Study: Biomass tax credit led to $12M in economic activity

By Lee van der Voo – Sustainable Business Oregon

Biomass tax credit led to $12M in economic activity

A new report delves into the jobs created and economic activity generated by a tax credit for biomass feedstock.

A new study on the performance of Oregon’s biomass tax credit shows the $5.5 million awarded in 2010 helped wood fuel prices stay competitive, support jobs and create economic activity, perhaps as much as $12 million.

It’s a good sign for a program tasked with promoting renewable energy and creating jobs in the forest products industry.

Oregon’s Biomass Producer or Collector credit was created in 2007 following the severe crash in the housing market and other forest products industries, when lower volumes of mill waste boosted demand for forest biomass for bioenergy feed stocks.

The tax credit is primarily used by collectors of forest biomass from logging, slash or land stewardship projects. Those who receive the credit are offered $10 for each green ton of forest biomass they deliver to a bioenergy facility.

Legislation calling for the program’s review in 2011 recently led researchers at the University of Oregon to probe its impacts, with assistance from the Oregon Department of Energy.

“We have a long history in the wood products industry of using the byproducts of logs, the mill residuals, to produce electricity, so we were kind of interested in what’s happening in this market after the tax credit came into play,” said Max Nielsen-Pincus, a research associate in the Ecosystem Workforce Program at the Institute for Sustainable Environment at UO, and a researcher on the project.

In the study, soon to be released in detail, the group found that the tax credit helped keep prices in the wood fuels market competitive while supplies from mills dwindled, and likely improved the margin on forest biomass moving out of forests during a time when output was otherwise likely to slump. Forest biomass volume increased between 100,000 and 190,000 tons from 2007 to 2010, and prices were about $7 less per ton after the tax credit became available. The results are based on a model that tracked previous trends in the industry.

The study also found the credit supported between 32 and 73 jobs in Oregon in 2010, or between 11 percent and 24 percent of the forest biomass portion of the wood fuels market in the state, and created at least as much economic activity as it cost in foregone revenue and possibly as much as $12 million.

Nielsen-Pincus said two other programs may also have played a role: the USDA introduced its Biomass Crop Assistance Program in 2009 and the American Recovery and Reinvestment Act allowed for the Forest Service and Bureau of Land Management to subsidize moving biomass off some lands.

“Between the Recovery Act and the Biomass Crop Assistance Program that USDA runs and the tax credit, it looks like we’re creating this economic lever that’s causing more material to get out of the forests,” said Nielsen-Pincus.

“In all cases you create some jobs, you create some wages and you create some economic activity, more than the program costs.”

A full report will be posted on soon, dubbed No. 32 “Impacts of the Biomass Producer or Collector Tax Credit on Oregon’s Wood Fuels Market and Economy.” Matt Krumenauer, Kate MacFarland and Cassandra Moseley also contributed to the research.

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