Biomass is the world’s largest renewable energy source, accounting for approximately 10% of global primary energy supply, and 5% of energy consumed in the United States. Prominent national programs like the U.S. Renewable Fuel Standard incentivize increased use of biomass, primarily as a transportation fuel. There has been comparatively little government support for using biomass as a renewable feedstock for the chemical sector. Such asymmetry in incentives can lead to sub-optimal outcomes in the allocation of biomass toward different uses. Greenhouse gas reduction is among the most cited benefits of bioenergy and bio-based products, however, there is increasing controversy about whether increased use of biomass can actually contribute to greenhouse gas emission targets. If biomass is to play a role in current and future greenhouse gas mitigation efforts its use should be guided by efficient use of natural and economic resources. This thesis addresses these questions through a series of case studies, designed to highlight important tradeoffs in the use of biomass for greenhouse gas mitigation. Should biomass be used as a fuel, a chemical feedstock, or neither? The first case study in this thesis focuses on the ‘fuel vs feedstock’ question, examining the greenhouse gas implications of expanding the scope of the U.S. Renewable Fuel Standard to include credits for bioethylene, an important organic chemical readily produced from bioethanol. Results suggest that an expanded policy that includes bioethylene as an approved use for ethanol would provide added flexibility without compromising greenhouse gas targets – a clear win scenario. Having established that bioethylene based plastics can achieve similar greenhouse gas reductions to bioethanol used as fuel, this thesis expands the analysis by considering how the greenhouse gas emissions from a wider range of bio-based plastics compare to each of the main commodity thermoplastics produced in the U.S. The analysis demonstrates that there are large uncertainties involved in the life cycle greenhouse gas emissions from bio-based plastics, and that only a subset of pathways are likely to be preferable to conventional plastics. The following chapter then builds on the existing model to compare the greenhouse gas mitigation potential of bio-based plastics to the potential for reducing emissions by adopting low carbon energy for plastics production. That chapter concludes that switching to renewable energy across the supply chain for conventional plastics energy cuts greenhouse gas emissions by 50-75%, achieving a greater reduction, with less uncertainty and lower cost, than switching to corn-based biopolymers – the most likely near-term biopolymer option. In the long run, producing bio-based plastics from advanced feedstocks (e.g. switchgrass) and/or with renewable energy likely offers greater emission reductions. Finally, this thesis returns to the dominant form of policy surrounding biomass use: biofuel mandates. That study takes a consequential approach to the ‘fuel or neither’ question. Specifically, this work examines how petroleum refineries are likely to adjust their production in response to biofuel policies, and what this implies for the success of these policies. The research demonstrates that biofuel policies induce a shift toward greater diesel production at the expense of both gasoline and non-combustion petroleum products. This has the potential to result in an increase in greenhouse gas emissions, even before accounting for the emissions from producing the biofuels themselves.

