Biomass or Biomess: Warping the Market

By Jeremy Bloom on January 11, 2010

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One of the things we should have learned from the corn to bio-ethanol mess of the past five years is: haste makes waste.

The subsidies that were supposed to help create a sustainable industry and help small farmers instead turned into a massive hand-out to big agriculture, and drove up prices on corn and other food when it was diverted to fuel - and the socalled green bioethanol turned out to cost almost as much CO2 as fossil fuels.

Now, the Washington Post reports the same thing is happening with wood biomass. Subsidies that were supposed to create green fuel are instead warping the market:

In a matter of months, the Biomass Crop Assistance Program—a small provision tucked into the 2008 farm bill—has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation’s composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets.

Of course, subsidies are an important tool for jump-starting the green economy. But not the way the wood biomass subsidies were written.

Biomass energy representatives, such as the Biomass Power Association president, Bob Cleaves, said those subsidies are critical to support a sector that currently supplies half of the nation’s renewable energy (the other half coming from wind, solar and other sources). Seven of Maine’s 10 biomass energy plants would have shut down without the new influx of funds, he said.

“The industry needs help,” Cleaves said. “Is the country not prepared to spend half a billion dollars on half the country’s renewable energy resources?”

The Agriculture Department, for its part, says it has no choice but to implement the subsidy the way Congress envisioned it under the 2008 farm bill. That legislation made no distinction between a waste product with little market value, such as corn husks, and the sawdust that sells for roughly $45 a dry ton.

Senator Tom Harkin (D-IA) is looking into the problem, and so is the Office of Management and Budget. So hopefully that means we’ll be seeing this fixed fairly quickly. Everyone agrees that some form of subsidy for biofuels is a very good thing - when it encourages the market in the right way.

But pellet mill owners such as the Rolf Anderson, chief executive of Bear Mountain Forest Products, said the program will eventually create an incentive for people to bring small pieces of wood left by loggers out of the forest, which will give companies like his a cheap and steady stream of raw materials.

“It opens up economic opportunities. It opens up healthier forests, and it helps companies and individuals save on their energy costs,” said Anderson, whose company is based in Oregon.

The problem with subsidies, though, is once companies start getting millions of dollars from the public trough, they lobby hard to keep the flow coming. Why? Because companies can easily afford to donate tens of thousands of dollars to campaign coffers if it means millions of dollars in government funding. The 2008 Farm Bill that contained this biomass provision was widely derided as a bloated mess that ended up pouring billions into Big Ag without really helping out struggling farmers.

What can you do? Write your Senators and Representatives and tell them to get it right. And stay with TENTHMIL as we research this critical issue.

This was Biomass or Biomess: Warping the Market, an entry in our Renewable Energy Campaign from January 11, 2010. It was filed under Biomass

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