stover and $57 to $63 for switchgrass — compared
with roughly $10 for corn.25 The USDA-DOE goal is to reduce the total feedstock
cost at the plant (production, harvest, transport, and storage) from $60 per ton (the

2007 level) to $46 per ton in 2012.26

A USDA-DOE study undertaken by the Oak Ridge National Laboratory estimates
just over 1.3 billion tons of biomass (Figure 2) could be available annually in the
United States for all forms of bioenergy production (including electricity and power

21 Producing Ethanol from Wood, presentation by Alan Rudie, USDA Forest Service Forest
Products Laboratory, Madison, WI, [http://www.csrees.usda.gov/nea/plants/pdfs/rudie.pdf].
22 DOE refinery feedstock estimates and CRS calculations into large round bales.
23 Analysis of the Efficiency of the U.S. Ethanol Industry 2007, by May Wu, Center for
Transportation Research Argonne National Laboratory Delivered to Renewable Fuels
Association on March 27, 2008.
24 From Biomass to Biofuels, National Renewable Energy Laboratory; NREL/BR-510-

39436, August 2006, [http://www.nrel.gov/biomass/].

25 The Economics of Biomass Collection, Transportation, and Supply to Indiana Cellulosic
and Electric Utility Facilities, Working Paper #08-03, by Sarah Brechbill and Wallace
Tyner Purdue University, April 25, 2008.
26 Biomass Multi-Year Plan, DOE Office of the Biomass Program, March 2006.
[http://www1.eere.energy.gov/ bioma ss/pdfs/biomass_program_mypp.pdf].

from biomass, and fuels from cellulose).27 If processed into biofuel, this 1.3 billion
tons of biomass could replace 30% of U.S. transportation fuel consumption at 2004
levels, according to USDA. However, this estimate has been heavily criticized for
several reasons, including the claim that it ignores the costs and difficulties likely to
be associated with harvesting or collecting woody biomass, as well as the charge that
it uses optimistic yield growth assumptions to achieve its biomass tonnages. The
USDA estimate also predates the definition of renewable biomass eligible for the
RFS. Current provisions restrict the use of woody biomass to trees grown in
plantations or pre-commercial thinnings from non-federal lands, while USDA’s study
included woody biomass from federal and private forests as well as commercial
Figure 2. Annual Biomass Resource Potential According to USDA

Source: Oak Ridge National Laboratory, 2005.
Note: Total is roughly equivalent to 42 billion gallons of gasoline.
Impacts on Food Supplies. Compared with corn, cellulosic feedstocks are
thought to have smaller impacts on food supplies.28 By refining corn into ethanol,
food markets are indirectly affected via cattle and dairy feed markets. In contrast,
cellulosic feedstocks are non-food commodities and thus do not reduce food output
unless they displace food crops on cropland.29 However, most cellulosic feedstocks
do not need prime farmland. Waste streams such as municipal solid waste, most crop
residues, wood pulp residues, and forest residues are potential sources of biomass that
27 Biomass as a Feedstock for a Bioenergy and Bioproducts Industry: The Technical
Feasibility of a Billion-Ton Annual Supply, Environmental Sciences Division, Oak Ridge
National Laboratory, 2005, [http://feedstockreview.ornl.gov/pdf/billion_ton_vision.pdf].
28 Breaking the Link between Food and Biofuels, Bruce A. Babcock, Briefing Paper 08-BP

53, July 2008, Center for Agricultural and Rural Development, Iowa State University,

[ h t t p : / / www.c a r d.i a s t a t e .e du] .
29 Ibid.

have no impact on food crop acreage.30 Corn stover, removed in appropriate
quantities, could also be refined into ethanol without affecting food supplies.
Feedstocks such as switchgrass and fast-growing trees appear to do well in marginal
conditions and would likely have a minimal impact on food supplies, particularly in
the case of woody biomass feedstocks from forested areas not suitable for crops.31
Multi-Year Crop Cycles. Arrangements for producing perennial crops would
necessarily reflect their multi-year cycles. Producers, whether they own or rent land,
can expect reduced returns while the crop becomes established. Producers renting
land would need long-term agreements suitable for multi-year crops. Some suggest
a legal framework would have to be developed for multi-year harvests. For example,
the University of Tennessee has entered into three-year contracts with producers to
ensure switchgrass availability for a pilot refinery scheduled to begin producing
ethanol in 2009.32
Extracting Fuel from Cellulose: Conversion
Breaking down cellulose and converting it into fuel requires complex chemical
processing — technology that is now rudimentary and expensive (see Table 2).
Starches (such as corn) and sugars (such as cane sugars) are easily fermented into
alcohol, but cellulose must first be separated from hemicellulose and lignin and then33
broken down into sugars or starches through enzymatic processes. Alternatively,
biomass can be thermochemically converted into synthesis gas (syngas),34 which can
then be used to produce a variety of fuels. Regardless of the pathway, as discussed
below, at the present time processing cellulose into fuels is expensive relative to other
conventional and alternative fuel options.
Production Processes
Three basic methods are used to convert cellulose into fuels: (1) acid hydrolysis
(dilute or concentrated), (2) enzymatic hydrolysis, and (3) thermochemical gasification
and pyrolysis. There are many different variations on these, depending on the
enzymes and processes used. Currently all these methods are limited to pilot or
demonstration plants, and all comprise the “pre-treatment” phase of ethanol