For many decades, demand for agricultural commodities has remained stagnant and its growth has been limited. In contrast, agricultural production continues to become ever more efficient by increasing output for stable or decreased inputs. Long-run profits have historically been near zero due to an ongoing relative equilibrium. But recent U.S. energy policy has changed to include a Renewable Fuels Standard (RFS), the goal of which is to boost domestic energy independence in an environmentally sound way. Most of the RFS in the near-term relies on the production of 15 billion gallons of ethanol made from corn. This has the effect of creating a new sector of demand for grain corn and subsequently supports rural economies. The RFS creates a new demand for 5.5 billion bushels of corn by 2015. At the corn-ethanol conversion ratio of 2.7 gallons per bushel, this will sustain the production of 15 billion gallons of ethanol. The RFS is a blending floor imposed on gasoline refiners. Ethanol producers, on the other hand, are not forced to supply ethanol. While the Environmental Protection Agency (EPA) has the authority to implement the RFS, it does not have the ability to expand ethanol supplies. The U.S. government has therefore supported the use of ethanol through a current 45 cent tax credit for each gallon of ethanol blended into gasoline. Other financial support programs such as grants and loan guarantees are in place for ethanol refiners. Ethanol in the U.S.is primarily made from the starchy molecules in corn. One bushel of corn in a dry mill ethanol plant will produce approximately 2.7 gallons of ethanol and 17 pounds of dried distillers grains with solubles (DDGS) which can be used in livestock rations. A wet mill plant will produce other by-products. Ethanol can be used directly in the nation's fuel supply at limited levels of blending. Most cars in the United States can withstand the corrosive nature of ethanol in blends of up to 10% or more. But flex-fuel vehicles, which are able to operate on 85% ethanol are increasingly becoming available for sale and their use continues to grow. Corn ethanol is a very complex issue when implemented on such a large scale as the RFS dictates. The amount of transportation fuel actually displaced by its use is a hotly debated topic. In any case, the large scale production of corn ethanol has created a firm link between agricultural markets and the energy sector. Ethanol is also an environmental issue. One of the primary goals of the RFS is to combat global warming and whether or not this is achieved it currently in debate. Aside from the climate change issue, there are other environmental ramifications tied directly to ethanol such as contamination, water use and land-use change. Since the inception of the RFS, price volatility and uncertainty has never been greater. In the first half of 2008, prices for all commodities reached historically high levels. This raises the concern of the impacts with the RFS has on markets other than corn. The livestock industry and other grain markets have been affected to some degree by the RFS. This is in part due to the changing profile of the major trading participants in the commodity trading centers. All of this is related to a structural change which has taken place in the agricultural markets as a result of the RFS. Historical relationships between price, supply and demand have adjusted and currently continue to adjust. The reasons for the adjustments are founded in economic theory regarding system-wide demand shocks. In this case, the demand shock is roughly a net 50% increase in the demand for corn by 2015 compared to the most recent decade. The adjustments which take place can be summarized by three periods. In period 1, the demand curve shifts outward, equilibrium is lost and higher corn prices are observed. In period 2, the market struggles to find a new equilibrium by increasing output. This period is marked by increased volatility and market participants over and under react to price signals until the new equilibrium is discovered. Period three is represented by the discovery of a relative market equilibrium at price higher than previously, but not as high as the initial demand shock. Results from, a fundamental analysis of the grain markets show that the expected market behavior has begun to take place and agriculture finds itself in period 2 of the changes described above. While most of the price changes and acreage shifts can be explained, the degree to which prices have increased are not fully explained. A change in trading center activities (Boards of Trade, etc.) may help to further account for the new prices. A survey of brokers shows that the behavior of commercial traders has significantly changed since RFS implementation. Volatility and uncertainty have ensued. The consequences of the RFS to the farmer have also been significant. Farm income has increased significantly sufficiently to overcome the riding costs of fuel and fertilizer. The risk exposure of farmers has also changed; the data indicates that exposure to risk has increased greatly. However, the farm gate prices have been more than enough to compensate for the changes in risk.

The Renewable Fuel Standard requires US oil refineries to blend biofuels into domestic transportation fuels. To ensure that compliance costs under this mandate don’t disproportionately affect any subset of refiners, the regulation includes a compliance credit program, whereby refiners blending excess biofuels can sell their excess compliance to refiners that do not blend enough. The price of these credits can be interpreted as the marginal cost of compliance with the mandate. I measure how changes in the prices of these compliance credits affect the stock prices of oil refining firms. There are a number of ways one might expect these compliance credits to affect firms. Much economic research finds that oil refiners are able to pass the costs of RFS compliance to consumers quite easily, suggesting that changes in the compliance cost should not affect firms’ value at all. Large refiners tend to claim that the RFS imposes a large cost and drags down their profits. Perhaps the most interesting claim is that of the “merchant refiners”—generally small refiners who do not own the infrastructure to blend biofuels on their own and are thus forced to comply with the mandate completely with compliance credits. They claim that larger refiners are able to hoard the credits and sell them for windfall profits at the expense of the merchant refiners. My results indicate that positive shocks in compliance credit prices are associated with stock losses only among large, non-merchant refiners, and that even this association is small. This discredits the claims of merchant refiners, but opens a new puzzle: why are large, integrated refiners the only ones affected? I conclude my paper with a number of potential explanations, though I am not able to test between them using my data.

