D4.4 LESSONS AND RECOMMENDATIONS FOR EU AND NATIONAL POLICY

Transcription

1 1 D4.4 LESSONS AND RECOMMENDATIONS FOR EU AND NATIONAL POLICY FRAMEWORKS CALLIOPE PANOUTSOU, ASHA SINGH, IMPERIAL COLLEGE LONDON AYLA USLU, JOOST VAN STRALEN, ECN KEES KWANT, JOSE MUISERS, RVO LUC PELKMANS, NATHALIE DEVRIENDT, VITO

2 Contents Introduction... 3 Rationale for a resource efficient bioenergy policy... 4 What do we consider integration in a biomass policy framework?... 4 Lessons and recommendations for policy in the agricultural sector... 5 Country analysis... 7 Value chains Lessons and recommendations for policy in the forest sector Country analysis Value chains Lessons and recommendations for policy in the organic waste sector Country analysis Lessons and recommendations for policy in the biomass heat sector Country related lessons Value chains Lessons and recommendations for policy in the biomass electricity sector Country related lessons Value chains Lessons from policy in the biofuels for transport sector Country related lessons Value chains Conclusions

3 Introduction The Biomass Policies project has been financed by Intelligent Energy Europe and aimed to develop integrated policies for the mobilisation of resource efficient indigenous biomass value chains in order to contribute towards the 2020 bioenergy targets set within NREAPs & 2030, and other European and national policies. It did so by capitalising on the knowledge of three recent studies (Biobench; Biomass Futures and a study for the European Environment Agency) and through collaboration with selected Energy Agencies in the participating countries, i.e. AT, BE, DE, EL, ES, FI, HR, NL, PL, SK and the UK as well as key stakeholders from the policy and market sectors. It aimed to impact the Member State (MS) policy for the mobilization of indigenous resource efficient biomass value chains, with the focus on highly relevant value chains and recommendations for improved financial support mechanisms. The active involvement of national agencies in the project highly increases the expected impact at national policy level. The aim of this report is to provide an overview of the lessons and suggested recommendations for future integrated biomass policy in EU and the Member States. The report is structured in a way that provides guidance and recommendations for the upstream (per feedstock supplying sector) and downstream (per energy use sector) and for specific market segments/ value chains which are considered most promising for market uptake by In addition, the lessons and information presented in each of the abovementioned sections are further grouped and analysed: per country where good practices have been identified with recommendations for other Member States with similar characteristics in terms of agriculture, forestry and waste management (based on the project analysis) per value chain for the ones that have been considered as most promising following the modelling performed in the project by RESolve. 1 Based on the project modelling results with RESolve model 3

4 Rationale for a resource efficient bioenergy policy The Biomass Policies project based its work on the following definition for resource efficiency: 2 All resources are sustainably managed, from raw materials to energy, water, air, land and soil. Climate change milestones are reached, while biodiversity and the ecosystem services are protected, valued and substantially restored. What do we consider integration in a biomass policy framework? Within the Biomass Policies project, integration for developing a biomass policy framework has been analysed based on a three pillar approach: Integration of specific policy mechanisms in the biomass value chain components. The mechanisms have been selected, based on benchmarking previous policies and several consultations with national policy makers, so that they can work complementary to enhance resource efficient feedstock uptake and secure supply for efficient conversion technologies. Integration of various types of policy mechanisms by combining a set of regulatory, expenditure and information provision policy mechanisms that are applied across value chains and sectors to ensure resource efficient uptake, successful market development and maintenance of existing capacities in the country of analysis. Integration of sectorial policy which reflects both the upstream and downstream policies required within specific value chains to ensure both resource and energy efficiency. The policy interventions are categorised in the groups as described in Table 1 below: Table 1 Policy measures 3 Regulations Quotas Financial support Product standards Targets & qualifying criteria for incentives Green procurement Grants/ feedstock premium Feed in Tariffs/ Feed in premium Tax incentives User charges Research funds Information provision (soft measures) Best Practices/ Lessons learnt Promotion Capacity building Awareness raising 2 Roadmap to a resource efficient Europe; SEC & 1068 final 3 Regulation type policy interventions are red; financial support measures are blue and information provision interventions are yellow. 4

5 Lessons and recommendations for policy in the agricultural sector Agricultural biomass has high shares in the overall European biomass potentials. This has been reported by numerous studies and is also confirmed from the recent findings of the Biomass Policies project. However, due to the diversity of agro-food chains among regions and farming systems policy coherence Is a critical element required to mobilise agricultural residue streams. Sectorial policies between agriculture, food, energy, environment and economy/ enterprise must also be aligned in the formation of future policy at national, regional and local level. of policy and market stage development where they fit best. Policy for agricultural biomass to energy has been promoted through Common Agricultural Policy (CAP) since 2003, starting with the Energy Crops subsidy. Alongside there have been a number of mechanisms in the individual Member States, such as Austria, Germany, etc. However, despite their technical potentials being rather high, straw and other agricultural residues use for energy purposes remains very limited (mainly happening for local heat demand) in the participating countries and the existing policy dedicated to this feedstock (i.e. in the form of feedstock bonus) has not resulted in increased use for energy purposes. Table 2 provides an overview of the main types of policy mechanisms that can be applied for agricultural biomass per value chain step, type Table 2 Policy mechanisms for agricultural biomass 4 per value chain step, type of policy and market stage development Regulatory Expenditure Information provision Mechanism Common Agricultural Policy Act on ecological products and farming practices Nitrates Directive (91/676/EEC) Certification/ Standardisation Investment subsidies, direct payments Crop (non-food) Production Harvesting/ Collection Logistics Early markets Early markets Early markets R&D Grants Early markets Early markets Tax exemptions Trade Strategies/ Action plans Early markets Early markets Early markets Early markets Capacity building Early markets 5 Early markets Early markets 4 Agricultural biomass within the Biomass Policies project comprises of field agricultural residues, manure, by- products and residues from agro-industries (including plant and animal based ones). 5 To introduce new varieties and farming systems 5

6 The key policy suggestions 6 for the agricultural biomass sector are presented below: Design expenditure mechanisms which will support the integration of food production with energy both at field (field residues) and within agro-industries (processing residues). These mechanisms can be combined with respective regulations that foster sustainable farming and renewable energy in agro-industries. Expenditure measures should favour the development and/ or upgrade of biomass logistics/ trade centers, etc. in order to facilitate the development of local capacities with high quality standards which will further trade un-mobilised indigenous biomass sources. Research grants should target the development of high yielding varieties with tolerance in the regional climate and ecology (e.g. high temperature and low rainfall for the southern EU countries, etc.) Introduce modules for agricultural biomass in regular training activities and/ or awareness campaigns for farmers, farmer cooperatives, etc. The following policy mechanisms are recommended to reinforce agricultural biomass mobilisation at local and regional level: Regulations: Ensure CAP measures from Pillar I and Pillar II are integrated into local planning and there are provisions for indigenous agricultural biomass feedstocks. In detail: CAP, pillar 2 Rural development: Introduce (where they are not existing) targeted national and/or regional rural development programmes focusing on shift to low-carbon economy (including onfarm renewable energy production). Expenditure mechanisms: Adapt and/ or develop local support/ financing actions for biomass logistics at local scales (e.g. trade centers) CAP P1 Direct Payments: Ensure that budget from Green Direct Payments includes appropriate crop diversification activities matched to local ecosystems and practices which can lead to optimised biomass mobilisation, including sustainable harvesting of residues. Provide support in the form of grant or tax exemptions for improving existing wood trade centers to include other biomass forms, such as straw bales, prunings, etc. Introduce new varieties with higher yields and good adaptation to local ecosystems and reinforce research programmes on selection and adaptation of varieties suitable to local ecosystems. Information provision mechanisms: Transfer knowledge and improve human resource capital Capacity building to existing wood trade centers on handling agricultural residues as well. Capacity building for improved quality handling and storage of straw and other field agricultural residues (e.g. prunings, etc.) Learn from Good Practices (e.g. Danish programme on straw for energy) 6 Policy suggestions are drawn from the Biomass Policies project work in the 11 participating Member States and from available literature for the non-participating ones. 6

7 Country analysis Table 3 provides a detailed overview of current policy mechanisms in the 11 Member States that participated in the Biomass Policies project and groups them in regulatory, expenditure and information provision to allow consistency in the analysis. 7

