A new RFF study concludes that federal efforts to increase the use of cellulosic biofuels could have important effects on U.S. timber markets. In "The Implications of Increased Use of Wood for Biofuel Production," Senior Fellow Roger Sedjo and RFF University Fellow Brent Sohngen find that meeting the targets laid out in the Energy Act of 2007 could result in significantly higher prices and increased imports.
The Energy Act of 2007 sets a standard that starts at 9 billion gallons of renewable fuel in 2008 and rises to 36 billion gallons by 2022. It also mandates a changing composition of biofuel use over time, with a total of 16 billion gallons of cellulosic biofuel required by 2022. In addition to the mandates, the act also creates a new set of subsidy incentives, providing a $1.04 per-gallon subsidy for cellulosic biofuel, while decreasing the corn ethanol subsidy from 51 cents to 45 cents.
Although grasses may prove to be a viable long-term alternative, in the near term the onus of meeting the mandated targets will probably fall on wood because large inventories and an infrastructure for harvest and transport currently exist, while for grasses they do not. Sedjo and Sohngen find that the wood required for the targeted 2022 biofuel feedstock would need to equal to 348 million cubic meters, or 71 percent of the U.S. 2005 harvest.
In addition, if the cellulosic mandates of the Energy Act are met solely by wood, U.S. and world prices for raw wood would be about 15 percent higher in 2015 and 20 percent higher in the early 2020s than they would be without the increased demand for wood to meet ethanol production mandates.
The study also suggests an adverse effect on the U.S. trade balance as the United States will look offshore for imports of wood-based products, which would grow to over $4 billion.