Source: MONTCLAIR STATE COLL submitted to
ASSESSING SOCIOECONOMIC IMPACTS OF FOREST BIOMASS BASED BIOFUEL DEVELOPMENT ON RURAL COMMUNITIES IN THE SOUTHERN UNITED STATES (U.S.).
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
EXTENDED
Funding Source
Reporting Frequency
Annual
Accession No.
0229744
Grant No.
2012-67009-19742
Project No.
NJW-2012-00899
Proposal No.
2012-00899
Multistate No.
(N/A)
Program Code
A6124
Project Start Date
Aug 1, 2012
Project End Date
Jul 31, 2016
Grant Year
2012
Project Director
Lal, P.
Recipient Organization
MONTCLAIR STATE COLL
347 RICHARDSON HALL 1 NORMAL AVENUE
UPPER MONTCLAIR,NJ 07043
Performing Department
Earth & Environmental Studies
Non Technical Summary
Federal policies such as the 2002 Farm Bill, 2005 Energy Policy Act, 2007 Energy Independence Security Act and 2008 Farm Bill have specifically encouraged the production of cellulosic biofuels such as those produced from woody sources. Forestlands present in the southern United States occupy about 28% (215 million acres) of total forestlands (751 million acres) in the nation. The thirteen southern states spanning from Texas to Virginia with around 5 million private landowners and 62 percent of the country?s total growing stock removals in 2006 are expected to play a dominant role in woody biofuels market development. Another factor that supports the importance of southern states in woody biofuel future is the fact that forest inventory volume in the South region has responded to increased management and harvesting since 1990s, when more of the harvest shifted to private lands. Woody biofuels markets can contribute to rural development benefiting local communities by generating additional revenues to nonindustrial private forest landowners and other economic agents, stimulate employment and diversify rural economies. However, delineation of economic impacts on rural communities in the region has not been systematically analyzed. We will conduct stakeholder discussions and primary surveys to assess perceived socioeconomic impacts of woody biomass based biofuel industry on landowners and other key stakeholders. We will use this information to: (i) assess stakeholder perceptions, awareness, interest, and acceptance of forest biomass based biofuels, and (ii) evaluate socioeconomic factors affecting the acceptance. Potential woody biomass based biofuel expansion scenarios will be developed based on future biofuel market emergence and socioeconomic acceptability considerations. Financial and economic models will be used to assess direct, indirect, and induced impacts of woody biomass based biofuel expansion on stakeholders and region-wide socioeconomic and distributional impacts to identify winners and losers. We will discuss farm and regional impacts of woody biofuel expansion on non-metro (rural) counties in US South, including impacts on persistent poverty and minority dominated counties. This work will further understanding of the short and long-term impacts of woody biofuel expansion in US South and the ensuing socioeconomic impacts on rural landowners, minorities, and other rural groups. The research will act as decision support tool for public and private decision makers towards woody biofuel investments and also help generate public awareness, education, and outreach programs.
Animal Health Component
90%
Research Effort Categories
Basic
10%
Applied
90%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6050611301020%
6050650301010%
6050680301020%
6056020301030%
6106020301020%
Goals / Objectives
Our overall goal is to generate regional-scale estimates of the socioeconomic impacts of forest biofuel development on rural communities in the Southern U.S based on the region's capacity to produce forest biomass feedstocks. To achieve this goal, we will focus on three interrelated objectives: 1) Assess key stakeholders participation along the supply chains of forest biomass based biofuels markets; 2) Analyze potential direct economic and employment impacts of woody biofuel development on forestland owners, and rural communities; and 3) Estimate region-wide socioeconomic and distributional impacts of woody biofuels development. Project outputs will include: (1) Social & economic acceptability report for woody biofuels; (2) Socioeconomic impact of woody biofuel expansion on rural communities report; (3) Training of post-doctoral associate, graduate and undergraduate students in woody biofuel impact analysis; (4) Sharing project learning's at regional national and international conference presentations; and (5) Publishing peer-reviewed articles and conference proceedings.
