Table of Contents. Preface 2. Wood Resources Availability and Demands - Implications of Renewable Energy Policies 3. End Users Perspective 7

Solid Biomass Mobilisation for the Forest-based Industries and the Bio-energy Sector Proceedings from a Seminar during the European Paper Week 2007 in Brussels on 28 November 2007 Supported by

Table of Contents Preface 2 Wood Resources Availability and Demands - Implications of Renewable Energy Policies 3 End Users Perspective 7 Willow (SALIX) for Biomass Production 8 Biomass Trade and Forest Wood Potential in Europe 10 Bio-energy and Wood Mobilisation 20 AEBIOM Views on Bio-energy and Competition with other Applications 25 Bio-energy Opportunities for the Pulp & Paper Industry 27 Conclusion 28 1

Preface Mobilising Biomass Markets is Vital to Meeting EU 2020 Renewable Energy Targets William Gillett, Head of Unit for Renewable Energy, European Commission, Executive Agency for Competitiveness and Innovation (EACI) MADO-04/44, B-1049 Brussels, Madou Plaza 04/44, Place Madou 1, Brussels, Email: william.gillet@ec.europa.eu Climate change, growing dependency on imported oil and other fossil fuels, and rising energy prices are all rendering Europe increasingly vulnerable. The key to a sustainable future for Europe must involve the greater use of renewable energies. At the beginning of 2007, as part of its Energy Policy for Europe, the European Commission put forward a proposal for a long-term Renewable Energy Roadmap. At its meeting in Spring 2007, the European Council made a commitment to binding targets for 2020, delivering 20% of EU final energy consumption from renewable energy sources, together with a 20% reduction in CO 2 emissions, 10% of transport fuels from biofuels, and a 20% improvement in energy efficiency. Based on these commitments, and building on the Renewable Energy Roadmap (2007) and the energy efficiency action plan (2006), the European Commission will bring forward a proposal for a new legislative package on energy in January 2008. It is foreseen that the new energy package will include legally binding targets, allowing each Member State the freedom to determine the best renewable energy mix for its own circumstances. At the same time and in view of reaching the overall national target, Member States will be required to establish National Action Plans outlining their specific objectives and sectoral targets for each of the renewable energy sectors - electricity, biofuels and heating and cooling. As a result, Member States will need to change their policies to increase the use of renewable energy significantly in all these fields. They will be called upon to ensure rapid, fair and simple authorisation procedures for renewable energies, improve pre-planning mechanisms in which regions and municipalities have to assign suitable locations for the deployment of renewable energies and integrate renewable energies into their regional and local plans. In 2007, the European Commission launched its second Intelligent Energy - Europe (IEE-II) Programme with a budget of 730M over 7 years (2006-2013), which is twice the annual budget of its predecessor. IEE-II has been included in the overall Competitiveness and Innovation Framework Programme (CIP) in order to contribute to achieving the objectives of EU energy policy and to implementing the Lisbon Agenda. It supports projects across the EU aiming to foster the market up-take of sustainable energy technologies, through a series of "soft" actions, e.g. awareness raising, networking, benchmarking approaches, market transformation initiatives, and projects enabling EU policies and legislation. IEE projects are expected to have an impact in five areas: enable policies; market transformation; change behaviour; access to capital; training. In this context, there are necessarily big expectations with regard to future contributions from biomass, and up-to-date information on biomass supply chains and markets will continue to be vital for energy decision makers at all levels. Also widely acknowledged to be important is the on-going work of the European Commission and other key market actors on sustainability criteria for biomass trading, and on Standards for the monitoring of the quality of biomass products. The IEE Programme is supporting the work of the project, which is expected to make a valuable contribution to the future mobilisation of European biomass markets. A specific objective of EU energy policy is the removal of non-technical barriers to the integration of renewable energy sources into EU energy systems, and the Intelligent Energy Europe (IEE) Programme is the main Community instrument for supporting such non-technological actions. The main objective of the IEE Programme is to create favourable policy and market conditions by supporting actions in three sectors: energy efficiency and the rational use of energy resources; new and renewable energy sources and energy diversification; energy efficiency and the use of new and renewable energy sources in transport. 2

Wood Resources Availability and Demands - Implications of Renewable Energy Policies A first glance at 2005, 2010 and 2020 in European countries Florian Steierer, University of Hamburg, Leuschnerstrasse 91, D - 21031 Hamburg, Email: steierer@holz.uni-hamburg.de Full report available under: www.unece.org/trade/timber/docs/tc-sessions/tc- 65/policyforum/Wood_availability_and_demand.pdf Abstract The Timber Section of the United Nations Economic Commission for Europe/Food and Agriculture Organisation (UNECE/FAO Timber Section) in cooperation with Hamburg University and other partners 1 assessed current and future wood availability and demand. First results indicate that 775 million m 3 roundwood equivalents are currently (2005) available for material and energy purposes. Based on the structure of the wood resource balance it showed that currently 73 million m 3 more woody biomass from forests is already being used than reported by international trade statistics for the EU/EFTA region. Energy targets set by the European Union require that renewable energy sources shall contribute 20% of the energy consumption by 2020. The second part of the study quantified these policy targets and calculated the requirement for wood to fulfil these targets for the years 2010 and 2020, based on certain assumptions. Comparing these calculations with forecasted wood demand by the European Forest Sector Outlook Study (EFSOS) shows that wood required for energy production would increase significantly faster than wood requirements for material uses. Calculated wood requirements will have implications for the forest and energy sector, implying the following options: Increased wood supply from existing forests, expansion or intensification of forest management, trees outside the forest, other sources -including recovered wood and industry co-products, or through imports Policy targets for renewable energy may not be met (at least not with the share of wood as expected in this study) Wood-based industries development at question Increasing overall energy efficiency and efficient use of wood contribute to mitigate increasing demand for energy and wood fibre. Objectives The study is addressed to decision-makers in the field of renewable energy, forestry and wood-based industries. The objective is to assess the current role of wood energy and its future potential to help to achieve policy goals on renewable energy and climate change in Europe. The focus of the assessment so far is on the countries in the European Union and EFTA. However, its implications address all UNECE member countries, as the conclusion and policy implications drawn from this study might apply to their national situation as well. The figures presented are the results of combining actual figures, forecasts of future raw material demand from the wood-processing sector, and scenarios for wood-energy requirements to meet policy targets for renewable energy. The figures presented are not meant to be a forecast of future wood demand, but should be a basis to discuss renewable energy policies and help in finding realistic targets for the future contribution of wood to the overall energy supply. The assessment is based on the best data available and is seen as a step in an on-going continuous process of data improvement. National specialists are invited to join. Current role and relative importance of wood energy Having always been one use of wood raw material, energy did not play a major economic role in the last decades; material use of wood (for paper and wood products) had been the dominating use in most countries of the UNECE region. 2 In recent years wood energy came back in the focus of society and policy-makers as a renewable energy source to tackle issues of secure energy supply and climate change. In particular the European Union and her Member States have set policy targets for renewable energy (12% by 2010 and 20% by 2020). Since wood energy is currently the major source for renewable energy, these targets can be expected to have major implications for the forest sector. However, there is a potential to increase wood supply from domestic sources, which has be to analysed and quantified 1 European Commission (DG ENTR), Swedish Forest Agency, Metsäteho Oy / Finland, European Confederation of woodworking industries (CEI-bois) and the Confederation of European Paper Industries (CEPI). 2 North America, pan-europe, Russia and Central Asia 3