30 Ibid.
31 For more information on biofuels and food supplies see CRS Report RL34474, High
Commodity Prices: What Are the Issues? By Randy Schnepf.
32 “DuPont Danisco and University of Tennessee Partner to Build Innovative Cellulosic
Ethanol Pilot Facility,” TN, July 23, 2008, [http://www.utbioenergy.org/NR/rdonlyres/-
7D4527E3-00F7-4574-92B1-E6749851 A A 4 1 / 1262/072308FINALUTDDCEPressReleas
33 Biofuels Energy Program 2007, DOE [http://www1.eere.energy.gov/biomass/-
publications.html #vision].
34 A mixture of hydrogen and carbon monoxide.

Table 2. Basic Steps Required to Produce Ethanol
ProductFeedstockRefining Required after MillingCost (per
Sugar ethanolSugar caneFermentation into ethanol$0.30
Corn-starchCorn starchHydrolysisFermentation into ethanol$0.53
e t ha no l ma k e s
fe r me n t a b l e
suga r s
Cellulo sic Switchgr ass, P r e-treatme nt Hydrolysis Fer men- $1.59
ethanolcorn stover,makesmakestation into
(biochemicalwoody bio-cellulosefermentableethanol
process)mass, municipalaccessiblesugars
solid waste
Cellulo sic Switchgr ass, P r e-treatme nt Synga s Co nve r s i o n $1.21
ethanolcorn stover,makesproductionof syngas
(therm-woody bio-cellulosethroughto products
chemicalmass, municipalaccessibletherm-including
process)solid wastechemicalethanol
Source: NREL, Research Advances in Cellulosic Ethanol, costs from the Economic Feasibility of
Ethanol Production From Sugar in the United States, Hosein Shapouri, USDA, and Michael Salassi,
Nelson Fairbanks, LSU Agricultural Center, March 2005.
Acid Hydrolysis. Dilute and concentrated acid hydrolysis pre-treatments use
sulphuric acid to separate cellulose from lignin and hemicellulose. Dilute acid
hydrolysis breaks down cellulose using acid at high temperature and pressure. Only
about 50% of the sugar is recovered because harsh conditions and further reactions
degrade a portion of the sugar. In addition, the combination of acid, high temperature,
and pressure increase the need for more expensive equipment.
On the other hand, concentrated acid hydrolysis occurs at low temperature and
pressure and requires less expensive equipment. Although sugar recovery of more
than 90% is possible, the process is not economical, due to extended processing times
and the need to recover large volumes of acid.35 36
Enzymatic Hydrolysis. DOE suggests that enzymatic hydrolysis, a
biochemical process that converts cellulose into sugar using cellulase enzymes, offers
both processing advantages as well as the greatest potential for cost reductions.37

35 Wright, J.D.; d’Agincourt, C.G. “Evaluation of Sulfuric Acid Hydrolysis Processes for
Alcohol Fuel Production.” Biotechnology and Bioengineering Symposium, No. 14, John
Wiley and Sons, New York, 1984, pp 105-123, [http://qibioenergy.wordpress.com/-

2008/03/08/acid-hydrolys is/].

36 Ethanol From Cellulose: A General Review, P.C. Badger, in J.Janick and A. Whipkey
(eds.), in “Trends in New Crops and New Uses,” ASHS Press.
37 DOE, EERE, Biomass Program. “Cellulase Enzyme Research, available at

However, the cost of cellulase enzymes remains a significant barrier to the conversion
of lignocellulosic biomass to fuels and chemicals. Enzyme cost primarily depends on
the direct cost of enzyme preparation ($/kg enzyme protein) and the enzyme loading
required to achieve the target level of cellulose hydrolysis (gram enzyme protein /
gram cellulose). According to DOE, the near-term goal is to reduce the cost of
cellulase enzymes from $0.50 to $0.60 per gallon of ethanol to approximately $0.10
per gallon.38 The National Renewable Energy Laboratory (NREL) of DOE is
conducting research to lower enzyme costs by allowing cellulase yeasts and
fermenting yeasts to work simultaneously — with significant savings.
The total conversion cost (excluding feedstock cost) for biochemical conversion
of corn stover to ethanol is estimated to be about $1.59 per gallon39 — compared with
the USDA-DOE goal of $0.82 per gallon in 2012.40
Thermochemical Gasification and Pyrolysis. Thermochemical processes
such as gasification and pyrolysis convert lignocellulosic biomass into a gas or liquid
intermediate (syngas) suitable for further refining to a wide range of products
including ethanol, diesel, methane, or butanol.41 Recovery rates of up to 50% of the
potentially available ethanol have been obtained using synthesis gas-to-ethanol
processes. Two-stage processes producing methanol as an intermediate product have
reached efficiencies of 80%. However, developing a cost-effective thermochemical
process has been difficult.42 The Fischer-Tropsch (FT) process uses gasification to
produce syngas that is then converted into biofuels such as diesel, methane, or
butanol. It is possible to produce diesel and other fuels using syngas from coal or
natural gas, but biomass-derived syngas is technically challenging because of
impurities that must be removed during processing.
The cost of gasification conversion (excluding the cost of feedstock) in 2005 was43
estimated at $1.21 per gallon (2007 dollars). The USDA-DOE goal for 2012 is
$0.82 cents per gallon.

