Can Market Incentives for Wood Products Help Scale Wildfire Risk Reductions in the West?

The 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 management 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 appropriations 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 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 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 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.
• 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 substantial— potentially much larger than carbon revenues in some places—but 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 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 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 programs 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 patterned on the Climate Action Reserve’s 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 feedstocks; 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 NGO’s can convene experts from the health care and natural resource sectors to develop ways to estimate and value benefits and explore crediting mechanisms.