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Global trade impacts of increasing Europe's bioenergy demand

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  • Johnston, Craig M.T.
  • van Kooten, G. Cornelis

Abstract

European governments are rapidly turning to biomass to comply with the EU's legislated renewable energy targets for 2020 and 2030. To do so, EU member states will likely have to increase imports of biomass from timber rich regions, which will undoubtedly disrupt international wood product markets. In this study, a static global forest trade model of coniferous wood products is used to examine the effects of expanded demand for wood pellets in Europe to generate reliable electricity. Positive mathematical programming (PMP) is used to calibrate the model to 2012 bilateral trade flows. To assess the impact of increased wood-pellet demand on global forest products, we consider a scenario where EU demand for wood pellets doubles. Model results suggest increases in the world prices of industrial roundwood (1%), particleboard ($34/m3), fibreboard ($30/m3), pulp ($65/t) and pellets (71% to 128%), while the prices of sawnwood and plywood & veneer are projected to fall by $12/m3 and $4/m3, respectively. The gains and losses are unevenly distributed between timber rich and timber poor regions; Russia, Canada and the U.S. experience large net welfare gains of $706 million, $544 million and $416 million, respectively, while Asia loses $1.8 billion. In the forest products sector, the gains outweigh losses with economic benefits increasing by some $4.9 billion, but this is a cost to the consumers of electricity and/or taxpayers in the regions implementing these renewable energy policies. The price of wood pellets is projected to rise between $107 and $154 per tonne. The findings highlight the need to account for the interconnections among softwood forest products globally.

Suggested Citation

  • Johnston, Craig M.T. & van Kooten, G. Cornelis, 2016. "Global trade impacts of increasing Europe's bioenergy demand," Journal of Forest Economics, Elsevier, vol. 23(C), pages 27-44.
    • Handle: RePEc:eee:foreco:v:23:y:2016:i:c:p:27-44
    DOI: 10.1016/j.jfe.2015.11.001
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    9. Oh, Juhyun & Suh, Dong Hee, 2024. "Exploring the import allocation of wood pellets: Insights from price and policy influences under the renewable portfolio standard," Forest Policy and Economics, Elsevier, vol. 161(C).
    10. Johnston, Craig M.T. & Parajuli, Rajan, 2017. "What's next in the U.S.-Canada softwood lumber dispute? An economic analysis of restrictive trade policy measures," Forest Policy and Economics, Elsevier, vol. 85(P1), pages 135-146.
    11. Bryngemark, Elina, 2019. "Second generation biofuels and the competition for forest raw materials: A partial equilibrium analysis of Sweden," Forest Policy and Economics, Elsevier, vol. 109(C).
    12. Jonsson, Ragnar & Rinaldi, Francesca & Pilli, Roberto & Fiorese, Giulia & Hurmekoski, Elias & Cazzaniga, Noemi & Robert, Nicolas & Camia, Andrea, 2021. "Boosting the EU forest-based bioeconomy: Market, climate, and employment impacts," Technological Forecasting and Social Change, Elsevier, vol. 163(C).
    13. Shayegh, Soheil & Sanchez, Daniel L. & Caldeira, Ken, 2017. "Evaluating relative benefits of different types of R&D for clean energy technologies," Energy Policy, Elsevier, vol. 107(C), pages 532-538.
    14. G. Cornelis van Kooten, 2020. "Climate Change and Agriculture," Working Papers 2020-01, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    15. 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.
    16. Lauri, Pekka & Forsell, Nicklas & Korosuo, Anu & Havlík, Petr & Obersteiner, Michael & Nordin, Annika, 2017. "Impact of the 2°C target on global woody biomass use," Forest Policy and Economics, Elsevier, vol. 83(C), pages 121-130.
    17. Lotte Visser & Ric Hoefnagels & Martin Junginger, 2020. "The Potential Contribution of Imported Biomass to Renewable Energy Targets in the EU–the Trade-off between Ambitious Greenhouse Gas Emission Reduction Targets and Cost Thresholds," Energies, MDPI, vol. 13(7), pages 1-30, April.
    18. Karner, K. & Dißauer, C. & Enigl, M. & Strasser, C. & Schmid, E., 2017. "Environmental trade-offs between residential oil-fired and wood pellet heating systems: Forecast scenarios for Austria until 2030," Renewable and Sustainable Energy Reviews, Elsevier, vol. 80(C), pages 868-879.
    19. Miguel RIVIERE & Sylvain CAURLA, 2018. "Integrating non-timber objectives into bio-economic models of the forest sector: a review of recent innovations and current shortcomings," Working Papers of BETA 2018-26, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    20. Fanny Groundstroem & Sirkku Juhola, 2021. "Using systems thinking and causal loop diagrams to identify cascading climate change impacts on bioenergy supply systems," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 26(7), pages 1-48, October.
    21. Bayramov, Vugar & Abbas, Gulnara, 2017. "Oil shock in the Caspian Basin: Diversification policy and subsidized economies," Resources Policy, Elsevier, vol. 54(C), pages 149-156.
    22. Brown, Terrence E. & Boon, Edward & Pitt, Leyland F., 2017. "Seeking funding in order to sell: Crowdfunding as a marketing tool," Business Horizons, Elsevier, vol. 60(2), pages 189-195.
    23. Johnston, Craig M.T. & van Kooten, G. Cornelis, 2017. "Impact of inefficient quota allocation under the Canada-U.S. softwood lumber dispute: A calibrated mixed complementarity approach," Forest Policy and Economics, Elsevier, vol. 74(C), pages 71-80.
    24. G. Cornelis van Kooten, 2016. "California Dreaming: The Economics of Renewable Energy," Working Papers 2016-05, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.

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    More about this item

    Keywords

    Bioenergy; Wood pellets; Forestry; Vertical and horizontal markets;
    All these keywords.

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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