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TheStreet Open House

Biofuels Survive a Really Bad Day

NEW YORK (TheStreet) -- Biofuels are being hit today by two studies questioning the industry's viability as a way to fight climate change. So why are so many people in the sector smiling?

First, a University of Nebraska-Lincoln team has concluded that corn stover -- what's left over in fields after corn is harvested -- may be a worse fuel than gasoline in terms of carbon emissions.

A team under Adam Liska, using computer models, estimated that removing the material from fields and turning it into ethanol would add 100 grams of carbon dioxide to the atmosphere for each megajoule of energy produced. This is more carbon dioxide than gasoline production produces.

The carbon impact was constant no matter how much stover was removed from fields, according to the study.

A new report from the Intergovernmental Panel on Climate Change (IPCC), the United Nations' environmental agency, also concludes that raising crops for fuel "poses risks to ecosystems and biodiversity" as well as to water supplies.

The IPCC report does not completely repudiate biofuels, but it was hailed by environmentalists who have warned that biofuel production raises land prices and thus fuel prices.

The Obama administration seems to be coming around to the skeptics' conclusion.

Last year the Environmental Protection Agency proposed reducing the amount of advanced biofuels required in gasoline and, according to Brooke Coleman of the Advanced Ethanol Council, an affiliate of the Renewable Fuels Association, this has frozen new research in the area.

The latest biofuel start-up to come up short is KiOR (KIOR), which I wrote about last year when Bill Gates invested in it. KiOR built a plant in Mississippi to test its process for creating fuel stocks from pine pellets, and the stock traded at more than $20 as recently as 2011. Its current price is about 62 cents.

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