CHICAGO/NEW YORK (Reuters) - DuPont Industrial Biosciences, a unit of DowDuPont Inc, on Thursday said it halted operations at a two-year-old ethanol plant and will sell it, dealing another blow to efforts to create biofuels without using food crops.

The decision to shut the Iowa plant comes as political winds are undercutting efforts to produce ethanol from plant waste and wood shavings. The U.S. Environmental Protection Agency (EPA) this year has pushed to lower the amount of cellulosic biofuels that need to be blended into the nation’s fuels under a 2007 mandate, arguing the industry has not produced enough.

DuPont spent about $225 million to build the facility, which used corn stalks and stems to make ethanol, which is blended into gasoline. The plant was designed to produce 30 million gallons a year.

The EPA predicted in 2007 that U.S. cellulosic ethanol production could hit 1 billion gallons by 2020, but output this year is expected to reach only 7 million gallons, according to Renewable Fuels Association (RFA), a trade group.

High production costs and still-maturing technology have undercut the rationale for cellulosic biofuel, part of the original goal to use biofuels to help reduce the nation’s dependence on foreign oil.

“Cellulosic biofuel innovators have been dealing with mixed policy signals and tremendous regulatory uncertainty for the past decade,” RFA Chief Executive Bob Dinneen said in an interview.

Refiners such as PBF Energy, which must blend biofuels into the nation’s fuel pool or buy credits from those who do, have opposed the mandates.

“This is yet another example of why the nation’s biofuel mandate needs fundamental reform. More than a decade after the cellulosic portion of the mandate was passed, the fuel is still nonexistent,” PBF Energy lobbyist Brendan Williams said.

A DuPont Industrial Biosciences spokeswoman said the EPA’s plan to decrease cellulosic biofuel volumes played no role in shutting the plant.

DuPont and rivals POET-DSM and Abengoa SA built large-scale cellulosic ethanol plants to take advantage of the 2007 biofuels mandate. Abengoa sold its 25-million-gallon Kansas facility for $48.5 million about a year ago.

In July, the EPA proposed reducing blending targets for cellulosic biofuel, setting a 2018 target for 238 million gallons, down from 311 million gallons this year. Much of that mandate was expected to be reached by captured natural gas.