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1、Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?ACan Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?David N.WearReport 24-14 August 2024Resources for the FutureiAbout the Author David N.Wear is a nonresident senior fellow a
2、nd director of the Land Use,Forestry,and Agriculture Program at Resources for the Future(RFF).Prior to his arrival at RFF,he spent more than 30 years with US Forest Service Research and Development,most recently as a senior research scientist and leader of national and regional resource assessments.
3、Acknowledgements I am grateful to Margaret Walls,Matthew Wibbenmeyer,Jim Boyd,Kate Dargen,Phil Saksa,Micah Elias,and Luke Carpenter for review and comments.This research was supported by a grant from the Gordon and Betty Moore Foundation.About RFFResources for the Future(RFF)is an independent,nonpro
4、fit research institution in Washington,DC.Its mission is to improve environmental,energy,and natural resource decisions through impartial economic research and policy engagement.RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy en
5、vironment and a thriving economy.The views expressed here are those of the individual authors and may differ from those of other RFF experts,its officers,or its directors.Sharing Our WorkOur work is available for sharing and adaptation under an Attribution-NonCommercial-NoDerivatives 4.0 Internation
6、al(CC BY-NC-ND 4.0)license.You can copy and redistribute our material in any medium or format;you must give appropriate credit,provide a link to the license,and indicate if changes were made,and you may not apply additional restrictions.You may do so in any reasonable manner,but not in any way that
7、suggests the licensor endorses you or your use.You may not use the material for commercial purposes.If you remix,transform,or build upon the material,you may not distribute the modified material.For more information,visit https:/creativecommons.org/licenses/by-nc-nd/4.0/Abstract or Executive Summary
8、Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?iiExecutive SummaryThe wildfire crisis in the western United States arises from the confluence of climate change,land-use patterns,and dense forest conditions.Federal land managers have responded by focusing mana
9、gement on reducing the density of forest vegetation and encouraging fire resilience through fuel treatments,including mechanical fuel treatments that remove woody biomass,often coupled with piling and burning.Treatments are costly and needs far outstrip available budgets,even after accounting for ap
10、propriations from the Bipartisan Infrastructure Law and Inflation Reduction Act.To improve the effectiveness of fuel treatment budgets,biomass removals might be sold as inputs to building materials or energy products,with revenues offsetting costs and extending area treated.Indeed,absent additional
11、large appropriations,selling the biomass may be the only viable means to bring fuel treatments to an effective scale.However,managers have struggled to find willing buyers for this material.I examine the constraints affecting utilization of fuel treatment biomass(FTB)in the West based on a survey of
12、 relevant literature and arrive at several findings:At current prices,potential for biomass utilization at scale is limited to a few areas where existing production infrastructure intersects with areas of high wildfire risk.These market zones are where utilization strategies have the best chance to
13、succeed.Crediting carbon offset values to utilization could greatly expand the economic feasibility of FTB utilization and the area of treatments,especially near active markets.Utilizing rather than burning FTB avoids carbon emissions and could be credited through voluntary and/or compliance markets
14、.Crediting avoided health costs from smoke might also greatly expand the economic feasibility of FTB utilization and the area of treatments.Utilizing rather than burning FTB avoids health costs caused by smoke,especially additional PM2.5 emissions.Recent studies show that health benefits could be su
15、bstantialpotentially much larger than carbon revenues in some placesbut valuation and exchange protocols are not yet available.Transaction costs reduce the marketability of FTB on federal lands,though managers can moderate these costs through selection of contract instruments and terms.As currently
16、designed,fuel treatments focus first on fire resilience and remove only small-diameter materials with low revenue potential.Forest managers can enhance the potential for utilization by offering a mix of this low-quality biomass and larger-diameter sawtimber.The report concludes with a set of actions
17、 that could expand the utilization of FTB in the West:To improve marketability of FTB,federal land management agencies can(1)analyze local demand to understand the reach and material requirements of existing and potential wood product manufacturers;(2)design treatment Resources for the Futureiiiprog
18、rams to balance utilization potential with ecological restoration and resilience objectives;and(3)use contract instruments that extend production periods but moderate transaction costs.To establish carbon credits for FTB utilization,agencies can(1)develop general carbon crediting protocols,likely pa
19、tterned on the Climate Action Reserves draft biochar protocol;and(2)develop a protocol to certify federal FTB as a waste product.To support development of wood-based bioenergy demands,regulators can:(1)revise environmental regulations to allow FTB from federal lands to qualify as renewable feedstock
20、s;and(2)develop low carbon fuel standard(LCFS)protocols specifically for the utilization of FTB.To advance understanding of the health implications of smoke from fuel treatments,agencies and NGOs can convene experts from the health care and natural resource sectors to develop ways to estimate and va
21、lue benefits and explore crediting mechanisms.Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?ivContents1.Introduction 12.Market Location and Potential 23.Cost Structure of Fuel Treatments 64.Contract Structures and Transaction Costs 85.Alternative Treatment D
22、esigns 10Box 1.Hypothetical Trade-Offs between Sawtimber“Subsidy”and Program Outcomes 116.Accounting for Climate Benefits 127.Accounting for Health Benefits 148.Policy Pathways 158.1.Redesign Fuel Treatments 158.2.Monetize Climate Benefits 168.3.Monetize Health Benefits 179.Conclusion 1810.Reference
23、s 1911.Appendix 22Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?11.IntroductionIn the western United States,changes in forest conditions combined with climate change and an expanding wildland-urban interface have led to increasingly intense wildfires with hi
