The second series of data illustrated in Fig. 1 shows that development of the bioethanol industry in the USA began in the 1980s. The drivers for the in­dustry were in part the rapid surges in global oil prices experienced in the 1970s and 1980s, which led to rising prices of fuel. There was also the presence of a strong agricultural lobby which was (and is) interested in creating ad­ditional revenue streams for farmers. The US bioethanol industry uses corn, and to a lesser extent wheat, as a feedstock for wet — and dry-milling processes. A number of different policy options have been employed to help build the industry. Both federal and state governments have offered the industry dir­ect funding in the form of public-private partnerships and research funds, as well as tax incentives and state-level renewable fuel mandates, i. e., legislated amounts of renewable fuels contained in fuel sales within the state, defined by blending level or by renewable fuels [22,23]. A more focused discussion of state-level funding and tax incentives, and the effectiveness of these options, may be found in Sects. 3 and 4, respectively.

In the USA, most bioethanol production capacity is concentrated in the Midwest, where corn is found in abundance, and where state and federal government incentives have combined to make an attractive en­vironment for investment in the infrastructure required for bioethanol production. Over half of US production capacity is found in just three states, each of which have supplied significant capital resources to the bioethanol industry. The US states with the highest bioethanol capacities include Illinois (annual bioethanol production capacity, 5.1 billion L), Iowa (3.7 billion L), South Dakota (2.2 billion L), Minnesota (1.9 billion L), and Ne­braska (1.8billionL) [18]. These states are notable in that they have provided direct funding incentives in addition to federal funding, as discussed in Sect. 3.

The total financial commitment that the USA has made to biofuels dwarfs the investment that other countries have made. By 2006, total cumulative US funding through national or state programs applicable to bioethanol has ex­ceeded US $ 2.5 billion [23]. The largest amount of funding has been offered by the federal government. Annual program spending by all government agencies, primarily the US Department of Agriculture and the US Depart­ment of Energy, on alternative fuels exceeded US$ 253 million in 1998 and has risen since to more than US$ 300 million [18,24]. This has resulted in improving the technology that is utilized by the industry, and has broadened the potential number of coproducts that can be generated from the bioethanol production process. The remainder of federal funds supports a number of in­centive programs, including the Alcohol Fuel Credit (a corporate tax credit designated for industry producing bioethanol), deductions for both clean — fuel vehicles and refueling properties, and the Renewable Energy Systems and Energy Efficiency Improvements Program. The latter program is designed to aid in the construction of new facilities, and will cover up to 25% of con­struction costs. Maximum grants for a single project under this program are US $ 500 000, and the fund generally pays out between US $ 3-5 million in any given year [22,23]. Finally, it should be pointed out that significant funding in the USA has been directed towards developing cost-effective coproducts from the biofuel production process, allowing the creation of “biorefineries” with improved economic and environmental performance. Pilot facilities are already operating under some of these funding programs [23].

Most recent policy developments in the USA stem from the Energy Pol­icy Act of 2005, H. R. 6, which was signed into law by President G. W. Bush on 8 August 2005 [25]. This act created a nationwide renewable fuels standard (RFS) that will raise the use of biofuels (mostly bioethanol and biodiesel) to 28.4 billion L year-1 by 2012, which is effectively 5% of the total fuel sales. The Act also introduced credits for the purchase or lease of flex-fuel vehicles by taxpayers, although these credits diminish as the sales of flex-fuel vehicles progress by manufacturer through the fiscal year [25]. The 2005 Energy Policy Act has had some unintended consequences as related to biofuels, however. Section 701 of the Act requires flex-fuel vehicles in the US federal fleet to op­erate on alternative fuels 100% of the time. By Executive Order 13149, federal flex-fuel vehicles were previously required to operate on alternative fuels the majority of the time (i. e., 51% or more) [26]. Thus, Section 701 has effectively doubled E85 use by the federal fleet, and the increased demand has raised prices and decreased the practical availability of E85 fuels. The long-term impact of this policy on the market has yet to be seen.

The recently-announced “20/20” vision for biofuels (introduced as a Sen­ate Bill on 29 July 2005) defines a future biofuel production goal for the USA as 20 billion gal (approximately 75.7 billion L) by 2020 [27]. As the US starch — based bioethanol capacity is already quite high, it is unlikely that continued growth could achieve this goal. Accordingly, in his State of the Union Address for 2006, the President outlined the Advanced Energy Initiative, which seeks to reduce US dependence on imported oil by accelerating the development of new, renewable alternatives to gasoline and diesel fuels [28]. These alter­natives include bioethanol and other future biofuels derived from cellulosic biomass. Cellulosic biomass is an attractive energy feedstock because it is an abundant, domestic, renewable source that can be converted to liquid trans­portation fuels including bioethanol, which can be used readily by current — generation vehicles and distributed through the existing transportation-fuel infrastructure. To determine feedstock availability for cellulosic bioethanol processes, the US Department of Agriculture commissioned a report that explored the technical feasibility of a billion-tonne annual supply. This re­port found that approximately 1.24 billion t of dry cellulosic biomass can be sustainably produced each year, with about 910 million t coming from agri­culture and an additional 330 million t from the forest sector [29]. Using the efficiency of conversion technologies observed in the literature to date [6], this would translate to between 110 and 250 million L year-1, compared to current US gasoline use of approximately 500 million L year-1.

US production of biofuels is significant, but today only comprises about 2.6% of liquid fuel consumption. In order to become a more significant component of the transportation fuel sector, biofuel production must grow tremendously, which will require access to cellulosic biomass. The Advanced Energy Initiative includes the Biorefinery Initiative, which sets a goal of mak­ing cellulosic bioethanol cost-competitive by 2012 and which provides signifi­cant funding to achieve this goal (US $ 91 million in 2006, US $ 150 million in 2007) [30]. Biorefining pilot facilities are already operating with starch — based feedstocks, and these processes have the potential to be applied to cellulose-based biofuel production facilities, which will contribute to the eco­nomic viability of these operations. If these measures are successful, cellu — losic bioethanol production could easily become the dominant biofuel within the USA.

2.3