Advanced biofuels are produced through a variety of combinations of (1) a feedstock, which is the type of renewable biomass that is converted into a renewable fuel, and (2) a conversion technology, which is used to convert renewable biomass into fuel. The result is a final fuel product. Advanced biofuels may be made from an assortment of feedstocks, ranging from waste fats and oils to crops grown expressly for biofuels production, such as grasses like miscanthus and switchgrass. (See fig. 1.) These feedstocks are converted into fuel using a variety of conversion technologies that generally rely on chemicals, catalysts, enzymes, heat, or pressure. Depending on the feedstock and conversion technology used, the fuel may fit into one or more of three advanced biofuels categories established in the RFS. Advanced: renewable fuel, other than ethanol derived from corn starch, that has life-cycle greenhouse gas emissions at least 50 percent lower than traditional petroleum-based fuels. This is a catch- all category that may include a number of fuels, including fuels made from algae or ethanol made from sugar cane. This category includes the following subcategories: Biomass-based diesel: biodiesel or renewable diesel that has life-cycle greenhouse gas emissions at least 50 percent lower than traditional petroleum-based diesel fuels. Cellulosic: renewable fuel derived from any cellulose, hemicellulose, or lignin that is derived from renewable biomass and has lifecycle greenhouse gas emissions at least 60 percent lower than traditional petroleum-based fuels. This category of fuel may include cellulosic ethanol, renewable gasoline, cellulosic diesel, and renewable natural gas from landfills that can be upgraded and used in vehicles designed to run on liquefied or compressed natural gas. Some advanced biofuels are compatible with existing engines and the fuel distribution infrastructure. Such fuels, known as “drop-in” fuels, include renewable diesel, renewable jet fuel, and renewable gasoline. Other advanced biofuels are not fully compatible. For example, cellulosic ethanol, like corn-starch ethanol, faces limits on the amount that can be blended into gasoline, in part because it is more corrosive. Drop-in fuels do not face this limitation because they are compatible with current infrastructure. EPA is responsible for implementing the RFS through several mechanisms. Specifically, EPA approves new combinations of feedstocks, conversion processes, and fuels that can be counted toward the statutory targets. EPA also has the authority to waive statutory targets and set annual volume requirements for categories of renewable fuels, including advanced biofuels. These volumes may deviate from the statutory targets because of inadequate domestic supply, among other reasons. For 2010 through 2013, EPA set annual volume requirements for the cellulosic biofuels category that were below statutory targets, but kept the overall volume for all advanced biofuels in line with the statute. For 2014 through 2017, in addition to setting lower annual volume requirements for the cellulosic biofuels category, EPA also set lower overall volume requirements for all advanced biofuels. For 2013 through 2017 EPA also set volume requirements for biomass-based diesel that were higher than the minimums set in the statute, which somewhat offset the lower requirements for cellulosic biofuels. (See fig. 2 for a comparison of statutory targets and volume requirements set by EPA.) In addition to the RFS, there are federal tax incentives to promote the production and use of advanced biofuels. These include the Biodiesel Income Tax Credit, which provides a $1 per-gallon tax credit for producers of certain biodiesel or renewable diesel. Separately, the Second Generation Biofuel Producer Tax Credit provides advanced biofuel producers a tax credit of up to $1.01 per gallon of advanced biofuel produced and used domestically. R&D related to advanced biofuels includes both basic and applied research. In general, basic research focuses on gaining a fundamental understanding of a material or process. Applied research explores the potential of a material or process to satisfy a technology need. Components of an advanced biofuels applied research portfolio may include developing technologies to provide a reliable, affordable, and sustainable biomass supply. To reach commercial-scale production, advanced biofuels must go through a process of increasing the scale of production, beginning with a research and development phase that culminates in proving a given technology in a laboratory setting. Once a conversion technology has been proven at laboratory scale, it can be scaled up and tested in a pilot facility. Pilot-scale facilities are small-scale facilities that verify the integrated performance of a given suite of technologies from feedstock through final product. Once a technology has been proven at this scale, it can be scaled up to a demonstration facility, which verifies the performance of integrated technologies at a scale that can be used to determine design specifications for a still larger facility. Commercial-scale facilities, including both “first-of-its-kind” and subsequent facilities, aim to produce commercial volumes economically on a continuous basis, with a reliable feedstock supply and production distribution system. Figure 3 illustrates the stages in the advanced biofuels scale-up process. The federal