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CPA says federal biomass feedstock subsidy could "wipe out" the composite panel industry. |
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The Composite Panel Association (CPA) says in a recent press release that a regulation now under consideration by the US Department of Agriculture (USDA) threatens the existence of many US-based wood products manufacturers and could shut down entire industries next year if implemented in its current form.
The USDA's Biomass Crop Assistance Program (BCAP), while well intended,
is being rushed though by its proponents without any consideration of
its unintended consequences, says CPA. BCAP will take wood out of the
hands of an industry making important consumer and construction
products and hand it over to the biomass fuel industry to burn. Worse,
taxpayers will foot a bill for a $500 million subsidy to make this
happen in 2010, with no net benefit to the US economy or the
environment.
BCAP's approach is bad public policy - bad for the economy, bad for
jobs and bad for the environment. It is especially ironic because BCAP,
as structured today, will serve to increase global warming instead of
mitigating it.
The way to fix BCAP is simple - i.e., change the list of raw materials
eligible for a federal subsidy. Here is why this must be done now
before a regulation is issued and money is allocated.
The US Census shows that industries dependent on composite wood panels
accounted for $68 billion in sales and more than 350,000 American
manufacturing jobs in 2006. What happens to this economy, this tax base
and these jobs if the raw materials needed to make composite wood
panels go away? Wood products sequester carbon for decades, even
centuries, and then they can be recycled. How is the environment helped
if this wood is instead burned, with CO2 immediately released into the
atmosphere?
As proposed by USDA's Farm Service Agency, BCAP has a laudable goal of
fostering the diversification of America's fuel supply by subsidizing
"renewable biomass" alternatives to traditional fossil fuels.
Unfortunately, BCAP's list of eligible materials includes residual wood
already being used for higher value purposes in homes, furniture,
cabinets, doors, flooring and other consumer and construction products.
The 2008 Farm Bill states that renewable biomass includes materials
that "would not otherwise be used for higher-value products." BCAP's
inclusion of wood used for higher value products is contrary to this
directive and represents a fatal flaw in the way the program has been
crafted. BCAP's purpose was to incentivize the collection of unused and
under-utilized wood and agriculture scraps resulting from farming and
timber activities. Congress never intended that it divert materials
currently used for the production of higher value products,
particularly those that sequester carbon rather than releasing it
through combustion.
BCAP funding, reportedly a $500 million apportionment through the
Commodity Credit Corporation in 2010, is now under review by the US
Office of Management and Budget (OMB). OMB has been asked by the
Composite Panel Association (CPA) and others to stop this massive
subsidy from moving forward until the unintended consequences are fully
resolved. All stakeholders need to be heard from and the economic
impacts must be fully considered. Concurrently, OMB is also considering
a draft BCAP regulation. CPA has also asked that this draft be amended
consistent with our recommendations about the scope of the program.
What is specifically wrong with the program? BCAP takes high value
sawdust and wood chips that have been used for decades to manufacture
most home and office furniture, cabinets and other composite wood
products, and subsidizes them so they can be diverted for use as
bio-fuel.
The magnitude of the proposed 2010 BCAP subsidy is enough to wipe out
the entire feedstock of US composite panel manufacturers (estimated at
$400 million in 2010) in one swift, misdirected federal intervention.
This would undermine an important domestic industry and create havoc
for its customers, the tens of thousands of manufacturers of wood-based
finished products across the United States.
The remedy for USDA's flawed approach is an amended BCAP program that
increases fiber supply and truly encourages the development of
alternative fuels based on unutilized and under-utilized raw material -
biomass crops in particular.
BCAP's list of eligible materials should be restructured to meet this
objective and the program's original intent as described in the 2008
Farm Bill. This means removing higher value industrial raw materials
(like wood chips and sawdust) as materials eligible for a federal
subsidy. This simple change would incentivize US landowners to expand
the bio-based domestic fuel supply, and would do no harm to the
emerging bio-fuels industry.
The US composite panel industry started in the 1950's and was founded
on the principal of recycling - using wood industry residuals to
maximize the utilization of every tree. Before the industry existed,
sawdust and wood residuals were incinerated or dumped in landfills,
which was neither good for the economy nor the environment. Now,
composite panels have become a global industry with a large positive
economic and environmental impact.
CPA is a fifty-year old trade association that represents more than 95%
of the composite panel (particleboard, medium density fiberboard and
hardboard) manufacturing in North America. Every one of its member
facilities in the United States has a raw material requirement affected
by BCAP.
Alternative energy programs must be part of a sound national energy
strategy, and their unintended consequences must be fully considered.
For instance, after the Renewable Fuel Standard was enacted in 2005 to
encourage ethanol production, corn prices doubled between 2006 and 2007
and many American consumers were harmed. The same could happen with
BCAP, except that it could be worse.
If the US composite panel industry suffers as a result of BCAP and
manufacturing plants close, consumers will have fewer choices,
thousands of American jobs will be eliminated, more finished wood
products will be imported, and less environmentally-friendly materials
such plastic, steel and glass will be substituted for composite wood.
CPA has filed letters with OMB and USDA urging BCAP's prompt
reconsideration, and urges others to do the same and to ask their
Congressional representatives to intervene. BCAP must be fixed before
USDA issues the regulation and directs $500 million in federal
subsidies in 2010.
Done right, a federal intervention to support the bio-fuel industry can
be a good thing for the United States. Done wrong, it's a
taxpayer-funded giveaway that completely misses the mark.
www.pbmdf.com
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