The first part of the study assesses in depth current wood supply and consumption in 29 EU/EFTA countries in 2005, using the "wood resource balance" developed by Mantau (2005). This methodology calculates independently the wood supply on the one hand (directly form the forest as well as indirect sources: wood residues, recovered wood, etc) and wood consumption on the other (by the wood-processing industries and energy generation). Multiple uses of wood (e.g. the use of wood residues, chips and particles etc) are accounted on both sides of the balance, thus it does not only consider the wood supply (and use) directly from the forest. On EU/EFTA level, the results of the study show a higher (47 million m 3 ) wood consumption (821 million m 3 ), than wood supply (775 million m 3 ). These differences were much higher in some countries, while for others a higher supply was estimated. Differences can be explained, by weak and missing data. On the supply side data weaknesses were found in particular in: woody biomass outside the forest, post consumer recovered wood and used logging residues. On the consumption side, little or weak information was found in particular on wood use for energy, as well as conversion factors (calculating wood raw material equivalent from units of products). Table 1: Wood resource balance 2005 for EU/EFTA 29 EU /EFTA 2005 million m 3 % % million m 3 Supply from forest & woody biomass outside the forest Industrial Roundwood - JFSQ 377 49% Material use: Industrial Roundwood* 26 3% 26% 214 Sawmill industry Fuelwood - JFSQ 56 7% 11% 89 Panel industry Fuelwood* 29 4% 19% 155 Pulp industry Bark 12 2% 1% 6 Pellets, briquettes etc. *** Used logging residues 17 2% 2% 14 Other physical utilization Woody biomass outside forest 13 2% Supply co-products: Chips, particles & wood residues 122 16% Pulp production co - products** 72 9% Energy use: Supply recovered wood: 6% 49 Power and heat Recovered wood*** 42 16% 7% 61 Industrial internal Supply processed wood fuel: 12% 96 Private households Processed wood fuel 6 1% 17% 138 Undifferentiated energy use Supply Total 775 Difference 47 821 Total Use * maximum difference unreported to JFSQ ** black liquor, tall oil, etc *** post consumer recovered wood for material & energy use **** processed wood fuel industry As other experiences from international (Joint Wood Energy Enquiry) and national level (e.g. household surveys in Germany, France, Norway) have also shown, volumes of wood used by the forest-based industries and in particular for energy generation are sometimes much higher than published in international and national statistics. Therefore empirical research is needed to gain a better picture on the actual situation of wood supply and demand, as well as the current contribution of wood to energy supply. 4

Wood Resources Availability and Demands - Implications of Renewable Energy Policies Potential of wood to achieve renewable energy targets The second part collected and assessed national and EU policy targets for renewable energy, bio-energy and wood energy (if available) and translated them into wood volumes by applying a number of straightforward, transparent assumptions (basically the same relative importance of different components as in 2005). Furthermore, the study calculated wood consumption from the wood-based industries 3 for 2010 and 2020, based on the European Forest Sector Outlook Study EFSOS (UNECE 2005). The wood requirements from EFSOS and the policy targets were then added up, to estimate wood requirements in 2010 and 2020 of both the energy and wood-based industries. The combined wood requirements showed a difference to the EFSOS wood supply forecast of 185 million m 3 wood in 2010 and 321 / 448 million m 3 wood in 2020 (75% scenario and "business as usual" scenario). These calculations are not meant to be forecasts, but should be a basis for discussion and help setting realistic wood energy policy targets. Table 2: Wood required to achieve national policy objectives for renewable energy Year 2005 2010 2020 2020 [million m 3 ] [million m 3 ] [million m 3 ] "75% scenario" [million m 3 ] EU 25 313 591 768 591 Sum of national targets in 313 446 689 581 EU 25 countries Sum of national targets in 343 481 738 620 EU/EFTA countries It can be concluded from this study that better data and discussion about the data is needed in different areas of wood supply and wood use. This knowledge is crucial for policy decision on the future role of wood as raw material for the wood-processing industry and energy generation. The assessment is based on the best data available and is seen as a step in an on-going continuous process of data improvement. Delegates and national specialists are invited to join the effort to advance data quality on wood and paper products, wood energy and wood supply. 3 Wood-based panels, sawmilling and pulp & paper industries 5

