ajanovic1economic challenges for the future relevance of biofuels in transport in eu countries0

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Economic challenges for the future relevance of biofuels in transport in EU countries A. Ajanovic * , R. Haas Vienna University of Technology, Energy Economics Group, Gusshausstr. 25-29/373-2, 1040 Vienna, Austria a r t i c l e i n f o Article history: Received 21 October 2009 Received in revised form 24 March 2010 Accepted 10 April 2010 Available online 14 May 2010 Keywords: Biofuels Costs EU countries Future perspectives a b s t r a c t The discussion on the promotion of biofuels is ambiguous: on the one hand bene ts like reduction of greenhouse gas emissions and increase of energy supply security are expected, on the other hand low effectiveness with respect to reducing greenhouse gas emissions and high costs are being criticized. The core objective of this paper is to investigate the market prospects of biofuels for transport in the EU in a dyn amic fra mework til l 2030.The ma jor res ult s of this ana lysisare: (i)Unde r current pol icyconditions e main ly ex empt ion of ex cise taxes e the econ omic prosp ects of 1st gene ratio n biof uels in Europe are rathe r promising; the major problems of 1st generation biofuels are lack of available land for feedstocks and the modest ecological performance; (ii) Large expectations are currently put into advanced 2nd generation biofuels production from lignocellulosic materials. With respect to the future costs development of 2nd gen er ati on bio fue ls,curre nt lyit canonlybe sta tedthatin a fav our able case by2030theywillbe cl oseto the cost s of 1st gene rati on biofu els.However , becau se of theincreasi ng price s forfossil gasol ineand diesel in all internation al scenarios e given remaining tax exemptions e biofuels will become competitive already in the next few years. 2010 Elsevier Ltd. All rights reserved. 1. Introduction 1.1. Motivation The interest in renewable energy based on low carbon fuels, mostly bioethanol and biodiesel, has increased in the last decades in many countries all over the world for the following reasons: About 95% of the world energy consumption in the transport sect or is basedon petr oleu m pro duct s. Since1990, the trans por t sector s CO 2 emissions worldwide have increased by 36%. On a well-to-wheels basis (i.e. including emissions from feedstock and fuel pr oduction and distri but ion to vehicl es) , in 2007 transport greenhouse gas (GHG) emissions accounted for close to 27% of total emissions [1] . So today we still face increasing green house gas emiss ions and othe r prob lems in trans por t sector, such as growing consumption of limited fossil fuels and gro wing impor t depe ndenc y frompolitical ly instable coun tries ; Biofuels are considered to have the potential to alleviate the abo ve ment ione d pr oble ms in the tra nsport sect or, suc h as growi ng consu mptio n of fossilfuels, growi ng importdependen cy from political instable countr ies and increasing greenhous e gas emissions at least to some extent; Yet, so far biofuels have been more expensive than petroleum fuels, so that government incentive programs have been and are still necessary to allow biofuels to play a role in the market place. In 2006, total support of biofuels (market price support and subsi die s) ass oci ate d wit h pol ici es of the EU and the Member States were around 3.7 billion EUR [2]. Currently, the share of biofuels is relatively small in almost all countries except the USA and Brazil. The share of biofuels in total transport fuels demand in 2007 was about 20% in Brazil, 3% in the USA and less than 2% in the EU, [3,4]. Many countries have set the goal to replace a signicant part of fossil fuels by biofuels. In the European Union by the end of this year (2010) 5.75 percent of the energy used for transportation should be biofuels [5]. A number of EU Member States have introduced targets and mandates for the use of biofuels, see Table 1 . Demand for roa d-t ran spo rt fue ls is expect ed to incr ease fur ther in the coming dec ade s. Acc or ding to the IEA 1 [1] , by 2030 , glob al ener gy use in transport sector is expected to be 3331 Mtoe, which is 45% higher than in 2007 (2297 Mtoe) in the Reference Scenario (RS) and 30% higher than in the Alternati ve Policy Scenario (AS) (2994 Mtoe) . * Correspondin g author . Tel.: þ43 1 58801 37364; þfax: þ43 1 58801 37397. E-mail address: [email protected] (A. Ajanovic). 1 IEA e International Energy Agency, Paris. Contents lists available at ScienceDirect Energy journal homepage: www.elsevier.com/locate/energy 0360-5442/$ e see front matter 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.energy.2010.04.020 Energy 35 (2010) 3340e3348

ajanovic1economic challenges for the future relevance of biofuels in transport in eu countries0

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