By Mica Rosenberg
July 12 (Reuters) - Biofuel producers will be subject to rules regulating carbon emissions, a U.S. appeals court ruled on Friday, in a decision hailed by environmental groups.
The U.S. Court of Appeals for the District of Columbia Circuit vacated a three-year deferral put in place in 2011 by the Environmental Protection Agency (EPA) that temporarily exempted paper and wood product manufacturers and ethanol producers from curbing the release of greenhouse gases.
The EPA wanted to further study how much of the emissions linked to climate change come from burning plant matter before issuing emission regulations and permit requirements that could be costly to industry.
But environmental groups contested the exclusion in court and two judges on the three-judge panel favored their view.
The court's decision cited the Supreme Court case Massachusetts v. EPA, the landmark 2007 decision in which the justices found that carbon dioxide is a pollutant that could be regulated under the Clean Air Act.
"There is no statutory basis for exempting biogenic carbon dioxide" from the EPA's rule making process, Judge David Tatel wrote for the court.
In a statement responding to the decision, the EPA said it "will review the decision to determine any next steps."
Biogenic carbon dioxide emissions are generated from processes including incinerating wood chips and residue like bark and sawdust to make electricity, decomposition of waste in landfills and fermentation during ethanol production.
These sources release much less carbon dioxide than coal-fired power plants or other polluters, but the biofuel sector is rapidly expanding and critics want much tighter regulation.
"Now carbon dioxide emissions, and other greenhouse gases, from these sources have to be a part of the overall equation," said Bill Snape, senior counsel at the Center for Biological Diversity, which brought the suit.
"We needed to get a handle on this pollution to get a handle on the American carbon footprint," he said.
People in the industry maintain that it is "carbon neutral" and should not be regulated like fossil fuels, since plants absorb carbon dioxide while they are alive.
"Trees take the CO2 from the atmosphere when they are growing and when you burn them for energy they are just releasing that back. It's a cycle," said Paul Noe, an official at the American Forest and Paper Association. "The net contribution to the atmosphere is zero."
The case was brought against the EPA but the association intervened on the government's behalf to support the temporary suspension of carbon emissions rules.
The wood and paper industry, which generates $200 billion in products each year, will now face uncertainty about what type of permits it will need in the future and wants the EPA to move quickly to issue new rules, Noe said. (Reporting by Mica Rosenberg; Editing by Howard Goller and Daivd Gregorio)