Economic approach to assess the forest carbon implications of biomass energy

There is widespread concern that biomass energy policy that promotes forests as a supply source will cause net carbon emissions. Most of the analyses that have been done to date, however, are biological, ignoring the effects of market adaptations through substitution, net imports, and timber investments. This paper uses a dynamic model of forest and land use management to estimate the impact of United States energy policies that emphasize the utilization of forest biomass on global timber production and carbon stocks over the next 50 years. We show that when market factors are included in the analysis, expanded demand for biomass energy increases timber prices and harvests, but reduces net global carbon emissions because higher wood prices lead to new investments in forest stocks. Estimates are sensitive to assumptions about whether harvest residues and new forestland can be used for biomass energy and the demand for biomass. Restricting biomass energy to being sourced only from roundwood on existing forestland can transform the policy from a net sink to a net source of emissions. These results illustrate the importance of capturing market adjustments and a large geographic scope when measuring the carbon implications of biomass energy policies.