Although the 2005 EPAct was enacted to help bolster the emerging biofuel industry, 52% of advanced biofuel projects were closed or shut down by 2015. However, there are no complete lists of barriers that impeded these projects. The goal of this study was to develop a framework of barriers impeding success of advanced biofuel projects by conducting a literature review of barriers, spatial analysis of status, survey of barriers, and determination of coproducts and byproducts and their marketing and distribution barriers from the industry stakeholders. The spatial analysis indicated 59 biofuel projects were attempted, and their Eastern and Western location by status was not a barrier. Using Grounded Theory, nine barriers were derived and aggregated in major categories, including product development, strategy, technology, competition, energy costs, funding, government, suppliers, and third-party relations. A contingency analysis was conducted relating their status to internal and external barriers, indicating no relationship between type of closing and type of barrier. Next, the number of barriers was expanded to 23, and a survey was conducted to gain knowledge on these barriers from industry stakeholders. When comparing the barriers by stakeholders, there were differences based on status, type, and technology of the projects. In addition, the survey and discussion identified 79 barriers different across years, type of industry (pilot, demonstration, or commercial), status (open, closed, or planning), and technology (thermochemical, biochemical, or hybrid). Forty-seven coproducts and byproducts and many unknown barriers to their marketability and distribution were determined and ranked by primary and secondary barriers. These extensive lists of barriers and coproducts will aid future biofuels projects in their planning, research, and development stages. / Master of Science

Die Ziele der vorliegenden Studie sind es, sowohl die Faktoren zu identifizieren, die den Ethanol-Kraftstoffmarkt der EU27 und der USA bis zum Jahr 2023 entscheidend beeinflussen werden, als auch die Bildung unterschiedlicher Szenarien, die den jeweiligen Markt im Jahr 2023 beschreiben. Anlass der Untersuchung war die Erkenntnis, dass die etablierten Forschungsinstitute ein weiteres Wachstum des Ethanolmarktes der EU27 und der USA prognostizieren, obwohl derzeitig eine starke Verunsicherung der Märkte vorherrscht und es im Jahr 2012 zu einem Rückgang der Ethanolproduktion in beiden Regionen gekommen ist. Die Verunsicherung des Ethanolmarktes der EU27 ist auf eine mögliche Änderung der politischen Förderung von Bi-okraftstoffen zurückzuführen, um einen Wandel des momentanen Ethanolmarktes der ersten Generation hin zu einem Markt der zweiten Generation zu erreichen. Der US-amerikanische Ethanolmarkt wird durch die „Blend Wall“-Problematik und einer möglichen Absenkung der Verbrauchsmandate des RFS 2 verunsichert. Die Erfüllung der beiden genannten Untersuchungsziele erfolgt mittels eines optimierten Ver-fahrens der Szenario-Technik, welches sich in die drei Kernschritte „Szenariofeld-Analyse“, „Szenario-Prognostik“ und „Szenario-Bildung und -Konsistenzprüfung“ untergliedert. Für den Ethanolmarkt der EU27 wird nach Durchführung des ersten Kernschritts ersichtlich, dass der Markt entscheidend von politischen Faktoren beeinflusst werden wird. Auch der US-amerikanische Markt wird in Zukunft erheblich durch die Politik und die „Blend Wall“-Problematik bestimmt sein. Die Erstellung der Szenarien erfolgt mithilfe der Kernschritte 2 und 3. Der Ethanolmarkt der EU27 im Jahr 2023 wird durch vier Szenarien beschrieben, die sowohl einen starken Anstieg des Ethanolmarktes der ersten Generation als auch einen Wandel des Marktes hin zur zwei-ten Generation prognostizieren. Infolge des Wandels würde der Markt schrumpfen und keine Nachfrage mehr nach Biokraftstoffen der ersten Generation in der EU27 bestehen. Eine sol-che Entwicklung würde die bereits bestehende Ethanolindustrie der ersten Generation in ihrer Existenz bedrohen. Der US-amerikanische Ethanolmarkt im Jahr 2023 wird ebenfalls durch vier Szenarien dar-gestellt. Beschreiben diese auf der einen Seite einen sehr starken Anstieg des Marktes, da der RFS 2 unverändert bleibt, prognostizieren sie auf der anderen Seite aufgrund einer star-ken Kürzung des RFS 2 ein nur moderates Marktwachstum. Im Gegensatz zur EU27 wird die bereits bestehende Ethanolindustrie in den USA jedoch nicht in Frage gestellt.

