Constructing a large-scale bioethanol industry also implies a major change in the industrial landscape: whereas oil refineries are predominately coastal, biorefiner­ies would be situated in agricultural areas or (with the development of a mature industry) close to forests and other biomass reserves. Gasoline distribution to retail outlets is without doubt a mature industry — in the United States, shipments of 6.4 billion liters of petroleum and petroleum products are made each day, 66% by pipe­line (in 320,000 miles of pipeline), but only 4% by truck and 2% by rail; from the Gulf Coast to New York, shipping costs for gasoline amount to only 0.8 0/l.76 It was the early development of a national distribution system for gasoline that decided the use of this fuel rather than ethanol for the emerging automobile industry before 1920.77

To support nationwide consumption of E10, cellulosic ethanol would be 61% of the total, the remainder being corn-derived; assuming that switchgrass will be a major contributor to the feedstock mix, ethanol production would be centered in a wide swathe of states from North Dakota to Georgia, whereas demand would have geographic maxima from west to east (figure 5.7). Ethanol shipping would be predominantly by truck or rail until the industry evolved to take over existing petroleum pipelines or to justify the construction of new ones; linear optimization showed that shipping by truck would entail a cost of $0.13/l ($0.49/gallon), whereas rail transport would entail lower costs, $0.05/l ($0.19/gallon). In contrast, gasoline transportation to retail outlets only incurs costs of $0.003/l ($0.01/gallon).76 The same study concluded that national solutions, although they would spur innovation and eventually lead to economies of scale, would increase shipping distances and add to total truck movements; an investment of $25 billion would be required for a dedicated ethanol pipeline system, “just to make petroleum pipelines obsolete in the long-term.”

Tax incentives and subsidies are, therefore, highly likely to be features of policy making relevant to the adoption of biofuels in OECD economies generally. Fund­ing the ethanol supply chain will be crucial; minimizing shipping costs implies the construction of as many production sites as possible, based on the use of raw materi­als from multiple geographical areas (forest, agricultural wastes, dedicated energy crops, municipal solid waste, etc.), ideally to match the likely distribution of major urban demand centers for ethanol blends (figure 5.7).