Biomass power infrastructure is often seen as a clean, renewable energy source. However, there are concerns about its environmental impact and financial risks to investors. The extraction of biomass feedstock leads to deforestation, which reduces carbon sequestration and can have significant long-term effects on climate change.

Challenging assumptions

The report emphasises that biomass’ extraction and use can lead to higher greenhouse gas emissions due to deforestation and land use change. It also discusses how biomass subsidies create a false market, directing investment and policy focus away from other renewable energy alternatives. The assumption that biomass is a carbon-neutral fuel is incorrect and has led to the oversight of carbon emissions from burning wood. This is because wood is wrongly viewed as a renewable resource, with the emitted carbon assumed to be reabsorbed as trees regrow. However, burning wood releases more CO2 than coal, and it takes decades for forests to recapture this carbon.

Implications for investors

The authors argue that biomass can hinder investment portfolios’ alignment with the Paris Climate Agreement goals and calls for engagement with the sector to adopt and enforce very strict criteria.

Current biomass policies

The authors critique current policies, including forestry and energy sector policies, of the top 15 European banks and the largest investors. There is emphasis that most policies do not go far enough in limiting combustion emissions and protecting the carbon stocks of forests. It recommends stronger criteria and guidance for governance processes, quantitative information, and verification from independent auditors.

Recommendations for engagement

The authors recommend that investors and banks not provide financial support for new biomass power infrastructure and prioritise solar or wind energy projects. It further recommends greater engagement with existing biomass power operators and supply chains to adopt and enforce strict criteria.

Forestry sustainability criteria

The authors advise that biomass feedstocks be composed of processing residues such as sawmills and paper mills instead of residue from forest, processing, or agricultural sources. Companies that manage forests should limit their impact on the carbon stocks of forests and use residues sourced from companies with strict sustainability and carbon criteria.

Harvested biomass feedstocks

The authors recommend the quantification of the above-and below-ground carbon stocks related to biomass feedstocks and how to maintain and protect them. It highlights the importance of independent verification from auditors, minimising feedstocks from whole trees, and ensuring the demand for waste or residues does not artificially increase its production.

Quantify and minimise full life cycle GHG emissions

The authors recommend measuring and disclosing greenhouse gas (GHG) emissions for the biomass sector’s full life cycle, including long-term loss of carbon from forests, cultivation, processing, and transportation emissions. Auditing supply chains and maximising energy efficiency are also crucial.

Asset owners and managers should ask forestry and utility companies high-level questions to inform engagement strategies and identify disclosure gaps. The report argues that in the absence of quantitative assessments, divestment is a necessary escalation strategy.

This report advocates for greater scrutiny of the risks and environmental impacts of biomass power infrastructure. The authors recommend stricter governance guidelines and independent auditors to have transparent disclosure and implement feedback mechanisms.