Post-RFS supports for cellulosic ethanol: Evaluation of economic and environmental impacts of alternative policies

Abstract

Cellulosic ethanol is a sustainable and low-emission transportation fuel, but production has been low in the past years. Existing policies, including the Renewable Fuel Standard (RFS) and producers’ tax credit, have been driving the market for cellulosic ethanol. But they are expected to expire at the end of 2022 and their efficacy is compromised by multiple waivers and exemptions. This study models potential regulatory and financial policy instruments and evaluates their cost-effectiveness in supporting cellulosic ethanol in the post-RFS era using the National Energy Modeling System (NEMS), a hybrid computational general equilibrium model of the U.S. energy market. The analysis suggests that the high volumetric mandate and financial subsidy will increase cellulosic ethanol production from 20.78 million liters (ML) to 57.84–65.94 ML in 2050. When policies are bundled, they will boost production reaching 63.29–65.94 ML more quickly than a singular policy. Finally, cost-benefit analysis and sensitivity analysis were employed to study the tradeoff of economic cost and environmental benefits of the policies. The result finds that the high mandate scenario has the greatest net benefit, which is more cost-effective than other policy instruments.