37 (...continued)
[http://www1.eere.energy.gov/ biomass/biomass_feedstocks .html ].
38 Development of New Sugar Hydrolysis Enzymes: DOE, Novozymes Biotech, Inc.
[http://search.nrel.gov/cs.html ?url=http%3A //www1.eere.energy.go v/ b i o ma s s / f y04/new_
sugar_hydrolys is_enzyme s .pdf&charset=utf-8&qt=cellulase+enzymes&col=eren&n=2&l
39 Biomass Multi-Year Plan, DOE Office of the Biomass Program, March 2006.
[http://www1.eere.energy.gov/ bioma ss/pdfs/biomass_program_mypp.pdf].
40 Biomass Multi-Year Plan, DOE Office of the Biomass Program, March 2006.
[http://www1.eere.energy.gov/ bioma ss/pdfs/biomass_program_mypp.pdf].
41 Wright, J.D. “Evaluation of Sulfuric Acid Hydrolysis Processes for Alcohol Fuel
Production,” in Biotechnology and Bioengineering Symposium, No. 14, John Wiley and
Sons, New York, 1984, pp 103-123.
42 Ethanol From Cellulose: A General Review, P.C. Badger, in J.Janick and A. Whipkey
(eds.), in Trends in new Crops and New Uses, ASHS Press.
43 Biomass Multi-Year Plan, DOE Office of the Biomass Program, March 2006.
[http://www1.eere.energy.gov/ bioma ss/pdfs/biomass_program_mypp.pdf].

Distribution and Marketing
Marketing, distribution, and absorption constraints may hinder the use of
cellulosic biofuels even as they are finally produced on an industrial scale. As the
RFS progresses, greater volumes of advanced biofuels (i.e., cellulosic or non-corn-
starch ethanol, biodiesel, or imported sugar ethanol) would need to be blended into
gasoline to fulfill the rising advanced biofuel mandate.
Distribution Bottlenecks
Distribution issues may hinder the efficient delivery of ethanol to retail outlets.
Ethanol, mostly produced in the Midwest, would need to be transported to more
populated areas for sale. It cannot be shipped in pipelines designed for gasoline
because it tends to attract water in gasoline pipelines. The current ethanol distribution
system is dependent on rail cars, tanker trucks, and barges. Because of competition,
options (especially rail cars) are often limited. As non-corn biofuels play a larger role,
some infrastructure concerns may be alleviated as production is more widely dispersed
across the nation. If biomass-based diesel substitutes are produced in much larger
quantities, some of these infrastructure issues may be mitigated. However, ethanol
would need to be stored in unique storage tanks and blended immediately before
pumping. This would require further infrastructure investments.
The Blend Wall
The blend wall refers to the volume of ethanol required if all gasoline used in the
United States contained 10% ethanol (E-10)44 — or roughly 15 billion gallons. The
volumes mandated under the RFS will soon exceed 15 billion gallons, which is less
than the RFS for 2012 (15.2 billion gallons), and far less than the 36 billion gallons
of biofuel mandated by 2022.45 Although greater use of E-85 could absorb additional
volume, it is limited by the lack of E-85 infrastructure (including the considerable
expense of installing or upgrading tanks and pumps) and the size of the flex-fuel fleet.
To maximize ethanol use, proposals to raise the ethanol blend level for
conventional vehicles from E-10 to E-15 or E-20 are being considered. DOE is
conducting tests to determine different blends’ compatibility with conventional
automobiles. These blends could be supplied by conventional infrastructure (storage
tanks and fuel pumps)46 but would require U.S. Environmental Protection Agency
(EPA) approval. Without EPA approval, vehicles using higher blend ratios such as
E-15 or E-20 could lose their manufacturer’s warranty.

44 E-10 refers to a fuel blend of 10% ethanol and 90% gasoline. Likewise, E-15 is a blend
of 15% ethanol, 85% gasoline; E-20 is 20% ethanol, 80% gasoline; and E-85 is 85%
ethanol, 15% gasoline.
45 Robert J. Meyers, Principal Deputy Assistant Administrator, Office of Air and Radiation
U.S. EPA Protection Agency, Testimony before the Committee on Agriculture
Subcommittee on Conservation, Credit, Energy, and Research, July 24, 2008.
46 National Biofuels Action Plan, October 8, 2008.

