Opportunities for Alternative Fuels Production
RAND CORP SANTA MONICA CA
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Today, I will discuss the strategic importance of alternative fuels, our assessment of the most promising candidates for near-term production, the barriers impeding alternative fuel production, and potential measures that Congress could pursue to promote a commercially-competitive subsidy-free domestic alternative fuels industry. My key conclusions are as follows. First, successfully developing a competitive alternative fuels industry in the United States would bring significant economic and national security benefits. But achieving those benefits requires an industry capable of producing millions of barrels per day. Second, the Fischer-Tropsch method, which is a thermochemical conversion method, is the only near-term approach capable of producing large amounts of alternative fuels beyond the level currently supplied by corn-derived alcohol fuels. Other near-term approaches, such as seed and waste oils and animal fats have extremely limited production potential. Third, alternative fuels production is being impeded by continuing uncertainties regarding world oil prices, uncertain production costs for first-of-a-kind facilities, and an uncertain regulatory environment, especially regarding the management of greenhouse gas emissions. Finally, a federal program directed at reducing these uncertainties and obtaining early, but limited, commercial experience in alternative fuels with a high production potential appears to offer the greatest strategic benefits. Federal policies that favor renewable fuels irrespective of energy security or environmental benefits should be reexamined.