1. 2011 FIA User Group Meeting March 8-10, Sacramento, CA Brad Upton, NCASI

2. Federal GHG Legislation Overview June 2009: Waxman-Markey cap and trade bill passed in House of Representatives March 2010: Kerry-Boxer cap and trade bill stalled in Senate April 2010: Kerry-Lieberman-Graham crafted less sweeping bill, but did not gain traction July 2010: After several attempts at more narrow bills the Senate dropped efforts No climate legislation is expected from 112 th Congress

3. EPA Actions Towards GHG Regulation (highlights) December 2009: Endangerment Finding – EPA concludes GHGs endanger public health, welfare April 2010: Tailpipe Emission Standards – EPA issues new vehicle GHG emission standards applicable to new cars and trucks (equivalent to 35.5 mpg) June 2010: Tailoring Rule – EPA publishes rule to regulate GHGs from stationary sources under PSD and Title V programs Biogenic CO2 treated no differently from fossil CO2

4. Renewable Fuel Standards (RFS2) & Energy Independence and Security Act (EISA) Finalized December, 2010 Includes specific life cycle GHG emission thresholds for renewable fuels (including land use change) Focused on agricultural biomass rather than forest biomass Established restrictions on the types feedstocks, and types of land used to grow them, that can be used to make renewable fuel Forest biomass from federal lands and from silvicultural plots cultivated after December 2007 not eligible RESULT: Most sources of woody biomass are excluded

5. Biogenic CO 2 “Carbon Neutrality” An attribute of the biogenic carbon cycle that enables the GHG mitigation potential of bioenergy systems There are several different meanings given to the term “carbon neutrality” The controversy surrounding biomass carbon neutrality is partly caused by a lack of a common understanding of the meaning of the term

6. Atmosphere Biomass Carbon Biogenic CO 2 CO 2 Biogenic carbon is part of a relatively rapid natural cycle that impacts atmospheric CO 2 only if the cycle is out of balance Fossil Fuel Atmosphere Non-biogenic CO 2 Fossil fuel combustion transfers geologic carbon into the atmosphere. It is a one-way process The “neutral” biomass carbon cycle VS Carbon transfers from geological reserves 6

7. Six Different Concepts of Carbon Neutrality Inherent carbon neutrality The inherent property of biomass reflecting its being part of a natural cycle which, if in balance, has a zero impact on atmospheric greenhouse gases Carbon cycle neutrality A property of biomass when it is obtained under conditions where forest carbon stocks remain stable over a given area and time, meaning that the forest carbon cycle is in balance Life cycle neutrality A property of a product or product system that has zero net emissions over the life cycle Offset neutrality A property of a product or product system whose emissions have been offset via obtaining reductions accomplished outside of the product’s lifecycle Substitution neutrality A property of a product or product system whose life cycle emissions are equal to those for all other likely substitute products or product systems Accounting neutrality The use of an emission factor of zero for biogenic CO 2 because the impacts of biogenic carbon flows are being characterized by calculating changes in stocks of carbon stored in forests and forest products

8. Carbon Stocks/Land Use Changes Fargione, et al. (Science 319, 1235 (2008)) discussed carbon debt from land use change due to biomass demand Searchinger, et al. (Science 326, 527 (2009)) assert that characterizing biogenic CO2 as carbon neutral is improper if land use change is not considered MANOMET study (June 2010) developed concept of carbon debt based on a plot level analysis of substitution impacts – carbon withdrawals from harvesting are “paid back” over time as regrowth occurs Sustainable Forest Management: In any given year carbon stock depletion on harvested stands is offset by carbon accumulation on undisturbed stands

9. Harvested Area In forests managed sustainably, carbon losses due to harvest are offset by carbon uptake by growing trees. 9

10. Where To Draw Analysis Boundaries? Internationally accepted life cycle analysis (LCA) standards require the accounting boundaries to extend upstream to the point where “elementary flows” enter the system from the environment This accounting approach considers flow of CO2 from atmosphere into growing biomass, and flow of CO2 back to environment when biomass is combusted Supports use of zero emission factor for biomass combustion as long as carbon stock/land use change is considered

11. EPA Call for Information (CFI) on GHG Emissions from Bioenergy Goal: Determine if biogenic CO2 is carbon neutral Selection of questions from EPA CFI: Does IPCC approach suggest biomass CO2 is carbon neutral? Can IPCC approach be applied at smaller scales? Request for alternative accounting approaches How to compare biomass energy to fossil energy Unfortunately, EPA has not defined its concept of “carbon neutrality”

12. EPA CFI on Bioenergy… Does IPCC approach suggest biomass CO2 is carbon neutral? IPCC approach tracks changes in carbon stocks on land and assigns zero emission factor for biomass combustion CO2 IPCC methods are based on “accounting neutrality” of biomass carbon Data on forest carbon stocks illustrates that, in the U.S., net flux of carbon is into forest biomass rather than into the atmosphere

13. Timberland Growth/Removal Ratio By Region Source: Forest Resources of the United States, 2007 – Table 36 13 Growth-removal ratio is calculated based on annual growth on timberland divided by annual removal as of reported years. No specific data for growth and removal in between reported years.

