IMPACTS OF FOREST BIOENERGY AND POLICIES ON THE FOREST SECTOR MARKETS IN EUROPE WHAT DO WE KNOW? Birger Solberg (NMBU) with Lauri Hetemäki (EFI), A. Maarit I. Kallio (Metla/Luke), Alexander Moiseyev (EFI & NMBU) and Hanne K. Sjølie (NMBU) EFI Technical Report 89, 2014. http://www.efi.int/files/attachments/publications/efi_tr89_2014_solberg_et_al.pdf Presentation at CenBio Days, March 17-19, 2015, Værnes 1
I. Background The main political objectives of EU's renewable strategy are decreased use of fossil energy sources, reduced CO 2 emissions and increased energy self sufficiency. Wood based bioenergy plays an important role in this strategy. The potential increase in wood demand for bioenergy production is of high interest for the EU forestry and forest industries as well as bioenergy producers due to its impacts on wood prices, profitability of forestry and forest industries, rural employment, recreation and forest ecology. In recent years, several studies have addressed the development of the wood demand for bioenergy, policies affecting it, and the above-mentioned impacts. These studies are rather comprehensive and their results differ quite a lot. 2
The devil is in the details, and for policy makers and other stakeholders in the forest and bioenergy sector with limited time to go into the details of the studies, a synthesis of the major existing studies was undertaken as a cooperation between European Forest Institute and CenBio WP4.3. The main goal of the report was to address the following questions: a. What are the policy relevant messages that come out of the studies? b. What are the primary issues we lack science-based information on? The report is published as EFI Technical Report 89, 2014. http://www.efi.int/files/attachments/publications/efi_tr89_2014_solberg_et_al. pdf and as CenBio deliverable 4.3.-21 3
The review covered 5 studies: S1 Mantau et al. 2010: EUwood - Real potential for changes in growth and use of EU forests. Final report. University of Hamburg/Germany, June 2010. 160p. S2 Moiseyev, et al. 2011: An economic analysis of the potential contribution of forest biomass to the EU RES target and its implications for the EU forest industries. J. For. Economics 17:197 213. S3 Lauri et al. 2012: Price of CO 2 emissions and use of wood in Europe. Forest Policy and Economics 15: 123 131. S4 Kangas et al. 2011: Investments into forest biorefineries under different price and policy structures. Energy Economics 33: 1165 1176. S5 Moiseyev et al. 2013. Wood biomass use for energy in Europe under different assumptions of coal, gas and CO 2 emission prices and market conditions. J. For. Economics. http://dx.doi.org/10.1016/j.jfe.2013.10.001. In the following main results are presented 4
II. Main results The most discussed and influencable study is Mantau et al. (2010) often referred to as the EUWood-study. Main results were: 5
However when comparing with the other 4 studies, the following results emerged: 1. In the next 10-20 years the EU demand for forest biomass from the EU region may be significantly lower than suggested by Mantau (2010) EUWood - medium scenario (referred to as S1) - because: The structural changes in global and EU forest products markets are likely to result in a significantly lower demand of forest biomass for industrial purposes than projected by S1. Due to international trade, EU already imports considerable quantities of forest biomass, both for forest industry and bioenergy purposes. These imports are likely to increase in the future, given that the markets and policies in EU provide needs and incentives for this. Forest biomass markets, bioenergy production and the traditional forest industry productions react quickly to market signals, such as the prices of raw material and end products. 6
(Main findings contin ) 2. The choice of policies in the forest and energy sectors will have strong impacts on the biomass markets and the competition between various wood fiber users. 3. EU substitution of coal with wood/coal co-firing are likely to create substantial market distortion for forest products globally; 7
Wood price impacts of production subsidies and CO 2 -taxes (Source: Moiseyev et al. 2013) Figure 2.4.3. Projected pulpwood price development in the EU plus Norway and Switzerland under the High coal & gas prices over the period 2015-2030 for various CO2 prices and with subsidy level of 30 /MWh (Left chart: B2 GDP growth, right chart: A2 GDP growth with the assumed graphic paper demand decline) /m 3. 8
Main findings (contin.) 4. The impacts of RES policies to the forest and bioenergy sectors are complex and many-sided 5. There is a strong need to update the assessment and outlook for EU forest biomass markets, by considering demand and supply simultanously and by explicitly consider the effects of policies. 9
III. Main «take home»- points for CenBio For the future prospects of wood-based bioenergy in Norway, the developments of main international policies (in particulae energy and climate policies, but also policies related to biodiversity protection and mobilisation of wood resources), and international markets for wood biomass and traditional forest products are very important. Surprisingly little science-based knowledge exist on these issues. Much more research is needed about their impacts on timber harvests, wood fiber prices and potentials for wood-based bioenergy: What are likely policies and carbon taxes/prices to be implemented in the EU and in the US? What are the policies likely impacts on wood prices, profitability of forestry, bioenergy and forest industries, as well as on rural employment, recreation and sustainable forestry? 10