Madhu Khanna

　　Department of Agricultural and Consumer Economics, University of Illinois, Urbana-Champaign

　　Perennial grasses, switchgrass ( Pancium virgatum ) and miscanthus ( Miscanthus x giganteus ) are particularly promising as bioenergy feedstocks in the United States as these can be grown in the rain-fed region of the eastern United States. These perennials are appealing because they are high yielding and can be grown on marginal land without competing with food crop production on high quality land. They also have the potential to provide a range of environmental benefits, including, soil carbon sequestration, low carbon fuels and reduction in soil nitrate run-off that can improve water quality as compared to existing uses of the land. The multiple environmental benefits from the production of these feedstocks occur jointly in the form of greenhouse gas mitigation and reduction in nitrate run-off.

　　The yields of these feedstocks are dependent upon local soil, climatic conditions, and agronomic practices, and therefore, vary spatially. The economic costs of production and the environmental benefits of producing these feedstocks also differ across locations. The costs of production of biofuels using these feedstocks are currently higher than that of fossil fuels and the costs of producing the first generation of biofuels from corn ethanol they seek to displace;  thus there are trade-offs among the economic and environmental benefits of biofuels from alternative feedstocks. The incentives for the production and consumption of these biofuels depend on policy incentives that would reward the producers of these biofuels.

　　An integrated biophysical and economic modeling approach is developed to quantify the environmental benefits of alternative feedstocks and their economic costs of production and for designing appropriate policy incentives to support cellulosic ethanol production. As compared to gasoline, the greenhouse gas savings from miscanthus-based ethanol ranged between 130%-156% while that from switchgrass ranged between 97%-135%. Similarly, the reduction in nitrate run-off also varies spatially depending on local topography, soil quality and proximity to waterbodies.

　　A watershed-scale integrated modeling approach is used to quantify the tradeoffs between profitability, food and fuel production, GHG emissions and nitrate runoff reduction with different types of biofuels. We determine the monetary valuation of greenhouse gas savings and nitrate reduction needed to induce production of these feedstocks in the watershed. This is used to design cost-effective carbon and nitrate reduction policies that need to be implemented jointly to achieve given environmental targets in the watershed.