8 Table 3 Overview of current successful policy measures for agricultural biomass in selected Member States Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 7 Member State where the suggested policy mechanism can be employed Austria (straw) CAP implementation (LWG Landwirtschaftsgesetz): Common Agricultural Policy (CAP) provides a framework for financial support to farmers (Pillar 1 Direct Payments) and national rural development programmes (Pillar 2 Rural Development). In 2015 the new Austrian CAP (LWG) came into force. Support for using alternative feedstocks in biogas plants under the Rural Development Programme: This measure under the Rural Development Programme also aims at reducing the arable land used for biogas production by promoting alternatives to feed crops being used in agricultural biogas plants. Under the measure Support for investments in creating and developing nonagricultural activities, investments facilitating the use of at least 50% non-feed crops, intercrops, alfalfa, grass clover, crop residues, manure etc. in existing biogas are subsidized to the extent of 35%. ÖPUL Austrian Agri-environmental Programme 2007 (Österreichisches Agrar-Umweltprogramm ÖPUL): Unlike some other EU countries which apply their environmental programmes only in specific, environmentally sensitive areas, Austria chose an integral, horizontal approach for its agri-environmental program, aiming at the participation of Austrian farmers all over the country. In 2012, 526 million euros were paid to 11,200 holdings for 2.2 million hectares under the programme. Around 110,200 farms, i.e. 74.6% of all agricultural holdings, managing 89% of the utilised agricultural area, participate in ÖPUL. This high participation rate in the Agri-environmental Programme puts Austria first among the EU Member States. The areas covered by ÖPUL (not including pastures) account for approximately 2.20 million hectares. The average aid amounted to 4,800 euros per holding. Regulation on agricultural raw materials for biofuels and bioliquids (Verordnung über Landwirtschaftliche Ausgangsstoffe für Biokraftstoffe und flüssige Biobrennstoffe 2010 BioVO): This act regulates the proof of sustainability of agricultural sources used for the production of biofuels. It includes the basic rules for documentation, monitoring, collection and transmission of relevant data. Tailored investment support with market sector focus Further to this Austria has long tradition in deploying woody biomass for energy purposes so the integration of agricultural biomass was added to the welldeveloped infrastructure and mature markets as additional feedstock type. UK, HR, FR, LU SI, SE, PL, PT, DE, GR, IT 7 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 8

9 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 8 Member States where the suggested policy mechanism can be employed Germany Perennial crops straw For biomass power plants that were put into operation between 2009 and 2012 the EEG provides an bonus on the feed-in tariff for the utilization of material from landscape management. So far, the bonus had only little impact on the development of perennials. Most farmers are used to react to market developments on a yearly basis. For them, perennials means a commitment to one crop for a couple of years. The programme Gemeinschaftsaufgabe Agrarstruktur und Küstenschutz seeks to provide farmers with financial support for the cultivation of short rotation coppices. The measure is applied in some federal states and is limited to the period It is required that at least 3000 trees are planted per hectare and that the land under cultivation is not dedicated to other crops for a period of 12 years. Germany is a large producer of agricultural commodities resulting in a significant potential of straw. But, to date there is only little use of it for energy. This is due to economic reasons, as production costs of conversion technologies for heat, power and fuel for transportation are all higher than the production costs of reference technologies [11]. The support mechanisms in force aren t sufficient to create economic viable concepts for straw as feedstock. Straw as feedstock for the production of lignocellulose ethanol biofuels can be counted towards quota obligations and benefit from an energy tax relief. Another support mechanism is the EEG. Biomass power plants that were put into operation between 2009 and 2014 can receive a bonus for the power production from straw. The utilization of straw in boilers smaller than 100kW benefit from emission thresholds that are higher than for biomass feedstock. In contrast to that the requirements for the utilization of straw in boilers larger than 100kW are very strict. Tailored investment support with market sector focus Further to this Germany has long tradition in deploying biomass for energy purposes so the integration of agricultural biomass was added to the welldeveloped infrastructure and mature markets as additional feedstock type. SI, LU, UK, AT HR, IE, FR, IT 8 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 9

10 Value chains Agricultural biomass is projected (based on modelling results from the project) to reach 294 million dry tonnes (76.3 Mtoe) in 2030 for the RED sustainability scenario while it presents an upward trend for the scenario that includes sustainability criteria for all bioenergy carriers, reaching to 339 million dry tonnes (88 Mtoe). This increase is mainly due to higher mobilisation rates from cereal straw and grain maize stover, as shown in Figure 3 below. Figure 1 Agricultural biomass potentials (in million dry tonnes) in 2030 for different sustainability criteria in the two scenarios In aggregate numbers, straw & stubbles in the scenario which places sustainability for all carriers account for 65.5 million dry tonnes while in the RED sustainability the respective figure is only 35.5 million dry tonnes. Table 4 below presents the suggested policy interventions per value chain and market maturity stage for the ones that have been considered as most promising following the modelling performed in the project by RESolve. 10

11 Table 4 Suggested policy interventions for market segments and agricultural value chains where biomass is expected to play major role from 2020 to 2030 Market segment Households Services Industry Utility Bioethanol 2 nd Value chain Suggested policy interventions Barrier/ gap/ specific challenge the intervention will address Added value expected from their implementation Early markets Early markets Early markets Straw and agricultural residues for small scale local heating plant (0.15 MW) Straw and agricultural residues for CHP > 10 MW Direct co-firing coal process Cellulose-EtOH Feedstock premium Capacity building Feedstock premium Investment grant for biomass trade centers Capacity building Certification/ Standardisation Premiums targeting specific indigenous feedstocks Feed in premiums with banding for feedstock choice Technology & innovation bonus prioritising agricultural biomass stream There is no or very low market uptake for straw and agricultural residues Lack of knowledge on straw for bioenergy Lack of infrastructure for straw storage and logistics Good market development for agricultural residues Competition for feedstock requires measures to mobilise other indigenous biomass streams Competition for feedstock requires measures to mobilise other indigenous biomass streams Develop the market Provide renewable energy heating option to rural populations Support income diversification for farmers Mobilise indigenous resources with low competition from non-energy industries 11

12 Lessons and recommendations for policy in the forest sector Not all forest ecosystems are the same in Europe. Future policy for forest biomass should: build on local circumstances learn from Best Practices form suitable incentives per cluster of countries that face similar issues (e.g. storm prone areas: bring down stock; drained peat areas: reduce drainage; high stocked area: bring down stock and combine with innovation in products; outgrown coppice: regenerate, stimulate local biomass innovation and plant adapted species, etc.; source: European Forest Institute) Private vs public forests: different measures are required to foster increases and improvements in production Forests and other wooded land in EU28 account for 180 million ha (42% of the total EU land). From these 40% are publically owned while the rest 60% belongs to almost 16 million private forest owners. Annual fellings account for 60% of the net annual increment and almost half of the EU forests are certified. The EU forest sector faces multiple and increasing demands with forest based bioenergy accounting for 50% of total EU renewable energy consumption while in the same time wood is considered as an important source of raw material in non energy biobased markets as well (green chemicals, viscose, bioplastics, etc.). Policy for forest biomass to energy has been promoted since the early Alongside EU mechanisms there are a number of policies in the individual Member States, which facilitate sustainable forest management and mobilise forest biomass for energy and industrial purposes. Scandinavian countries (Finland and Sweden), Austria and Germany are frontrunners both in policy and market development. The key project findings for the forest biomass sector are presented below: Forest biomass is expected to continue playing a very strong role in bioenergy from 2020 to Harvested biomass & residues in the timeframes should not exceed annual increment in most countries. Sustainability regulations should ensure resource efficiency and criteria must be applied across all products. Mobilisation of additional stemwood harvest (for biobased markets) will also result to additional residues so policy mechanisms should be tailored to work synergistically and foster the use of low competition unused forest streams. Improvement in forest management especially in south- east and parts of central Europe and efficient use of harvested biomass are expected to sustain high rates of forest biomass mobilisation. The main types of policy mechanisms that can be applied to forest biomass are outlined in Table 5 below following a value chain perspective and grouped in regulatory, expenditure and information provision (soft measures). Further indications are provided for the market maturity stage where the respective measures fit best. 12

13 Table 5 Biomass policy mechanisms for forest biomass 9 per value chain step, type of policy and market stage development Regulatory Mechanism Afforestation Harvesting/ Collection Regulations: Early markets EU timber regulations Logistics Trade Expenditure Information provision Certification/ Standardisation Certification/ Standardisation Loans, Credit lines R&D Grants Early markets Early markets Investment Tax exemptions subsidies R&D Grants Strategies/ Early markets Early markets Early markets Action plans Tax exemptions Capacity building Early markets Early markets Early markets EU Forest Strategy Strategies/ FLEGT Forest Law Action plans Enforcement, Governance and Trade LULUCF Targets/ Obligations Certification/ Standardisation The findings from the Biomass Policies project at EU level are fully aligned with the new EU forest strategy and the key policy suggestions focus primarily on: Increased information provision measures towards private forest owners by means of capacity building and awareness campaigns at national and regional level. Encourage forest certification activities at national level: forest certification schemes and sustainable forest legislation are considered by the project findings as key mechanisms to ensure sustainability in practices and biomass supply. National preconditions could be better taken into account by national policy. Develop new or tailor existing financing towards multifunctional and sustainable forest management activities that will include use of residuals for energy and other biobased products. Cascading implies the sequential use (in time and product flows) of biomass across various end use sectors from high to low added value products. As such, it should: be used as an underlying principle in policy. form part of the circular economy and facilitate the re-use of wastes through value chains that ensure end product efficiency and long term sustainability. be taken into account when developing policy both at EU28 and Member States but its implementation should be steered by well- functioning markets. 9 Forest biomass within the Biomass Policies project comprises of: primary forest residues, secondary forest residues, roundwood and landscape care wood. 13