Conclusions of the study 1. The wood resource balance for 2005 has shown the broad pattern of wood supply and use in demand and the approximate size of differences. The projected fibre demand is considerably higher than the supply forecast by EFSOS. The size of the margin is subject to discussion, but not the general direction. 2. Traditional analysis of wood supply and demand, centred on wood removals from forests and wood input to industries is inadequate. A more complex approach, based on comprehensive wood resource balances, is necessary, which requires original research and data gathering, notably the following: a. Unrecorded sources of wood supply (trees outside the forest, logging residues, and post consumer recovered wood) and use (wood energy in private households and small CHP plants) b. Input/output conversion factors for wood using industries. 3. One or several of the following developments are necessary to keep supply and use in balance both now and also in the future: If wood supply is not increased, or not increased sufficiently: a. Targets for renewable energies will simply not be met b. Targets will be met, but with non-wood renewables and other renewables will be develop faster than wood-based energy c. Wood-processing industries will not develop as forecast in EFSOS, but their production will increase less (or even decrease). In order to increase wood supply: d. Wood supply from new sources should be expanded, notably through expansion of the area used to grow wood (whether or not this area is considered forest ). This approach cannot really bear fruit by 2010, but could by 2020 e. Wood supply from existing sources (forest and non-forest) should be expanded, e.g. through higher wood removals f. Increase imports of wood, (roundwood, products or wood energy sources) In this context, it should be noted that the extensive use of imported biomass could compound problems rather than solving them. 4. In order to fulfil the increasing demand, some recommendations need to be taken into account, whether or not wood supply expands: a. Energy efficiency will have to be radically improved b. There will be further improvements in the efficiency of use of wood flows. 5. There is an urgent need to analyse in quantitative terms the potential of each of the above strategies and their combinations taking account of local realities. 6. The concept and level of sustainable levels of wood supply needs re-examination. Net annual increment is not a sufficient indicator by itself of what is a sustainable level of supply; age structure, ownership, location and infrastructure, conservation and protection needs, quality aspects and other features must all be considered. References European Commission (1997) Energy for the Future: Renewable Sources of Energy. White Paper for a Community Strategy and Action Plan. COM(97)599 final, 26 Nov 1997. Brussels, Belgium. European Commission (2005 a): Biomass action plan. COM(2005) 628 final. 7 December 2005. Brussels, Belgium. European Commission (2005 b): Green paper on energy efficiency: Doing more with less. COM(2005) 265 final. 22 June 2005. Brussels, Belgium. EurObserv'ER (2006): State of renewable energies in Europe. 6th report. Paris, France. Online: http://www.energies-renouvelables.org/ IEA (2005): World Energy Outlook 2006. Paris, France. Mantau, U. (2005) Development of methods to generate market information and linkages between biomass supply and demand. INFRO - Information Systems for Resources. Hamburg, Germany. online: [http://webapp.rrz.uni-hamburg.de/~holz/files/161_methods%2006.pdf] MCPFE/UNECE/FAO (2007MCPFE) Enquiry on quantitative indicators of sustainable forest management Schulmeyer, F. (2005) European Forest Sector Outlook Study: Trends 2000-2005 compared to the EFSOS Scenarios. Geneva Timber and Forest Discussion Paper 47. ECE/TIM/DP/47. Geneva, Switzerland. Steierer F, Fischer-Ankern A, Francoeur M, Wall J, Prins K. 2007: Wood energy in Europe and North America: A new estimate of volumes and flows. Joint Wood Energy Enquiry, UNECE/FAO, Geneva, Switzerland. UNECE (2005) European Forest Sector Outlook Study. Main Report. Geneva Timber and Forest Study Paper 20. ECE/TIM/SP/20. Geneva, Switzerland. UNECE (2007) Timber Committee Price Database. Online: [http://www.unece.org/trade/timber/mis/fp-stats.htm] 6

End Users Perspective Christer Segerstéen, Södra/Swedish Federation of Forest Owners Klarabergsgatan 35, SE - 105 33 Stockholm, Email: christer.segersteen@sodra.com Södra is a Swedish company owned by about 50,000 forest owners, possessing in average 50 ha which sums up to about 2.3 mil ha forest land. The company has its own forest industry including pulp- and sawmills, interior wood production and pellets factory. The wood supply chain in Södra Wood supply chain is organized in a way that the wood is delivered from the forests directly to the different industries of Södra; whereby energy plays a very important part for the overall economic result. Most forest owners have a forest management plan that incorporates production and nature conservation. This plan is also the basis for harvesting operations, which is in 80% done by contractors from Södra, The level of mechanised harvesting is very high, in most cases harvesters are used. In order to maximize the efficiency of the harvesting operations, global positioning system (GPS) and geographic information system (GIS) are used to send the data collected by the harvester directly to the contractors transporting the logs to the mills. Once the logs reach the roadside, lorries pick them up, and send the information with modern technology to the mill where the logistics are coordinated. A close cooperation with competitors in transportation allows lowering costs and environmental impacts. The utilization of modern information technologies has lead to an increasing productivity, expressed in cubic meters per working hour. This efficient supply chain made it possible to come close to a balance between growth and harvesting in Sweden, taking into consideration that growth should exceed harvesting because of protected forests. The harvested wood is used for pulp and paper, sawmill and board industry and heat production. But in future demand for wood will also come from combined heat and power plant, cellulose ethanol, black liquor gasification, biomass gasification, and possibly other uses. However, currently about 3 TWh 4 can be harvested additionally in primary forest fuels in Södra's forests by utilizing more forest residues. Other options to increase the wood supply are to increase the growth of the forest and this could be done by 25-40%. This increase is partly possible due to climate change, which will probably lead to a warming in Sweden, which might increase the forest growth by 15-20%. In addition the existing forestland can be managed more intensively through improved silviculture and improved plant, fertilizing, ditch cleaning, and more efficient nature and landscape preservation. Also afforestation will play an important role to increase the wood supply. Afforestation will be on bare land as well as on agricultural land with fast growing broadleaves like hybrid aspen or poplar, leading to high increments (25 m 3 /ha*a) and nice landscapes. In summary, the Swedish wood supply system is based on productivity in all parts of the chain, improved silviculture and most important profitability for forest owners and companies. The strengths of the system are the long tradition in silviculture and logging operation in Sweden, family forest ownership willing to harvest their forest and a good dialog with forest authorities and forest agency. There are little weaknesses in the wood supply system at Södra, but some on a political level, since policies have to be more holistic (e.g. taking water and biodiversity policies into account and vice versa) on a national, European and international level. With regards to bio-energy, Södra sees this as an opportunity; their pulp mills are already selling energy to the market and are also interested in black liquor and biomass gasification. Thus, the forest industry, forest owners and the society as a whole are mutually benefiting from these new developments. 4 Corresponding to roughly 1.6 million m 3 7

