Corn growers seen limiting cellulosic ethanol

By Timothy Gardner

NEW YORK (Reuters) - Growth of a new ethanol made from switchgrass and fast-growing trees could be limited by competition from corn growers, ethanol experts said.

The fuel, called cellulosic ethanol, is not yet commercially available, but has been touted by U.S. President George W. Bush, environmentalists, and venture capitalists as an efficient low-carbon fuel.

The Bush administration has rolled out nearly $1 billion in funds to research and build new refineries to ethanol producers, including for cellulosic fuel, in an effort to cut reliance on foreign oil as well as greenhouse emissions.

The White House wants to boost U.S. production of biofuels by nearly five times current levels by 2017.

At the beginning stage, at least, cellulosic ethanol can cost as much as double to produce as traditional U.S. ethanol, currently mostly made from corn. Even if costs fell over time, cellulosic producers could face heavy competition from corn growers because of U.S. incentives to make traditional ethanol.

"It's hard to imagine growers have spent 25 years nurturing members of Congress to support tariffs and blenders credits... in order to give this game away to grass," C. Ford Runge, an economics professor at the University of Minnesota, told reporters at the Council on Foreign Relations in New York.

The U.S. puts a 54-cent-per-gallon tariff on imports of ethanol from Brazil, which makes the fuel mostly from sugar cane, and gives comparable ethanol blending credit for producers of the traditional fuel.

Ethanol made from sugar cane is much more efficient than corn-based ethanol because it requires far less inputs such as fertilizer and insecticides.