Project Methods
We will conduct stakeholder discussions and primary surveys to assess perceived socioeconomic impacts of forest biomass based biofuel industry on landowners and other key stakeholders. We will use this information to assess stakeholder perceptions, awareness, interest, and acceptance of forest biomass based biofuels, and willingness of landowners to participate in woody biofuels market, and evaluate socioeconomic factors affecting the acceptance and willingness. Minority ownership effect will be assessed as well. Potential woody biofuel expansion scenarios will be developed based on biofuel market pathways and socioeconomic acceptability considerations. Direct, indirect, and induced impacts of forest biomass based biofuel expansion on stakeholders will be estimated through Input Output Analysis and Social Accounting Matrix (I-O/SAM) approach. We will estimate region-wide socioeconomic and distributional impacts using a computable general equilibrium model to identify winners and losers. We will delineate farm and regional impacts of woody biofuel expansion on non-metro (rural) counties in Southern U.S., including impacts on persistent poverty and minority dominated counties.

Progress 08/01/13 to 07/31/14

Outputs
Target Audience: Policy makers, extension agents, forestland owners, loggers, transporters, processors, distributors, private sector bioenergy operators and/or investors, environmental professionals, and academia especially those from disciplines like forestry, environmental conservation, economics, urban planning, geography, engineering, environmental science, public policy and sociology. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? This project has helped in training of graduate research assistants (Bernabas Wolde and Pralhad Burli) and one post-doctoral associate (Thomas Ochuodho). How have the results been disseminated to communities of interest? The study results were disseminated through publishing peer-reviewed journal article, book chapters, and oral presentations at academic conferences and seminars. Other community outreach activities include stakeholder meetings with forestland owners in states of Texas, Virginia, and Alabama; Meeting with contractors/loggers; Landowner survey instrument refinement and feedback from university extension professionals engaged in bioenergy research and extension. What do you plan to do during the next reporting period to accomplish the goals? We are currently conducting a more comprehensive assessment of other socioeconomic and forestland features that affect respondents' likelihood of participating in these markets. We plan to finalize the economic analyses of unit costs and profitability of woody biofuels production. We plan to assess the profitability of woody biofuels under more scenarios and using different measures of profitability. We will also evaluate if investors would consider this as a viable investment option by comparing likely returns from other investments in the energy sector and average stock market returns. We will administer landowner surveys in Virginia and Texas and analyze the survey results. We will undertake statistical analyses to better understand the motivations of forestland owners that express willingness to participate in the woody biomass supply market and the limiting factors for those expressing unwillingness to participate in such markets. We will assess respondents' policy preference to better understand the types of incentives for which they will respond. We also plan to assess forestland owners' educational needs, likelihood to change management practices in response to the emergence of woody bioenergy, how prior information affects their policy preference, how past activities may be used to predict planned activities, their sustainability concerns and how that manifests in terms of the amount of residual biomass they are willing to harvest for bioenergy. We believe that these results will be of interest to extension and outreach professionals, forestland owners, managers and other researchers studying the potential economic, social, and ecological impacts associated with the changes forestland owners report as their plans and potential response to woody bioenergy. The income and employment impacts (including total and distributional impacts) of biofuels will be analyzed using the Social Accounting Matrix (SAM) and computable general equilibrium approaches. Techno-economic modeling results along with survey data will be used to calibrate the model for the biofuels sector in the SAM framework and develop biofuel expansion scenarios. We will also undertkae GIS analyses to gauge association between distribution of Loblolly and Slash and pine and counties with significant minority population and which are delineated "persistent poverty counties' by USDA ERS. We willshare project learning's at regional national and international conference and meetings and publish results and submit them to peer-reviewed journals and other outlets so that others professionals can benefit from them.