Willow (SALIX) for Biomass Production P. Dobrzeniecki, Lantmännen Agroenergi AB, SE-107 17 Örebro, Sweden, Tel +48-601718865, Fax +48-618141433, Email: pd@lantmannen.com Abstract Short rotation willow (Salix) coppice (SRC) has been cultivated as an agricultural crop in Sweden for twenty years, and so far 15,000 hectares have been planted. During the last decade Lantmännen Agroenergi AB (earlier Agrobränsle AB) has become the worlds leading authority in the commercial development of this field. They have developed techniques for planting, harvesting and selling of willow wood chips to heating plants in Sweden and are now expanding their interests into a number of European countries. During the coming winter Lantmännen Agroenergi AB will harvest 3,000 hectares of SRC, providing about 25 district heating plants with about 240 GWh for heat and power production. Background Short rotation willow (Salix) coppice is a new agricultural crop that has been tested on a small scale for over twenty years. The acreage of willow plantations in Sweden is increasing and willow has proven to be a promising alternative crop for biomass production. Today 15,000 hectares are established which covers about 0.5% of the total arable land in Sweden. The main usage of willow wood chips is for fuel in district heating plants, and willow represents 3.3% of the wood fuel for district heating in Sweden today. Willow wood chips is paid about 17 Euro per MWh, which is at a similar level as for waste material from forestry. Most willow plantations are established on private farmland. Lantmännen Agroenergi AB manages these plantations and performs the harvests for the majority of the 1,250 willow growers. Lantmännen Agroenergi AB has contracts with processors and utility operators, who take care of planting, harvest and transports of the willow wood chips to the district heating plants. Commercial yield of willow During this winter about 3,000 hectares of SRC will be harvested. Most plantations are grown for about four years before harvest. The average annual yield from 1996-2006 has been 4.0 odt per hectare per year. Newer plantations have been established with new, higher productive varieties, which are more tolerant to pests, insects and frost. Plantations with new varieties are now beginning to be harvested and there is a trend for higher average yields. Plantations Lantmännen Agroenergi AB organises the plantations and advise the farmers on the site preparation prior to planting. The company assesses whether the site is suitable for willow cultivation in terms of its size and whether there are good connecting roads close by for transport of the harvested wood chips. Planting is carried out by a number of contractors on behalf of Lantmännen Agroenergi AB. The current costs for establishing SRC is about 935 SEK per hectare. This includes the price of cuttings, land preparation and plantation. There is a planting grant of 540 SEK per hectare for willow. Fertilisation The economy of growing SRC is strongly dependent upon a sufficient level of fertilisation. The recommended practice involves an annual application of about 100 kg N per hectare. This will result in good growth and enable the best economical outcome from the plantation. In the subsequent harvest cycles there is a diminishing requirement for annual nitrogen applications due to nutrient circulation from roots and leaf litter fall. The application rate of fertilisers should therefore be adjusted accordingly. Currently, many of the plantations are fertilised using sewage sludge from the municipalities. Lantmännen Agroenergi AB organises the spreading of sewage sludge, which generally occurs directly after harvesting. The applications of sludge are often co-ordinated in joint contracts with the municipalities as integrated waste to energy initiatives. About 50 % of all harvested plantations in Sweden are fertilised by sewage sludge (about 1,500 ha annually). Although it is possible to use sludge on SRC, it is necessary to adhere to the strict rules for application. For instance, there are limits on specific compounds and the time span for applications. Also, it is necessary to harrow immediately after application in order to cover the sludge. 8

Willow (SALIX) for Biomass Production Harvest Harvesting is today performed by seven contractors, on behalf of Lantmännen Agroenergi AB. Most of the plantations which will be harvested this winter are located in central Sweden, in the vicinity of Örebro-Uppsala-Stockholm. The wood chip produced was sold and delivered to about 25 district heating plants. The harvesting and transport of such large quantities of wood chips to these boilers at the correct time, according to their specifications (due to climate and temperatures), is a huge logistic challenge. The income from the harvest procedures is very much dependent on how the harvest and transport operations can be co-ordinated. During harvesting the willow is chipped directly and loaded into a trailer either driven parallel to the harvester or connected directly to the harvester. These chips are then transported to freight trucks for direct delivery to boilers or to other storage facilities. A minimum of two tractors and trailers are required if the harvester is to work continuously. It is often possible to harvest on unfrozen soil, although some fields may be too wet and soft for this operation. The most commonly used harvesting machines are modified maize harvesters with headers adjusted specifically for use with willow. Because, the willow industry is still immature there has been a lack of investment by the large machinery manufacturers. Lantmännen Agroenergi AB has therefore modified its own machinery. For instance, a new type of header has been constructed in which the mechanic forcing components have been replaced by hydraulic ones. A particular problem with harvesting willow is that certain sections of a plantation grow more vigorously than others due to edge effects. This results in very thick stems within areas of the plantation and especially in the side rows. It has therefore been necessary to develop a header that is more flexible and powerful. The weighing of the delivered wood chips is made at the heating plants. At the same time samples are taken for determination of moisture content of the wood, to determine the calorific value of the wood. Normally the moisture content is about 50%. For many heating plants the willow wood chips has proved to be of a very good quality, being homogenous in size and free from stones and other contaminations. Willow varieties Willow for biomass production is a novel crop in plant breeding, which means that there are good opportunities to make rapid improvements both in yield and pest and disease resistance. A breeding programme was set up in 1987 at the plant breeding company Svalöf Weibull AB. From January 2002 this breeding program was taken over by Lantmännen Agroenergi AB. Twenty four varieties are now plant protected by Plant Breeders Rights for the European Community (administered by the Community Plant Variety Office). The most commonly used Lantmännen Agroenergi AB varieties today are Tora, Tordis, Inger and Gudrun. Tora is popular because of its high yielding capabilities and Gudrun for its good frost tolerance. The aims of the willow breeding programme at Lantmännen Agroenergi AB are the production of new varieties with: higher dry matter yield, improved resistance to pests and diseases, better tolerance to frost and drought, and a plant habit suited for mechanized harvesting. Through plant breeding the relative yields have been increased by up to 60% and levels of leaf rust have been reduced to almost nil. The majority of the SRC plantations harvested during the last two winters have consisted of older, un-bred varieties originating from the remains of earlier basket willow plantations in Northern Europe. Today mainly new bred varieties are planted, but the expected yield increase in commercial plantations will not have a major impact on the average yield until 3 to 4 years from now. Activities outside Sweden Lantmännen Agroenergi AB is now developing markets in the UK, Poland, Germany, Ireland, Austria, Slovak Republic, Czech Republic, Denmark, France and Baltic states where they hope to build the willow concept based on the Swedish example. The interest to establish willow plantations is very high. In 2006 about 2,000 hectares were planted in these countries. Commercial Willow plantations of substantial size, as the source of desired wooden fuel for power and heat production, could decrease the level of competition for the same raw material between various industries. Larger plantations are expected in the near future. References Larsson, S. (1997). Commercial breeding of willow for short rotation coppice. Aspects of Biology 49, p. 215-218. Larsson, S. (1996). Willow coppice as short rotation forestry. In: Energy from Crops. Eds. Murphy, D.P., Bramm, A. & Walker, K.C., Semundo Ltd, Cambridge. Larsson, S, Melin, G. & Rosenqvist, H. (1998). Commercial harvest of willow wood chips in Sweden. Proceding from 10th European Conference and Techniology Exhibition Biomass for Energy and Industry Würzburg, Germany 8-11 June 1998. Larsson, S. (2001). Commercial varieties from the Swedish willow breeding programme. Aspects of Applied Biology 65: 193-198. 9

