1) basic concepts in bioenergy and background

Learning Portfolio – Bioenergy Markets and Policies Camila Maciel Viana #300218

1) Basic Concepts in Bioenergy and Background

Bioenergy, which is generally produced from plants such as agricultural crops or

trees, comes in various forms. Wood and other solid biomass are commonly used for

heating and electricity generation. Liquid biofuels for transport and other purposes are

mainly made from food and feed crops, but can also be produced from waste and

residues. Bioenergy can also be delivered in the form of gas. Bioenergy is a renewable

but finite energy source, and considered as climate-friendly because the carbon which

is emitted during combustion was removed from the atmosphere during growth of the

biomass and will be removed again after some time if new plants are grown.

Biomass energy was the first energy source. Wood for fuel and housing helped build

civilizations. With the discovery of electricity, man discovered another way of utilizing

the biofuel. This form of fuel was discovered even before the discovery of the fossil fuels,

but with the exploration of the fossil fuel like gas, coal, and oil the production and use of

biofuel suffered a severe impact. With the advantages placed by the fossil fuels they

gained a lot of popularity especially in the developed countries.

In the period of World War II, the high demand of biofuels was due to the increased

use as an alternative for imported fuel. In this period, Germany was one of the countries

that underwent a serious shortage of fuel. It was during this period that various other

inventions took place like the use of gasoline along with alcohol that was derived from

potatoes. Britain was the second country which came up with the concept of grain

alcohol mixed with petrol. The wars frames were the periods when the various major

technological changes took place but, during the period of peace, cheap oil from the gulf

countries as well as the Middle East again eased off the pressure.

With the increased supply the geopolitical and economic interest in biofuel faded

away. A serious fuel crisis again hit the various countries during the period of 1973 and

1979, because of the geopolitical conflict. Thus (OPEC), Organization of the Petroleum

Exporting Countries made a heavy cut in exports especially to the non OPEC nations.

The constant shortage of fuel attracted the attention of the various academics and

governments to the issues of energy crisis and the use of biofuels. The twentieth century

came with the attention of the people towards the use of biofuels. Some of the main

reasons for the people shifting their interest to biofuels were the rising prices of oil,

emission of the greenhouse gases and interest like rural development.


2) The role of policy on bioenergy markets

Until the 90´s or so, the policies and institutions that had a significant impact on the

expansion of bioenergy were local or national. The valuable role of local institutions in

maintaining biomass resources for multiple uses has long been recognised in traditional

cultures that rely almost exclusively on biomass for energy, materials, and livelihoods.

National policies and institutions have been crucial in establishing large markets for bio-

ethanol in countries such as Brazil and Malawi.

More recently, regional and international organisations have emerged to address

the growing international trade in biomass and biofuels, as well as the greater sharing

of technologies and agricultural expertise.

The efficiencies that can be obtained through greater coordination of bioenergy

strategies include transport and distribution, as well as political and economic

coordination. Another important aspect to be consider in these frameworks are the

sustainability criteria.

Appropriate policy frameworks and political, together with the setting of realistic

usage targets, are required to ensure that bioenergy can be managed sustainably. Since

bioenergy crosses many ministerial departments, it is vital that all relevant government

policy-making departments are involved in this process, including the environment,

energy, forestry, agriculture, health and finance departments.

Policies also need to provide incentives, such as flexible tax regimes, for reaching

the remote and rural poor; and to ensure that these incentives are not exploitative or

detrimental, environmental and social safeguards need to be established on a case-by-

case basis through impact assessments.

Analysing the European Union case, the below mentioned policies instruments are

the most accessed aiming to ensure national Bioenergy development and sustainability:

- Energy Roadmap 2050 - Defines EU energy strategy by 2050 and Provides

different scenarios;

- Energy Efficiency directive - National EE targets and the assessment in mid

2014, National heating and cooling plans by 2014, and Promotion of CHP and

district heating;

- Common Agricultural Policy (CAP) - Rural development priority, Crop

diversification measures;

- Renewable Energy Directive II – Overall policy for the production and

promotion of energy from renewable sources in the EU.

- Climate and Energy Framework - Sets three key targets for the year 2030.


