Abstract
This is a report on how policy instruments to reduce greenhouse gas emissions affect the production of biofuels and the impacts on other markets caused by an increased production of biofuels. The relevant markets are mainly the markets for food and forest products. Taxes, like the Swedish carbon dioxide tax, and transferable emission rights, like the European Emission Trading System, are examples of instruments that put a price on greenhouse gases. Development of new technology lowers the costs of reducing emissions in the future. A price on greenhouse gas emissions encourages research and development and diffusion of new technology. Instruments used to influence the production of biofuels have partly been justified by the argument that biofuels are carbon neutral. The main instruments used to increase the production of biofuels are tax rebates, blend mandates, trade barriers and subsidies. Nonetheless, biofuels are not only causing emissions of greenhouse gases when combusted. Land conversion, cultivation and harvesting, felling of forests and the industrial process to refine biomass to biofuels also cause emissions. The current policy on biofuels from agriculture to reduce emissions of greenhouse gases is expensive. Biofuels production is supported by subsidies and requirements that impose large costs on taxpayers and
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Citation Formats
Hammarlund, Cecilia, Ericsson, Karin, Johansson, Helena, Lundmark, Robert, Olsson, Anna, Pavlovskaia, Evgenia, and Wilhelmsson, Fredrik.
Fuel for a better climate - market and policy for biofuels; Braensle foer ett baettre klimat - marknad och politik foer biobraenslen.
Sweden: N. p.,
2010.
Web.
Hammarlund, Cecilia, Ericsson, Karin, Johansson, Helena, Lundmark, Robert, Olsson, Anna, Pavlovskaia, Evgenia, & Wilhelmsson, Fredrik.
Fuel for a better climate - market and policy for biofuels; Braensle foer ett baettre klimat - marknad och politik foer biobraenslen.
Sweden.
Hammarlund, Cecilia, Ericsson, Karin, Johansson, Helena, Lundmark, Robert, Olsson, Anna, Pavlovskaia, Evgenia, and Wilhelmsson, Fredrik.
2010.
"Fuel for a better climate - market and policy for biofuels; Braensle foer ett baettre klimat - marknad och politik foer biobraenslen."
Sweden.
@misc{etde_1005365,
title = {Fuel for a better climate - market and policy for biofuels; Braensle foer ett baettre klimat - marknad och politik foer biobraenslen}
author = {Hammarlund, Cecilia, Ericsson, Karin, Johansson, Helena, Lundmark, Robert, Olsson, Anna, Pavlovskaia, Evgenia, and Wilhelmsson, Fredrik}
abstractNote = {This is a report on how policy instruments to reduce greenhouse gas emissions affect the production of biofuels and the impacts on other markets caused by an increased production of biofuels. The relevant markets are mainly the markets for food and forest products. Taxes, like the Swedish carbon dioxide tax, and transferable emission rights, like the European Emission Trading System, are examples of instruments that put a price on greenhouse gases. Development of new technology lowers the costs of reducing emissions in the future. A price on greenhouse gas emissions encourages research and development and diffusion of new technology. Instruments used to influence the production of biofuels have partly been justified by the argument that biofuels are carbon neutral. The main instruments used to increase the production of biofuels are tax rebates, blend mandates, trade barriers and subsidies. Nonetheless, biofuels are not only causing emissions of greenhouse gases when combusted. Land conversion, cultivation and harvesting, felling of forests and the industrial process to refine biomass to biofuels also cause emissions. The current policy on biofuels from agriculture to reduce emissions of greenhouse gases is expensive. Biofuels production is supported by subsidies and requirements that impose large costs on taxpayers and consumers. These costs are unnecessarily high; there are other options that give the same effect on emission reductions at a lower cost. Both trade in biofuels and trade in agricultural raw material are restricted by tariffs. This leads to additional costs as biofuels are not produced from the cheapest raw materials and by the most efficient producers. A side effect of the policy is that it becomes less interesting to use land as a carbon sink. If blend mandates, subsidies and tariffs on biofuels were to be removed, production would decrease in countries with high production costs and increase in countries with low production costs, lowering the overall costs of reducing greenhouse gas emissions. In addition, if the current policy is replaced with a price tag on emissions, emissions of greenhouse gas reductions would be achieved at a significantly lower cost than with the existing policy. Since biofuel production causes emissions of greenhouse gases, both the EU and the U.S. have introduced sustainability criteria specifying how much a biofuel should reduce emissions compared to a fossil fuel in order to be eligible for support. Sustainability criteria are problematic since they only focus on biofuels. If emissions of greenhouse gases are to be reduced, it is better to focus on emissions where they occur rather than targeting final products. Otherwise, emissions could move to unregulated sectors and countries. Increased demand for crops to produce biofuels increases demand and prices for farmland. So far, the effect on land use has not been large. The effects of increased food prices could especially affect consumers in poor countries. In poor countries, the cost of crops is a large part of the food price, and food represents a large proportion of poor people's consumption. At the same time opportunities to grow crops for biofuels could increase the incomes of poor farmers in developing countries. A price on greenhouse gas emissions affects the profitability of biofuels production. The profitability of biofuels on a market not affected by existing policy instruments is largely governed by production costs of different biofuels and the price of greenhouse gas emissions. The current price of emission permits in the EU is in most cases not enough to replace fossil fuels with biofuels from sugar beets, corn or wheat. Rising emission prices mean that more types of biofuels may be profitable, but profitability will also depend on the extent to which emissions from the cultivation of biomass and production