Conditions Necessary for Private Investment in the Ethanol Industry

While agricultural economics literature has become rife with the economics of ethanolproduction and cellulosic ethanol feedstock production, little has been written about capitalinvestment necessary for the magnitude of industry development mandated by the EnergySecurity and Independence Act of 2007. Financing the development of the ethanol industry tomeet the 36 billion gallon production capacity set for 2022 (with 16 billion gallons fromcellulosic ethanol) will require capital investments exceeding $100 billion for productionfacilities, plus extensive investment in feedstock establishment and transportation/handlinginfrastructure. Federal support associated with political mandates does not address all of thefinancial issues related with the development of the industry in such a relatively shorttimeframe. This article addresses the challenges associated with and the conditions necessaryfor achieving the private investment needed to expand the ethanol industry in the UnitedStates.