24、gh costs for property,communities,and firefightingthe annual economic burden of wildfire in the United States is estimated to be$394 billion to$893 billion.1 In response,federal land management agencies have focused their management on avoiding costly megafires,primarily by changing the structure of
25、 vast areas of forest and reestablishing fire resilience2 consistent with management by indigenous cultures(US Forest Service 2022a,2022b).The US Forest Service has targeted 50 million acres of high-risk forests for fuel treatments and estimates the cost at about$67 billion.3 That is much less than
26、total wildfire cost4 but orders of magnitude beyond annual appropriations,of about$400 million(Nielsen-Pincus et al.2013),largely explaining the accumulation of a 50-million-acre treatment backlog.More than$5 billion of supplementary appropriations from the Bipartisan Infrastructure Law and Inflatio
27、n Reduction Act will more than double the rate of treatments over a five-year period,but given the current design and cost of treatments and evolving forest and climate conditions,its unlikely that the backlog and associated wildfire risks can be substantially reduced at this rate.Deploying treatmen
28、ts at an effective scale will require either an additional massive influx of funding or a change in treatment strategies.The former is unlikely,and the latter is the topic of this report.Fuel treatments increase fire resilience by removing excess tree biomass and changing the structure of forests,us
29、ing either prescribed burning or,more often,mechanical treatments that involve cutting,piling,and burning removals.An often-discussed strategy for reducing the net costs of treatments is to sell the removed biomass for use as wood products or transportation fuels.Where feasible,revenues generated fr
30、om biomass sales can offset management costs and might even make programs self-sustaining.Various factors have limited this“utilization”strategy,including high production costs,low biomass values,and risks for purchasers,but also the lack 1 These cost estimates are from the US Congress Joint Economi
31、c Committee,dated October 2023:https:/www.jec.senate.gov/public/_cache/files/9220abde-7b60-4d05-ba0a-8cc20df44c7d/jec-report-on-total-costs-of-wildfires.pdf.They extend and update earlier estimates of$87 billion to$428 billion from Thomas et al.(2017).2 Fire resilience is the ability of fire-adapted
32、 forest ecosystems to accommodate natural,low-intensity fires.3 Average fuel treatment costs of$1,000/acre have been cited by the US Forest Service since 2012(Clavet et al.2021).In 2023 dollars this amounts to$1,340/acre.Campbell and Anderson(2019)estimate average fuel treatment costs of about$1,300
33、/acre for mechanical fuel treatments and$300/acre for prescribed burning(adjusted to 2023 values).Some suggest that costs of treatments,especially after accounting for ongoing maintenance treatments,could be substantially higher(Hartsough et al.2008).4 An important question that I do not address is
34、how investments in fuel treatments are expected to reduce total wildfire coststhat is,the overall return on these investments.Resources for the Future2of clear social license for this approach to public land management.The report of the Wildland Fire Mitigation and Management Commission(WFMMC)5 reco
35、gnizes utilization as an important and perhaps the only practical way to extend fuel treatment program effectiveness.Several studies show that utilization strategies could be feasible in the West under the right market and policy conditions(Prestemon et al.2012;Cabiyo et al.2021;Elias et al.2023;San
36、chez et al.2021;Porter et al.2019;Wear et al.2023;Swezy et al.2021).Yet utilization on a large scale has failed to emerge despite efforts to increase sales,raising questions about its practicality.This report explores the potential for developing a more effective utilization strategy for fuel treatm
37、ents and policies that could overcome substantial economic barriers.I examine where utilization could be effective in the West,and how managers could improve the economic feasibility of utilization options,based first on wood production economics.I then explore how incorporating climate and health b
38、enefits could increase utilization revenues and expand the area of economically feasible treatments.The report concludes with actionable policy options for building an effective utilization strategy in the western United States.2.Market Location and PotentialFuel treatments,as designed,produce low-q
39、uality biomass,usually wood chips.A market for this fuel treatment biomass(FTB)is the starting point for any effective utilization strategy.Markets emerge where landowners offer material of sufficient quality at prices that can draw willing purchasers.Existing markets for woody biomass are strongest
40、 where forests are relatively productive and transportation infrastructure is adequate for moving timber to mills and products to end markets.Production facilities for different types of wood products tend to co-locate because of economies of scopewhere returns accrue to sorting timber of variable q
41、uality into different production streams and where waste material can be sold to secondary manufacturers.The market price of harvested timber reflects the sum of its value for primary products(e.g.,lumber)and the value of the production residuals(e.g.,sawdust sold for fiber board production)(Bowe et
42、 al.2004).Wood products markets also exhibit economies of agglomerationwhere returns accrue to specialized labor and capital,especially in the logging sector that delivers raw material to processing facilities(He et al.2021).Woody biomass is a primary input to a variety of wood products,including th
43、ose that use saw timber inputs,such as lumber,plywood,posts,and poles,and those that use chips and production or logging residuals,such as oriented-strand board,paper,and bioenergy products(Table 1).Glulam,a mass timber product,uses a combination of solid timber and chips in production.In the arid W
44、est,solid wood products markets have a long historylumber has been produced there since the 19th centurybut have trended down since the 1980s.Among solid wood products,only mass timber product output has trended upward over the past two decades.Most biomass-based fuel products use relatively new gas
45、ification or pyrolysis technologies that are in demonstration stages,but combustion-based bioenergy has had a long history.5 https:/www.usda.gov/topics/disaster-resource-center/wildland-fire/commission.Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?3Timber ma
46、rkets in the West have also evolved around federal timber policies since the early 20th century.From the 1950s until an abrupt curtailment in the early 1990s,the US Forest Service was the dominant timber supplier in the region(Wear and Murray 2004).In the 1990s,production levels declined abruptly,an
