BIOCHAR CARBON CREDIT

MARKET ANALYSIS
Examining the potential for coupled biochar and
carbon credit production from wildfire fuel reduction
projects in the Western U.S.
 Authors & Acknowledgements

Blue Forest Conservation

University of California, Berkeley
Pacific Biochar
Climate Action Reserve
2022

Micah Elias, UC Berkeley and Blue Forest Conservation

Josiah Hunt, Pacific Biochar
Jon Remucal, Climate Action Reserve
Phil Saksa, Blue Forest Conservation
Daniel L. Sanchez, UC Berkeley

Suggested reference: Elias, M., Hunt, J., Remucal, J., Saksa, P., Sanchez, D. L. 2022. Biochar Carbon Credit Market
Analysis: Examining the potential for coupled biochar and carbon credit production from wildfire fuel reduction
projects in the Western U.S. Blue Forest Conservation, 44 pp.

This report was informed by conversations with numerous practitioners, experts, researchers, and business
representatives working to promote high quality carbon markets, biochar production, and forest management.
We are grateful for their time and generosity in sharing their expertise with us. We are especially grateful to
Andrew Friedenthal at CharTech Solutions for his insight on biochar production as well as the many carbon
market consultants and brokers who took time to share their insight into market trends with us. All responsibility
for the views expressed here, and any errors, remain with the authors.

This work was supported in part by the Doris Duke Charitable Foundation and the U.S. Forest Service Wood
Innovation Program. The Climate Action Reserve is an equal opportunity provider.

Cover Photo: Belted trailer unloads biochar at West Marin Compost, Nicasio, CA. (Josiah Hunt, Pacific Biochar)
 Contents

Executive Summary 1
1. Introduction 3
2. Annual Woody Biomass Supply and 5
Potential for Coupled Biochar and
Carbon Credit Production
3. Biochar and Carbon Credit Production 9
Capacity
4. Carbon Credit Demand Potential 13
5. Biochar Agricultural Application 15
Financial Impact Analysis
a. Market Analysis Implications: Farmer 19
Adoption of Biochar as a Soil Additive
6. Biochar Production Investment 20
Potential and Market Scenario
Analyses
a. Market Analysis I: Biochar and Carbon 22
Market Price Effect on Internal Rate of
Return
b. Market Analysis II: Biochar and Feedstock 25
Cost Effect on Internal Rate of Return
c. Sensitivity Analysis 28
d. Investment Potential Implications: 29
Connecting Biochar, Carbon Credits, and
Feedstock Costs
7. Level of Investment Needed 30
8. Conclusions and Implications 33
9. Methods 36
References 41
 Executive Summary

This report evaluates the potential to utilize low-value or non-merchantable woody

biomass generated from forest thinning and restoration projects to jointly produce
biochar products and carbon credits. While biochar can be produced from many
feedstocks, biochar produced from woody biomass has the potential to contribute to
much-needed forest restoration throughout the Western U.S. while providing a source of
carbon credits perceived as high quality by carbon offset purchasers.

Biochar has emerged as a climate beneficial and productive use of the enormous
amounts of woody biomass generated during forest restoration and fuel thinning
projects throughout the Western U.S. Throughout the Western U.S., between 4 and 18
million tonnes of non-merchantable woody biomass are produced from forest restoration
projects annually. That biomass could create between 1 and 4 million tonnes of biochar
and 2 to 11 million carbon credits. These numbers may increase up to 25 times if various
state and federal forest management goals are met.

Co-production of biochar and carbon credits can provide high quality carbon offsets and
large quantities of biochar through several production strategies. Current biochar
production in California is less than 10,000 tonnes per year and less than 20,000 tonnes
per year throughout the West, although specific numbers are challenging given the lack of
transparency in the market. Roughly 42,000 tonnes of biochar could be produced with
modest upgrades to a portion of the biopower facilities in California and 69,000 tonnes of
biochar with upgrades throughout the West. Approximately 210,000 tonnes of biochar
could be produced with more intensive upgrades to the California biopower facilities and
340,000 tonnes with upgrades to facilities throughout the West. This corresponds to
potential carbon credit generation of up to 570,000 credits per year in California and
930,000 credits annually throughout the West.

Carbon credit prices are critical to sustained industry growth. The hypothesized demand
from market experts for carbon credits from biochar is high and not a limiting factor in the
near term. Voluntary carbon offsets will sustain current prices around $100 as long as
biochar credits remain niche and marketed at buyers concerned with durability and
quality. However, for biochar credits to be transacted in volumes at a scale in the hundreds
of thousands of tonnes per year, biochar carbon offset prices may need to drop lower than
they are today.

Blue Forest 1
 Agricultural soil amendments provide potential for biochar end use markets. Biochar
applications can provide economic returns in as little as two harvests. Throughout the
U.S., the potential market for biochar soil applications is over three billion tonnes. We
conducted a discounted cost flow analysis to investigate the potential for biochar
applications to improve economic returns in agriculture. Assuming a 10% yield increase,
we find that high value crops benefit greatly from biochar applications at $240 per tonne
biochar and with four tonnes applied per acre every five years. Pistachios in particular
stand out, with a positive return after the second harvest and an additional value of $239
added per tonne of biochar applied.

Our examination of the financial viability of four biochar production systems finds that
all production systems have positive Internal Rates of Return and Net Present Values in
certain scenarios. We model the profitability of four different biochar production facilities
with a discounted cash flow analysis under the following market scenarios: a 25MW
biopower facility with both light and heavy upgrades, a mobile biochar unit, and dedicated
centralized biochar production. The market scenarios modeled include the effects of
biochar pricing between $100-250 per ton, carbon pricing between $0-100 per tonne
CO2, and feedstock costs between $0-120 per tonne. The light upgrade of the biopower
facilities has the highest returns, with Internal Rates of Return generally between 10-
30%, although each production system had positive returns in certain scenarios.
Production types with lower returns may still provide opportunities for landowners to
defray costs associated with dealing with non-merchantable biomass, potentially cutting
those costs in half.

$100 million in investments could generate up to four million carbon credits over 10
years and investments between $20 - 50 billion could utilize all of the non-merchantable
forest biomass generated from forest restoration, roughly 100 million tonnes annually
throughout the West assuming an increased forest management scenario. The various
production systems examined in this report may be better suited to different types of
investment or financing (equity, debt, or public subsidies), but the total investment
potential is large.

Large scale utilization of non-merchantable forest biomass as a feedstock for biochar

production will be made possible by transparent and consistent feedstock supply chains
coupled with 1) high carbon market prices, 2) a subsidy or other price mechanism to
lower feedstock costs, or 3) economies of scale. Increasing attention, investment, and
collaboration in the biochar space, alongside the immediate need for high quality carbon
credits, may help overcome historical barriers to the biochar industry.

Blue Forest 2
 1. Introduction

Biochar can be made from a range of biomass materials - such as woody biomass from
forest restoration projects, food and yard waste, and crop residues - and has promising
applications in agriculture, forestry, and other industries. This report explores the
potential for generating carbon credits alongside biochar particularly from woody
biomass generated during forest restoration and thinning projects throughout the
Western United States, with a particular focus on California. The biochar market
throughout the United States has recently begun to grow, but sales are still limited
primarily by lack of demand, access to capital, and other market barriers (Thengane,
Kung, Hunt, et al. 2021). However, biochar has gained increased attention in the
academic literature in recent years for its potential to retain soil moisture and nutrients
while improving soil quality and storing carbon (H. Schmidt et al. 2021). Coupling the
production of biochar with carbon offset credit generation provides an opportunity to
foster an industry with potential for local ecological impacts and global climate benefits,
while improving profitability of biochar production. To date, the large majority of biochar
producers have utilized either agricultural waste or sawmill residues to produce biochar
given the relatively cheaper feedstock prices and lack of supply chain and sourcing
challenges.

