government programs tailored to agricultural production, conservation, and human nutrition. The fourth section of this chapter reviews the federal and state policies that are related to biofuels or affected by biofuel policies and the observed and anticipated economic effects of biofuel-support policies on other government initiatives. The rationale for public support for these policies is also examined.

Because of the costs that biofuel policies incur, alternative options have been proposed to achieve similar policy goals. The final section provides an overview of alternatives that could possibly reduce or mitigate these costs while still encouraging biofuel production. It also examines how biofuel policy may interact with federal policy to reduce carbon emissions. Both policies have or would have reduction of greenhouse-gas (GHG) emissions as an objective.

ESTIMATING THE POTENTIAL PRICE OF CELLULOSIC BIOMASS

As of 2011, a functioning market for cellulosic biomass does not exist. Therefore, the committee chose to model possible prices based on production results found in published literature. This section explains the model, along with its assumptions and results, and estimates the cost of converting biomass to liquid fuel. It was not feasible for the committee to model every possible conversion pathway and biofuel product in the duration of this study. Thus, biochemical conversion of biomass to ethanol was used as an illustration in this analysis. The first part evaluates the production costs of various potential biorefinery feedstocks, assuming constant biorefinery processing costs. The second part analyzes the costs for various biorefining technologies, assuming constant feedstock costs.

Crop Residues and Dedicated Bioenergy Crops

If a cellulosic feedstock market were in existence, the data on market outcomes would be collectable. For instance, the purchase price for feedstocks could be obtained by surveying biorefineries, and the marginal costs of producing and delivering biomass feedstocks to a biorefinery could be calculated based on observed production practices. Presumably, if the market is operating, the price the biorefinery pays would be equal to or above the marginal cost of production and delivery. However, at the time this report was written, a commercial-scale cellulosic biorefinery and feedstock supply system did not exist in the United States. As a consequence, industry values were not available to estimate or otherwise assess the biomass supplier’s marginal cost or supply curve and the biorefinery’s derived demand for biomass.

The Biofuel Breakeven model (BioBreak) was used to evaluate the costs and feasibility of a local or regional cellulosic biomass market for a variety of potential feedstocks.1 BioBreak is a simple and flexible long-run, breakeven model that represents the local or regional feedstock supply system and biofuel refining process or biorefinery. BioBreak calculates the maximum amount that a biorefinery would be willing to pay for a dry ton of biomass delivered to the biorefinery gate. This value, or willingness to pay (WTP), is a function of the price of ethanol, the conversion yield (gallons per dry ton of biomass) the

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1 The BioBreak model was originally developed as a research tool to estimate the biorefinery’s long-run, breakeven price for sufficient biomass feedstock to supply a commercial-scale biorefinery and the biomass supplier’s long-run, breakeven price for supplying sufficient feedstock to operate such a biorefinery at capacity. An earlier version of the model was used in the NAS-NAE-NRC report Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts (2009b).



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