47、d production shares shifted toward private suppliers.Table 1.Products That Utilize Woody BiomassProductInput typeOutput,notesFuel productsHydrogenChipsHydrogen fuels and feedstocksRenewable natural gasChipsReplacement for natural gasFischer Tropsch fuelsChipsGasoline and biodiesel blend stocksPyroly
48、sis fuelsChipsLiquid transportation fuelsNonfuel bioenergyCombustion-based bioenergyChipsWith or without carbon capture and storageWood pelletsChips,residuesSolid wood productsLumberSolid woodPoles,posts,pilingsSolid woodPlywoodSolid woodOriented-strand boardChipsPaperChipsDemand is limited in arid
49、WestMass timberSolid wood,chips BiocharChipsFor soil amendment and environmental remediationWood vaultsSolid woodHarvested wood is indefinitely stored underground as carbon sinkSources:The list of fuel products is based on Elias et al.(2023);see the citation for more detail.The list of solid wood pr
50、oducts is informed by Table 8 in(Porter and Longcor 2020).Resources for the Future4The current distribution of production in the West is shown in Figure 1.The largest concentration of production is on the west side of the Cascade Mountains in Oregon and Washington,where forests are highly productive
51、 but outside the arid zone where fuel treatments are most needed(Figure 1b).Within the arid West,timber production is focused in two regions:the Sierra-Cascade-Klamath region in California and Oregon,and the Northern Rockies(northern Idaho and western Montana).In addition,some smaller markets persis
52、t in the Front Range of the Rockies in Colorado and the Black Hills of South Dakota.Outside these areas,harvesting occurs at very low rates,if at all.These active market areas,with a variety of potential end uses and extant logging operations,define the locus of current wood demand and where wood ut
53、ilization has potential to expand(see Nielsen-Pincus et al.2013).The centripetal forces of scope and agglomeration economies generate substantial cost advantages for locating new production facilities in these areas.Drawing investments to areas with little existing infrastructure would be greatly ch
54、allenged by limited wood supply and the high costs of establishing an entire production chain(e.g.,building a logging sector only to service fuel treatments).Potential for investment would also be influenced by state policies(e.g.,Californias Low Carbon Fuel Standard program,discussed later in this
55、report)but would still need to address these economic fundamentals.Figure 1.Timber Production and Fire Risk in the American West.(A)Timber production as thousand cubic feet/acre/year(source:US Forest Service TPO reports for 2012)and location of primary processing mills(source:personal communication,
56、US TPO program).Output data are top coded at 50 cf/acre/year.Each dot represents a primary wood-processing mill,defined as sawmills,pulp and paper facilities,plywood and veneer mills,and composite board mills.Mill locations for South Dakota are not available.(B)Fire-risk quartiles for the western st
57、ates using the FEMA Fire Risk Index.(C)Bivariate map of intersection of timber market strength and fire risk(timber output from A is summarized using county quartiles).01020304050cf/acre/yrA.Fire RiskLowMedium-LowMedium-HighHighB.C.Fire RiskTimber OutputCan Market Incentives for Wood Products Help S
58、cale Wildfire Risk Reductions in the West?5The intersection of wildfire risk and current timber production highlights where utilization strategies could be most effective for addressing wildfire mitigation and forest resilience needs.Figure 1c shows strong correspondence between market strength and
59、wildfire risk in the Sierra-Klamath region,along the east side of the Cascade Mountains in Oregon,northeastern Washington,parts of the Northern Rockies,and in the Black Hills of South Dakota.This relatively small portion of the arid West is where an effective FTB economy has the greatest likelihood
60、of succeeding.About one-third of the US Forest Service priority landscapes for fuel treatment(Figure 2)occur within these areas.Figure 2.US Forest Service Priority Landscapes for Fuel Treatment Overlaid with High-Risk Fire ShedsNote:Both original landscapes from 2021 and new landscapes added in Janu
61、ary 2023 are shown.Source:US Forest Service.Resources for the Future63.Cost Structure of Fuel TreatmentsEven in areas with active markets,high production costs and low-quality biomass limit the extent to which FTB might be sold in a competitive market(Wear et al.2023;Swezy et al.2021;Porter and Long
62、cor 2020;Cabiyo et al.2021).Where market prices fail to cover the costs of bringing material to market,FTB utilization can be made feasible by subsidizing production or by adjusting fuel treatment designs to reduce costs and/or enhance returns to producers.Production costs include harvesting costs(d
63、etermined by site conditions,such as steepness),hauling costs(e.g.,distance between harvest site and mill site,quality of roads,and proximity to roads),and transaction costs(e.g.,sale complexity,compliance monitoring,bonding,and other contractual obligations).The costs of procuring FTB varies substa
64、ntially within any subregion.For example,treatments in forests close to mills with gentle slopes are less costly than those in remote forests with steep slopes.Complex administrative requirements lead to higher transaction costs for federal land compared with other ownerships(Jackson 1987;Munn and R
65、ucker 1995).Recent research into the structure of biomass supply accounts for how costs vary across complex western landscapes.Wear et al.(2023)evaluate costs of delivering biomass to existing mills from all nonreserved forests in Montana and Idaho,accounting for site conditions,biomass quantity,and
66、 road networks.Their maps of FTB production costs can be summarized using the marginal cost or supply curves in Figure 3.The value on the vertical axis is the price of FTB,and the horizontal axis is the Figure 3.Supply of Feasibly Treated Area(Percentage Treatable of Total and Total Treatable Area)U
67、sing Fuel Treatments without Sawtimber Removal,by Ownership ClassNote:The price index is set to one for$20/bdt of biomass(e.g.,price index of 4 is a price of$80/bdt).Source:Wear et al.(2023).4 46810025507510001020Non-Sawtimber Price IndexAcres(Percent)3579Acres(Millions)OwnerForest ServiceOther Publ
68、icPrivateCan Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?7area of forests that have costs lower than the pricethat is,the curves define the total area with economically feasible FTB for a given price.Harvesting and hauling costs in all locations exceed prices
69、until the price reaches$60 per bone-dry ton(bdt)of biomass,after which feasible area increases with price.At$130/bdt,about 80 percent of federal forests and 90 percent of nonfederal forests would have economically feasible treatments.Put another way,Figure 3 shows that the harvesting and hauling cos