Biomass Trade and Forest Wood Potential in Europe Eija Alakangas, co-ordinator of, VTT, Technical Research Centre of Finland, P.O. Box 1603, FI-40101 Jyväskylä, Email: eija.alakangas@vtt.fi, www.eubionet.net Abstract This paper concentrates on rating the current situation and future trends of solid biomass fuel trade and forest wood potential in Europe and fuel supply chains. The annual assessed figure for the total techno-economical volume of solid biomass fuel resources according the study for 20 EU countries is 143 Mtoe, while the biomass use was 65.5 Mtoe in 2004. This means that currently about 50% of the estimated biomass potential is exploited. The greatest potential to increase the use of biomass in energy production seems to lie in forest residues and other biomass resources (agrobiomass and fruit biomass). The most traded biomass fuel is pellets. This is natural, as pellets are the most compact form of solid biofuels, so the transport costs per energy unit is lowest, which is important especially with longer transport distances. In addition, introducing pellets in an existing plant usually requires less modification at the plant compared with more heterogeneous fuels. The eight EU member states in the Baltic Sea area contribute the major of the bioenergy production and use in EU25, 48% of biomass use in EU25. This area is also important international trader of solid biomass fuels. The current pellet production in the Baltic sea area is around 3 million tonnes. Introduction The Efficient trading of biomass fuels and analysis of fuel supply chains and business models project (EIE/04/065/S07.38628) is carried out during 2005 2007 (www.eubionet.net). This paper concentrates on rating the current situation and future trends of biomass fuel trade in Europe. The paper consists of the following parts: assessing the techno-economic biomass volume in Europe, reviewing the operation of biomass fuel markets by providing information on biomass fuel prices and summarising the data available on the current international trade of solid biomass fuels in Europe and overseas. partners and subcontractors were asked to assess the economically and technically viable volumes of solid biomass fuels and report the energy use of biomass in 2004. By comparing biomass resources and the current use, the potential to increase the use of biomass for energy production purposes has been estimated so that neither the importance of the balance between biomass use as a raw material for industry and as a fuel for bio-energy nor the sustainable use of biomass resources have been ignored [1,2]. Biomass fuel prices are collected to review the biomass fuel market operation. In this report, fuel price data for the check points is presented, i.e. fuel prices for December 2004, June 2005, December 2005 and June 2006. Price data has been collected also for the main fossil fuels, for comparative reasons [1,2]. Biomass resources in Europe Table 1 presents the reported availability of biomass resources in 20 EU-countries. In the case of UK and Italy, data on forest residues and domestic firewood is derived from Finnish Forest Research Institute [5], whilst the data on industrial wood residues and by-products and wood wastes dates back to EC project called AFB-net V with focus on import and export possibilities and fuel of biomass in 20 European countries finalised in 2001 [11]. The total annual figure for reported biomass resources in 20 EU countries is around 5 974 PJ (143 Mtoe). Germany (1 300 PJ), France (1 200 PJ), Spain (793 PJ), Sweden (648 PJ) and Finland (426 PJ) are the richest EU countries in biomass resources. Sweden, Finland, Germany and France have largest volumes of forest residues (excluding stump wood). 10

Biomass Trade and Forest Wood Potential in Europe Table 1. Biomass resources in Europe RESOURCE TYPE EU-20 [1,2] Biomass Action Plan EU-25 IE-EU28 [10] Mtoe in 2010 (year 2020 in brackets) Mtoe Mtoe Forest residues 33.1 43 (39 45) 61 Domestic firewood (residential) 21.1 Wood direct from forest (increment and harvest residues) Refined wood fuels 1.6 100 (100) Industrial by-products (solid) 19.1 Organic waste, Industrial waste liquors 10.7 wood industry residues, Wood residues 8.2 agricultural and food processing residues, manure Other biomass resources 48.9 43 96 (76 94) 62 186 (agrobiomass, fruit biomass) Energy crops from agriculture TOTAL 142.7 186 189 (215 239) 201 352 The volume of technically available forest wood in EU25 according the study of Finnish Forest Research Institute [5] is 199 million m 3 solid (1 368 PJ, 32 Mtoe), of which 76.5 million m 3 solid are logging residues from current fellings. data gives same amount for forest residues. 1 387 PJ (33 Mtoe) for EU20. Institute für Energie und Umwelt (IE) has estimated that the technical potential of raw wood will be 2 535 PJ/a (61 Mtoe) in 2020 in EU28 [10]. In Biomass Action Plan the potential from wood direct from forest (increment and harvest residues) is 1 800 PJ (43 Mtoe) in 2010. Institute für Energie und Umwelt [10] has estimated that the potential for energy crops will be 2 614 7 792 PJ/a (62 186 Mtoe/a) depending the land released. The annual total potential for bio-energy sources for the EU28 is 8 450 14 750 PJ (201 352 Mtoe) in 2020 according IE. European Environmental Agency has estimated in 2006 that environmentally-compatible annual primary biomass potential is 7 950 PJ (190 Mtoe) in 2010, 9 880 PJ (236 Mtoe) in 2020 and 12 351 PJ (295 Mtoe) in 2030, which is about 17% of the current biomass use in EU25. In the 1997 White Paper, a biomass consumption target was defined concerning the 15 member states in the end of year 2010. This target was 135 Mtoe (12% share of renewable energy of overall energy mix) in its whole, including 15 Mtoe for biogas production and 18 Mtoe for liquid biofuels. The Biomass Action Plan was redefined at the end of 2005 with a new scenario for all of the 25 member states. According to this plan, the biomass consumption could reach approximately 150 Mtoe (55 Mtoe for electricity, 75 Mtoe for heat and 19 Mtoe for transportation) by the end of the year 2010. The total potential of the Biomass Action Plan and study is almost the same. 11

