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Pellet promotion in the Finnish sawmilling industry: The cost-effectiveness of different policy instruments

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  • Mäkelä, Matti
  • Lintunen, Jussi
  • Kangas, Hanna-Liisa
  • Uusivuori, Jussi

Abstract

The demand for wood fuels is increasing as several countries have targets for different types of wood-based energy, e.g. pellets. Sawmills are a source for wood fuels since they can refine their by-products into energy products. We present a model of a profit-maximizing sawmill, and analyze the production and investment decisions of thirty large-scale Finnish sawmills. The model allows the investigation of required policy incentives that enable sawmills to realize the production targets set for pellets. We analyze the policy costs of the investment, production and input subsidies. We found that the production subsidy is an efficient policy instrument.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:foreco:v:17:y:2011:i:2:p:185-196
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    References listed on IDEAS

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    1. Klugman, S. & Karlsson, M. & Moshfegh, B., 2009. "A Swedish integrated pulp and paper mill--Energy optimisation and local heat cooperation," Energy Policy, Elsevier, vol. 37(7), pages 2514-2524, July.
    2. Fouquet, Doerte & Johansson, Thomas B., 2008. "European renewable energy policy at crossroads--Focus on electricity support mechanisms," Energy Policy, Elsevier, vol. 36(11), pages 4079-4092, November.
    3. Junginger, Martin & de Visser, Erika & Hjort-Gregersen, Kurt & Koornneef, Joris & Raven, Rob & Faaij, Andre & Turkenburg, Wim, 2006. "Technological learning in bioenergy systems," Energy Policy, Elsevier, vol. 34(18), pages 4024-4041, December.
    4. 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.
    5. 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.
    6. Svensson, Inger-Lise & Jönsson, Johanna & Berntsson, Thore & Moshfegh, Bahram, 2008. "Excess heat from kraft pulp mills: Trade-offs between internal and external use in the case of Sweden--Part 1: Methodology," Energy Policy, Elsevier, vol. 36(11), pages 4178-4185, November.
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    Cited by:

    1. Kangas, Hanna-Liisa & Lintunen, Jussi & Pohjola, Johanna & Hetemäki, Lauri & Uusivuori, Jussi, 2011. "Investments into forest biorefineries under different price and policy structures," Energy Economics, Elsevier, vol. 33(6), pages 1165-1176.
    2. Paulo Henrique de Mello Santana, 2015. "Cost-effectiveness as Energy Policy Mechanisms: The Paradox of Technology-neutral and Technology-specific Policies in the Short and Long Term," Working Papers Working Paper 2015-02, Regional Research Institute, West Virginia University.
    3. de Mello Santana, Paulo Henrique, 2016. "Cost-effectiveness as energy policy mechanisms: The paradox of technology-neutral and technology-specific policies in the short and long term," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 1216-1222.

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