government has supported R&D related to advanced biofuels through direct research and grants in recent years, with the focus of this R&D shifting away from cellulosic ethanol, an advanced biofuel that is not fully compatible with current vehicle engines and fuel distribution infrastructure, and toward drop-in biofuels, which are compatible with this infrastructure. Agency officials said that they are focusing on drop-in fuels in part because of this compatibility. As figure 4 shows, the federal government obligated about $1.1 billion for R&D related to advanced biofuels in fiscal years 2013 through 2015, of which DOE obligated over $890 million, or about 80 percent of the total. USDA obligated over $168 million for such R&D in this time frame, or about 15 percent of the total. Of these obligations, $3 million of DOE’s total and about $5.29 million of USDA’s total were obligated for projects through the Biomass Research and Development Initiative—an annual joint funding opportunity announcement focused on biofuels and bioproducts. NSF, DOD, and EPA spent relatively small amounts on R&D related to advanced biofuels in fiscal years 2013 through 2015, compared with DOE and USDA. In fiscal years 2013 through 2015, DOE obligated $890.4 million—the majority of all federal funding for R&D related to advanced biofuels— through four offices: the Office of Science, the Bioenergy Technologies Office, the Advanced Research Projects Agency-Energy (ARPA-E), and the Vehicle Technologies Office. (see fig. 5.) The following DOE offices obligated funds for basic and applied R&D on all stages of advanced biofuel production, and overall have shifted away from R&D on cellulosic ethanol: Office of Science. In fiscal years 2013 through 2015, DOE’s Office of Science obligated approximately $424.1 million for external R&D related to advanced biofuels. According to an agency official, the office supports basic R&D in this field primarily by funding three bioenergy research centers. The Office of Science also awards grants to fund projects at national laboratories and academic institutions. Research covers all areas of biofuels R&D, including sustainability, feedstock development and logistics, and conversion technologies. DOE officials told us that, although they continue to investigate cellulosic ethanol, drop-in fuels are more desirable because they are compatible with current engine designs and fueling infrastructure. According to an agency official, the office supports basic research and focuses efforts on demonstrating proof of concept—showing that laboratory results can be replicated in real- world conditions. For example, staff at one of the bioenergy research centers supported by the Office of Science recently transplanted poplar trees that had been cultivated for biofuel production under laboratory conditions to the field to observe their growth. Once proof of concept has been demonstrated in this way, research often transitions to other federal offices and/or industry to conduct additional applied research. Bioenergy Technologies Office. In fiscal years 2013 through 2015, this office obligated approximately $397.5 million for in-house and external R&D related to advanced biofuels. The office conducts its own basic and applied R&D at federal laboratories including the National Renewable Energy Laboratory in Golden, Colorado, and partners with industry and universities. The office focuses on developing and transforming renewable biomass into commercially viable high-performance biofuels, bioproducts, and biopower. The office spent much of the past decade focusing R&D on cellulosic ethanol, but after meeting key goals to reduce production costs, the office shifted its focus to drop-in fuels in 2012. For example, the Bioenergy Technologies Office funded a project by the nonprofit Gas Technology Institute to develop a process for converting a broad range of feedstocks—residue from wood harvesting and manufacturing, algae, and corn stover—into drop-in fuels. According to DOE officials, the process resulted in fuels that meet technical specifications for gasoline and diesel while achieving a 90-percent reduction in greenhouse gas emissions relative to fossil fuels. Officials told us the technology was licensed in June 2015 to a company that plans to build a demonstration plant. ARPA-E. In fiscal years 2013 through 2015, DOE’s Advanced Research Projects Agency-Energy obligated approximately $57.9 million for external R&D related to advanced biofuels. ARPA-E awards funds for applied research to outside organizations, such as private companies and academic institutions. The agency seeks to fund high-impact energy technologies that are too early for private- sector investment. More than 87 percent of ARPA-E’s advanced biofuel R&D projects are funded as part of the Plants Engineered to Replace Oil (PETRO) program and the Transportation Energy Resources from Renewable Agriculture (TERRA) program. Neither of these programs directly supported cellulosic ethanol research. During fiscal years 2013 through 2015, the agency obligated more than $18 million for advanced biofuels projects through the PETRO program, which seeks to fund technologies that optimize production and conversion of plants for use as advanced biofuels, aiming to significantly reduce production costs. In fiscal year 2015, the agency obligated more than $32 million through the TERRA program, which began that year and focuses on