Besides, in the European Commission website we can find the following list of EU

policies and initiatives on bioenergy:

• Strategic Energy Technology Plan

• European Industrial Bioenergy Initiative (EIBI)

• Energy 2020 - A strategy for competitive, sustainable and secure

energy

• A resource-efficient Europe – Flagship initiative of the Europe 2020

Strategy

• Strategic Energy Technologies Information System (SETIS)

• Renewable Energy Road Map

• Clean Vehicles Directive

• Climate Change: 2050 – the future begins today

• EU strategy for biofuels

3) Economic instruments of policy

Possible local policy instruments for the promotion of bioenergy can be classified as follows:

- Regulations and laws (municipality statutes)

- Target setting

- Economic instruments (taxes, grants, subsidies, municipal guarantees etc.)

- Voluntary agreements

- Municipal ownership and leadership by example

- Urban planning, spatial planning

- Organizational instruments (bioenergy cluster, local energy agencies etc.)

- Demonstration projects

- Education, information, promotion

- Networking

Focusing on the economic instruments, the following chart is a summary of the

support schemes available in some countries and at what level they are applied. It gives

us a great understanding about the main policies and mechanisms that have been used

to promote bioenergy.

By the economic theory of demand and supply, we can understand how policies that

include subsidies and taxes can help on the promotion of bioenergy.


A per-unit subsidy, is an amount of money that the government pays to either producers or

consumers for each unit of goods that is bought and sold. In the bioenergy promotion case,

subsidies are more likely to be applied in the producer side. Mathematically speaking, a

subsidy functions like a negative tax.


In the other hand, tax credits for bioenergy are the most direct and widely used

financial support instrument to promote it. Tax credits lower the cost of production

while also increasing output.

Tax credits shift the supply curve down and to the right (figure below), lowering the

price from PE to PS and increasing the amount produced from QE to QS.

4) Adoption dynamics in bioenergy markets

As analyzed in several studies conducted during crop energy plantations

installation, which can be generalized for the bioenergy case, adoption dynamics in

bioenergy markets follows the Diffusion of Innovation (DOI) Theory, developed by E.M.

Rogers in 1962.

It originated in communication to explain how, over time, an idea or product gains

momentum and diffuses (or spreads) through a specific population or social system. The

end result of this diffusion is that people, as part of a social system, adopt a new idea,

behavior, or product. Adoption means that a person does something differently than what

they had previously (i.e., purchase or use a new product, acquire and perform a new

behavior, etc.). In the bioenergy context, it is analyzed as the farmers or producers

willingness to shift their production cultures and methods to supply this specific market.

Roger´s model understand this process as it follows:


There are five established adopter categories:

1. Innovators - These are people who want to be the first to try the innovation. They are venturesome and interested in new ideas. These people are very willing to take risks, and are often the first to develop new ideas.

2. Early Adopters - These are people who represent opinion leaders. They enjoy leadership roles, and embrace change opportunities. They are already aware of the need to change and so are very comfortable adopting new ideas. They do not need information to convince them to change.

3. Early Majority - These people are rarely leaders, but they do adopt new ideas before the average person. That said, they typically need to see evidence that the innovation works before they are willing to adopt it. Strategies to appeal to this population include success stories and evidence of the innovation's effectiveness.

4. Late Majority - These people are skeptical of change, and will only adopt an innovation after it has been tried by the majority. Strategies to appeal to this population include information on how many other people have tried the innovation and have adopted it successfully.

5. Laggards - These people are bound by tradition and very conservative. They are very skeptical of change and are the hardest group to bring on board. Strategies to appeal to this population include statistics, fear appeals, and pressure from people in the other adopter groups.

Besides the personal profile level of innovation acceptance and dispersion, this shift

is also stimulated by policies, innovation and economic incentives.


5) Biomass Markets

To supply a national or global bioeconomy, logistics and market structures will need

to address and cope with the spatial, temporal, and compositional variability of biomass.

Only a reduction of this variability, that is, a constant supply within quality specifications

can guarantee the stable and high conversion yields necessary for an economically viable

cellulosic biorefinery relying on these supply streams. At present, pilot scale cellulosic

biorefineries rely on vertically integrated feedstock supply systems designed to support

traditional agricultural and forestry industries, where feedstock is procured through

contracts with local growers, harvested, locally stored, and delivered in low‐density format

to the nearby conversion facility. While these systems have been demonstrated to achieve

high‐volume, low‐cost feedstock supply, they have not yet been able to consistently

demonstrate narrow quality specifications and guarantee a reliable conversion in‐feed

process.

Two different markets for biomass are likely to develop in the future. One market

will utilize chemical or enzymatic processes to convert biomass into liquid biofuels and

other high-value renewable products. A second market will use thermal, pyrolysis or

gasification processes to use biomass energy for the production of electricity, syngas, steam

and other forms of energy.

