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Bioenergy and the Feed-in-Tariff in Japan: Creating Demand for Domestic Wood

9/18/2020

 
The Japanese Forestry Agency of the Ministry of Agriculture, Forestry and Fisheries (MAFF) has implemented a series of policies designed to increase the use of domestic wood. Over the past decade, these policies and programs promoted the “cascading-use of forest resources” to more fully utilize domestic wood resources, including low-grade woody biomass for biofuel. Thus, these programs expand the overall demand for domestic wood products and provide more economic opportunities for the domestic forestry and forest products industries while helping to develop a globally competitive forestry and forest products sector through economies of scope and scale.

The Ministry of Economy, Trade and Industry (METI) oversees and regularly reviews feed-in tariff (FIT) programs. After the Fukushima Dai’ichi nuclear power disaster caused by the Great East Japan earthquake, METI in July 2012 started providing generous tariffs to support the expansion of biomass power generation. The schedule of tariffs was applied over a 20-year time frame and are guaranteed at a set purchase price following METI’s approval of a biomass power generator. The new FIT program initially set a purchase price of 40 yen/kWh for biomass power plants smaller than 2,000 kW and 32 yen/kWh for power plants larger than 2,000 kW, but only if they use domestically sourced woody biomass derived from forest thinning operations. For bioenergy plants using imported (sustainably sourced) woody biomass, the FIT program initially set a purchase price of 24 yen/kWh. The generous FIT tariffs have resulted in the rapid increase in the number and capacity of biomass power generators all over Japan. However, in order to reduce the energy burden in Japan, METI has begun to reduce the tariffs for newly joining biomass power generators.

Biomass generating facilities range from large-scale coal-biomass co-firing plants (mainly using imported wood pellets), medium-sized biomass power plants (using domestic wood, imported palm kernel shell (PKS) and wood pellets), biomass facilities co-located with wood manufacturing companies (fueled by wood waste and sawdust), to small-scale heat/electricity co-generators that utilize a wide variety of fuels. The supply of domestic unutilized wood or imported ordinary wood (wood pellets, wood chip, PKS and other agricultural residues) is currently sufficient to meet the demand of this rapidly growing biomass sector.  As of December 2019, Japan has approved proposals for biomass power plants with a pooled power generation capacity of 8.5 GW, while the operational capacity of qualifying power plants stood at 2.1 GW.  The lack of supply of biomass for the approved, but not yet operating power plants, is the key limiting factor in Japan’s efforts to increase its use of biomass for energy generation.

In order to increase the demand for domestic wood and help revitalize rural mountain communities, MAFF and METI have developed and implemented a number of strategies designed to subsidize the expansion of woody biomass energy. Developing this new industry is currently an on-going activity and it is likely that success in this area will greatly increase the demand for woody biomass, exceeding the domestic supply of woody biomass (including forest thinnings) and thereby providing new opportunities for foreign wood suppliers. Exporting wood chips, white pellets and torrefied (black) pellets to Japan represents a strong new market for the U.S. forest products industry. Given the growing demand for woody biomass in Japan (as well as CLT panels which can be manufactured using lower quality softwood lumber), there also exists a possibility to expand exports of lower quality logs and lumber from the US.


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Consumer Willingness to Pay for Renewable Building Materials: An Experimental Choice Analysis and Survey

1/1/2005

 

Authors: ​Alicia Robbins and John Perez-Garcia

​Executive Summary
In recent years, growing consumer awareness of the environmental effects of the products they purchase has resulted in a demonstrated change in buying behavior. The tremendous rise of the organic food industry illustrates the desire and willingness by consumers to pay a price premium for food products that meet certain environmental standards. The emergence of forest eco-certification standards demonstrates that greater market share will go to companies that can demonstrate higher levels of environmental sustainability. Other developments, like carbon-trading programs and green energy programs further demonstrate this shift.  Over the past decade, greater attention has also been paid to the environmental effects of building products industries.
Understanding public attitudes toward building materials and their related environmental performance is important as it can provide consumers with the product attribute information they seek.  Product attribute information has important policy implications for programs that may help achieve certain environmental standards.  This study uses a choice-based, stated preference approach and relies on basic consumer demand theory.  Using a mail survey, respondents were asked to assess a set of goods with different levels of emissions and price attributes; they were then asked to choose their most preferred alternative.  Various price and environmental levels were included in the choice sets.  Surveys were sent to two different populations.  The first sample came from the general population; the second came specifically from real estate agents in the western states.
The results of the general population survey demonstrated that respondents were most sensitive to reductions in greenhouse gas emissions and were willing to pay for up to eleven tons of reduction associated with building a new house.  Considering a typical house produces twenty tons of such gases during the construction process, this assessment is significant. They were also willing to pay for reductions in air pollution and solid wastes, although less than they were for reductions in greenhouse gas emissions. The water pollution variable was not significant enough in this study to estimate a willingness to pay.  The responses from real estate agents appear to be much more willing to pay for reductions in solid waste emissions than for reductions in the other environmental attributes.
Results: Total WTP and Amount Reductions by Pollution Type for Each Survey
Environmental Variable Total WTP and Amount of Reduction
Air Pollution
Solid Waste Emissions
Greenhouse Gas Emissions

General Mail Survey Respondents
$106.25 for up to 18%
$95.50 for up to 18%
$168.09 for up to 11 tons

Real Estate Agents
$110.90 for up to 21%
$189.16 for up to 17%
$62.21 for up to 13 tons

NB: each WTP is estimated individually while holding the other elements constant
The survey results suggest that wood-based framing construction (instead of steel- or concrete- based framing) can better achieve certain environmental standards since, particularly in the case of greenhouse gas emissions, wood framing has lower green house gas emissions than either steel- or concrete-framed houses. That is to say that the reduction in the number of tons a respondent was willing to pay for always exceeds the inherent reductions when these two framing systems were compared.  For example, in Minneapolis, using wood instead of concrete results in a 9.8-ton reduction in greenhouse gas emissions; in Atlanta, using wood instead of concrete results in a 6.6-ton reduction[1].
Comparison Between Reductions in Different Building Materials and WTP
Environmental attribute
Minneapolis
Steel vs. wood
Atlanta
Concrete vs. wood
Maximum amount respondents WTP

Greenhouse gas emissions
9.8 tons
6.6 tons
11 tons

Air emissions
14%
23%
18%

Solid waste emissions
-0.9%
51%
18%

 
This survey has useful implications for both market and policy applications.  For marketing purposes, the results suggest that those building materials producers seeking to increase their market share can point to better environmental performance associated with those materials that produce lower emissions, particularly greenhouse gases.  For policy purposes, programs that aim to improve environmental performance standards might want to design a label that indicates the lower emissions standards in building material products.  Perhaps a label similar to that of the “green star” by the EPA might be appropriate.  Such a label may be used to educate homebuyers on the environmental performances associated with the building materials used in the construction of the house.  Research into effective marketing tools should be conducted to provide consumers with the environmental attribute information to enable them to make better-informed decisions about the building products they purchase.
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 [1] Lippke, B., J. Wilson, J. Perez-Garcia, J. Bowyer, J. Meil, 2004, CORRIM: Life Cycle Environmental Performance of Renewable Building Materials, Forest Products Journal, 54(6): 8-19.
 
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