improving production of sorghum as an advanced biofuel feedstock. Vehicle Technologies Office. In fiscal years 2013 through 2015, DOE’s Vehicle Technologies Office obligated approximately $10.9 million for in-house and external R&D related to advanced biofuels, focusing on end-user considerations. The Vehicle Technologies Office supports applied research to increase knowledge of the effects of conventional and advanced biofuels on engines and improve the efficiency of alternative fuel vehicles, among other things. It supports this research primarily through collaboration with national laboratories, universities, and industry. For example, the office is collaborating with Cummins engine company to develop a compression ignition engine capable of running on ethanol, which is usually a spark-ignition fuel, and diesel, which is a compression ignition fuel. An agency official told us that because compression ignition is more efficient than spark ignition, such an engine allows ethanol to be used more efficiently, thus decreasing petroleum consumption. In fiscal years 2013 through 2015, USDA obligated approximately $168.7 million for R&D related to advanced biofuels—making it the second largest funder of federal R&D related to advanced biofuels. It obligated these funds through two agencies: the Agricultural Research Service and the National Institute of Food and Agriculture. Each agency accounts for approximately half of USDA’s obligations related to R&D for advanced biofuels. Similarly to DOE, these agencies funded basic and applied research on all stages of advanced biofuel production, focusing on drop-in biofuels, biodiesel, and coproducts. Agricultural Research Service. In fiscal years 2013 through 2015, USDA’s Agricultural Research Service obligated approximately $85.5 million for in-house R&D related to advanced biofuels. According to its officials, the Agricultural Research Service conducts both basic and applied advanced biofuels R&D in four national research centers. The Agricultural Research Service is USDA’s chief in-house research arm, and its biofuels research is aimed at the production of advanced biofuels, focusing on drop-in fuels, biodiesel, and bioproducts. For example, scientists in Peoria, Illinois, developed a novel process that increased production of butanol—a drop-in fuel—from corn stover and lowered estimated production costs from $4.39 per gallon to $3.42 per gallon. The key to this cost reduction is to recover the butanol continuously as it is generated, which is done using a special pretreatment and distillation process. Scientists at the same laboratory also developed a new method of converting plant oils into skin care and food ingredients with antioxidant properties that extend shelf life. Agency officials told us that such high-value bioproducts may pave the way for commercial production of advanced biofuels. Such products may help offset the up-front cost and minimize the risk of constructing large, commercial-scale biorefineries that produce advanced biofuels. National Institute of Food and Agriculture. In fiscal years 2013 through 2015, USDA’s National Institute of Food and Agriculture obligated approximately $83 million for external R&D related to advanced biofuels. The agency funds basic and applied research through grants to academic institutions, non-governmental organizations, government laboratories, and industry. According to agency officials, the National Institute of Food and Agriculture’s current advanced biofuels research focuses on drop-in fuels. For example, the agency is investing in seven regional public/private consortia developing supply chains for biofuels and biobased products. One consortium, led by Washington State University, successfully developed a series of processes to take logging residues from Weyerhaeuser—a forest products company—and convert them to alternative jet fuel. DOE’s and USDA’s obligations to support advanced biofuels R&D included funds they contributed to the Biomass Research and Development Initiative, which funds R&D projects through funding opportunity announcements. Specifically, in fiscal years 2013 through 2015, USDA obligated $5.29 million to Biomass Research and Development Initiative projects through its National Institute of Food and Agriculture, and DOE obligated $3 million to these projects through its Bioenergy Technologies Office. The Initiative’s 2015 funding opportunity announcement called for applicants in the technical topic areas of feedstock development, including harvest and storage; biofuels and bioproducts development, including for chemicals that can potentially increase the economic viability of large-scale fuel production in a biorefinery; and biofuels and bioproducts development analysis, focusing on analytical tools to better evaluate bioproducts. One of the selected projects proposes to convert poplar trees to ethanol and polyurethane—a material that is used in a variety of applications, including insulation and foam cushioning. NSF, DOD, and EPA obligated less for R&D related to advanced biofuels than DOE and USDA; combined, these three agencies accounted for about 5 percent of the federal funds obligated for such R&D in fiscal years 2013 through 2015. In these years, NSF awarded approximately $45 million, mostly to academic research institutions, to fund external R&D related to advanced biofuels that could include cellulosic ethanol or drop- in fuels. These funds