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Strong push towards developing fossil and biomass based alternative liquid fuels to substitute conventional oil
1. Security of supply 2. Higher oil price3. Peak oil4. Incentives to reduce GHG emissions
(1)-(3) primarily benefit fossil alternatives, such as coal to liquids (CtL) with higher GHG emissions than oil
Gasification of biomass is the 2nd gen biofuel (..) and is a desirable process as 1. it has high resource utilization, 2. no or small contributions of GHG emissions3. does not directly compete with food production
Contextual factors when designing an instrument for absorbing the market risk
• Time scale for transformation of the transport sector is short– Rapidly increasing emissions from the transport sector and limited time frame for
transforming the transport sector (peak by about 2015 and major reduction 2050)– Long time scale to go through pilot/demo to commercial plants for each trajectory– Long time scale to go from 7 to 150 plants (10% of market by 2030?)
=>all policies must be assessed with respect to their ability to deliver within a specified time frame (impossible to speak of efficiency without effectiveness)
• To be effective, several alternative technologies that vary in scale, cost, feed-stock, products need to be developed and coexist - Good policy is designed to create markets for renewable technologies that out-compete fossil alternatives and not each other
• Given large cost differences, a potential intra-EU trade in fuel may impact on policy choice and incentives to invest
BtL blending quotas• Will take the cheapest Btl (Finland) if trade is allowed• Price levels will equalize (and approach the most expensive)• But if suppliers pursue aggressive pricing strategies out compete
others – leads to sequential development• To be effective, there is not time for sequential development• May be resolved though a very high quota (but very high consumer
cost)
=>BTL blending quota possible but risky for variety, effectiveness and consumer costs
Feed-in with cost covering payment may lead to diversity and effectiveness• may need to adjust for feed-stock prices• may link policy to CO2 reduction performance (i.e. opens up for higher
prices for more costly but higher performance fuels)• scope for SNG! Biogas feed-in law easy to implement (many plants)
But, • Variety requires one tariff for each trajectory-manageable but need
experience with full size commercial plants to calculate costs?• The first seven commercial size plants around 2015 – feed-in for 7 plants
– is it meaningful especially when there is yet no competition in the capital goods sector within each trajectory?
• Tax exemptions and guaranteed off-take price from public sector customer (Bonn, Berlin, Göteborg, Ministry of Defense) or trader or petrochemical firm