Cellulosic biofuels are produced from cellulose derived from renewable biomass feedstocks such as corn stover (plant matter generally left in the field after harvest), switchgrass, wood chips, and other plant or waste matter. Current production consists of a few small-scale pilot projects—and significant hurdles must be overcome before industrial-scale production can occur. Ethanol produced from corn starch and biodiesel produced from vegetable oil (primarily soybean oil) are currently the primary U.S. biofuels. High oil and gasoline prices, environmental concerns, rural development, and national energy security have driven interest in domestic biofuels for many years. However, the volume of fuel that can be produced using traditional row crops such as corn and soybeans without causing major market disruptions is limited; to fulfill stated goals, biofuels must also come from other sources that do not compete for the same land used by major food crops. Proponents see cellulosic biofuels as a potential solution to these challenges and support government incentives and private investment to hasten efforts toward commercial production. Some federal incentives—grants, loans, tax credits, and direct government research—attempt to push cellulosic biofuels technology to the marketplace. Demand-pull mechanisms such as the renewable fuel standard (RFS) mandate the use of biofuels, creating an incentive for the development of a new technology to enter the marketplace. In contrast, petroleum industry critics of biofuel incentives argue that technological advances such as seismography, drilling, and extraction continue to expand the fossil-fuel resource base, which has traditionally been cheaper and more accessible than biofuel supplies. Other critics argue that current biofuel production strategies can only be economically competitive with existing fossil fuels in the absence of subsidies if significant improvements are made to existing technologies or new technologies are developed. Until such technological breakthroughs are achieved, critics contend that the subsidies distort energy markets and divert research funds from the development of other renewable energy sources not dependent on internal combustion technology, such as wind, solar, or geothermal, which offer potentially cleaner, more bountiful alternatives. Still others debate the rationale behind policies that promote biofuels for energy security, questioning whether the United States could ever produce and manage sufficient feedstocks of starches, sugars, vegetable oils, or even cellulose to permit biofuel production to meaningfully offset petroleum imports. Finally, there are those who argue that the focus on development of alternative energy sources undermines efforts to score energy savings through lower consumption. Principal among the cellulosic biofuels goals to be met is a biofuels usage mandate—the renewable fuel standard (RFS) as expanded by the Energy Independence and Security Act of 2007 (EISA, P.L. 110 - 140 , Section 202)—that includes a specific carve-out for cellulosic biofuels. The RFS is a demand-pull mechanism that requires a minimum usage of biofuels in the nation's fuel supply. This mandate can be met using a wide array of technologies and fuels. Although most of the RFS is expected to be met using corn ethanol initially, over time the share of advanced (non-corn-starch derived) biofuels in meeting the mandate increases. The RFS specifies three non-corn-starch carve-outs: cellulosic biofuels, biomass-based diesel fuel, and other (or unspecified), which could potentially be met by imports of sugarcane-based ethanol. The RFS mandate for cellulosic biofuels in the EISA begins at 100 million gallons per year in 2010 and rises to 16 billion gallons per year in 2022 ( Figure 1 ). This mandate represents a prodigious challenge to the biofuels industry in light of the fact that no large-scale commercial production of cellulosic biofuels yet exists in the United States. Indeed, in March 2010, the U.S. Environmental Protection Agency (EPA) issued a final rule for implementation of the RFS that sets a new, lower cellulosic biofuel mandate of 6.5 million gallons for 2010. In December 2010, EPA issued a final rule to lower the 2011 cellulosic biofuel mandate of 250 million gallons to 6.6 million gallons (actual volume). The RFS also mandates maximum lifecycle greenhouse gas emissions for each type of biofuel. Lifecycle greenhouse gas emissions encompass emissions at all levels of production, from the field to retail sale, including emissions resulting from land use changes (e.g., the clearing of forests for cropland due to increased energy crop production elsewhere). Under the law, GHG emissions for cellulosic biofuels qualifying for the RFS are limited to 60% of the GHG emissions from extracting, refining, distributing, and consuming gasoline. Cellulosic biofuels have potential, but there are significant hurdles to overcome before competitiveness is reached. In his 2007 State of the Union Address, President Bush announced the "Twenty in Ten" initiative, calling for the rapid expansion