Economic and Environmental Issues
Economic Efficiency
Cellulosic biofuels are generally thought to have favorable economic efficiency
potential over corn-starch ethanol primarily because of the low costs of production for
feedstocks. However, current NREL estimates of the total cost of producing cellulosic
ethanol, including feedstock production and supply, and conversion, are $2.40 per
gallon, more than twice the cost of producing corn ethanol.
A major impediment to the development of a cellulose-based ethanol industry is
the state of cellulosic conversion technology (i.e., the process of gasifying
cellulose-based feedstocks or converting them into fermentable sugars).47 DOE’s goal
of competitiveness in 2012 assumes $1.30 (2007 dollars) per gallon costs for corn
stover ethanol based on a feedstock price of $13 per ton. This compares with USDA’s
estimated cost of producing corn-based ethanol in 2002 of $0.958 per gallon (about
$1.07 per gallon in 2007 dollars).48 In addition, the cost of harvesting, transporting,
and storing bulky cellulosic biomass is not well understood and consequently is often
undervalued. Ethanol competitiveness is highly dependent on gasoline and corn
prices. Higher gasoline prices relative to ethanol improve the competitiveness of
ethanol, while higher corn prices reduce ethanol’s competitiveness. However,
cellulosic ethanol benefits from the $1.01 production tax credit (discussed below),
which is $0.50 per gallon higher than the blender’s tax credit of $0.51 ($0.45
beginning in 2009) for corn ethanol.
Energy Balance
A measure of energy balance is provided by the net energy balance (NEB), a
comparison of the ratio of the per-unit energy produced versus the fossil energy used
in a fuel’s production process. The use of cellulosic biomass in the production of
biofuels yields an improvement in NEB compared with corn ethanol. Corn ethanol’s
NEB (under what are considered by some to be overly optimistic assumptions about
corn production and ethanol processing technology) was estimated at 67% by USDA
in 2004 — 67% more energy was available in the ethanol than contained in the fossil
fuel used to produce it. Estimates of the NEB for cellulosic biomass range from
300%49 to 900%.50 As with corn-based ethanol, the NEB varies based on the
production process used to grow, harvest, and process feedstocks.

47 Research Advances in Cellulosic Ethanol, DOE-NREL, [http://www.nrel.gov/biomass/-
pdfs/40742.pdf], NOEL/BR-510-40742], March 2007.
48 The Energy Balance of Corn Ethanol: An Update, Shapouri, Hosein; James A. Duffield,
and Michael Wang. USDA, Office of the Chief Economist, Office of Energy Policy and
New Uses, Agricultural Economic Report (AER) No. 813, July 2002; available at
[http://www.usda.gov/oce/reports/energy/index.htm] .
49 Cellulosic Ethanol Fact Sheet, by Lee R. Lynd, presented at the National Commission on
Energy Policy Forum: The Future of Biomass and Transportation Fuels, June 13, 2003.
50 Worldwatch Institute, Biofuels for Transportation, Global Potential and Implications for
Sustainable Agriculture and Energy in the 21st Century. Table 10-1, p. 127, June 2006.

Another factor that favors cellulosic ethanol’s energy balance over corn-based
ethanol relates to byproducts. Corn-based ethanol’s coproducts are valued as animal
feeds, whereas cellulosic ethanol’s coproducts are expected to serve directly as a
processing fuel at the plant, substantially increasing energy efficiencies.
Additionally, switchgrass uses far less fertilizer than corn, by a factor of two or
three,51 and its perennial growth cycle reduces field passes for planting. Some suggest
that ethanol from switchgrass has at least 700% more energy output per gallon than
fossil energy input.52 The same is largely true of woody biomass that, even in
plantations, requires minimal fertilizer and infrequent planting operations.
Greenhouse Gas Emissions
Greenhouse gas emissions differ among types of ethanol because of a number of
factors, including the fuel used to power the refinery (fossil or renewable) and the
original state of the land on which the feedstock was produced. For instance, if virgin
forest land were cleared and planted with switchgrass, higher greenhouse gas
emissions would result than if switchgrass were grown on previously-cleared
cropland, mainly because GHG emissions associated with clearing and plowing the
virgin soil would have to be included as part of the production process. Likewise, a
cellulosic refinery powered by coal or natural gas would have higher greenhouse gas
emissions than one powered by recovered feedstock co-products.
Multi-year harvesting of perennial crops decreases greenhouse gas emissions by
minimizing field passes. Prairie grasses and woody crops require reduced inputs
compared with corn — and have lower greenhouse gas emissions. Also, because
cellulosic feedstocks require far less fertilizer for their production, the energy balance
benefit of cellulosic ethanol could be significant. A study by the Argonne National
Laboratory concluded that with advances in technology, the use of herbaceous53-
feedstock cellulose-based E-10 could reduce fossil energy consumption per mile by
8%, while herbaceous-feedstock cellulose-based E-85 could reduce fossil energy
consumption by roughly 70%.54
According to the EPA’s Office of Transportation and Air Quality, for every unit
of energy measured by British Thermal Units (BTU) of gasoline replaced by cellulosic
ethanol, the total lifecycle greenhouse gas emissions (including carbon dioxide,
methane, and nitrous oxide) would be reduced by an average of about 90%. In
comparison, the reduction from corn ethanol averages 22%.55

51 Ethanol From Biomass: Can It Substitute for Gasoline? Michael B. McElroy, book
chapter draft.
52 Net Energy of Cellulosic Ethanol from Switchgrass, M.R. Schimer, K.P. Vogel, R.B.
Mitchell, and R.B. Perrin, PNAS January 15, 2008, vol. 105, no. 2, available at
[http://www.pnas.org/ cgi/doi/10.1073/pnas.0704767105].
53 A herbaceous plant is a plant that has leaves and stems that die down at the end of the
growing season to the soil level.
54 Wang, et al., table 7.
55 Greenhouse Gas Impacts of Expanded Renewable and Alternative Fuels Use, EPA Office

