The Economy of Bioenergy Production

Woody biomass (bioenergy) is energy derived from trees. Bioenergy made from wood comes with steep environmental costs. Side effects of this industry include:

  • air pollution during production
  • air pollution during combustion
  • water pollution and runoff during forest destruction
  • forest destruction
  • conversion of natural forests to pine plantations
  • conversion of natural forests to developed land
  • less land available for food production for human consumption

Despite these environmental issues, companies produce more and more each year. In this article, we’ll look at the economic impacts of bioenergy production.

What is the wood pellet industry?

The woody biomass energy industry uses trees to make wood pellets. It then ships them to Europe and Asia. The pellets are then burned in power plants to make electricity. Many people believe that trees are a great replacement for fossil fuels. Yet, this type of energy production produces a lot of greenhouse gas emissions. As a result, it shouldn’t replace fossil fuels or any other high carbon energy production method. Wood pellet plants are as dirty and problematic as coal plants.

There are better ways to reduce carbon dioxide emissions from fossil fuels than biomass energy. While trees may be a “renewable” energy source, they’re simply not a green substitute for fossil fuels.

Renewable energy subsidies are propping up wood pellet production

The production cost of bioenergy isn’t going down. Burning wood and plants for heat has been going on for thousands of years. While burning wood for energy production is newer, advancement has stopped. We can’t get more energy out of a single plant or tree, regardless of technological advancement.

This stands in stark contrast to truly green energies like wind and solar. The production cost for these new technologies has been steadily decreasing. And because the wind and sun are inherently free, there are no ongoing feedstock costs. Biomass facilities, on the other hand, need a steady supply of materials to burn.

Many communities hope that the biomass industry will provide social benefits to rural areas. They believe it’ll help the local economy and lower poverty. As a result, governments at all levels provide millions of taxpayer dollars in incentives to attract new businesses. These include things like tax breaks, use of land, and support with water and road systems. Even international governments give subsidies.

There’s no scientific evidence to support the idea that bioenergy production results in strong economic growth. Even models show trade-offs between:

  • bioenergy production
  • local economy
  • community health
  • ecosystem health

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On paper, any biomass energy that a country imports from the US is “free.” In other words, it doesn’t count against their carbon emissions. This type of investment props up “solutions” that are still releasing carbon dioxide. This, unfortunately, will disproportionately impact developing countries.

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International subsidies to bioenergy production

International green energy subsidies are propping up the bioenergy industry. In most situations, carbon dioxide is “counted” as emissions when it’s released into the atmosphere. When a power plant burns coal, those emissions are counted. This is true in most electricity production, agriculture, and many other industries.

With bioenergy, there’s a weird loophole. The carbon emissions are counted during the trees’ harvest, but not when burned. Because most trees get harvested in other countries, European countries can burn trees (wood pellets) for “free.” There are no emissions counted against them because they didn’t cut the trees down.

This system has lent itself to perverse incentives. Countries across Europe and Asia are importing wood pellets from North America. It’s a cheap, easy way to meet their climate goals. And often, the governments are subsidizing these purchases, at the cost of billions of dollars. Since 2015, European countries have provided the equivalent of nearly 50 billion US dollars to subsidize burning trees from other countries.

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US subsidies to bioenergy production

International governments are not the only ones to subsidize. In the US, both the Department of Agriculture (USDA) and state/local governments subsidize this industry. While the USDA does so in the name of “research,” other entities tend to offer subsidies in the name of questionable economic benefits.

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State and local governments are throwing money at these dirty industries. Most of the state and local money to bioenergy facilities comes via “Economic Development” programs. These programs may or may not require reporting on the number of jobs created. Indirect subsidies may come in the form of:

  • tax abatement
  • tax credits
  • reduced leases of land
  • building infrastructure (e.g., roads, water tanks)
  • grants
  • low- or no-interest bonds and loans

Collectively, states and the federal government have provided over 75 million dollars to subsidize wood pellet production.

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International subsidies prop up bioenergy

Even though millions of dollars seems large, the US investment into bioenergy is small compared to foreign investment. The funds for bioenergy from foreign sources are nearly 700 times more than the domestic funds. While not all of that money ends up in the hands of US companies, a significant portion does. To deal with the wood pellet issue in the US, we must work with foreign governments.

foreign governments invest over 650 times more money into bioenergy than the US does.

People suffer when biomass facilities move in

Polluting industries like biomass wood pellets have been moving into rural communities for decades. These communities continue to struggle with poverty and unemployment. And industry executives who live outside the community prosper. Both property values and livability decline in areas near heavy manufacturing like wood pellets. In some places with wood pellet plants, tax rates have increased despite no changes in income level or housing value.

These issues are collectively known as environmental justice issues.

Where To Go From Here

Wood pellet production is not the economic boon that it claims to be. As you now know, it’s often propped up by unsustainable foreign and local subsidies. There are no environmental benefits to woody biomass production. It’s not a cost-effective strategy to combat climate change. The more people learn that the biomass industry is a scam, the better chance we have of ending it.

Download and share this fact sheet on the economics of bioenergy.

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Join the fight against wood pellet facilities.

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