In both markets, the two most important criteria buyers will utilize to determine the

value of the biomass delivered to a plant site are the quantity of biomass supplied as

measured by weight in tons and the moisture content. If the biomass buyer is using either


an enzymatic or thermal process, they would prefer to purchase “bone dry” biomass, which

is biomass that contains no water.

In addition to commercial biomass markets, farmers with ample biomass resources

should not overlook local consumer demand. Many rural residents and businesses have

installed wood, corn or pellet stoves. Biomass can be made denser by pelleting, compaction

or other techniques and then marketed locally. This can provide farmers with an attractive

return on lower-quality biomass with minimal additional processing costs.

6) Governance in Bioenergy

´Sustainability governance’ refers to a set of regulatory processes, mechanisms and

organizations through which engaged actors influence environmental and social actions

and outcomes. We find it useful to understand governance comprehensively as a range of

mandatory or voluntary, public or private regulatory systems, with some examples being

governmental regulations, international agreements and conventions, private certification

systems, standardization, company policies, best management practices, and education

programs.

The future importance of large scale production of biomass for bioenergy,

biochemicals and biomaterials is increasingly recognized. Manage activities associated with

both traditional and newer bioproducts span over large portions of productive regions are

one of the largest challenges related to human impacts on nature and the environment.

Working with sustainability of bioenergy and the bioeconomy involves a high

degree of complexity, as biomass is a dispersed resource across the landscape. Also, supply

chains often involve a large number of actors and multiple sectors, such as forestry,

agriculture, waste and biogas.

Policies of sustainability governance systems or complexes in specific settings, with

regard to, for example, drivers of their emergence and development, roles of the actors

involved (scientists, researchers, policy makers, actors from relevant economic sectors and

industries, NGOs and other interested persons), prescriptiveness of substantive or

procedural system rules, and thresholds.

Aiming to develop strong governance and guarantee sustainability in this process, it

is crucial to access the availability and reliability of research, data, maps, models, tools and

methodologies, and use such knowledge and information to support development of

credible sustainability governance systems, their implementation, showing compliance,

examining effectiveness on-the-ground, and guidance on their improvement and adaptation

to new conditions.


7) International Markets

Biomass is at the core of the bioeconomy and the key societal challenges it

addresses. The demand for biomass is increasing worldwide, consequently, there is a

growing need to assess and better understand how much biomass is available and can be

mobilized sustainably, how much is being used and for which purposes, what are the

biomass flows in the economy and how the increased pressure on natural resources can be

reconciled with environmental, economic and social sustainability in Europe and globally.

Overall, the average annual biomass produced in the land-based sectors (agriculture

and forestry) of the EU is 1466 Mt in dry matter (956 Mt agriculture, 510 Mt forestry). Not

all the biomass produced is harvested and used, part of it remains in the field to maintain

the carbon sink and the other ecosystem services. The biomass harvested and used in 2013

from the EU agricultural and forestry sectors was estimated as 805 Mt dry matter (578 Mt

from agriculture, 227 Mt from forestry). In addition, 119 Mt were grazed in pastures.

Production from fisheries and aquaculture by the EU-28 Member States equalled

6.05 Mt wet mass (roughly corresponding to 1.5 Mt dry weight) in 2013, representing

3.17% of total global production.

Comprehensive cross-sectorial biomass flow diagrams (Sankey diagrams)

representing in a unique view the flows of biomass of different sectors of the bioeconomy,

from supply to uses including trade, have been developed. The biomass flow diagrams are

the bases to frame the future analysis of cross-sectorial competitions and synergies.

Wood Biomass Flows in EU-28 (2013, values in Mm3 SWE).


8) Bioenergy Markets Supply Chains

The bioenergy manufacturing production process can be pictured like a river. Many

studies predominantly explored the complete Supply Chain (i.e., upstream, midstream, and

downstream) to tackle sustainability issues (i.e., economic, environmental, and social),

there is a dearth of literature for detailed analysis of each individual segment of the Supply

Chain. Exploring and addressing the gaps in each segment can raise the awareness of

decision makers and, subsequently, aid in identifying alternative ways of making business

more robust and sustainable.

Upstream refers to the material inputs needed for production, while downstream is

the opposite end, where products are produced and distributed. The upstream stage of the

production process involves searching for and extracting raw materials. The upstream part

of the production process does not do anything with the material itself, such as processing

the material. This part of the process simply finds and extracts the raw material. In a more

general sense, "upstream" can also refer to any part of the production process relating to

the extraction stages.

