Q: How can the goals of the BCAP Matching Payment Program be met?

From the April 2010 Forest2Fuel newsletter.

A: The key to achieving the goals of the BCAP program is demand. When bioenergy facility announcements become realities and a real market for biomass emerges, a supply chain will materialize. No incentive, not even one that doubles the price of biomass, can compensate for lack of demand. Only robust demand will incentivize loggers to invest in the equipment needed.

Based on these observations, Forest2Market believes that future policy and legislation should focus on loan-based programs. Equipment loan guarantees would decrease the risk to lenders and result in lower interest rates for purchasers. Interest-free loans could also be paired with a BCAP-like program, with part or all of each matching payment going to repay the loan.

Loan programs like these would direct money to the right people. When demand develops, logging companies will make independent decisions about whether there is enough demand in their operating areas to support loan payments. As a result, a loan program wouldn’t just increase supply for the sake of increasing supply. It would increase supply to meet demand.

It also sets up an ideal situation for logging companies. A piece of biomass removal equipment has a lifespan of 4 or 5 years. A loan or loan/subsidy program would support loggers during the initial stage of entry into the market, as they are learning how to operate the equipment efficiently and deploy it profitably. This is when a company is in most need of support. When it comes time to replace the equipment, however, the gained efficiencies and higher profitability will mean logging companies can afford new equipment loans without government support.

Additional BCAP Q & A:
Q: Which states received the highest total matching payments? Answer
Q: Which regions received the most funding? Answer
Q: Why were payments so heavily weighted toward forest materials? Answer
Q: When will the USDA release the final rules and restart the BCAP program? Answer
Q: The $170 million question: What did the American taxpayer get for the $170,112,607 in BCAP matching payments? Answer

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