supported mostly basic and some applied research. One NSF-funded project at the University of Kentucky aims to develop an improved process for the conversion of vegetable oils and animal fats into a drop-in substitute for diesel. The process uses nickel, which is abundant and inexpensive, as a catalyst for conversion, as opposed to the expensive precious metals commonly used. DOD, through the Defense Advanced Research Projects Agency, funded one R&D project related to advanced biofuels during this period for a total of $9 million. This project sought to develop more efficient methods of growing and harvesting algae. According to EPA officials, the agency did not conduct any R&D on new ways to produce advanced biofuels; rather, in its role of administering the RFS program, it primarily conducted analyses to determine the life-cycle greenhouse gas emissions of combinations of feedstocks, conversion technologies, and the advanced biofuels produced to determine if they meet the requirements to be counted toward the statutory targets under the RFS. Experts said that several advanced biofuels are technologically well understood but noted that among those currently being produced there is limited potential for increased production in the near term. They further cited multiple factors that will make it challenging to significantly increase the speed and volume of production. In addition, current advanced biofuel production is far below overall RFS target volumes, and those volumes are increasing every year. Given expert views on the limited potential for increased production and current production volumes, it does not appear possible to meet the targets in the RFS for advanced biofuels under current market and regulatory conditions. Several advanced biofuels are technologically well understood, according to experts, and some are being commercially produced in significant quantities, but the overall volume being produced falls short of the volume target in the RFS. For example, in 2015, about 3.1 billion ethanol- equivalent gallons of advanced biofuels were produced, falling short of the statutory target of 5.5 billion gallons in the RFS for that year. By 2022, the advanced biofuels target increases to 21 billion gallons, so production would have to rapidly increase to meet this target. Biodiesel and renewable diesel—which typically fall under the category of biomass-based diesel in the RFS—are among the types of advanced biofuels that are technologically well understood, according to experts, and they are being produced in the largest volumes. Biomass-based diesel, which has its own minimum statutory volume target set in the RFS, is the exception among the categories in that it exceeded its minimum of at least 1 billion gallons for 2015. In 2015, about 1.5 billion gallons of biodiesel were produced, according to EPA. In addition, about 300 million gallons of renewable diesel were produced in 2015. Experts agreed that expansion potential for these fuels is limited by the availability of feedstocks (fats and oils), for which there are competing uses. For example, soybean oil is also used as a cooking oil. Cellulosic biofuels—specifically cellulosic ethanol and renewable natural gas from landfills—are also technologically well understood, according to experts, but current production is far below the volume needed to meet the target for these fuels. Specifically, in 2015, about 142 million gallons of cellulosic biofuel overall—including about 2 million gallons of cellulosic ethanol and about 140 million gallons of renewable natural gas—were produced. This cellulosic biofuel volume was less than 5 percent of the statutory target of 3 billion gallons. According to experts, there is limited potential for expanded production of cellulosic ethanol in the next 5 years to meet the higher volumes called for in the statute. Experts said that the most economical way to quickly expand production of cellulosic ethanol is through “bolt-on” facilities, which use the cellulosic corn fiber remaining after corn-starch ethanol production as a feedstock; however, the experts said that such facilities would not boost overall cellulosic ethanol volumes by more than about 750 million gallons even if added to every existing corn-starch ethanol refinery. This is far short of the 2015 target of 3 billion gallons. Several corn-starch ethanol producers are already using such bolt-on facilities, and other corn-starch ethanol producers are expected to follow suit, according to experts and producers we interviewed, because these technologies require relatively low expenditures of capital and these costs can be recovered relatively quickly. Experts said that significant expansion of cellulosic ethanol production beyond current levels would require construction of large stand-alone facilities and that even though several such facilities have been built, attracting the investments necessary to build more is unlikely until conversion yields and operability improve and costs come down. Concerning renewable natural gas, which is produced mainly from landfills, an expert noted that to be usable as a transportation fuel, the gas must be purified and adjusted to specifications. A renewable natural gas producer we spoke with said the cost to upgrade landfill gas to meet such specifications is significant and that landfill gas can be used for other purposes, including making electricity, without this costly