Federal Policies and Incentives Promoting Woody Biomass Production and Utilization

By: M. Rahmani, A.W. Hodges, and M. Monroe

The federal government actively encourages the use of woody biomass for energy and biobased products such as cellulosic ethanol and biodiesel by setting policy and providing incentives. Efforts to encourage the electric utility industry to use resources other than coal and natural gas began with the Public Utility Regulatory Policies Act of 1978 (PURPA). This act was designed to help promote energy conservation and the use of renewable resources. More recent policy efforts to encourage development of biomass energy include the following (U.S. DOE, 2007):

  • The National Energy Policy Act of 1992 contains several provisions to encourage the use of renewable energy sources.
  • Executive Order 13134, issued by Executive Memorandum in August 1999, encourages the development and promotion of bio-based products and bioenergy.
  • The Biomass Research and Development Act of 2000 describes the need for biomass research, encourages coordination between the United States Department of Energy (DOE) and United States Department of Agriculture (USDA), created the Biomass Research and Development Board, and set the scope of the joint DOE-USDA Biomass Initiative.
  • The Farm Bill of 2002, Title IX, supported biomass through federal procurement procedures, renewable fuels development programs, cooperative extension and research programs, and the Biobased Products and Bioenergy Coordination Council.
  • The Healthy Forest Restoration Act of 2003 recommended thinning programs to reduce accumulation of woody fuel to lower the risk of catastrophic wildfire. The collection and removal of small-diameter trees and understory shrubs has spawned local biomass utilization efforts.
  • The Energy Policy Act of 2005(EPACT) provided for a federal tax credit for energy production using renewable fuels; grants for forest biomass utilization; and grants for small enterprises, training, and outreach (see the following section, “Incentives,” for more information).
  • The Energy Independence and Security Act of 2007 (EISACT) reauthorized a number of the programs found in the Energy Policy Act of 2005. In addition, it set a mandatory Renewable Fuel Standard (RFS) that requires energy producers to use at least 36 billion gallons of biofuel in 2022. (See the following section, “Incentives,” for more information.)
  • The Food Conservation and Energy Act of 2008 reauthorizes 2002 Farm Bill programs and provides grants for investment in renewable technologies, financial incentives to use agricultural and forestry crops for bioenergy. It also established a biobased markets program. (See the following section, “Incentives,” for more information.)

In an effort to maximize expert input and help ensure efficient usages of funding, federal agencies are working together to address issues surrounding woody biomass production and utilization. Multiagency projects, such as the Biomass Research and Development Initiative (BRDI), a collaboration between USDA and DOE, specifically work to address cellulosic ethanol costs, logistics of biomass use, biobased products, and related policies. BRDI is managed by two groups, an advisory committee consisting of thirty appointed members from industry, academia, environmental groups, and state or tribal government; and an oversight committee with members representing the following agencies:

In 2003, the U.S. departments of Agriculture, Interior, and Energy produced a joint Memorandum of Understanding (MOU) agreeing to cooperate to support the use of woody biomass where economically and ecologically appropriate. This MOU raised awareness about the possibilities of using wood for energy production among agency employees, collaborators, natural resource professionals, and communities as well as prompting the development of joint programs to provide support. Furthermore, the MOU outlined several policy principles to guide the processes by which agencies work with communities to promote woody biomass utilization (NACD, 2005):

  • Collaborate with local communities to create woody biomass utilization strategies.
  • Increase public understanding of the amount and value of woody biomass, and that it can be an effective element of habitat restoration and wildfire risk reduction activities.
  • Develop and apply the best scientific knowledge to manage forests for woody biomass production.
  • Encourage the use of contracts and other agreements with growers, suppliers, and haulers to reduce wildland fuels and provide reliable, long-term supplies of woody biomass.
  • Develop woody biomass systems to create jobs and new economic opportunities.

The U.S. Forest Service, Bureau of Land Management (BLM), U.S. Fish and Wildlife Service (FWS), U.S. Environmental Protection Agency (EPA), and U.S. Department of Energy (DOE) are actively participating in biomass utilization efforts. For instance, under a closely monitored program, the BLM authorizes contractors to remove woody biomass from lands it manages through stewardship contracts that exchange cost of thinning and removal for the value of the harvested wood. These practices often receive strong opposition from some environmental groups who are concerned that forests may be overharvested.


