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We investigate the near-term techno-economic feasibility of providing carbon-negative fuels by capturing and sequestering by-product CO2 from biofuel production in geological formations. Four different biorefinery technologies (corn ethanol, cellulosic ethanol, thermal fast pyrolysis and thermal gasification) are examined and compared based on performance and costs. Based on our results, the cost of adding CCS on the high-concentration streams of biorefineries varies between 22 and 24 $/tCO2. A clear jump in cost can be seen for plants that feature flue gas capture, being 66 $/tCO2 for pyrolysis.

This study proposed a modelling framework which addresses various issues such as decreasing marginal yield of corn with respect to fertilizer use in biofuel production and the resulting greenhouse gas emissions. Particularly, the framework considered exogenous changes including oil price development and biofuel policy through market interactions of different inputs and outputs in biofuel production. We applied the modelling framework numerically in an example of corn ethanol production in the United States to illustrate how the economics of fertilizer use could impact the GHG emissions based on both average and marginal emissions. The results show that higher oil prices increase the prices of gasoline, natural gas, ethanol, and corn, which stimulates corn-based ethanol production and increases corn yields by encouraging profit-maximizing farmers to increase their application rate of nitrogen fertilizers slightly. The effect is that, on average, GHG emissions per unit of produced corn ethanol remain almost constant if oil price increases from 60 to 120 $/barrel. However, the marginal emissions per additional unit of ethanol production increase by 2.2% or10%, depending on whether the Volumetric Ethanol Excise Tax Credit is implemented or not. More important is that the marginal emissions of corn ethanol are much higher than those of conventional gasoline. Although on average there are GHG emission savings of corn ethanol compared to conventional gasoline, the savings are negative when based on the marginal emissions of corn ethanol. An interesting implication is that the effectiveness of biofuel policies aimed at reducing GHG emissions might be questionable.

The Energy Independence and Security Act of 2007 increased the amount of corn ethanol that must be blended into motor vehicle and other fuels as part of the renewable fuel standard. The purpose of this article is to look at how the increase in demand for corn influenced the profitability and downside risk of farms. We conducted this investigation using annual data for more than 300 farms in Kansas from 1997 through 2014. We find that the probability of a farmer’s experiencing a negative return on equity (i.e. the ‘downside risk’ of farming) decreased by 25 percentage points after 2007.

As government actors and the private sector attempt to de-carbonize the economy, the role of life cycle analysis (also know as life cycle assessment or “LCA”) has become increasingly important. In this essay, we explore the use of life cycle analysis in the transportation sector to assess its influence in federal and state policy efforts to move to a low carbon energy future. We first define life cycle analysis and explain its use in evaluating the environmental impacts of all stages of a product, from production, to use, to disposal. We then review the use of life cycle analysis in considering the carbon emissions associated with different types of biofuels, primarily ethanol, which now makes up 10% of every gallon of gasoline sold in the United States as a result of federal mandates. This evaluation shows that life cycle analysis for ethanol has undermined many of the basic premises federal policymakers relied upon to enact significant mandates and, for many years, major tax benefits, to promote the production and use of ethanol for transportation fuel. We then discuss the increasing application of life cycle analysis to electric vehicles (EVs), which compares the GHG emissions associated with the production, use, and disposal of EVs with conventional automobiles, and evaluates the source of electricity used to power EVs in different parts of the country. Not surprisingly, the lifecycle GHG emissions associated with an EV driven in California, where electricity is generated primarily by natural gas and renewable energy, are far lower than the GHG emissions associated with an EV driven in West Virginia, which relies almost exclusively on coal-fired electricity. We conclude by reflecting on the ways life cycle analysis can be used effectively to guide policymakers to incentivize the development of environmentally beneficial products and technologies. For instance, if today’s life cycle analysis had been used to evaluate corn ethanol in the 1990s and early 2000s, policymakers may have paused before creating the significant incentives and mandates that exist today and that are now very difficult to eliminate. At the same time, however, there are risks in relying too heavily on life cycle analysis when information gaps exist in comparing alternative fuels and vehicles with traditional fuels and vehicles. Such information gaps may result in creating disincentives for potentially beneficial new products and technologies that, with sufficient support, may be critical to meeting de-carbonization goals in the transportation sector and the economy as a whole.

