EU28 future transport fuel policy and bioenergy trade pekka EU28 future transport fuel policy and bioenergy trade pekka.lauri@iiasa.ac.at Purpose: Consider trade-off between biofuels and pellets import to EU28 when the choice of EU28 future transport fuel is uncertain. Method: Solve GLOBIOM (=global agriculture, forest and bioenergy sector model) for two different EU28 transport fuels scenarios (“baseline” and “EU28 electric cars”). Results:1) In the baseline scenario EU28 imports 60 % of its biofuels consumption in 2050. 2) If uncertainty about EU28 future transport fuel policy is high enough then biofuels import decreases to zero and it is replaced by pellets import.

Bioenergy demand scenarios -bioenergy demands taken as given from POLES (global energy sector model) => separate demands for 1st biofuels, 2nd biofuels, heat & power and fuelwood -”baseline” scenario: POLES baseline scenario => CO2 concentration 500 ppm in 2050 (~low mitigation scenario) => EU28 biofuels 1.4 EJ (0.82 EJ 2nd biofuels and 0.56 EJ 1st biofuels) in 2050 (~10% of EU28 transport fuels) -“EU28 electric cars” scenario: EU28 biofuel consumption replaced by electric cars and bio electricity in 2030 => “EU28 10% biofuel target” replaced by “EU28 10% electric car target” 17.6.2018

Trade and compatibility assumptions 1) Bioenergy traded in form of pellets or biofuels -bioenergy trade in form of logs, chips, bio gas or electricity not profitable (due to high trade costs) 2) Trade costs of pellets are higher than biofuels - biofuels trade costs: 30 $/ton ≈ 0.8-1.1 $/GJ - pellets trade costs: 30 $/ton ≈ 1.7 $/GJ (3.3-5.6 $/GJ final energy) 3) Pellets are more compatible than biofuels -pellets can be converted to biofuels or power -it is not profitable to convert biofuels to electricity (due to low energy efficiency) 17.6.2018

EU28 transport fuel policy uncertainty -regions that import biofuels to EU28 face uncertainty about EU28 transport fuel policy some probability between “baseline” and “EU28 electric cars” scenarios uncertainty modelled by assuming a risk premium for investment costs in import regions -biofuels risk free investments costs 5 $/GJ (≈50% of total biofuel costs) Add risk premium 0-5 $/GJ Biofuels risk-adapted investments costs 5-10 $/GJ (=risk premium increases investments costs 0-100%) 17.6.2018

Results: EU28 bioenergy import without uncertainty 17.6.2018

Results: EU28 bioenergy import with uncertainty 17.6.2018

CONCLUSIONS In the baseline scenario EU28 imports 60% of its biofuels consumption in 2050 (current import 20% of consumption). => EU28 future biofuels consumption depends much on import If uncertainty about EU28 transport fuel policy is high enough then biofuels import decreases to zero and it is replaced by pellets import => this is inefficient solution from viewpoint of trade costs minimization Uncertainty about EU28 transport fuel policy could be reduced by binding commitment to biofuels or electric cars policy => problem: binding commitment to one technology might also lead to inefficient solution (historical examples of “lock-in” to inferior technologies)

Bioenergy technologies 1) Biomass power efficiency 30% (with CHP) 2) Biomass biofuel efficiency 30% (ethanol) and 50% (FT diesel) Combustion Gasification (methanol -> FT biodiesel) Fermentation (ethanol) Biomass (m3) -1 -1 -1 Heat (GJ) 4.3 1.4 2.5 Power (GJ) 2.15 - 1.1 Biofuel (GJ) - 3.6 2.2   Total eff. 90% 70% 80% Power eff. 30% - 15% Biofuel eff. - 50% 30% 3) Ethanol energy content (LHV) 28 GJ/ton, biodiesel 38 GJ/ton, pellets 18 GJ/ton 4) Electric motor energy efficiency 90% vs. internal combustion engine (diesel/gasoline) 30% 17.6.2018

EU28 bioenergy demand Final energy Primary energy 17.6.2018

EU28 pellets consumption -POLES does not provide separate demand for pellets -in 2010 pellets demand is based on FAOSTAT data -after 2010 pellets demand depends on total bioenergy demand -pellets have same heat value than other woody biomass, but lower trade costs =>motivation for pellets demand is lower trade costs 17.6.2018