Assessing the economic impact of alternative biomass uses: biofuels, wood pellets, and energy production.

Abstract

Abstract. The green economy, including biofuels and biomass production, has received considerable academic and popular press attention. Yet, documenting and measuring the economic impact of green economy activities remains a challenge, as this ill-defined economic sector's benefits are often overstated. This article makes two unique contributions to the emerging academic literature on the green economy. First, it contributes to the applied academic literature on economic impact assessments of the green economy by documenting approaches to measure the economic impact of three alternative biomass uses: electricity generation, pellet manufacturing, and biofuels manufacturing. Second, it examines the regulatory influences and market volatility that challenge the long-term viability of each alternative use.1. IntroductionThe green economy, including biofuels and biomass production, has received considerable academic and popular press attention. Yet, documenting and measuring the economic impact of green economy activities remains a challenge, as this ill-defined economic sector's benefits are often overstated (Swenson, 2006 and 2007; Schlosser, Leatherman, and Peterson, 2008). This article makes two unique contributions to the emerging academic literature on the green economy. First, it contributes to the applied academic literature on economic impact assessments of the green economy by documenting approaches to measure the economic impact of three alternative biomass uses: electricity generation, pellet manufacturing, and biofuels manufacturing (both enzymatic and thermochemical processing). Second, it examines the regulatory influences and market volatility that challenge the long-term viability of each alternative use. For each scenario of our model, we used 1,000 tons per day (T/D) of locally sourced hardwood biomass. The hypothetical processing facilities are located in Pitt County, North Carolina, which is in the heart of the state's wood basket.2. Literature reviewThe economic and policy implications of green economy efforts, such as biofuels usage and energy mandates, have received considerable attention in regional science journals. Twenty-nine states have adopted portfolio standards (RPS) and seven others have adopted renewable portfolio goals (Dincer, Payne, and Simkins, 2014). RPS mandate that a portion of the state's utility energy needs be generated from sources (Rabe, 2007). Internal factors, such as citizen preferences, appear to be the primary driver of initial state RPS adoption (Matisoff, 2008). Once adopted, state target levels for the percentage of energy generation have ranged from 0% to as high as 40% (Dincer et al., 2014). Multiple factors explain this variation, with a state's RPS target level being positively influenced by neighboring state targets, energy potential, transmission capacity, unemployment rate, and educational attainment (Dincer et al., 2014). States represented by a Democratic governor also have higher RPS target levels (Dincer et al., 2014).RPS are also promoted as economic development tools (Rabe, 2007). States may engage in import substitution by supplying feedstocks in-state rather than importing fossil fuels (Rabe, 2007). The presence of RPS positively influences energy development within a state (Yin and Powers, 2010). Energy consumption has been closely tied to state economic growth (Payne, 2009), and state-level energy efficiency programs diminish residential energy consumption (Cebula and Herder, 2010; Cebula, 2012). Theoretically, engaging in import substitution by producing energy feedstocks in-state could counteract the economic loss from reduced energy consumption.The emergence and policy interests in the green economy have stimulated researchers to apply input-output approaches to measure the economic impact of biomass, biofuels, and other green economy activities on local, regional, and state economies. …