Increasing concerns about energy security and climate change mitigation have led to significant policy support for biofuels, particularly for cellulosic biofuels. This paper examines the short- and long-run effects of Renewable Fuel Standard (RFS) on the mix of agricultural and forest biomass, food, fuel and wood markets and land use change by using an economic model that integrates the agriculture, forest and transportation fuel sectors. Our results show that RFS would lead to the production of about 1600 billion liters of corn ethanol over the 2010-2035 periods, which could constitute a maximum of two-thirds of the cumulative biofuel production; the remaining mandate is met by advanced biofuels. The logging residues are the primary initial providers of biomass feedstocks. After year 2025, energy crops and crop residues will play the leading role in cellulosic feedstocks production. Producing these biofuels will not cause significant land use change between and within agricultural and forest sector as compared to the business-as-usual (BAU) case. The total annual GHG flux under RFS in 2035 is improved by 6.9% and social welfare increases by 4% relative to BAU.

Liquid biofuels such as ethanol and biodiesel are considered important renewable replacements for petroleum fuels such as gasoline and diesel. Biomass-based energy carriers are traditionally treated as inherently carbon neutral, so that only the fossil-based carbon dioxide (CO2) and other non-CO2 greenhouse gas (GHG) emissions associated with their production are counted when assessing their global warming impact. This accounting convention is embedded by construction in lifecycle assessment (LCA) models, which on a direct basis (i.e., excluding economically induced effects) often find that biofuels from efficient industrial agricultural production systems reduce GHG emissions relative to their fossil fuel counterparts. LCA modeling can be subjected to an independent empirical test that bounds a biofuel's potential GHG reduction within the dynamics of the terrestrial carbon cycle. Such a test can be performed using annual basis carbon (ABC) accounting, which entails spatially and temporally explicit analysis of the direct GHG exchanges between the atmosphere and a physical vehicle-fuel system. An ABC case study of a corn ethanol biorefinery and the farmland that supplies it shows that using the ethanol it produced instead of gasoline provided no significant reduction in GHG emissions, in contrast to an LCA result that found a 40% GHG reduction for the same facility. ABC accounting reveals that the renewable ethanol so produced was not carbon neutral when substituting for gasoline, and sensitivity analysis indicates that its net GHG emissions impacts are likely to higher than those of petroleum gasoline in practice.

A combination of mandates, credits, and subsidies are employed in the US to encourage biofuel production. Recent demands for reduced federal spending have increased scrutiny of these incentives just as many are set to expire if not soon renewed by Congress. In this context, it becomes important to understand what impacts ethanol production has had on food and fuel markets and what changes can be expected if ethanol production is eliminated. We report here on a modeling study of these questions. Using a computable general equilibrium model that captures the market effects of the various interactions among fuel production, imports, exports, and consumption in equilibrium, we study two policy scenarios to elucidate the effects of ethanol production: (1) a future hypothetical scenario in which ethanol production is eliminated at the end of 2011 and (2) a historical counterfactual scenario in which ethanol production was eliminated in 1999, before it became a substantial proportion of US fuel markets. We evaluate these relative to a baseline scenario in which corn ethanol production peaks at 15 Bg/yr (in 2012) and stays fixed.We also examine the sensitivity of model outputs along two parameter dimensions: the price elasticity of the global oil supply and the elasticity of US consumer demand for gasoline. Within acceptable ranges for both parameters, we find that wholesale gasoline prices between 2000 to 2010 would have been 1.7-2.5% higher on average without the contribution of ethanol to the fuel supply. For 2012 viewed apart, this effect is substantially stronger, showing a 6-8.6% increase in the wholesale gasoline price in the no-ethanol scenario.Further, due to the fact that simulation results in these scenarios generally show prices for crude oil and refined petroleum increasing faster than those for corn and corn-based ethanol, the price disparity continues to grow larger even after ethanol production peaks in 2012. In 2025, the difference between the wholesale gasoline price in the baseline and no-ethanol scenarios is 12.5%, with a sensitivity range from 7.0 to 23.6%.We compare these results to a series of recent estimates of similar measures from Xiaodong Du and Dermot Hayes. We find that both their published results [Du and Hayes, 2009] and a recent unpublished extension of these results [Du and Hayes] imply a consistently much larger price effect of ethanol production (a 16% average increase between 2000 and 2010 relative to the mean and a 41% marginal increase in 2010). Regarding their recent unpublished extension [Du and Hayes], we discuss a number of compounding circumstances that could contribute in whole or in part to these very high estimates. While we cannot compare our results directly to either of the estimates, because of significant methodological differences, we conclude that their highly nonstandard treatment of fuel imports and the selection of elasticity parameters well below typical values is likely responsible for the high result. Although highly inelastic fuel supply conditions, such as might lead to large price spikes given sudden supply shocks in ethanol production, are certainly not impossible in the very short run, we note two points: (1) a return to the peak levels of gasoline imports of 2006 itself could make up for more than half the fuel lost from a complete elimination of fuel ethanol, and (2) given the size of the ethanol production market in the US and the import market for sugarcane based ethanol, we find it unlikely that a single disturbance, be it from drought or public policy, could provide as strong a shock as considered in Du and Hayes (i.e., a complete and immediate elimination of all fuel ethanol production).

