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Heat or power: how to increase the use of energy wood at the lowest costs?

Author

Listed:
  • Vincent Bertrand

    (Climate Economics Chair, Univ. Paris Dauphine, Paris, France
    CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France)

  • Sylvain Caurla

    (UMR INRA – AgroParisTech, Laboratoire d’Economie Forestière, 54042 Nancy Cedex, France)

  • Elodie Le Cadre

    (Climate Economics Chair, Univ. Paris Dauphine, Paris, France)

  • Philippe Delacote

    (UMR INRA – AgroParisTech, Laboratoire d’Economie Forestière, 54042 Nancy Cedex, France)

Abstract

We compute the optimal subsidy level to fuelwood consumption that makes it possible to achieve the French biomass energy consumption target. In this view, we model the competitions and trade-offs between the consumption of fuelwood for heat (FW-H) and the consumption of fuelwood for power generation (FW-E). To do so, we couple a forest sector model with an electricity simulation model and we test different scenarios combining FW-H and FW-E that account for contrasted potential rise in carbon price and potential reduction in the number of nuclear plants. We assess the implications of these scenarios on (1) the budgetary costs for the Government, (2) the industrial wood producers’ profits, (3) the costs savings in power sector for the different scenarios tested and (4) the carbon balance. We show that the scenario with the higher carbon price and the lower number of nuclear plants is the less expensive from a budgetary perspective. Indeed, when associated with a high carbon price, co-firing may increase FW-E demand with lower subsidy level, which enables reducing the cost of reaching the target. However, in this case, FW-E crowds-out part of FW-H which may cause political economy issues. From a carbon balance perspective, a FW-H only scenario better performs than any other scenario that combines FW-H and FW-E due to the relatively low emissions factors of alternative technologies for electricity generation, in particular nuclear energy.

Suggested Citation

  • Vincent Bertrand & Sylvain Caurla & Elodie Le Cadre & Philippe Delacote, 2017. "Heat or power: how to increase the use of energy wood at the lowest costs?," Working Papers - Cahiers du LEF 2017-03, Laboratoire d'Economie Forestiere, AgroParisTech-INRA, revised Mar 2017.
  • Handle: RePEc:lef:wpaper:2017-03
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    References listed on IDEAS

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    Cited by:

    1. Miguel Riviere & Sylvain Caurla & Philippe Delacote, 2020. "Evolving Integrated Models From Narrower Economic Tools : the Example of Forest Sector Models," Post-Print hal-02512330, HAL.
    2. Li, Zhimin & Pan, Yanchun & Yang, Wen & Ma, Jianhua & Zhou, Ming, 2021. "Effects of government subsidies on green technology investment and green marketing coordination of supply chain under the cap-and-trade mechanism," Energy Economics, Elsevier, vol. 101(C).
    3. Miguel Riviere & Sylvain Caurla, 2020. "Representations of the Forest Sector in Economic Models [Les représentations du secteur forestier dans les modèles économiques]," Post-Print hal-03088084, HAL.
    4. Chen, Shi & Huang, Fu-Wei & Lin, Jyh-Horng, 2022. "Life insurance policyholder protection, government green subsidy, and cap-and-trade transactions in a black swan environment," Energy Economics, Elsevier, vol. 115(C).

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    More about this item

    Keywords

    Forestry sector; Bioenergy; Biomass-based electricity; Carbon pricing; Nuclear power;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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