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BEWHERE EXAMINES THE INFLUENCE OF CARBON TAX ON FUTURE BIOENERGY INVESTMENTS IN EUROPE Karthikeyan Natarajan Researcher University of Eastern Finland, Joensuu [email protected] 27th January 2016, Biomass market and policies Contents • BeWhere Optimization model • Case Europe: CHP or biofuel production • Policy factors – Carbon tax and biofuel support • Model inputs • Model Results • Key conclusions BMP / Natarajan 2.2.2016 2 Supply Chain (1/2) Bio-product transport Biomass transport Production site Distribution Harvesting Where to set up the plant? BMP / Natarajan 2.2.2016 3 Supply Chain (2/2) BMP / Natarajan 2.2.2016 4 Research Questions? 1. Which bioenergy technologies for woody biomass are costeffective in reducing CO2 emissions and substituting fossil fuels? 2. Which bioenergy policy instruments reach the targets of reducing CO2 emissions and substituting fossil fuels costeffectively. 3. Which restrictions are imposed on bioenergy utilization by the spatial structure of biomass supply and energy demand? 4. Which plant locations are suitable and optimal for bioenergy production? BMP / Natarajan 2.2.2016 5 MILP : cost minimization problem • The model minimizes the total cost of the supply chain which is defined as (Total Cost) = (Supply chain cost) + (supply chain emissions) * (CO2 cost) • The supply chain cost includes: – feedstock cost, collection cost & transportation cost to the production plant – production plant: set up & bioenergy production costs, – bioenergy transport cost to the gas stations, – income from the co-products, • The supply chain emission include: – emissions of fossil CO2 from biomass and biofuel transportation, – emissions from additional transport fossil fuel use, – offset emissions from replaced fossil transportation fuel, power and heat BMP / Natarajan 2.2.2016 6 BeWhere Bioenergy supply chain costs Biomass supply CHP Forest Biomass Pellet Sawmill Pulp mill Import Bioenergy .harvesting .forwarding .chipping .storage Biomass transport .truck .train Production .investment .operation & maintenance .interest rate Bioenergy transport .truck .train Distribution .fuel station Model results 1.plant no 2.optimal location 3.Size Transport network .Road origin Biomass supply Bioenergy production Energy demand destination 5.biomass share 6.biofuel sold ++++++++++++ .Rail 4.biomass area 7.heat sold origin terminal destination 8.electricity sold 9. minimized costs a.biomass Candidate sites b.transport .close to biomass supply .close to energy demand .pulp & paper industry .ports c.production d.fuel station Heat Demand 10.bioenergy cost 11.CO2 emissions 12.parameter sensitivity Energy demand .transport fuel .district heating Parameters Constraints Other costs .biofuel yield .biomass supply .production plant .energy demand .heat transport .fossil fuel .heat price .electricity price .heat yield .electricity yield .emission factor 13.biofuel blend 14.import & export BMP / Natarajan 2.2.2016 7 Biomass potential Possible production plants Bioenergy Demand Parameters Biomass Cost Transport cost Production cost Excel Input data reading Matlab Optimization Gams Results Interpretation Matlab Results Costs Emissions Biomass flows Biomass Supplied Production plants selected Excel Energy delivered ArcGis BMP / Natarajan Case Europe: CHP or biofuel production? BMP / Natarajan 2.2.2016 9 Objective To investigate the opportunity to invest into CHP or biofuel production plants under varying • CO2 costs • biofuel support BMP / Natarajan 10 What is CO2 costs or Carbon tax ? • A tax levied on carbon emissions from coal, oil and natural gas (A fee for greenhouse gas pollution). • Cost is calculated per ton on carbon translated it into a tax for fossil fuels. (Polluter pays!) • Carbon tax encourage alternative energy and reduce fossil fuel use and CO2 emissions. • Carbon tax offers an incentive to the alternate energy (e.g biomass CHP or biofuel). • Carbon tax increases the energy efficiency. By reducing fuel consumption, increasing fuel efficiency, using cleaner fuels and adopting new technology, businesses and individuals can reduce the amount they pay in carbon tax, or even offset it altogether. /BCMF BMP / Natarajan 2.2.2016 11 Carbon tax disadvantages Industrial production shift to countries with no or lower carbon tax BMP / Natarajan 2.2.2016 12 Cop21 reflections on carbon market • Revenue-neutral carbon taxes (as per economic conditions of the countries – Elon Musk). • Put a global tax on carbon pollution (international fair pricing) • Carbon tax (revenue) to be invested in clean energy and technology. Cop21 five action points 1. Cop21 Paris agreement ratifications 2. End fossil fuel subsidies 3. Put a global tax on carbon pollution 4. Wrok toward political consensus 5. Invest in greener technologies Source: Cnn, cop21 BMP / Natarajan 2.2.2016 13 BeWhere Model Boundaries Major harbor Inland trade points between two regions Country not considered BMP / Natarajan 2.2.2016 14 Europe – Input Data BMP / Natarajan 2.2.2016 15 Economy of scale BMP / Natarajan 2.2.2016 16 Technologies Key parameters Unit Methanol a, b Ethanol c CHPd Base plant capacity MW 357 105 100 Base investment cost M€ 505 143 78 M€/PJbiofuel 1.2 2.5 3.7 GJbiofuel/GJbiomass 0.55 0.30 - GJelectricity/GJbiomass 0 0.11 0.42 GJheat/Gjbiomass 0.11 0.40 0.43 GJin/GJout 0.66 0.81 0.85 Operating and maintenance cost Biofuel efficiency Electrical efficiency District heating efficiency Total efficiency a Hamelinck , et al., 2002. b Wahlund, et al., 2004. c Barta, et al., 2010. d Schmidt et al, 2010. BMP / Natarajan 2.2.2016 17 Example results – EU BMP / Natarajan 2.2.2016 18 18 Results - Potential BMP / Natarajan 2.2.2016 19 Biomass Use CHP Biofuel CHP Biofuel BMP / Natarajan 2.2.2016 20 Biofuel Support vs Carbon Cost Biomass used (PJ/a) Emissions (MtCO2/a) Biofuel CHP BMP / Natarajan 2.2.2016 21 Conclusions • CHP High carbon cost Low biofuel support • Biofuel High biofuel support Irrespective of the carbon cost • Highest emission substituted High carbon cost Low biofuel support • Conflict of interest between increase biofuel production & decreased CO2 emissions BMP / Natarajan 2.2.2016 22 Case Eastern Finland: CHP or methanol production? BMP / Natarajan 2.2.2016 23 Model Scheme BMP / Natarajan 2.2.2016 24 Optimal plant locations Influence of CO2 cost on technology diffusion and emission savings BMP / Natarajan 2.2.2016 25 THANK YOU!