Biomass use in Europe The total energy use of biomass was 2 741 PJ (65.5 Mtoe) in 2004 (Table 2). This means that about 50% of the reported techno-economically available biomass resources are still being unexploited [1,2]. Firewood is the mostly used biomass, but figure of firewood is not so accurate, because most of the firewood is not traded officially. Industrial by-products and residues represent the next biggest biomass types contributing to the total figure: use of solid by-products covers 18% of the total consumption, whilst the share of waste liquors (mainly black liquour) is 15%. Use of forest residues comes next with 12% share of the total figure, and is followed by other biomass resources 10%, wood residues (waste wood) 9% and refined wood fuels 2% [1,2]. Table 2. Energy use of biomass in 2004 [1,2] RESOURCE TYPE PJ % Mtoe Forest residues 337.5 12.3 8.1 Residential firewood 917.2 33.5 21.9 Refined wood fuels 488.6 17.8 11.7 Industrial by-products (solid) 409.8 15.0 9.8 Industrial waste liquors 55.6 2.0 1.3 Wood residues 256.3 9.4 6.1 Other biomass resources 275.6 10.1 6.6 (agrobiomass, fruit biomass) TOTAL 2740.6 100.0 65.5 EurObserv ER [4] reports that in EU25 the total biomass use was 2 805 PJ (67 Mtoe) in 2004 and 3 027 PJ (72.3 Mtoe) in 2005. Use of solid biomass was 2 328 PJ (55.6 Mtoe) in 2004 and 2 458 PJ (58.7 Mtoe) in 2006. EU statistical pocket book reports that the gross inland consumption of biomass fuels was 72.3 Mtoe in 2004, which was 66% of all renewable energy sources in the EU25. 12

Biomass Trade and Forest Wood Potential in Europe Pulp and paper industry s role in the national bio-energy production is significant in many European countries. In 2004 the bio-energy accounted for 638.8 PJ (15.3 Mtoe) in pulp and paper industry in Europe, which is 50% of the total energy consumption in pulp and paper industry. Pulp and paper industry accounts on average 27% of bio-energy use in these countries and 23% of total bio-energy use in EU20 countries. Figure 1 presents the bio-energy use in pulp and paper industry. Figure 1. Renewable energy share in pulp & paper industry % 60 50 47.0 47.1 46.7 48.1 47.1 47.3 45.5 47.5 48.3 49.5 51.2 50.4 52.4 51.8 52.6 52.5 54.5 40 30 20 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source CEPI 13

Figure 2 shows example of logging residue harvesting integrated to round wood procurement [1]. Figure 2. Logging residue supply chain based on chipping at road side and integration to round wood procurement. VTT In the data questionnaire, fuel prices were asked in rather detailed level. Prices for following different forest residues types were asked: forest residue chips from final fellings, forest residue chips from thinnings and chips from delimbed small-sized trees. Of the total 19 countries included in the survey, only in 10 of them there was fuel price data available for forest residues in general or some of the specified fuels [1,2]. Similar to forest residues, in the case of industrial by-products (solid), fuel prices were asked for following products: sawdust, bark, and chips. In general, the availability of these prices was better than prices for forest residues, as price level for industrial by-products was reported for 14 countries. The reported fuel prices for sawdust, bark, and chips at industrial plants are presented separately, but in all the summary figures and tables, the average prices are used [1,2]. Price data was asked to report in EUR/GJ that prices can be more easily to compare. In Scandinavia it is more common to trade in energy units (mainly EUR/MWh) than in Central Europe, where prices are reported mainly in EUR/tonne. If a country has reported the price in EUR/tonne, it has been calculated by using average calorific values for moist fuels. Figure 3 reports minimum, maximum and average observation of fuel prices at industrial plants and Figure 4 fuel prices of industrial by-products and residues used at industrial plants [1]. 14

Biomass Trade and Forest Wood Potential in Europe Figure 3. The reported minimum, maximum and average observation of fuel prices at industrial plants in countries in June 2006 [1] 35 EUR/GJ 30 25 20 30.7 23.1 15 16.4 10 5 0 5.3 3.8 2.8 4.0 3.1 1.2 3.5 2.2 0.5 10.5 7.7 6.0 8.9 4.8 3.5 10.5 2.6 14.2 5.9 9.1 3.8 10.5 3.9 1.4 Maximum Average Minimum Forest residues Ind. by-products Wood waste Ref. wood fuels Other biomass Heavy fuel oil Light fuel oil Natural gas Coal Figure 4. The reported fuel prices for industrial by-products and residues used at industrial plants in June 2005 [1] 6 EUR/GJ 5 4.5 4 3.7 4.0 4.1 4.1 3 3.1 3.1 3.4 2 2.0 1.9 1.6 1.5 2.2 1.5 2.2 2.3 2.1 2.1 1.4 1 1.0 1.0 1.0 0 Austria Czech Rep. Denmark Estonia Finland France Germany Ireland Latvia Poland Portugal Slovakia Sweden Forest residues Industrial by-products (solid) 15