14. EPA CFI on Bioenergy… Can IPCC approach be applied at smaller (than national) scale? At the national scale, “ownership” of forest biomass is defined by national boundaries – data is available At the facility level, it is not possible to link wood users to specific areas or land However, it may be possible to apply IPCC’s guidelines at the regional scale (e.g., state) Some states (e.g., Washington) and regions (e.g., Western Climate Initiative) have adopted this approach (“carbon cycle” biomass neutrality)

15. EPA CFI on Bioenergy… EPA request for alternative accounting approaches IPCC approach (accounting neutrality) can be used in emissions reporting Comparative assessments can be used to identify policies that ensure stable or increasing forest carbon stocks Comparative assessments can also be used to evaluate the difference in net carbon emissions for two different scenarios (e.g., two different fuels, two different policies, etc.) Comparative assessments typically include other life cycle emissions and are described as comparative carbon footprints

16. EPA CFI on Bioenergy… How should biomass energy be compared to fossil energy? Comparative carbon footprint studies are required Life Cycle Assessments (LCA) limited to carbon and GHGs Land use change should be addressed Standard methods are under development by ISO and WRI/WBCSD Benefits of forest biomass-based fuels, where forest carbon stocks are maintained, have been documented

17. Recent LCA Analyses of Biopower StudyBiofuelOffset fuelGHG saved Froese et al. 2010Forestry ResidualsCoal100% Mann & Spath 2001Wood ResidualsCoal123% Robinson et al. 2003Forest/Ag ResidualsCoal~95% Pehnt 2006Residuals, Energy Crops Mix85-95% Cherubini et al. 2009Forestry ResidualsVarious70-98% Zhang et al. 2010Wood PelletsElec from Coal, Gas 91%, 78% Raymer 2006Fuel Wood, Pellets, Residuals Elec from Coal, Oil 81-98% Heller et al. 2004Short Rotation WillowCoal99% 17

18. EPA GHG Regulation - UPDATE On January 12, 2011, EPA announced decision to defer, for three years, GHG permitting requirements for biomass CO2 EPA will use this time to “seek further independent scientific analysis of this complex issue” EPA received more than 7000 comments on it’s July 2010 Call For Information on bioenergy Expect EPA guidance to permitting authorities that use of biomass as fuel is BACT for GHG emissions

19. Federal GHG Legislation - UPDATE Legislation introduced in the 112 th Congress to delay or strike down EPA GHG regulation Two bills in House would invalidate EPA’s Endangerment Finding, Tailoring rule, PSD regulations, etc. House bills would also repeal or prevent enforcement of EPA mandatory GHG reporting rule Other House action (“Continuing Resolution”) cuts off funding for EPA GHG regulations until September 30, 2011 (end of fiscal year)

20. International Climate Negotiations Sixteenth Conference of the Parties (COP 16), Cancun Mexico in late 2010 Voluntary emission reduction targets for both developed and undeveloped countries Agreement to keep temperature increases below 2°C (450 ppm CO2) Monitoring, reporting, and verification (MRV) of actions Establishment of “Global Climate Fund” to finance adaptation and mitigation measures in developing countries Advance REDD+ and endorse CDM No binding targets

21. State & Regional GHG Programs Northeastern Regional Greenhouse Gas Initiative (RGGI) Ten Northeastern and Mid-Atlantic states Reducing cap on emissions from electric generating units Regulation began in 2009 Western Climate Initiative (WCI) Seven U.S. states and four Canadian provinces Economy-wide program with planned cap and trade California program will take effect in 2012 Midwestern GHG Reduction Accord (Midwestern Accord) Six U.S. states and one Canadian province Economy-wide program with planned cap and trade Scheduled to launch in 2012

22. Summary GHG regulating legislation is unlikely from 112 th Congress EPA moving forward with GHG regulation but deferring permit requirements for biogenic CO2 Continuing challenges to use of zero CO2 emission factor for biomass at point of combustion Only modest progress in international climate initiatives State and regional GHG programs are moving forward More research is needed to better define the lifecycle attributes of certain biomass fuel materials, and to improve understanding of carbon accounting concepts