Private Investment
Private investment is viewed by many to be critical to the development of the
cellulosic biofuels industry. However, the aggregate value of required private
investment is difficult to determine. Anecdotal evidence suggests the main sources
of capital are venture capitalists and petroleum companies — commercial banks have
a minor role. Venture capitalists generally have an extended (10-year) perspective,
which fits well with nascent technologies and is insulated from shorter-term financial
volatility. Petroleum companies, faced with mandatory blending of biofuels with
gasoline, have been eager to invest in the cellulosic industry. Numerous partnerships
have been formed: British Petroleum (BP) and Verenium announced a partnership in
August 2008 to accelerate the commercialization of cellulosic ethanol, with BP
investing $90 million in the deal.56 In another collaboration, Royal Dutch Shell has57
teamed up with Imogen Corporation to develop cellulosic ethanol processes.
Mascoma, a major ethanol producer, raised $30 million to support its investment in
cellulosic feedstock conversion with technical support from General Motors and
Marathon Oil.58 A collaboration between Monsanto and Mendel Biotechnology Inc.
will focus on the breeding and development of crops for production of cellulosic
biofuels. 59
Federal Cellulosic Biofuels Policies
USDA and DOE are currently engaged in a variety of activities to encourage
development and demonstration of cellulosic biofuels technologies. The Energy
Independence and Security Act of 2007 (EISA, P.L. 110-140), the Food,
Conservation, and Energy Act of 2008 (the 2008 farm bill, P.L. 110-246), and other
legislation support research and development of a broad range of cellulosic
technologies through USDA and DOE programs. Many of these programs extend the
goals of the Energy Policy Act of 2005 (EPAct, P.L. 109-58) and President Bush’s 20
in 10 initiative.60 The Biomass Research and Development Initiative (BRDI)
coordinates federal interagency technology-push efforts, such as R&D, loans, and

55 (...continued)
of Transportation and Air Quality, EPA-420-F-07-035, April 2007.
56 BP and Verenium Partner To Commercialize Cellulosic Ethanol, RenewableEnergy-
World.com, August 11, 2008, [http://www.renewableenergyworld.com/rea/news/story?id
57 Shell Boosts Second Generation Biofuels, by Ed Crooks, Financial Times, July 16, 2008,
[ h t t p : / / www.f t .com/ c ms / s / 7 f 9 f 1 ee8-52d0-11dd-9ba7-000077b07658.ht ml ] .
58 U.P. Biofuel Plant Lands $50m in State, Fed Aid, by Gary Heinlein and David
Shepardson, The Detroit News, October 8, 2008, [http://www.detnews.com/apps/pbcs.dll/
article?AID=/20081008/BIZ/ 810080393].
59 Monsanto Company and Mendel Biotechnology, Inc. Announce Cellulosic Biofuels
Collaboration, BioSpace.com, April 28, 2008, [http://www.biospace.com/news_story.aspx-
60 “2007 State of the Union Address” 20 in 10: Strengthening America’s Energy Security,
[http://www.wh itehouse.gov/ stateoftheunion/2007/initiatives/energy.html ].

grants, under the guidance of the Biomass Research and Development Board. The
Board was authorized in the Biomass Research and Development Act of 2000 and is
co-chaired by USDA and DOE. BRDI plays a major role in R&D for the cellulosic
biofuels industry.61
In October 2008, USDA Secretary Ed Schafer and DOE Secretary Samuel W.
Bodman released the National Biofuels Action Plan (NBAP), which provides an
outline of the major challenges facing the cellulosic biofuels industry: feedstock
production and logistics; conversion science and technology; distribution
infrastructure and blending. The plan reflects current federal and industry efforts to
develop the cellulosic biofuels industry.62
Direct Federal Spending on R&D
Recognizing that cellulosic biofuels can contribute to improving national energy
security, reducing greenhouse gas emissions, and boosting rural economic
development, discretionary DOE spending on bioenergy R&D (including a major
cellulosic component) was $196 million in FY2007.63 DOE appropriations for this
purpose totaled $198 million in FY2008, of which 33% was spent on conversion
R&D, 7% on feedstock infrastructure, and 52% on biorefinery development.64 The
Administration’s FY2009 budget request is for $225 million.
USDA discretionary outlays for Bioenergy and Renewable Energy Programs,
which funded cellulosic biofuels in part, were $75 million in FY2007, nearly $100
million in FY2008, and the FY2009 budget request is $82 million.65 USDA R&D
expenditures were $35 million in FY2007, estimated at $39 million in FY2008, and
budgeted at $59 million in FY2009. Commercialization outlays (primarily the
Bioenergy Program) totaled $39 million in FY2007, an estimated $59 million in
FY2008, and are budgeted at $18 million in FY2009. These totals are modest in
comparison to the $5 to $8 billion in annual federal support for corn ethanol. Over
time, as the corn ethanol industry matures, the focus of USDA efforts is likely to
increasingly shift to cellulosic biofuels.
Federal-Private Partnerships. Private sector investment received a
substantial federal policy boost on February 28, 2007, when the DOE announced the
awarding of up to $385 million in mandatory cost-share funding for the construction

61 For more information on federal biofuels incentives see CRS Report RL33572, Biofuels
Incentives: A Summary of Federal Programs, by Brent D. Yacobucci.
62 The National Biofuels Action Plan is available at [http://www.eere.energy.gov/-
63 FY2009 DOE Budget Request to Congress, available at [http://www.cfo.doe.gov/budget/

09budget/start.htm#Detailed%20Budget%20J ustifications].

