Essays concerning the cellulosic biofuel industry

Alicia Rosburg

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Despite market-based incentives and mandated production, the U.S. cellulosic biofuel industry has been slow to develop. This dissertation explores the economic factors that have limited industry development along with important economic tradeoffs that will be encountered with commercial-scale production. The first essay provides an overview of the policies, potential, and challenges of the biofuel industry, with a focus on cellulosic biofuel. The second essay considers the economics of cellulosic biofuel production. Breakeven models of the local feedstock supply system and biofuel refining process are constructed to develop the Biofuel Breakeven (BioBreak) program, a stochastic, Excel-based program that evaluates the feasibility of local biofuel and biomass markets under various policy and market scenarios. An application of the BioBreak program is presented using expected market conditions for 14 local cellulosic biofuel markets that vary by feedstock and location. The economic costs of biofuel production identified from the BioBreak application are higher than frequently anticipated and raise questions about the potential of cellulosic ethanol as a sustainable and economical substitute for conventional fuels. Program results also are extended using life-cycle analysis to evaluate the cost of reducing GHG emissions by substituting cellulosic ethanol for conventional fuel. The third essay takes a closer look at the economic trade-offs within the biorefinery industry and feedstock production processes. A long-run biomass production through bioenergy conversion cost model is developed that incorporates heterogeneity of biomass suppliers within and between local markets. The model builds on previous literature by treating biomass as a non-commoditized feedstock and relaxes the common assumption of fixed biomass density and price within local markets. An empirical application is provided for switchgrass-based ethanol production within U.S. crop reporting districts (CRDs). Incorporating location-specific biomass supply conditions creates unique and important economic tradeoffs within each CRD that have important impacts on the potential supply and distribution of U.S. cellulosic biofuel production.

Date: 2012-01-01
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