ethanol market base, and (3) engage in cost-shared demonstration projects with industrial partners to encourage the acceptance of new technology and reduce market barriers.

The projected cost of ethanol production from cellulose declined significantly in the 1980s as the technology was improved. However, since about 1991, there has been little if any drop in the projected cost of about $1.28 per gallon (1995 dollars) based on the technology that OFD has been pursuing. OFD maintains that this result arises from different bases used for the 1991 cost estimate and more recent cost estimates. Nevertheless, even taking into account different bases, the committee believes that a leveling off has occurred and is concerned that this may reflect the inherent limits of the process technology being pursued in the OFD program. Required cost reductions will require major, not incremental, improvements in the current processes and/or breakthroughs (i.e., the replacement of current process steps by much less expensive, much more efficient alternatives).

In the committee's view, widespread market acceptance of biobased ethanol is not achievable with DOE's current technology base. OFD's most recent cost analysis indicates that potentially lower cost technologies are being developed outside of the government program. Therefore, the OFD's milestones should be used not only to track its progress toward the production of bioethanol but also to compare OFD's costs with industry costs. OFD should consider working with more scientists and engineers outside of OFD to improve biomass conversion technologies.

OFD provides some support for several large-scale bioethanol plants that use both currently available, well demonstrated technology and some new technology, notably recombinant organisms to ferment both five-carbon and sixcarbon sugars to ethanol. The knowledge and experience from these large-scale demonstrations should help identify the risks and reduce the costs of bioethanol production. However, scale-up is a much more expensive proposition than fundamental investigation. Once the program supporting commercialization has been completed, OFD should reestablish its leadership role by focusing on providing a technical basis for the next generation of commercial ventures.


To reduce the cost of bioethanol and increase competitiveness with other energy sources in the near term (2000-2010) and midterm (2010-2020), the Office of Fuels Development should redirect the focus of its research and development programs from demonstrations to technology fundamentals for both feedstock development and ethanol conversion. Continued technical support should be provided to the demonstration plants now in place to test and evaluate the results of this fundamental research and development. As industrial firms commercialize these lower cost technologies, the role of the Office of Fuels Development in biofuels research should be refocused on overcoming the remaining technical barriers.


The motivation for developing bioethanol as a transportation fuel is based on concerns about energy security, environmental quality, and trade deficits. Current research is focused on the potential for bioethanol to reduce net emissions of greenhouse gases to the atmosphere from dedicated energy crops (e.g., woody crops, herbaceous perennials). The impact of the entire fuel cycle, which includes growing, harvesting, processing, and consuming bioethanol, is expected to add very little net carbon dioxide to the atmosphere. However, the magnitude of net reductions of greenhouse gases produced by biomass is still the subject of heated debate, and the entire life cycle of the fuel, including feedstock production, combustion, and transportation, has been the subject of research on greenhouse gas emissions from bioethanol manufactured from corn starch, woody crops, and herbaceous crops. Although the benefits from the production of bioethanol from corn or other residues have not been determined, the benefits from dedicated energy crops are expected to reduce net emissions of carbon dioxide to the atmosphere.

One concern about the introduction of biofuels is that the diversion of land to energy production could reduce the acreage devoted to food production. In the case of biofuels, however, the coproduction of biobased ethanol, biobased chemicals, and human food and animal feed products in ''biorefineries" could actually reduce conflicts between the production of food and the production of fuels. A possible disadvantage is that the large-scale harvesting of crop residues could increase soil and wind erosion. With proper soil management techniques, however, biofuels based on crop residues may not degrade topsoil. In some cases, production of perennial bioenergy crops could provide local benefits to biofiltration (removal of unwanted nutrients from soil or groundwater via plant root uptake and metabolism), erosion control, and the creation of wildlife habitat. Thus, the economics and environmental effects of cellulosic biomass production will vary with the characteristics of the site.

Market factors will determine the effectiveness of OFD's launch of a new biofuels industry based on cellulosic biomass conversion. The current low price of oil, for example, would limit the success of a "technology push" program. The current subsidized market for ethanol as a blend stock in gasoline to satisfy octane and oxygenate requirements is subsidized by federal and some state tax incentives that should be considered temporary. In the long run, all aspects of the cellulosic biomass-based fuel industry will have to be competitive with petroleum-based fuels. Meeting this difficult challenge will require that OFD's program achieve significant technical breakthroughs that lead to sharp reductions in manufacturing costs.

Although the displacement of gasoline by neat ethanol is a long-term proposition, the subsidized use of ethanol as a blend agent has created near-term opportunities. The OFD

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