64 Presentation at Platts Cellulosic Ethanol Conference, by Valri Lightner, DOE Biomass
Program, October 2008, [http://www.autobloggreen.com/photos/platts-conference-doe-
65 The values in this paragraph are from personal correspondence with USDA’s Office of
Budget and Policy Analysis.

of six cellulosic ethanol plant projects over a four-year period under Section 932 of
the EPAct of 2005 as expanded by EISA of 2007. When fully operational, the six
plants combined were expected to produce up to 100 mgpy of cellulosic ethanol.
These demonstration-scale biorefinery projects focus on near-term commercial
processes. The combined cost-share plus federal funding for the projects represents
total planned investment of more than $1.2 billion.
The uncertainties of moving an industry from laboratory to commercial reality
were highlighted when two recipients with total grant funding of $113 million
dropped out of the program, one because of a substantially higher offer from the
Canadian government,66 and the other after determining that the risks involved
outweighed any anticipated benefits.67
Renewable Energy Provisions in the 2008 Farm Bill
(P.L. 110-246)
Renewable energy policy in the 2008 farm bill (Food, Conservation, and Energy
Act of 2008, P.L. 110-246) builds on earlier programs originally authorized in the

2002 farm bill (P.L. 107-171) or the EPAct of 2005 (P.L. 109-58) but provides greater68

emphasis on cellulosic biofuels. Title IX, the energy title, authorizes or reauthorizes
grants, loans, and loan guarantees to foster research on agriculture-based renewable
energy, to share development risk, and to promote the adoption of renewable energy
systems.69 Implementation of the farm bill provisions is underway, and regulations
for new programs have not been finalized. Funding for the cellulosic component of
renewable energy programs is difficult to determine because most provide support to
a wide range of biofuels. Title VII, the research title, contains provisions supporting
R&D in cellulosic biofuels, and Title XV, the tax and trade title, contains tax
incentives and tariffs. The following programs provide support to cellulosic biofuels
research, demonstration, and production.
Tax Credit for Cellulosic Biofuels (Section 15321). Tax and trade
provisions in the 2008 farm bill benefit cellulosic biofuels. One significant incentive
is a production tax credit of $1.01 per gallon that applies to cellulosic biofuels
production, more than twice the blenders’ tax credit (45 cents per gallon beginning in
2009) that applies to corn ethanol. In the case of cellulosic biofuel that is alcohol, the
$1.01 credit amount is reduced by (1) the credit amount applicable for such alcohol
under the alcohol mixture credit and (2) the credit amount for small ethanol producers,
if applicable.

66 “Iogen Suspends U.S. Cellulosic Ethanol Plant Plans,” Earth2tech, [http://earth2tech.com-
67 “Alico to Discontinue Ethanol Efforts,” June 2, 2008, press release, [http://www.alicoinc.-
com/ j une208.asp].
68 For additional information see “Public Laws That Support Agriculture-Based Energy
Production and Use,” in CRS Report RL32712, Agriculture-Based Renewable Energy
Production, by Randy Schnepf.
69 Title IX cites are amendments to the 2002 farm bill (P.L. 107-171).

Ethanol Tariff Extension (Section 15333). In addition to tax credits, an
ethanol tariff benefits the U.S. industry by reducing the competitiveness of imported
ethanol sold in this country. Domestic ethanol benefits from a small ad valorem and
a substantial specific 54 cent per gallon tariff on imported ethanol (except for limited70
imports under the Caribbean Basin Initiative). The original intent of the tariff was
to prevent imported ethanol from benefitting from the U.S. tax credit.
Agricultural Bioenergy Feedstock and Energy Efficiency Research
and Extension Initiative (Section 7207). This new program awards competitive
matching (up to 50%) grants for projects supporting on-farm biomass crop research
and the dissemination of results to enhance the production of biomass energy crops
and their integration with the production of bioenergy. It consists of elements of
earlier initiatives that were moved to the research title (Title VII) in the 2008 farm bill.
Discretionary funding of $50 million annually is authorized for FY2008 through
FY2012, subject to appropriations.
Bioenergy Program for Advanced Biofuels (Section 9005). The
Bioenergy Program is the lead program under Title IX providing support for the
development of conversion technologies for cellulosic biofuels. It was originally
established by Executive Order in 1999 and provided Commodity Credit Corporation
(CCC) incentive payments to ethanol and biodiesel producers on the basis of yearly
increases in production. Eligibility is now limited to producers of advanced biofuels.
Eligible producers entering into a contract with USDA are paid based on quantity and
duration of advanced biofuel production and on net renewable energy content of the
advanced biofuel. Under the 2002 farm bill (P.L. 107-171), the Bioenergy Program
received total funding of $426 million during FY2003 to FY2006 but no
appropriations for FY2007 or FY2008. The 2008 farm bill provides a total of $300
million in mandatory funding for FY2009 to FY2012 ($55 million annually in
FY2009 and FY2010, $85 million in FY2011, and $105 million in 2012), and also
authorizes $25 million annually, subject to appropriations, from FY2009 to FY2012.
At this time the regulations are being written for the program, and funding for FY2009
has not been determined.
Biomass Crop Assistance Program (Section 9011). This is a new
program intended to establish and produce crops for conversion to bioenergy and
assist with the collection, harvest, storage and transportation of eligible material for
use in a biomass conversion facility that produces heat, power, biobased products, or
advanced biofuels. The program, which will be implemented by the Farm Service
Agency with support from other federal and local agencies, has mandatory CCC
funding of such sums as necessary. Payments under the Biomass Crop Assistance
Program are not expected to begin until mid-2010 after environmental impact studies
are completed for the program.71

