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At the broader international level, the IPCC is also in the processing of preparing a new report on renewable energy that is expected to be published in 2011. Initial indications are that this report will provide more detailed considerations of the carbon issue for forest biomass. 1.3 U.S.FEDERALFORESTBIOMASSENERGY POLICIES 1.3.1 MostSignificantFederalPrograms& Incentives for Biomass Energy Federal incentives for renewable energy (including forest biomass) have taken many forms over the past four decades. The focus of most of these programs has been on encouraging renewable electricity generation and, more recently, production of renewable transportation fuels, such as ethanol. The third area of energy use—thermal applications for heat, cooling and industrial process heat—has not been a focus of federal energy programs until very recently. A summary of the full scope of existing federal programs and incentives related to the development of biomass energy facilities is included as Appendix 1-A to this report. Federal policy initially encouraged renewable electricity generation by requiring utilities to purchase electricity from renewable energy generators at a fixed cost through the Public Utility Regulatory Policy Act (PURPA). More recently, federal policy has shifted towards encouraging renewable energy through tax incentives and direct grants—with the primary focus on renewable transporta- tion fuels and renewable electricity generation. The thrust of current federal investment in renewable energy is summarized in a recent report by the Environmental Law Institute (Environmental Law Institute, 2009). From 2002 through 2008 the U.S. Government spent approximately $29 billion on renewable energy subsidies (compared to $72 billion spent on fossil fuels). Of this $29 billion, most was dedicated to transportation fuels or electricity generation through a combination of tax programs and direct grants and loans. • Transportation fuels via corn-based ethanol production received more than half of the total subsidies ($16 billion), primarily through the Volumetric Ethanol Excise Tax Credit Program (VEETC) ($11 billion) and the corn-based ethanol grant program ($5 billion). • Renewable electricity generation projects received approximately $6 billion in subsidies during this seven-year period, principally through the Production Tax Credit ($5 billion), the Investment Tax Credit ($250 million), the Modified Accelerated Cost Recovery System ($200 million), and the Clean Renewable Energy Bond program ($85 million). • Thermal energy as a sector received no significant subsidies. Within the electric power sector biomass facilities are eligible for funding under these four primary renewable electricity generation incentives (the Production Tax Credit, Investment Tax Credit, Modified Accelerated Cost Recovery System, and Clean Renewable Energy Bond program); however they have received a relatively small share of the total funding. The U.S. Energy Information Adminis- tration (EIA) estimates that in fiscal year 2007, open-loop biomass facilities received approximately $4 million in tax credits under the production tax credit program, compared to approximately $600 million for wind facilities. Funding for combined heat and power or purely thermal facilities is also negligible compared to expendi- tures on other renewable resources (EIA, 2008). And many of the biomass-specific grant programs have total annual allocations in the $1 to $5 million range, with individual projects often capped in the $50,000 to $500,000 range. The primary federal subsidy or incentive to biomass electric power production is the Renewable Electricity Production Tax Credit which provides $0.011 per kWh or approximately $10 per MWh.3 As discussed more fully below, while smaller in value than state Renewable Energy Credits (REC’s), which currently average between $20–$35 per MWh, the PTC does provide a significant and stable incentive for the development of biomass power over time. The American Recovery and Reinvestment Act of 2009 allows taxpayers eligible for the federal renewable electricity production tax credit (PTC) to take the federal busi- ness energy investment tax credit (ITC) or to receive a grant from the U.S. Treasury Department instead of taking the PTC for new installations for up to 30% of capital costs following the beginning of commercial production. The new law also allows taxpayers eligible for the business ITC to receive a grant from the U.S. Treasury instead of taking the business ITC for new installations. Grants are available to eligible properties placed in service in 2009 or 2010, or if completed by 2013. Within federal subsidies specific to biomass energy, there is an even greater emphasis on transportation fuels, a very limited focus on biomass power, and no historic public policy support for biomass thermal applications. In addition to the federal Production Tax Credit, the Biomass Crop Assistance Program (BCAP) has provided significant subsidies over the past year to the biomass supply sector. However, it is considered unlikely that the current high level of subsidies will continue. Created in the 2008 Farm Bill, BCAP (sec. 9011) is an innovative program intended to support establishment and production of eligible crops for conversion to bio-energy, and to assist agricultural and forest landowners with collection, harvest, storage, and transportation (CHST) of these eligible materials to approved biomass conversion facilities (BCF). 3 The federal renewable electricity production tax credit (PTC) is a per-kilowatt-hour tax credit for electricity generated by qualified energy resources and sold by the taxpayer to an unrelated person during the taxable year. Originally enacted in 1992, the PTC has been renewed and expanded numerous times, most recently by H.R. 1424 (Div. B, Sec. 101 & 102) in October 2008 and again by H.R. 1 (Div. B, Section 1101 & 1102) in February 2009. Efforts to again renew the PTC are currently underway in the US Congress. BIOMASS SUSTAINABILITY AND CARBON POLICY STUDY MANOMET CENTER FOR CONSERVATION SCIENCES 13 NATURAL CAPITAL INITIATIVEPDF Image | NATURAL CAPITAL INITIATIVE AT MANOMET
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