According to legend, Prometheus brought fire to mankind, sparking enlightenment. Several millennia later, scientists are exploring wood chemistry to find new sources of energy.

Cellulosic ethanol, or "treethanol," is a promising new energy source with the potential to mitigate high gas prices, national security concerns, and global climate change. Ethanol derived from cellulose--the complex sugar polymer that gives green plants their structure--has a smaller carbon footprint than other fuels and could be used to supplement or replace gasoline. But anything that requires cutting down trees while purporting to save the environment should attract a reasonable dose of skepticism.

Harnessing energy from the sun in the form of biomass is not new. For centuries, man has used wood to provide warmth, cook food, and forge tools. New enzyme technologies now enable scientists to break down wood cellulose into glucose, its component sugar, which is then converted to ethanol through fermentation, turning this age-old energy source into fuel for the new global economy.

Cellulosic ethanol differs from the most common biofuels--sugarcane-based ethanol from Brazil and corn-based ethanol from the United States--in both its net energy yield and its fuel conversion process. Traditional ethanol and cellulosic ethanol are chemically equivalent: Both produce two-thirds the energy of regular gasoline. But not all ethanol is created equally. The energy balance (or energy yielded over energy added during production) for corn ethanol is roughly 1.3 and an estimated 8.3 for sugarcane. For cellulosic ethanol, the ratio can reach as high as 16. When it comes to greenhouse gas emissions, traditional ethanol shows a reduction of 10 to 20 percent compared to gasoline, while cellulosic ethanol reduces emissions as much as 80 to 100 percent.

Using trees or other biomass instead of food crops for ethanol production also has its advantages. Trees make up roughly 90 percent of the world's terrestrial biomass, grow all year round, require fewer inputs than food crops, and yield more energy. Switchgrass, a native North American plant, shows great potential for cellulosic ethanol: It can produce twice as much ethanol per acre compared to corn, it requires less water, and it can grow in places otherwise unsuitable for food crops. Poplars and other fast growing trees are also being explored as potential sources.
 
Food price volatility, highlighted in a report by UN-Energy, is a concern that does not apply to cellulosic ethanol production. As demand for cleaner energy grows, ethanol production increases and therefore commodity prices rise for corn and sugar. Some developing countries have already felt these effects. As Adam Dean writes elsewhere in Policy Innovations, "Due to its use in the production of ethanol, corn prices have risen more than 80 percent since last summer, from $2.17 to nearly $4 a bushel. This increase has caused tortilla prices in Mexico to rise by nearly 50 percent over the same period."

Replicating the success of other biofuels, cellulosic ethanol could also play a role in promoting rural development. Increases in commodity prices generally benefit rural farmers who rely on those prices to make a living, although this benefit is hindered by agricultural subsidies in developed countries. Ethanol production also creates more jobs for low-skilled laborers.

Domestic production of ethanol in developing countries is also an opportunity to correct trade imbalances and spur foreign investment. This is especially true if those countries are able to participate in the higher value-added production process. Annie Dufey of the International Institute for Environment and Development writes, "Domestic biofuel production offers an opportunity to replace oil imports and improve the trade balance." For example, it is estimated that the replacement of gasoline by sugarcane ethanol in Brazil saved some $43.5 billion between 1976 and 2000.

High gas prices and national security concerns have precipitated a favorable change in the political and economic climate for alternative fuel sources such as cellulosic ethanol. Policymakers around the world have made reducing reliance on foreign oil a high priority. If the price of ethanol can compete with gasoline, the effects of political volatility in oil-rich regions such as Russia, Venezuela, and the Middle East will lessen.

Because oil has a high price elasticity of demand, countries that rely heavily on oil stand to lose dramatically if demand drops: During the 1997-1998 Asian financial crisis there was a 10 percent drop in oil demand which sent oil prices plummeting 75 percent. But according to Thomas Friedman's "First Law of Petropolitics," this could also be a boon for the development of democratic institutions. Friedman claims that oil prices and the pace of freedom are negatively correlated.

Despite its benefits, cellulosic ethanol is no magic elixir for the world's energy woes. Significant hurdles hinder its adoption on a commercial scale, including feasibility, production costs, and environmental degradation. Achim Steiner, executive director of UN Environment Programme says, "Investments need to be planned carefully to avoid generating new environmental and social problems."

High cost of production, almost synonymous with any new technology, is one of the greatest barriers to the adoption of cellulosic ethanol. Right now, methods of producing cellulosic ethanol are expensive and complex, involving a multi-step enzymatic process. Significant R&D investment is needed to generate more efficient production methods, particularly better enzymes. This month, researchers in Brazil announced that they had done just that, perfecting a method of producing cellulosic ethanol that reduces its costs of production from about $2.25 cents per gallon to roughly 40 cents per gallon. If verified, this would mark a great advancement in cellulosic ethanol production.
Many argue that there is simply not enough land to meet the world's food needs and provide energy if ethanol is added to the mix. It would take about 100 million acres of switchgrass--roughly the area of California--to replace just 25 percent of the petroleum use in the United States.

Cellulosic ethanol production also promotes exploitation of forests, which threatens the climate change benefits from reduced greenhouse gas emissions. One proposed solution is to use fast-growing grasses, like switchgrass, or leftover biomass, such as corn stalks, instead of trees. But if trees are cleared to grow other biofuels, both the forest as a carbon sink and the higher energy yield of the treethanol will be lost.
Governments have an important role to play, encouraging development of this new technology through incentives and sustainable policies, but they must do so with caution. An imprudent rush to reduce reliance on fossil fuels is likely to have its own environmental and economic side effects.

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