Use of net present value analysis to evaluate a publicly funded biomass-to-ethanol research, development, and demonstration program and valuate expected private sector participation

Abstract

One of the functions of government is to invest tax dollars in programs, projects, and properties that will result in greater public benefit than would have resulted from leaving the tax dollars in the private sector or using them to pay off the public debt. This paper describes the use of Net Present Value (NPV) as an approach to analyze and select investment opportunities for government money in public research, development, and demonstration (RD&D) programs and to evaluate potential private sector participation in the programs. This approach is then applied to a specific biomass-to-ethanol opportunity in California.