ENERGY VS. MATERIAL: USES OF WOOD BIOMASS - ECONOMIC IMPACTS OF ALTERNATIVE SCENARIOS Peter Schwarzbauer, Applied Life Vienna (Boku) and Tobias Stern, Competence Centre for Wood Composites and Wood Chemistry (Wood K plus) Todor Balabanov, Institute for Advanced Studies (IHS) Wolfgang Schwarzbauer, Institute for Advanced Studies (IHS) Forest Sector Modeling: State-of-the-Art and Future Challenges in an Expanding Global Marketplace, Seattle. Nov. 17-20th, 2008
Overview of presentation Background and goals of the research Model structures res and theoretical basis Forest sector scenario assumptions, results and perspectives Macroeconomic impacts beyond the forest sector Summary and conclusions
Background and goals of the project The Austrian forest-based sector is an important branch: Employment (up to 250.000 persons, depending on definition) especially in economically weak regions Contribution to GDP (3-5%, depending on definition) Foreign trade (10% of all exports in value)
Net-increment and fellings per hectar in the EU-15 and in Austria (over bark) cum o.b./ha 9,3 10 7,5 5,6 4,8 5 3,1 2,5 0 EU-15 Austria But: Only a share of wood potential is actually used Increment Sources: UN-ECE/FAO (2000), BFW (2004), ow n calc. Fellings
The largest coniferous industrial round wood importing countries worldwide Total 2006: 85,1 Mill. cum Turkey 2% Italy 3% USA 3% Germany 3% Others 19% China 26% Sweden Rep. Korea Finland Austria 4% 7% 8% 9% Canada 5% Source: FAOSTAT (2008), o.c. Therefore: Because not enough wood is supplied from domestic sources, Austria has become the third largest importer of coniferous industrial roundwood worldwide Japan 11% pp
Increasing demand for wood energy: Due to the promotion of renewable energy a sharp increase in the consumption of wood for energy is expected. Forecasts of the consumption of wood for energy (various assortments) in Austria until 2010 (Source: Austrian Energy Agency, 2006) At the same time: The demand of industries competing for the same wood is rising as well.
Research goals Adress the links, market effects and macro-economic effects of alternative uses of wood for energy purposes and for material purposes (trade-off)
Overview of presentation Background and goals of the research Model structures res and theoretical basis Forest sector scenario assumptions, results and perspectives Macroeconomic impacts beyond the forest sector Summary and conclusions
Model structure and theoretical basis Macroeconomic Variables Macroeconomic Model (ATCEM-E3) Forest Sector Simulation Model (FOHOW) General interactions of the models (off-line) Forest Sector specific variables Main focus
RESOURCES GENE ERAL ECONOMY FOREST INDUSTRY FORESTR RY FOREST P Sawmill Res., Waste Austria General Demand factors (GDP, Population) Domestic DEMAND for: Wood Products (Sawnwood, Panels, Paper & Paperbd.) and Fuelwood Produkt Markets Domestic SUPPLY of: Wood Products (Sawnwood, Panels, Paper & Paperbd.) Domestic DEMAND for: Roundwood (Sawlogs, Pulpwood), Sawmill Residues & Waste Paper Markets of Roundwood, Sawmill Res. & Waste Paper Domestic SUPPLY of: Roundwood (Sawlogs, Pulpwood), Sawmill Residues & Waste Paper Domestic RESOURCES (Forest Area, Growing Stock, NAI) by ownership categories Fuelwood REST of the WORLD Trade Partners General Demand factors (GDP P l i ) IMPORT DEMAND for: Austrian Wood Products Depending on Product EXPORT SUPPLY of: Wood Products (ROW) IMPORT DEMAND for: Austrian Roundwood Depending on Product EXPORT SUPPLY of: Roundwood, Sawmill Residues & Waste Paper (ROW) RESOURCES (Growing Stock, NAI) (ROW) Structure of FOHOW (Simulation model, based on SD) Components / Modules Forest resources Timber production Demand for timber and production of wood products (sawmills, panel-, paper industry and energy use) Generel economy 2R Regions: Austria Total of all trade partners (ROW) Ca. 1500 equations
Price P2* P1 m D1 D2 PS2 P0 m 1/2 P2 m P1* S1 S2 1/2 D1 D1 m Q1 m S1 m Q2* D2 m Q1* S1 D2 S2 m Q2 m Quantity Market-clearing mechanism of FOHOW No simultaneous equations possible Price equations formulated as levels. Changes in current period through changes in supply & demand of previous period (very short periods)
