Greenhouse Gas Balance: Because the GHG balance of renewable fuels is the result of a complex range of factors, policy makers should address the problem in a comprehensive way. One policy solution is a Low-Carbon Fuel Standard (LCFS), such as the one currently being designed for California. A LCFS places a requirement for a gradual reduction in the greenhouse gas intensity of all fuels sold, but doesn’t mandate any specific way this has to be reached. The key part of an effective LCFS is to create an incentive for all fuel producers to analyze and report what the real GHG impact of their fuels is. The University of California team advising the state on its LCFS has recommended the use of an opt-in system for reporting. Rather than require mandatory reporting from every single producer, default values will be set that assume worst-case scenarios. If producers are using better practices, they can provide that information and get more credit for GHG reductions. This ensures that best practices are credited and encouraged without providing an unnecessary regulatory burden. The LCFS should also create a market for sustainably produced feedstocks, thus encouraging best agricultural practices. Ideally, the information on overall emissions and environmental impact would also be available to consumers so that they can make informed decisions about the fuels they buy. Oregon should devise and adopt an LCFS based on these principles.

Tailpipe and Evaporative Air Emissions: It seems likely that increased use of ethanol will lead to at least some increases in NOx emissions, and therefore a possible increase in ozone levels. If biodiesel also increases NOx levels, which may not be the case, this could pose a real concern in Oregon (although US EPA testing has also indicated that the total smog-forming potential of biodiesel is 50% lower than petroleum diesel). The more difficult question may be the impact of evaporative emissions of VOCs from ethanol blends, as the more easily evaporated ethanol carries off compounds from the gasoline during storage. Because different ethanol blends may have very different air quality impacts, both as a result of burning and evaporation, the exact mix of blends used in the state will determine what the impacts are. Overall, while it seems most likely that biofuels will produce air quality benefits, considering the uncertainty in several areas, it would be advisable for the Oregon Department of Environmental Quality to assess the impacts on air quality of increased use of biofuels in the state.

Air Emissions from Biofuels Production Facilities: Biofuel plants should comply with the state’s air quality rules. Any attempt to loosen restrictions on emissions from biorefineries could offset tailpipe air quality benefits.

Agricultural Impacts on Water Quality: Oregon should increase technical assistance and conservation incentives to farmers to help them minimize their impact on water quality through nutrient management planning, minimizing the use of chemical inputs, creating stream buffers, making changes to tillage and rotation, and implementing other techniques as appropriate. Specifically, Oregon should:

• Become a leader in interdisciplinary research and education in sustainable farming and energy systems by establishing a Center in the Oregon University System that would provide research on alternative, sustainable production methods, and degree programs and extension outreach on sustainable production methods.

• Increase funding for technical assistance to improve best management practices on-farm, transition to more sustainable practices (including certification), and restore watersheds and habitats on agricultural lands.

• Provide state tax credits, payments, grants, or other financial incentives for transition to certification by an independent third party, and annual incentives for best practices or certified acreage.

Water Use: Oregon should support research and development of drought-resistant biofuels crops, such as camelina, that don’t require irrigation. Total long-term water requirements for the region need to be carefully considered when state agencies issue permits for new ethanol and biodiesel plants. Overall, newer designs that are more efficient at water recycling should be encouraged through tax breaks, loan guarantees or other incentives or requirements.

Biodiversity and Ecosystem Conversion: Bioenergy production needs to be done in a way that doesn’t negatively impact biodiversity or rare and threatened ecosystems. In order to discourage the conversion of CRP and CREP land (and other valuable habitat) back into land used for agricultural production, biofuels produced from land that is taken out of these programs early should not qualify for state incentives. While it is likely that higher crop prices will result in some landowners not renewing their contracts after they are up, any attempts to allow an “early out” to the contracts to supply biofuels will do more harm than good. Ideally, these and other conservation programs should receive more funding to help protect ecologically valuable lands and help balance the strain put on agriculture from intensified production of biofuels. Specifically, Oregon should:

• Advocate at the federal level to ensure that early opt-outs from the CRP and CREP programs for the production of biofuel feedstocks are not allowed.

• Not allow biofuels grown on land which has taken an early opt-out from a CRP or CREP contract or other similar conservation programs to qualify for a state Low Carbon Fuel Standard or other biofuel regulatory or incentive programs.

• Provide strong incentives for farmers to protect habitat, wildlife, and water resources and make sure these incentives are competitive with the incentives provided to farmers to produce biofuel feedstocks.

Social Sustainability: To support locally owned biofuels operations where the greatest value is returned to the local farmer, Oregon could consider a system like Brazil’s, which provides tax breaks to biodiesel producers who source their feedstocks from family farms rather than large agribusinesses.

