The Rise & Fall of Cellulosic Biofuels: Lessons from U.S. & Brazil’s Struggles and Successes

By Daniel Lee, Student at the University of Illinois Chicago

March 25, 2025

While traditional biofuels extract the simple sugars of plant seeds or fruit, cellulosic biofuels are derived from plant “waste”, such as leaves, stems, or other biomaterial. Cellulosic biofuels convert the complex sugars held within a plant into ethanol.

Described as a “holy grail,” cellulosic biofuel promised the ability to use waste products or purposefully grown energy crops harvested from marginal lands not suitable for other crops. Additionally, they provide greater life cycle greenhouse gas emission reductions than traditional ethanol (as much as 90% compared to ~20% reduction). In December of 2007, Congress passed the expansion of the Renewable Fuel Standard (called RFS2), which called for cellulosic biofuels to comprise of at least 16 billion of the 36 billion gallons of biofuel produced in 2022.

In 2022, just 1.39 million gallons of cellulosic biofuels were produced from agricultural feedstocks, representing just 0.21% of cellulosic biofuels. In 2014, the EPA expanded the definition of cellulosic biofuels to include renewable natural gas, as well as reducing the annual mandates by over 90%. Even so, in 2023, producers failed to meet the massively reduced obligation of 840 million gallons of cellulosic biofuel.

In parallel, on February 28, 2007, DOE announced the investment of $385 million into six small-scale biorefinery projects, all aimed at making cellulosic biofuels cost competitive with gasoline by 2012. As of 2024, these plants have all either been shut down, auctioned off, or never built. POET LLC - one of the projects announced in 2007 - received a total of $80 million by 2008 – and additional $105 million in 2011 for Project Liberty.  Project Liberty was meant to produce 25 million gallons of lignocellulosic ethanol. In 2018, Forbes reported Project Liberty as the single commercial cellulosic plant operating in the US, in 2019, the plant closed down. POET blamed EPA policy under the Trump administration creating conditions that made cellulosic biofuel even less competitive.

Brown (2019) published an analysis of why the biofuels mandate fell short: Pioneer cellulosic biofuel plants faced poor economic return and low technological readiness - worsened by government policy that inadvertently increased the uncertainty and risk of investing in cellulosic biofuels - in addition to the unfavorable market conditions in the form of lower oil prices.

DOE also funded numerous private companies and university labs developing new methods that could produce cellulosic ethanol cost-effectively. It is unclear how successful these efforts were. As of 2020, cellulosic ethanol is estimated to be around $4 per gasoline-gallon equivalent, requiring oil to reach over $100 per barrel to be cost competitive. Cost estimates of producing cellulosic biofuel have actually risen over time, due to a better understanding of feedstock and capital costs.

Internationally, cellulosic biofuel plants are undergoing various stages of deployment but have yet to see breakthrough success. Brazil, the world’s second largest biofuel producer, is the only country opening new, commercial-scale cellulosic ethanol plants. Founded in 2011, Raizen formed from a joint venture between Royal Dutch Shell and Brazilian bioenergy conglomerate Cosan S.A. In 2014, Raizen opened its first cellulosic ethanol plant in Piracicaba, São Paulo, with an installed capacity of 40 million liters a year.

In 2015, just 2 million gallons of cellulosic biofuel was produced, echoing the difficulties faced by plants in the U.S. In between 2015 and 2023, Brazil saw the opening and closing of at least 3 additional cellulosic biofuel plants, leading to the original Piracicaba plant being the country’s sole remaining cellulosic ethanol producer.

In this time, however, Raizen was able to overcome its difficulties, and produced over 32 million gallons of cellulosic ethanol in 2023. While at just 39% of nameplate capacity, Raizen claimed to have met its production targets since 2019. Raizen recently opened a second plant in 2024, and Brazil’s total cellulosic ethanol production reached 51 million gallons. Both plants have a nameplate capacity of 82 million gallons. Raizen currently has five plants under construction, expected to open before 2026, with plans for three more plants.

Compared to Project Liberty and other similar projects in the United States, Raizen had several key advantages that allowed its plant to survive. Brazil produces 22% of the world’s sugar, and extracting ethanol from sugar cane is more than six times more energy efficient than corn-based ethanol. First-generation ethanol plants in Brazil have evolved to produce both sugar and ethanol simultaneously, as well as cogenerate electricity through the burning of waste plant material, known as bagasse. Bagasse is the remaining of plant material left after a plant has crushed and extracted the juice out of the cane. These ethanol-sugar plants produce enough electricity to both cover their own energy needs, as well as produce a combined total of 32.26TWh, or 4.76% of Brazil’s electricity generation.

Raizen also opted to integrate its cellulosic ethanol facility adjacent to its already existing sugar cane mill. In turn, this effectively allowed for a pioneer project to be supported by already existing industry, rather than a brand-new, independent, risky project. Finally, Raizen licensed their technology from Iogen, a Candian energy company that suspended its plans to build cellulosic ethanol plants in the wake of the 2008 recession. Raizen not only benefited from Iogen’s experience, but also had more realistic expectations on the difficulty of producing cellulosic biofuel. Additionally, gasoline has historically been more expensive than ethanol in Brazil.

In short, Raizen benefited from favorable market conditions, a mature and supportive domestic industry with established supply chains, and a more risk-aware approach. The continued success of cellulosic biofuel is not guaranteed, however. Both of Raizen’s cellulosic biofuel plants are both operating well under full capacity, and the 51 million liters (13.4 million gallons) produced in 2024 is a mere 1.8% of Brazil’ total ethanol production of 28 billion liters. To quote Hayashi (2024): “This long-term plan requires long-term, pre-signed contracts with customers,” referring for the need for buyers of future fuel production. As cellulosic biofuel is still more expensive than first-generation biofuels, changing market conditions could lead to cellulosic biofuel stumbling once again. In late November 2024, Raizen began restructuring, and was allegedly “evaluating the sale of a stake in its second-generation (E2g) ethanol plants to raise capital and reduce debt.”

It is possible that the failures of U.S. cellulosic biofuel in the early 2010’s could have been avoided with a more progressive deployment of technology. In recent years, DOE has followed this approach. Instead of funding expensive, large-scale projects, DOE has opted to fund a greater number of smaller projects, operating at various scales to better understand the challenges that may arise from production.

The contents of this blog post reflect the author’s views, and not necessarily those of the GFRC.