upgrading. The producer told us that despite the additional cost, the incremental revenue from credits under the RFS makes it worthwhile to upgrade landfill gas. According to the experts, some other technologies for producing advanced biofuels are also well understood, but these technologies have produced relatively small volumes of fuel because they cannot compete with petroleum-based fuels given current oil prices and despite federal biofuels tax credits and other incentives. These technologies include pyrolysis, which involves the thermal and chemical decomposition of a feedstock without the introduction of oxygen. About 44,000 gallons of cellulosic renewable gasoline blendstock and about 9,000 gallons of cellulosic diesel were produced in 2014 and none in 2015 or 2016 because the producer went out of business. Both of these fuels are considered drop-ins. Experts agreed that algal biofuels are technologically well understood and have significant future potential, but are still several years away from being economical to produce because of the high cost of growing algae. Experts estimated it may cost $1200 to $4000 per ton to produce algae currently, and costs need to fall to $400 to $500 per ton to make the process economical for fuel production. For example, one producer we interviewed can reliably produce biofuel from algae but is focusing on higher-value nutritional and pharmaceutical products. Experts identified several factors, many related to cost, that will affect the speed and volume of production of advanced biofuels and make it challenging to significantly increase production in the next 5 to 10 years. These factors include the following: Low price of fossil fuels relative to advanced biofuels. According to experts, low fossil fuel prices affect advanced biofuels in two ways. First, experts said getting consumers to accept higher blends of advanced biofuels at the pump will require those biofuels to be priced competitively with equivalent fossil fuels. While the average retail gasoline price was over $4 per gallon in May 2011, it dropped to under $2 per gallon in early 2016, making it harder to compete on price at the pump. Similarly, retail diesel prices were over $4 per gallon as recently as March 2014, but briefly fell below $2 in early 2016. Second, experts said low fossil fuel prices are a significant impediment to biofuels investment. One expert noted that investment in advanced biofuels technology has dropped since oil prices have dropped, making it difficult to fund the R&D needed to reduce the cost of biofuels. Experts agreed that one option to overcome this fossil fuels price advantage would be to put a price on greenhouse gas emissions—for example, through a carbon tax or similar mechanism. High cost of converting cellulosic feedstocks. Experts told us that conversion costs are a function of (1) the number of processing steps it takes to convert a raw feedstock to a fuel; (2) the difficulty of transporting and handling solid feedstocks as compared with liquid or gaseous feedstocks; (3) the difficulty of handling and disposing of waste products from the conversion process; and (4) infrastructure challenges associated with a plant’s location, such as access to a steady feedstock supply and rail lines to transport fuel. For example, one expert noted that handling solid feedstocks on the front end of conversion, as opposed to liquids or gases, is more time consuming and complex, resulting in additional costs. These feedstocks, such as corn stover or forest logging residues, may need to be ground or chipped to a uniform size so they will more easily flow through equipment, and debris such as rocks and dirt may need to be removed to prevent damage to equipment. In addition, experts noted that it can be costly to dispose of waste products from the conversion process. Ideally, producers will find ways to monetize waste products by creating coproducts, but more work is needed in this area to make that a reality. For example, lignin—a part of plant matter that is left over after conversion to cellulosic ethanol—can be burned to produce energy. One producer told us using lignin in carbon fiber may be a future possibility. Time and cost to bring a new technology to commercial-scale production. Experts told us that developing a biofuel technology and bringing it from laboratory scale to commercial scale may take 12 years if every step works out well, and could take considerably longer; one representative we interviewed from a company that produces biofuel said this process may take 15 to 25 years. (See fig. 6 for examples of laboratory-scale and commercial-scale advanced biofuels production.) Once a biofuel technology is technologically ready, the design, engineering, and construction of the first plant normally take 3 to 4 years, according to experts. Such first-of-their- kind facilities often face challenges because the companies are still optimizing the technology and may encounter problems that only occur when building at commercial scale. One producer told us they overbuilt their first commercial facility out of caution. Therefore these facilities take longer and are more expensive to construct than subsequent facilities. A representative of a company that produces advanced biofuel told us that, compared to the cost of its first plant, it has identified opportunities that could save about 25 percent on its next plant. Time and cost to secure fuel