Ethanol and Biodiesel Plants: State incentives to encourage the use of renewable energy and process efficiencies in new plants will pay substantial environmental dividends. Providing incentives for ethanol plants to employ biomass gasification would be a cost-effective way to reduce fossil fuels, promote real energy independence and reduce GHGs, while maximizing agricultural resources. (Financial incentives may be necessary because of the substantial up-front capital cost of biomass gasification systems.) There are a range of other process changes that can be utilized in first-generation plants to substantially improve energy efficiency, including not drying the distiller’s grains. The Pacific Ethanol plant in Boardman, Oregon is already moving in this direction.

The Glycerin Challenge: Biodiesel production produces 10% glycerin (or glycerol) as a byproduct. While glycerin has a range of uses in soap, cosmetics, pharmaceuticals, and other products, the huge amounts of glycerin that will be produced as biodiesel production ramps up has the potential to create a glut in current markets but is also a great opportunity. Because glycerin sales are an important component of the profitability of biodiesel production, not to mention a key component in the net energy balance, finding uses for all of the glycerin will be an important part of ensuring the long-term viability of the industry. Uses could include high value chemicals like propylene glycol, the production of biogas or other uses that are appropriate to the local circumstances. Funding research into what the most economic and environmentally beneficial use of glycerin might be in Oregon, will help both support local biodiesel producers and could also create other industries in the state.

Corn Ethanol: Considering the high environmental cost of industrial corn production, it is no surprise that corn ethanol is fairly controversial. Still, it is possible to do corn ethanol better. Improved agricultural practices and processing plant designs can substantially reduce the environmental impact of corn ethanol and improve the GHG and energy balance. Since it seems inevitable that Midwest corn will be imported into Oregon for ethanol, Oregon should devise incentives to encourage the use of these best practices.

Whey and Other Agricultural Byproducts: Of all types of biofuels, those derived from waste products are all-around winners. An Oregon-wide survey of agricultural waste streams, the economics of transportation and the necessary conversion technologies would be an important first step to identifying where the most promising areas for investment are. The state should also create incentives, such as tax breaks, and offer loan guarantees for smaller-scale plants that can take advantage of locally available, no-value waste products that aren’t economical to transport to larger plant sites.

Short-Rotation Woody Crops: In the long-run it would make far more sense to convert wheat or corn acreage that is being used for biofuel production to hybrid poplars or other short-rotation woody crops. However, grain and food crops are generally of higher economic value. Ironically, as expanded first-generation biofuel use pushes prices for grains higher, it makes cellulosic crops even less economically attractive. Providing farmers with a payment for improving the net-GHG flux of their lands within a cap and trade system would be one way to encourage short-rotation woody crops. Another possibility would be the creation of a low-carbon fuel standard, where the higher GHG reduction value of biofuels from hybrid poplar would create stronger markets for cellulosic biofuels and allow producers to pay farmers more for biomass.

Forest Certification and Greenhouse Gas Benefits: All calculations of the net GHGs for biofuels are based on a key assumption: that the carbon released from burning the biomass is recaptured from the plant. With agricultural products and energy crops this is clearly a reasonable assumption. It is not at all clear that this will be the case for forestry. Considering the huge amount of carbon stored in forests over decades, even if clear-cutting or other practices are not used, enough carbon to outweigh the displacement of fossil fuels may be released. As biomass utilization will increase the economic pressure to use forest resources more intensely, the possibility that forest biomass use may contribute to, rather than help solve, global warming is very real.

Determining the net GHG impact of biomass removal (including reduction of fire risk) is difficult. Until this area is more fully understood there is a simple policy option to provide at least some assurance. This would be to ensure that all biomass used is sourced originally from third-party-certified sustainably managed forests. The Forest Stewardship Council, a third-party certifier, already does chain-of-custody tracking of products for mill wastes, so it should be possible to identify the quantities of sustainably produced biomass that are available.

Particularly over the next ten years or so when there is likely to be at most only a few cellulosic plants constructed in Oregon, it would be perverse to provide government incentives designed to reduce global warming to products that may be contributing to it. It is strongly recommended that only biomass from third-party-certified sustainably managed forests or from federal forests that have developed scientifically sound and rigorous sustainability criteria be allowed to qualify for any state-level incentives or tax breaks. Plants intending to use woody biomass that receive funding or tax breaks from the state should also be required to use only certified biomass.

“Roving” biomass-to-biofuel production facilities: Given the concern that fixed-in-place production facilities may place economic pressure to continue thinning biomass from areas immediately around the plant after it’s no longer sustainable to do so, Oregon should study the feasibility of smaller-scale production facilities that could be dismantled and moved to an area where sustainable harvest could occur.

Bio-products: While few technologies to produce chemicals, plastics and other products from biomass have been commercialized, state policy should encourage the development of these bio-based industries and not become exclusively focused on biomass energy production. For example, Oregon BEST, the Bio-Economy and Sustainable Technologies Research Center that is being developed in the Oregon University System, should research commercialization of these safer, non-toxic alternatives to petroleum-based products.

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