of biofuels are priced. In many countries, forests are one of the main sources of raw materials for biofuels. The production of forest fuels could increase by converting more land to forest, by increased logging from existing forests or by increasing the use of by-products from forestry. It is possible to globally increase the area of forested land, but it is important that the forestry is sustainable. In Sweden, the climate policy instruments in place, mainly the tax on carbon dioxide and the system of tradable electricity certificates, have led to an increased demand for forest fuels. Currently, logging residues are primarily used for energy production, but an increased demand from the energy sector may result in an increased use of pulpwood. This may result in a reduced demand for pulpwood from other sectors, such as paper mills, as prices rise. Problems may arise if climate policy instruments are not introduced in all sectors and countries. Then, the Swedish forestry industry may be at a disadvantage in relation to forest industries in other countries and other sectors in Sweden.}
place = {Sweden}
year = {2010}
month = {Jul}
}
title = {Fuel for a better climate - market and policy for biofuels; Braensle foer ett baettre klimat - marknad och politik foer biobraenslen}
author = {Hammarlund, Cecilia, Ericsson, Karin, Johansson, Helena, Lundmark, Robert, Olsson, Anna, Pavlovskaia, Evgenia, and Wilhelmsson, Fredrik}
abstractNote = {This is a report on how policy instruments to reduce greenhouse gas emissions affect the production of biofuels and the impacts on other markets caused by an increased production of biofuels. The relevant markets are mainly the markets for food and forest products. Taxes, like the Swedish carbon dioxide tax, and transferable emission rights, like the European Emission Trading System, are examples of instruments that put a price on greenhouse gases. Development of new technology lowers the costs of reducing emissions in the future. A price on greenhouse gas emissions encourages research and development and diffusion of new technology. Instruments used to influence the production of biofuels have partly been justified by the argument that biofuels are carbon neutral. The main instruments used to increase the production of biofuels are tax rebates, blend mandates, trade barriers and subsidies. Nonetheless, biofuels are not only causing emissions of greenhouse gases when combusted. Land conversion, cultivation and harvesting, felling of forests and the industrial process to refine biomass to biofuels also cause emissions. The current policy on biofuels from agriculture to reduce emissions of greenhouse gases is expensive. Biofuels production is supported by subsidies and requirements that impose large costs on taxpayers and consumers. These costs are unnecessarily high; there are other options that give the same effect on emission reductions at a lower cost. Both trade in biofuels and trade in agricultural raw material are restricted by tariffs. This leads to additional costs as biofuels are not produced from the cheapest raw materials and by the most efficient producers. A side effect of the policy is that it becomes less interesting to use land as a carbon sink. If blend mandates, subsidies and tariffs on biofuels were to be removed, production would decrease in countries with high production costs and increase in countries with low production costs, lowering the overall costs of reducing greenhouse gas emissions. In addition, if the current policy is replaced with a price tag on emissions, emissions of greenhouse gas reductions would be achieved at a significantly lower cost than with the existing policy. Since biofuel production causes emissions of greenhouse gases, both the EU and the U.S. have introduced sustainability criteria specifying how much a biofuel should reduce emissions compared to a fossil fuel in order to be eligible for support. Sustainability criteria are problematic since they only focus on biofuels. If emissions of greenhouse gases are to be reduced, it is better to focus on emissions where they occur rather than targeting final products. Otherwise, emissions could move to unregulated sectors and countries. Increased demand for crops to produce biofuels increases demand and prices for farmland. So far, the effect on land use has not been large. The effects of increased food prices could especially affect consumers in poor countries. In poor countries, the cost of crops is a large part of the food price, and food represents a large proportion of poor people's consumption. At the same time opportunities to grow crops for biofuels could increase the incomes of poor farmers in developing countries. A price on greenhouse gas emissions affects the profitability of biofuels production. The profitability of biofuels on a market not affected by existing policy instruments is largely governed by production costs of different biofuels and the price of greenhouse gas emissions. The current price of emission permits in the EU is in most cases not enough to replace fossil fuels with biofuels from sugar beets, corn or wheat. Rising emission prices mean that more types of biofuels may be profitable, but profitability will also depend on the extent to which emissions from the cultivation of biomass and production of biofuels are priced. In many countries, forests are one of the main sources of raw materials for biofuels. The production of forest fuels could increase by converting more land to forest, by increased logging from existing forests or by increasing the use of by-products from forestry. It is possible to globally increase the area of forested land, but it is important that the forestry is sustainable. In Sweden, the climate policy instruments in place, mainly the tax on carbon dioxide and the system of tradable electricity certificates, have led to an increased demand for forest fuels. Currently, logging residues are primarily used for energy production, but an increased demand from the energy sector may result in an increased use of pulpwood. This may result in a reduced demand for pulpwood from other sectors, such as paper mills, as prices rise. Problems may arise if climate policy instruments are not introduced in all sectors and countries. Then, the Swedish forestry industry may be at a disadvantage in relation to forest industries in other countries and other sectors in Sweden.}
place = {Sweden}
year = {2010}
month = {Jul}
}