Figure 2 Bioenergy Sources

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In order to project the agricultural and economic impacts of expanded ethanol and biodiesel production, two models are employed. The POLYSYS model (De La Torre Ugarte and Ray, 2000; Ray et al, 1998a; De La Torre Ugarte et al, 1998; Ray et al, 1998b) has the unique ability to provide annual estimates of changes in land use resulting from the demand generated by bioenergy industries, including changes in economic conditions that affect adjustment costs.

While maintaining a long-term analytical horizon, the proposed research emphasizes the challenges faced by increasing competition for land from bioenergy and traditional agricultural uses. This approach accounts for adoption and the identification of short-term requirements that a market or policy incentive mechanism must meet for agriculture to remain a reliable source of feedstocks for bioenergy, without imposing significant costs to consumers. Furthermore, the POLYSYS model is linked with an input-output model, IMPLAN, to project the economic impacts of ethanol and biodiesel feedstock production and conversion.

Recently, policy initiatives to spur the development and use of bioenergy and bioproducts using starch, cellulose, oil, etc. have been enacted or proposed. President Clinton signed Executive Order 13134 calling for tripling the use of bioproducts and bioenergy in the U.S. by 2010. The Agricultural Risk Protection Act of 2002 provides for the research and development of biobased industrial products. The National Energy Supply Diversification and Disruption Prevention Act, passed in 2005, encourages the development of more renewable energy and expedites the development of environmentally responsible renewable energy projects on federal lands. In addition, the Act established a renewable fuel content requirement for the nation's fuel pool mandating 7.5 billion gallons of renewable fuels by 2012. While ethanol is the primary focus, biodiesel is also defined as an eligible renewable fuel.

The Farm Security and Rural Investment Act of 2002 establishes, among other provisions, a Federal agency program to purchase bioproducts, provides biorefinery grants to support development of bioproducts and fuels, extends the termination date of the Biomass Research and Development Act of 2000, and expands the feedstocks list for use of CCC payments to eligible producers to purchase biomass feedstocks. The long term vision of the U.S. Department of Energy calls for an increase of biomass power from 2.7 quads (1 quadrillion btus) to 4.8 quads by 2030, and for the use of biobased transportation fuels from 0.5 percent of 2001 fuel consumption to 20 percent by 2030 (USDOE, 2002a).

Use of biomass feedstocks for transportation fuels, bioproducts, and power are increasingly being viewed as opportunities to enhance energy security, provide environmental benefits, and increase economic development particularly in rural areas. Several studies have addressed various aspects of these issues (USDA-OCE, 2002a; Urbanchuk, 2001; Wang et al, 1999; House et al, 1993; Petrulis et al, 1993; USDA-OCE, 2002b; Evans, 1997; CEC, 2001; Shapouri et al, 2002; Whitten, 2000; Sheehan et al, 2002a and 2002b; Walsh et al, 2003; De La Torre Ugarte et al, 2002; English et al, 2000; USDOE-EIA, 2001a and 2001b; Delucchi, 1997; McLaughlin et al, 2002; Mann and Spath, 2001a and 2001b; and Sheehan et al, 1996).

Previous economic modeling evaluating agriculture feedstocks for energy have been conducted in the context of carbon displacement potential (McCarl et al, 2000; McCarl et al, 2001; Adams et al, 1992; Adams et al, 1999) and have analyzed long-term and intermediate-run outcomes, that is, equilibrium situations that occur during twenty or more years. Adjustment costs incurred in the short-run for implementing new technologies and/or policies are not considered by these models (Schneider, 2000). Additionally, such long-term modeling is incapable of assessing the near-term challenges of adoption. Previous economic impact modeling experience using IMPLAN for agricultural feedstocks for energy have been conducted for evaluating the: 1) economic impacts of using alternative feedstocks for coal-fired plants in the southeastern United States (English, Menard, Walsh, and Jensen, 2004), 2) economic analysis of producing switchgrass and crop residues for use as a bioenergy feedstock (English, Menard, Wilson, and De La Torre Ugarte, 2004), and 3) the potential regional economic impacts of converting corn stover to ethanol (English et al, 2001). Results from these studies included intraregional transfers of economic activity resulting from displacement of traditional energy sources such as coal and examined the impacts to the regional and state economies for selected areas of the United States.

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