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Timber set to star: research, energy production, carbon trading

Timber is big business in Mississippi, generating $1.1 billion worth of forest products in 2007, second only to the $2.33 billion in sales of poultry and eggs as the most valuable agriculture commodity in the state.

Although 2007 was the 15th year that sales of forest products were more than $1 billion in Mississippi, total harvest value in 2007 was down 9.2% from 2006. This decline resulted from lower harvest volumes and lower prices, particularly for pine sawlogs, said James Henderson, assistant Extension professor, Mississippi State University.

“Mississippi’s forest landowners collected $630.8 million for their standing timber in 2007,” Henderson said. “The estimated value of the logging and transportation sector was $470 million, which is the difference between the delivered and standing values. Severance tax collections on forest products were $3,537,091 in 2007.”

Abundant supply

The future could bring many more uses — and economic gain — from the state’s abundant supply of trees. A promising new market that is beginning to develop is bioenergy produced from woody biomass.

“Potential sources of woody biomass include low-value forest products such as residues from logging operations and thinnings of overstocked stands,” Henderson said. “Typically, this material is left on site as waste, which may be piled and burned at an additional cost to the landowner. Given that traditional energy sources are becoming ever more costly, combined with increasing pressure for green energy, the interest to utilize woody biomass for bioenergy conversion will continue to grow.”

Cellulosic ethanol is one such use of woody biomass that is being heavily researched. Another application of woody biomass as an energy source is very similar to fossil fuel-based plants such as coal. Henderson said woody biomass can be direct-fired in a boiler to produce steam that rotates an electric-generating turbine. Another method of woody biomass utilization is a process known as co-firing that involves a combination of coal and biomass.

“As this market develops, the potential exists for forest landowners to supply woody biomass for bioenergy production, and for local and regional governmental agencies to promote their regions for bioenergy production facilities,” Henderson said. “For many regional economies, the limiting factor to local woody biomass market and bioenergy development is not lack of the natural resource base, but rather a lack of information.”

Many landowners do not recognize the potential of woody biomass as an income source, and local and regional government and economic development officials often are not aware of the potential economic impacts to their local economies that can result from developing woody biomass-based bioenergy production. Henderson said bioenergy production creates a market for landowners’ woody biomass, and local governments need to know about available resources landowners can offer and the economic impact potential for new jobs and value added that can result from bioenergy production.

Would it work here?
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h-tech tools are currently being used to conduct a feasibility study for the location of a cellulosic ethanol facility in the state. The Mississippi Institute for Forest Inventory (MIFI) offers a software package (MIFI Mississippi Dynamic Report Generator) that utilizes MIFI’s remotely-collected forest resource inventory to estimate timber volumes for a user-defined specified region. This software can be used to contribute to feasibility studies for forest product facilities by estimating wood volumes within a specified radius of a proposed location of a new facility. More information on this can be found at www.mifi.ms.gov/.

Another possible source of new income for Mississippi forest owners is carbon trading. Randy Rousseau, associate extension/research professor, College of Forest Resources, Mississippi State University, said concerns about climate change or global warming linked to excess carbon dioxide from burning fossil fuels have led to markets such as the Chicago Climate Exchange (www.theccx.com) that help fund carbon sequestration projects. The idea is that trees can be used to take carbon out of the air, storing it in the wood.

“The subject of carbon and carbon trading has been on the forestry radar for at least 15 years, but it is only recently that the subject has begun to gain increasing momentum as the result of increasing concern of global climate change,” Rousseau said. “With this momentum, carbon sinks and carbon credits may become a revenue possibility for forest landowners. In 1993, carbon in the United States was trading for $0.70 per metric ton, whereas today it is trading somewhere between $2 and $4 per metric ton. Today, forest landowners, under certain circumstances, can take advantage of this new revenue source. However, it is imperative to clearly understand the protocols of this newly developing market and maintain awareness of the changes in the market.”

Rousseau said basic to the entire understanding of the carbon market is the term “carbon credits.” Typically, a carbon credit represents one metric ton of carbon dioxide (CO2) removed or sequestered from the atmosphere or constrained from entering into the atmosphere.

Another term that is used quite often is a “carbon offset”. A carbon offset is generated by reduction, avoidance or sequestration from a specific project. Today, the only viable offset for forestry is afforestation (the planting of trees on sites that were either in agriculture production or left fallow) of traditionally agronomic fields. For loblolly pine plantations in Mississippi, an estimate of CO2 sequestration is between 2.21 and 7.92 metric tons per acre per year, depending on age and management intensity. The state’s bottomland hardwood plantations sequester from 0.23 to 3.49 tons of CO2 per acre per year.

Another term is “offset aggregators.” These group small forest acreages and other carbon offset projects together for trading.

“It takes a minimum of 1,200 acres of pine plantations to sequester one offset unit of CO2 or 10,000 metric tons per year,” Rousseau said. “Offset aggregators serve as administrative and trading representatives on behalf of numerous individual participants. This allows small landowners the ability to trade carbon. The Chicago Climate Exchange (CCX) requires that all aggregators be registered.”

Federal conservation programs, such as the Conservation Reserve Program (CRP) and the Wetlands Reserve Program (WRP), are recognized by the CCX and qualify for possible carbon credits if they are undertaken with forestation on a contiguous site.

Currently. the carbon market is voluntary, but it is possible that the U.S. government could make it mandatory at some time in the future. Industries producing carbon dioxide could be required to purchase carbon credits. A lot will depend on the outcome of the upcoming presidential election.

“It is a very changing market right now,” Rousseau said. “No one knows what will happen after the election, what the new administration will do with bioenergy and a sink for carbon. The price for carbon sequestration needs to go up much higher for more to take place in this market. At $15 per ton, it could compete with the chip and saw or pulp markets. But at $2 to $6 per ton, it is not worth it. If it goes up to $30 per ton, which is what it trades for on the European market right now, it would be very attractive.”

Contact MBJ contributing writer Becky Gillette at 4becky@cox.net.

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