• Department Home
• Forestry Home
• About Us: Forestry
• Forest Management
•   • State Forests
•   • Forest Health
•   • Forest Hydrology
•   • Forestry Assistance
•   • Acquisition Programs
• Wildland Fire
• Services We Provide
• County Foresters
• Field Operations
• State Forest Recreation
• Fire Weather
• Training and Education
• Calendar of Events
• Publications
• Employment: Forestry
• Forestry Site Map
• Contact Us
• Search
• Select a Division

Economic Impact Analysis of Woody Biomass Utilization for Bioenergy in Florida

The Florida Division of Forestry (DOF) has been designated within the Florida Department of Agriculture and Consumer Services (DACS) as the lead agency on the study, and is contracting as described herein with the University of Florida to furnish the analysis mandated by the Laws of Florida, Chapter 2008-227, Section 113. Based on the results of the University of Florida analysis, the DOF in conjunction with the Department of Environmental Protection (DEP) will prepare the final project report for the Florida Governor, the President of the Senate, and the Speaker of the House of Representatives as requested.

• James R. Karels, Director, Florida Division of Forestry, Tallahassee, FL
• Timothy L. White, Ph.D., Professor and Director, School of Forest Resources and Conservation, University of Florida, Gainesville, FL

• Jarek Nowak, Ph.D., Forest Utilization Specialist, Florida Division of Forestry, Tallahassee, FL
• Douglas R. Carter, Ph.D., Professor, School of Forest Resources and Conservation, University of Florida, Gainesville, FL
• Alan W. Hodges, Ph.D., Extension Scientist, Food & Resource Economics Department, University of Florida, Gainesville, FL
• Frederick Rossi, Ph.D., Postdoctoral Research Associate, School of Forest Resources and Conservation, University of Florida, Gainesville, FL
  

Background

The impacts of the bioenergy industry, and especially the impacts of various federal, state and local government financial incentives on the new market development and on the existing timber and forest product industry, is largely unknown. Renewable energy financial incentives are among top five drivers with the highest potential impact on renewable energy adoption (Navigant Consulting, 2008). Other “key drivers” with high impact potential and high uncertainty are: (i) fossil fuel prices, (ii) greenhouse gas policies, (iii) credit markets, and (iv) renewable energy regulatory framework. This project will evaluate the current and long-term (2009 to 2030) supply of, and demand for, woody biomass in Florida under unfavorable, mid-favorable, and favorable renewable energy adoption scenarios (Navigant Consulting, 2008). These scenarios take into account varying levels of input variables affecting the key renewable energy adoption drivers. The variables under the renewable energy financial incentives category include: federal investment tax credit, federal production tax credit, state solar rebate program, state sales tax exemption, state property tax exemption and state production tax credit. Variables considered under other key driver categories include: CO₂ prices on carbon exchange markets, cost of debt, cost of equity, availability of debt, natural gas and coal prices, and last but not least renewable energy certificates (RECs) state spending caps. The unfavorable, mid-favorable, and favorable renewable energy adoption conditions can be depicted by a family of technology adoption curves (Navigant Consulting, 2008). Assuming that biomass-to-electricity technologies would be adopted along the similar trajectories as those depicted by Navigant Consulting, impact of the various financial incentives and other key drivers translates into between 1.6-fold to 3.1-fold increases in woody biomass consumption for electricity generation by 2020, as one moves from unfavorable (no change from 2009 baseline) to mid-favorable and then to favorable renewable energy adoption scenarios, either with or without RECs. One can similarly interpolate the increases in woody biomass consumption for 2015, 2025 and 2030 compared to 2009 baseline using the same family of technology adoption curves.

The analytical and modeled part of the project conducted by the University of Florida will be limited to merchantable timber (plus tree tops), and urban wood waste. These are the woody biomass resources either currently used by the existing forest products industry, or are the most likely to be sought after by the emerging bioenergy industry because of established markets, harvesting methods, relative ease of handling and large volumes available for utilization. The current and future effects of changes in timber and other woody biomass supply/demand on timber markets and forest sustainability will be addressed in terms of timberland acreage and growing stock volumes by major forest cover types.

Objectives

1. Estimate current and long-term (2009 to 2030) potential supply of woody biomass under three scenarios (i) merchantable timber alone,(ii) merchantable timber plus tree tops,(iii) merchantable timber plus tree tops plus urban wood waste in Florida based on the latest published U.S. Forest Service Forest Inventory and Analysis FIA data (Brown, 2007) and Timber Product Output TPO data (Johnson et al., 2008), unless more recent FIA and TPO data sets are available for use by the time the study commences.
2. Estimate current and long-term (2009 to 2030) demand for woody biomass (as defined in objective #1) for bioenergy production based on existing, announced, and projected bioenergy facilities in Florida under unfavorable, mid-favorable and favorable renewable energy adoption scenarios similar to those defined by Navigant Consulting (2008). Specifically, scenarios will be examined that assume the amount of woody biomass derived electricity will be between 1% and 20% of total 2006 electricity demand in Florida in 2% increments for years 2009, 2015, 2020, 225 and 2030.
3. Project changes in market conditions for conventional forest products including prices and volumes resulting from the increased demand for woody biomass as defined in objective #1.
4. Evaluate current and future economic impacts of changes in supply/demand for woody biomass resources (as defined in objective #1) on forest industry output, income, employment, and business taxes for the forestry and energy production sectors.
5. Evaluate the near term and long-term (2009-2030 ) sustainability of the forest resource, including timberland acreages and timber volumes by broad forest types under alternative woody biomass demand scenarios.

