02/12/2009 05:12 am ET Updated May 25, 2011

Staying in the Lead on Biofuel Development -- Part 1

In a recent report, Dr. Cole R. Gustafson, an economist at North Dakota State University, found that despite current economic challenges, the US ethanol industry is poised to significantly increase the production of ethanol derived from wood chips, corn cobs, switchgrass and other forms of cellulose.

Gustafson, however, also took note of the challenges facing the industry -- the lack of capital, uncertainty in U.S. financial markets, and overall industry prospects. If these challenges are not met by the industry and the government, Gustafson predicts that "foreign competitors, primarily Brazil and Mexico, appear well positioned to fill U.S. consumer's demand for advanced biofuels."

This would be a terrible tragedy. It would not only be a setback for America's nascent advanced biofuels industry, but would cede the production of ethanol here at home to importing it from our southern neighbors when modest changes in government policy can help the industry meet its congressionally set goals.

In 2008, Congress passed an energy bill that will require the production of 36 billion gallons of ethanol, 22 billion gallons of cellulosic and advanced biofuels, by 2022. But because of the sudden downturn in the US economy and the volatility of oil and commodity prices, investment in new biofuel technology, as Gustafson points out, has slowed to a trickle.

Given the higher cost for building new second generation cellulosic plants, changes in tax provisions -- a 50% tax credit for cellulosic biofuel plants -- will help with financing. But more is needed if we are to sustain the growth and the development of this vital home grown industry.

Because investments in new ethanol plants will generate green jobs, including support for ethanol in the president's forthcoming stimulus plan makes a lot of sense. At the end of the day, commercializing second generation ethanol manufacturing will not only create green jobs, but will further reduce our reliance on imported oil and help decrease carbon emissions.