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For years, proponents of bioenergy and biofuels promised that the industry would help reduce U.S. dependence on fossil fuels, decrease greenhouse gas (GHG) emissions, and spur rural economic development. They also promised that eventually, the industry would move away from food-based feedstocks toward more sustainable, next-generation biomass sources. Biomass is defined “as organic matter that can be converted into energy.”  Proponents hoped that vehicles would one day run on advanced biofuels and power facilities would eventually be fueled by agricultural residues, wood waste, algae, and perennial grasses. But even with a maze of taxpayer supports propping up the industry, the next generation of biofuels and bioenergy has failed to meet its lofty expectations. Meanwhile, the mature corn ethanol industry has dominated the renewable fuel market, partially due to thirty years of subsidies, tax breaks, mandates, and other taxpayer supports.

Taxpayer subsidies and mandates for renewable energy derived from biomass originate in several different pieces of legislation and are administered by various federal agencies, including the Departments of Energy (DOE) and Agriculture (USDA) and Environmental Protection Agency (EPA). One of the primary coffers for biomass subsidies is the federal farm bill’s energy title. The farm bill, renewed approximately every five years, is a wide ranging piece of legislation that funds everything from nutrition assistance programs and broadband internet to agricultural subsidies for the production of crops such as corn and soybeans. More specifically, the energy title of the farm bill, first introduced in 2002, provides grants, loans, and other subsidies to energy efficiency, biofuels, and bioenergy (heat and power) projects. In total, the 2008 farm bill energy title’s 13 major programs were projected to cost taxpayers $1.1 billion over five years (FY08-12).  Instead, the programs spent taxpayer dollars on the mature corn ethanol industry, supported biomass sources with numerous unintended consequences, and even paid for updates to farmers’ irrigation equipment and grain dryers. Here, we focus on subsidies to the woody biomass industry.

Types of Biomass Qualifying for Federal Subsidies

Determining which types of biomass are eligible for federal mandates, energy title subsidies, and other taxpayer supports has been a controversial topic, particularly within the last decade. Not all forms of biomass are created equal since the following characteristics can differ:  cost-effectiveness, energy density, land use, need for fossil-based inputs in the production cycle, competition with other food or industrial uses, GHG emissions, likelihood of becoming an invasive species, etc. The term “biomass” was first defined in federal legislation in 1980, but it was not until the 2007 energy bill and the 2008 farm bill that the two most widely used biomass definitions were solidified in federal law.  Most taxpayer subsidies for biomass are reliant on these latter two definitions.

In the energy title of the farm bill, renewable biomass is defined as the following :

– Materials, pre-commercial thinnings, or invasive species from National Forest System land and public lands which are:

• Byproducts of preventative treatments that are removed to reduce hazardous fuels, reduce or contain disease, or restore ecosystem health;
• Not otherwise used for higher-value products; and
• Harvested in accordance with applicable law, land management plans, and old-growth maintenance, restoration, and management guidelines in the Healthy Forests Restoration Act.

– Or, any organic matter that is available on a renewable or recurring basis from non-Federal land or land belonging to an Indian or Indian tribe, including:

• Renewable plant material like feed grains [such as corn or soybeans], other agricultural commodities, other plants and trees, and algae; or
• Waste material like crop residue, other vegetative waste material (including wood waste and wood residues), animal waste and byproducts (including fats, oil, greases, and manure), and food and yard waste.

This definition dictates which forms of biomass are eligible for the various energy title programs, and thus millions of dollars in taxpayer subsidies. Note that the farm bill’s definition of which types of biomass can qualify for subsidies differs from the 2007 energy bill’s definition which dictates types of biomass that qualify for the federal Renewable Fuel Standard (RFS) mandate. The RFS requires 36 billion gallons of renewable fuel, including 15 billion gallons of corn ethanol, to be produced by 2022. The 2007 energy bill does not allow woody biomass from federal lands and crops from forested lands to qualify for RFS production volumes, but since the farm bill definition is less strict, woody biomass is eligible for various grants and loan guarantees in both energy and rural development programs.

Woody Biomass Subsidies in the Farm Bill Energy and Rural Development Titles

The eight energy title programs and two rural development programs supporting woody biomass, in addition to other forms of renewable energy, include the following:

Other Federal Biomass Programs and Subsidies

Biomass subsidies are not only allocated through USDA programs, but also through the federal tax code and various DOE programs. A federal tax credit for open-loop biomass production is expected to cost taxpayers $2.2 billion over the next decade.  Various DOE biomass and bioenergy programs fund the Bioenergy Technologies Office’s support of biorefineries, research and development of new types of biomass or conversion technologies, and various Congressionally-directed projects such as those supporting Iowa switchgrass, Indiana corn ethanol, Texas dairy waste conversion, and hybrid poplar tree research alongside the U. S. Forest Service.  The President, in his FY14 budget request, proposed additional spending on biomass and bioenergy programs:  $141 million for conversion technology research and development, $78 million for integrated biorefineries (including a joint USDA/Navy initiative to develop advanced biofuels), $15 million for algae biomass productivity, $20 million for manufacturing research and development, and $20 million for high-impact new technologies. If enacted, the budget request totaling $282 million would exceed current FY12 bioenergy spending at DOE by $87 million.

Unintended Consequences

While early proponents attempted to sell biomass as an environmentally friendly renewable fuel source, data has shown that converting some types into biofuels or burning them for heat or power can have several negative impacts, leaving taxpayers shouldering costly liabilities. Converting wood and municipal solid waste into biofuels increases air pollutants like GHG emissions and particulate matter and causes associated negative health effects. Similarly, the National Research Council found that clearing land and tearing up native grasslands to grow biofuels crops can actually increase net carbon emissions if appropriate mitigation steps are not taken.  If one of the original goals of the biofuels and biomass industries was to reduce GHG emissions and reduce dependence on oil, then subsidizing biofuels and biomass will only send the U.S. in the wrong direction toward meeting these objectives.

Conclusion

It’s time that the biomass industry stood on its own two feet without taxpayer support. With their numerous unintended consequences and failure to achieve stated goals, biomass subsidies scattered throughout the federal tax code, DOE, and the farm bill energy and rural development titles should be eliminated once and for all. Not only will several downstream costs and long-term liabilities be reduced, but taxpayers will bear less unnecessary risks and save billions of dollars.

For more information, contact Taxpayers for Common Sense at 202-546-8500.