of renewable biofuels production as a major part of an effort to reduce U.S. gasoline use by 20% through biofuels and conservation. This goal was given substance in December 2007, when Congress passed EISA, mandating the RFS for the use of specific volumes of renewable biofuels through 2022 and setting a goal of commercial-scale cellulosic biofuels production by 2012. This report provides background on the current effort to develop industrial-scale, competitive technology to produce biofuels from cellulosic feedstocks. It outlines the three major challenges faced in the context of the RFS: (1) feedstock supply, (2) extraction of fuel from cellulose, and (3) biofuel distribution and marketing issues. It then examines the current role of government (in cooperation with private industry) in developing that technology. Finally, the report reviews the role of Congress with respect to the emerging cellulosic biofuels industry, reviews recent congressional actions affecting the industry, and discusses key questions facing Congress. Feedstocks used for cellulosic biofuels are potentially abundant and diverse. Initially it was thought that a major advantage of cellulosic biofuels over corn-starch ethanol was that they could be derived from potentially inexpensive feedstocks that could be produced on marginal land. Corn, on the other hand, is a resource-intensive crop that requires significant use of chemicals, fertilizers, and water, and is generally grown on prime farmland. However, field research now suggests that establishment costs, as well as collection, storage, and transportation costs, associated with the production of bulky biomass crops are likely to be more challenging than originally thought. Cellulose, combined with hemicellulose and lignin, provides structural rigidity to plants and is also present in plant-derived products such as paper and cardboard. Feedstocks high in cellulose come from agricultural, forest, and even urban sources (see Table 1 ). Agricultural sources include crop residues and biomass crops such as switchgrass; forest sources include tree plantations, natural forests, and cuttings from forest management operations. Municipal solid waste, usually from landfills, is the primary urban source of renewable biomass. Cellulosic feedstocks may have some environmental drawbacks. Some crops suggested for biomass are invasive species when planted in non-native environments. Municipal solid wastes may likely require extensive sorting to segregate usable material and may also contain hazardous material that is expensive to remove. In general, calculation of the estimated cost of biofuels production does not reflect environmental or related impacts, but such impacts are relevant to overall consideration of biofuels issues. Biomass feedstocks are bulky and difficult to handle, presenting the industry with a major challenge. Whether feedstocks are obtained from agriculture or forests, specialized machinery would need to be developed to harvest and handle large volumes of bulky biomass. For instance, harvesting corn for both grain and stover would be more efficient with a one-pass machine capable of simultaneously segregating and processing both—a combination forage and grain harvester. Currently, machines such as these are being developed to handle biomass crops, but few are commercially available. Storage facilities capable of keeping immense volumes of cellulosic material in optimal conditions may need to be developed, if an industry is to grow. Crop residues are by-products of production processes (such as producing grain), and so their production costs are minimal. Corn stover and rice and wheat straw are abundant agricultural residues with biomass potential. Among residues, corn stover has attracted the most attention for biofuels production. However, an important indirect cost associated with using crop residue as a biomass feedstock is a potential loss of soil fertility. When harvesting stover, sufficient crop residue must be left in place to prevent erosion and maintain soil fertility. Research suggests that, under the right soil conditions, up to 60% of some residuals can be removed without detrimental soil nutrition or erosion effects. Results from early trials suggest the potential ethanol yield from corn stover (not including the grain harvested, which could be used for feed or fuel) is approximately 180 gallons of ethanol per acre. This compares with roughly 425 gallons of corn-starch ethanol (from grain) and 662 gallons per acre of sugar cane (in Brazil), when grown as dedicated energy crops. Perennial prairie grasses include native species, which were common before the spread of agriculture, and non-indigenous species, some of which are now quite common. Switchgrass is a native perennial grass that once covered American prairies and is a potential source of biomass. Its high density and native immunity to diseases and pests have caused many to focus on its use as a cellulosic feedstock. According to research at the University of Tennessee, the 10-foot tall grass, if harvested after frost, will produce for 10 to 20 years.