Figure 3: Conventional biomass-based energy supply chain (Source: Amin Mirkoue).

The downstream stage in the production process involves processing the materials

collected during the upstream stage into a finished product. The downstream stage further

includes the actual sale of that product to other businesses, governments or private individuals.

The type of end user will vary depending on the finished product. Regardless of the industry

involved, the downstream process has direct contact with customers through the finished

product. In general words, the downstream segment includes distribution and demand

activities.


9) International Polices

In response to many different policy objectives, including climate change mitigation,

energy security, and rural development, more than 50 countries worldwide have put in

place targets and/or mandates for bioenergy.

The International Risk Governance Council (IRGC) found that, in at least some parts of

the world, policies are being decided before sound scientific knowledge about the risks has

been considered, or even generated.

In response to some unintended negative effects caused by bioenergy policies, some

countries such as Germany, New Zealand and Thailand have reduced policy targets or

support for biofuels, and others including Tanzania have put a temporary moratorium in

place.

While some governments have been concerned about unanticipated negative impacts

of biofuels, others continue to provide subsidies to support their growth.

Considering this situation, the IRGC recommends:

Minimise any negative impact of bioenergy production (and in general of all

agricultural practices) on water resources; and

Promote more sustainable agricultural practices, both for food and fuel production.

Maximise the use of waste, particularly sewage, in bioenergy generation but only

deliberately use food crop residues when doing so does not lead to soil erosion or

humus depletion.

Further develop and use risk assessment methodologies such as full “cradle to

cradle” lifecycle assessments and Environmental Impact Assessments (EIAs), and

apply them locally.

Adopt internationally agreed definitions, sustainability standards and criteria for

certification that would be recognised under international trade rules.

There is a plethora of bioenergy policies used worldwide. Some of them are used more

frequently, such as mandates or consumption subsidies (e.g., tax credits and tax

exemptions), and others less so, for example, import quotas. From an international trade

perspective, it is important to distinguish between policies that do not discriminate and

those that do discriminate against international trade. The former group includes

consumption subsidies (e.g., tax credits or tax exemptions) and mandates, while the latter

encompasses production subsidies (for biofuels and feedstocks), import tariffs and quotas.

The choice of particular instrument is a result of comparative advantage in bioenergy

production, political process, and pressure from interest groups. There is no significant

cooperation among countries to harmonize their policies, although spillover effects due to

the learning process among countries cannot be excluded.


10) Recent and Future Trends in Bioenergy

In 2017, bioenergy power generation increased 10%. However, growth was lower

than in previous years, and bioenergy power generation is forecast to increase by only 6%

per year over the next five years. As a consequence, bioenergy needs improvement to reach

its Sustainable Development Scenarios (SDS) electricity generation target of more than

1100 TWh by 2030.

Figure x: Historical development and targets for Bioenergy power generation.

In the SDS, the contribution of solid biomass for electricity to long-term climate targets

in the power sector takes account of air pollution constraints.

While Europe has historically been the key source of bioenergy deployment, Asian

markets are expected to drive future expansion. In Japan and Korea, bioenergy electricity

generation has increased significantly since 2015, driven by co-firing with coal and

generous support for dedicated biomass plants. China has raised its 13th Five-Year Plan

target for bioenergy capacity and introduced a pilot programme to increase the co-firing of

biomass with coal in 2017.

In Brazil, the new RenovaBio legislation is expected to increase transport biofuel

production in the long term. This growth is also anticipated to increase bioenergy power

generation, as ethanol producers use bagasse residues in co-generation plants that generate

electricity.


Despite these positive trends, bioenergy in the power sector needs improvement to

accelerate growth and become fully on track with SDS targets by 2030.

REFERENCES:

http://biomassmagazine.com/articles/3302/energizing-the-woody-biomass-market

http://www.oecd.org/science/inno/2108273.pdf

https://link.springer.com/chapter/10.1007%2F978-1-4939-1447-0_18

https://www.iea.org/



http://publications.jrc.ec.europa.eu/repository/bitstream/JRC109869/jrc109869_biomas

s_report_final2pdf2.pdf



https://link.springer.com/chapter/10.1007%2F978-1-4939-1447-0_18

https://www.iea.org/



http://publications.jrc.ec.europa.eu/repository/bitstream/JRC109869/jrc109869_biomass_report_final2pdf2.pdf

http://publications.jrc.ec.europa.eu/repository/bitstream/JRC109869/jrc109869_biomass_report_final2pdf2.pdf

1) basic concepts in bioenergy and background

Documents