International biomass trade in Europe Considering biomass in general using a large scope, it can easily be concluded that the majority of biomass trade takes place in the form of raw material or refined products instead of fuels. Raw biomass is usually traded for food, fodder or raw material purposes [1]. Customs statistics can give rough figures on international biomass trade. Statistics do not differentiate the end-use purposes of the materials into energy use and raw material use, and various products can be included in one CN code. An example of this is wood pellets, which are recorded under the same CN code as wood waste [1]. IEA Task 40 has studied the global biomass production and trade. According to IEA World Energy Outlook 2004 the biomass use in world energy supply was 47 000 PJ (1 123 Mtoe), of which traditional use was 32 000 PJ (764 Mtoe) and industrial use 15 000 PJ (358 Mtoe). According IEA Task 40 estimation the current international trade of biomass fuels is less than 1 000 PJ (24 Mtoe), but in the long-term it can be 80 000 to 150 000 PJ (1 900 3 500 Mtoe) [6,7,9]. The most traded biomass fuel is pellets (Figure 5). This is natural, as pellets are the most compact form of solid biofuels, so the transport costs per energy unit is lowest, which is important especially with longer transport distances. In addition, introducing pellets in an existing plant usually requires less modification at the plant compared with more heterogeneous fuels [1]. Figure 5. Trading of pellets in Europe [1]. 16

Biomass Trade and Forest Wood Potential in Europe The eight EU member states (Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland and Sweden) in the Baltic Sea area contribute the major of the bio-energy production and use in EU25, 48% of biomass use in EU25. This area is also important international trader of solid biomass fuels. The current pellet production in the area is around 3 million tonnes. According to Johansson [9]. The sawdust availability in the Baltic Sea area including North-West Russia could reach to a production of 5.5 million tonnes, if all sawdust is used for pellet production. Current production capacity in the Baltic Sea area is about 4.5 million tonnes [1]. The countries around the Baltic Sea as well as the Netherlands are most active in international biomass fuel trade. The main flows are from the new member states (Estonia, Latvia, Lithuania, and also Poland) to the old member states, especially Sweden, Denmark, Germany and the Netherlands. In Central Europe, the greatest volumes are traded to and from Austria. Some European countries also import biomass fuels from overseas, mainly from Canada. The exports to Europe exceeded 400 000 tonnes from Western Canada [1,9]. For example, the Swedish biofuel import in 2003 is estimated to be about 18 34.2 PJ. The most important origins of the import are the Baltic States and Belarus (pellets, logging residues, peat), North America (tall oil and pellets), and Mainland Europe (municipal solid waste and recovered wood). Prices on imported refined biofuels are about 25% lower than domestic ones, whereas prices on imported primary wood fuels are roughly the same as the domestic ones. The Swedish biofuel export in 2003 was 12.6 PJ. The most important fuel categories of the export were peat and tall oil. Pellets import is about 350 000 tonnes, mainly from Canada, the Baltic States and Finland [1,9]. Denmark, on the other hand, imported about 7.7 PJ of different wood-based fuels in 2004, pellets being the most important single fuel. The main import routes for biomass are from the three Baltic Countries, Estonia, Latvia and Lithuania, which in 2004 counted for 60% of the import. Sweden is the second largest exporter to Denmark with a share of 21%. Poland is third with 8% and finally Germany is the fourth with 7%. The remaining 4% is from other North-European countries and Canada. The export from Denmark in 2004 was only a little more than 0.1 PJ, comprised almost totally of wood chips to Norway [1]. In 2004, as much as 45% of the raw wood imported into Finland ended up indirectly in energy production. The total international trading of biofuels was evaluated at 73 PJ, of which the majority, 58 PJ, was raw wood. About 22% of wood based energy in Finland originated from imported raw wood. Tall oil and wood pellets composed the largest export streams of biofuels. The forest industry as the biggest user of wood, and as producer and user of wood fuels has a central position in biomass and biofuels markets in Finland. Lately, the international aspects of Finnish biofuel markets have been emphasised as the import of raw wood and export of wood pellets have increased. The wood pellet production is about 200 000 tons (3.3 PJ), of which 75% is exported. Sweden, Denmark and the Netherlands were the main destinations for the exported wood pellets. Wood pellets are exported almost totally by means of maritime transport [8,9]. In Estonia, the net export of wood fuel in 2003 was 1.12 million tonnes (8 PJ). Almost all of the imported fuel (about 60 000 tonnes, or 97.7%) comes from Latvia. The export goes mainly to the Scandinavian countries. It has to be noticed that in Estonia (as well as in many other countries) the classification in import and export statistics does not enable to carry out more in-depth analysis of wood products in foreign trade. For example, the densified wood fuels (pellets, briquettes) are still classified in the same commodity group with sawdust and other waste wood. Therefore, the trade statistics do not reflect clearly the export of approximately 200 000 tonnes of wood pellets and briquettes (4 PJ) from Estonia in 2004 [1]. In Latvia biomass export represents the main international biomass flow. Biomass import is rather marginal and there are no precise data available. In 2002, the by far most important exported wood fuel was wood chips, comprising more than 1.2 million tonnes. The amounts of exported pellets and sawdust were about 100 000 tonnes for each. Most of the wood fuels (3 PJ) were exported to Sweden, Norway, Denmark and the Netherlands [1]. Until the year 2000, the Netherlands barely imported biomass for energy production. Over the last few years, both the import and export of biomass for energy purposes have been strongly increasing. Only little information is available on the exact volumes of the imported biomass, as this information is 17

