Cellulosic biofuel was once widely heralded as the key to cutting United States’ dependence on foreign oil, without the adverse environmental effects of corn ethanol.

But the dream is on the verge of going bust.

The U.S. has set itself a goal of getting one billion gallons of home-grown fuel from corn stalks, wood chips and other non-edible waste by 2013 and 16 billion gallons by 2022, under the 2007 renewable fuels standard (RFS).

But for now the cellulosic sector is delivering close to nothing, and it could be as much as four years behind RFS targets, according to Department of Energy estimates.

Its failure to launch has ignited a summer campaign by the Union of Concerned Scientists (UCS), an environmental group that claims the government can get advanced biofuels back on track for a cost of $4 billion. The money would fund a 30 percent investment tax credit and loan guarantees.

According to the “Billion Gallon Challenge,” as the suite of policies is called, the U.S. can bring the first 10 to 20 commercial facilities online with those perks – enough to send one billion gallons of cellulosic fuels to market.

The plan would also replace the existing system of biofuel tax credits with a new “biofuels performance tax credit” that would provide more dollars to fuels with smaller carbon footprints.

Cellulosic ethanol is seen as a promising alternative fuel because feedstock does not compete with food and can be grown on marginal lands that don’t require much water. It is also perceived as a low-emissions substitute to corn-based fuels.

Scale Up Needed ‘Right Away’ 

The UCS roadmap is one of the most detailed efforts to work out the nuts and bolts of a shift to fuels from non-food sources.

Jeremy Martin, author of the 63–page policy and a senior scientist in UCS’s clean vehicles program, said there is an urgency to scale up.

“If we’re to have any hope of realizing the ambitions of the RFS to significantly replace oil with domestically produced low-carbon bio fuels, then we need to get those cellulosic biofuels up towards scale right away,” Martin told SolveClimate News.

Martin has spent much of August trumpeting his work in corn-country Iowa and other Midwestern states, in part to sway those who fear an advanced biofuels boom would come at corn ethanol’s expense.

“There’s general support for next-generation biofuels [in these states],” he said, “but also a kind of a skepticism.”

Ed Hubbard of the Renewable Fuels Association, a trade group, described the “Billion Gallon Challenge” as “destroying a successful sector of the industry in an effort to promote newer technologies.”

“In making its case for the acceleration of next generation biofuels, the Union of Concerned Scientists and its cabal of corn ethanol opponents continue to misstate or ignore the advances and successes achieved by the existing ethanol industry,” Hubbard wrote in a blog post last week.

50 to 100 Facilities

Martin said that the goal of the report is to get the cellulosic industry to five billion gallons of annual production capacity, with 50 to 100 commercial facilities churning out cellulosic fuels.

That would bring the industry to where corn ethanol was in 2006, the report explains, and help to even the playing field.

According to the RFS schedule, cellulosic ethanol is supposed to deliver a massive share of renewable fuels by 2022 – 16 billion gallons out of the 32 billion gallons targeted.

There are now roughly 189 corn ethanol refineries across the country, with a total capacity of 13 billion gallons per year, and not a single cellulosic plant.

“Where the policy is stumbling is on the cellulosic side, so that’s where we should invest the resources,” Martin said.

Subsidies for biofuels are now in the ballpark of $5 billion a year, with most of the money flowing to corn ethanol.

Martin said the subsidies are “accomplishing nothing” since the industry can already stand on its own.

Cellulosic ethanol now qualifies for a hefty subsidy of $1.01 per gallon. But Martin said that “in practical terms,” the credit offers “no support.”

“It sounds quite generous but it expires at the end of 2012, so anybody who tries to build the facility right now, it won’t be up and running in time to claim that credit,” he added.

UCS insists that any new government aid would be relatively short-lived. The new tax credit, of 30 percent for the first billion gallons, would shrink by six percent for each additional one billion gallons.

At five billion gallons, it would end entirely. Then the government would leave it to market forces.

“Government should then vacate the driver’s seat, allowing different companies and technologies to compete on the basis of their ability to deliver clean, cost-effective cellulosic biofuels,” the report said.

Climate Benefits

Together, the “Billion Gallon Challenge” and the biofuels performance tax credit could reduce global warming emissions by almost 100 million metric tons a year by 2022, the report said, equivalent to taking some 15 million vehicles off the road.

The report said that “cellulosic biofuels have substantially lower life-cycle global warming emissions than either petroleum or food-based biofuels.”

Corn ethanol is also dirtier when pitted against gas, it said.

“Both the EPA and CARB [California Air Resources Board] found that today’s corn ethanol typically has life-cycle global warming emissions that are higher than those of gasoline,” the report stated. “The EPA did find, however, that by 2022 corn ethanol should be able to reduce emissions by 17 percent and, with advanced technologies likely to be in use then, could reduce emissions by more than 20 percent.”

Hubbard of RFA disputed that claim.

“Ethanol shows tremendous GHG reduction compared to gasoline in excess of 20 percent,” he said.

Martin told SolveClimate News that such claims are “unsupported by the peer reviewed record.”

“The article [RFA] cite admits upfront that it is an incomplete accounting, which excludes indirect emissions required to account for the impact of land use as required by both EPA and CARB.”

A Shift in Congress

UCS remains optimistic about the plan’s success in Congress.

“I don’t really expect them to copy and paste from our report into legislative language,” Martin said, “but at least there’s a recognition [in Washington] that we need to get something for the investments we make in this industry, and that we need get the next generation going.”

One indication is that Congress may scrap an expiring subsidy for corn ethanol, the Volumetric Ethanol Excise Tax Credit (VEETC), or more commonly, the “blenders’ credit.” Under the subsidy, refineries that blend ethanol with gasoline get a 45 cent tax break for every gallon they produce. The billions have gone mainly to oil firms to comply with RFS mandates. 

“I think certainly industry was just hoping to keep things the way they were, and that doesn’t look feasible,” said Martin.

(Image: Poet) 

See also:

ZeaChem CEO: Sound Cellulosic Biofuel Solutions Will Proceed Without U.S. Subsidies

Biofuels Industry Blames Washington for Holding Back Cellulosic Ethanol

Corn Ethanol Subsidy Under Siege from Many Quarters, Renewal in Question 

Battle Over Extension of $31Bn Corn Ethanol Subsidy Heats Up

Ethanol Production Follows the Subsidies

Will Extending the Ethanol Tax Credit Slow Progress Toward Advanced Biofuels