14 Country analysis Table 6 provides a detailed overview of current policy mechanisms in the 11 Member States that participate in the Biomass Policies project and groups them in regulatory, expenditure and information provision (soft measures) to allow consistency in the analysis. 14

15 Table 6 Overview of current successful policy measures for forest biomass in selected Member States Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 10 Member States where the suggested policy mechanism can be employed Austria Waste wood Regulation on recycling of waste wood (RecyclingholzV): The objective of this ordinance is an efficient recycling of waste wood by the wood industry. This has to be made without any impacts on humans and the environment. The directive should avoid any accumulation of hazardous substances and supports the sorting of waste wood for reuse and recycling in accordance with the Waste Management Act AWG. A basic requirement is that the application of wood should have the same environmental risks as the usage of primary wood materials. Well managed forest industry Strong biomass market development SK, SI, PT, RO, FR, LT, PL HR, BG, CZ, HU, LU 10 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 15

16 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors11 Belgium Industrial wood residues Decree of 27/06/2003 for establishing the criteria for sustainable forest management for forests situated in the Flemish Region: The management of public forests and forests situated in the VEN (Flemish Ecological Network) should be done according to the criteria for sustainable forest management. Subsidies for afforestation and forest management Subsidies for the purchase of land for afforestation: Subsidies are provided to cities, municipalities and provinces to buy land for afforestation. The subsidy amounts to 80% of the buying price, with a maximum of 2.5/m². Priority is provided to the realisation of urban fringe woodlands, play areas and the strengthening of local forest expansion initiatives. Also, priority is given to projects situated in special protection areas which contribute to the realization of the specific conservation objectives of this special protection area. Subsidies for the afforestation of agricultural land: Subsidies are provided for the afforestation of agricultural land if three conditions are met: (1) a minimal surface within the Flemish region has to be afforested, (2) the land has been used for agriculture at least one year within the last five years and (3) the land will have to be afforested for at least 25 years. The subsidy consists of a plantation subsidy, maintenance subsidy and income compensation. Subsidy for the ecological function of forests: The Flemish government provides subsidies to stimulate the ecological function of forests. Subsidies are provided to those forest managers that have an approved management plan in accordance with the criteria for sustainable forest management. Subsidies for reforestation or afforestation: Subsidies for the reforestation or afforestation with native tree species. The goal of the subsidies is to stimulate the usage of tree species that are most suited from an ecological point of view. Subsidies for the opening of private forests: The demand for green space and play areas in Flanders is large, therefore, the Flemish government provides subsidies to private forest owners to open up their forest. Subsidies for the preparation of a forest management plan: Forest owners that prepare a comprehensive forest management plan, in which criteria for sustainable forest management are taken into account, can apply for a subsidy. The reason is that costs for a comprehensive forest management plan can be high due to the strict requirements (e.g. forestry and vegetation measurements). High presence of industry with good knowledge and urgency to find optimal ways for resource and energy efficient uses of available residues. Member States where the suggested policy mechanism can be employed UK, NL, DK, LU IE, DE 11 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 16

17 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 12 Member States where the suggested policy mechanism can be employed Finland Forest Strategy Finland Afforestation Private forest owners Finland Forest certification Government report of Forestry the most important measures included are: Create the conditions for renewal of enterprises in the field through business policy and legislation. Create the conditions for business-like and active forestry, for example, by developing taxation and improving the structure of holdings and forest ownership. Secure the supply of raw materials and improve the functioning of the markets. Target R&D activities by means of public funding to support the renewal of forest-based business and activities and transition to bioeconomy. Secure the biodiversity of forest nature, ecosystem services and ecological and social sustainability of forests Act on the Financing of Sustainable Forestry (1094/1996, 1311/1996, 544/2007, 100/2011, 34/2015, 594/2015) and degree (from the annual appropriations included in the State budget in the form of aid and loan shall be allocated for measures which promote the sustainable management and use of forests in accordance with the Forest Act (1093/1996) as provided in this Act. The measures referred to in subsection 1 above are: 1) ensuring the sustainability of timber production; 2) maintaining the biological diversity of forests; 3) forest ecosystem management projects; and 4) other measures in support of the activities referred to in subsections 1-3. Financing may be granted to private landowners upon application. Nonindustrial, private forest owners are entitled to seek governmental grants for the afforestation of understocked areas, prescribed burning, the tending of young stands, the harvesting of energy wood, forest recovery, fertilisation, etc. The Ministry of Agriculture and Forestry pays support for the harvesting, forestry transport and chipping of wood sold for fuel as part of the management of young stands. Finnish PEFC certification requirements have been documented in 29 criteria that define forest certification requirements for ecologically, socially, culturally and economically sustainable forest management and forest use. Like with other types of certification, legal compliance is the basic requirement also in forest certification. Finland is a country with well managed forests and long tradition in sustainable forest management practices and forest biomass energy. Key success factors include consistency and continuity of measures; adoption of new mechanisms and efficient adaptation to include innovations. Further to this, Finnish stakeholders across policy and industry are well informed and there are efficient communication channels which allow them to be informed with all relevant technical and scientific evidence. AT, S, DE, LT, ES 12 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 17

18 Value chains The key findings (based on modelling results) from the Biomass Policies analysis can be summarised as follows: Harvested biomass and residues in the timeframes do not exceed annual harvest increment (AHI) in most countries. The rates across countries and scenarios vary between 60% & 85% of the AHI, with the exception of Croatia, Estonia, Luxemburg, Slovakia and Slovenia. Mobilisation of additional stemwood harvest (for biobased markets) also results to additional residues (see disaggregate numbers per feedstock in Figure */*). Improvement in forest management especially in south- east and parts of central Europe and efficient use of harvested biomass are expected to sustain high rates of forest biomass mobilization. Figure 2 Forest biomass potentials (in million dry tonnes) in 2030 for different sustainability criteria in the two scenarios In detail, the observed increase from 359 million dry tonnes (93.2 Mtoe) in the RED Sustainability scenario to 450 million dry tonnes (116.8 Mtoe) can be attributed to the following factors: Increased roundwood harvests for all industries (48 million dry million tonnes roundwood increase to meet the new demand for all biobased industries is projected by the EFISCEN mobilisation scenario; the number is equivalent to the 2010 stemwood demand in Sweden and Finland together but the total figure is spread in the EU28 countries. The higher shares are expected in Sweden (9.2 million dry tonnes), Germany (7.6 million dry tonnes), France and Poland (approximately 5 million dry tonnes), Romania (3 million dry tonnes) and Austria, Spain and Czech Republic following with approximately 2 million dry tonnes. Mobilisation of residues: the increased roundwood harvest is expected to also increase the amount of primary and secondary forest residues (see Figure 8 for details per forest feedstock type) by a total of 43 million dry tonnes. Table 7 below presents the suggested policy interventions per value chain and market maturity for the ones that have been considered as most promising following the modelling performed in the project by RESolve. 18

19 Table 7 Suggested policy interventions for forest biomass in energy & biofuel market segments and value chains where biomass is expected to play major role from 2020 to 2030 Market segment Households Services Value chain Suggested policy interventions Barrier/ gap/ specific challenge the intervention will address Added value expected from their implementation Early markets Early markets Early markets Residential wood chips boilers - small scale (10 kw) Wood chip boilers-large size (50 kw) Industry CHP using solid biomass > 10 MW CHP using solid biomass MW Loans Credit lines Investment grants Capacity building Investment grants Certification/ Standardisation Premiums targeting specific indigenous feedstocks Feed in premiums with banding for feedstock choice Technology & innovation bonus prioritising agricultural biomass stream Market is not developed High shares of low & polluting stoves used Market is not developed Good integration of efficient stoves Competition for feedstock requires measures to mobilise other indigenous biomass streams Mobilise unused biomass streams with low competition Develop the market Share the costs with medium to low income population in rural areas Develop the market Mobilise indigenous resources with low competition from non-energy industries 19

20 Lessons and recommendations for policy in the organic waste sector Wastes should not be wasted Refine terms and conditions in the Waste Directive and account for all potential uses and waste transportation issues. Feedstock bonus to mobilise unutilised potentials: It is essential to introduce feedstock bonus schemes for the most important biomass feedstocks which remain unmobilised. The scheme could be in the form of premium with favourable pricing Policy for organic wastes to energy is promoted primarily through the EU Waste Directive. Alongside there are a number of mechanisms in the individual Member States. For organic wastes Austria, the Netherlands and Germany hold the best management practices. These countries all have comprehensive waste collection systems, landfill generally less than 5% of their waste, well developed recycling systems, sufficient treatment capacity, and they perform well with biodegradable wastes. The main ones are outlined in Table 8 below following a value chain perspective, grouped in regulatory, expenditure and information provision. Further indications are provided for the market maturity stage where the respective measures fit best. Table 8 Biomass policy mechanisms for organic wastes per value chain step, type of policy and market stage development Mechanism Collection/ Sorting Logistics Trade Regulatory Regulations Certification/ Standardisation Expenditure Loans, Credit lines Early markets Early markets Investment subsidies R&D Grants Early markets Early markets Early markets Information provision Tax exemptions Strategies/ Action plans Targets/ Obligations Early markets Early markets Early markets At this point it is important to mention that for the analysis in the Biomass Policies project we have grouped municipal solid waste (MSW), landfill gas, organic waste from industry and collected vegetables, fruit and garden waste (collected VFG) under the value chain Organic waste. Of course there are other ways to categorize. For example, sewage sludge could be put under Organic waste. 20

