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U.S. Economic Impact of Advanced Biofuels Production

The U.S. Renewable Fuel Standard (RFS) for transportation fuels sets minimum levels of renewable fuels that must be blended into gasoline and other transportation fuels from 2006 to 2022. Specific requirements for blending advanced biofuels,** including cellulosic biofuels and biomass-based biodiesel, begin at 0.6 billion gallons per year in 2009 and rise to 21 billion gallons in 2022. The RFS levels for advanced biofuels production will drive the creation of a major new industry, creating a foundation for future technology development and commercial growth.

To estimate the economic implications of the emergence of this new industry, bio-era conducted a meta-analysis of nearly two dozen studies of economic impacts of biofuels production, developed a model to analyze economic output and job creation, and applied this model to analyze the economic impact of increasing U.S. advanced biofuel production to 21 billion gallons per year by 2022.

This analysis yielded the following conclusions:

  • Direct job creation from advanced biofuels production could reach 29,000 by 2012, rising to 94,000 by 2016 and 190,000 by 2022. Total job creation, accounting for economic multiplier effects, could reach 123,000 in 2012, 383,000 in 2016, and 807,000 by 2022.
  • Investments in advanced biofuels processing plants alone would reach $3.2 billion in 2012, rising to $8.5 billion in 2016, and $12.2 billion by 2022. Cumulative investment in new processing facilities between 2009 and 2022 would total more than $95 billion.
  • Direct economic output from the advanced biofuels industry, including capital investment, research and development, technology royalties, processing operations, feedstock production and biofuels distribution, is estimated to rise to $5.5 billion in 2012, reaching $17.4 billion in 2016, and $37 billion by 2022.
  • Taking into consideration the indirect and induced economic effects resulting from direct expenditures in advanced biofuels production, the total economic output effect for the U.S. economy is estimated to be $20.2 billion in 2012, $64.2 billion in 2016, and $148.7 billion in 2022.
  • Advanced biofuels production under the RFS scenario could reduce U.S. petroleum imports by approximately $5.5 billion in 2012, $23 billion in 2016, and nearly $70 billion by 2022. The cumulative total of avoided petroleum imports over the period 2010–2022 would exceed $350 billion.

The bio-era model was also used to assess the economic implications of a scenario in which total U.S. biofuels production grows to 60 billion gallons by 2030, with 15 billion gallons of conventional biofuels production and 45 billion gallons of advanced biofuels production. This analysis concludes that:

  • Approximately 400,000 jobs would be directly created in the advanced biofuels industry, with total employment creation in the U.S. economy totaling 1.9 million jobs.
  • Direct economic output from advanced biofuels production would rise to $113 billion by 2030. The total economic output effect would be $300 billion.
  • Biomass feedstocks in this scenario could be provided by a mix of agricultural and forest wastes and dedicated energy crops, providing a total of 470 million dry tons of biomass by 2030 using existing crop and forest land.
  •  The average cost of advanced biofuel production at the plant-gate in 2030 would be $1.88 including all operating costs, overhead, and capital recovery.