In this post, I would like to focus more closely on the unintended consequences of timberland divestments from a perspective that few have considered and that might not seem apparent on the surface. It is, however, a viewpoint that is ultimately very important to maintaining the health of both individual forests and the larger forest products industry.
In the midst of the debate over the whether importing wood pellets to the European Union from the southern United States is a sustainable undertaking for electricity generators there, the Sustainable Biomass Partnership (SBP) has released its Biomass Assurance Framework. As part of the framework, Standard #1: Feedstock Compliance Standard outlines a set of criteria for demonstrating that pellets consumed in the EU are sustainably sourced. Based in part on standards put in place by the UK Department of Energy and Climate Change (DECC) and current forest certification schemes, the standard outlines ten areas for assessment.
A recent article in the Tidewater News asks the question, "Is the wood product industry sustainable in Western Tidewater?" The question is an important one. The forest products industry is not sustainable if wood supply dries up, and no one understands the significance of this better than the forest products industry. Unfortunately, the answer provided in this article falls short of providing a complete and therefore accurate picture of Southampton County's forest resources and their long-term sustainability. Instead of trying to answer this question directly, the article suggests that only one segment of the forest products industry, wood pellet manufacturers, is responsible for a lack of sustainability.
As Q1 2015 came to a close, Europe's near-term commitment to utilizing low-carbon energy solutions continues to reflect a growing global awareness of pioneering energy alternatives. International interest in wood pellets - an increasingly popular and sustainable biomass feedstock- remains high, particularly by Western European utilities. In fact, wood pellet demand continues to rise year-over-year and growth in the sector has led to a number of recent pellet mill expansions in the Southeastern US, which is an ideal region to manufacture this product due to its thriving forestry and timber industry. In recent years, US-based pellet producers have fulfilled the increased demand abroad and with continued growth in the sector- as well as continued EU subsidies for renewable energy-there are real opportunities for American producers.
Recent actions by the Environmental Protection Agency (EPA) and petrochemical industry organizations suggest that 2015 will be another controversial year for the Renewable Fuel Standard. The 2014 volume requirements have yet to be finalized, multiple proposals have been floating in Congress (one bolstering biomass-based diesel, another removing the corn-based ethanol requirement) and at least one lawsuit has been filed.
While Environmental Protection Agency (EPA) has not yet finalized 2014 volume requirements for its Renewable Fuel Standard (RFS), there have been some associated developments that may affect companies and investors directly involved in the advanced biofuels industry. On April 3, EPA announced its direct final rule on cellulosic waiver credits (CWC) that is scheduled to take effect on June 2. Notably, the formula for calculating CWC has been reassessed with a goal of establishing a more timely and reasonable set of data for creating pricing schema going forward. This arrangement has historically provided a loophole whereby major oil companies may opt to purchase CWC at substantially lower prices than actual gallons of advanced biofuels.
