Professional paper
Impacts of EmissionTrading Markets on Competitiveness of Forestry Biomass in Croatia
Robert Pašičko
; Fakultet elektrotehnike i računarstva Zagreb
Davorin Kajba
orcid.org/0000-0001-9194-1030
; Šumarski fakultet Sveučilišta u Zagrebu
Julije Domac
; Regionalna agencija sjeverozapadne Hrvatske, Zagreb
Abstract
A rising share of renewable energy sources in the overall ene rgy balance is one of the strategic goals of a growing number of countries. By signing international agreements (e.g. the Kyoto Protocol), and in accordance with the legislature and accession to the EU, Croatia undertook the obligation to make concrete steps and increase the use of renewable energy sources, as stated by the paradigm “sustainable development”. In Croatia, biomass is a renewable energy source with the greatest potential.
The goal of this work is to explore the impact of the European Emission Trading Scheme (EU ETS Scheme) and flexible mechanisms of the Kyoto Pro tocol – the Joint Implementation Mechanism, JI, and the Clean Development Mechanism, CDM, – on the competitiveness of biomass energy production. Compared to fossil fuels, the advantage of biomass is that energy from bio mass combustion is considered CO2free technology, since biomass sequesters CO2as part of photosynthesis.
The EU ETS restricts emission amounts at the national level and at the level of single installation. Every industrial operator is allocated a certain amount of emission allowances. In order to satisfy their needs, the operators may trade with their allowances and purchase emission allowances on the market. The JI and CDM projects represent flexible Kyoto mechanisms which allow investment in emissions reduction outside the investing country. The amount of emissions reduced in such projects is used to satisfy the allowances of the investing countries, while the price of CO2emissions per ton is determi ned by the market. An allocated amount of emissions which an installation or a country may emit increases the competitiveness of low-carbon technologies.
Forest management and exploatation produces large quantities of forest biomass, which can be used for energy production. Biomass can additionally be generated by the establishment of bioenergy plantations and biomass pro duction in short rotation crops (SRC) of forest tree species.
The article presents a mathematical economic model which explores the im pact of CO2prices on investment decisions related to the construction of new electrical power plants or a change of fuels in the existing plants. The model determines emissions allowance prices at which biomass becomes more competitive than other technologies. Changes in CO2prices affect short run margi nal costs (SRMC) and long run marginal costs (LRMC) of electrical energy production, where a decision on the replacement of fuel in the existing plant depends on trends in short run marginal costs, whereas an investment decision to construct new electrical plants depends on long run marginal costs.
According to the results of the applied model, biomass fuel in the existing plants (comparison of SRMC) is more competitive than gas even with minimal biomass prices and no additional CO2allowance price or feed-in tariffs. With CO2prices larger than 26 €/t CO2, biomass becomes more competitive than gas and coal for its minimal price, while for its maximal price it is more com petitive at CO2prices larger than 21 €/t CO2.
Keywords
Croatia; EU ETS scheme; forest biomass; short run (SRMC) and long run marginal costs (LRMC)
Hrčak ID:
40470
URI
Publication date:
31.8.2009.
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