Main material flows in FOHOW Forestry (A) Roundwood imports Competing uses, depending on price differentials Sawmills (sawlogs) Sawmill residues Panel & Pulp (pulpwood & sawmill residues) Energy (fuelwood & sawmill residues) Competing uses, depending on price differentials
Overview of presentation Background and goals of the research Model structures res and theoretical basis Forest sector scenario assumptions, results and perspectives Macroeconomic impacts beyond the forest sector Summary and conclusions
Assumptions for the FOHOW-BASE-scenario Business as usual (no specific energy-related policies) Time horizon 2000-2020 GDP-growth according to published forecasts Oil-price increased to 128 US $ (HWWI) by 2020, Euro-US $ exchange rate 2020 1.30 Because of new wood-processing capacity in neighboring countries ti roundwood-imports di cannot grow any further: freeze at the 2005 level until 2010, decrease by 20% (from the 2005 level) by 2020.
Assumptions for the FOHOW- WOOD-FOR-ENERGY ENERGY - scenario (in addition to the base-scenario) scenario) Demand of wood fuel (from forest and from sawmill residues) increases; in 2010 doubles and in 2020 tripples the amount in the base-scenario (in accordance to the Biomasseaktionsplan ) (shift of the demand curves to the right) No exogenous limitations of wood supply from the forest. Timber supply from forest is based on market mechanisms; econometrically estimated supply functions.
Results 180 Total removals 2000= =100 160 140 120 100 Wood for Energy Basis base-scenario (blue) wood-for-energy-scen. (red) Increasing components: * pulpwood * fuelwood logs not much affected 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Results 350 Fuelwood Consumption (from forest and sawmill residues) 2000=1 100 300 250 200 150 100 50 2000 2002 2004 2006 Wood for Energy 2008 2010 2012 2014 Base 2016 2018 2020 base-scenario (blue) wood-for-energy-scen. (red) Use of sawmill residues for energy increase more than fuelwood from the forest!!!!
=100 Results 140 130 Wood for Energy 2000120 110 100 2000 2002 2004 2006 2008 2010 Pulwood consumption (rd. & split and sawmill residues) of paneland paper-industry p Base 2012 2014 2016 2018 2020 base-scenario (blue) wood-for-energy-scen. (red) Due to diminishing price differential a significant amount of (former) pulpwood and sawmill residues is transferred to energy use
Results 180 160 Base Sawmill residue consumption of panel- and paper-industry 100 2000= 140 base-scenario (blue) wood-for-energy-scen. (red) 120 100 Wood for Energy More sawmill residues are used for energy purposes than (former) pulpwood from the forest 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Results 2000=10 00 400 350 300 250 200 150 100 50 Wood for Energy Base Base: Fuelwood (forest) Pulpwood price (green) Base: pulpwood (forest) Base: sawmill Sawmill residue price (red) residues Wood f. energy: fuelwood (forest) Fuelwood price (solid)(blue) Wood f. energy: pulpwood (forest) Wood f. energy: sawmill residues base-scenario (full lines) wood-for-energy-scen. (dotted lines) Most affected is the price of sawmill residues 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Results intermediate summary FOHOW Deviations (%) of wood-for-energy-scenario from base-scenario fit 1) 0 47 1 +82 7 Forestry and sawmills (the latter not immediately) are winners, panel- und paper-industry are loosers of a wood- for-energy energy -policy 2000 2010 2020 Forestry gross prod. value 0 +61.1 +94.2 Conif. sawmills gross prod. value 0 +0.2 +14.0 gross profit 1) 0-47.1 +82.7 Panel industry gross prod. value 0-0.3-3.4 gross profit 1) 0-9.6-33.0 Paper industry gross prod. value 0-0.7-6.3 gross profit 1) 0-10.6-60.4 1) gross profit = gross production value minus rawmaterial costs minus (other) variable production costs
Overview of presentation Background and goals of the research Model structures res and theoretical basis Forest sector scenario assumptions, results and perspectives Macroeconomic impacts beyond the forest sector Summary and conclusions