21 However, in this study sewage sludge has been analysed as a different value chain (wastewater sludge). The key findings from the project modelling for the waste sector and the future energy recovery from organic wastes and wastewater sludges are: There is a significant potential of organic waste for anaerobic digestion that can become available and can be utilized if separated organic waste is first digested and afterwards utilized for composting purposes. By going up the waste hierarchy, via increased shares for separately collected organic waste, the amount of organic waste that will be used for energy generation is expected to decline. For making reliable modelling estimations of the wastes shares in the overall renewable energy (RES) mix it would be good to have a reliable potential for digestion under different waste separation regimes, and have better understanding of to what extent, and which volumes, organic waste can be mixed with wet manure to be applied in manure co-digestion. Solely an increased support level for anaerobic digestion of organic waste is not enough to see this option being used: upfront a significant improvement in waste separation needs to take place as well. The key policy suggestions 13 for the agricultural biomass sector are presented below: Regulations Refine terms and conditions in the EU Waste Directive and respective legislation in Member States and account for all potential uses of organic wastes. Introduce measures for sorting wastes at source to increase the availability of organic waste fractions. Expenditure mechanisms Investments subsidies might not be the best support measure to stimulate for anaerobic digestion of organic waste, followed by upgrading to biomethane for injection in the gas grid. The reason is that due to the relatively high O&M costs the financial gap remains positive. A production support measure, like a feed-in premium, seems more appropriate. Information Provision mechanisms Capacity building on CHP in industry and waste management sectors Country analysis Table 9 provides a detailed overview of current policy mechanism in the 11 Member States that participate in the Biomass Policies project and groups them in regulatory, expenditure and information provision (soft measures) to allow consistency in the analysis. As a general remark, it is worth mentioning that among the participating countries Austria, the Netherlands and Germany hold the best organic waste management practices. These countries all have 13 Policy suggestions are drawn from the Biomass Policies project work in the 11 participating Member States and from available literature for the non-participating ones. 21

22 comprehensive waste collection systems, landfill generally less than 5% of their waste, have well developed recycling systems, sufficient treatment capacity, and they perform well with biodegradable waste. 22

23 Table 9 Overview of current successful policy measures for biomass from organic wastes in selected Member States Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 14 Member States where the suggested policy mechanism can be employed Austria Germany Waste management: The legal framework for waste treatment in Austrian is the Waste Management Act The waste treatment hierarchy defined in this legislation is intended to promote (1) waste prevention, (2) reuse and recycling and, as an ultimate option instead of disposal on landfills, (3)energetic utilization. For biowaste and packaging paper waste, there is an obligation for separate collection. An effective waste paper collection system is in place, providing separate bins for almost every household. Originators of biogenic waste are obliged to deliver the waste either to home or community composting facilities, make it available for separate collection or bring it to an appropriate collection point. EU Landfill Directive: EU legislation aimed at diverting biodegradable municipal waste from landfills has been adopted in Austria before respective regulations under the EU Landfill Directive came into force. A reduction of biogenic MSW landfilling to almost zero was achieved through a landfill ban for untreated waste with total organic carbon content over 5%. This ban already came into effect in 2004 (with exemptions until 2008). Furthermore, a special tax for landfilling waste is in place. EEG: Renewable Energy Sources Act: The EEG in Germany supports the anaerobic digestion from organic wastes by means of higher feed in tariffs. To be eligible for the bonus, the biogas has to be produced by a minimum of 90% biodegradable waste within the period of one year. Waste disposal: The Legislation on the advancement of the recycling economy and securing environmental friendly waste disposal (Kreislaufwirtschaftsgesetz-KrWG) transforms the guidelines of the Directive 2008/98/EC into national law. The Legislation aligns the term of waste with the European term and expands it. It describes the waste hierarchy and the separate collection of waste. Austria has long tradition in waste management with strong measures and the essential infrastructure. Germany has long tradition in waste management with strong measures and the essential infrastructure. NL, DE, BE, SE, DK LU NL, DK, AT SE, BE 14 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 23

24 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 15 Member States where the suggested policy mechanism can be employed Belgium Netherlands Material Decree and Vlarema: The use of organic waste is bound to the regional translation of the EU Waste Frame Directive. In Flanders the use/treatment of waste is regulated by the Material Decree and Vlarema. In practise this means that organic waste can be collected separately and can be used for combustion, digestion or composting. Historically composting was one step higher on the priority ranking than digesting and combustion. New insights based on life cycle thinking have opened possibilities (evaluated case by case) for digestion of organic waste combined with composting of organic waste. VLAREM II and VLAREM II The collecting and treatment of organic waste is regulated by environmental policy measures, covering the environmental permits of the installations. In Flanders this is specified in VLAREM I and VLAREM II. An installation using organic waste as feedstock for bioenergy has to fulfil stricter regulations (e.g. flue gas emissions) than a bioenergy installation only using fresh biomass. The Netherlands has implemented a strategic initiative in order to promote anaerobic digestion of MSW-derived organics. The country has a very well developed infrastructure for natural gas, the government intends to produce a large amount of biomethane which can be distributed across the country. The Netherlands has the ambition to replace 15 to 20%of the natural gas by green gas by The new insights based on life cycle thinking to use organic wastes for digestion before an existing composting facility, can unlock the already separately collected biowaste as feedstock for bioenergy. By coupling digestion to an existing composting facility the recycling of the material to compost stays in place. Calculations of different case studies reveal that by coupling both technologies, a reduction of circa 15% of compost is the disadvantage in comparison of the gain of 100 m³ biogas per ton of organic waste. Vegetables, Fruit and Garden waste is collected separately in the Netherlands. In general this stream, but also the organic fraction of municipal solid waste and organic residues from food and beverage industry are used as feedstock within the SDE+ category all feedstock digestion, SE, NL, AT DE, DK AT, DE, BE, SE, DK 15 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 24

25 Value chains Waste biomass is projected (based on modelling results from the project) to reach 105 million dry tonnes (27.23 Mtoe) in 2030 for the RED sustainability scenario while it is slightly reduced for the scenario that includes sustainability criteria for all bioenergy carriers, reaching to 94.6 million dry tonnes (24.55 Mtoe). Figure 3 Waste biomass potentials (in million dry tonnes) in 2030 for different sustainability criteria in the two scenarios At this point it should be highlighted that the above potentials exclude non energy uses but do include the energy ones. The overall picture shows that the waste potential available per country does have a very strong relationship with the size of population or economy. At the same time smaller waste levels are seen then one would expect by the size of the population and economy. The countries with the largest household waste potentials are Germany, Spain, France, Italy, Romania and UK. The countries who have a large household waste potential in combination with low energy recovery, thus high disposal and incineration without energy recovery rate, are particularly Spain with 86%, Poland with 92%, Italy with 82%, Hungary with 86%, Greece with 100% and Slovakia with 88% disposal and incineration without energy recovery. France has a bit higher energy recovery of household waste but disposal and incineration without energy recovery is still at 66%. Table 10 below presents the suggested policy interventions per value chain and market maturity for the ones that have been considered as most promising following the modelling performed in the project by RESolve. 25

26 Table 10 Suggested policy interventions for organic wastes in energy & biofuel market segments and value chains where biomass is expected to play major role from 2020 to 2030 Market segment Value chain Suggested policy interventions Barrier/ gap/ specific challenge the intervention will address Added value expected from their implementation Early markets Early markets Early markets Industry/ Utility anaerobic digestion Investment Transport anaerobic digestion + grants upgrading to methane Capacity building Premiums targeting specific indigenous feedstocks Technology & innovation bonus Market is not developed High shares of low & polluting stoves used Competition for feedstock requires measures to mobilise other indigenous biomass streams Develop the market Mobilise indigenous resources with low competition from non energy industries 26

27 Lessons and recommendations for policy in the biomass heat sector Although biomass heat dominates the biomass market sector, there are still many gaps in policy at Member State level. Two of them are considered critical both to developing the markets and maintaining market shares for resource and energy efficient biomass to heat value chains: Need to finance individual heating systems in buildings especially in MSs with high stock of inefficient boilers. Improve knowledge and local market capacities. During the last fifteen years, biomass heat has been promoted through a variety of policy mechanisms in the individual Member States, which have operated as single or combination of measures (that is in general more effective towards market development and sustaining existing capacities). The main ones are outlined in Table 11 below following a value chain perspective, grouped in regulatory, expenditure and information provision. Further indications are provided for the market maturity stage where the respective measures fit best. Table 11 Biomass policy mechanisms for biomass heat per value chain step, type of policy and market stage development Mechanism Biomass supply Conversion Distribution End Use Regulatory Regulations Early markets Certification/ Standardisation Public procurement Expenditure Loans, Credit lines Investment subsidies Early markets Early markets Early markets R&D Grants Early markets Early markets Information provision Tax exemptions Tariffs/ Premiums/ Tendering schemes Strategies/ Action plans Targets/ Obligations Early markets Early markets Early markets The key project findings for the biomass heat sector are presented below: 27