In California, 90% of the largest and most destructive fires in recorded history have
occurred since 2010 (CalFire 2021), with similar trends throughout the Western U.S. The
increasing severity of wildfires throughout the state has been caused by a combination of
management decisions exacerbated by climate change. To address this risk while
restoring ecosystem health to forests throughout the state, enormous amounts of woody
biomass need to be removed (Collins, Everett, and Stephens 2011; Lydersen and Collins
2018; McIntyre et al. 2015). The State of California and the U.S. Department of
Agriculture, Forest Service have goals to collectively reduce fire risk on one million acres
of forest land per year, representing roughly a fourfold increase in acres treated (USDA
Forest Service Pacific Southwest Region 2020). Biomass generated from forest treatment
is often non-merchantable and is generally piled and burned, with little going to
productive uses or generating revenue. Pile burning biomass not only releases stored
carbon but represents high costs to land managers. The anticipated increase in treatment
efforts creates an opportunity for innovative wood products such as biochar.

Blue Forest 3
Although biochar production can utilize a range of different feedstocks, the increase in
forest management throughout the state offers a unique opportunity to produce biochar
and carbon credits while providing a climate beneficial use for the flow of biomass from
forest restoration projects. With the goal of understanding the potential for coupling
forest restoration with biochar and carbon credit production, we investigate several
questions:

1. What is the potential supply of woody biomass from forest restoration projects
throughout California and the Western United States?
2. What is the current generation capacity for coupled biochar and carbon offset
production in California? What is the potential capacity if biopower facilities
throughout the state were upgraded to produce biochar? How many carbon credits
could be generated given different production scenarios?
3. What is the potential demand for carbon credits coupled with biochar production?
4. What is the potential demand and financial impact of biochar used as an
agricultural soil amendment?
5. What is the financial viability of different biochar production systems? How do
fluctuations in carbon credit price, biochar price, and feedstock costs affect
viability?
6. What is the potential for investment in biochar production?

The findings from this report can be used as a starting place to guide investment in the
biochar industry while providing an understanding of the feasibility of using woody
biomass from forest restoration projects to create biochar and carbon credits.
 2. Annual Woody Biomass Supply
and Potential for Coupled Biochar
and Carbon Credit Production
Large volumes of non-merchantable woody biomass are typically left in the forest after
restoration and fuel thinning projects, with much of that material being piled and burned,
releasing the stored carbon, and presenting higher management costs to land owners
(Springsteen et al. 2015). As the pace and scale of forest restoration increase to meet
state and federal goals, the potential supply of this biomass will greatly increase. The
amount of biomass remaining in the forest after restoration will vary by site given a range
of factors, including local wood product markets, diameter of trees removed, and
management objectives. With these shifting dynamics in mind, we estimated both the
current amount of biomass left in the forest in the form of slash as a byproduct of
restoration and the future amount of slash given expected increases in forest restoration.
We further translated these forest slash estimates into the potential amount of biochar
and carbon credits which can be made from this biomass without considering the
limitation of current biochar production capacity (see Table 1).

Blue Forest 5
 We model the current technical supply of non-merchantable forest biomass based on
several key factors including 1) the number of acres of forest land treated, 2) the amount
of biomass harvested during fuel thinning projects, 3) the proportion of the harvest which
is currently left in the forest as slash, and 4) the current and increased capacity of the
wood products infrastructure in California and the West. A key assumption in the supply
of non-merchantable forest biomass moving forward is the capacity of sawmills and other
traditional wood products infrastructure. Regardless, even with a large increase in the
capacity of the state’s wood product infrastructure (as was assumed in the low estimates
for the increased forest management scenarios), the technical supply of biomass will not
be a limiting factor to coupled biochar and carbon credit production in the near term. For
example, potential biomass supply is multiple times the feedstock necessary to power
70% of biopower capacity in the West, as outlined in the next section.

However, economical access to biomass from forest restoration is highly variable

(Springsteen et al. 2015). The fundamental limitations to forest slash supply appear to be
the feedstock price biochar producers are able to pay as well as lack of transparent
woody biomass supply chains. In other words, understanding when, where, and how much
woody biomass will be generated from forest restoration and at what price. Transparent
supply chains must be created in close partnership with large scale land owners, such as
the U.S. Forest Service and industrial timber companies. Feedstock price is highly
dependent on the type of work being completed and the transportation distance and is
another key aspect of transparent and well functioning supply chains. The impact of
feedstock price on financial viability of biochar production is examined further in the
market scenario analysis. The maximum amount of biochar and corresponding carbon
credits that could be generated (Table 1) importantly do not consider economic
limitations or viability, but simply characterize the maximum technical potential.

Seven different biochar materials displayed with corn seed for size reference. (Josiah Hunt, Pacific Biochar)
Current potential biomass supply in California is between 1 and 5 million tonnes per year,
while future supply could reach as high as 22 million tonnes per year if state goals are
achieved. This biomass could be converted to between 250,000 tonnes and 1,300,000
tonnes of biochar currently and up to 5.5 million tonnes if state goals are achieved. The
potential for carbon credit production is currently between 500,000 and 3,500,000 and
could increase to 15,000,000 yearly with state restoration goals.

Throughout the western United States, roughly 4 and 18 million tonnes of slash are
generated per year, while up to 102 million tonnes could be generated in an increased
management scenario of roughly four fold - which is in line with many state and federal
policies. This translates to a potential biochar production between one and four million
tonnes currently and up to 26 million tonnes with a four fold increase in restoration. The
potential for carbon credit production is currently between two and 11 million credits
and could increase to almost 70 million with state restoration goals.

THE POTENTIAL FOR CARBON CREDIT PRODUCTION IS

CURRENTLY BETWEEN 2 AND 11 MILLION CREDITS AND
COULD INCREASE TO ALMOST 70 MILLION WITH STATE
RESTORATION GOALS.
 Biochar-amended compost. (Douglas Gayeton)

At a CA biomass power plant modified for biochar production, a front end

loader moves forest biomass to the feed rakes. (Josiah Hunt, Pacific Biochar)
 3. Biochar and Carbon Credit
Production Capacity

Current biochar production in California is limited to a small number of companies and

production is currently below 10,000 tonnes, although accurate numbers are challenging
to estimate given the lack of market transparency (Thengane, Kung, Hunt, et al. 2021).
Incremental increases in production within the last decade, coupled with the potential for
additional income from carbon credits, has attracted both startups as well as investors
into the space. Currently, there are two primary methods for biochar production: stand
alone biochar production at centralized or mobile units, or coupled biochar and biopower
production. We identify the potential for biochar and carbon credit generation in
California and throughout the Western U.S. based on surveys of biochar producers
(Groot et al. 2018) along with hypothetical industry capacity increases and upgrades to a
portion of biopower facilities. In California, there are 26 biopower facilities with a total
551 MW capacity (McIver 2015) and throughout the West there are 42 biopower
facilities with a total 893 MW capacity (“U.S. Biomass Power Plants” 2022).

Blue Forest 9
 Stand alone biochar production capacity is based on the market survey results (Groot et
al. 2018) which included 46 biochar producers throughout the U.S. and 17 in the Western
U.S. specifically. The stand alone industry capacity increases of 50% and 100% assume a
proportional increase in industry capacity based on market survey results (Groot et al.
2018). In our biopower light and biopower heavy upgrade scenarios, we incorporate
modifications to 70% of biopower capacity, which is believed to be the rough proportion
of facilities which are well suited to an upgrade (Hunt, Personal Communication 2021).
We further assumed that 2% of feedstock total mass would be captured as biochar in the
light upgrade scenario and that 10% would be captured in the heavy upgrade scenario
(Friedenthal 2022; Hunt Personal Communication 2021; Hunt and Miles 2020). The
potential carbon credit generation incorporates a range of carbon benefit estimations
from the IPCC (2019), Carbonfuture (H.P. Schmidt, Kammann, and Hagemann 2021), and
Puro (Schimmelpfennig and Glaser 2022) ranging between 1.9 and 2.7 tonnes of CO2 per
tonne of biochar produced.