70 For more information about ethanol imports under the CBI, see CRS Report RS21930,
Ethanol Imports and the Caribbean Basin Initiative, by Brent Yacobucci.
71 William Hagy III, deputy administrator, USDA - Rural Development, presentation at
Platts Cellulosic Ethanol Conference, Chicago, October 2008, [http://www.autobloggreen.
com/ 2008/10/15/platts-cellulosic-ethanol-conference-doe-and-usda-discuss-bioe/].

Forest Biomass for Energy (Section 9012). Under this new program,
USDA’s Forest Service is authorized to conduct a comprehensive research and
development program to use forest biomass for energy. Other federal agencies, state
and local governments, Indian tribes, land-grant colleges and universities, and private
entities are eligible to compete for program funds. No mandatory funding is available,
but discretionary appropriations of $15 million annually for FY2009 to FY2012 are
authorized. This program has not yet been implemented. Priority research projects
include the following:
!the use of low-value forest biomass for energy from forest health and
hazardous fuels reduction treatment;
!the integrated production of energy from forest biomass into
biorefineries or other existing manufacturing;
!the development of new transportation fuels from forest biomass; and
!the improved growth and yield of trees for renewable energy
Biorefinery Assistance (Section 9003). This initiative provides loan
guarantees for the development, construction, and retrofitting of commercial-scale
biorefineries and provides grants to help pay for the development and construction
costs of demonstration-scale biorefineries. The program received mandatory funding
of $320 million ($75 million for FY2009 and $245 million for FY2010) for
commercial scale biorefinery loan guarantees, and discretionary funding, subject to
appropriations, of $150 million annually for FY2009 through FY2012 for both
demonstration and commercial scale biorefineries. This program was originally
authorized by the 2002 farm bill, but received no funding from FY2002 through
On November 19, 2008, USDA announced it was accepting applications for loan
guarantees under the Biorefinery Assistance Program. Applications for funding in the
first half of FY2009 must be submitted no later than December 31, 2008.
Applications for funding in the second half of FY2009 must be submitted between
March 1, 2009, and April 30, 2009. Loan guarantees are limited to $250 million per
project, subject to the availability of funds. USDA also announced it is seeking public
input on rulemaking to implement the program.
Biomass Research and Development Initiative (Section 9008). This
program was originally authorized in the 2002 farm bill (P.L. 107-171) and is
administered jointly by USDA and DOE. It supports research on and development
and demonstration of biofuels and biobased products, and the methods, practices, and
technologies for their production. The 2008 farm bill provides mandatory funding of
$118 million for FY2009 to FY2012 ($20 million for FY2009, $28 million for
FY2010, $30 million for FY2011, and $40 million for FY2012). The farm bill also
authorizes the appropriation of $35 million for each of fiscal years FY2009 through
FY2012. The program received $5 million in FY2002, $14 million for each of
FY2003, FY2004, and FY2005, $12 million for FY2006, and was not funded in
FY2007. Outlay amounts for FY2008 are not available at this time.

For information on additional related provisions and mandated studies in the
2008 farm bill, see CRS Report RL34130, Renewable Energy Policy in the 2008 Farm
Bill, by Tom Capehart.
Energy Improvement and Extension Act of 2008 (P.L. 110-343)
The Emergency Economic Stabilization Act of 2008 (P.L. 110-343), which
incorporates the Energy Improvement and Extension Act of 2008, contains tax and
trade incentives for renewable energy production. Enacted on October 3, 2008, it
expands federal benefits for renewable energy to fuels and processes that previously
did not qualify and limits trade practices that benefit foreign producers but do not
enhance U.S. energy independence.
Expansion of the Allowance for Cellulosic Ethanol Property
(Division B, Section 201). Previous federal tax law limited the eligibility for first-
year bonus depreciation of cellulosic biofuels to facilities producing ethanol; those
producing non-ethanol fuels from cellulosic feedstocks did not qualify for the
allowance. P.L. 110-343 does not limit the allowance to any particular type of
cellulosic fuel or production process. Taxpayers can immediately write off 50% of
the cost of facilities that produce cellulosic biofuels if such facilities are placed in
service before January 1, 2013.
Legislative Proposals
Congress has shown a strong interest in the development of biofuels in general
and cellulosic biofuels in particular. Debate may continue on the appropriate level of
incentives needed to jump start the industry. Perhaps the most critical emerging issue
is the federal mandate for cellulosic biofuels under the RFS — and the industry’s
potential to meet that mandate. In the long term, Congress might also consider the
ongoing level of government support that is appropriate for the cellulosic biofuels
industry — considered by some to be essential, especially if the RFS is to be met.
Others contend such support could distort market signals. The general level of
support in the form of grants and loans has been determined in the 2008 farm bill but
will be revisited as appropriations are considered. The cellulosic biofuels tax credit
applies to fuel produced from 2009 through 201,2 and extension of this credit could
be the subject of debate. In addition, Congress has considered the definition of
biofuels and biofuel feedstocks that qualify for federal incentives.
Legislative Changes in the RFS Volume
Citing the RFS and corn ethanol production as contributing to rising food prices
and high input costs for livestock and poultry producers, some are calling for a
reduction of the RFS. S. 3031, introduced in May 2008, would limit the corn-starch
component of the RFS to 9 billion gallons compared with 15 billion under the current
law. Opponents of the reduction claim it would set back efforts to reduce the nation’s
dependence on foreign oil and achieve environmental goals. Reducing the corn-starch
component of the RFS would increase the importance of advanced fuels, primarily
cellulosic biofuels, in meeting the mandate.