28 Policy mechanisms should cover two or more value chain steps to ensure they facilitate uptake and market development. The most common combination in biomass heat is expenditure measures for the conversion part with simultaneous support at local/ regional levels for farmers and foresters to develop/ improve the supply chains on site (e.g. biomass trade centers, provision of equipment such as chippers, pelletisers, etc.). Loans, credit lines and investment subsidies are very effective for the development of new market capacity. In countries with low market development of resource (appropriate seasoning of forest biomass, etc.) and energy efficient (modern boilers, stoves) biomass heat, they function better if they are combined with information provision activities such as capacity building, awareness campaigns, etc. Taxation in the form of tax credits for biomass or tax for the fossil fuel counterpart (e.g. heating oil, etc.) is an effective mechanism once the market is established but requires careful monitoring and periodic adjustments. Premiums are effective only in mature markets with high awareness and provide a means for policy makers to refine both the market sub segments (e.g. residential boilers, specific scales of CHP with certain feedstocks, etc.) and the scales to be promoted. The major recommendations for future policy interventions in the biomass heat sector include: Regulations: Refine recommendations for biomass heat in the new Renewable Energy Sources (RES) directive and Energy Performance in Buildings directive (EPBD). The new RES directive could extend and strengthen the requirement to include RES in Nearly Zero Energy Buildings (NZEB) applying to new buildings and renovated ones. Article 13.4 of the RES directive could be reinforced to complement EPBD and ensure RES deployment in buildings. As far as existing buildings stock is concerned, national long-term refurbishment planning of existing building renovation, based on primary energy use requirement, could be envisaged. Such a provision would mean a need for mechanisms triggering renovation cycles by 2050 that promote only the most efficient technologies using renewable energy (for example, for individual appliances, linking support schemes with eco-labelling requirements). Long term renovation planning, including the replacement of heating systems is more effective than a quick-fix-approach which can lock-in technologies not compatible with long-term decarbonisation objectives. It is crucial that any renewable heat policy would also consider the energy efficiency policies and design the policy framework accordingly. Expenditure mechanisms: Financing individual heating systems in buildings especially in MSs with high stock of inefficient boilers. Although biomass heat is widely known across EU Member States, there is still a lot of market improvement required to ensure that biomass is used with the appropriate moisture content, is well stored and that existing stock of boilers & stoves is substituted with high efficiency, low polluting ones where required. The cost of this investment is still high compared to fossil fuels and therefore, there is a need to encourage such investment to take place. Policy incentives given to high efficiency CHP plants and the use of heat through District Heating systems proved to be the key success factors in countries like Finland and Austria, so they are highly recommended to other Member States as well. The right policy mix depends on the country-specific conditions (climate conditions) and the heat sector (i.e. existence of infrastructures). However, combinations of investment subsidy and tax 28

29 incentives are well- proven approaches, especially, for countries where the markets are at their early development stages and the DH systems are not existing or not well developed. Information provision mechanisms: Improve knowledge and local market capacities. Although biomass heat is not a new idea, most of the stakeholders consulted during the project across EU agree that efforts to improve knowledge, especially at remote regions and local markets need to be continued and reinforced in order to promote uptake of indigenous sources and ensure combined measures with energy efficiency, especially in industries. Three groups of information provision activities are recommended by the project: Raise awareness on wood fuel quality & efficient boilers (eco-design). Promote biomass heat in buildings. Promote biomass heat in agro- industries. Country related lessons Table 12 below provides on overview of successful policy mechanisms which are currently effective in selected Member States, comments for their success factors (both endogenous, related to the policy mechanism itself but also exogenous related to country and national market developments) and indicates other Member States where the suggested policy can be employed as well in a tailored form applicable to national conditions. 16 Policy for biomass heat has been implemented successfully in a number of Member States, the most prominent ones being Austria, Finland, Germany, the Netherlands and UK. 16 The selection of Member states has been based on the Biomass Policies project work. 29

30 Table 12 Overview of current successful policy measures for biomass heat in selected Member States Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 17 Member States where the suggested policy mechanism can be employed Germany: Three policy mechanisms work hand in hand to increase renewable heat and achieve the 14% RES target in 2020 in Germany. Spain The Energy Saving Ordinance ("Energieeinsparverordnung (EnEV)") focuses on the increase of overall energy efficiency and energy savings. The Renewable Energy Sources Act (EEG) requires to use a minimum of 60% of the waste heat from electricity production. Within this, the Renewable Energies Heat Act (EEWärmeG) obliges a part of heating and cooling demand of buildings to be covered by renewable energies. The obligation concerns new erected buildings, existing public buildings as well as fundamentally renovated buildings. Regarding biomass the obligation is fulfilled if 50% of the final heat consumption is covered by liquid or solid biomass, which is used in high efficiency boilers. Alternatively, gaseous biomass can be used to cover 30% of the final heat consumption, if it is used for combined heat and power production. The repayment bonus from the market incentive program (MAP) and the soft loans with low interest rates offered by the public sector bank KfW f encourages realisation of biomass heating plants, biogas pipelines and heat storages. In the framework of the Market Incentive Programme (MAP) BAFA provides investment support for heat produced in existing buildings. Installations in new buildings are only eligible if process heat is used. The investment support is divided into basic support, bonus support and innovation support. BIOMCASA II Resolution dated December 12, 2012, establishing the regulatory basis and call for the authorization of collaborating companies in the programme for the implementation of projects on the use of biomass for heating in buildings (BIOMCASA II) [1]. The Biomcasa II programme is a continuation of the Biomcasa programme. The aim of the programme is to establish a funding mechanism that promotes quality and is tailored to the specific needs of users of biomass systems. Private or public companies dealing in the supply and installation of biomass systems and Energy Service Companies may participate in this scheme and gain access to funding, as long as they can demonstrate a certain level of quality in technical services and organisational structure. The total available budget of the programme is EUR 5 million. 100% of the project costs can be covered, but there is a maximum limit of EUR 350,000 per individual projectand a maximum of EUR 1 million per qualified company. Complementarity between energy efficiency and renewable energy measures. Synchronisation and alignment of regulatory and financing mechanisms. Exogenous success factors include: high level of available forestry resources and a strong biomass industry in terms of suppliers, manufacturers, etc. AT, FR, SK, SI, BE, UK, GR IT, GR, PT, IE, LT, CY, MT, SK 17 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 30

31 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 18 Member States where the suggested policy mechanism can be employed Netherlands Energy Investment Allowance (EIA): Biomass fired boilers or energy efficient cogeneration plants intended for the heating of buildings or processes are eligible for tax deduction. The amount of tax credit may be up to 41.5% of the total investments made in renewable energy or energy-efficiency technologies within one year. Since 2012, the SDE+ scheme also grant a premium on top of the market price to the producers of renewable heat. High percentage of tax credit stimulates high efficiency technologies. Tax credits and direct premiums are considered as strong stimulation mechanisms when the markets are well developed and there is high awareness Austria Energy Fund-Subsidy scheme wood heating. CHP Act: The annual support budget until 2020 is 12 billion Euro per year. Thereof, 7 billion Euro are reserved for plants in industrial and commercial enterprises. Eligible are newly constructed as well as existing plants being modernized, provided that the modernisation costs amount to at least 50% of the entire cost for a new station. Rural Development Programme for Austria: One of the priorities is resource efficiency and climate. Under this topic, investments in new biomass heat and CHP plants and heat grids, renovation of existing plants, measures to improve the efficiency of heat grids and facilities for the production for biomethane and biogas not intended for electricity generation are supported by investment subsidies. Environmental Assistance in Austria ( UFI ) programme: Investment grants depend on the technology and the size of the facility: i) a flat rate of de minimis support is calculated. De minimis allows for aid up to 200,000 to be provided from public funds over a period of three years; or ii) standard reimbursement rate which mostly amounts to 25% of the environment-related investment costs and can be increased A combination of expenditure mechanisms which refine scales of applications and target specific sectors and biomass resource types and end uses. These policy mechanisms are effective in mature markets with high awareness in biomass heat. Exogenous success factors include: high level of available forestry resources and a strong biomass industry in terms of suppliers, manufacturers, etc. Well established network of district heating. through awards (sustainability and gas-cleaning awards, etc.) to a maximum of 35%. Climate & Energy Fund (Klima- und Energiefonds): investment subsidy depends on the type of system being installed and the one being replaced and ranges from 500 Euro to 2,000 Euro. Only pellet and wood chip heating systems are eligible for funding. DE, SK, SI, BE, FR 18 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 31

