Implications of U.S. Policies on Biomass Energy

U.S. policy actions, both enacted and under consideration, would have substantial implications for the commercialization of biomass energy. A tax incentive for the production of alcohol fuel from renewable resources has been in place since 1978. The incentive is 0.54c per gallon, and a current production of 1.1 billion gallons of ethanol annually provides revenues to the ethanol industry ofapproximately $550 million each year. As part of the Clean Air Act amendments of 1990, the nation's nine smoggiest cities are required to use reformulated gasoline (RFG) year-round to control air pollution. Final rules were released by the U.S. Environmental Protection Agency in December 1993; these included a proposed rule to establish a renewable oxygenate standard. The standard, if approved,would require that 30% of the oxygen added to RFG would have to be made from renewable feedstocks such as corn or biomass. This proposed standard could increase the demand for renewable fuels, such as ethanol, by as much as 60%. The Energy Policy Act of 1992 provided a renewable energy production incentive for electric power. Incentive payments of 1.5c/kWh will be made to qualified renewableenergy facilities, including electric power generated by biomass. The U.S. government is currently preparing a Global Change Action Plan, which may be funded as early as 1995. The initial plan contained a program in the deployment of biomass electric power, and the program is being expanded to include biofuels for transportation. The combination of these policies can have important implicationsfor biomass energy in the United States. The projected level of biomass energy use and the associated impact on the increase in renewable electricity, reduction of oil imports, increase in gross domestic product and jobs, and reduction in carbon dioxide are described.