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This study was funded to explore potential opportunities for Nebraska in future carbon markets, most explicitly those opportunities related to the possibility of replacing fossil fuels with biomass at Nebraska corn ethanol plants. The most direct and significant finding is that biomass-fired CHP (combined heat and power) technology is not economically viable for Nebraska corn ethanol plants under current conditions. We estimate in the study that corn stover price would have to be at least $50 per ton of dry matter for the requisite amounts to be delivered to any of the three ethanol plant locations considered (Adams, Norfolk and Wood River). At this price, adoption of CHP would reduce ethanol plant fuel expenditures from about $0.16 per gallon for fossil fuels to about $0.10 per gallon for corn stover, and in addition could add nearly $0.04 per gallon in receipts from sale of surplus electricity to the grid, for a net operating cost reduction of about $0.095 per gallon. However, retrofitting a plant for CHP would require large capital investments with an amortized cost of about $0.24 per gallon, substantially greater than the fuel savings. Potential carbon markets could add only marginal improvements to the prospects for CHP feasibility, adding revenues of about $0.02 per gallon from carbon offsets and perhaps another $0.014 from renewable energy credits. This would bring net operating cost savings to about $0.13 per gallon, still far from paying for the $0.24 per gallon capital cost. CHP technology could become feasible if the capital cost for retrofitting a plant were to fall by 50%, or if natural gas and electricity prices were to rise considerably - at least 60% relative to 2009 prices. Another consideration is the impact of BCAP, USDA's Biomass Crop Assistance Program. This program offers producers a matching payment for whatever price they receive for biomass from an authorized biomass-using facility. The practical effect of this would be to cut in half the price that biomass facilities must pay for delivered biomass, except that the matching payments are limited to two years. Ethanol plants would not be able to invest the capital for retrofitting to biomass based on lower prices for biomass that are limited to only two years, so BCAP will have little impact on CHP feasibility. It is possible that CHP-based ethanol could have a higher market value because of a lower carbon footprint, in California or states that adopt similar policies. We have not made an estimate of this value, because current California regulations do not include soil carbon losses within the boundary of the LCA (life cycle analysis) for the carbon content of biofuels. Our estimates are that conversion to stover-fired CHP would reduce the GHG intensity of the ethanol by 13.3 gCO2e MJ-1. However, the reduction of Midwest corn ethanol's footprint by that amount would provide a fuel with a GHG reduction of only 11% relative to gasoline, which would result in a minimal carbon premium in California even if their regulations were changed to recognize it. An important contribution of this project has been the estimation of supply curves for various amounts of corn stover or switchgrass to be delivered at one of the three delivery points in the study. Biomass in large quantities may be used for other purposes, such as for co-firing with coal in electrical generating plants, or as a feedstock for cellulosic ethanol. The relationship between delivered price and quantity is important information in the evaluation of any such project. One significant finding of the study is that corn stover price would need to be at least $50 per ton of dry matter to have small amounts of less than 100,000 tons per year delivered, or $55-$62 per ton to have a million tons per year delivered, depending on the location in Nebraska. A second significant finding is the lack of competitiveness of switchgrass as a source of biomass in the area of the study. Given current switchgrass technology, prices would have to be $70-$75 per ton of dry matter for delivery of 100,000 to one million tons per year. The project conducted several background studies to be able to address the above issues, results of which are summarized in the report. We reviewed the history and status of climate change initiatives in the U.S. and internationally, from which we were able to identify carbon credits as possible benefits in the future, and renewable energy credits and BCAP benefits available currently and the near future. We also reviewed and summarized the literature on ethanol's carbon footprint attributable to Indirect Land Use Change (ILUC), and though we did not attempt any original research on this issue, a thesis study was in progress at the close of the project examining the potential effects of corn stover revenues on the expansion of cropland into pasture and hay lands in Nebraska. Finally, we examined the relationships between prices of energy sources in Nebraska (natural gas, electricity, and diesel) to aid in understanding how changing energy prices would affect financial feasibility of retrofitting to CHP.