Demand for liquid fuels (i.e., petroleum products) has burdened the U.S. with major challenges, including national security and economic concerns stemming from rising petroleum imports; impacts of global climate change from rising emissions of CO2; and continued public health concerns from criteria and hazardous (i.e., toxic) air pollutants. Over the last decade or so, biofuels have been touted as a supply-side solution to several of these problems. Biofuels can be produced from domestic biomass feedstocks (e.g., corn, soybeans), they have the potential to reduce GHG emissions when compared to petroleum products on a lifecycle basis, and some biofuels have been shown to reduce criteria air pollutants. Today, there are numerous policy incentives—existing and proposed—aimed at supporting the biofuels industry in the U.S. However, the Renewable Fuel Standard (RFS) Program stands as perhaps the most significant mandate imposed to date to promote the use of biofuels. Overall, the RFS stands as the key driver in a transition to biofuels in the near term. By mandating annual consumption of biofuels, increasing to 36 bgy by 2022, the program has the potential to significantly alter the state of the U.S. liquid fuels sector. Fuel transitions in the transportation sector are the focus of this thesis. More specifically, the increasing consumption of biofuels in the transportation sector, as mandated by the RFS, is examined. With a well-developed, efficient, and expensive, petroleum-based infrastructure in place, many barriers must be overcome for biofuels to play a significant role in the transportation sector. Identifying and understanding the barriers to a biofuels transition is the objective of this thesis. Although fuel transitions may seem daunting and unfamiliar, the U.S. transportation sector has undergone numerous transitions in the past. Chapter 2 reviews major fuel transitions that have occurred in the U.S. liquid fuels sector over the last half century, including the phasing out of lead additives in gasoline, the transition from MTBE to ethanol as the predominant oxygenate additive in gasoline, and the recent introduction of ULSD. These historical transitions represent the uncertainty and diversity of fuel transition pathways, and illustrate the range of impacts that can occur across the fuel supply chain infrastructure. Many pertinent lessons can be derived from these historical transitions and used to identify and assess barriers facing the adoption of alternative fuels (i.e., biofuels) and to understand how such a transition might unfold. Computer models can also help to explore the implications of fuel transitions. In order to better understand the barriers associated with fuel transitions, and to identify options for overcoming these barriers, many recent research efforts have used sophisticated modeling techniques to analyze energy transitions. Chapter 3 reviews a number of these recent modeling efforts with a focus on understanding how these methodologies have been applied, or may be adapted, to analyzing a transition to biofuels. Four general categories of models are reviewed: system dynamics, complex adaptive systems, infrastructure optimization, and economic models. In chapter 4, scenarios created from a high-level model of the liquid fuels sector (the Liquid Fuels Transition model) are presented to explore potential pathways and barriers to a biofuels transition. The scenarios illustrate different pathways to meeting the requirements of the RFS mandate, and differ based on the overall demand of liquid fuels, how the biofuels mandate is met (i.e., the mix of biofuels), and the status of the ethanol blend limit in the motor gasoline sector. The scenarios are used to evaluate the infrastructure implications associated with a biofuels transition, and illustrate the uncertainty that exists in assessing such a transition. / text