Author(s): Yeh, Sonia; Witcover, Julie | Abstract: California’s low-carbon fuel market is growing.nRegulated parties in the State’s LCFS exceeded the requirements for 2011 and Q1 of 2012 by a substantial margin.nBased on available data, average compliance cost in August 2012 is $13/MT CO2e, adding about 0.1 cents per gallon to the production cost of gasoline. Summer drought increased costs of corn ethanol, but the full impact of the drought on CA-LCFS compliance and compliance costs will not be known for some time.We find that regulated parties in the California LCFS (CA-LCFS) exceeded the standard in 2011 and the first quarter (Q1) of 2012 by a substantial margin. Companies achieve compliance when credits equal deficits. Regulated parties generated 1.58 million credits (metric tonnes CO2e reduction) in the first 15 months, nearly double the amount of deficits (0.78 million), for a net surplus of 0.80 million credits to exceed the required reduction level by about 0.8 million metric tonnes CO2e. Companies relied on ethanol to generate 86% of the credits. The CI of ethanol fuels used to generate CA-LCFS credits in 2011 and first quarter of 2012 averaged around 84 gCO2e/MJ, compared to baseline values of 95.6 for gasoline.Because no central trading mechanism exists, we used available information on actual trades, bids, and offers in August 2012 to estimate that CA-LCFS carbon credits were valued at $10-18/metric tonne (MT) CO2e, with an average of $13/MT CO2e. At this price ($13/MT CO2e) and given the 2012 requirement of 0.5% CI reduction, companies who choose to meet their obligation purely by purchasing CA-LCFS credits for compliance would incur an added cost of about 0.1 cents per gallon of gasoline produced.The special topic addressed in this review is the effect of the 2012 U.S. summer drought. We find that poor yields due to extreme drought in the Midwestern U.S. raised corn prices about 60% from mid-June through August, causing ethanol prices to rise about 60 cents per gallon. The actual impacts of the drought on this year’s CA-LCFS compliance and on other food/fuel prices are not yet clear. Even with current higher corn prices, corn ethanol is still less expensive than gasoline on a per gallon basis and considerable amounts are being exported. Given that companies have until March 31, 2013 to acquire additional credits to meet 2012 compliance requirements, and corn and sugarcane ethanol markets are still adjusting to the drought's effects, it is too soon to gauge the drought’s overall impact on CA-LCFS compliance and compliance cost.We will continue periodic publication of the LCFS Status Review and provide in-depth analysis on critical issues associated with the performance of the CA-LCFS as more data become available.

The last ten years have seen tremendous expansion in biofuels production, particularly in corn ethanol in the United States, at the same time that commodity prices (e.g., corn) have experienced significant spikes. While supporters claim that biofuels are renewable and carbon-friendly, concerns have been raised about their impacts on land use and food prices. This paper analyzes how U.S. crop prices have responded to shocks in acreage supply; these shocks can be thought of as a shock to the residual supply of corn for food. Using a structural vector auto-regression framework, we examine shocks to a crop's own acreage and to total cropland. This allows us to estimate the effect of dedicating cropland or non-crop farmlands to biofuels feedstock production. A negative shock in own acreage leads to an increase in price for soybeans and corn. Our calculations show that increased corn ethanol production during the boom production year 2006/2007 explains approximately 27% of the experienced corn price rise.

