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Oil Refinery

Residential Appliance Incentives

B. Fuel Incentive Program

Fuel incentives come in two general forms: tax incentives or affordable wood harvesting permits. Tax incentives are generally offered for “biomass fuel.” Biomass fuels often refers to cordwood or wood pellets but can also apply to energy crops as well as qualifying residues including sawdust and wood chips. These incentives come in the form of tax exemptions or credits and can be applied at the production, sale or use of fuels. Although these fuel incentives are not strong enough to motivate the purchase of biomass stoves, they do serve as a signal of governmental support for this technology.

Many states including Connecticut, New Jersey, Wisconsin and Michigan have state forest firewood programs that allow residents to apply to harvest a designated amount of firewood each year. The number of applications is often limited and distributed by lottery or on a first come first serve basis. These programs provide a source of fuel for low income families while maintaining forest health through thinning and removal of debris. Most national forests allow people to cut dead or downed wood for their personal use after obtaining a permit, typically about $10-30 a cord for two to six cords, although prices will change yearly depending on demand. Individuals should contact their local forest supervisor’s office for information available on programs and how to apply.

The following states have notable cut-your-own programs in some or all of the state owned forest lands:

Table 11: State Sponsored Self Harvest Firewood Programs

Wood harvested from state and national forests is an often-overlooked component of the wood fuel market. In 1982 the Forest Service issued 655,000 permits for the removal of firewood from national forests. Some officials estimated that over 4 million cords were cut.1

Policy Considerations: Pellets
Missouri offers an energy production tax credit of $5 per ton (or dry cord) of materials to any facility processing forestry residues into fuel within the state, with credits being carried over year to year. 2 This type of incentive can help buoy local industry and create jobs while ensuring a strong local fuel market. A bill has been proposed in the West Virginia legislature providing a one-time $300 tax credit for the purchase of wood pellets. Although a positive development in a state that often lags on biomass friendly policies, its effectiveness is dubious due to the short-term benefits it would have for consumers, especially those of a lower-income. A simple policy consideration is to apply sales tax exemptions for the purchase of pellet fuels. Furthermore, current sales tax exemptions for heating fuels should be amended to include pellet fuels.

Currently there are no industry wide, third-party enforced pellet standards, which has resulted in the creation of some very dirty burning pellets that are not only detrimental to air quality, but will damage pellet stoves and boilers. The Pellet Fuels Institute, a “North American trade association promoting energy independence through the efficient use of clean, renewable, densified biomass fuel,” 3 passed voluntary industry standards in 2008 to mandate stricter codes concerning pellet production. These standards include third-party monthly inspections and an established criterion for a variety of pellet properties such as ash content. As the pellet industry moves toward a more robust certification program, incentive schemes should only apply towards certified pellets to help guide consumers to cleaner burning fuel that will not damage the stove, or create undue levels of emissions.

Policy Considerations: Cord Wood
GeorgiaVirginiaWisconsin and Maryland all offer 100% sales tax exemptions on heating fuel- although the specific qualifiers for each incentive program differ state by state. Georgia has the widest definition of qualifying fuels, including agricultural and construction waste on top of more common biomass fuels used to generate steam or electricity. 4 Wisconsin’s exemption, dating back to 1979, has exempted cordwood from 100% of the state’s Sale and Use Tax and was amended in 2007 to expand the definition of biomass. 5 Maryland provides a similar tax exemption for refuse-derived fuel (forestry residue) and both residential and commercial heating applications apply.6

Oregon, a national leader on biomass, offers a unique tax credit providing $10 per bone-dry ton or cord of fuel burned (not purchased) meaning that even wood harvested by individuals and used for heating can qualify. Credits are limited to a maximum of $200 per taxpayer per year7. This program is works well in terms of supporting self-sufficient Oregonians but could be expanded so as to increase its economic benefits.

The self-harvest programs on government lands provide options for low-income consumers who may not otherwise have access to affordable wood. These programs are the only source of heating fuel for some families. An additional benefit of these programs is that they provide a valuable tree thinning service to the National Forestry Department.

1 U.S. Congress, Office of Technology Assessment. Wood Use: U.S. Competitiveness and technology, Vol. 1  Washington, D. C. August 1983. Pg 160
2 DSIRE. Missouri Wood Energy Production Credit. Last updated October, 2010 < incentive.cfm?Incentive_Code=MO02F&re=1&ee=1>
3 Pellet Fuels Institute. Accessed May 6, 2011. <>
4 DSIRE. Georgia: Biomass Sales and Use Tax Exemption. Last updated August 2010 <>
5 DSIRE. Wisconsin: Renewable Energy Sales Tax Exemptions. Last updated September 2010 <>
6 DSIRE. Maryland: Wood Heating Fuel Exception. Last updated October 2010 <>
7 Oregon Department of Energy. Premium Efficiency Wood and Pellet Stoves. Last updated January 2011 <>

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