Transcript www.dwt.com
The Role of Biomass in
a Carbon-Constrained
World
May 12, 2010
Forest Resources Association -- Western
Region Spring Meeting
Craig Gannett
Agenda
Context
Federal Legislation
Federal Regulations
Regional and State Activities
Risks and Opportunities
Context
Context (cont.)
Federal Legislation
Status of the Federal Legislation
Waxman-Markey (HR 2454) passed the House on June 26,
2009
Kerry-Boxer (S. 1733) reported by the Senate Environment and
Public Works Committee on November 5, 2009. Prospects for
Senate floor action almost zero.
Senators Kerry, Graham, and Lieberman were working on a
grand compromise, but Graham has now pulled back.
Action this year very unlikely.
Key Provisions
Cap and Trade
Forest Offsets
Renewable Energy Credits (RECs)
Cap and Trade
Overall goal: 80% reduction below 2005 levels by 2050
Reductions across all sectors of the economy
One allowance must be submitted to EPA for each ton
emitted
Transition from free allowances to full auction
GHGs from biomass-fueled electric generating
facilities are exempt from the cap (W-M, p. 735)
Cap and Trade (cont.)
In addition to free allowances, covered entities
can comply by obtaining allowances via -
Purchasing at auction
Trading (not limited to covered entities)
Banking
Borrowing
Offset credits (W-M, p. 740-41)
Stiff penalties for non-compliance
Forest Offsets
An offset is the reduction or avoidance of GHG
emissions, or sequestration of GHGs, in a sector
not subject to the cap. (W-M, p. 780)
Forestry and agriculture are the primary sources
of offsets
An offset credit is a tradeable compliance
instrument, just like an allowance
Forest Offsets (cont.)
Forestry offsets include afforestation,
reforestation, and forest management resulting
in increased sequestration. (W-M, p. 1394)
Sequestration must be additional, verifiable, and
permanent, and leakage and reversals must be
accounted for. (W-M, p. 780-81; 787-90)
Proposed offset project plans must be submitted
to USDA for approval. (W-M, p. 1406)
Potential for early offset credits (W-M, p. 802)
Renewable Energy Credits
Electric utilities must meet 20% renewables by 2020 (W-M, pp.
24, 31); can either produce or purchase RECs
Biomass-fueled electric generating facilities create RECs
Key definition for both cap and trade and RECs: “renewable
biomass.” From federal lands, it includes:
materials removed as part of a federally recognized timber sale, or
to reduce hazardous fuels, or to restore ecosystem health;
Not from Wilderness Areas, old growth, or late successional
stands;
Harvested in environmentally sustainable quantities, as
determined by the federal land manager
Renewable Energy Credits (cont.)
Renewable biomass from non-federal lands
includes any organic matter that is available on a
renewable or recurring basis.
Residues and byproducts from wood, pulp, or
paper products facilities. (W-M, p. 857-59)
EPA
EPA Regulations
While Congress dithers, EPA moves ahead under
Clean Air Act
GHG Reporting Rule (Final)
EPA expects approximately 10,000 facilities to report,
accounting for nearly 85% of total GHGs
Reporting only – no emission limits or reductions
Monitoring required as of 1/1/10; first annual reports due
3/31/11.
Applies to pulp and paper facilities emitting more than
25,000 tons of GHG annually. (40 CFR 98.270 et seq.)
EPA Regulations (cont.)
Prevention of Serious Deterioration (PSD) Tailoring Rule
(Proposed)
Due to endangerment finding, new or modified major
stationary sources will be required, beginning next year, to
address GHGs through the PSD permitting process.
High quantities of GHGs makes 100/250 tpy limits in the
CAA unmanageable; therefore, EPA is “tailoring” the rule to
cover only sources over 25,000 tpy.
No established technologies to capture GHGs;
Energy efficiency is only answer from EPA’s Climate
Change Work Group so far.
EPA Regulations (cont.)
Possible PSD/tailoring rule outcomes –
Endangerment finding overturned
Rule implementation delayed further
Court enforces 100/250 threshold
Congress enacts climate change legislation
EPA Regulations (cont.)
Boiler and Process Heat Rule (Proposed)
Addresses toxics, not GHGs, but applies to biomass-
fueled facilities
Would require Maximum Achievable Control
Technology (MACT)
EPA Regulations (cont.)
Renewable Fuel Standard -- 3/26/10 Final RFS
rule intended to dramatically increase amount of
renewable fuels blended into all transportation
fuels.
Biomass-based diesel to grow from 650 million
gallons in 2010 to 1 billion gallons by 2012.
Feedstock includes slash and pre-commercial
thinnings from non-federal forestland that is not
ecologically sensitive.
USDA Rulemaking
Biomass Crop Assistance Program (BCAP) off to a rocky
start - Much more expensive
Diverted wood fiber from higher value products
Proposed rule issued on 2/8/10 - Payment for wood waste limited to that which would
not otherwise be used for a higher-value product
But payment allowed for slash chipped solely for
purposes of transport
Alternative payment limits proposed
Comment period ended on 4/9/10; USDA says final rule
will be issued “this year.”
Regional and State Efforts
Western Climate Initiative (WCI)
7 states, 4 Canadian Provinces (including B.C and
Manitoba)
Forestry offset rules
Constitutional problems
State RES requirements
Biomass definition is critical
Will RES percentages go up?
Will Congress preempt?
State GHG reporting requirements
Risks and Opportunities
Risks
Compliance with new EPA rules
Increased feedstock costs due to RFS
Inconsistent biomass definitions may hinder REC market
Opportunities
Exemption from cap and trade
Forest offsets
Ability to create RECs
Market pelletized biomass as substitute for coal
Market biofuels under RFS
Questions?