certification and acceptance. Experts told us that once a fuel can be produced several steps remain before it can be brought to market, including regulatory registration, certification by ASTM International, as well as oil company and vehicle acceptance. These steps can occur concurrently, but they have different time frames. In addition, these steps are costly for companies. For example, one expert said that passing the EPA registration for a new fuel costs millions of dollars, while another noted that ASTM certification of a new fuel is a longer and more expensive process. Oil companies and vehicle manufacturers must also approve a new fuel before they will be willing to blend it for use in transportation fuels. New advanced biofuels must also have their combination of a feedstock, a conversion process, and a final product approved by EPA in order to be counted toward the annual volume requirements under the RFS. A representative from one company we spoke to told us EPA’s reviews are taking longer than expected. One expert told us that two different advanced biofuels projects have been recently cancelled specifically because of the time it has taken for EPA to complete these approvals. Uncertainty about government policy. Experts agreed that uncertainty about government policy is a major barrier for the commercialization of advanced biofuels because it sends mixed signals to the market, which can limit investment. The future of the RFS, the Biodiesel Income Tax Credit, and the Second Generation Biofuel Producer Tax Credit may all be sources of uncertainty. Regarding the RFS, there is uncertainty about whether it will remain in place, and uncertainty about where EPA will set annual volume requirements. As described in the sidebar on this page, the tax credits have been allowed to expire and then have been retroactively extended in the past. This uncertainty affects all stages of biofuel production. For example, one expert stated that producers of farm equipment will not invest in new harvesting technology to maximize biomass feedstock yields if they see too much uncertainty in the market for advanced biofuels over the next 10 years, while other experts noted the difficulty in obtaining capital to build commercial- scale plants. Every advanced biofuels producer we interviewed also cited uncertainty about government policy as a major barrier to commercial-scale production. One producer said policy uncertainty has increased since 2013 when EPA used its waiver authority to reduce the RFS statutory volumes, causing investors to lose confidence and interest in commercial-scale plants. Another producer we interviewed told us that producers cannot rely on the Second Generation Biofuel Producer Tax Credit in their investment decisions. Underdeveloped feedstock supply chain. Experts agreed that the lack of logistics for the entire feedstock supply chain—from securing a contract to delivering and storing a feedstock—is an economic barrier to the production of advanced biofuels. One expert noted that it may take longer to set up contracts with farmers for feedstock delivery, such as corn stover, than it takes to build an advanced biofuels plant. Without a developed commodity market for advanced biofuel feedstocks, producers must negotiate contracts with individual farmers, which is costly and time consuming. One cellulosic biofuel producer told us it faced challenges with feedstock transport and storage in trying to minimize burdens on farmers. Specifically, the producer noted that it was working with farmers to offer two different contract models: to store bales of stover at the farm, or to store them at the plant. Experts also noted that large amounts of dry cellulosic feedstock in storage may be susceptible to fire, such as from lightning strikes—something that has happened at one cellulosic ethanol facility. We provided a draft of this report to EPA, USDA, NSF, DOE, and DOD for review and comment. In its written comments, reproduced in appendix IV, EPA generally agreed with the report and its findings. USDA and NSF provided technical comments, which we incorporated as appropriate. DOE and DOD did not have any comments on the draft. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Agriculture, the Secretary of Defense, the Secretary of Energy, the Administrator of the Environmental Protection Agency, the Director of the National Science Foundation, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report provides information related to advanced biofuels research and development (R&D). Specifically, it describes (1) how the federal government has supported advanced biofuels R&D in recent years and where its efforts have been targeted and (2) expert views on the extent to which advanced biofuels are technologically understood and the factors that will affect the speed and volume of production. To describe how the federal government has supported advanced biofuels R&D in recent years and where its efforts have been targeted, we reviewed documents and obligations data and interviewed officials from the following agencies: the Department of Agriculture’s (USDA) Agricultural Research Service and National Institute of Food and Agriculture; the Department of Defense’s (DOD) Defense Advanced Research Projects Agency; the Department of Energy’s (DOE) Advanced Research Projects Agency–Energy, Bioenergy Technologies Office, Office of Science, and Vehicle Technologies Office; the