32 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 19 Member States where the suggested policy mechanism can be employed Finland UK Heat bonus in CHP: The main support mechanism for heat produced from RES, is a heat bonus allocated to CHP plants working on biogas and forest fuel. In addition to that, various investment supports are made available. Also fossil fuels in heat production have to pay CO2 taxes. Dedicated support for farmers, including both solid biomass and biogas plants (Regulation No. 855/2013: The aid can be in the form of either a state investment subsidy, lowered interest rates for loans or state acting as a guarantee for a loan. The exact amount of subsidy varies from the action supported, details for each action are provided in the annex of the Regulation No. 855/2013. The Renewable Heat Initiatives (RHI), introduced in 2011 in the UK, initially only applied to non-domestic installations in the public, industrial and business sectors. Since 2013, the scheme is also open for the residential sector where the eligible applications include biomass boilers, solar water heating and certain heat pumps. Payments are made for 7 years and are based on the amount of renewable heat made by the heating system. Direct premiums in the form of bonus are considered as strong stimulation mechanisms when the markets are well developed and there is high awareness. This on to with taxation for fossil based heat generation shifts interest towards biomass. Exogenous success factors include: strong position of the forestry sector and the available (and leading) capabilities of innovations in this area. During 2011, the number of anaerobic digesters in the UK rose by about a third to 78, not counting those used in the wastewater treatment industry. The reason for this surge in interest is the implementation of the new legislation Renewable Heat Incentives (RHI) to promote renewable heat. S, DE, AT, SK, SI, GR, HR SI, BG, FR, PL, HU, NL, LV, SK, CZ, DE, HR 19 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 32

33 Value chains Based on the findings from Biomass Policies project, the market for biomass heat presents a steadily increasing potential, fully justifying the high strategic priority which is given by European Commission. Project results show that biomass heat will remain the major contributor to the 2030 RES share of 27% (with 3,106 PJ, 74.2 Mtoe). More than half of the total biomass heat is expected to be in the residential sector. According to these data, households remain the biggest user of biomass heat (with 1675 PJ; 40 Mtoe; 54 %), followed by industry (with 1074 PJ; 25.6 Mtoe; 34.4%) and services (with 361 PJ; 8.6 Mtoe; 11.6%). Figure 11 presents the details findings of Biomass Policies project in terms of biomass heat consumption (in PJ) from 2010 to Figure 4 Biomass heat consumption (in PJ) in EU28 till 2030 Table 13 below explain how the policy recommendations fit into specific heat market segments which represent shares above 100 PJ to the overall biomass contribution for heat 20 from 2020 to 2030, which policies and gaps are they addressing and what is the added value expected from their implementation. 20 The total biomass heat component varies from 3,000 to 3,100 PJ during the period

34 Table 13 Suggested policy interventions for market segments and value chains where biomass is expected to play major role from 2020 to 2030 Market segment Value chain Suggested policy interventions Barrier/ gap/ specific challenge the intervention will address Added value expected from their implementation Early markets Early markets Early markets Households Residential batch fired logwood stove for heat (10-20 kw) Residential wood chips boilers - small scale (10 kw) Services Wood chip boilers-large size (50 kw) Local heating plant for straw small scale (0.15 MW) Industry CHP using solid biomass > 10 MW CHP using solid biomass MW Waste combustion - heat only Pyrolysis oil in CHP combustion engine Pyrolysis oil production Loans Credit lines Investment grants Capacity building Investment grants Certification/ Standardisation Premiums targeting specific indigenous feedstocks Feed in premiums for electricity Technology and/ or innovation bonus Market is not developed High shares of low & polluting stoves used Market is not developed Technologies have low efficiencies Good integration of efficient stoves Competition for feedstock requires measures to mobilise other indigenous biomass streams Improve efficiencies in existing plants Add new capacities in existing plants Diversify feedstock Develop the market Share the costs with medium to low income population in rural areas Certification/ Standardisation Premiums targeting specific indigenous feedstocks Mobilise indigenous resources with low competition from non-energy industries Increase mobilisation of unused resources streams and reduce competition with non-energy markets 34

35 Lessons and recommendations for policy in the biomass electricity sector Biomass electricity can still play an important role from 2020 to 2030 but the new capacities are expected to be highly refined within specific sectors (such as waste management, agro and forest industries) and scales (sized upon availability of resources with low competition from non-energy industries). Capacity building on CHP in industry and waste management sectors is considered a key issue for the successful deployment of new capacities. Moreover, in order to sustain existing capacities in certain Member States, such as NL, DE, AT, etc. CHP bonus payment/ premiums above certain conversion efficiencies are considered a means to both ensure their long term operation and the uptake of highly efficient technologies/ value chains. During the last fifteen years, biomass electricity has been promoted through a variety of policy mechanisms such as carbon and energy taxes, investment grants, Feed in tariffs and premiums, green electricity certificates, etc. The main policy mechanisms are outlined in Table 14 below following a value chain perspective, grouped in regulatory, expenditure and information provision. Further indications are provided for the market maturity stage where the respective measures fit best. Table 14 Biomass policy mechanisms for biomass electricity per value chain step, type of policy and market stage development Mechanism Biomass supply Conversion Distribution End Use Regulatory Regulations Early markets Expenditure Investment subsidies Early markets Early markets R&D Grants Early markets Early markets Tax exemptions, green electricity certificates Tariffs/ Premiums/ Technology and/or Innovation bonus Tendering schemes Information provision Strategies/ Action plans Targets/ Obligations Early markets Early markets 35

36 The key findings for the biomass electricity sector are presented below: Policy on biomass electricity in EU and most Member States has been dictated by the focus on climate change and respective reduction of GHG emissions in heavily polluting sectors such as power utilities and large industries (e.g. cement, chemical industries, etc.). Energy and carbon taxes have high effectiveness in the uptake of biomass within utilities and large industries (e.g. cofiring, etc.). However, the scale of implementation is often prohibited by the availability of biomass at prices the industry can afford. Feed-in tariffs are able to initiate strong growth of biomass electricity but then the critical issue is to ensure a form of continuity for policy support to sustain capacities. Policy mechanisms should cover two or more value chain steps to ensure they facilitate uptake and market development. National policy focus on biomass electricity is often dictated by the availability of other sources which are used to generate electricity such as nuclear and natural gas. It has been observed that such countries (e.g. France, etc. avoid placing focus for bioelectricity in their policy and support measures. Depending on the individual country capacities, the design of a Feed in Premium can be based on/ differentiated by issues such as start-up date, biomass feedstock, source of electricity or the type of technology, and size of the facility or a time of generation/ The major recommendations for future policy interventions in the biomass electricity sector include: Regulations: Accounting for the provisions of State Aid regulations 21 and ensure appropriate conditions are developed to mobilise currently unexploited residual and waste fractions in Member States. Environmental benefits of biogas production from waste should be emphasised both at the national and the EU level policy making. The avoided methane emissions should be emphasised and such benefits need to be translated into appropriate policy frameworks that promote biogas systems (i.e. obligations to avoid methane emissions or further bonus/financial support due to avoided emissions to biogas). Financial mechanisms: While least cost options such as biomass co-firing can be supported in the short-term, they should be considered as transition technologies that can enhance feedstock supply and at the same time ensure target achievement. The design of such support mechanisms should take into account the sustainability concerns and at the same time give priority to indigenous feedstocks, mainly primary forest residues, straw, landscape care wood, perennial crops etc. Feed-in premiums, with its advantage of creating a relatively stable investment climate, combined with investment support and further tax incentives, are expected to be effective in promoting bioelectricity. The MS that are lagging far behind also apply similar policy mixes. This indicates that the level of support provided in these countries are not sufficient enough to overcome the existing 21 COMMUNICATION FROM THE COMMISSION Guidelines on State aid for environmental protection and energy (2014/C 200/01). 36

37 barriers. Policy frameworks for these countries should be tailored to the existing country-specific barriers. Dedicated policy support to certain feedstocks, be it a feedstock bonus or a dedicated subsidy for harvesting for energy purposes, can be successful with the pre-condition that other barriers in the value chain are also sufficiently addressed (i.e. enough financial support is provided for instance for the conversion technologies, the high efficiency in CHP is promoted etc.). This, however, needs to happen hand in hand with other policy domains to establish strong sustainable forest and agricultural management practices that are key to the success of bioenergy policy support. Information provision measures: Strengthen knowledge transfer towards the industrial sector: that is important when it comes to bio-electricity (via CHP). Measures that encourage industrials sites to switch from fossil to renewable energy sourcing should be promoted. One of the reasons why this switch is not currently taking place at a large scale today is the lack of information and awareness of industrial sites, as well as the fact that carbon is not properly priced today. Therefore, targeted capacity building actions are recommended with high emphasis on CHP in agro-industry and waste management sectors. Best practises from successful biogas operations should be widely disseminated to counter the current lack of awareness amongst many farmers, economic actors, municipalities and other stakeholders about the benefits of biogas technology for rural communities. Both at the EU and national level research and development should be encouraged to improve the technical development of biogas plants, and the possibilities for improving the yields of biogas production from animal manure alone or mixed with organic waste. Country related lessons Table 15 below provides on overview of successful policy mechanisms which are currently effective in selected Member States, comments for their success factors (both endogenous, related to the policy mechanism itself but also exogenous related to country and national market developments) and indicates other Member States where the suggested policy can be employed as well in a tailored form applicable to national conditions. 22 Policy for biomass electricity has been implemented successfully in a number of Member States, the most prominent ones being Austria, Finland, Germany and the UK. 22 The selection of Member states has been based on the Biomass Policies project work. 37

