and cellulosic biofuel is less than $1 billion a year because these fuels are not produced in large volumes. However, forgone federal tax revenue as a result of VEETC was $5.4 billion in 2010 and is anticipated to increase to $6.75 billion in 2015 as corn-grain ethanol production approaches the mandate limit. The forgone revenue is much larger than any savings that could be gained from reduced CRP enrollment. As of the writing of this report, the biofuel subsidies were under review by Congress.

Impact with No Federal Subsidies

All biofuel tax credits will end in 2012 unless Congress takes action to extend them, but RFS2 will remain in effect. Without biofuel tax credits and with RFS2 in effect, the cost of biofuel programs is borne directly by consumers, as they are forced to pay a higher cost for the blended renewable fuel than for petroleum-based products. Otherwise, consumers bear the cost of biofuel programs indirectly through taxes paid.

ENVIRONMENTAL EFFECTS OF INCREASING BIOFUEL PRODUCTION

FINDING: The environmental effects of increasing biofuel production largely depend on feedstock type, site-specific factors (such as soil and climate), management practices used in feedstock production, land condition prior to feedstock production, and conversion yield. Some effects are local and others are regional or global. A systems approach that considers various environmental effects simultaneously and across spatial and temporal scales is necessary to provide an assessment of the overall environmental outcome of increasing biofuel production.

Although using biofuels holds potential to provide net environmental benefits compared to using petroleum-based fuels, the environmental outcome of biofuel production cannot be guaranteed because the key factors that influence environmental effects from bioenergy feedstock production are site specific and depend on the type of feedstocks produced, the management practices used to produce them, prior land use, and any land-use changes that their production might incur. In addition to GHG emissions, biofuel production affects air quality, water quality, water quantity and consumptive use, soil, and biodiversity. Thus, the environmental effects of biofuels cannot be focused on one environmental variable. Environmental effects of increasing biofuel production have to be considered across spatial scales because some effects are local and regional (for example, water quality and quantity) and others are global (for example, GHG emissions have the same global effect irrespective of where they are emitted). Planning based on landscape analysis could help integrate biofuel feedstock production into agricultural landscapes in ways that improve environmental outcomes and benefit wildlife by encouraging placement of cellulosic feedstock production in areas that can enhance soil quality or help reduce agricultural nutrient runoffs, anticipating and reducing the potential of groundwater overuse and enhancing wildlife habitats.

Air Quality

Air quality modeling suggests that production and use of ethanol as fuel to displace gasoline is likely to increase such air pollutants as particulate matter, ozone, and sulfur oxides. Published studies projected that overall production and use of ethanol will result in higher pollutant concentration for ozone and particulate matter than their gasoline counterparts on a national average. Unlike GHG effects, air-quality effects from corn-grain ethanol are largely localized. The potential extent to which the air pollutants harm human



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