How To Understand And Understand Forest Based Bioenergy

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1 Annual Report 2010 SusEn Programme Consortium: Forest-based bioenergy and its climatic and economic viability - an integrated analysis (FOBIT) Project A) Forest-based fuel and material demand and the overall climatic impacts VTT Technical Research Centre of Finland Research team: Juha Forsström, Kim Pingoud, Sampo Soimakallio The EPOLA model based on the original EFOM model is used to describe the adaptation of the Finnish national energy system to the EU driven renewable energy targets, including alternative shares of 0%, 10%, 20% biodiesel produced from domestic forest biomass. The prescribed biodiesel target influences both emissiontrading and non-emission-trading sectors in Finland the impacts also being dependent on the estimated CO 2 allowance price. As a consequence, for instance, the demand for fossil fuels and peat will likely change and, in principle, emission allowances could either be sold or have to be bought from abroad. Further, increased biomass demand changes the C balance of Finnish forests, which has been estimated in project B using the EFISCEN model. The results show that the use of wood increases, but simultaneously use of fossil fuels and peat appears to increase too, when substantial amount of liquid biofuel is produced. The energy system analysis augmented to forest carbon sink analysis by the EFISCEN demonstrates the overall climatic impacts of domestic biofuel production. A manuscript on this study is under preparation. Another study deals with development of new climate indicators of forest bioenergy and biomass use chains. To illustrate the indicators for wood energy, case results from a study of the Finnish Environment Institute have been used in which decay patterns of forest harvest residues were estimated. The indicators for wood material use are illustrated using results from a life-cycle assessment of a wooden office building in Finland. A manuscript on this study is also under preparation. Besides, the research team at VTT has participated in the international (Science) and national (Helsingin Sanomat) debate on the accounting rules of greenhouse gas balance of bioenergy. Publications Pingoud, Kim; Cowie, Annette; Bird, Neil; Gustavsson, Leif; Rüter, Sebastian; Sathre, Roger; Soimakallio, Sampo; Türk, Andreas; Woess-Gallasch, Susanne;

2 Bioenergy: Counting on Incentives. Letter to Science. Science Vol. 327, 5 March 2010: Pingoud, K., Pohjola, J., Valsta, L Assessing the Integrated Climatic Impacts of Forestry and Wood Products. Silva Fennica 44 (1), Savolainen, Ilkka; Pingoud, Kim; Nykyinen päästöjen laskentatapa voi johtaa biomassan haaskaukseen. Helsingin Sanomat. Yleisönosasto Forsström, J., Pingoud, K., Pohjola, J., Valsta, L., Vilen, T EU biofuel targets and GHG balance of the Finnish energy sector and forests. Manuscript. Pingoud, K., Ekholm, T. Savolainen, I. Valsta, L Displacement of fossil carbon emissions by forest biomass GWP factors and warming payback time as climate indicators. Manuscript. Project B) Energy and material supply from forest resources University of Helsinki Research team: Lauri Valsta, Johanna Pohjola, Henna Lyhykäinen Together with the European Forest Institute, the project provided forest resource simulations for the biorefinery study of the consortium. Additionally, the scenarios produced in that study were analyzed through climatic cost-benefit analysis in a MS thesis (Niko Nummela). The climatic impacts of forest based biofuels were analyzed by a set of scenario options, which represent alternative emission trading prices and different shares of biodiesel usage in the transportation sector in Finland. The study analyzed carbon dioxide emissions by discounting, using different discounting approaches including approach where the discounting rate is not constant relative to time. If climate change mitigation is the criterion, the scenarios evaluated cannot be considered sustainable with any of the discounting schemes applied. Nevertheless, commercial roundwood removals caused by scenarios do not exceed the annual increment of the growing stock. The conclusion is that there might be better ways to utilize forest biomass to mitigate climate change than production of liquid biofuel from domestic biomass. A new study was started on the climatic impacts of use of forest biomass for packaging. This will complement the set of analyses by covering one central area of forest biomass use in Finland. One PhD degree was completed on evaluating carbon sinks in mitigating climate change (Johanna Pohjola). 2