Environmental Protection Agency’s (EPA) Office of Transportation and Air Quality; and the National Science Foundation (NSF). We reviewed obligations data for advanced biofuels research and development for fiscal years 2013 through 2015. In some cases, agencies or offices estimated these obligations because they did not track obligations data for advanced biofuels R&D separately from other biofuels or bioenergy R&D. In addition, USDA’s Agricultural Research Service was not able to provide obligations data for advanced biofuels R&D, but provided allocations data instead. These data differ in that allocations are a delegation of authority to obligate funds, while obligations are legally binding agreements to outlay funds. According to officials from the Agricultural Research Service, it does not track funding for its research projects by obligations but rather by the allocation of funding by research project. Agency officials told us that they have reasonable certainty that the allocations they provided to us would align one-to-one with the obligations for agency research projects. To assess the reliability of the obligations data, we asked officials who maintain the relevant databases for information about steps they take to maintain the data. We determined that the data we used were sufficiently reliable for purposes of describing the scale of advanced biofuels R&D by the federal government. In addition, to further develop an understanding of the type of R&D done with federal funding, we visited the USDA Agricultural Research Service’s National Center for Agricultural Utilization Research in Peoria, Illinois and National Laboratory for Agriculture and the Environment in Ames, Iowa. We also visited a DOE Office of Science Bioenergy Research Center in Madison, Wisconsin. To describe expert views on the extent to which advanced biofuels are technologically understood and on the factors that will affect the speed and volume of production, we contracted with the National Academy of Sciences to convene a group of 20 experts for a 2-day meeting in May 2016. One expert was unable to attend the meeting, and we interviewed him separately. (See app. II for a list of the experts who participated.) Participants, who were identified and recommended by the National Academy of Sciences and approved by us, included experts in advanced biofuels feedstocks, conversion technologies, and the use of biofuels from industry, academia, and research organizations. We asked these experts to discuss the technological readiness of a variety of biofuels and the economic and other factors that may affect the speed and volume of their commercial-scale production. Specifically, we asked the experts to discuss the short-, medium-, and long-term technical potential of a variety of advanced biofuels and the conversion processes and feedstocks that can be used to make them, as well as any opportunities and challenges associated with these fuels, conversion processes, and feedstocks. We also asked them to discuss the most important economic and scale-up factors that will affect the speed and volume of commercial-scale production of advanced biofuels once they are technologically ready, and any particular areas on which the federal government should focus its R&D efforts to advance the technological readiness of advanced biofuels. We analyzed summary statements agreed upon by experts at the meeting as well as meeting transcripts to inform this report. To better understand the extent to which advanced biofuels are technologically understood and the factors that will affect the speed and volume of production, we also interviewed representatives, either in person or over the phone, from 11 companies that produce, or aim to produce, advanced biofuels. We visited POET-DSM’s cellulosic ethanol plant in Emmetsburg, Iowa; Quad County Corn Processor’s’ cellulosic ethanol plant in Galva, Iowa; and Solazyme’s demonstration plant in Peoria, Illinois. Producers were selected on the basis of technology used and scale of production to ensure a variety of perspectives. Specifically, we selected companies that are using well-established technologies and producing at commercial scale, companies using first-of-their-kind technologies and producing at commercial scale, and companies using first-of-their-kind technologies and not yet producing at commercial scale. These selection criteria allowed us to obtain broader perspectives on the logistical challenges of scaling up a technology, the factors involved in processing different fuel types, and the factors involved in EPA registration. These producer interviews provided key insights on and real- world examples of the factors that influence the speed and scale of advanced biofuel production; however, the results of our interviews cannot be generalized to all producers. (See app. III for a list of producers interviewed.) We conducted this performance audit from June 2015 to November 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The experts who participated in our meeting on advanced biofuels research and development at the National Academy of Sciences on May 26 and 27, 2016, are listed below. John Benemann CEO, MicroBio Engineering, Inc. The companies listed below are advanced biofuels producers we interviewed between January and June of 2016 to inform this report. Renewable Energy Group (REG) Waste Management Renewable Energy (WMRE) In addition to the contact named above, Karla Springer (Assistant Director), Tim Bober, Philip Farah, Cindy Gilbert, Connor Kincaid, Jesse Lamarre-Vincent, Janice Latimer, Cynthia Norris, Madhav Panwar, Marietta Mayfield Revesz, Dan Royer, Angela Smith, and Barbara Timmerman made key contributions to this report.