Impacts
What was accomplished under these goals? We conducted techno-economic analyses of woody bioenergy from loblolly pine. This included assessment of unit cost of producing biofuel from woody biomass under various scenarios including different feedstock prices, capital costs, conversion efficiencies, co-product values, transportation costs. We are complementing this with a profitability analyses by using different potential market prices and discount rates. We are using state specific values whenever possible to tailor the results, conclusions and recommendations to the relevant states while also trying to maintain some generality. Our results suggest that under some scenarios such as lower discount rate and higher conversion efficiency competitive unit cost and profitably may be achieved. We are currently doing sensitivity analyses where we change the value of certain variables at a time while holding the rest constant to evaluate how sensitive the whole assessment is to changing parameters and to capture performance under changing market conditions. The preliminary results of this analysis suggest that the cost of capital accounts for a significant portion of the unit cost and that financial support programs aimed at this cost component could alleviate the business risk investors might face.We also evaluated the net present value of growing pine for bioenergy under different scenarios of fertilization use, thinning, raking practices, site preparation needs. Our results suggest that forestland owners can viably grow pine for bioenergy under scenarios such as relatively lower site preparation need and with raking, among others. The primary data is being collected through the use of survey instrument based on randomly selected private forestland owners from each state. The Tailored Design Method was adopted for survey administration. We included four different bid values per state in our survey representing per acre woody biomass revenue based on stakeholder meetings, expert feedback and tested through growth and yield models coupled with Timber Mart South price data. The survey covered forested counties in South West Alabama, Virginia, and East Texas. Following previous studies and a consideration that the economics of harvesting from a much smaller land size discourages loggers and forestland owners from actively engaging in biomass marketing practices, we targeted forestland owners holding 20 acres or more. In Alabama, 42 percent of completed survey responses were received from minority landowners.Our results suggest that forestland owners are willing to participate in these markets and that they are responsive to price, where higher price offers lead more forestland owners to participate in these markets. Based on our preliminary analysis we found that for respondents that initially didn't accept the value quoted in the survey, their self-reported minimum acceptable price tend to have a positive and significant effect on the proportion of non-forested land, where for each additional hundred dollars reported by respondents, there was a statistically signifcant increase in the proportion of non-forested land allocated for pine.The preliminary survey results show that the majority of those who responded will consider diverting loblolly pine if they expect returns between $1,200 and $1,700 per acre. If given the price 54% of the respondent will plant some acres of loblolly pine for energy production on non-forest land. As expected, willingness to participate in this market is higher for higher bid price offers. While there is increased willingness to participate in this market for higher bid price offers, which is in line with expectations, some forestland owners expressed reluctance, perhaps owing to strictly defined alternative forest management objectives. complete data analysis will give a clearer picture and delineate other factors that can influence their biomass supply decisions. We applied social accounting matrix (SAM) and Computable General Equilibrium (CGE) model to assess regional economic impacts of bioenergy production in US southeast. CGE models are a class of economic impact models that use economic data to estimate how an economy might react to changes in policies, markets, technologies, or other similar factors. Literature review was meant to arrive at most suitable procedure of "creating" bioenergy sectors from an existing SAM. For the purposes of this study, we identified the following 13 US southeast states as one contiguous land base with potential for bioenergy production. With the help of University of Florida, we acquired 2010 SAM dataset from Impact Analysis for Planning (IMPLAN) for the 13 US southeast states above. The SAM dataset is the basic framework used in CGE modeling. SAM dataset is a square matrix table showing economic data for commodity by industry demand, commodity trade (imports and exports), demographics (number of households by income groupings) among other data categories. We mapped and aggregated the SAM for CGE modeling. SAM data came as transactions between two accounts in 27 separate individual files (for example, demand of each factor of production by individual industries, is one such file) for each of the 13 states. The raw 2010 SAM dataset has 440 industries, 440 commodities, 4 factors, and 20 institutions. For CGE modeling purposes, these have to be "grouped" into some reduced number of the same. A grouping system was defined in a procedure called mapping using General Algebraic Modeling System (GAMS) software (Holland et al. 2007). Mapping procedure therefore detailed in GAMS software codes the way the unaggregated activities (industries), commodities, factors, institutions, and government entities were to be aggregated. Mapping procedure define the sectoring scheme. Aggregation process is where the 440 industries were grouped (grouping common industries together and disaggregating "new" industries from existing ones) into fewer industries. In this case, we aggregated the original 440 industries into 15 industries, which included bioenergy industry sectors. At the moment, bioenergy (from all sources) does not exist as a distinctive commodity/industry sector within IMPLAN SAM database as with the case of conventional energy sectors like coal and electricity. In order to conduct any regional economic assessments of bioenergy production or policy in a CGE model setup, bioenergy sector(s) has/have to exist as own sector(s). For the purposes of model calibration, we assembled forest biomass data for the 13 US southeast states. Model calibration is the process of estimating model parameters such as budget shares in household utility function. Calibration was done by solving the model equations for the parameters of interest using observed values in the SAM of both the endogenous and exogenous variables (Lofgren et al. 2002). Once satisfactory estimates of the parameters for all model were obtained, the model was checked to assure that it adequately performed the functions for which it was intended. The validation process established the credibility of the model by demonstrating its ability to replicate actual observed data.We formulated CGE model which is the process of establishing economic relationships between variables and parameters in the model based on neoclassical economic theory. In this process, model equations and their functional forms (linear and non-linear) were specified. These were written both in mathematical formulation and in GAMS software algorithm codes. In this study, we applied a CGE model developed by Lofgren et al. (2002) and customized by Holland et al. (2007) for compatibility with the IMPLAN to achieve the objective of this study.For actual model analysis and simulations, we shall incorporate biomass data for forest biomass based on landowner survey and techno-economic analyses.