Indirect land use change (ILUC) is based on the simple observation that use of cropland for biofuels raises food prices and thereby increases the incentive to convert forests and grasslands to crop production, causing the released of stored carbon and decreasing future carbon sequestration. ILUC is mediated by world food and fiber prices and therefore requires no geographic link between the land used for biofuels and the land converted to crops – growing biofuels in Iowa could cause the loss of rainforest in Brazil. Current models indicate that ILUC is substantial but there is substantial uncertainty about its magnitude. This Article uses EPA’s recent decision to approve corn ethanol as a renewable fuel as a lens for examining the ILUC issue and more generally the regulatory treatment of uncertainty. Given the closeness of the decision to approve corn ethanol as a renewable fuel, a more sophisticated treatment of uncertainty would likely have changed the outcome. But EPA was correct to proceed with a consideration of ILUC despite the admitted degree of uncertainty regarding the magnitude of ILUC.

Biofuels have gained increasing attention as an alternative to fossil fuels for several reasons, one of which is their potential to reduce the greenhouse gas (GHG) emissions from the transportation sector. Recent studies have questioned the validity of claims about the potential for biofuels to reduce GHG emissions relative to the liquid fossil fuels they are replacing when emissions due to direct and indirect land use changes (ILUCs) that accompany biofuels are included in the life-cycle GHG intensity of biofuels. Studies estimate that the GHG emissions released from ILUC could more than offset the direct GHG savings by producing biofuels and replacing liquid fossil fuels and create a “carbon debt” with a long payback period. The estimates of this payback period, however, vary widely across biofuels from different feedstocks and even for a single biofuel across different modeling assumptions. In the case of corn ethanol, this payback period is found to range from 15 to 200 years. We discuss the challenges in estimating the ILUC effect of a biofuel and differences across biofuels, and its sensitivity to the assumptions and policy scenarios considered by different economic models. We also discuss the implications of ILUC for designing policies that promote biofuels and seek to reduce GHG emissions. In a first best setting, a global carbon tax is needed to set both direct and indirect land use change emissions to their optimal levels. However, it is unclear whether unilateral GHG mitigation policies, even if they penalize the ILUC related emissions, would increase social welfare and lead to optimal emission levels. In the absence of a global carbon tax, incentivizing sustainable land use practices through certification standards, government regulations and market-based pressures may be a viable option for reducing ILUC.

Corn ethanol produced in the US and sugarcane ethanol produced in Brazil are the world’s leading sources of biofuel. Current US biofuel policies create both incentives and constraints for the import of ethanol from Brazil and together with the competitiveness and greenhouse gas intensity of sugarcane ethanol compared to corn ethanol will determine the extent of these imports. This study analyzes the supply-side determinants of this competitiveness and compares the greenhouse gas intensity of corn ethanol and sugarcane ethanol delivered to US ports. We find that while the cost of sugarcane ethanol production in Brazil is lower than that of corn ethanol in the US, the inclusion of transportation costs for the former and co-product credits for the latter changes their relative competitiveness. We also find that the relative cost of ethanol in the US and Brazil is highly sensitive to the prevailing exchange rate and prices of feedstocks. At an exchange rate of US$1 = R$2.15 the cost of corn ethanol is 15% lower than the delivered cost of sugarcane ethanol at a US port. Sugarcane ethanol has lower GHG emissions than corn ethanol but a price of over $113 per ton of CO2 is needed to affect competitiveness.

Policy to address the environmental impacts of transportation fuel derived from conventional oil is frequently focused on the promotion of alternatives such as biofuels. While there are some biofuels that can be developed with relatively few impacts, others can result in broader, complex social concerns that should be included in the policy debate. These concerns include impacts arising from the conversion of natural landscapes and changes in food supply. To help inform policy development, this paper raises a series of questions to encourage a fuller debate and proposes a methodology to capture ethical risks related to the energy and environmental choices. This methodology should be applied to policies that encourage a transition to fuel alternatives for transportation – whether unconventional fossil fuels or corn ethanol.