Investments into forest biorefineries under different price and policy structures
Increasing scarcity of oil reserves and the high CO2 emissions from using oil have contributed to the development of renewable biofuels. Pulp and paper mill integrated forest biorefineries offer one important means to increase biofuel production. This study analyzes the effects of policies to support biofuel production in the pulp and paper sector. We study the relative effectiveness of three biofuel supporting policy instruments, namely production subsidy, input subsidy and investment subsidy. We present a partial equilibrium pulp and paper market model with a biorefinery investment option. A numerical model is used to evaluate the impacts of policy instruments on wood prices, as well as input choices and investment strategies of pulp and paper industries. The data represent the Finnish pulp and paper sector. We evaluate the values and direct costs of the policy instruments in a situation of exogenous biofuel production targets. The direct costs of input and investment subsidies are higher than those of a production subsidy. With all the policy instruments, Finnish pulp and paper mills would invest in wood-gasifying technology, instead of black liquor based one. The number of biorefinery units is dependent on the subsidy type — investment and input subsidies are likely to result in more numerous but smaller biofuel production units than a production subsidy. With all the policy instruments the demand for wood increases in Finland leading to higher wood prices. This, in turn, could reflect negatively on the profitability of the pulp and paper industries. To a significant degree, the model and the results can be generalized to other countries and markets where integrated pulp and paper mills are operating.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kangas, Hanna-Liisa & Lintunen, Jussi & Uusivuori, Jussi, 2009. "The cofiring problem of a power plant under policy regulations," Energy Policy, Elsevier, vol. 37(5), pages 1898-1904, May.
- Lintunen, Jussi & Kangas, Hanna-Liisa, 2010. "The case of co-firing: The market level effects of subsidizing biomass co-combustion," Energy Economics, Elsevier, vol. 32(3), pages 694-701, May.
- Mäkelä, Matti & Lintunen, Jussi & Kangas, Hanna-Liisa & Uusivuori, Jussi, 2011. "Pellet promotion in the Finnish sawmilling industry: The cost-effectiveness of different policy instruments," Journal of Forest Economics, Elsevier, vol. 17(2), pages 185-196, April.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:33:y:2011:i:6:p:1165-1176. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.