Expanding Biomass Eligible under the RFS
The definition of forest-based renewable biomass under the RFS is considered
by some to be too restrictive because it limits eligible woody biomass to privately
planted trees and tree residue from actively managed tree plantations, and slash72 and
pre-commercial thinnings from non-federal forests.
The definition of renewable biomass specifically excludes biomass from federal
forests. Some suggest that this exclusion eliminates much potential biomass and
creates regional disparities. One-third of the 755 million acres of forest in the United
States is owned by the federal government — and this acreage is concentrated in the
western states. Likewise, the exclusion of private, naturally regenerated forests affects
the northern and southeastern parts of the country where other feedstocks eligible
under the RFS may not be as readily available. According to some, biomass
extraction could become a powerful tool for improving federal land management.73
Markets for small-diameter trees would enable a wider range of options for
management of wildlife habitat, forest hydrology, hazardous fuels reduction, and pest
infestations. These markets are not likely to appear if federal forests remain excluded
from the RFS.
The House Committee on Agriculture Subcommittee on Conservation, Credit,
Energy, and Research held hearings during July 2008 on producer eligibility under the
RFS. The subcommittee heard from government officials, researchers, and producers
who provided an update on the implementation of the RFS and shared concerns on
barriers to eligibility for many agricultural producers. Subsequently, a Senate Energy
and Natural Resources Committee field hearing on forest waste for biofuels was held
in South Dakota on August 18, 2008.
In the 110th Congress, H.R. 5236, the Renewable Biomass Facilitation Act of
2008, would expand the definition of renewable biomass to include low-value
materials removed from public forests. These materials are frequently removed during
fire or disease reduction efforts or ecosystem health supporting activities. Waste
materials such as wood waste and wood residues from private forests are also
Also in the 110th Congress, the House-passed the Comprehensive American
Energy Security and Consumer Protection Act (H.R. 6899). It contained a sense of
Congress provision recommending a broad definition of renewable biomass to
“encourage cellulosic biofuels ... produced from a highly diverse array of feedstocks,
allowing every region of the country to be a potential producer of this fuel.” No
Senate action has been taken.

72 The accumulation of limbs, tops, and miscellaneous residue left by forest management
activities, such as thinning, pruning, and timber harvesting.
73 Federal Forests and the Renewable Fuel Standard Factsheet, Environmental and Energy
Study Institute, July 17, 2008.

Time Frame for Cellulosic Biofuels Production
Estimates for commercial production of cellulosic biofuels vary widely. As
previously discussed, several firms have broken ground on commercial scale plants
projected to produce a total of 40 mgpy in 2009. There are 11 additional plants
planned for the U.S., bringing projected cumulative capacity to 300 mgpy by 2011.
The pace of plant construction falls short of DOE’s stated goal to make cellulosic74
ethanol competitive as a mature technology by 2012. Some analysts have predicted
a growth trend for the cellulosic ethanol industry similar to that for corn-starch
ethanol. However, there is a major difference between the two: the basic process for
making corn-starch ethanol (fermentation) is thousands of years old, whereas that for
cellulosic is very new.
The USDA Office of Energy and New Uses projects that cellulosic biofuels are
not expected to be commercially viable on a large scale until at least 2015.75 In its
March 2008 baseline, the Food and Agricultural Policy Research Institute (FAPRI) of
the University of Missouri assumes cellulosic biofuel production will fall behind the76
RFS and, as a consequence, the mandate will be waived by EPA. In an August 2008
baseline update, FAPRI projects cellulosic ethanol production in 2013 at 326 mgpy,77

about a third of the one billion gallons in the RFS for that year.
74 Biomass Multi-year Program Plan, DOE, March 2008, [http://www1.eere.energy.gov/-
biomass/publications.html #vision].
75 U.S. Biobased Products: Market Potential and Projections Through 2025, Office of the
Chief Economist, Office of Energy Policy and New Uses, USDA, the Center for Industrial
Research and Service of Iowa State University, Informa Economics, Michigan
Biotechnology Institute, and The Windmill Group. OCE-2008-1, [http://www.oce.usda.gov].
76 U.S. Baseline Briefing Book, FAPRI, FAPRI-MU Report #03-08, March 2008,
[ h t t p : / / www.f a pr i . mi s s our i . e du] .
77 Baseline Update for Agricultural Markets, FAPRI, FAPRI MU-Report #10-08, August

2008. [http://www.fapri.missouri.edu].