Deforestation

From the August 2010 Forest2Fuel newsletter.

In our view, one of these least credible arguments made by those opposing biomass energy plants is that biomass utilization in the United States will lead to deforestation. In fact, we think the opposite is far more likely to be true:

  • Creation of new wood markets will lead to either stability or increases in forested acres in the U.S.
  • Exclusion of biomass as a renewable source of energy will lead to more rapid conversion of forest land to other uses, including development and energy crops.

According to a 2007 study by the non-profit Society of American Foresters 1, the amount of forestland in the United States has remained relatively stable at about 755 million acres over the last 100 years. The standing inventory of hardwood and softwood trees — also known as the amount of growing stock — has increased by roughly 50 percent since 1953. In addition, 20 percent of forestland in the U.S. is managed under some type of conservation program; worldwide, the average is 11 percent.

The 2010 Global Forest Resources Assessment 2 suggests the numbers could be even better. Conducted by the Forestry Department at the United Nations, the study reports that the United States gained forested acres over the last five years. Annually, it turns out, the U.S. gains between 600,000 and 1,200,000 acres of forest. While deforestation is occurring worldwide—the U.N. report estimates the number of acres lost globally every year at just under 13 million acres during the 2000-2010 period (down from 20 million acres annually during the 1990-2000 period)—the United States continues not only to replace acres harvested and lost to forest fires, insects, disease and development, but to reclaim additional acres as well.

Why has the United States turned the corner with deforestation? The National Alliance of Forest Owners (NAFO) provides the following rationale from basic economics: 3

Using forest biomass for new renewable energy markets will help conserve forestland. Today the greatest threat of deforestation comes from the conversion of forests to non-forest uses that have a higher economic value. The families, businesses and individuals that own 57% of our nation’s forests depend on the returns they get from the products their forests produce to make additional investments in sound, long-term forest management. When existing markets for their products are strong, or when new markets like energy emerge, they provide forest owners the means to keep their land forested by investing in tree planting and forest health treatments and by keeping their forests economically competitive with other uses.

Squashing a new market through the regulatory re-classification of biomass as “non-renewable,” it also makes the conversion of forested acres to other uses more likely. A recent report by the United States Forest Service takes a closer look at this phenomena. 4 If landowners cannot make a profit from growing trees, they will tend to turn the land to agricultural purposes or sell it to developers. And if renewable energy policy excludes forest biomass and favors energy crops, landowners living close to bioenergy facilities will be much more likely to convert their agricultural or forest land to non-native species like miscanthus.

Even with government targets and new demand for low value biomass feedstock, basic forestry economics, when combined with current industry best practices, will protect U.S. forests from overharvest. In effect, forest landowners will choose between harvesting low value biomass for little to no profit, or they will allow their forests to grow until they can harvest higher value products. Given this choice, landowners will continue to choose the latter. NAFO explains the economics this way: 3 

The economics of forestry favors the growth of large trees to produce high value products, like lumber for homes or furniture. Energy production is one of the lowest value uses of forest biomass. Because of this, forest owners will continue to grow forests for long periods to produce large trees. Forest owners will use smaller and inferior trees thinned from the forest to benefit larger trees along with tree limbs, tops and other debris from logging for energy production. Forest owners can also manage their forests to produce more biomass and larger trees over time. Market history and recent studies show that forest owners can sustainably increase biomass from their forests by as much as 150% on planted forests and 75% on naturally growing forests as the market demand for biomass increases.

Even with this potential, biomass facilities in the U.S. will only be built as economic and other conditions, such as securing necessary permits and enough wood to operate sustainably, will allow. Credible market analysis shows that only 35% of all the new biomass energy projects announced in 2010 are expected to be online by 2020. This will create a gradual build-up in the demand of forest biomass for energy rather than a sudden spike that could create short-term biomass shortages.

Over the last couple of years, members of the Forest2Market staff have attended the annual meetings of many state forestry associations. Without exception, by the end of any session about biomass, either a speaker or a landowner in the audience provides the following advice: “Grow sawtimber.” The emergence of biomass markets will not change this long-held view.

Even if too many plants are built in an individual wood basket, however, the result will not be deforestation. Economics encourages the right-sizing of the industry. Forest2Market has conducted hundreds of resource studies to help our clients understand market dynamics in individual supply sheds over the years. Our models for doing so incorporate a price sensitive formula for capacity rationalization. That formula is based on the following market patterns, which is characterized by NAFO in “Assurance of Long-term Sustainable Biomass Energy”: 5

Since private capital markets rigorously verify biomass supply before financing the construction of a wood fiber plant, oversubscription of available supply is unusual. When over subscription of supply does occur, market observations show that the following sequence takes place:
  • Market prices increase as competition seeks a fixed or moderately elastic supply.
  • Market prices cap at the point of inelasticity, where additional price increases render the wood fiber product unprofitable.
  • Plant capacity is rationalized to adjust to a fixed supply.
  • Ultimately, investments that did not properly scope out supply availability will fail. It is this very risk that creates the need for a high level of due diligence concerning raw material supply.
Landowners do not act against their own financial interests by harvesting simply to keep the plant open.

Perhaps the Working Forests Coalition says it best: "As existing markets weaken or dissappear, goods, services and uses associated with working forests are becoming less competitive with other economic uses of private forest land over time. While some conversion from forests to other usees is acceptable to accomodate a growing population or to optimize land use, it is critical to develop policies and programs that help working forests remain competitive with other land uses and thereby help sustain the many benefits they provide as part of our nation's natural resources infrastructure. This is especially critical as we advance our efforts to meet our nation's growing need for renewable energy, climate change solutions, a healthier environment, and family-waged jobs in rural communities."

1 Alvarez, Milagros. “State of America’s Forests.” 2007. http://www.safnet.org/publications/americanforests/index.cfm
2 “Global Forest Resources Assessment 2010.”  http://foris.fao.org/static/data/fra2010/KeyFindings-en.pdf
3 “Biomass Energy Q and A.” http://nafoalliance.org/biomass-energy-q-a/
4 USFS. "Private Forests, Public Benefits: Increased Housing Density and Other Pressures on Private Forest Contributions." 2010. http://www.fs.fed.us/openspace/fote/benefits.html
5 “Assurance of Long-term Sustainable Biomass Energy.” http://nafoalliance.org/assurance-of-long-term-sustainable-biomass-energy/
Additional Stories from the August 2010 Forest2Fuel Newsletter:
Newly Announced Facilities Facing Obstacles
Carbon Emissions
Anywhere But Here
BCAP Update
Progress Report—Aspen Power, Nacogdoches Power, Range Fuels

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