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Modelling effects of policies for increased production of forest-based liquid biofuel in the Nordic countries

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  • Jåstad, Eirik Ogner
  • Bolkesjø, Torjus Folsland
  • Rørstad, Per Kristian

Abstract

The Nordic countries have ambitious plans to reduce the use of fossil fuels. One possible solution is to blend biofuel into the liquid fuel mix. A large share of this biofuel could potentially be produced from forest biomass, which is an easily available resource in the Nordic countries. However, technologies for producing liquid biofuel from forest-based biomass are immature, implying high risk for biofuel investors. This study assesses six different support schemes that may increase the attractiveness of investing in forest-based liquid biofuel production facilities. Furthermore, the study simulates the likely effects of policy schemes on the future production of forest-based liquid biofuels using a partial equilibrium forest sector model. The study applies an nth plant estimate for the costs of various biofuel technologies and analyses investment support, feed-in premiums, quota obligations, increase in fossil fuel taxes, biofuel tax exemptions, and support for using harvest residues. According to the model results, a feed-in premium gives the lowest needed subsidy cost for production levels below 6 billion L (25% market share) of forest-based biofuel, while quota obligation is the cheapest option for production levels above 6 billion L. The necessary subsidy level is in the range of 0.60–0.85 €/L (82–116% of the fossil fuel cost in 2030) for realistic amounts of biofuel production. The pulpwood prices increase up to 24% from the base scenario due to increasing biomass demand.

Suggested Citation

  • Jåstad, Eirik Ogner & Bolkesjø, Torjus Folsland & Rørstad, Per Kristian, 2020. "Modelling effects of policies for increased production of forest-based liquid biofuel in the Nordic countries," Forest Policy and Economics, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:forpol:v:113:y:2020:i:c:s1389934119301364
    DOI: 10.1016/j.forpol.2020.102091
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    References listed on IDEAS

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