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The bioenergies development: the role of biofuels and the CO2 price

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  • Pierre-Andre Jouvet

    ()
    (Universite Paris Ouest Nanterre La Defense, Climate Economics Chair, France)

  • Frederic Lantz

    ()
    (IFPEN)

  • Elodie Le Cadre

    ()
    (IFPEN, Universite Paris Ouest Nanterre La Defense,)

Abstract

Reduction in energy dependancy and emissions of CO2 via renewables targeted in the European Union energy mix and taxation system might trigger the production of bioenergy production and competition for biomass utilization. Torrefied biomass could be used to produce second generation biofuels to replace some of the fuels used in transportation and is also suitable as feedstock to produce electricity in large quantities. This paper examines how the CO2 price aspects demand of torrefied biomass in the power sector and its consequences on the profitability of second generation biofuel units (Biomass to Liquid units). Indeed, the profitability of the BtL units which are supplied only by torrefied biomass is related to the competitive demand of the power sector driven by the CO2 price and feed-in tarifis. We propose a linear dynamic model of supply and demand. On the supply side, a profit-maximizing torrefied biomass sector is modelized. The model aims to represent the transformation of biomass into torrefied biomass which could be sold to the refinery sector and the power sector. A two-sided (demanders and supplier) bidding process led us to arrive at the equilibrium price for torrefied biomass. The French case is used as an example. Our results suggest that the higher the CO2 price, the more stable and important the power sector demand. It also makes the torrefied biomass production less vulnerable to uncertainty on demand coming from the refining sector. The torrefied biomass co-firing with coal can offer a near-term market for the torrefied biomass for a CO2 emission price lower than 20 euros/tCO2, which can stimulate development of biomass supply systems. Beyond 2020, the demand for torrefied biomass from the power sector could be substituted by the refining sector if the oil price goes up whatever the CO2 price.

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File Function: First version, 2012
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Bibliographic Info

Paper provided by Chaire Economie du Climat in its series Working Papers with number 1201.

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Length: 34 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:cec:wpaper:1201

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Keywords: Bioenergy; CO2 price; Re nery market; Electricity market; Optimization.;

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  1. Levin, Todd & Thomas, Valerie M. & Lee, Audrey J., 2011. "State-scale evaluation of renewable electricity policy: The role of renewable electricity credits and carbon taxes," Energy Policy, Elsevier, vol. 39(2), pages 950-960, February.
  2. Quariguasi Frota Neto, J. & Bloemhof-Ruwaard, J.M. & van Nunen, J.A.E.E. & van Heck, H.W.G.M., 2006. "Designing and Evaluating Sustainable Logistics Networks," ERIM Report Series Research in Management ERS-2006-003-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  3. Kocoloski, Matt & Michael Griffin, W. & Scott Matthews, H., 2011. "Impacts of facility size and location decisions on ethanol production cost," Energy Policy, Elsevier, vol. 39(1), pages 47-56, January.
  4. Hansson, Julia & Berndes, Gran & Johnsson, Filip & Kjrstad, Jan, 2009. "Co-firing biomass with coal for electricity generation--An assessment of the potential in EU27," Energy Policy, Elsevier, vol. 37(4), pages 1444-1455, April.
  5. Babcock, Bruce A. & Marette, Stéphan & Tréguer, David, 2011. "Opportunity for profitable investments in cellulosic biofuels," Energy Policy, Elsevier, vol. 39(2), pages 714-719, February.
  6. Fan, Lin & Hobbs, Benjamin F. & Norman, Catherine S., 2010. "Risk aversion and CO2 regulatory uncertainty in power generation investment: Policy and modeling implications," Journal of Environmental Economics and Management, Elsevier, vol. 60(3), pages 193-208, November.
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