forest economics tct 2016

Arkansas Forest Economics

AFA Teacher Conservation TourJune 24, 2016, Monticello, Arkansas

Matthew PelkkiAssociate Director, Arkansas Forest Resources Center

George H. Clippert Endowed Professor of ForestrySchool of Forestry and Natural Resources

University of Arkansas at Monticello

OutlineEconomic impact of forest

industries in Arkansas

Biofuels / bioenergy

New forest products

Carbon credits in forestry

Economic impact of forest industries in ArkansasArkansas Forest EconomicsAFA Teacher Conservation TourJune 24, 2016, Monticello, Arkansas

Direct employment of 28,057

Average labor compensation of $51,939 annually (133% of state avg.)

Direct contribution of $2.9 billion to GSP

Arkansas’s Forest Industry Economy – 2014 (latest data)

~ 70,000 jobs in Arkansas

~ $3.6 billion in wages

~Value added of $6.3 billion

Economic Multipliers and total impact

Tax contribution by Arkansas’s Wood manufacturing IndustriesState and local taxes:

$400 million

Federal Taxes: $700 million

Sustainable timber supply?

1978 2015Hardwoods323,925,06

557%

Softwoods247,516,91

643%

Hardwoods532,821,33

159%

Softwoods366,783,43

941%

Surplus of nearly 15 million tons every year today!

Biofuels / bioenergyArkansas Forest EconomicsAFA Teacher Conservation TourJune 24, 2016, Monticello, Arkansas

Wood pellets

Let’s start an experiment with two kinds of wood pellets…..

Coal15.614

16%

Natural Gas28.319

29%Petroleum

35.37336%

Nuclear8.3389%

Renewable9.67510%

Primary Energy Use by Sector 2015Total USA = 97.5 quadrillion Btu

Hydro-elec-tric

238925% Geo-thermal

2242%

Solar5506%

Wind181619%

Biomass469649%

Renewable Energy Consumption in the USA 2015

Values are in trillions of BTUs

Biofuels200743%

Waste49611%

Wood217046%

Biomass Energy Con-sumption in USA, 2015

Values are in trillions of BTUs

Wood vs. other renewable energy sources in USA Wood represents

about 2% of our total energy consumption

Wood is 85% of hydro-electric energy

Wood is 135% of wind energy

Wood is 711% of solar energy

How is wood energy used in the USA? 25% used in residential heating

About 10% of US households use wood for heating

75% used for industrial generation by wood products industry This represents about 65% of total

energy used by industry The other 35% of energy is fossil-fuel

based

Bioenergy or biofuels from wood?

Bioenergy from woody biomass is a proven technology – combustion of wood powering combined heat and power (CHP) facilities

Biofuels relies on conversion of wood into some liquid transportation fuel Enzymatic conversion (ethanol) Thermo-chemical conversion

(gasification/pyrolysis) Technological difficulties

In wood industry, CHP works!

Wood burned to generate steam

High pressure steam drives electrical turbines

Low pressure steam dries wood and paper

An Arkansas exampleGeorgia-Pacific Paper

Mill at Crossett, AR75% of electrical needs

generated internally100% of steam

(heating) needs generated internally

Still, daily Entergy bill averages $30,000 for electricity

What do our wood pellets look like now?

New forest productsArkansas Forest EconomicsAFA Teacher Conservation TourJune 24, 2016, Monticello, Arkansas

“New” forest products opportunities

Multi story wood buildings

New architectural designs

Wood plastic composites

Nano technology from wood

Cellulose film

Filtration and selectively permeable membranes

New printing technologies – smart paper surfaces

=New medicines

Carbon credits in forestryArkansas Forest EconomicsAFA Teacher Conservation TourJune 24, 2016, Monticello, Arkansas

Who is trading in carbon?

Where do trees and forests sequester carbon?Living biomass

Shrubs and other vegetation

Forest floor carbon

Soil carbon

More carbon sequestration in wood products

Major issues for carbon markets

Carbon trading pools

AdditivityReserve poolContract lengthLeakage

An example of how a landowner can get paid for sequestering carbon in their growing forest

Getting greenbacks from greenhouse gases

1. A qualified forest

2. Measure currentcarbon sequestration

3. Landowner signs contract with carbon

broker

4. Carbon broker produces CFI contract and

sells it on carbon

exchange

5. Landowner receives payment

for sale of CFI(less commissions and

fees)

Carbon sequestration rates for forests

Age Loblolly-shortleaf

Oak-hickory

1-5 2.33 1.706-10 2.37 2.2011-15 2.12 2.3316-20 1.91 1.9921-25 1.99 2.0126-30 1.82 1.83

Metric tons of carbon dioxide per acre per year sequestered in the southeast United States

The situation….A landowner has a 100-acre

stand of pine trees that was just planted and is 1-year old.

The landowner will let the pine trees grow for 15 years and then harvest them

The value of carbon (dioxide) is $3.00 per metric ton

What is the value of the carbon sequestration?

Using the table of CO2 sequestration

YearCO2

Sequestered per acre

Price of CO2 Value per acre

Value on 100 acres

1 2.33 $3.00 $6.99 $699.00 2 2.33 $3.00 $6.99 $699.00 3 2.33 $3.00 $6.99 $699.00 4 2.33 $3.00 $6.99 $699.00 5 2.33 $3.00 $6.99 $699.00 6 2.37 $3.00 $7.11 $711.00 7 2.37 $3.00 $7.11 $711.00 8 2.37 $3.00 $7.11 $711.00 9 2.37 $3.00 $7.11 $711.00

10 2.37 $3.00 $7.11 $711.00 11 2.12 $3.00 $6.36 $636.00 12 2.12 $3.00 $6.36 $636.00 13 2.12 $3.00 $6.36 $636.00 14 2.12 $3.00 $6.36 $636.00 15 2.12 $3.00 $6.36 $636.00

Total $10,230.00

What happens to the carbon in trees that are harvested?

A lot remains in logging slash, stumps, and roots and eventually decays (about 50% of a tree)

About 50% of the logs are bark and wood waste that are burned for energy

About 25% of tree biomass becomes paper, lumber, and other wood products

For lumber, about 10% of it remains in wood after 100 years.