	Introduction

Cellulosic biofuels are produced from cellulose derived from renewable biomass feedstocks such as corn stover (plant matter generally left in the field after harvest), switchgrass, wood chips, and other plant or waste matter. Current production consists of a few small-scale pilot projects—and significant hurdles must be overcome before industrial-scale production can occur. The Renewable Fuel Standard: A Mandatory Usage Mandate

Principal among the cellulosic biofuels goals to be met is a biofuels usage mandate—the renewable fuel standard (RFS) as expanded by the Energy Independence and Security Act of 2007 (EISA, P.L. The RFS mandate for cellulosic biofuels in the EISA begins at 100 million gallons per year in 2010 and rises to 16 billion gallons per year in 2022 ( Figure 1 ). This mandate represents a prodigious challenge to the biofuels industry in light of the fact that no large-scale commercial production of cellulosic biofuels yet exists in the United States. Indeed, in March 2010, the U.S. Environmental Protection Agency (EPA) issued a final rule for implementation of the RFS that sets a new, lower cellulosic biofuel mandate of 6.5 million gallons for 2010. In December 2010, EPA issued a final rule to lower the 2011 cellulosic biofuel mandate of 250 million gallons to 6.6 million gallons (actual volume). This goal was given substance in December 2007, when Congress passed EISA, mandating the RFS for the use of specific volumes of renewable biofuels through 2022 and setting a goal of commercial-scale cellulosic biofuels production by 2012. This report provides background on the current effort to develop industrial-scale, competitive technology to produce biofuels from cellulosic feedstocks. Finally, the report reviews the role of Congress with respect to the emerging cellulosic biofuels industry, reviews recent congressional actions affecting the industry, and discusses key questions facing Congress. Cellulosic Feedstock Supplies

Feedstocks used for cellulosic biofuels are potentially abundant and diverse. The USDA estimate also predates the definition of renewable biomass eligible for the RFS. Impacts on Food Supplies

Compared with corn, cellulosic feedstocks are thought to have smaller impacts on food supplies. As a result, even though cellulosic biofuels benefit from a production tax credit of up to $1.01 (discussed below), which is $0.56 per gallon higher than the blender's tax credit of $0.45 per gallon for corn ethanol, it remains at a substantial cost disadvantage compared with corn-starch ethanol. Prairie grasses and woody crops require reduced inputs compared with corn—and have lower greenhouse gas emissions. Private Investment

Private investment is viewed by many to be critical to the development of the cellulosic biofuels industry. 110 - 140 ), the Food, Conservation, and Energy Act of 2008 (the 2008 farm bill, P.L. BRDI plays a major role in R&D for the cellulosic biofuels industry. Debate may continue on the appropriate level of incentives needed to jump start the industry. In the long term, Congress might also consider the ongoing level of government support that is appropriate for the cellulosic biofuels industry—considered by some to be essential, especially if the RFS is to be met. The general level of support in the form of grants and loans has been determined in the 2008 farm bill but will likely be revisited as appropriations are considered. The cellulosic biofuels tax credit applies to fuel produced from 2009 through 2012 and extension of this credit could be the subject of debate during the 112 th Congress. Expanding Biomass Eligible under the RFS

The definition of forest-based renewable biomass under the RFS is considered by some to be too restrictive because it limits eligible woody biomass to privately planted trees and tree residue from actively managed tree plantations, and slash and pre-commercial thinnings from non-federal forests. Some small-scale plants came online in 2010.
Cellulosic biofuels are produced from cellulose (fibrous material) derived from renewable biomass. They are thought by many to hold the key to increased benefits from renewable biofuels because they are made from potentially low-cost, diverse, non-food feedstocks. Cellulosic biofuels could also potentially decrease the fossil energy required to produce ethanol, resulting in lower greenhouse gas emissions.
Cellulosic biofuels are produced on a very small scale at this time—significant hurdles must be overcome before commercial-scale production can occur. The renewable fuels standard (RFS), a major federal incentive, mandates a dramatic increase in the use of renewable fuels in transportation, including the use of cellulosic biofuels—100 million and 250 million gallons per year (mgpy) for 2010 and 2011, respectively. After 2015, most of the increase in the RFS is intended to come from cellulosic biofuels, and by 2022, the mandate for cellulosic biofuels will be 16 billion gallons. Whether these targets can be met is uncertain. In March 2010, the Environmental Protection Agency issued a final rule that lowered the 2010 cellulosic biofuel mandate to 6.5 million gallons. In December 2010, EPA lowered the 2011 mandate to 6.6 million gallons. Research is ongoing, and the cellulosic biofuels industry may be on the verge of rapid expansion and technical breakthroughs. There are no large-scale commercial cellulosic biofuel plants in operation in the United States. A few small-scale plants came online in 2010.
The federal government, recognizing the risk inherent in commercializing this new technology, has provided loan guarantees, grants, and tax credits in an effort to make the industry competitive by 2012. In particular, the Food, Conservation, and Energy Act of 2008 (the 2008 farm bill, P.L. 110-246) supports the nascent cellulosic industry through authorized research programs, grants, and loans exceeding $1 billion. The enacted farm bill also contains a production tax credit of up to $1.01 per gallon for fuels produced from cellulosic feedstocks. Private investment, in many cases by oil companies, also plays a major role in cellulosic biofuels research and development.
Three challenges must be overcome if the RFS is to be met. First, cellulosic feedstocks must be available in large volumes when needed by refineries. Second, the cost of converting cellulose to ethanol or other biofuels must be reduced to a level to make it competitive with gasoline and corn-starch ethanol. Third, the marketing, distribution, and vehicle infrastructure must absorb the increasing volumes of renewable fuel, including cellulosic fuel mandated by the RFS.
Congress will likely continue to face questions about the appropriate level of intervention in the cellulosic industry as it debates both the risks in trying to pick the winning technology and the benefits of providing start-up incentives. The current tax credit for cellulosic biofuels is set to expire in 2012, but its extension may be considered during the 112th Congress. Congress may continue to debate the role of biofuels in food price inflation and whether cellulosic biofuels can alleviate its impacts. Recent congressional action on cellulosic biofuels has focused on the definition of renewable biomass eligible for the RFS, which is considered by some to be overly restrictive. To this end, legislation was introduced in the 111th Congress to expand the definition of renewable biomass eligible under the RFS.