Renewable Fuel Standard Potential Economic and Environmental Effects of U.S. Biofuel Policy Public Release October 4, 2011
Renewable Fuel Volume Consumption Mandated by RFS2 40 35 Cellulosic biofuels Advanced biofuels Total = 36 Billions of Gallons 30 25 20 15 Biomass-based diesel Conventional biofuels 16 4 1 10 15 5 0 Year Source: Energy Independence and Security Act of 2007
Definitions of Renewable Fuels in RFS2 Conventional biofuel: ethanol derived from corn starch with a life-cycle greenhouse-gas (GHG) emission reduction of at least 20% compared to petroleum-based gasoline and diesel. Biomass-based diesel: fuels must achieve life-cycle GHGemission reduction of at least 50% compared to petroleumbased diesel. Advanced biofuels: renewable fuels (excluding conventional biofuel) that achieve life-cycle GHG-emission reduction of at least 50%. Cellulosic biofuels: fuels derived from any cellulose, hemicellulose, or lignin from renewable biomass that achieve life-cycle GHG-emission reduction of at least 60%.
Statement of Task Describe biofuels produced in 2010 and projected to be produced and consumed by 2022 using RFS-compliant feedstocks primarily from U.S. forests and farmland. Review model projections and other estimates of the relative effects of increasing biofuels production as a result of RFS2 on the prices of: Land, food, feed, and forest products. Imports and exports of relevant commodities. Federal revenue and spending. Discuss the potential environmental harm and benefits of biofuels production and the barriers to achieving the RFS2 consumption mandate.
Study Committee Members Lester B. Lave 1 (Chair) *, Carnegie Mellon University Ingrid (Indy) C. Burke (Cochair), University of Wyoming Wallace E. Tyner (Cochair), Purdue University Virginia H. Dale, Oak Ridge National Laboratory Kathleen E. Halvorsen, Michigan Technological University Jason D. Hill, University of Minnesota Stephen R. Kaffka, University of California, Davis Kirk C. Klasing, University of California, Davis 1 Member of the Institute of Medicine * Chair until May 9, 2011 Chair from May 9, 2011
Study Committee Members Stephen J. McGovern, PetroTech Consultants John A. Miranowski, Iowa State University Aristides (Ari) Patrinos, Synthetic Genomics Inc. Jerald L. Schnoor 2, University of Iowa David B. Schweikhardt, Michigan State University Theresa L. Selfa, State University of New York, Syracuse Brent L. Sohngen, Ohio State University J. Andres Soria, University of Alaska, Fairbanks 2 Member of the National Academy of Engineering
Finding: RFS2 may be ineffective policy for reducing global GHG emissions The effect of biofuels on GHG emissions depends on: Types of feedstock to be produced. Management practices used to produce feedstocks (for example nutrient management). Types of at land-use or land-cover changes occurred in the process (including direct and indirect land-use and land-cover changes).
Environmental Effects of Producing Biofuels to Meet RFS2 Environmental effects depend on o feedstock type, o site-specific factors, o feedstock production management practices, o land condition prior to feedstock production, and o conversion yield. Effects of increasing biofuel production on air quality, water quality, water quantity and consumptive use, soil, and biodiversity are uncertain and o can be local, regional, or global
Environmental Effects of Producing Biofuels to Meet RFS2 Air pollutants (particulate matter, ozone, and sulfur oxides) -- likely to increase with increasing ethanol production and use. Water quality -- deteriorated as corn production increased; effect of achieving RFS2 uncertain. Consumptive water use -- range of estimates much wider than petroleum-based fuels; 2.9 1,500 gallons per gallon of gasoline equivalent for biofuels and 1.9 6.6 gallons per gallon of gasoline equivalent for petroleum-based fuels.
Finding: RFS2 cellulosic fuel mandate unlikely to be met in 2022 No commercially viable biorefineries exist, to date, for converting lignocellulosic biomass to fuels. Aggressive deployment, in which the capacity build rate doubles the historic capacity build rate of corngrain ethanol, necessary to produce 16 billion gallons of cellulosic biofuels by 2022. Policy uncertainties could deter investors from aggressive deployment.
Finding: Only in an economic environment characterized by high oil prices, technological breakthroughs, and a high implicit or actual carbon price would biofuels be cost-competitive with petroleum-based fuels. Biofuel Breakeven Model used to estimate: o The minimum price that biomass suppliers would be willing to accept for a dry ton of biomass delivered to the biorefinery gate. o The maximum price that processors would be willing to pay to at least break even.
Gap between supplier s price and processor s price is negative for all types of cellulosic biomass likely to be produced in 2022. Cellulosic Feedstock Corn Stover in Corn-Soybean Rotation Price Gap Between Biomass Suppliers and Processors Supplier s Price Processor s Price Price Gap (Per Dry Ton) Price Gap (Gallon of Ethanol) $92 $25 $67 $0.96 Alfalfa $118 $26 $92 $1.31 Switchgrass in the Midwest Short Rotation Woody Crops $133 $26 $106 $1.51 $89 $24 $65 $0.93 Forest Residues $78 $24 $54 $0.77 Source: Examples from committee analysis in BioBreak model. Price of Oil $111/barrel. Biomass yield 70 gallons of ethanol per dry ton.
Price gap for cellulosic feedstock could be closed under other market circumstances: Price of oil reaches $191 per barrel. A price is placed on carbon that makes cellulosic biofuels more cost-competitive. Government subsidy payments increase to cover price gap. Government biofuel mandates are enforced.
Economic Effects of Increasing Biofuel Production Land prices will increase because of increased demand for food and feedstock production. Food-based biofuel is one of many factors that has contributed to upward price pressure on agricultural commodities, food, and livestock feed. Competition with existing markets will increase wood product prices if woody biomass contributes heavily to biofuel feedstock.
Economic Effects of Increasing Biofuel Production Changes in trade in agricultural commodities have so far been buffeted by the decline in the value of the U.S. dollar. Imports of wood products will likely increase, imports of oil will decrease slightly, and exports of livestock products will decrease slightly. Federal budget outlays would increase because of spending on subsidy payments, grants, loans, and loan guarantees and because of foregone revenue from biofuel tax credits.
Barriers to Achieving RFS2 High cost of producing cellulosic biofuels compared to petroleum-based fuels. Uncertainties related to market conditions and government support programs (for example, EPA waiver). Blend wall and transportation infrastructure if large amount of biofuels for meeting RFS2 is be met by ethanol. Other environmental and social barriers.
Thank you. Report is available online at www.nap.edu.