The influence of Emissions Trading Schemes on bioenergy use

Abstract

A growing number of countries are implementing greenhouse gas (GHG) emissions trading schemes. As these schemes impose a cost for GHG emissions they should increase the competitiveness of low carbon fuels. Bioenergy from biomass is regarded as carbon neutral in most of the schemes, therefore incurring no emission costs. Emissions trading schemes may therefore encourage increased use of biomass for energy, and under certain conditions may also incentivize the construction of new bioenergy plants. This paper first identifies design elements in emissions trading schemes that influence the use of biomass. It then discusses the experiences with the EU-ETS so far and compares the design elements of the EU-ETS with different existing and emerging trading schemes in the US, Australia and New Zealand, with focus on factors that may influence the use of biomass. Furthermore, the paper analyses how incentives for bioenergy change as the price of carbon changes and which trade offs may have to be considered, if emissions trading schemes are linked.