How Europe's CO2 Cap and Trade Means Georgia Jobs

Burning biomass from Georgia pines is one way European power companies are meeting greenhouse gas reduction goals

By Tiffany Stecker and ClimateWire  | Monday, October 31, 2011

 

BIOMASS TO BURN: Efforts to restrain greenhouse gas emissions in Europe have led to booming demand for Georgia's trees as fuel. Image: TheSussman / Wikimedia Commons

WAYCROSS, Ga.—Pawn shops, diners, churches and pine trees. Hundreds of thousands of pine trees.

This is the view from U.S. Route 85, which runs from the coast across the Southern ridge of Georgia. In recent years, though, something else has sprouted up: billboards advertising upcoming wood pellet plants. They carry the promise of steady jobs in a recession-racked economy.

In 2008, then-Georgia Gov. Sonny Perdue called this region the "bioenergy corridor of the nation." To date, 13 wood pellet plants have opened throughout the southeastern United States. Twelve more are in the planning stage.

While the local pulp and paper industry has been on the wane for years, the demand for wood pellets has recently shot up. These are the result of a process that turns wood chips into pencil-sized cylinders that are chopped up into roughly inch-long pieces.

The resulting product is lighter, drier, more compact and easier to transport than chips or sawdust -- a better option for shipping to Europe, where the demand for them has been created by the European Union's renewable energy mandates. It stems from a 2003 law setting up the E.U. Emissions Trading System and a 2009 renewable energy directive that called for E.U. member states to collectively generate 20 percent of energy from clean energy sources by 2020.

For power plants that burn coal, the quickest way to lower emissions, meet renewable energy goals and get emissions trading benefits is to burn a rising percentage of wood pellets along with the coal. As a result, demand for wood energy in Europe is set to soar by 44 percent in the next decade, according to forests research group RISI.

Waycross, one of the gateways to the Okefenokee swamp, became the home of Georgia Biomass LLC in May. It is the largest wood pellet factory in North America and, arguably, the world. Owned by European utility RWE Energy, the company is ramping up to export up to 750,000 metric tons of wood pellets per year to generate electricity in the United Kingdom and the Netherlands.

Boom times in an American 'wood basket'
"We looked at many sites," said Sam Kang, chief financial officer and chief operating officer of Georgia Biomass, from the company's headquarters in Savannah, Ga. The location in Waycross won out with "a combination of wanting to be in a very good wood basket, with good logistical connections, at the lowest cost possible."

Kang's wood-paneled office overlooks the Port of Savannah, where approximately 5,700 tons of pellets arrive by rail from Waycross every three days. They are stored in two giant domes, are loaded on barges and cross the Atlantic to a biomass-burning plant in Tilbury, England, and a coal-biomass co-firing plant in the Netherlands. About half of the cross-Atlantic pellet trade goes to the Dutch, whose renewable energy goal for 2020 is 14.5 percent.

The European stamp is apparent at Georgia Biomass's plant in Waycross, the red, yellow and black German flag waving alongside the stars and stripes and Georgia's state flag. Kang estimates his export market to lie between $150 million and $200 million annually.

But the European Union -- the entity responsible for helping the success of pellets to date -- is becoming increasingly wary of biomass's green claims. Last month, the European Environment Agency's Scientific Committee, which advises the European Commission, issued a stern opinion on the current assumption that biomass is a zero-emission energy source: It's simply not true.

In the EEA analysis, the competition for land that biomass creates, as well as the lost opportunity of maintaining trees that absorb carbon dioxide, creates an even larger footprint. The EEA seeks to correct an "accounting error" that has, according to the agency, given carte blanche to polluters.

"The opinion was motivated by concerns over correct [greenhouse gas] accounting in current E.U. and international biomass energy policies," said Helmut Haberl, a member of the EEA and one of the authors of the opinion. "Of course we hope that [the European Union] will adopt correct and comprehensive [greenhouse gas] accounting rules."

Green groups worry about 'carbon debt'
Joule for joule, both burning wood and burning coal for energy expel similar levels of carbon dioxide. Woody biomass's low-carbon credentials lie in carbon sequestration. The emissions released in the atmosphere are, over the course of several years, reabsorbed by the world's forests through photosynthesis. In theory, at least, this natural recycling system is much cleaner than burning coal, a fossil fuel that releases CO2 that has been stored in the ground for millions of years.

The lingering debate over burning pellets centers around what is known as the carbon debt -- the delayed sequestration of carbon emissions, thanks to the continuous planting of new trees. Taken into account, the carbon debt allows for biomass to be an efficient source of renewable energy. Once the debt is repaid, emissions reductions could reach up to 91 percent compared to coal, according to a University of Toronto study.

The rate of reabsorption varies according to what is burned, what is grown and the accounting in between. A recent study from the University of Ontario found that in the long term, electricity generation from pellets reduces overall emissions relative to coal. But the recoup of carbon losses was delayed by 16 to 38 years, depending on whether the source of biomass was whole trees, sawmill leftovers or other wood residues.

The EEA's concerns are not new. The burning of biomass for energy has stoked the fires of environmentalists on both sides of the Atlantic for years.

"Over the life cycle, if you leave off smokestack emissions, the equivalent is even worse than coal," asserted Janet Pritchard, director of the Climate and Forests program for ClientEarth, one of several European organizations that have long fought for the European Commission to reconsider the allowance it gives biomass.

The Southern Environmental Law Center (SELC), an environmental advocacy group for the region, has also voiced its concerns. While not "anti-biomass," the group is keeping a close eye on the boom.

"If it expands too much, there's going to be tons of carbon implications," said David Carr​, national forest project leader for SELC. Like ClientEarth is doing in Europe, SELC is looking to set standards for low-carbon biomass in nearby North Carolina -- the only state in the region with a renewable energy mandate.

