Energy system perspectives on transport biofuel policies – a modelling analysis

Abstract: Climate concerns and energy security issues have in recent years triggered the interest in biofuels for transport. This has resulted in governmental and intergovernmental targets that, if implemented, will lead to an unprecedented growth in biofuel production. There are several alternative options to achieve reductions of greenhouse gas emissions and less dependence on imported energy carriers. However, due to limited resources, regarding both energy supply and economic room to manoeuvre, solutions can often be in conflict with each other. This work analyses system aspects of biofuels for transport and competing technology options. Special attention is given to the influence of transport biofuel policies on cost-effective choices in the transportation sector as well as in the stationary energy system. In the study, applications of the well-established, cost-optimizing MARKAL model are developed and used. The first part of the study applies a national viewpoint and includes a wide range of alternatives for vehicle technologies, fuels and fuel production technologies. In the second part, the study narrows down the perspective and a higher detail regional modelling approach is utilized. This part of the analysis focuses on applications of biomass gasification for production of transport biofuels as well as for combined heat and power (CHP) generation. The results show that transport fuel taxation is an important tool to accelerate a transition in the vehicle fleet towards more energy-efficient vehicle options, such as hybrids and plug-in hybrids. Biofuels, particularly from biomass gasification, can with promoting policies (tax exemptions etc.) obtain significant shares of the transport fuel market. Due primarily to limitations in biomass supply, this can, however, be at the expense of biomass use in the stationary energy sector. Implications can include less renewable electricity production from CHP plants in district heating systems, which would partly offset the environmental benefits. In addition, lower governmental tax revenues and higher system costs to reach climate targets can be unwanted consequences of such strategies.