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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
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Exemption from cap and trade
Forest offsets
Ability to create RECs
Market pelletized biomass as substitute for coal
Market biofuels under RFS
Questions?