Catching up with Canada and Scandinavia
To Kang of Georgia Biomass, the EEA opinion is a concern, but one that can be refuted.

"We're not cutting down tropical rainforest; it's a crop," he said. "We monitor all those things, and we have to counterbalance them with our own arguments."

Last year, more than 11 million metric tons of wood pellets was consumed in Europe, a 7 percent rise from the previous year. In the past decade, Canada has been the leader in wood pellet production, with the first U.S. pellet plants only joining in around 2008.

But since then, the Southeast has been catching up, fast.

Canada's 33 pellet plants are expected to export 2 million metric tons of pellets this year, according to a report by the U.N. Economic Council for Europe. By the end of the year, the Southeast will be pushing out pellets at a rate of 2.9 million metric tons per year. That production is likely to increase to 4.6 million -- a nearly 60 percent jump -- in the next two years, according to Forisk Forest Consulting. Georgia Biomass alone will produce half of Canada's pellet output from last year.

Biomass is one of the most attractive forms of renewable power on the continent. The infrastructure is far less expensive than for solar panels or wind turbines, there is no dependence on weather conditions, and plant retrofits from coal to pellets are relatively simple.

While Scandinavia has supported much of Europe's wood market to date, recent reports indicate that continent's own forests will soon be unable to keep up. According to a European Commission report, wood resources in Europe could peak by as early as 2015.

Georgia's forests, on the contrary, have more than enough to go around, says the biomass industry. For every cubic foot of wood harvested, there is 28 cubic feet of wood in live trees, according to studies by the state's Forestry Commission. The annual regrowth adds another 1.9 million cubic feet.

"At the end of the day, the supply outstrips the demand, clearly," Kang said. On the drive from Savannah to Waycross, "you see rows clearly growing as crops. It is part of the Georgia economy."

Darren Wolfgang, a forest ecologist with Georgia ForestWatch, is skeptical. The industry has grown at such a speed in less than four years that sustainability might lose out to business interests. "We're worried it's going to create a beast that won't be able to be fed," he said.

Obeying an expanding set of rules
The EEA sets out two rules for biomass to fit the clean energy mold. It must be sourced from "additional carbon" -- leftover sawdust, agricultural waste, manure, wastewater or other residues that would simply decompose if not used for energy.

Or it must be grown so that the land and plants take up more carbon dioxide than in a scenario where the land is devoid of a biomass culture. If a farmer grows switch grass on degraded land, where no other conventional crop can be grown, it would satisfy the definition of additional carbon.

Many of the proposed pellet plants have said they will rely on paper mill waste, timber leftovers and other residual matter. But for Georgia Biomass and Biomass Energy -- a Bumpass, Va. operation that expects to export nearly 350,000 pellets to Europe in the next three years -- that source is regarded as being too iffy.

"You're fairly exposed if you depend on a residual market," said Jacob Blondin, general manager for Biomass Energy. "You're hoping that other people can perform in their business practices." Contamination from a foreign feedstock is also an issue, as are the potentially long distances -- and carbon footprint -- needed to reach the residual wood.

The only way to guarantee a contract with plants, added Blondin, was to use whole logs. Although there may be a surplus of trees in Georgia, ensuring a sustainable, easily renewable source may not be enough under growing scrutiny.

"It may, of course, still be a renewable source of energy," said the EEA's Haberl. "So renewable must not be equated with CO2-free."

In the fiber basket of Georgia, alternatives are puzzling. In a region where more than 90 percent of forests are privately owned, not harvesting the Southeast's forests is not an option many will consider.

"It probably isn't [carbon-neutral]," said Robert Jackson, faculty director at Duke University​'s Center on Global Change. "But in my view, it's better than coal."

Concerns about clear-cutting
Nevertheless, the risk of clear-cutting is real if pellet prices continue to rise, said Jackson. While several certification schemes exist, private forest owners are not required to adhere to sustainability rules.

"What we don't want is for our forests to be clear-cut for wood pellets," said Jackson, who is also a landowner in the Southeast. "Unless there are safeguards in Europe, there nothing to prevent me or my neighbors from cutting down our own land."

By the end of the year, the European Commission is required to report on sustainability requirements for solid and gas biomass, with a possible decision to revise the reporting criteria under the Emissions Trading System.

Just what the commission will propose is unknown, but Cezary Lewanowicz, a spokesman for the commission, suggested that the wood pellet business won't stop anytime soon. "Under the Renewable Energy Directive, biomass is a renewable energy source," he said. "This will stay unchanged."

Jeroen Brouwers​ is a spokesman for Essent, another subsidiary of RWE that burns Waycross pellets in a 35 percent mix with coal in a 1250-megawatt plant in Netherlands. Essent hopes to boost its mix to 50 percent pellets and plans to open a bigger co-firing plant in 2013.

International discussions around the issue are important, he noted, and "you cannot bank on one kind of sustainable biomass." But he is confident that his pellets will continue to meet sustainability requirements.

"It doesn't conflict with the food chain; there was already existing forestry; they already provided land for planting new trees," he added. "When you use a fuel, you have to be sure that it's sustainably produced."

The future of the business seems robust. Just weeks after the EEA opinion, the Dutch oil and gas exchange APX-ENDEX announced it would launch a pellet-trading market. The futures price for pellets hovers just under €130 per metric ton. Today, the spot price for a ton of pellets lies between €270 and €290 per metric ton.

On the streets of Waycross, there isn't much concern about the carbon debt. What the pellet jobs are doing is paying off financial debts. From the beat cop in nearby Hoboken, Ga., to the train conductor in Okefenokee Swamp Park, people are excited about the pellet industry.

"It gave us jobs; people are buying the timber," said conductor Bill Smith. "It's a good thing for the economy and surrounding communities."