Historically, market challenges such as the lack of demand and high production costs,
were noted as limiting biochar production (Thengane, Kung, Hunt, et al. 2021). Niche
demand in horticultural applications, biofiltration, and high value agricultural crops has
driven demand to date, but the scale of that demand has inhibited industry scale. Other
challenges to scale have been noted, such as access to capital, customer perception, lack
of market research or promotion, and inconsistent demand. These challenges have
limited the biochar market to roughly $100 million per year, although that number is
projected to increase in coming years at a compounding rate of 17% (“U.S. Biochar
Market Size & Share Report” 2021) which is in line with our modeled 100% industry
capacity increase (Table 2) in roughly five years. Linking biochar production with non-
merchantable biomass generated during forest restoration will require overcoming these
challenges while also creating transparent feedstock supply chains.

Given that most of the potential application in the state is in commercial agriculture,
commercial landscaping, home gardening or horticulture, and soil remediation,
demonstrating impact in these sectors is key. In general, soil based applications will likely
be the biggest market for biochar, especially in high value cropping systems given current
prices for biochar (see Section 5).

Blue Forest 10
 Biochar production costs are currently between $200 and $1000 per ton, averaging
around $400 for the majority of producers (Li et al. 2017; Sahoo et al. 2019), although
these numbers are highly variable and are quickly dropping. Average market prices in
California vary between $600 and $1300 per tonne of biochar for small quantities (Young
and Lawrence 2019) and have decreased significantly from over $2500 per tonne in 2013
(International Biochar Initiative 2015). Current bulk quantity prices are near $200 or
lower per tonne, and large-scale market demand would likely support wholesale prices in
the range of $80 to $150 per tonne (Hunt, Personal Communication 2021).

Given the increased attention on biochar as a climate solution and the potential for the
industry to rapidly scale given the new carbon credit income stream, a new set of
challenges arise. Most notable is the need to ensure market demand, or at the very least a
viable end use, for biochar. Soil applications in agriculture have been shown to have
positive impacts on crop yield (Ye et al. 2020; H. Schmidt et al. 2021) but nevertheless,
farmer adoption has been low. Adoption rates may increase as biochar is increasingly
viewed as a durable climate change mitigation strategy and carbon credits lower the price
of biochar. Another critical challenge to scaling the biochar industry in conjunction with
the forest restoration needs throughout the Western U.S. is understanding feedstock
supply chains. Given current processes for permitting, planning, and completing forest
restoration work, understanding the timing, quantity, and location of forest biomass
generated is extremely difficult. Overcoming these challenges will require working with
early adopters who are willing to demonstrate the agricultural yield benefits of biochar as
a soil amendment, as well as with public and private landowners to better predict the
generation of forest biomass from forest restoration projects and provide greater supply
consistency.

OVERCOMING THESE CHALLENGES WILL REQUIRE

WORKING WITH EARLY ADOPTERS WHO ARE WILLING TO

DEMONSTRATE THE AGRICULTURAL YIELD BENEFITS OF

BIOCHAR AS A SOIL AMENDMENT, AS WELL AS WITH

PUBLIC AND PRIVATE LANDOWNERS TO BETTER PREDICT

THE GENERATION OF FOREST BIOMASS FROM FOREST

RESTORATION PROJECTS AND PROVIDE GREATER SUPPLY

CONSISTENCY.

Blue Forest 11
4
At a CA biomass power plant modified for biochar production, a trailer is loaded with
biochar that has been moistened for dust control and safety. (Josiah Hunt, Pacific Biochar)
 4. Carbon Credit Demand Potential

In order to identify potential demand for voluntary carbon credits produced alongside
biochar, we spoke with a range of carbon market experts (consultants, project
developers, and offset brokers) representing five different organizations to understand
how they perceive demand. Biochar credits are generally characterized as being high
quality - each credit has considerable co-benefits, there is a high level of certainty in the
carbon benefits, and the carbon benefits have medium durability, roughly between 70
and 90% remaining carbon over 100 years. To date, it appears that biochar credits have
had effective environmental safeguards to ensure that biochar production does not have
unintended negative environmental consequences. Ensuring that biochar production
continues to use ecologically sound feedstocks, production processes with minimal
emissions and other environmental impacts, and end uses with demonstrable benefits will
be critical to the scale and longevity of the industry. In general, the market is increasingly
demanding credits with clearly demonstrable durability over longer time frames, credits
that are associated with social and environmental co-benefits, and those with high
certainty regarding carbon benefits. Although price is still a critical factor in voluntary
carbon credit purchasing decisions, this increasing attention on the need for high quality
carbon offsets have begun to help bolster the biochar industry.

BIOCHAR CREDITS ARE IN VERY HIGH DEMAND,

COMMANDING PRICES BETWEEN $90 AND $600 PER
TONNE, WITH MOST PURCHASES BETWEEN $95 AND $125

Biochar’s categorization as a carbon dioxide removal credit, as opposed to an emission

reduction, also attracts a certain level of attention in line with the recent trend in the
market. Biochar credits are in very high demand, commanding prices between $90 and
$600 per tonne, with most purchases between $95 and $125 (“Nasdaq Carbon Removal
Marketplace and Technologies” 2022), and are purchased essentially the moment they
reach the market. Buyers who require a secondary due diligence before purchasing
carbon offsets - in other words, buyers who hire consultants to authenticate the veracity
of the carbon benefits claims of the offsets they are purchasing - view biochar

Blue Forest 13
as a stepping stone between the current carbon offsets on the market and project types
such as direct air capture which have the highest level of certainty about the amount of
carbon removed. One consultant who specializes in guiding clients towards the highest
impact voluntary carbon credits, generally focusing on less than 10% of the total carbon
market, sees the demand for $100 biochar generated carbon credits in the tens of
thousands annually in the near term. Nasdaq has begun tracking not simply carbon credit
pricing, but specifically carbon dioxide removal (CDR) pricing due to the manner in which
the market differentiates biochar and other CDR credits.

Despite the high demand amongst a small fraction of quality-conscious buyers, the
majority of voluntary carbon offset purchasers are first and foremost still focused on the
price of carbon credits, utilizing a portfolio approach to both bring down total costs and
spread investment over a range of carbon projects. Given that most offset purchasers are
simply looking for the approval of a certified registry to feel comfortable purchasing
credits, if biochar credits start to scale to transactions in the hundreds of thousands of
tonnes, prices near $100 may not be sustainable despite the perceived quality of such
credits. One broker, who has not transacted any biochar credits given the niche market
characteristics and lack of substantial supply on the market, said that biochar prices at
scale would need to drop below $25 to $30 per ton, in the range of soil carbon and
mangrove offsets, for anything but niche purchases under 1,000 tonnes to take place. For
most buyers, price is still the most important factor in purchasing decisions and although
many anticipate broader carbon market prices to increase, it is challenging to know over
what time period and to what extent prices will increase.
 5. Biochar Agricultural Application
Financial Impact Analysis

Coupled with the need to understand the market demand for carbon credits from biochar
production is the need to understand potential options for biochar application and the
financial impact of its application. Although biochar application is important to help offset
the cost of production in addition to carbon credits to provide revenue to biochar
producers, a carbon credit can also only be issued once biochar is safely sequestered in
the soil in all the biochar carbon accounting methodologies currently in use, which relies
on an end user applying the biochar. End use markets which are able to purchase and use
biochar profitably are key in modeling biochar markets.

To better understand viable prices for large volume biochar sales, we analyze the
profitability of biochar applications in a few select crops with enough acreage to utilize
meaningful quantities of biochar. In this analysis, we assume that if a biochar purchase
can produce returns within several harvests, it may have a viable path to market
adoption. To determine the near term and long term value of biochar to farmers, we use
the Net Present Value (NPV) to estimate the financial impact of biochar application. NPV
essentially measures the total growth of an investment. A 20 year time frame is used to
harmonize with the assumptions for biochar production financial viability (see Section 6).
We couple this economic analysis with a top end estimate of the total addressable
market, based on the acreage in production of each crop in California. If this analysis were
to be scaled to other crops or larger geographies, these market estimates would grow
significantly.

