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The bioenergies development: the role of biofuels and the C02 price

Author

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  • Elodie Le Cadre

    (IFPEN - IFP Energies nouvelles, INRA - Institut National de la Recherche Agronomique, UPN - Université Paris Nanterre)

  • Frederic Lantz

    (IFPEN - IFP Energies nouvelles)

  • Pierre-André Jouvet

    (Climate Economics Chair - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

Reduction in energy dependancy and emissions of CO2 via renewables targeted in the European Union energy mix and taxation system, might trigger the production of bioenergy production and competition for biomass utilization. Torre ed biomass could be used to produce second generation biofuels to replace some of the fuels used in transportation and is also suitable as feedstock to produce electricity in large quantities. This paper examines how the CO2 price a ects demand of torre ed biomass in the power sector and its consequences on the pro tability of second generation biofuel units (Biomass to Liquid units). Indeed, the pro tability of the BtL units which are supplied only by torre ed biomass is related to the competitive demand of the power sector driven by the CO2 price and feed-in tari s. We propose a linear dynamic model of supply and demand. On the supply side, a pro t-maximizing torre ed biomass sector is modelized. The model aims to represent the transformation of biomass into torre ed biomass which could be sold to the re nery sector and the power sector. A two-sided (demanders and supplier) bidding process led us to arrive at the equilibrium price for torre ed biomass. The French case is used as an example. Our results suggest that the higher the CO2 price, the more stable and important the power sector demand. It also makes the torre ed biomass production less vulnerable to uncertainty on demand coming from the re ning sector. The torre ed biomass co- ring with coal can o er a near-term market for the torre ed biomass for a CO2 emission price lower than 20 euros/tCO2, which can stimulate development of biomass supply systems. Beyond 2020, the demand for torre ed biomass from the power sector could be substituted by the re ning sector if the oil price goes up whatever the CO2 price.

Suggested Citation

  • Elodie Le Cadre & Frederic Lantz & Pierre-André Jouvet, 2011. "The bioenergies development: the role of biofuels and the C02 price," Working Papers hal-02505389, HAL.
    • Handle: RePEc:hal:wpaper:hal-02505389
    Note: View the original document on HAL open archive server: https://ifp.hal.science/hal-02505389
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    Cited by:

    1. Dupoux, Marion, 2019. "The land use change time-accounting failure," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    2. Albert Banal-Estañol & Jeremy Eckhause & Olivier Massol, 2015. "Incentives for early adoption of carbon capture technology: further considerations from a European perspective," Working Papers hal-02475485, HAL.
    3. Vincent Brémond & Emmanuel Hache & Tovonony Razafindrabe, 2015. "On the link between oil price and exchange rate : A time-varying VAR parameter approach," Working Papers hal-03206684, HAL.
    4. Anthony Paris, 2016. "The Effect of Biofuels on the Link between Oil and Agricultural Commodity Prices: A Smooth Transition Cointegration Approach," EconomiX Working Papers 2016-5, University of Paris Nanterre, EconomiX.
    5. Hache, Emmanuel, 2018. "Do renewable energies improve energy security in the long run?," International Economics, Elsevier, vol. 156(C), pages 127-135.

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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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