70、ts of FTB production for about 80 to 90 percent of forests in Montana and Idaho is$60 to$130/bdt.Three other studies construct similar supply models to evaluate the feasibility of biomass-based bioenergy facilities in three smaller areas of the West.Swezy et al.(2021)estimate delivered costs of fuel
71、 treatment biomass for two facility locations in the northern Sierras;Adams et al.(2019)estimate and compare delivered biomass costs for two potential biorefinery sites in western Oregon and Washington;and Jones et al.(2013)estimate FTB supply curves from the Bitterroot National Forest for a specifi
72、c bioenergy facility in western Montana.Adams et al.consider all potential sources of biomass,including harvest and mill residuals,but only from nonfederal lands because federal biomass does not qualify for federal renewable fuel credits.Jones et al.limit their analysis to sites with a low slope cla
73、ss and good road access and analyze the integrated harvesting of sawlogs and FTB.Swezy et al.consider a case directly comparable to Wear et al.by evaluating the economics of FTB.Figure 4.Estimated Harvest and Hauling Costs for FTB.Sources:Wear et al.(2023);G.Jones et al.(2013);Adams et al.(2019);Swe
74、zy et al.(2021).Note:Cost estimates have been adjusted to 2023 dollars based on the GDP price deflator.66 Note that Swezy et al apply an additional cost factor of 30%to cover overhead and trans-action costs which I exclude for these cost comparisons.$0.00$20.00$40.00$60.00$80.00$100.00$120.00$140.00
75、Wear et al.(FTBonly)Swezy et al.(FTBonly)Adams et al.(Integratedharvest)Jones et al.(integrated harvest)low$60.00$58.22$54.26$44.22high$130.00$125.46$102.50$110.56midpoint$95.00$91.84$78.38$77.39Costs($/bdt)Resources for the Future8Those four studies generate very similar estimates of production cos
76、ts,ranging from$44 to$120/bdt with midpoint estimates of$77 to$95/bdt(Figure 4).The studies that evaluate FTB-only treatments in the Sierras(Swezy et al.2021)and in Montana and Idaho(Wear et al.2023)estimate a nearly identical range of harvest and hauling costs,$60 to$130/bdt.In these areas,then,a p
77、rice of$60/bdt would be needed to incentivize any FTB utilization,and higher prices would likely be required to provide supplies that could justify facility investments and increase the scale of FTB utilization.Swezy et al.find that a price of$83/bdt would fully supply FTB to the facilities they exa
78、mine in the Sierras.In the Wear et al.study,roughly 25 percent of forest area would be economically feasible for treatment if prices rose to about$85/bdt.Adams et al.find that a feedstock price of$85/bdt would generate a nonfederal biomass supply needed for siting a biorefinery in western Oregon or
79、Washington.Federal land managers might reduce their production costs and enhance feasibility by prioritizing low-cost treatment locationsthat is,sites with lower access costs that are closer to processing centersor by subsidizing transportation system development.Subsidizing road construction and ma
80、intenance could also reduce access and hauling costs across broad areas;that might or might not change the overall feasibility of fuel treatment operations.7 Per unit treatment costs might also be reduced by increasing the amount of FTB removed and the density of treated areas within a fuel treatmen
81、t contract to achieve economies of scale.But the topography and accessibility that shape the supply curves in Figure 3 are immutable factors that limit managers ability to reduce harvesting and hauling costs in many areas.4.Contract Structures and Transaction CostsIn addition to harvesting and hauli
82、ng costs,transaction costs have an important influence on the market feasibility of FTB.Although these costs are difficult to estimate,research on timber auctions shows that federal timber sale complexity and compliance with federal contracting rules lead to higher costs for contractors(Jackson 1987
83、;Munn and Rucker 1995).Overhead rates of up to 30 percent are often added to harvest and haul costs to capture these and other cost factors(Swezy et al.2021).The structure of contract instruments strongly influences transaction costs.Until 2000,the Forest Service sold the harvest rights to timber ex
84、clusively through timber sale contracts.The timber sale contract process uses sealed-bid auctions to provide competitive pricing,formal appraisals to define fair market prices and minimum acceptable bids,and contracts to specify strict standards for logging and other compliance rules,including custo
85、dy-tracking protocols.Proceeds from a timber sale are deposited with the US Treasury.Congress first authorized an alternative“stewardship contracting”approach for the national forests in 1999 and has 7 Building road networks is costly and may not be the most effective means of subsidizing fuel treat
86、ment utilization.Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?9subsequently extended the scope of authority,especially for areas with high wildfire hazard.8 Stewardship agreements allow contractors to be compensated for a variety of management activities wi
87、th the proceeds from harvested timber.Contracts are awarded on a“best-value”basis that considers service as well as timber-harvesting outcomes and allows for consideration of factors other than price and costs,such as previous performance of contractors or contributions to local communities.Most imp
88、ortantly,the exchange of timber goods for management services allows federal land managers to direct the receipts of timber harvests to local management needs instead of transferring them to the Treasury.Stewardship authorities now allow for two types of contracts.9 Integrated resource timber contra
89、cts(IRTCs),based on a timber sale contract and administered by a timber sale contracting officer,apply where the value of the harvested timber exceeds the cost of the management activities.Integrated resource service contracts(IRSCs),based on a service contract and administered by a procurement cont
90、racting officer,apply where the value of the harvested timber is less than the cost of the management activities.IRTCs require detailed economic analysis through the agencys timber sale analysis protocols(the timber sale gate system)and full compliance with timber sale standards,including custody tr
91、acking.IRSCs require less formal economic analysis and compliance monitoring and provide a means for federal land managers to offer“below-cost timber sales,”which are not allowed under standard timber sale contracting authority.IRSCs in effect allow the Forest Service to directly subsidize harvests
92、to provide other values from land management,including fuel treatments.Subsidizing sales through an IRSC can effectively reduce per acre treatment costs and expand the scale of treatment programs.The benefits of stewardship contracting for fuel treatment programs include the local retention of recei
