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
Georgia, Virginia, Wisconsin 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.