What makes one energy source replace another? Technology matters, and so does resource availability—but prices, taxes and subsidies can be just as decisive. Our study, Assessing external factors on substitution of fossil fuel by biofuels: model perspective from the Nordic region, explored how economic policy could influence the replacement of fossil fuels by forest-based bioenergy in the Nordic region. Rather than asking only whether enough biomass exists, the study focused on a more practical question: under what economic conditions does switching away from fossil fuels actually become attractive?
The model produced a clear message: policy instruments can reinforce each other. A subsidy for forest biofuels increased modelled biofuel demand and encouraged substitution away from fossil fuels, but the effect became considerably stronger when the subsidy was combined with a fossil-fuel tax. In that scenario, the estimated level of fuel substitution increased by around 31%. These figures are not predictions of what must happen in the real world. Instead, they illustrate the mechanisms at work: even relatively simple changes in relative prices can reshape demand, influence investment decisions and alter the competitiveness of renewable alternatives.
More than a decade later, this question has lost little of its relevance. Europe is simultaneously trying to reduce greenhouse-gas emissions, strengthen energy security and manage its biological resources sustainably. Forest biomass can contribute to this transition, but its role cannot be understood independently of markets, taxation, competing uses of wood and wider forest policy. The challenge is therefore not simply to produce more renewable energy, but to design incentives that encourage substitution where it is economically and environmentally sensible. More research on these questions can be found at the Biomass Production Research Group and on this research website.
KHANAM T, MATERO J, MOLA-YUDEGO B, SIKANEN L, RAHMAN, A. 2014. Assessing external factors on substitution of fossil fuel by biofuels: model perspective from the Nordic region. Mitigation and Adaptation Strategies for Global Change. doi: 10.1007/s11027-014-9608-xAbstract
The aim of this study is to develop a theoretical model by which to demonstrate how taxes and subsidies work as external factors to substitute fossil fuel by a forest-based biofuel. For biofuels, this study predominantly considers solid-form biomass that generates electricity; for fossil fuels, it considers coal. The model results explicated with three states by using various numeric values taken from the literature. Three states are as follows: a situation without a tax and subsidy, a situation with a biofuel subsidy, and a situation with a biofuel subsidy and a fossil fuel tax. The results of the first state exemplify current fuel market situation; those of the second indicate that the aggregate demand for biofuel has shifted upwards by around 15 % and that substitution has increased by around 18 % due to biofuel subsidies being offered. Under the third state, aggregate biofuel demand has shifted upwards by around 19 %, reduced the demand for fossil fuels by around 13 %, and increased substitution by around 31 %. This state relates to a greater sense of social welfare than other two states. It is conceivable that the joint application of taxes and subsidies will succour biofuel to supplant fossil fuel in the near future.
Mitigation and Adaptation Strategies for Global Change at Springer Link [link]
ResearchGate [link]
0 comments:
Post a Comment