In our assumed market scenario (see Table 3) biochar applications in pistachio orchards
have the greatest financial impact, with a yearly additional value of $239 per tonne
biochar applied and a return on investment (a positive NPV) after the second year
harvest. Biochar applications have a similar impact on wine grapes and almonds, with a
$163 and $125 annual impact per tonne of biochar applied and a return on investment in
two years. The impact on walnuts is still very high, with a $88 annual impact per tonne
and a two year return on investment, but the impact is less substantial than pistachios,
wine grapes, and almonds. The lowest impact is on wheat, with a per tonne impact of only
$12. Each of these crops represents an enormous potential market, between 4 and 15
million tonnes for each crop and collectively a market over 30 million tonnes with
applications every five years.

Blue Forest 15
Blue Forest 16
 Our economic impact analysis assumes that four tonnes of biochar are applied per acre
(Ye et al. 2020; H. Schmidt et al. 2021) with applications in the first year and every five
years following. Although there is literature which highlights the persistence of carbon
after applications of biochar (Guo 2015; Glaser and Birk 2012; Knicker 2011; Downie et
al. 2011), the authors assume that reapplication is needed to maintain yield increases.
There are two biochar cost scenarios modeled, the first assumes a biochar price of $150
per tonne, a shipping cost of $80 per tonne, and a spreading cost of $10 per tonne for a
total delivered and spread cost of $240 per tonne biochar or $960 per acre. Shipping
costs are based on roughly 6.75 hours roundtrip drive time, costs at $150 per truck hour,
and 21 tonnes capacity per truck. The biochar price of $150 per tonne is chosen to
harmonize the cost per tonne of biochar to farmers with the price of biochar at which
many biochar production scenarios were financially viable (see Section 6).

The second cost scenario assumes a delivered and spread cost of $0 per tonne biochar, to
explore the potential economic benefits to farmers if a market support such as a subsidy
were used to increase adoption rate. We further assume 10% yield increases given the
four tonne per acre application rate, based on findings from two recent meta-analyses (Ye
et al. 2020; H. Schmidt et al. 2021). The assumed per acre harvest numbers are based on
market averages and prices are based on recent price reports (“No Salty Feelings for the
U.S. Pistachio Outlook - West Coast Nut” 2021; “California Grape Acreage Report, 2020
Summary” 2021; “2021 California Almond Objective Measurement Report” 2021;
“Walnut/ Raisin/ Prune Report State Summary - 2020 Crop Year” 2021; “Crop Profile for
Wheat in California” 2022); (“U.S. Pistachio Prices” 2022; “California Grape Acreage
Report, 2020 Summary” 2021; “U.S. Almond Prices” 2022; “Sample Costs to Establish a
Walnut Orchard” 2012; “Average Prices for U.S. Wheat from 2014 to 2025” 2022).

Blue Forest 17
In a biochar-amended manure compost, fungal hyphae are
shown wrapped around a piece of biochar. (Josiah Hunt,
Pacific Biochar)

An experimental biologically activated biochar-fertilizer

product, with a subtle white coating of soil
microorganisms. (Josiah Hunt, Pacific Biochar)
 MARKET ANALYSIS IMPLICATIONS: FARMER
ADOPTION OF BIOCHAR AS A SOIL ADDITIVE

Our production analysis shows that biochar can have a highly positive effect on certain
crops, particularly high value crops such as nuts and wine grapes. The modeling also
suggests that lower value crops, such as wheat, may not present a viable biochar market
when delivered and applied biochar prices are $240. However, lower value crops still may
benefit from biochar applications, leaving open the possibility of using subsidies or other
policy mechanisms to encourage biochar applications given the high carbon benefits and
other co-benefits.

BIOCHAR CAN HAVE A HIGHLY POSITIVE EFFECT ON

CERTAIN CROPS, PARTICULARLY HIGH VALUE CROPS
SUCH AS NUTS AND WINE GRAPES.

The technical market potential for biochar as an agricultural soil amendment is enormous.
However, our estimates and others do not take into consideration the rate of farmer
adoption, only the number of potential acres and an assumed application rate of four
tonnes of biochar per acre. Using compost addition as a precedent, agricultural practices
that are profitable and cost saving practices can sometimes take decades to be adopted at
significant levels. Assuming high volumes of biochar production driven by support from
high carbon prices, biochar supply might increase at a faster pace than farmer demand to
purchase biochar. Solutions to address this hypothetical problem might include 1)
embedding the cost of biochar application to farmland into the price of each carbon
credit, with the potential to claim the resulting co-benefits in the carbon credit, 2)
subsidizing biochar applications through government programs such as California’s
Department of Food and Agriculture’s Healthy Soils Initiative or the U.S. Department of
Agriculture’s Environmental Quality Incentives Program (EQIP), or 3) creating financial
tools for loans which embed anticipated future crop yields or other monetizable benefits
into expected future income, as has been used for residential energy efficiency financing.

Blue Forest 19
 6. Biochar Production Investment
Potential and Market Scenario Analyses

To estimate the financial viability of coupled biochar and carbon credit production in
various market scenarios, we model four different production systems based on
existing techno-economic analyses in the academic literature: mobile biochar produced
via a small scale transportable system in forests (Thengane, Kung, York, et al. 2021),
centralized biochar produced in a dedicated industrial facility (Friedenthal 2021), a 25
MW biopower plant with a light upgrade which harvest partially combusted biomass as
biochar (Wiltsee 2000; Hunt and Miles 2020), and a 25 MW biopower plant with a
heavy upgrade which incorporates three kilns to produce biochar alongside syngas,
which is combusted to generate electricity (Friedenthal 2021). Throughout this report,
any reference to production systems are the technologies from these references and all
economic assumptions are based on these production systems.

Internal Rate of Return (IRR) is a metric used to measure annual profitability of an

investment and was the primary metric used in our analysis. Net Present Value (NPV)
was used as a secondary metric and is essentially the magnitude of the return on a
potential investment.

In our assumed market scenario (see Table 4) biopower with a light upgrade on a 25 MW
facility has an IRR of 29% with a twenty year NPV of $10.5 million. Biopower with a heavy
upgrade on a 25 MW facility has an IRR of 9% and has a NPV of $5.9 million. Mobile
biochar has an IRR of 2% and NPV of $-0.15 million. Centralized biochar has an IRR of -1%
and a NPV of $-8.7 million. In order to be conservative, a contingency was added to the
capital expenditures (CAPEX) costs for the light and heavy upgrades of 50% and 30%
respectively given the existing amount of contingency already built into these estimates.

This analysis is limited in its focus on five primary variables: operational expenditures,
capital expenditures, feedstock costs, biochar price, and carbon credit prices. Some of the
production systems modeled here represent a potential for investment from traditional
investors while others may be less directly investible. However, given the high potential
for societal benefits from biochar, production systems which have a lower return on
investment may still represent valuable projects for private, state, or federal sponsorship.
This analysis does not attempt to identify the best biochar production system - that will
vary considerably depending on a range of factors - but simply to investigate the financial
viability of four potential production systems.

Blue Forest 20
A trailer of biochar unloaded at Compost Solutions Inc in Orland CA. (Josiah Hunt, Pacific Biochar)
 MARKET ANALYSIS I: BIOCHAR AND CARBON
MARKET PRICE EFFECT ON INTERNAL RATE OF
RETURN
To understand how biochar and carbon prices affect profitability, we model the Internal
Rate of Return (IRR) of each production system with assumed biochar prices between
$100 and $250 per tonne and assumed carbon prices between $0 and $100 per tonne
CO2. Biopower with light upgrades on a 25 MW facility has an IRR between -7% and 40%,
biopower with heavy upgrades on a 25 MW facility has an IRR between -15% and 19%,
biochar mobile has an IRR between -16% and 18%, and biochar centralized had an IRR
between -2% and 9%. Feedstock costs were held constant at $50 per tonne.