Summary: The RFS generally mandates that domestic transportation fuels be blended with increasing volumes of biofuels through 2022, with the goals of reducing greenhouse gas emissions and expanding the nation's renewable fuels sector while reducing reliance on imported oil. Blending of conventional renewable fuels, primarily ethanol derived from corn starch which is required to reduce greenhouse gas emissions by 20 percent compared with petroleum-based fuels, has nearly reached the maximum called for under the RFS. Further growth in renewable fuels is to come from advanced biofuels, which must reduce life-cycle greenhouse gas emissions by at least 50 percent compared with petroleum-based fuels to qualify under the RFS. However, production of advanced biofuels has not kept pace with statutory targets. To promote the development and commercialization of advanced biofuels, the federal government has supported R&D efforts for biofuels since the 1970s. GAO was asked to review issues related to advanced biofuels R&D. This report describes (1) how the federal government has supported advanced biofuels R&D in recent years and where its efforts have been targeted and (2) expert views on the extent to which advanced biofuels are technologically understood and the factors that will affect the speed and volume of production. GAO interviewed DOD, DOE, EPA, NSF, and USDA officials and worked with the National Academy of Sciences to convene a meeting of experts from industry, academia, and research organizations. EPA generally agreed with the report. The federal government has supported research and development (R&D) related to advanced biofuels through direct research or grants, and the focus is shifting away from cellulosic ethanol and toward drop-in biofuels. Unlike corn starch-based or cellulosic ethanol, drop-in fuels such as renewable gasoline are fully compatible with existing infrastructure, such as vehicle engines and distribution pipelines. In fiscal years 2013 through 2015, the federal government obligated more than $1.1 billion for advanced biofuels R&D. Of this amount, the Department of Energy (DOE) obligated over $890 million. For example, DOE's Office of Science funds three bioenergy research centers affiliated with universities and national labs that conduct basic research for all stages of biofuel production. The Department of Agriculture (USDA) obligated over $168 million in fiscal years 2013 through 2015 to support advanced biofuels. For example, USDA scientists developed a novel process to increase production of butanol, a drop-in fuel that lowered production costs by over 20 percent. The remaining federal obligations during these years were through the Environmental Protection Agency (EPA), the Department of Defense (DOD), and the National Science Foundation (NSF), which obligated relatively less for such R&D. According to agency officials, agencies are shifting their focus to drop-in fuels in part because they are compatible with existing infrastructure. Officials from one federal funding agency said this compatibility makes drop-in fuels more desirable than cellulosic ethanol. Experts said that several advanced biofuels are technologically well understood and some are being commercially produced, but they noted there is limited potential for increased production in the near term and cited several factors that will make significant increases challenging. Given that current advanced biofuel production is far below Renewable Fuel Standard (RFS) targets and those targets are increasing every year, it does not appear possible to meet statutory target volumes for advanced biofuels in the RFS under current market and regulatory conditions. Biofuels that are technologically well understood include biodiesel, renewable diesel, renewable natural gas, cellulosic ethanol, and some drop-in fuels. A few of these fuels, such as biodiesel and renewable diesel, are being produced in significant volumes, but it is unlikely that production of these fuels can expand much in the next few years because of feedstock limitations. Current production of cellulosic biofuels is far below the statutory volumes and, according to experts, there is limited potential for expanded production to meet future higher targets, in part because production costs are currently too high. Experts told GAO that technologies for producing other fuels, such as some drop-in fuels, are technologically well understood but that these fuels are not being produced because production is too costly. Among the factors that will affect the speed and volume of production, experts cited the low price of fossil fuels relative to advanced biofuels. This disparity in costs is a disincentive for consumers to adopt greater use of biofuels and also a deterrent for private investors entering the advanced biofuels market. Experts also cited uncertainty about government policy, including whether the RFS and federal tax credits that support advanced biofuels will remain in effect. While such policies should encourage investment, investors do not see them as reliable and thus discount their potential benefits when considering whether to invest.