Cellulosic Ethanol

The potential for biofuel production in Vermont
PRS Briefs
PRS Policy Brief 0708-04
Sunday, March 9, 2008

Cellulosic ethanol is a renewable liquid biofuel that has emerged as a prospective alternative transportation fuel source with significant environmental implications. Sources of cellulosic biomass from which ethanol can be made include, but are not limited to: agricultural wastes such as corn stover, cereal straws, and sugarcane bagasse; grasses; woods; and plant wastes from industrial processes, such as sawdust and paper pulp.

Ethanol can be blended with gasoline to power cars. The two most common blends are E10 (10 percent ethanol, 90 percent gasoline) and E85 (85 percent ethanol, 15 percent gasoline). Increased use of cellulosic ethanol has the potential to reduce the state's dependence on foreign oil and reduce overall greenhouse gas emissions.

No cellulosic ethanol is currently being produced in the United States, but ethanol is being made from corn. The production of cellulosic ethanol releases less greenhouse gases than does the production of corn-based ethanol. It also does not put a strain on the nation's food supply. Ethanol from cellulose is not yet cost competitive with corn-based ethanol, and it will likely be three to ten years before the industry could be economically viable in Vermont.

There is little to no cellulosic ethanol research and development in the state of Vermont. Both the state and the federal government have programs that could help fund a cellulosic ethanol plant, but none are currently being utilized. If cellulosic ethanol becomes economically viable in Vermont, there is the potential to produce approximately 140 million gallons annually.

In Georgia, Range Fuels, Inc. will build the country's first commercial cellulosic ethanol plant. Woodchips will be used as the feedstock. The company is receiving significant sales tax breaks from the state. In Tennessee, the government has given $51 million to support the University of Tennessee's Biofuels Initiative. The university conducts research into switchgrass production and has partnered with the Mascoma Corporation to build a pilot plant that utilizes switchgrass.

Six policy options to encourage cellulosic ethanol production in Vermont are:

  • Increase funding for cellulosic ethanol research and development. This may include partnering with a company to build a pilot plant.
  • Increase tax incentives for the industry, including a state gas tax exemption for all gasoline blended with a specified quantity of ethanol.
  • Increase funding for feasibility studies to better determine the potential for cellulosic ethanol in the state when the industry becomes cost competitive.
  • Mandate that fuel sold is at least E10.
  • Increase demand for ethanol through tax incentives for flex fuel vehicles and E85 pumps.
  • Better utilize current state incentives.