Economic Considerations Influencing the Competitiveness of Cellulosic Ethanol.

There is growing interest in using agricultural residues and dedicated energy crops like perennial grasses for producing cellulosic ethanol. This presentation examines the costs of producing ethanol using corn stover and two energy crops, switchgrass and miscanthus, in Illinois. A crop-productivity model is used together with a GIS to estimate yields of energy crops across counties in Illinois. Spatially variable crop yields, together with county-specific opportunity costs of land, are used to determine the spatial variability in the break-even cost of producing these feedstocks and the resulting variability in costs of producing ethanol from alternative feedstocks across Illinois counties. These costs are compared to those of corn-based ethanol at various prices of corn. Economic factors that influence the cost of conversion of cellulosic feedstocks to fuel needed to allow cellulosic ethanol to compete with corn ethanol are analyzed. We also examine the lifecycle greenhouse gas emissions and soil carbon sequestration associated with alternative feedstocks and the potential for each of these feedstocks to mitigate carbon emissions relative to gasoline. The implications of valuing the carbon mitigation potential for the competitiveness of alternative feedstocks are analyzed. Policy implications of these findings for coordinating climate policy and energy policy to provide incentives for using alternative feedstocks based on recognition not only of their energy content but also environmental benefits are discussed.