The objective of this dissertation is to analyze the economic impact of newly operational ethanol biorefineries on rural counties in the U.S. Midwest region for the period 2001 to 2015 using a quasi-experimental approach. Rapid growth in the ethanol industry expanded the number of ethanol plants located in the U.S. Midwest from 54 in 2001 to 173 in 2015. Out of the counties with 119 new ethanol biorefineries, 97 counties met the general treatment criteria defined in this dissertation, but only 56 of those counties qualified for the rural treatment criteria. Counties with ethanol biorefineries that qualified for treatment were organized into a treated group based on county level data. Six counterfactual control groups (or control counties without ethanol biorefineries) were contemporaneously matched to the treated counties based on the Mahalanobis distance metric evaluated on a set of 29 selection variables. Matching occurred on two levels. In the first level, matching was performed both for the in-state level and over the entire Midwest region. In the second level, three criteria were used to select the final control groups: Mahalanobis distance metric best match, population best match, and rural-urban continuum codes (RUCC) best match. Economic impact is evaluated based on the growth rate in real per capita earnings for the treated group over a period from one to five years after treatment relative to the control group. A difference-in-differences (DID) model is used to assess the significance of results where the dependent variable is the natural log of real per capita earnings and a set of control variables is used to capture state fixed effects, time fixed effects and spillover effects. Empirical results evaluated against a representative Midwest control group and over six regression models adjusting for various fixed effects produced, on average, one-sided significant results for average treatment on the treated (ATOT) with a (min, max) range of growth rates as (5.53%-7.63%), (10.0%-12.0%), (14.7%-19.6%), (14.5%-18.3%), and (13.3%-18.9%) from one to five years after treatment, respectively. The minimum value of these estimates can be represented as an uncorrected average annual growth rate as 2.75%, 3.33%, 3.68%, 2.90%, and 2.22% over the respective period from one to five years after treatment. Employment levels for the treated group increased on average by 211 at the county level five years after treatment. A comparative Midwest control group lost, on average, 169 jobs over the five year period after treatment. A treated county employment multiplier calculated using the direct, indirect and induced employment impacts varied from 1.46 during the year of treatment to 7.6 five years after treatment relative to the control group. Five years after treatment, the treated group employment rate gradually increased, on average, by 2.2% which was better than either of the two counterfactual control groups used in this comparison. Overall, the analysis presented in this dissertation does show statistically significant positive economic impacts, on average, for rural U.S. Midwest counties with newly operational ethanol biorefineries relative to control counties without an ethanol biorefinery. These results demonstrate that the Renewable Fuel Standard (RFS) contributed to positive rural economic development impacts in treated counties with the possibility of spillover effects positively affecting contiguous counties.

Submitted by João Paulo Haddad (joaoprhaddad@gmail.com) on 2015-03-04T20:23:45Z No. of bitstreams: 1 JoaoPRHaddad_dissertação_MPAGRO.pdf: 428803 bytes, checksum: 9d3362c4928252a97968c52175773cbf (MD5) / Approved for entry into archive by Fabiana da Silva Segura (fabiana.segura@fgv.br) on 2015-03-04T21:19:37Z (GMT) No. of bitstreams: 1 JoaoPRHaddad_dissertação_MPAGRO.pdf: 428803 bytes, checksum: 9d3362c4928252a97968c52175773cbf (MD5) / Made available in DSpace on 2015-03-04T21:20:48Z (GMT). No. of bitstreams: 1 JoaoPRHaddad_dissertação_MPAGRO.pdf: 428803 bytes, checksum: 9d3362c4928252a97968c52175773cbf (MD5) Previous issue date: 2015-02-04 / Ethanol trading between Brazil and United States is strongly guided by a reg-ulatory asymmetry, which valorizes the Brazilian product through the creation of an American demand for it. This demand is originated from the Renewable Fuel Stand-ard (RFS) program’s mandates for biofuels consumption. RFS classifies the Brazili-an ethanol as an Advanced Biofuel, turning this product more valuable in the Unit-ed States than the one produced locally from the corn starch. What differentiates one product from the other is the producing process, which gives to the sugar cane ethanol the status of a less CO2 emitting life cycle biofuel when compared do the ethanol