Cellulosic ethanol (the use of trees in creating ethanol) is now becoming cost competitive as the enzymes needed for this process have decreased in price due to advances in technology. Using sources such as hybrid poplar, forest harvest residues and thinning of forested areas provide a biomass that is easier to store than most other materials.
The near-term goal is to reduce the cost of cellulosic ethanol down to $1.07/gallon by 2012, where it is expected to be competitive with ethanol produced from corn. The price of $1.07 per gallon is used because it is close to the lowest selling price that fuel grade ethanol has sold for in the U.S. over the past 10 years. Also, the high growth rate in the corn dry mill industry combined with rising energy costs are expected to drive corn prices up from current levels of around $2.10/bushel to $2.60-$2.70/bushel by 2012, which then drives corn ethanol costs up by approximately 20% over the next six years.