Figure 1: Depiction of the absolute internal rate of return (IRR) of four biochar production types with
biochar prices between $100 and 250 and carbon prices between $0 and 100 per tonne CO2. Feedstock
costs are fixed at $50 per bone dry tonne. IRR values below negative 10% are excluded.

Blue Forest 22
Assuming inflexible biochar price and flexible carbon price, we capture the modeled
breakeven carbon price (in this case the landed carbon price to the producer, including
transportation, fees, etc) for each production system given IRRs of 5%, 10%, and 15% in
table 5. The breakeven carbon price essentially determines the price at which carbon
credits would need to be sold in order to achieve a predetermined IRR, holding feedstock
costs at $50 per tonne and biochar price at four different points in turn ($100, $150,
$200, $250). Depending on the assumed price of biochar, the breakeven carbon price for
biopower with light upgrade is between $0 and $70 per tonne CO2, between $45 and
$140 per tonne CO2 for biopower with a heavy upgrade, between $65 and $155 per
tonne CO2 for mobile biochar, and between $80 and $200 per tonne CO2 for centralized
biochar. These numbers also assume that the carbon price is the final price realized by the
producer after accounting for all transaction costs, commissions, etc.
 Table 5: The breakeven carbon credit price which provides Internal Rates of Return (IRR)
of 5%, 10%, and 15% with biochar prices between $100 and $250 per tonne. Feedstock
costs are fixed at $50 per tonne.

Blue Forest 24
 MARKET ANALYSIS II: BIOCHAR AND
FEEDSTOCK COST EFFECT ON INTERNAL RATE
OF RETURN
To understand how biochar and carbon prices affect profitability, we model the Internal
Rate of Return (IRR) of each production system with biochar prices between $100 and
$250 with feedstock costs between $0 and $120 per ton. Biopower with light upgrades
has an IRR between -23% and 47%, biopower with heavy upgrades has an IRR between
-5% and 36%, biochar mobile has an IRR between -9% and 26%, and a biochar centralized
facility has an IRR between -15% and 25%. The carbon price was held constant at $80 per
ton.

Figure 2: Depiction of the absolute internal rate of return (IRR) of four biochar production types with
biochar prices between $100 and 250 and feedstock costs between $0 and 120 per bone dry ton. Carbon
price is fixed at $80 per ton. IRR values below negative 10% are excluded.

Blue Forest 25
We capture the breakeven feedstock costs for each production system dependent on the
IRR needed by investors given IRRs of 5%, 10%, and 15% in table 5. Depending on the
assumed price of biochar, the breakeven cost per tonne of feedstock for biopower with
light upgrades is between $60 and $150, between $20 and $70 per tonne for biopower
with heavy upgrades, between $-30 and $70 per tonne for mobile biochar production,
and between $0 and $50 per tonne for centralized biochar production. Negative values
show situations in which a production system would need to be paid to take feedstock. In
each scenario, these numbers assume the carbon credit price is fixed at $80 per tonne.
 Figure 6: The breakeven feedstock cost which provides Internal Rates of Return (IRR) of
5%, 10%, and 15% with biochar prices between $100 and $250 per tonne. Feedstock
costs are fixed at $50 per tonne.

Blue Forest 27
 SENSITIVITY ANALYSIS
A sensitivity analysis demonstrates how fluctuations in specific variables affect the
baseline IRR. Each fluctuation is expressed as an absolute increase in IRR. Both biopower
with light upgrades and heavy upgrades are most sensitive to changes in capital
expenditures, with a 40% decrease in cost leading to IRR increases of 20% and 9%,
respectively. Both biopower with light upgrades and heavy upgrades are least sensitive to
changes in operational expenditures, with a 40% decrease in cost leading to IRR increases
of 0% and 1%, respectively. Biochar mobile is most sensitive to changes in operational
expenditures with a 40% increase in cost leading to an IRR decrease of 15%. Biochar
mobile is least affected by variations in capital expenditures, with a 40% decrease leading
to an IRR increase of 5%. Biochar centralized is most sensitive to changes in feedstock
price, with a 40% decrease in cost leading to an IRR increase of 11%. Biochar centralized
is least sensitive to changes in operational expenditure with a 40% decrease leading to an
IRR increase of 2%.

Figure 3: Depiction of the absolute change of the internal rate of return from the baseline scenario with a
stepwise change in the independent variables for each of the four technologies. Negative values are
excluded.

Blue Forest 28
 INVESTMENT POTENTIAL IMPLICATIONS:
CONNECTING BIOCHAR, CARBON CREDITS, AND
FEEDSTOCK COSTS
Our market analyses show that each production system can be profitable in certain
market conditions. Given the constraints of this analysis, particularly in limiting carbon
price to $100 per tonne CO2, each production system simultaneously needs income from
the biochar produced as well as carbon credits to achieve profitability. The only exception
is biopower with a light upgrade, which may be profitable with either high carbon prices
(over roughly $100 per tonne) or very high biochar prices (over roughly $250 per tonne)
alone.
EACH PRODUCTION SYSTEM CAN BE PROFITABLE IN
CERTAIN MARKET CONDITIONS.

Feedstock costs are a critical variable affecting profitability. Our assumed market
scenario holds feedstock costs at $50 per tonne, which is an accurate representation of
the typical current costs to remove biomass from the forest and transport it to a
centralized location for processing. In certain instances, that price may be much higher or
lower than this assumed cost.

However, mobile biochar may be able to operate directly at a forest restoration site,
effectively reducing the cost of feedstock close to $0 per tonne. In a situation in which
feedstock costs are close to $0, mobile biochar is profitable with biochar prices at $100
per tonne and carbon prices at $80 per tonne, given the production system modeled here
(Thengane, Kung, York, et al. 2021) (see Figure 2). This may provide a viable option in
many cases for forest managers, such as the U.S. Forest Service, to defray some of the
costs of dealing with the biomass from forest restoration projects, particularly if that
biochar is applied directly to the forest. For instance, pile and burning costs for
unmerchantable biomass on U.S. Forest Service land can be $300-600 per acre (Foster
Personal Communication, 2022). Assuming 2 tonnes of biochar generated from an
equivalent amount of unmerchantable timber, the Forest Service could subsidize biochar
production up to $150 and 300 per tonne biochar ($300 and 600 per acre) and
potentially reduce costs compared to pile burning.

Given the variety of situations this analysis aims to capture, it is important to analyze
potential investments on a case by case basis by examining feedstock costs, which are
highly dependent on transportation, in addition to income from biochar and carbon
offsets, as well as necessary return on investment.

Blue Forest 29
 7. Level of Investment Needed

There is potential for both private and public investment in this space, either from
landowners, or from outside investors interested in the growing biochar and carbon
markets. Alongside traditional investments is the potential for cost savings for large scale
landowners engaging in forest management. In certain instances, such as with light and
heavy upgrades, there is a more compelling argument for outside investments given the
potential for returns on investment. Centralized and mobile biochar systems may not be
as attractive to private investors, but can still play an important role in reducing the costs
associated with large scale forest restoration and can be an attractive option for land
owners and managers. In either situation, it is important to acknowledge the limitations
of a modeling exercise such as this - we are inherently limited by the information available
to the public. Biochar production processes and investment potential are evolving rapidly
and should be examined on a case by case basis.

While only accounting for the biomass generated from forest thinning and not the
potential from agricultural, municipal, and other sources, the potential for investment is
large. With relatively short timelines between an initial investment and production,
investments in light and heavy upgrades as well as mobile biochar can produce biochar
and offsets within a year or two of securing funding. Centralized production may require
more time to operationalize, but can still be producing biochar and carbon credits in less
than five years. Table 7 shows that with a 10 million dollar investment, up to
approximately 181,000 tonnes of biochar and over 400,000 carbon credits could be
generated over 10 years. With a 100 million dollar investment, almost two million tonnes
of biochar and over four million carbon credits could be generated over 10 years.

