Economic Approach to Assess the Forest Carbon Implications of Biomass Energy Adam Daigneault,* ,† Brent Sohngen, ‡ and Roger Sedjo § † Landcare Research, Auckland, New Zealand ‡ Agricultural, Environmental, and Development Economics, The Ohio State University, Columbus, Ohio, United States § Resources For the Future, Washington, DC, United States * S Supporting Information ABSTRACT: There is widespread concern that biomass energy policy that promotes forests as a supply source will cause net carbon emissions. Most of the analyses that have been done to date, however, are biological, ignoring the effects of market adaptations through substitution, net imports, and timber investments. This paper uses a dynamic model of forest and land use management to estimate the impact of United States energy policies that emphasize the utilization of forest biomass on global timber production and carbon stocks over the next 50 years. We show that when market factors are included in the analysis, expanded demand for biomass energy increases timber prices and harvests, but reduces net global carbon emissions because higher wood prices lead to new investments in forest stocks. Estimates are sensitive to assumptions about whether harvest residues and new forestland can be used for biomass energy and the demand for biomass. Restricting biomass energy to being sourced only from roundwood on existing forestland can transform the policy from a net sink to a net source of emissions. These results illustrate the importance of capturing market adjustments and a large geographic scope when measuring the carbon implications of biomass energy policies. ■ INTRODUCTION For centuries, the proportion of wood used as a primary energy source has been declining. The United States and Europe, however, are pushing ever more stringent renewable portfolio standards that will increase the demand for wood as a primary energy source and potentially reverse this trend, at least in some locations. According to the Center for Climate and Energy Solutions, 39 states now have adopted some form of renewable or alternative energy portfolio standard or goal that promotes the use of alternative energy. 1 Many of the laws these states have adopted promote biomass energy as a renewable source of electricity production. In addition, policies like the Low Carbon Fuel Standard in California, or laws like the United States Energy Independence and Security Act of 2007, promote development of liquid fuels from woody biomass. With technological change in the fuel processing sector, demand for wood as an input into the liquid fuel system could increase in the future. When viewed as a renewable energy source, wood-based biomass has been treated as carbon neutral, such that when it is burned for energy, it does not release net carbon dioxide. 2 This assumption of “carbon neutrality”, however, has been challenged. For example, in the fall of 2010 two noteworthy letters were sent to the Congress by eminent scientists examining the meritsor demeritsof biomass in the climate debate. The first, from about 90 scientists, 3 questioned the treatment of all biomass energy as carbon-neutral, arguing that “clearing or cutting forest for energy... has the net effect of releasing otherwise sequestered carbon into the atmosphere just like... fossil fuels.” The second letter, by over 100 forest scientists, 4 expressed concern over equating biogenic carbon emission with fossil fuel emission. It argued that such an approach that focuses on net smoke stack emissions independent of their feedstocks would encourage further fossil fuel energy production to the long-term detriment of the atmosphere. In addition to these statements by scientists, several analyses have now been conducted to examine the implications that wood used for biomass energy has on the carbon cycle. Two recent studies have concluded that when biomass energy or biofuels are produced with wood, carbon emissions to the atmosphere actually increase. 5,6 The emission results from the loss of carbon in existing stocks of forests that are drawn down in order to meet new demands for forest resources. In the paper by Searchinger et al., 6 land use change can occur which shifts forests to perennials such as switchgrass, or other annual crops, that have lower carbon intensity per hectare. In either case, the avoided emissions from the energy that is displaced are not large enough to limit the carbon losses. Received: August 30, 2011 Revised: March 26, 2012 Accepted: April 19, 2012 Published: April 19, 2012 Policy Analysis pubs.acs.org/est © 2012 American Chemical Society 5664 dx.doi.org/10.1021/es2030142 | Environ. Sci. Technol. 2012, 46, 5664-5671