93、pts.This expands the total area of fuel treatments and provides flexibility in designing nonharvest treatments.However,stewardship contracts are more complex than standalone timber sale or procurement contracts,implying additional complexity both for Forest Service managers,who must design and negot
94、iate the structure and terms of contracts,and for contractors,who must coordinate multiple management activities,from harvesting to regeneration,either in-house or through subcontracts.10 These transaction costs are likely to be directly proportional to the complexity of agreements.More complex cont
95、racts also limit the number of potential purchasers and reduce net returns to harvesting(especially when sole-source contracting is applied).8 Stewardship contracting began with limited authorization in 1999 and was permanently authorized by the 2014 Farm Bill.The 2018 Consolidated Appropriations Ac
96、t(Section 207)extended the term limit to 20 years for areas with high fire risk.See https:/ Guidance for stewardship contracting is found in the US Forest Service Handbook,sec-tion 2409.19(Amendment 24019-2022.3,dated 1/3/2022).10 Timber sales establish timber value using appraisal methods that are
97、less complicated than methods needed for stewardship contracts.Resources for the Future105.Alternative Treatment DesignsThe timber economy of the arid West is built on harvesting sawlogswhole logs of at least 7 to 8 inches in diameter at breast height(dbh)to produce lumber and other solid wood produ
98、cts.In 2015,84 percent of the timber harvested in Montana and Idaho was delivered to sawmills or to plywood and veneer plants,and 40 to 50 percent of this material was subsequently output as mill residues and used to produce secondary products,including paper,energy,and particleboard(Hayes et al.202
99、1).In California,the sawlog share of the total harvest was 73 percent in 2016(Porter and Longcor 2020).11 The production infrastructure of these regions supports several products,consistent with economies of scope,but is organized around the harvest and delivery of sawlogs,which are much more valuab
100、le than FTB.In western Montana and Idaho,average sawtimber prices in 2023 were about$400/mbf,the equivalent of about$200/bdt.Enhancing the quality mix of FTB and associated revenues is one strategy for expanding utilization.Including even small amounts of valuable sawtimber in fuel treatment design
101、substantially changes feasibility.Wear et al.(2023)find that at a low price of$20/bdt for FTB,incorporating removal of 20 percent of sawtimber in fuel treatments makes 40 percent of treatments economically feasible at current sawtimber prices.Swezy et al.(2021)find that combining sawtimber removal w
102、ith fuel treatments,using what they label an integrated harvesting approach,would lower the minimum delivered costs of biomass to about$49/bdt(from about$61/bdt for treatments with only FTB)and substantially expand potential FTB utilization.Adding sawtimber harvest to fuel treatment removals likely
103、changes their effects on fire resilience outcomes.This implies trade-offs between per unit area effectiveness and overall program effectiveness,after accounting for the economic viability of treatments and the total area treated(see Box 1).Fuel treatments designed only to optimize ecological restora
104、tion and resilience objectives may have very limited market potential that substantially limits their application(the large 4FRI forest restoration project in Arizona is one example12).Overall program effectiveness is determined not only by the effectiveness of treatments as designed,but also by the
105、 likelihood that treatments occur and thus the overall scale of the program.Program design needs a concurrent assessment of the effects of treatment design on resilience and economic feasibility of application.11 Original data at https:/www.bber.umt.edu/FIR/S_CA.asp.12 See https:/4fri.org/wp-content
106、/uploads/2018/04/1205_4FRI-Lessons-Learned-ERI-White-Paper.pdf for a case where utilization strategies focused on national forests with very little local production infrastructure.Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?11Box 1.Hypothetical Trade-Offs
107、between Sawtimber“Subsidy”and Program OutcomesConsider a hypothetical case where adding sawtimber removals to fuel treatments increases their returns and economic feasibility as shown in Figure B.No area is economically feasible until the share of sawtimber removed is 5 percent and from there the fe
108、asible area increases as a function of sawtimber share.At the same time,the effectiveness of the treatments declines from a maximum of 100 percent with no sawtimber removal to near zero effectiveness at a share of 25 percent as shown in Figure A.The total effect of the fuel treatment program(Figure
109、C)is determined by the average effectiveness of treatments times the area that can be feasibly treated.In this hypothetical case,the maximum benefit of treatments is found at a sawtimber share of about 12 percent.Clearly,program trade-offs are more complex,varying by ecosystem type and local market
110、conditions,but this simple example illustrates the types of trade-offs involved when a subsidy affects not only returns to treatments and treatment effectiveness but also the area that can be treated.0.000.050.100.150.200.250.250.500.751.00EfectivenessSawtimber ShareA.Treatment efectiveness0.000.050
111、.100.150.200.250.000.250.500.75Feasible Area IndexSawtimber ShareB.Treatment feasibility0.0000.0250.0500.0750.1000.1250.000.050.100.150.200.25Sawtimber ShareTotal ImpactC.Program impactResources for the Future126.Accounting for Climate BenefitsPublic funding for forest fuel treatments is justified b
112、y the public good benefits expected to accrue to wildfire mitigation,mainly from avoided wildfire losses and suppression costs over time.In the long run,resilient forests would also produce less greenhouse gas emissions from wildfires(Reinhardt and Holsinger 2010).In the short run,treatments that bu
113、rn FTB can generate additional and immediate social costs in the form of greenhouse gas emissions and human health effects from smoke(Aurell et al.2017;Reid et al.2016).Utilizing rather than burning FTB avoids these costs,and crediting these avoided costs would expand the area of economically feasib
114、le treatments(e.g.,Hunter and Taylor 2022).The climate benefits of utilizing woody biomass in general and FTB in particular factor into various assessments of wood-based transportation fuels,biochar,and other wood uses(Cabiyo et al.2021;Elias et al.2023).Forest carbon credits resulting from improved
115、 forest management,afforestation,or avoided deforestation are currently traded in compliance and voluntary offset markets at prices that can vary substantially based on credit quality.13 Credits arise from verified projects that generate“additional”carbon benefits over a credible reference case.For