Publications

  • Type: Book Chapters Status: Awaiting Publication Year Published: 2015 Citation: Lal, P., Burli, P. and J. Alavalapati. Policy Mechanisms to Implement and Support Biomass and Biofuel Projects in United States, In S. Jose, and Bhaskar, T. (eds.). Biomass and Biofuels. CRC Press Boca Raton, FL (in press)
  • Type: Book Chapters Status: Awaiting Publication Year Published: 2015 Citation: Lal, P., E. Kebede, B. Wolde, P. Burli, J. Alavalapati, J. Gan and E. Taylor. Assessing Socioeconomic Impacts of Forest Biomass Based Biofuel Development on Rural Communities in the Southern United States. In J. Janick and A. Whipkey (eds.) Proceedings of the Seventh National New Crops Symposium New Crops: Bioenergy, Biomaterials, and Sustainability (in press)
  • Type: Journal Articles Status: Published Year Published: 2014 Citation: Susaeta, A., J.C. Chang, D. Carter and P. Lal. 2014. Economics of carbon sequestration under fluctuating economic environment, forest management and technological changes: An application to forest stands in the southern United States. Journal of Forest Economics 20(1): 47-64.
  • Type: Other Status: Other Year Published: 2014 Citation: Lal, P. 2014. Market and Policy Instruments for Environmental Management: Learnings from Woody Bioenergy in United States and Solid Waste Management in Dominican Republic. Oral Presentation, Centre for Economic and Social Sciences Hyderabad Research Seminar. April 24, 2014.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2013 Citation: Lal, P., Kebede, E., Alavalapati, J., Gan, J., Wolde, B., and E. Taylor. 2013. Assessing Socioeconomic Impacts of Forest Biomass Based Biofuel Development on Rural Communities in the Southern United States, Oral Presentation. The Association for the Advancement of Industrial Crops Annual Meeting, Washington D.C, October 12-16.