WITH A 100 MILLION DOLLAR INVESTMENT, ALMOST

TWO MILLION TONNES OF BIOCHAR AND OVER FOUR
MILLION CARBON CREDITS COULD BE GENERATED OVER
10 YEARS.

Blue Forest 30
 While $10 and $100
million investments can
enable large scale
biochar and carbon
credit production, the
total investment
potential in biochar
production is much
higher. Accounting for
only forest biomass as a
feedstock and no other
feedstock sources such
as agriculture, municipal
or other, up to 50 billion
dollars could be invested
in biochar production
(see Table 8).

UP TO 50 BILLION DOLLARS COULD BE INVESTED IN

BIOCHAR PRODUCTION.
 We predict that the two main limitations to scaling investments to this level are 1) an
assured end use for biochar, either as an agricultural soil amendment or other beneficial
use, as well as 2) a transparent and consistent feedstock supply chain. Working with
potential customers, such as large scale agricultural producers and early adopters, to
provide a more nuanced answer to the yield impact that biochar has on agricultural land
may help stimulate market demand. Creating transparent supply chains is largely
dependent on tracking forest restoration project development to better understand the
timing, quantity, and location of non-merchantable forest biomass generation.

THE TWO MAIN LIMITATIONS TO SCALING INVESTMENTS

TO THIS LEVEL ARE 1) AN ASSURED END USE FOR
BIOCHAR, EITHER AS AN AGRICULTURAL SOIL
AMENDMENT OR OTHER BENEFICIAL USE, AS WELL AS 2)
A TRANSPARENT AND CONSISTENT FEEDSTOCK SUPPLY
CHAIN.

Blue Forest 32
 8. Conclusions and Implications

Throughout the Western U.S. there is considerable potential to link biochar production
with forest restoration while providing a value-added use for currently non-
merchantable woody biomass. Today in the West, there are between roughly 5 and 20
million tonnes of non merchantable biomass generated yearly during restoration
projects, most of which is pile burned or left to decompose in the forest. Those estimates
increase to 25 and 100 million tonnes of biomass yearly if much needed restoration goals
are achieved. Making biochar from this biomass can provide both a product with many
beneficial potential end use cases - such as agricultural soil additions, bio-filtration,
forestry applications, and many others - and high quality carbon offsets. Using the non-
merchantable woody biomass throughout the Western U.S. could provide up to 25 million
tonnes of biochar and 70 million high quality carbon offsets each year.

Currently, stand-alone biochar production is limited to a few thousand tonnes per year in
the West, but there is potential to build both dedicated biochar facilities as well as
upgrade existing biopower facilities to coproduce biochar and carbon credits at scale. The
carbon market is increasingly demanding carbon credits from biochar production, with
prices commonly between $95 and $125 per tonne CO2 and reaching as high as $600.
These prices are well aligned with the U.S. Department of Energy’s Carbon Negative Shot,
with a goal of removing CO2 from the atmosphere and durably storing it for less than
$100 per tonne (U.S. Department of Energy n.d.). If biochar-generated carbon credits are
produced in the magnitude examined in this report, carbon credit prices will likely fall.
However, today's market can easily absorb tens of thousands of carbon credits at current
prices. While in certain cases high carbon prices can single-handedly pay for the
production of biochar, developing viable end use markets for biochar will be critical to the
development of the biochar industry. Our analysis shows that certain crops can benefit
economically from biochar application, with some crops receiving a net financial return
during the second harvest after application.

Blue Forest 33
 This report finds that biochar production is profitable in many scenarios, with light upgrades
to 25 MW biopower facilities standing out as the most financially viable from a traditional
investment standpoint, with internal rates of return between 10% and 35% in most cases.
Dedicated biochar production, while not as seemingly investible as upgrades to biopower
facilities, may play a powerful role in defraying costs traditionally associated with pile burning
non-merchantable woody biomass. While pile burning costs may be near $300 and $600 per
acre, mobile biochar systems may be able to process a comparable amount of biomass and cut
costs significantly. Feedstock costs are key to make biochar production profitable in many
scenarios, although high carbon or biochar prices can compensate for high feedstock costs in
some situations. Given the high variability in financial viability due to costs and potential sales
prices, it is important to consider the feasibility of biochar production on a case by case basis
and whether the goal of production is return on investment or reducing costs associated with
disposing of non-merchantable biomass from forest restoration projects. With that in mind,
the total investment potential in this space is between $20 and $50 billion dollars assuming
forest restoration goals are met in the coming years. In the near term, investments totaling
$100 million would generate up to four million carbon credits in the next 10 years.

Despite the enormous potential of biochar as both a product and generator of carbon offsets,
there are several roadblocks to industry scale. From a technical standpoint, the lack of
current production infrastructure limits scale. But more fundamentally, uncertain demand for
biochar, lack of transparent biomass supply chains, and a lack of historic investment in this
space must be overcome. Working with farmers and other land managers to demonstrate the
impact of biochar on production on a large scale is necessary to establish sustained demand,
while collaboration with the U.S. Forest Service and potentially large private landowners to
develop transparent biomass supply chains with clear timing, cost, quantity, and location of
biomass generation is critical. Both of these will be key to attracting historically wary
investors.

WORKING WITH FARMERS AND OTHER LAND

MANAGERS TO DEMONSTRATE THE IMPACT OF
BIOCHAR ON PRODUCTION ON A LARGE SCALE IS
NECESSARY TO ESTABLISH SUSTAINED DEMAND, WHILE
COLLABORATION WITH THE U.S. FOREST SERVICE AND
POTENTIALLY LARGE PRIVATE LANDOWNERS TO
DEVELOP TRANSPARENT BIOMASS SUPPLY CHAINS
WITH CLEAR TIMING, COST, QUANTITY, AND LOCATION
OF BIOMASS GENERATION IS CRITICAL.

Blue Forest 34
 To continue growing the biochar industry, producers will likely need to follow the
example of the producers who have already begun to leverage the niche characteristics of
the carbon credits they produce to enhance their own growth. Moving forward, there are
three potential pathways for the biochar industry to scale and utilize biomass from forest
management and fuel thinning projects. Either 1) the carbon market will need to sustain
high carbon prices, 2) a subsidy or other mechanism will need to decrease the cost of
feedstock biomass, or 3) production will need to take advantage of economies of scale to
bring down biochar prices while increasing biochar and carbon credit production,
providing conditions necessary for credits to be widely available at prices the market will
sustain. Given the growing interest in co-produced biochar and carbon credits, and the
need to massively expand the pace and scale of forest restoration through the Western
U.S., increased attention, investment, and collaboration is already happening in this space.
The combination of these forces could combine to overcome the historical barriers to the
development of the biochar industry.

Blue Forest 35
 9. Methods

Woody Biomass Supply, Potential Biochar Production, and Potential Carbon Credit Production
Each of the estimates for supply of currently non-merchantable biomass in bone dry
tonnes (BDT) is based on the following equations and the scenario specific assumptions.
The wood products capacity estimates for California are based directly on industry
information (University of Montana 2016; McIver 2015) and conversions from million
cubic feet, the unit used in the report, to million bone dry tonnes (MMBDT) was based on
conversion factors in Shelley (2007) with one hundred cubic feet of logs equating to 1.2
BDT. The total capacity of the wood products infrastructure is derived from the current
merchantable timber harvest and the current percent of the wood products
infrastructure utilized (McIver 2015; University of Montana 2016). The capacity
estimates for the West assume the capacity is six times as large as California based on the
size of the timber harvest statistics in information for Washington, Oregon, Montana,
Idaho, and California for the year of 2016 (“University of Montana Bureau of Business
and Economic Research” 2013). Potential biochar production is calculated by assuming a
0.25 mass yield from woody biomass to biochar. The potential carbon credit generation
incorporates carbon benefit estimations from the IPCC (IPCC 2019), Carbonfuture (H.-P.
Schmidt, Kammann, and Hagemann 2021), and Puro (Schimmelpfennig and Glaser 2022)
with low estimated of 1.9 tonnes of CO2 per tonne biochar produced and high estimated
of 2.7 tonnes of CO2 per tonne biochar produced.