38 Table 15 Overview of current successful policy measures for biomass electricity in selected Member States Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 23 Member States where the suggested policy mechanism can be employed Austria: Austria scores green almost in all indicators for bioelectricity sector. This represents the wellfunctioning policy framework in the country. Green Electricity Act: provides support to RES (incl. biomass) with feed-in-tariffs. For bioenergy, the current tariffs range from approximately 4.85 ct/kwh to ct/kwh depending on the plant type, biomass used and other criteria like overall efficiencies. Plants using waste material or by-products (like wood-processing residues) generally get lower tariffs than such using primary biomass streams (like forest wood chips or energy crops), but there are also exceptions from this rule: A 30%-share of manure (mass-based) is a precondition for small biogas plants (up to 250 kw) to be eligible for a relatively high ct/kwh-tariff, and straw is treated as primary biomass rather than a by-product. For biogas plants, some further regulations apply: If they fulfil the efficiency criterion according to the CHP Act (see below), they are entitled for an additional premium of 2 ct/kwh. If biogas is conditioned to biomethane, injected into the grid and used for power generation in a dedicated plant, a technology bonus of 2 ct/kwh is paid. All administrative procedures like registration of injection plants, certification etc. are managed by the AGCS Gas Clearing and Settlement AG within the Biomethan Register Austria. CHP Act: see Table 12 for heat Both mechanisms are expenditure which refine scales of applications and target specific sectors and biomass resource types and end uses. Further to this, since Austria These policy mechanisms are effective in mature markets with high awareness in biomass heat. Exogenous success factors include: high level of available forestry resources and a strong biomass industry in terms of suppliers, manufacturers, etc. Well established network of district heating. DE, SK, SI, BE, FR 23 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 38

39 Country Policy mechanism (regulatory, expenditure information provision) Key success factors 24 Member States where the suggested policy mechanism can be employed Germany Renewable Energy Sources Act Act (EEG 2014): With the 2014 amendment, additional capacity of biomass power is limited to 100 MWel (gross) per year. Direct marketing is obligatory for installations larger than 100kW (as of 2016). This aims to incentivise flexible and demandorientated power production. Therefore, newly installed biogas plants can receive a flexibility supplement for the provision of flexible installed capacity. Already existing biogas and biomethane plants can receive a flexibility premium for additionally installed capacity. From 2017, an auction model should be introduced for the funding of renewable energies. Market premium (in EEG 35): Instead of receiving the feed-in tariff for electricity from renewable sources, a plant operator may choose to sell his electricity directly, i.e. to a third party by a supply agreement or at the stock market, and claim the so-called market premium from the grid operator. The amount of the market premium shall be calculated each month. Flexibility premium for existing installations (EEG, 54): Biogas plants and biomethane CHP-plants that were put into operation before may claim a flexibility premium for providing additional installed capacity for on-demand use. Flexibility supplement for new installations: For the provision of flexible installed capacity newly installed capacities larger than 100 kw a flexibility supplement exists. It is 40 /kw/year. BiomasseV Ordinance: regulates which substances are classed as biomass, the substances for which an additional substance-based tariff may be claimed, which energy-related reference values are to be used to calculate this tariff and how the substance based tariff is to be calculated. The Biomass Sustainability Regulation stipulates the sustainability requirements for bioliquids, according to the Renewable Energy Directive. Operators of plants producing electricity from liquid biomass under the EEG or by cross-reference with the EEWärmeG obligated under EEWärmeG when fulfilling commitment through liquid biomass. Very well developed market with a set of clear regulatory and tailored expenditure mechanisms which refine scales, prioritise feedstocks and also provide innovation and technology related bonuses to stimulate the uptake of highly efficient technologies. Exogenous success factors include: high mobilisation rates of biomass and a strong biomass industry in terms of suppliers, manufacturers, etc. AT, FR, SK, SI, BE, UK, GR 24 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 39

40 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 25 Member States where the suggested policy mechanism can be employed UK Finland The Renewables Obligation (RO) scheme, based on green certificates has been favouring landfill gas, after onshore wind, as landfill biogas production costs are lower than many other renewable technologies. Consequently, in 2012 landfill gas was approximately 85% of the total biogas production in the UK. Premium tariff: Producers of electricity from wind, biogas and biomass receive a variable premium tariff on top of the wholesale electricity price for a period of 12 years. The generators get a premium tariff for their electricity. All technologies used for the generation of electricity from wind, biogas, forest chips or wood fuels are eligible if they meet the following requirements: i) The plant/system must be located in Finland or in Finnish waters and be connected to the grid and ii) the project must meet economic and technical requirements for electricity generation. The premium tariff is equal to the difference between the fixed target price and the average market price of the previous three months. However, if the market price for the previous three months is below 30 EUR the premium will be fixed at target price minus 30 Euros ( 25 Act No. 1396/2010). Energy Aid Investment support: The so-called "energy aid is a state grant for investments in RES production facilities and research projects related to it. Grants are available for projects, which promote the use or production of renewable energies, advance energy efficiency and reduce the environmental effects caused by energy production and use ( 3, 5 Regulation No. 1063/2012). At least 25% of the projects financing must come from nongovernmental funds. Energy aid may be granted to companies, municipalities and other communities. All technologies are eligible for grants. Among other costs, the costs for preparation, administrative.planning and employment are eligible for subsidies. Direct support in the form of green certificates are considered as strong stimulation mechanisms when the markets are well developed and there is high awareness. Tailoring support to dedicated efficient technologies reduces the risk and improves market shares. Direct premiums in the form of bonus are considered as strong stimulation mechanisms when the markets are well developed and there is high awareness. This on to with taxation for fossil based heat generation shifts interest towards biomass. Exogenous success factors include: strong position of the forestry sector and the available (and leading) capabilities of innovations in this area. SI, BG, FR, PL, HU, NL, LV, SK, CZ, DE, HR S, DE, AT, SK, SI, GR, HR 25 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 40

41 Value chains Based on the findings from the Biomass Policies project, gross final electricity consumption from biomass will account for approximately 985 PJ (274 TWh; 23.5 Mtoe) in These figures present a small growth towards 2030 and are consistent with the Commission s assessment, as mentioned above. CHP accounts for almost 60% of this with increased contributions expected from pyrolysis oils, and the energy exploitation of manure and landfill. At this stage it is worthwhile to mention that while electricity from biomass is expected to keep a good share in the 2030 renewable energy mix, other RES are expected to play a much more significant role. Figure 5 Biomass electricity consumption (in PJ) in EU28 till 2030 Figure 7 presents the findings of Biomass Policies project in terms of biomass electricity consumption (in PJ) from 2010 to Table 16 presents the biomass to electricity value chains with shares above 40 PJ 26 to the overall biomass contribution from 2020 to The total biomass electricity component varies from 850 to 985 PJ during the period

42 Table 16 Suggested policy interventions for market segments and value chains where biomass electricity is expected to play major role from 2020 to 2030 Market segment Conversion technology Suggested policy interventions Barrier/ gap/ specific challenge the intervention will address Added value expected from their implementation Industry Industry Industry/ Utility Utility CHP using solid biomass > 10 MW CHP using solid biomass MW Medium scale wood gasification CHP > 0.5MW Landfill & sewage gas engine - CHP Pyrolysis oil in CHP combustion engine Direct co-firing coal process Early markets Early markets Early markets Investment grants Capacity building Investment grants Certification/ Standardisation Premiums targeting specific indigenous feedstocks Technology and/ or innovation bonus Feed in premiums for electricity Technology and/ or innovation bonus Market is not developed Technologies have low efficiencies Improve efficiencies in existing plants Add new capacities in existing plants Diversify feedstock Certification/ Standardisation Premiums targeting specific indigenous feedstocks Increase mobilisation of unused resources streams and reduce competition with non energy markets 42