116、afforestation,the reference case is defined by the existing land use,and the additional carbon is defined by the carbon removed from the atmosphere and stored in forest biomass.Credits or offsets for FTB utilization would be based on avoided burning:the reference case is emissions from pile burning
117、or decomposition of FTB,and the additional carbon benefit is avoided greenhouse gas emissions.Unlike other forest carbon credits,credits for utilizing FTB are based on an immediate diversion of a waste product from the atmosphere,not on long-term and uncertain sequestration of carbon in future fores
118、t vegetation.14A rough estimate of potential returns indicates that carbon credits could add considerable value to utilization alternatives.Burning 1 green ton of forest biomass generates roughly 0.83 ton CO2 equivalent(tCO2e)of carbon emissions.15 Utilization options have product-specific recovery
119、rates,but with a conservative 70 percent recovery rate,they could yield$216/bdt of benefits from avoided emissions,using a$185/tCO2 social cost of carbon(Rennert et al.2022).At current carbon market prices 13 Compliance markets for offsets are linked to emissions trading systems(ETSs),gener-ally bas
120、ed on a cap-and-trade model,that allow emitters to meet some portion of their obligations through offset purchases(currently 4 percent in California).Carbon offset credits are packaged as discrete projects that comply with compliance offset protocols and registered with a registry such as the Climat
121、e Action Reserve.Projects can then be sold to a“covered entity”within the ETS.14 This logic also undergirds the underground storage of compressed wood waste to pro-duce offsets for the voluntary markets,recently deployed by Graphite,Inc.;see https:/ See the appendix for estimates and sources.Can Mar
122、ket Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?13($10 to$50/tCO2e),16 returns to avoided emissions would range from$12 to$60/bdt of utilized FTB,and adding carbon credits could more than double the potential revenues from utilizing FTB.For example,with a carbon cred
123、it of$36/bdt,the biomass price at which feedstocks in Idaho and Montana become economically feasible would drop from$60 to$39/bdt,and treatment of 50 percent of forests would be economically feasible at$49/bdt(see Figure 3).Recent developments have laid groundwork for carbon credit protocols for uti
124、lizing FTB.The Climate Action Reserves draft Biochar Protocol defines carbon credits for producing biochar from wood waste(including FTB)and agricultural waste(Elias et al.2022)that could be extended to any use of the FTB.Because fuel treatments are a federal imperative,they define a concrete baseli
125、ne based on burning or decomposition,and utilization alternatives define additional carbon benefits.Where FTB is used for building materials,carbon credits derive from life-cycle analysis of manufactured wood products.For use as feedstock for biofuels,carbon values are determined by the carbon emiss
126、ions density of the resulting fuels compared with fossil fuel alternatives,consistent with established protocols such as the California Low Carbon Fuel Standard(LCFS,where returns to abated emissions are currently as high as$190/tCO2e).Direct leakage is not a concern because the utilization of remov
127、ed material is not expected to result in burning elsewhere.17 Furthermore,and unlike other types of forest carbon credits,utilizing FTB does not incur the risk of reversal by wildfire even if a wildfire occurs on treated sites.Producing fuel products from FTB within the LCFS framework may provide th
128、e highest return,after accounting for carbon benefits.Elias et al.(2023)evaluate potential returns on investment for several liquid biofuels and other bioenergy products listed in Table 1,both with and without carbon capture and storage benefits and as influenced by existing policies,including LCFS,
129、tax credits,18 and renewable fuel standards.They find high internal rates of return for investments in all technologies except renewable natural gas,but only when policies allow for capturing these carbon benefits(carbon provided 40 to 65 percent of income).Without policies that provide these carbon
130、 benefits,fuel technologies were not economically viable.1916 The Ecosystem Marketplace State of the Voluntary Carbon Market for 2023 reports an average world price of$11.21/tCO2e for forestry and land use projects and$15.60/tCO2e for afforestation projects.California ETS allowance prices were$28.08
131、/tCO2e in 2023,likely defining a ceiling for offset credit prices.17 Even if overall production of wood products does not change(i.e.,leakage arises from shifts in market location),the avoided carbon emissions from avoided burning would still be additional.18 Dating to 2018 and revised by the Inflat
132、ion Reduction Act of 2021,Section 45Q of the Internal Revenue Code provides tax credits for carbon dioxide capture and aims to ex-pand carbon capture and storage activities.45Q does not apply to nature-based carbon dioxide removals.19 Elias et al.(2023)find exceptionally high rates of return for hyd
133、rogen-based fuels.Resources for the Future147.Accounting for Health BenefitsThe other major potential source of benefits from utilizing rather than burning FTB is avoided health harms.Health costs arise from the effects of particulate matter,especially PM2.5,on lost life-years and hospital visits fo
134、r various respiratory and cardiovascular treatments(Fann et al.2012;Reid et al.2016).Costs depend on how populations are exposed to the particulate and the demographics of the exposed population(Jung et al.2024).The literature on the health effects of PM2.5 suggests that average health benefits from
135、 avoided emissions could be more than an order of magnitude greater than carbon credit values.Our rough estimate is$224 to$826/bdt for PM2.5 mitigation,20 with effects varying substantially across seasons,regions,and locations within regions.Regulation has reduced PM2.5 from most sectors of the US e
136、conomy,but these reductions have been more than offset by growth in wildfire emissions(Ford et al.2018).Because wildfire emissions fall under the Exceptional Events Rule,they do not affect state compliance with National Ambient Air Quality Standards under the Clean Air Act(Krupnick et al.2024).Emiss
137、ions from prescribed burning or pile burning,however,do count against the standards.States thus have a strong and perverse incentive not to burn FTB or use prescribed fire,even when these fuel treatments might reduce the net long-term emissions from wildfire(Jones et al.2022).21 High health sector c
138、osts and regulatory incentives suggest a potential for compensating landowners to mitigate emissions from fuel treatments,especially in areas where large populations are regularly exposed to wildfire emissions,such as cities in California and Nevada and the Rocky Mountain states(Robarge et al.2020).