3 Publications Pingoud, K., Pohjola, J., Valsta, L Assessing the Integrated Climatic Impacts of Forestry and Wood Products. Silva Fennica 44 (1), Pohjola, J Carbon sinks in mitigating climate change: Evaluation with models of varying scope. Doctoral dissertation. Helsinki School of Economics, A-362. Eriksson, L-O., Gustavsson, L., Hänninen, R., Kallio, M., Lyhykäinen, H., Pingoud, K., Pohjola, J., Sathre, R., Solberg, B., Svanaes, J., Valsta, L Climate Change Mitigation through Increased Wood Use in the European Construction Sector Towards an Integrated Modelling Framework. Accepted to be published in European Journal of Forest Research. Forsström, J., Vilen, T., Pingoud, K., Pohjola, J., Valsta, L EU biofuel targets and GHG balance of the Finnish energy sector and forests. Manuscript. Nerg, K. ja Valsta, L Metsän kiertoajan vaikutus hiilensidontaan ja metsänkasvatuksen kannattavuuteen. Submitted manuscript. Presentations Pohjola, J. Nielujen aktiivinen hyödyntäminen: tutkimustuloksia ja näkökulmia. Pyydetty puheenvuoro. Ympäristöministeriön koolle kutsuma seminaari Nielujen rooli (LULUCF ja REDD) YK:n ilmastosopimusjärjestelmässä (UNFCCC), Tapahtumatalo Bank, Valsta, L., Pingoud, K. & Solberg, B Integrating forest management, wood product use and biofuel use for mitigating climate change. Paper presented in the IUFRO World Congress, Seoul, Republic of Korea, Posters Forest-based bioenergy and its climatic and economic viability - an integrated analysis (FOBIT). Annual seminar 2010, The SusEn programme, Academy of Finland. 3

4 Project C) Energy wood and timber market model for Finland, Finnish Forest Research Institute Research team: Matti Mäkelä, Juha-Pekka Kyllönen, Hanna-Liisa Kangas, Jussi Lintunen, Jani Laturi, Johanna Pohjola & Jussi Uusivuori One of the main tasks of Project C in this consortium has been creating a partial equilibrium model of the forest and energy sector in collaboration with a Metla project funded by Metsämiesten Säätiö. Our work and the greatest progress focused on the development of the model in Until now, we have operated with separate modules covering the energy sector, the pulp and paper industry and the wood product industry. However, now we succeeded to link these modules together and calibrate the complete model using our collected data. We also developed the model further; we extended the regional scope to the model and inserted a more sophisticated approach to model wood supply. The wood supply comprises wood flows from first thinnings, other thinnings and final fellings. The model is now divided into county-level subregions and therefore, it enables more detailed regional studies than previously. We also made econometric studies that support our numerical partial equilibrium model. We started to estimate co-firing costs and optimal bio ration of fuel input related to energy production by performing the econometric estimations. Both parameter are used in the numerical model and had previously based on literature. We used the same cost function of energy production in the estimation problem that is used in the partial equilibrium model. The problem was formulated as a mathematical program with equilibrium constraints (MPEC). We also performed an estimation about own-price and cross-price elasticities of wood fuels and peat, where we used a translog model. Presentations Uusivuori, J Investments into forest biorefineries under different price and policy structures. Presentation in How forest sector models tackle climate policies - workshop , Nancy, France. Lintunen, J Finnish Forest and Energy Policy Model FinFEP. An overview. Presentation in How forest sector models tackle climate policies -workshop , Nancy, France. 4

5 Kangas, H-L. & Mäkelä, M Ilmasto- ja energiapolitiikan vaikutukset ja kustannukset: mallisimulointiesimerkkeinä metsäbiojalostamot ja sahateollisuus. Esitys seminaarissa Taloudelliset mallit ajankohtaisissa ilmasto- ja energiakysymyksissä, Helsinki, Suomi Mäkelä, M Finnish Forest and Energy Policy Model FinFEP. Presentation in A Partial Equilibrium Model of the Finnish Forest Sector -seminar, , Umeå, Sweden. Mäkelä, M Pellet promotion in the sawmill industry. Presentation in The 17th Ulvön Conference on Environmental Economics, , Ulvö, Sweden. Pohjola, J Investments into forest biorefineries under different price and policy structures. Presentation in International Energy Workshop 2010, , Stockholm, Sweden. Mäkelä, M., Lintunen, J., Kangas, H-L., & Uusivuori, J Pellet promotion in the Finnish sawmilling industry: The cost-effectiveness of different policy instruments. A submitted manuscript, second round. Kangas, H-L, Lintunen, J., Pohjola, J., Hetemäki, L.& Uusivuori, J Investments into forest biorefineries under different price and policy structures. A submitted manuscript, second round. Kangas, H-L, Alexeeva Talebi, V., Löschel, A., Uusivuori, J. & Pohjola, J Benchmarking for free allocation in emission trading: The impacts of the allocation method choice on Finnish pulp and paper industry. A manuscript. Kyllönen, J-P., Mäkelä, M., & Uusivuori, J Short run translog model for studying interfuel substitution of wood fuels and peat under emissions trading. A manuscript. Publications Kyllönen, J-P The Effect of European Union s Emission Trading System on Fuel Choices in Finnish Energy Sector. Master s Thesis, University of Helsinki, Department of Forest Sciences. 5