Technical Approach

Used to evaluate various policies in the forestry and agricultural sectors, FASOMGHG calculates optimal temporal allocations of land within and between components of these two sectors based on a price-endogenous market structure; it solves for the multi-market, multi-period equilibrium for each forestry and agricultural market identified, as well as for the intertemporal asset market for land. FASOMGHG simulates market behavior over a 70 to 100 year time period, providing projections of the forestry and agricultural sectors at 5 year intervals for 11 regions of the conterminous United States. Production, consumption and price formation are modeled (for both hardwood and softwood) by FASOMGHG for sawtimber, pulpwood, and fuelwood in the forest sector and for a large number of primary and secondary crops and livestock in the agriculture sector. It also takes into account timber management investment decisions and changes in secondary product demands, secondary processing technology, secondary product capacity adjustments across regions. Specifically for Florida, this project will utilize FASOMGHG to estimate impacts to the supply of woody biomass resources, the demand for woody biomass for bioenergy utilization, and the demand for timber resources for conventional forest products as a function of various exogenous policy changes. However, the model will need to be modified in order to address these economic aspects of the forest sector. The most relevant revision will require abstracting Florida from the current FASOMGHG region within which it is located.

The economic impacts of changes in demand for woody biomass due to expanded bioenergy production in Florida will be assessed using the IMPLAN Professional software and associated databases for Florida, coupled with a Computable General Equilibrium (CGE) model simulated with GAMS software. IMPLAN is an Input-Output analysis and Social Accounting Matrix (I-O/SAM) modeling framework that represents the operation of a local or regional economy in terms of transactions between 440 individual industry sectors, nine household income classes, state/local and federal governments (MIG, Inc. 2008). The model accounts for industrial commodity production, employment, labor and property income, interregional trade, transfer payments (e.g. welfare, retirement pensions), capital investment and business inventories. The model enables estimation of economic multipliers that capture the secondary impacts or “ripple effects” of exogenous changes in final demand, including supply chain activities for purchased inputs (indirect effects) and employee household spending (induced effects), as well as direct changes in industry output or employment. Economic impact measures include industry output (revenue), employment (fulltime and part-time jobs), value added, labor income, property income, and indirect business taxes. Sectors explicitly represented in the models will include timber producers, forest product manufacturers, electric utilities, biofuel producers, and transportation fuel wholesalers. Where appropriate, existing production functions in the model will be customized to represent bioenergy commodities. Data from the I-O/SAM models will be exported to the CGE model for dynamic simulation of industry activity and commodity consumption resulting from changes in volumes and prices of woody biomass resources. This approach overcomes the limitations of static I-O/SAM models to evaluate changes in commodity prices.

Based on the conducted analyses and modeling, current and future economic impacts of changes in woody biomass supply and demand on timber markets and forest sustainability will be described in the University of Florida furnished report. The final report prepared by the DOF for the Governor, the President of the Senate, and the Speaker of the House of Representatives will be based largely on the University of Florida report, but may also address to the extent possible estimates of other woody biomass resources potentially available to bioenergy producers (e.g., forest logging residues, non-merchantable timber from pre-commercial thinnings, forest understory woody biomass, urban forest trimmings, etc.). Currently, these additional resources are not widely utilized because of difficulties with their quantification, harvesting, collection, and transportation to energy facilities. Because of these factors their impact on the current and future timber markets in Florida remains somewhat elusive.

Project Timeline

Public Input

• Online comments closed at 5 PM EDT on May 15, 2009.

References

Brown, M.J.  2007.  Florida’s forests—2005 Update.  Resource Bulletin SRS-118.  Asheville, NC:  U.S. Department of Agriculture Forest Service, Southern Research Station.  39 p.

Hodges, A.W., M. Rahmani and W.D. Mulkey.  Economic contributions of Florida agriculture, natural resources, food and kindred product manufacturing, distribution and service industries in 2006. UF/IFAS EDIS document FE702, 23 pages, March 2008.

Johnson, T.G., Bentley, J.W., Howell, M.  2008.  Florida’s timber industry—An Assessment of Timber Product Output and Use, 2005.  Resource Bulletin SRS-133.  Asheville, NC.  U.S. Department of Agriculture Forest Service, Southern Research Station.  31 p.

Minnesota IMPLAN Group (MIG), Inc.  IMPLAN Professional Economic Impact and Social Accounting Software and Associated Data for Florida.  October 2008.

Navigant Consulting.  2008.  Florida Renewable Energy Potential Assessment.  Full Report Draft.  Prepared for Florida Public Service Commission, Florida Governor’s Energy Office, and Lawrence Berkeley National Laboratory, November 24, 2008. 
269 p. accessed online 21-Jan-2009 at: http://www.floridapsc.com

US Department of Energy, Energy Information Administration.  Annual Energy Outlook.  June 2008.

Contacts