139、But compensation would need to start with site-specific measures of smoke emissions and potential damages,with precise definition of hazard delivery to affected communitiesthat is,the unit of exchange and who would be harmed and might be willing to pay for avoided damages.22Smoke-related health effe
140、cts do not share the same commodity attributes that support carbon tradingthe uniform quality that makes carbon from anywhere 20 Heo et al.(2016)estimate a seasonally weighted average cost of$88,000-$130,000/tonne PM2.5(2005)in the United States with highly variable costs across regions.I use these
141、values along with an assumption that 20-50%of burned biomass would lead to health impacts to derive the$224-826 range as shown in the Appendix.21 This establishes a perverse incentive to avoid management fire that could prevent wild-fire events with higher emissions.See https:/www.americanbar.org/gr
142、oups/environ-ment_energy_resources/publications/fr/fighting-fire-with-fire/and(Kelp et al.2023).22 Defining the magnitude and delivery of harm from wildfire and management fire will require substantial new research across health and forest management disciplines and the development of new data produ
143、cts for understanding health impacts and manage-ment options.See especially“The Human Health Benefits of Improving Forest Health in California,”a report by the California Council on Science and Technology and Blue Forest Conservation.https:/ccst.us/reports/linking-forest-health-wildfire-smoke-and-pu
144、b-lic-health/.Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?15in the world fungible.Benefits of emissions reductions are more“exclusive”than climate benefits:they are generated by and accrue to well-defined entities in specific places.Such attributes might s
145、upport bargaining solutions between polluters and those harmed.Exposed communities,represented by state governments or health insurance companies,might be willing to compensate landowners for designing their fuel treatment programs to reduce long-term exposure to wildfire smoke while abating short-t
146、erm exposure to FTB smoke emissions.Because of the complexity of these types of bargaining solutions,Quesnel Seipp et al.(2023)see a role for project developers in coordinating forest management activities across landowners,defining and monitoring benefits,and designing financial instruments to brok
147、er the exchanges.Environmental impact bonds funded by private capital and repaid by beneficiaries for avoided damages may be especially well suited(Brand et al.2021).Similar negotiated exchanges involving water utilities and land management agencies have been used to reduce wildfire effects on munic
148、ipal watersheds.Denver Water,for example,cost-shares fuel treatments with the US Forest Service to avoid costs from postfire siltation in its reservoirs and treatment facilities.23 The Yuba Water Agency and State of California similarly pay for forest restoration activities in their watersheds to av
149、oid wildfire-related costs,and corporations pay for“volumetric water benefits”as part of their water replenishment programs,using forest restoration bonds organized by Blue Forest Conservation.24 In a similar vein,electric utilities have contributed to fuel treatments on national forests to protect
150、their infrastructure from wildfire and mitigate their exposure to liability for wildfires ignited by their transmission lines.258.Policy PathwaysHigh costs and low returns limit FTB utilization in the West.Expanding the scale of utilization requires actions that would reduce costs or enhance revenue
151、s,with the prospect of revenues having the greater potential.I have identified three areas with immediately actionable polices:(1)agency design and marketing of fuel treatments to reduce costs or enhance revenues;(2)formalizing and supporting carbon offset protocols to value the climate benefits of
152、utilizing FTB;and(3)developing methods to define the health effects of fuel treatment smoke and provide payments for reducing health costs.8.1.Redesign Fuel Treatments Federal land managers can adjust treatment designs to reduce management costs and enhance revenues,allowing for more treatments to g
153、enerate marketable biomass products.Opportunities are constrained by the essentially fixed costs of hauling,23 See https:/www.denverwater.org/your-water/water-supply-and-planning/water-shed-protection-and-management.24 See https:/www.blueforest.org/the-yuba-project.25 See,for example,https:/ for the
154、 Future16market prices for wood products,and availability of infrastructure,so initial efforts should focus on areas with strong existing markets.Adding some sawtimber to FTB removals could expand utilization in areas with active sawtimber and mass timber markets.Increasing utilization requires desi
155、gning treatments to provide materials that meet local market demands.Treatment designs focused only on restoration outcomes without accounting for local demands are unlikely to draw willing buyers of FTB.Transaction costs and investment risks also limit demand for FTB.Uncertainty about long-term fed
156、eral timber supplies inhibits investment in new facilities,and transaction costs,largely related to sale complexity and monitoring requirements,reduce the marketability of FTB.Supply certainty is important and can be achieved through long stewardship contracts or,alternatively,by announcing long-ter
157、m plans for small sale offerings.26 Additionally,providing standardized public-facing reporting of activity planning,accomplishments,and pricing would increase transparency and supply certainty.Federal agencies now have considerable flexibility in designing treatment contracts,including stewardship
158、contracting,but this can result in complex,multipurpose contracts with high unit costs.In sum,to improve marketability of FTB,federal land management agencies can(1)evaluate local markets to define the material requirements of existing and potential wood product manufacturers;(2)design treatment pro
159、grams to balance utilization potential with ecological restoration and resilience objectives;and(3)apply contract specifications that extend production periods but moderate transaction costs and risks.8.2.Monetize Climate BenefitsAllowing purchasers to sell carbon credits would increase treatment re
160、venues to levels that might substantially expand the scale of FTB utilization.Although current federal policy precludes the direct sale of carbon credits from federal land,certification of FTB as a waste product could be sufficient for purchasers to establish the credits in existing markets.Bid pric