43 Lessons from policy in the biofuels for transport sector A quota obligation alone is not sufficient to promote advanced biofuels based on innovative technologies. The combination of blending obligations supported by tax exemptions appear effective only when the level of tax relief is high enough. Further support to advanced biofuels can include the following measures: Combination of blending obligation supported by tax exemptions (i.e. in the form of duty free) can be effective with the pre-condition that the level of tax relief is high enough. Biofuels deployment is directly dependant on adequate regulatory frameworks, both for current biofuels and advanced biofuels. Existing support double counting of advanced biofuels has not been sufficient enough to bring the more advanced technologies into the market. Additional policy mechanisms that would reduce investment risk and ramp up the production of advanced biofuels are required. During the last fifteen years, biofuels have been promoted through a variety of policy mechanisms in the individual Member States, which have operated as single or combination of measures (that is in general more effective towards market development and sustaining existing capacities). The main ones are outlined in Table 17 below following a value chain perspective, grouped in regulatory, expenditure and information provision. Further indications are provided for the market maturity stage where the respective measures fit best. Table 17 Biomass policy mechanisms for biofuels in transport per value chain step, type of policy and market stage development Mechanism Biomass supply Conversion Distribution End Use Regulatory Expenditure Information provision Regulations Certification/ Standardisation Investment subsidies Early markets Early markets Early markets R&D Grants Early markets Early markets Tax exemptions Tariffs/ Premiums/ Tendering schemes Strategies/ Action plans Targets/ Obligations Early markets Early markets Early markets 43

44 The key findings for the biofuels for transport sector are presented below: Future policy on advanced biofuels should o be in line with the long term decarbonisation plans (2050) o o o set a dedicated target/obligation to advanced biofuels keep consumption of UCO and animal fat to sustainable levels Further support to advanced biofuels, Obligations can be a successful measure where future supply and the obligation are balanced. The major recommendations for future policy interventions in the advanced biofuels sector include: Regulations: Future policy should be in line with the long term decarbonisation plans (2050) that foresee a shift of biofuel use from light duty vehicles to heavy duty vehicles, aviation and shipping. Expenditure: The results from Biomass Policies indicate that a quota obligation alone is not sufficient to promote advanced biofuels based on innovative technologies. The combination of blending obligations supported by tax exemptions appear effective only when the level of tax relief is high enough. Next to that, the existing policies have mainly been favouring conventional biofuels and the majority of double counted biofuels in the EU are produced from used cooking oil or animal fat. Further support to advanced biofuels can include the following measures: Combination of blending obligation supported by tax exemptions (i.e. in the form of duty free) can be effective with the pre-condition that the level of tax relief is high enough. Biofuels deployment is directly dependant on adequate regulatory frameworks, both for current biofuels and advanced biofuels. Existing support double counting of advanced biofuels has not been sufficient enough to bring the more advanced technologies into the market. Additional policy mechanisms that would reduce investment risk and ramp up the production of advanced biofuels are required. Information provision: Improve public awareness on the benefits from advanced biofuels Country related lessons Table 18 below provides on overview of successful policy mechanisms which are currently effective in selected Member States, comments for their success factors (both endogenous, related to the policy mechanism itself but also exogenous related to country and national market developments) and indicates other Member States where the suggested policy can be employed as well in a tailored form applicable to national conditions. 27 Policy for advanced biofuels has been implemented successfully in a number of Member States, the most prominent ones being Germany, Finland, the Netherlands and UK. 27 The selection of Member states has been based on the Biomass Policies project work. 44

45 Table 18 Overview of current successful policy measures for biofuels in transport in selected Member States Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 28 Member States where the suggested policy mechanism can be employed Germany Federal Immission Control Act (BImSchG) The main means of support for renewable energy sources used in transport is a quota obligation. Subject to the obligation are only biofuels1. The act foresees to support electricity and methane and hydrogen using renewable energy (power-togas) in the future, too. The mechanism obliges companies importing or producing petrol, gas or diesel fuels to ensure that biofuels make up a defined percentage of the company s total annual sale. Obliged fuel suppliers may assign this obligation to other companies. From 2015, a greenhouse gas reduction quota is introduced. Accordingly, the allowed share of greenhouse gases discharged from diesel and gasoline is being reduced in form of a quota, meaning that the usage of biofuel is only indirectly stimulated. By 2015, emissions have to be reduced by 3.5%, by 4%from 2017 on and by 6% from 2020 onwards. Energy Tax Act (EnergieStG) The Energy Tax Act regulates the amount of taxes on energy consumption on German territory. The Act also includes tax incentives for the production of biofuels. The tax deduction is only granted if the produced amount of biofuel is pure and not used to fulfil the biofuel quota. Some biofuels are exempted from this rule, namely [1]: Synthetic hydrocarbons or synthetic hydrocarbon mixtures which are obtained by thermochemical conversion of biomass. [2] Alcohols, that have been produced through biotechnological processes to reveal cellulose. Quota have been a successful measure for the increase of the overall biofuels share in transport The energy tax accounts for advanced biofuels AT, ES, GR, SK, HR, PL 28 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 45

46 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 29 Member States where the suggested policy mechanism can be employed Finland Tax regulation mechanism Fuels are taxed according to their use. Excise duty on liquid fuels is collected on all types of fuels, including biofuels. The latest amendment to the Act of Excise Duty on Liquid Fuels sets out a taxation system, according to which each component of a liquid fuel is taxed separately, based on its energy content and carbon dioxide emission, meaning reduced taxation for biofuels ( 1 Act No. 1472/1994). The tax on petrol released for consumption is at least ct 35.9 per litre, for diesel the amount is at least ct 33 per litre ( 4 Act no. 1472/1994). The exact excise duty rates of the different components of the liquid fuels are shown in the annexed table of the Act No. 1472/1994. Biofuel quota The Act on the Promotion of Biofuels in Transport obliges vendors of petrol and diesel to fulfil a defined quota of biofuels. The amount of biofuels has to be increased year by year to make up 20% of the total sales by the year When biofuel is produced from waste, residues or inedible cellulose or lignocelluloses, its energy content is counted as double when calculating the final amount of biofuels ( 5 Act No.446/2007). If the retailer fails to fulfil the quota a fine will follow. The penalty payment will be calculated based on the amount by which the retailer has failed to fulfil the quota, where each mega joule (MJ) is charged 0.04 ( 11 Act No. 446/2007). Finland has received the target of 20% of biofuels in transport sector in The Government has made first decisions to support also biogas production for transportation fuel. Taxation of fossil fuels is considered a strong indirect support measure fir the uptake of biofuels Quota have been a successful measure for the increase of the overall biofuels share in transport S, DE, AT, SK, SI, GR, HR 29 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 46

47 Country Policy mechanisms (regulatory, expenditure information provision) Key success factors 30 Netherlands UK Energy Investment Allowance, EIA scheme: This tax benefit enables entrepreneurs based in the Netherlands to write off investments in renewable energy plants against tax. The level of funding depends, among other things, on the source of energy and the type of plant used. Investments of less than 450 Euros are ineligible. Furthermore, a total of at least 2,300 (and at most 116 million) must be invested in eligible projects within one year. The amount of tax credit may be up to 41.5% of the total investments made in renewable energy or energy-efficiency technologies within one year. MIA/VAMIL scheme The Environmental Investment Allowance (MIA) provides the opportunity for private companies to deduct an extra amount of the investment cost from the taxable profit for investments which are included in the Environmental List. The exact share of the investment that applies for the deduction varies between 0% and 36% depending on the nature of the investment. Random depreciation of environmental investments scheme (VAMIL) provides the opportunity to depreciate 75% of an investment which is included in the Environmental List in a single year, thereby reducing the taxable profit in that year. The depreciation of remaining 25% of the investment should be spread over the economic lifetime of the obtained goods. Each business can be granted the MIA for environment related investments of a minimum of 2,300. The budget for MIA in 2014 amounted to 131 million, and the budget for VAMIL in 2012 was 24 million. Annual obligation of Renewable Energy in Transport (HEV): For fuel suppliers to the Dutch transport market an annual obligation of renewable energy is valid increasing up to 10% of the total supply in Renewable Transport Fuel Obligation (biofuel quota): A quota system for biofuels is in place in the United Kingdom since Fuel suppliers for transport are obliged to satisfy a specified quota amount of biofuels in the total supplied fuel. There is a certificate system (RTFC) for providing proof of compliance. In case the supplier does not own sufficient certificates, it will need to pay a penalty fee ( buy-out price ) to the Authority. Tailored financing support that allows for innovative and high efficiency technologies to be implemented. Quota have been a successful measure for the increase of the overall biofuels share in transport Member States here the suggested policy mechanism can be employed AT, DE, BE, SE, DK BG, FR, HR, PL, HU, NL 30 Endogenous- related to the mechanism and exogenous- related to country specific characteristics 47

48 Value chains The findings from Biomass Policies project indicate that in the absence of a RES-T target for 2030 and no further support for advanced biofuels, the existing quota obligations may continue and result in average 10.5% in 2030 in total final energy consumption in transport. The assumptions include the continuation of a 7% cap on conventional biofuels that are based on food crops. Among the advanced biofuels cellulosic bioethanol and biomethane appear to play a major role in the 2030 renewable fuel mix for transport. It is necessary to highlight that the EC impact assessment study of the 2030 climate and energy package considers the role of biofuels to be in the range of 14 to 16% by Figure 6 Biofuels consumption (in PJ) in EU28 till 2030 Table 19 presents the biomass to transport biofuel value chains with shares above 40 PJ to the overall biomass contribution from 2020 to