Blue Forest 36
 Biochar Production Capacity Estimates
Stand alone production capacity is based on the market findings from Groot et al. (2018),
which surveyed producers in the biochar industry throughout the U.S. Stand alone
production estimates are based on biochar production of 45,000 tonnes per year, likely a
conservative estimate. 17 of the 46 producers were located in the Western U.S., with 12
producers on the West Coast. We assume that six of the producers are located in
California. Production estimates are proportional, based on the number of producers in
each region and the total amount of biochar produced yearly. Potential increases in
industry capacity are calculated as proportional increases in total capacity based on the
estimation of current stand alone production capacity.

Blue Forest 37
 Light upgrade production scenario assumes that 70% of the biopower capacity in the
state and throughout the West is eligible for a light upgrade based on conversation with
practitioners (Hunt 2021), which converts 2% of feedstock into biochar. The biochar
output of the light upgrade to biopower is calculated using the equations and assumptions
below.

The heavy upgrade production scenario assumed that 70% of all biopower capacity in the
state is eligible for a heavy upgrade which coupled the production of biochar with
biopower, yielding 10% of the feedstock as biochar.

Blue Forest 38
 Feedstock is the amount of biomass needed to generate the portion of the biopower
energy output in the state which is eligible for a light or heavy upgrade.

Biochar yield is the amount of biochar which could be produced from the feedstock in the
above equation. There are different generation capacities for light and heavy upgrades.

Increased feedstock is the additional amount of feedstock needed to compensate for the
biochar generation.

Carbon Offset Generation

To calculate the carbon offsets generated by standalone biochar producers (not coupled
biopower and biochar producers), we use the carbon benefits of 1.9 and 2.6 tCO2 per
tonne biochar based on the IPCC quantification methodology (IPCC 2019). Both the high
and low scenarios assumed a biochar carbon content of 80% with 65% carbon remaining
after 100 years in the low scenario and 89% carbon remaining in the high scenario.

To calculate carbon offsets generated by coupled biopower and biochar producers, we

use carbon benefits of 2.4 and 2.7 tonnes CO2 per tonne biochar based on the Puro (high
estimate) and Carbonfuture (low estimate) methodologies. The Puro (Schimmelpfennig
and Glaser 2022) and Carbonfuture (H.-P. Schmidt, Kammann, and Hagemann 2021)
methodologies differ from the IPCC methodology most significantly in that the IPCC
methodology does not account for emissions during the creation or transportation of the
biochar or feedstock. Puro and Carbon Future differ from each other primarily in how the
margin of safety is calculated, which is part of the credit quantification methodology. The
benefits for the biochar produced from light and heavy upgrades is estimated using the
quantification approaches of Puro and Carbonfuture because the examples from a
specific coupled biopower and biochar facility were available at the time of this analysis.
In the end, the estimates from the IPCC, Puro, and Carbonfuture are all relatively similar
and we chose the numbers that we felt most accurately represented the high and low
estimates of credits that could be generated.

Blue Forest 39
 Carbon Credit Demand Potential
Quantifying the demand for biochar carbon credits is based on the opinions of six experts
representing five organizations, including consultants, project developers, and brokers.
Between September and December 2021, these conversations focused on how perceptions
of quality in the marketplace influence demand, whether there was increasing demand for
credits from removals vs emissions, at what price point various quantities of biochar credits
could be sold, and how market drivers have changed over time. These interviews were semi-
structured and confidential.

Biochar, Carbon Credit, and Feedstock Market Scenario Analysis

Market analyses are based on deconstructed techno-economic analyses (TEA), which are
modeled in Excel to calculate the Net Present Value and Internal Rate of Return for each
market scenario. The biomass feedstock needed for a 25 MW biopower plant (Wiltsee 2000)
is coupled with light (Hunt and Miles 2020) and heavy (Friedenthal 2022) upgrade scenarios
with any changes to those scenarios done in consultation with the authors. Labor costs for
the light and heavy upgrades to the 25MW biopower plant are based on full time employee
costs of $132,500 (adjusted for 2022 inflation) (The Beck Group 2015). Mobile biochar is
based on a mobile system (Thengane, Kung, York, et al. 2021), which is a small-scale system
which produces biochar in forest. Centralized biochar is based on Friedenthal (2022) which is
a large industrial facility. Carbon benefits used were based on Puro, Carbonfuture, and IPCC
estimates. A 2.5 tonne CO2 benefit per tonne biochar was used for both light and heavy
upgrade scenarios, which was a conservative average between from the Puro and
Carbonfuture methodologies described above. 2.3 tonnes CO2 benefit per tonne biochar was
used for mobile and centralized biochar, which was using the IPCC methodology assuming
that the biochar was 80% carbon and that 80% of the carbon remained after 100 years.

Sensitivity Analysis
The sensitivity analysis is completed by changing each variable in increments of 10% in each
direction, examining both a 40% decrease and increase in each variable. Outcomes are
recorded and represented based on the absolute change in IRR of each production system.

Blue Forest 40
 References

“2021 California Almond Objective Measurement Report.” 2021. United States Department of
Agriculture National Agricultural Statistics Service.
https://www.almonds.com/sites/default/files/2021-07/2021ObjectiveReport.pdf.

“Average Prices for U.S. Wheat from 2014 to 2025.” 2022. Statista. 2022.
https://www.statista.com/statistics/675822/average-prices-us-wheat/.

CalFire. 2021. “Stats & Events.” CalFire. 2021. https://www.fire.ca.gov/stats-events.

“California Grape Acreage Report, 2020 Summary.” 2021. 2021.

https://www.nass.usda.gov/Statistics_by_State/California/Publications/Specialty_and_Other_Release
s/Grapes/Acreage/2021/grpacSUMMARY2020Crop.pdf.

Collins, Brandon M., Richard G. Everett, and Scott L. Stephens. 2011. “Impacts of Fire Exclusion and
Recent Managed Fire on Forest Structure in Old Growth Sierra Nevada Mixed-Conifer Forests.”
Ecosphere 2 (4): art51. https://doi.org/10.1890/ES11-00026.1.

“Crop Profile for Wheat in California.” 2022. University of California.

https://ipmdata.ipmcenters.org/documents/cropprofiles/CAwheat.pdf.

Downie, Adriana E., Lukas Van Zwieten, Ronald J. Smernik, Stephen Morris, and Paul R. Munroe. 2011.
“Terra Preta Australis: Reassessing the Carbon Storage Capacity of Temperate Soils.” Agriculture,
Ecosystems & Environment 140 (1–2): 137–47. https://doi.org/10.1016/j.agee.2010.11.020.

Foster, Gabe. 2022. Personal Communication - Tahoe National Forest.

Friedenthal, Andrew. 2021. “High Temperature Pyrolysis System Budgetary Proposal.” CharTech
Solutions.

Friedenthal, Andrew. 2022. “Wood Waste to Biochar & Power Budget Pricing.” CharTech Solutions.

Glaser, Bruno, and Jago Jonathan Birk. 2012. “State of the Scientific Knowledge on Properties and
Genesis of Anthropogenic Dark Earths in Central Amazonia (Terra Preta de Índio).” Geochimica et
Cosmochimica Acta 82 (April): 39–51. https://doi.org/10.1016/j.gca.2010.11.029.

Blue Forest 41
 Groot, Harry, Kathryn Fernholz, Chuck Henderson, and Jeff Howe. 2018. “Survey and Analysis of the
U.S. Biochar Industry.” Dovetail Partners.
https://dovetailinc.org/report_pdfs/2018/DovetailBiochar118.pdf.