often treated as confidential, and no official statistics are kept. However, it has been estimated that in total almost 1.2 million tonnes of biomass was imported in 2005. The imported biomass is used almost 100% in Dutch power plants (mainly coal-fired, but two gas-fired plants), and can be roughly divided into liquid biofuels like palm oil and fatty acids, and solids, such as agricultural residues (e.g. palm kernel expeller), wood chips and wood pellets and solid waste streams (e.g. bone meal and wood waste). Imports of pellets is about 160 000 tonnes [9]. In total, about 9.9 PJ was imported in 2004. In 2002, about 24% of the total primary biomass supply was imported. The exported biomass consists mainly of waste wood and construction wood, accumulating to 13.4 PJ. Most of this material is exported to Germany and Sweden [9]. In the United Kingdom it is difficult to obtain detailed information concerning the level of bio-energy imports into the UK. Much of the material imported is for cofiring in coalfired power plants. Over 1.4 million tonnes (11 PJ) of biomass was cofired in 2005. About two thirds of this mass was derived from imported biomass. The cofiring market in the UK has developed into a key market for agricultural residues that have few alternative uses. For example, the UK accounted for over 55% of imports of dry olive cake into EU member states [9]. Compared to the previous study of 1999 [11], it is clear that the amounts in international biomass fuel trade have increased significantly. Also the number of countries with organised foreign trade has increased, it seems that almost all of the EU countries are either exporting or importing biomass fuels or both. However, the countries with the largest traded volumes are still the same, and can be expected to remain the same for the near future, as it takes time to establish the international trade system for greater biomass volumes. Conclusions The annual assessed figure for the total techno-economical volume of solid biomass fuel resources according the study for 20 EU countries is 5 974 PJ (143 Mtoe), while the biomass use 2 730 PJ (65.5 Mtoe) in 2004. This means that currently about 50% of the estimated biomass potential is exploited. The greatest potential to increase the use of biomass in energy production seems to lie in forest residues and other biomass resources (agrobiomass and fruit biomass) [1]. Eurostat reports biomass use combined with waste, so it is difficult to compare the EUBIONET biomass utilisation figures with the EU statistics. In 2004 Eurostat reported biomass use of 3 027 PJ (72.3 Mtoe). EurObserv ER [4] reports almost the same figure for solid biomass use, 2 805 PJ (67 Mtoe), as partners. This figure includes 25 countries while the study had 20 countries [1,2]. Availability of fuel price data varies a lot among the EU countries. Finland, Sweden and Austria are publishing four times a year average wood fuel prices. There is need for a market price index for the most traded biomass fuel, pellets. The Rotterdam harbour is planning to start publishing wood pellet price (fob in Rotterdam). This index should be based on international pellet standard (CEN/TS 14961). Regarding trends in fuel prices, within the considered from December 2004 to June 2006, all the other fossil fuel prices but coal had increased, whilst most biomass fuel prices had decreased during 2005 and increased in 2006. Prices of biomass fuels differ between countries and even inside one country. Also the national financial support mechanisms and demand have impact on fuel prices [1]. VAT in different countries shows to vary between 5 25% for biomass fuels. The VAT rate is a possible financial instrument to improve economics of private households. One can notice that some countries do apply a reduced VAT rate on electricity and natural gas in comparison with the standard rate. A few member states have implemented a reduced rate on wood fuels (from 5 to 7%), leading to favourable competition situations in Austria, Belgium, Germany, France and the United Kingdom. In Portugal, however, the VAT rate on wood is higher that on electricity and gas [1]. 18

Biomass Trade and Forest Wood Potential in Europe The most traded biomass fuel is pellets. This is natural, as pellets are the most compact form of solid biofuels, so the transport costs per energy unit is lowest, which is important especially with longer transport distances. In addition, introducing pellets in an existing plant usually requires less modification at the plant compared with more heterogeneous fuels. The wood pellet production in Europe was 6.2 million tonnes (105 PJ) in 2006, of which more than 60% is produced and traded in the Baltic Sea area [1]. Customs statistics can give rough figures on international biomass trade. Statistics do not differentiate the end-use purposes of the materials into energy use and raw material use, and various products can be included in one CN code. An example of this is wood pellets, which are recorded under the same CN code as wood waste. Own CN codes for energy products like wood pellets are needed [1]. References [1] Alakangas, E., Heikkinen, A., Lensu, T. & Vesterinen, P. Biomass fuel trade in Europe Summary report. VTT-R-03508-07, EUBIONET II- project, Jyväskylä 2007. 55 p. + app. 2 p. (www.eubionet.net) [2] Fuel supply chains - Guide 2007, EUBIONET II, 32 p. (www.eubionet.net) [3] EU Energy & Transport in Figures. Statistical pocket book 2006, 203 p. Luxemburg 2006 [4] EurObserv ER, Solid biomass barometer, December 2006, Systèmes Solaires no 176, p. 41 58 (http://www.energies-renouvelables.org) [5] Asikainen, A., Karjalainen, T., Peltola, S, Laitila, J., Liiri, H., 2007. Forest Energy Potential (EU27), Finnish Forest Research Institute Working papers of the Finnish Forest Research Institute. 36 p. (http://www.metla.fi) [6] Heinimö, J., 2006a. Future visions of international biomass markets, Developing bioenergy markets Focus on Forest Sector and Russia seminar, Lappeenranta 24 October 2006, seminar folder. (http://www.lut.fi/nordi) [7] Heinimö, J., 2006b. Methodological aspects on international biofuels trade: International streams and trade of solid and liquid biofuels in Finland, Submitted to Biomass & Bioenergy Journal, 28 p. [8] Heinimö, J. & Alakangas, E., 2006. Solid and Liquid Biofuels Markets in Finland a Study on International Biomass Trade in Finland, IEA Task 40 & EUBIONET II. Lappeenranta University of Technology, Research Report EN A-53, Lappeenranta. (http://www.eubionet.net) [9] Junginger, M., Bolkesjø, T., Bradley; D., Dolzan, P., Faaij, A. Heinimö, J., Hektor, B.Leistad, Ø, Ling, E., Perry, M., Piacente; E., Rosillo-Calle, F., Ryckmans, Y., Schouwenberg, P-P, Solberg, B., Trømborg, E, da Silva Walters, A. & de Wit, M., 2007, Developments in international bioenergy trade, Submitted to Biomass & Bioenergy [10] Thrän, D., Weber, M., Scheuermann, A., Fröhlich, N., Thoroe, C., Schweinle, J., Zeddies, J., Henze, A., Fritsche, U., Jenseit, W., Rausch, L. & Schmidt, K., 2006. Sustainable Strategies for biomass use in the European Context, IE Report 1/2006.360 p. (http://www.ie-leipzig.de/) [11] Vesterinen, P.& Alakangas, E., 2001. Import and export possibilities and fuel prices of biomass in 20 European countries. AFB-net V. VTT Energy 19