Federal Incentives

Federal agencies use various incentive programs to encourage the use of woody biomass. The following programs help provide funding for research and development of new technologies and investment in and use of renewable forms of energy. Tax credits are available for those who produce energy from renewable sources. The Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007 (U.S. DOE, 2007) provide several incentives that apply to woody biomass.

Federal Renewable Energy Production Tax Credit

The production tax credit is an inflation-adjusted tax credit for electricity produced from qualifying renewable energy sources or technologies. EPACT 2005 expanded the types of qualifying sources and systems (U.S. DOE, 2007). Three different rates of tax credits are available for producers of energy from biomass. A credit of 1.5 cents per kilowatt-hour (kWh) is available for facilities that use wood from trees planted for energy use (closed-loop biomass). If the wood is mixed with coal in a co-firing facility, the 1.5 cents credit is reduced to match the ratio of wood fuel used. Using waste wood from any source enables facilities to earn 0.75 cents per kilowatt-hour (kWh) in tax credits. For the year 2005, the credit was adjusted for inflation to make the credit 1.9 cents per kWh for wind energy, closed-loop biomass, geothermal and solar, and 0.9 cents per kWh for open-loop biomass (NRBP, 2005).

Grants for Forest Biomass Utilization

Sections 209, 210, and 944 of EPACT 2005 enable grant programs for rural or remote communities. One program is for communities that improve the commercial value of woody biomass for increased efficiency or use, and the other is for small business bioproduct marketing and certification (Ashworth, 2006). USDA is authorized to issue grants to improve the commercial value of forest biomass for such uses as electric power and heat. Eligible communities can get up to $500,000 total or up to $20 per ton of green forest biomass for utilization. USDA may also issue grants for small business bioproduct marketing and certification and may match grants up to $100,000 for a total of $1 million per year. DOE may issue grants for rural and remote community electrification, with grants up to $20 million per year available for increased efficiency or use of renewable energy sources including woody biomass.

Grants for Forest Biomass Utilization Research and Development

Section 223 EISACT 2007 authorizes $25 million for each of the fiscal years 2008 through 2010 for grants for research, development, demonstration, and commercial application of biofuel production technologies in states with low rates of ethanol production, including low rates of production of cellulosic biomass ethanol, as determined by the Secretary. Section 234 of the EISACT 2007 authorizes $25 million for establishment of a competitive grant program, in a geographically diverse manner, for projects submitted for consideration by institutions of higher education to conduct research and development of renewable energy technologies.

Grants for Small Enterprises, Training, and Outreach

Millions of dollars in grants have been awarded to small enterprises, universities, and research institutions to develop new uses for woody biomass, to explore policy issues, and to develop training and outreach programs.

Incentives for Biomass Producers

The Food, Conservation, and Energy Act of 2008 (formerly the 2008 Farm Bill) includes several new provisions, which address biomass and bioenergy. It allots $1 billion for programs designed to encourage investment in renewable energy and technology. The act also creates the Rural Energy for America Program (REAP), which assists agricultural producers and rural small businesses in planning and preparing feasibility studies for renewable energy projects. The Bioenergy Program receives $300 million in funding to provide incentives for using agricultural and forestry crops and waste to produce bioenergy and provides for multiyear contracts for crop and forest producers to grow dedicated energy crops. In addition, the act establishes the Biobased Markets Program, designed to provide a USDA certification system for qualifying biobased products. This provision also establishes a federal procurement preference for biobased products.

As renewable and local sources of energy become more valuable, a variety of policies and incentive programs such as those just described may make it easier for communities, industries, and forest landowners to develop woody biomass systems.


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  • National Association of Conservation Districts. 2005. Moving ahead on biomass. Special Report, Forestry Notes. Volume XIV, Issue 3.
  • Northeast Regional Biomass Program. 2005. Renewable Electricity Production Tax Credit, Energy Policy Act of 2005. Washington, DC, August 2005.
  • U.S. Department of Energy. 2007. Federal Biomass Policy, Biomass Program, Energy Efficiency and Renewable Energy. http://www1.eere.energy.gov/biomass/federal_ biomass.html (accessed March 21, 2007).