An Economic Assessment of Traditional and Cellulosic Ethanol Technologies

Ethanol is a clean, renewable fuel that can be produced from biomass resources in nearly every region of the United States. Today in the U.S. the majority of ethanol is produced from corn, a practice that relies on subsidies to compete economically with gasoline and diverts food supplies. Significant growth of the ethanol industry will depend on the development of new processes that convert cellulosic biomass from non-food crops and waste materials into ethanol. The purpose of this research is to compare the private and total social cost of producing ethanol using conventional methods from corn to the production of ethanol from cellulosic biomass feedstocks, and to analyze the sensitivity of the technology to key variables such as capital costs, feedstock and energy prices, and estimates of social costs. Results indicate that existing ethanol technologies hold an economic advantage due primarily to the larger capital costs and greater complexity associated with the cellulosic ethanol conversion process. However, under certain economic conditions cellulosic technology is competitive with traditional methods.