made from corn. Although there is a difference between both production systems, the final product is the same: Anhydrous Fuel Ethanol. Therefore, when the American demand for the sugar cane product causes a deficit in the Brazilian balance of supply and demand, it makes necessary an importation of ethanol from the US. This ethanol’s round trip occurs simultaneously, which allows to consider that there is a redundant flow of product between both countries, with financial and environmental expenses that could be avoided. Given that the American interest for the Brazilian product lies on the lower emission life cycle of the sugar cane ethanol, the redundant flow mentioned before could be swapped for transactions of Ad-vanced Biofuel Credits, a new idea which is designed throughout this work. For the Credits traded from Brazil to the United States, the latter will account on it’s balance the emissions of CO2 related to an equivalent volume of ethanol from sugar cane, while Brazil assumes the emissions for the same volume of ethanol from corn starch. The substitution of physical product trading for paper trading is the source for the savings proposed by the title of this work. / O comércio de etanol entre Brasil e Estados Unidos é fortemente guiado por uma assimetria regulatória, que agrega valor ao etanol brasileiro ao gerar uma de-manda americana pelo produto derivado da cana de açúcar. A demanda advém dos mandatos de consumo de biocombustíveis estabelecidos no programa americano conhecido como Renewable Fuel Standard (RFS). A assimetria emerge pelo fato de RFS dar ao etanol brasileiro a classificação de Biocombustível Avançado, tornando-o para os Estados Unidos um produto mais nobre que o etanol derivado do amido de milho produzido domesticamente. Apesar dos processos produtivos tornarem os dois produtos diferenciados quanto ao teor de emissão de CO2 em seus ciclos de vida, o produto final é o mesmo: etanol anidro combustível. Portanto, quando a aquisição de etanol brasileiro pelos Estados Unidos é tal que torna o balanço do-méstico de oferta e demanda deficitário no Brasil, faz-se necessária a importação brasileira de etanol americano. Esse vai e vem do produto ocorre de forma simultâ-nea e, por isso, considera-se a existência de um fluxo redundante de etanol, geran-do custos logísticos, transacionais e emissões de CO2 que poderiam ser evitados. Dado que o objeto do interesse americano pelo produto brasileiro é o baixo índice de emissões de CO2 no ciclo de vida do etanol de cana de açúcar, o fluxo redun-dante de etanol pode ser substituído por transações de Créditos de Biocombustível Avançado, uma nova ideia que é desenvolvida ao longo deste trabalho. Para cada Crédito transacionado, os Estados Unidos contabilizarão em seu balanço a emissão de CO2 correspondente ao volume equivalente de etanol de cana de açúcar, trans-ferindo para o Brasil as emissões correspondentes ao mesmo volume de etanol de-rivado do amido de milho. A substituição do fluxo físico pela transação de contratos é a fonte de economia proposta no título deste trabalho.

In an attempt to achieve energy independence, rural economic development, and greenhouse gas emissions reduction, the United States has turned to fuels derived from agriculture. The U.S. Congress and Environmental Protection Agency mandated the blending of biofuels into conventional gasoline until 2022 under the Renewable Fuel Standard. However, largely missing from the discussion of biofuels is their feasibility regarding environmental protection and end-use marketing to consumers. This thesis investigates the motive for biofuel mandates in the U.S., the irony in the EPA’s decision to back a resource-exhaustive fuel source, and the questionable ability of the U.S. to supply and consume greater volumes of biofuels in the transportation sector. Barriers to consumption are outlined as increased production costs and high market fuel prices, strong political backing of traditional energy sources, and environmental implications of production on ecosystems in certain regions of the United States. By analyzing Iowa and Texas as two biofuel-producing states held in high regards for biofuel production capacity—yet varying degrees of consumption—the feasibility of reaching federal biofuel mandates and promoting this alternative fuel is determined.