The economic competitiveness of biobased industries is discussed by comparing the South relative to other regions of the United States and biomass as a feedstock source relative to fossil fuels such as coal and petroleum. An estimate of the biomass resource base is provided. Estimated changes in the agricultural sector over time resulting from the development of a large-scale biobased industry are reported, and a study on the potential to produce electricity from biomass compared with coal in the southern United States is reviewed. A biobased industry can increase net farm income and enhance economic development and job creation.

First-generation grain ethanol biofuel has affected the historical excess capacity problem in U.S. agriculture. Second-generation cellulosic ethanol biofuel has had difficulty achieving cost-competitiveness. Third-generation drop-in biofuels are under development. If lignocellulosic biomass from perennial grasses becomes the feedstock of choice for second- and third-generation biorefineries, an integrated system could evolve in which a biorefinery directly manages feedstock production, harvest, storage, and delivery. Modeling was conducted to determine the potential economic benefits from an integrated system. Relatively low-cost public policies that could be implemented to facilitate economic efficiency are proposed.