Guo, Mingxin. 2015. “Pyrogenic Carbon in Terra Preta Soils.” In SSSA Special Publications, edited by
Mingxin Guo, Zhongqi He, and Sophie Minori Uchimiya, 15–27. Madison, WI, USA: American Society
of Agronomy and Soil Science Society of America.
https://doi.org/10.2136/sssaspecpub63.2014.0035.5.

Hunt, Josiah. 2021. Personal Communication.

Hunt, Josiah, and Tom Miles. 2020. “Modification of Existing Biomass Power Plants for Biochar
Production.”

International Biochar Initiative. 2015. “State of the Biochar Industry.” https://biochar-

international.org/.

IPCC. 2019. “Appendix 4: Method for Estimating the Change in Mineral Soil Organic Carbon Stocks
from Biochar Amendments: Basis for Future Methodological Development.” Intergovernmental Panel
on Climate Change.

Knicker, Heike. 2011. “Pyrogenic Organic Matter in Soil: Its Origin and Occurrence, Its Chemistry and
Survival in Soil Environments.” Quaternary International 243 (2): 251–63.
https://doi.org/10.1016/j.quaint.2011.02.037.

Li, Wenqin, Qi Dang, Ryan Smith, Robert C. Brown, and Mark M. Wright. 2017. “Techno-Economic
Analysis of the Stabilization of Bio-Oil Fractions for Insertion into Petroleum Refineries.” ACS
Sustainable Chemistry & Engineering 5 (2): 1528–37. https://doi.org/10.1021/acssuschemeng.6b02222.

Lydersen, Jamie M., and Brandon M. Collins. 2018. “Change in Vegetation Patterns Over a Large
Forested Landscape Based on Historical and Contemporary Aerial Photography.” Ecosystems 21 (7):
1348–63. https://doi.org/10.1007/s10021-018-0225-5.

McIntyre, Patrick J., James H. Thorne, Christopher R. Dolanc, Alan L. Flint, Lorraine E. Flint, Maggi
Kelly, and David D. Ackerly. 2015. “Twentieth-Century Shifts in Forest Structure in California: Denser
Forests, Smaller Trees, and Increased Dominance of Oaks.” Proceedings of the National Academy of
Sciences 112 (5): 1458–63. https://doi.org/10.1073/pnas.1410186112.

McIver, Chelsea P. 2015. “California’s Forest Products Industry and Timber Harvest, 2012,” 58.

Blue Forest 42
 “Nasdaq Carbon Removal Marketplace and Technologies.” 2022. 2022.
https://www.nasdaq.com/solutions/carbon-removal-marketplace.

“No Salty Feelings for the U.S. Pistachio Outlook - West Coast Nut.” 2021. 2021.
https://www.wcngg.com/2021/09/07/no-salty-feelings-for-the-u-s-pistachio-outlook/.

Sahoo, Kamalakanta, Edward Bilek, Richard Bergman, and Sudhagar Mani. 2019. “Techno-Economic
Analysis of Producing Solid Biofuels and Biochar from Forest Residues Using Portable Systems.”
Applied Energy 235 (February): 578–90. https://doi.org/10.1016/j.apenergy.2018.10.076.

“Sample Costs to Establish a Walnut Orchard.” 2012. University of California Cooperative Extension.
https://coststudyfiles.ucdavis.edu/uploads/cs_public/de/5b/de5b047e-efb5-4145-b618-
1c643240abe9/walnutsv2012.pdf.

Schimmelpfennig, Sonja, and Bruno Glaser. 2022. “One Step Forward toward Characterization: Some
Important Material Properties to Distinguish Biochars.” Journal of Environmental Quality 41 (4): 1001–
13. https://doi.org/10.2134/jeq2011.0146.

Schmidt, Hans-Peter, Claudia Kammann, and Nikolas Hagemann. 2021. “EBC-Guidelines for the
Certification of Biochar Based Carbon Sinks Version 2.1 from 1st February 202,” 35.

Schmidt, Hans‐Peter, Claudia Kammann, Nikolas Hagemann, Jens Leifeld, Thomas D. Bucheli, Miguel
Angel Sánchez Monedero, and Maria Luz Cayuela. 2021. “Biochar in Agriculture – A Systematic
Review of 26 Global Meta‐analyses.” GCB Bioenergy 13 (11): 1708–30.
https://doi.org/10.1111/gcbb.12889.

Shelley, J.R. 2007. “Woody Biomass Definitions and Conversions Factors.” 2007.
https://ucanr.edu/sites/WoodyBiomass/newsletters/IG003_-
_Woody_Biomass_Definitions_and_Conversions_Factors31510.pdf.

Springsteen, Bruce, Thomas Christofk, Robert A. York, Tad Mason, Stephen Baker, Emily Lincoln,
Bruce Hartsough, and Takuyuki Yoshioka. 2015. “Forest Biomass Diversion in the Sierra Nevada:
Energy, Economics and Emissions.” California Agriculture 69 (3): 142–49.
https://doi.org/10.3733/ca.v069n03p142.

The Beck Group. 2015. “California Assessment of Wood Business Innovation Opportunities and
Markets (CAWBIOM). Phase II Report: Feasibility of Potential Business Opportunities.”

Thengane, Sonal K., Kevin Kung, Josiah Hunt, Haris R. Gilani, C. Jim Lim, Shahabaddine Sokhansanj,
and Daniel L. Sanchez. 2021. “Market Prospects for Biochar Production and Application in California.”
Biofuels, Bioproducts and Biorefining, August, bbb.2280. https://doi.org/10.1002/bbb.2280.

Blue Forest 43
 Thengane, Sonal K, Kevin Kung, Robert York, Shahabaddine Sokhansanj, C Jim Lim, and Daniel L
Sanchez. 2021. “Technoeconomic and Emissions Evaluation of Mobile In-Woods Biochar Production,”
36.

University of Montana. 2016. “California’s Forest Products Industry and Timber Harvest.” Forest
Industry Research Program, University of Montana.

“University of Montana Bureau of Business and Economic Research.” 2013. 2013.

https://www.bber.umt.edu/FIR/H_Harvest.asp.

“U.S. Almond Prices.” 2022. Selina Wamucii (blog). 2022.

https://www.selinawamucii.com/insights/prices/united-states-of-america/almonds/.

“U.S. Biochar Market Size & Share Report.” 2021. Grand View Research. 2021.
https://www.grandviewresearch.com/industry-analysis/us-biochar-market.

“U.S. Biomass Power Plants.” 2022. 2022.

http://biomassmagazine.com/plants/listplants/biomass/US/.

U.S. Department of Energy. n.d. “Carbon Negative Shot.” Energy.Gov. Accessed February 11, 2022.
https://www.energy.gov/fecm/carbon-negative-shot.

“U.S. Pistachio Prices.” 2022. Selina Wamucii (blog). 2022.

https://www.selinawamucii.com/insights/prices/united-states-of-america/pistachios/.

USDA Forest Service Pacific Southwest Region. 2020. Agreement for Shared Stewardship of
California’s Forest and Rangelands between the State of California and the USDA, Forest Service
Pacific Southwest Region.

“Walnut/ Raisin/ Prune Report State Summary - 2020 Crop Year.” 2021. 2021.
https://www.nass.usda.gov/Statistics_by_State/California/Publications//Specialty_and_Other_Releas
es/Handler_Reports/2020_wrp_1021.pdf.

Wiltsee, G. 2000. “Lessons Learned from Existing Biomass Power Plants.” NREL/SR-570-26946,
753767. https://doi.org/10.2172/753767.

Ye, Lili, Marta Camps-Arbestain, Qinhua Shen, Johannes Lehmann, Balwant Singh, and Muhammad
Sabir. 2020. “Biochar Effects on Crop Yields with and without Fertilizer: A Meta-Analysis of Field
Studies Using Separate Controls.” Soil Use and Management 36 (1): 2–18.
https://doi.org/10.1111/sum.12546.

Young, Peter, and John Lawrence. 2019. “Biochar Market Profile Report,” 63.

Blue Forest 44