|WTA||WTP||Price Gap (Per Dry Ton)||Price Gap (Per Gallon of Ethanol)|
|Corn stover in a corn-soybean rotation||$92||$25||$67||$0.96|
|Corn stover in a 4-year corn-alfalfa rotation||$92||$26||$66||$0.94|
|Switchgrass in the Midwest||$133||$26||$106||$1.51|
|Switchgrass in Appalachia||$100||$26||$74||$1.06|
|Miscanthus in the Midwest||$115||$26||$89||$1.27|
|Miscanthus in Appalachia||$105||$27||$79||$1.13|
|Short-rotation woody crops||$89||$24||$65||$0.93|
at or above $191 per barrel. Alternatively, a carbon price3 of $118-$138 per tonne of CO2 equivalent can close the gap between WTP and WTA at an oil price of $111 per barrel for some feedstocks given current technology. A subsidy of $1.01 per gallon of cellulosic biofuel blended with fossil fuel was established in 2008, but this payment is not sufficient to close the price gap at $111 per barrel of oil.4
RFS2 is decoupled from biofuel cost of production and economics. Although the economics may be a strong deterrent to developing capacity, cellulosic biofuels will have a government-mandated market to the extent that capacity is built. The future of RFS2 after it expires in 2022 is a source of uncertainty for investors.
FINDING: RFS2 may be an ineffective policy for reducing global GHG emissions because the effect of biofuels on GHG emissions depends on how the biofuels are produced and what land-use or land-cover changes occur in the process.
GHGs are emitted into the atmosphere or stored in soil during different stages of biofuel production—for example, CO2 storage in biomass during growth and emissions from fossil fuel combustion in the manufacturing, transport, and application of agricultural inputs, from fermentation to ethanol, and from tailpipe emissions. Processes that affect GHG emissions of biofuels also include land-use and land-cover changes. If the expanded production involves removing perennial vegetation on a piece of land and replacing it with an annual commodity crop, then the land-use change would incur a one-time GHG emission from biomass and soil that could be large enough to offset GHG benefits gained by displacing petroleum-based fuels with biofuels over subsequent years. Furthermore, such land conversion may disrupt any future potential for storing carbon in biomass and soil.
3 A carbon price can be enacted through a carbon tax credit provided to the biofuel producer (or feedstock supplier) per dry ton of cellulosic feedstock refined or as the market price for carbon credits if processors are allocated marketable carbon credits for biofuel GHG reductions relative to conventional gasoline.
4 These conclusions are based on average prices for a cellulosic biofuel industry that is assumed to be commercially competitive and viable. Other studies have shown small quantities of biomass feedstocks could be available at significantly lower prices.