161、es for FTB would then reflect the sum of wood product returns and carbon credits.Certification of federal fuel treatment biomass as a waste product is essential because it establishes the crediting reference case based on forest resilience imperatives,but it would require agency initiative and perha
162、ps congressional authorization.Additionally,waste certification could allow FTB purchasers to avoid the costly custody tracking required for federal timber,as proposed by Porter and Longcor(2020).The development of carbon crediting protocols could be accelerated with support from nongovernmental org
163、anizations(NGOs)and foundations.Utilizing fuel treatment biomass for transportation fuels may have the highest potential to grow the demand for FTB in some areas of the West.Californias Low Carbon Fuel Standardnow extended to Oregon,Washington,and British Columbiaincentivizes 26 Establishing a patte
164、rn of offering regular FTB sales of a size that is manageable for po-tential purchasers could reduce supply uncertainty and reduce purchasers risk associat-ed with long-term high-volume contracts.Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?17use of biomass
165、-based fuels and could spur investment in production infrastructure.But its current design does not account for avoided emissions from pile burning(Sanchez et al.2021).New low-carbon fuel protocols could be initiated by potential investors and supported by the certification of federal fuel treatment
166、 biomass as a waste product.Foundations and other NGOs could convene and accelerate these evaluations.The federal Renewable Fuel Standard provides substantial price support for qualifying RIN fuels,including those produced from woody biomass,but Environmental Protection Agency(EPA)regulations disqua
167、lify woody biomass removed from federal land.27 Given the high climate and health costs of burning FTB,this regulation should be revisited.Two initiatives are needed to enhance carbon credits for FTB utilization:(1)develop broad carbon crediting protocols for FTB,patterned on the Climate Action Rese
168、rves draft biochar protocol;and(2)develop a protocol to certify federal FTB as a waste product.Two initiatives could expand wood-based bioenergy demands:(1)revise EPA regulations to allow FTB from federal lands to qualify as renewable feedstocks;and(2)develop LCFS protocols specifically for the util
169、ization of FTB.8.3.Monetize Health BenefitsIn the longer term,valuing the avoided health costs of burning could incentivize more FTB utilization,since average health benefits could be substantially larger than carbon benefits.Unlike carbon,which is a commodity,health effects vary across space,and va
170、luation requires linking emissions sources to exposed populations,making exchange more complex but allowing for direct bargaining solutions.Additional research is needed to establish methods for defining benefits and mechanisms for exchange between landowners and affected communities.28 The latter m
171、ight include conservation finance approaches,including forest restoration bonds that link private capital with beneficiaries and forest landowners in complex landscapes.Communication between health care and land management sectors is needed to“socialize”the underlying concepts.The health care sector
172、 likely has the greatest incentive to pursue efforts to mitigate the high and growing costs associated with wildfire smoke.Supporting research,convening parties,and socializing novel exchanges are areas where action could be accelerated by foundation and NGO support.To advance an understanding of ho
173、w avoiding smoke from fuel treatments could reduce health costs:convene experts from the health care and natural resource sectors to assess the possibilities and mechanisms for mitigating health effects of fuel 27 See https:/www.epa.gov/fuels-registration-reporting-and-compliance-help/what-ma-terial
174、s-non-federal-forestlands-meet.28 California Senate Bill 945,the Wildfire Smoke and Health Outcomes Data Act,would fund the development of a“statewide integrated wildfire smoke and health data platform”to enhance understanding of the negative impacts of wildfire smoke on human health.Resources for t
175、he Future18treatments and identify knowledge deficits and barriers.9.ConclusionFuel treatments are land managers primary tool for addressing the wildfire crisis,and although Congress has provided substantial funding,overall benefits may be limited with current approaches.Utilizing FTB provides reven
176、ues that would expand the effectiveness of wildfire appropriations while greatly reducing the climate and health costs of wildfire solutions.But utilization is limited because wood product returns rarely exceed harvesting and hauling costs.Although land managers have some latitude to adjust costs,en
177、hancing treatment revenues,either by adjusting treatment designs or marketing the carbon or health benefits of utilization,could substantially expand economic feasibility.Given the advanced state of carbon offset markets and the strong demand for high-quality credits,valuing carbon benefits may have
178、 the greatest potential for expanding the scale of FTB utilization in the near term.A utilization strategy will become even more important for building effective fuel treatment programs as the surge in funding from recent legislation concludes.Can Market Incentives for Wood Products Help Scale Wildf
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211、ces for the Future2211.AppendixTable A.1 Conversion Factors and Calculations Used for Estimating Carbon and Health Variables Conversion FactorSourcea1 bone-dry ton biomass=2 green tons biomass0.50General knowledgeb44 tons CO2=12 tons C3.67General knowledgec1 ton=1.1 metric tons=1 Mg0.91General knowl
212、edged.5 tons C=1 bone-dry ton biomass0.50General knowledgee1020 bone-dry tons biomass/1 acre fuel treatment15.00Rummer et al.f.7 C storage/C harvest0.70Assumption g17100$/tCO2(market price)50.00Various sourcesh4 tons/thousand board feet timber4.00General knowledgei21.936 lbs PM=1 green ton biomass22
213、.00FERAT*emissions ratej13.523.6 lbs PM2.5=1 green ton biomass14.00FERAT*emissions ratek4059$/lb PM2.550.00Heo et al.2016 l0.20.5 PM2.5 delivery factor0.35Assumption EstimatesValueFormulamCO2 released from burning 1 gt biomass(tCO2e/gt)0.83a*b*c*dnCO2 released from 1 acre with burning(tCO2e/acre)25.
214、00m*e/aoCarbon value:avoided burning of 1 gt biomass($/gt)29.17m*f*gpCarbon value:avoided burning of 1 bdt biomass($/gt)58.33o/aqCarbon value:avoided burning of 1 acre FT($/acre)1136.36n*c*grPM2.5 value:avoided burning of 1 bdt biomass($/bdt)490.00j*k*l/asPM2.5 value:avoided burning of 1 acre FT($/acre)7350.00r*e*FERAT is the Fire and Environmental Research Applications Team at the USDA Forest Service,Pacific Northwest Research Station:https:/depts.washington.edu/nwfire/piles/support/pile_documentation.php Resources for the Future23