  • Type: Other Status: Other Year Published: 2013 Citation: Lal, P. 2013. Economic implications of expanded forest biomass based energy production in Southern United States. Oral presentation. New Jersey Institute of Technology Fall Seminar Series. September 17


Progress 08/01/12 to 07/31/13

Outputs
Target Audience: Policy makers, extension agents, forestland owners, loggers, transporters, processors, distributors, private sector bioenergy operators and/or investors, environmental professionals, and academia especially those from disciplines like forestry, environmental conservation, economics, urban planning, geography, engineering, environmental science, public policy and sociology. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? This project has helped in training of one graduate research assistant (Bernabas Wolde) and one post-doctoral associate (Thakur Upadhyay). How have the results been disseminated to communities of interest? The study results were disseminated through publishing peer-reviewed journal article, book chapters, and oral presentations at academic conferences. Other community outreach activities include stakeholder meetings with forestland owners were held in states of Texas, Virginia, and Alabama to assess their participation in future bioenergy markets and to facilitate adoption of dedicated bioenergy crops; Focus group discussion with minority landowners was held to gauge their perception about wood based energy and participation in future bioenergy markets; Meeting with contractors/loggers; Landowner survey instrument development and feedback from university extension professionals engaged in bioenergy research and extension; and bioenergy webinar at the trade council for technology and technology support companies. What do you plan to do during the next reporting period to accomplish the goals? Objective 1: Quantitative and qualitative primary data will be collected through the use of survey instrument based on randomly selected private forestland owners from each state. The Tailored Design Method (Dillman, 2007) will be adopted in administering the survey. Given the binomial attribute of the dependent variable in terms of participating or not in bioenergy markets, planting non-forested fields and adopting or not intensive management as a response to bioenergy market, increasing logging activities or not, investing in specialized transportation and processing equipment or not, among others, a logit model will be used. This will identify the factors that statistically explain stakeholders’ responses using their respective socioeconomic, demographic and other relevant attributes. Further, a collective, pairwise and two-way analysis of variance will be used to assess presence of a statistical difference and interaction in response to the survey responses. We will also use statistical technique such as principal component analysis to find a more condensed way of structuring the number of variables by identifying the most significant ones to develop a robust predictive model. We will analyze what type of supply response behavior forestland owners will exhibit in terms of either adopting an intensive silvicultural practice or foresting previously non-forested fields. The literature review on sustainability,markets, sustainability, policies, logging and transportation along the pine feedstock based bioenergy supply chain will be used to develop a white paper. Objective 2: We will assess economics of slash and loblolly pine management for the forestland owner under different scenarios including fertilization and pine raking, the unit cost of producing ethanol from loblolly and slash pine for cellulosic plants under two different capabilities in terms of conversion efficiency and integrated CHP, and its profitability under different scenarios including different discount rate and selling prices. We will estimate the standing forest per acre value, the annual equivalent value, and the land expectation values. We will also estimate of the unit cost of producing an energy equivalent gallon of pine biomass based ethanol. This information can be used to identify the phases of the production cycle that contribute significantly to the overall cost, and identifying alternative inputs and/or production/transportation techniques. We will compare our results with fossil fuel prices. An ethanol plant without a power production capability at 75% conversion efficiency and a plant with a higher conversion efficiency with an onsite power generation capability representing a wide range of present and potential cellulosic ethanol capabilities (Davis et al. 2013) will be used for unit cost analyses. We will conduct sensitivity analyses in terms of feedstock price, excess biomass value, cost of capital, and handling and transportation costs. Objective 3: We will continue our work on the input-output/social accounting matrix (IO/SAM) will be used to assess regional information on employment, industry output, personal income, commodity level supply and demand, state and federal government taxes and spending, capital investment, business inventories, value-added and domestic and foreign trade. We will map and aggregate the SAM for CGE modeling. Other CGE activities will include CGE model formulation, biomass data acquisition and assembling, and CGE model calibration and validation. The GISoverlay for county levelmaps of loblolly and slash pine forest in the study states, minority dominated counties, and persistent poverty counties will be undertaken.

Impacts
