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Data-Driven Internal Carbon Pricing Mechanism for Improving Wood Procurement in Integrated Energy and Material Production

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  • Teijo Palander

    (Faculty of Science, Forestry and Technology, University of Eastern Finland, P.O. Box 111, FI-80101 Joensuu, Finland)

Abstract

More than 25% of the total energy consumption in Finland has been produced with wood fuels. Since 2012, the share has been greater than that of oil, coal, or natural gas. Internal carbon pricing is used to manage the risks in wood procurement after wood import from Russia ended. Further, the EU announced plans to sell more carbon emission permits to fund the EU’s exit from Russian energy. To manage these challenges, a data-driven internal carbon pricing mechanism (DDICPM) has been developed for wood procurement optimization. Particularly, local changes are considered via available information about growth-based carbon sinks (GBCS). The results of the new scenario were compared to the basic national scenario that ensures carbon neutrality in forestry. The DDICPM may provide the optimum wood-procurement operations maintaining carbon neutrality in the integrated energy and material industry (IEMI). In this study, the use of DDICPM increased profitability b 16.2, 16.1, and 16.0% between adapted wood procurement areas at the EU’s emission allowance prices of 30, 65, and 98 € t −1 CO 2 . The experiments’ results also revealed that the DDICPM could consistently and significantly outperform the conventional solution adopted by the company in terms of economic costs. A significant conclusion is that an increase in profitability is possible if the size of wood procurement areas is allowed to vary optimally with respect to transport distance to take advantage of the GBCS as a new application of the renewable carbon sink.

Suggested Citation

  • Teijo Palander, 2023. "Data-Driven Internal Carbon Pricing Mechanism for Improving Wood Procurement in Integrated Energy and Material Production," Energies, MDPI, vol. 16(8), pages 1-10, April.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:8:p:3473-:d:1124424
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    References listed on IDEAS

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    1. Teijo Palander & Jari Takkinen, 2021. "The Optimum Wood Procurement Scenario and Its Dynamic Management for Integrated Energy and Material Production in Carbon-Neutral Forest Industry," Energies, MDPI, vol. 14(15), pages 1-19, July.
    2. Bento, Nuno & Gianfrate, Gianfranco, 2020. "Determinants of internal carbon pricing," Energy Policy, Elsevier, vol. 143(C).
    3. Thollander, Patrik & Mardan, Nawzad & Karlsson, Magnus, 2009. "Optimization as investment decision support in a Swedish medium-sized iron foundry - A move beyond traditional energy auditing," Applied Energy, Elsevier, vol. 86(4), pages 433-440, April.
    4. Teijo Palander & Hanna Haavikko & Emma Kortelainen & Kalle Kärhä, 2020. "Comparison of Energy Efficiency Indicators of Road Transportation for Modeling Environmental Sustainability in “Green” Circular Industry," Sustainability, MDPI, vol. 12(7), pages 1-22, March.
    5. Palander, Teijo & Haavikko, Hanna & Kärhä, Kalle, 2018. "Towards sustainable wood procurement in forest industry – The energy efficiency of larger and heavier vehicles in Finland," Renewable and Sustainable Energy Reviews, Elsevier, vol. 96(C), pages 100-118.
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