Economic and Environmental Assessment of Advanced Biofuels : Adoption Under Uncertainty, Farmer Willingness, and Land Use Implications

The production of biofuels offers the prospect of enhancing a country’s energy security by limiting petroleum imports and supporting domestic economic activity by bolstering agricultural and allied sectors. Additionally, advanced biofuels can reduce the reliance on food-grain based first generation ethanol, replace a part of our fossil fuel consumption, and potentially reduce environmental impacts through greenhouse gas emission reductions. However, the cellulosic biofuel industry has not developed as anticipated due to slow advancements in the technology for converting feedstock to fuel, improvements in vehicular efficiency, which has muted fuel demand, and lack of an assured year-round supply of feedstock that has hindered commercial viability of cellulosic biofuel production. Against this backdrop, this dissertation explores the development of switchgrass based bioenergy from economic, environmental, and policy perspectives. We evaluate switchgrass adoption under uncertainty by developing a discrete-time binomial framework to model output prices. This approach allows us to incorporate the time-to-establishment attributes of switchgrass cultivation into the modeling framework. We analyze the economic viability of investments in switchgrass cultivation under various price transitions, evaluate the relationship between risk and profitability, and estimate the value of flexible decision-making. Understanding the perceptions of the farming community about producing crops used in biofuel production, and whether they will adopt switchgrass cultivation, is a crucial part of the bioenergy feedstock supply puzzle. To our knowledge, our study undertook the first survey of farmers in Missouri to delineate their perceptions and preferences around bioenergy production since the new administration assumed office. Therefore, our survey results are timely and provide valuable insights regarding the potential for switchgrassbased bioenergy. We unravel the influence of a host of factors on farmer willingness to cultivate switchgrass. Finally, we study the role of farmer perceptions around the suitability of switchgrass for their operations and assess their initial land allocation decisions. We find that land allocated for switchgrass cultivation is more likely to come from lands under hay or under other uses. Our research contributes to the body of knowledge about energy crop cultivation and has important implications for designing policies that consider financial incentives, risk management, and future land use perspectives