Economics of herbaceous bioenergy crops for electricity generation: Implications for greenhouse gas mitigation

This paper examines the optimal land allocation for two perennial crops, switchgrass and miscanthus that can be co-fired with coal for electricity generation. Detailed spatial data at county level is used to determine the costs of producing and transporting biomass to power plants in Illinois over a 15-year period. A supply curve for bioenergy is generated at various levels of bioenergy subsidies and the implications of production for farm income and greenhouse gas (GHG) emissions are analyzed. GHG emissions are estimated using lifecycle analysis and include the soil carbon sequestered by perennial grasses and the carbon emissions displaced by these grasses due to both conversion of land from row crops and co-firing the grasses with coal. We find that the conversion of less than 2% of the cropland to bioenergy crops could produce 5.5% of the electricity generated by coal-fired power plants in Illinois and reduce carbon emissions by 11% over the 15-year period. However, the cost of energy from biomass in Illinois is more than twice as high as that of coal. Costly government subsidies for bioenergy or mandates in the form of Renewable Portfolio Standards would be needed to induce the production and use of bioenergy for electricity generation. Alternatively, a modest price for GHG emissions under a cap-and-trade policy could make bioenergy competitive with coal without imposing a fiscal burden on the government.