What was accomplished under these goals? Objective 1: We identified those that have stake or interest in bioenergy issues including key supply chain actors such as forestland owners, loggers, transporters, processors, and distributors. We conducted literature review to understand if and how well these stakeholders are willing to participate in woody biomass supply markets. This review also helped identify their priorities, expectations from the sector, the strength, opportunities, threats, challenges they perceive about the sector, and their interaction with others in the forest biomass based bioenergy supply chain. We conducted stakeholder meetings with forestland owners in states of Texas, Virginia, and Alabama to assess their participation in future bioenergy markets and to facilitate adoption of dedicated bioenergy crops.Focus group discussion with minority landowners was held to gauge their perception about wood based energy and participation in future bioenergy markets. Meetings with contractors/loggers were held to discuss their participation in bioenergy markets. We developed the survey instruments that will be used to assess stakeholders participation along the supply chains of forest biomass based biofuels markets in three study states.Thus far, the survey instrument has undergone several rounds of peer reviews from academicians and extension agents. Pilot runs were conducted to determine how forestland owners are likely to respond to it and their suggestions on survey questions were incorporated. The stakeholder meetings in study states were used to develop bid values for landowner survey. Growth and yield model results coupled with price data from Timber Mart South was used to improve per acre stumpage price estimations. The triangulation process also included per acre stumpage price data gathered through sealed bid opening and timber sale award. We reviewed the status of technology and markets, sustainability, policies, and logging and transportation, focusing more on the ways in which forest bioenergy issues have been approached by researchers, and the ensuing results.We are analyzing forest based bioenergy sustainability and policies through intensive literature review comprising the supply chain of pine based biofuels. This review encompasses the entire supply chain—biomass production, harvesting, collection, pretreatment, storage, transporting from the site to the roadside landing, merchandizing and transporting to biomass processors, conversion to advanced biofuels, and delivery to the final consumer. Objective 2: We have prepared manuscript on economics of woody bioenergy as a chapter (Lal and Alavalapati, 2014) in an upcoming book on Handbook of Forest Resource Economics. This work presents a summary of previous studies that apply principles of economics to measure and assess implications of woody bioenergy on the local and regional economies. It summarizes some of the more commonly used tools, findings, and the challenges resulting from varied models and their underlying assumptions. It highlighted some of the areas that have received recent research attention and future research needs required to better inform future public policy. We are conducting economic analyses to assess if conversion facilities can produce cellulosic ethanol at competitive prices. Towards this end, we are assessing the streams of income for a conversion facility from ethanol sales at different prices, capital investment and operating cost analysis to estimate unit cost of producing a gallon of gasoline equivalent cellulosic ethanol. Our preliminary results indicate that cellulosic ethanol can be produced at a competitive price at lower discount rates and prices higher than the unit cost of producing a gasoline equivalent gallon up to the conversion stage. Similarly, our preliminary sensitivity analysis indicates that unit cost of ethanol is significantly influenced by changes in capital return factor and feedstock prices given their proportionally bigger role in the total cost. Such sensitivity of profitability to capital returns factor and feedstock prices may indicate a need for tax credits on capital investments or other forms of assistance to manage risk for conversion facilities. Objective 3: Extensive review of most current literature on application of CGE modeling in bioenergy studies was conducted. Kretschmer and Peterson (2010) conducted an extensive survey on integrating bioenergy into computable general equilibrium models. Their study gives a summary of most recent studies of bioenergy using CGE models. The study also summarizes major issues in modelling bioenergy in CGE models. At the moment, bioenergy does not have its own distinctive account in the SAM but rather it is aggregated as part of other energy sectors, depending on the level of grouping (aggregation) of a particular SAM database. Literature review was meant to arrive at most suitable procedure of “creating” bioenergy sectors from an existing SAM. For the purposes of this study, we identified the following 13 US southeast states as one contiguous land base with potential for bioenergy production. These include: Arkansas Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia. With the help of University of Florida, we acquired 2010 SAM dataset from Impact Analysis for Planning (IMPLAN) for the 13 US southeast states above. The SAM dataset is the basic framework used in CGE modeling. SAM dataset is a square matrix table showing economic data for commodity by industry demand, commodity trade (imports and exports), demographics (number of households by income groupings) among other data categories.

Publications

  • Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: Lal, P. 2013. Economic and Environmental Analysis of Biofuels in Southern United States. Association of American Geographers Annual Meeting, Los Angeles, April 9-13, 2013.
  • Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: Wolde, B., and P. Lal. 2013. Sustainability Assessment of Woody Biofuels in Southern United States, Oral Presentation. Montclair State University Student Research Symposium, Montclair NJ, April 20, 2013
  • Type: Journal Articles Status: Published Year Published: 2013 Citation: Susaeta, A., P. Lal, J. Alavalapati and D. R. Carter. 2013. Modelling the impacts of bioenergy markets on the forest industry in the Southern United States. International Journal of Sustainable Energy 32(6):544-561.
  • Type: Other Status: Other Year Published: 2012 Citation: Lal, P. 2012. Bioenergy Research at Montclair State University. New Jersey Technology Community Tech Industry Webinar Series on Energy/Environment. December 11, 2012.
  • Type: Book Chapters Status: Accepted Year Published: 2014 Citation: Lal, P. and J. R. R. Alavalapati, 2014. Economics of forest biomass-based energy. Handbook on Forest Resource Economics. In S. Kant and J. Alavalapati (eds.). Routledge London and New York pp. 275-289.