It is, of course, the dirty little secret of alternative fuels that cellulosic ethanol is where the real environmental gains are. Cellulosic ethanol contains more energy and produces fewer greenhouse gases than corn ethanol. Better yet, the source plants can be grown in all regions of the country rather than on the midwest's prime farmland. Unfortunately, the agricultural wastes, switchgrass and other non-food materials used to make it are much harder to break down and, with today's refining techniques, this means cellulosic ethanol is much more expensive to produce.

That's why the Department of Energy announced on Tuesday that it would be investing up to $34 million for biomass energy projects. Industry is expected to kick in its share as well, meaning the total investment could be as high as $70 million. Money from this commitment will go to projects focused on improving the enzymes that convert plant cellulose to sugars, which can then be fermented into (no, not grain whiskey) ethanol. From the looks of things, DOE is betting big on biofuels, having announced $1 billion of funding for the technology over the last year.

Delivering the news, DOE's Assistant Secretary for Energy Efficiency and Renewable Energy Andy Karsner said, "Success of these projects will play a pivotal role in the rapid development and deployment of renewable fuels to reduce emissions and dependence on foreign oil, and fundamentally change how we power our vehicles."

The investment is positioned to help meet the goal put forward by President Bush during last year's State of the Union address of reducing gasoline consumption by 20% by 2017. It is expected that most of this decrease will be achieved through the use of 35 billion gallons of alternative fuels like ethanol. The rest will come from the higher 35 MPG fuel economy standards passed by Congress in December.

The cash will be divvied up among four projects, chosen based on their ability to reduce the "enzymes per gallon" needed to make ethanol and increase the overall efficiency of the process (make it cheaper). This could be just the catalyst the biofuels industry has been looking for.

Bonus Link: Wired had a great article a few months ago on the science and business of cellulosic ethanol, including the race between those finding enzymes in nature and those engineering them in the lab.