Model structure and theoretical basis Macroeconomic Variables Macroeconomic Model (ATCEM-E3) Forest Sector Simulation Model (FOHOW) General interactions of the models Forest Sector specific variables Impacts beyond the forest sector
General Structure of ATCEM-E3 E3 (IHS) E3=Economy, Energy, Environment KLEM = capital, labor, energy, materials static computable general equilibrium model (perfect competition) similar to maximization of consumer- and producer surplus (but less strict) economy of Austria represented by Social Accounting Matrix (SAM; like World Bank models) 3 regions: Austria, other EU, ROW 25 sectors, of which 3 are forest-based: forestry, wood-processing, paper industry GAMS software; mixed non-linear complementarity problem solved by using the PATH algorithm
Assumptions and data in ATCEM-E3E3 Same general economic indicators as FOHOW (e.g. GDP growth) Assumptions based on FOHOW results (e.g. fuelwood demand and prices) Three levels of CO 2 taxation in /t emission: 0, 60, 80 Linear growth of electricity end-use until 2020 No more increase of hydro-power All developments are measured in their relation to GDP. GDP development equals index 1,0 An index of e.g. 1.2 means that a sector (or whatever) has performed better than the GDP development, 0.7 would mean that is has developed less well.
Results beyond the forest sector GDP growth is slightly higher due to biomass utilization. index 1.4 1.2 1 0.8 0.6 04 0.4 0.2 0 Summary of the main indicators in the three scenarios PIFWS0 1.193 1.186 1.180 PIFWS60 1.029 1.011 0.998 PIFWS80 0.538 0.364 0.306 Households' consumption GDP at producer prices Energy consumption This gain is diminishing with increased CO 2 taxation. Households consumption is above GDP growth and energy consumption is far below.
Results on the sectoral level index 1.800 1600 1.600 1.400 1.200 1.000 0.800 0600 0.600 0.400 0.200 0.000 Electricity and heat Sectoral Production/GDP growth - Fuelwood-for-energy scenario Refinery Forestry Paper industry Building Materials Plastic production Metallurgy Light industry Other mining PIFWS0 PIFWS60 PIFWS80 The (solid wood) forest sector will benefit, prospects for sectors such as pulp & paper, building material, plastics, metallurgy, construction and mining will worsen.
Results intermediate summary ATCEM-E3E3 The analysis shows that the Austrian economy can afford the enhanced use of renewables and a sustained economic growth; and can benefit from the double dividend - sustained economic growth and fullfilment of EU targets on renewables and CO 2 reduction. The restructuring to more energy efficient technologies, and/or production processes/practices is one of the prices to be paid for increased use of renewables.
Overview of presentation Background and goals of the research Model structures res and theoretical basis Forest sector scenario assumptions, results and perspectives Macroeconomic impacts beyond the forest sector Summary and conclusions
Summary and conclusions Forest sector level The impact of a wood-for-energy -policy is different for the forestbased sectors. Forestry (production of roundwood) is benefiting because fuelwood prices rise and have an impact on other assortments as well. Sawmills are winners in the long run, because they can sell sawmill residues at a higher price. The panel and paper industries are both affected negatively due to problems in raw-material procurement. The paper industry is also negatively affected due to its high energy consumption
Summary and conclusions Entire Economy Enhancing the use of fuel wood, as well as taxing CO 2 emissions at a higher rate will not alter the level of GDP and household consumption tremendously. The Austrian economy can afford the enhanced use of renewables and a sustained economic growth; and can benefit from the double dividend - sustained economic growth and fullfilment of EU targets on renewables and CO 2 reduction. The restructuring to more energy efficient technologies, and/or production processes/practices is one of the prices to be paid for increased use of renewables.
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