# No. 46: Scenarios for biofuels in the road transport sector - environmental and welfare economic consequences

Frederiksen, P. (ed). 2013. Scenarios for biofuels in the road transport sector - environmental and welfare economic consequences. Synthesis report from the REBECa project. Aarhus University, DCE – Danish Centre for Environment and Energy, 71 pp. Scientific Report from DCE – Danish Centre for Environment and Energy No. 46. http://dce.au.dk/udgivelser/vr/nr-1-50/abstracts/no-46-scenarios-for-biofuels-in-the-road-transport-sector-environmental-and-welfare-economic-consequences/

## Summary

“Renewable energy in the transport sector – using biofuels as energy carrier” (REBECa) was an integrated research project running from 2007 to 2011. While based on the EU policy decision to introduce 5.75 % biofuels in the transport sector from 2010, changes in the societal context took place during the project period. Oil prices soared in 2008 and fluctuated afterwards, but with an upwards tendency. Economic crisis hit the global community and resource scarcity related to oil and other resources rose on the policy agenda. A policy on renewable energy targets for 2020 was adopted by EU in 2009, including a target of 10 % for the transport sector. An on-going debate on the sustainability of biofuel production and use prompted the development of sustainability criteria and schemes for biofuels, and these were implemented in the renewable energy directive. This implied that the project was carried out in a transitional context, and adaptations to this was implemented in terms of a high oil price variant in the scenarios, and a review of international approaches to sustainability schemes.

The aim of the project was to investigate the potentials for providing biofuels for the road transport sector based on domestically cultivated bioenergy crops, and to analyse the Well-to wheel (w-t-w) consequences for air quality, land use, GHG emission and welfare. Based on the international debate on sustainability, a review of international perspectives on biofuels was carried out.

Two scenarios for biofuel introduction were developed – a conservative, following EU renewable energy targets for transport of 10 % in 2020 and keeping this level to 2030, and a more ambitious, with a biofuel share that increases to 25 % in 2030. Bioethanol and biodiesel were selected fuel types, and the respective shares of these were assumed identical. Moreover, it was assumed that the growth in bioethanol use was increasingly provided by 2nd generation bioethanol while 1st generation bioethanol was kept at a 5 % level. Forecasts of the road traffic to 2030 was developed – initially based on an oil price of 65$per barrel and later including a variant based on 100$ per barrel. Resulting energy demands for the four different scenarios were calculated and translated into biofuel demands, and subsequently land claims. The transport forecasts were analysed for emission changes relative to a reference with no biofuel, and the land claims were investigated in different scenarios for agricultural development. An extended well-to-wheel analysis and a welfare economic analysis were conducted, based on the same analytical framework, allowing for comparisons of scenario consequences for emissions, energy consumption and welfare economic consequences.

The results from the project showed that changes to emission factors relative to the biofuel blend ratio varied according to fuel-, vehicle-, and emission type. The changes in absolute emissions (NOx, VOC, CO, PM) between the reference and the biofuel scenarios were, however, small compared to the general decrease in emissions expected based on the presently adopted emission norms. Consequently, the results show no significant changes in air quality as a consequence of the biofuel introduction. Supplementary motor combustion and health hazard studies related to different motor technologies (Euro 2 and Euro 4) also added that while differences between biofuel and fossil fuel was detected, and some advantages related to particle emissions could be assigned to biofuel, after-treatment with particle filters seemed a more effective tool for risk reduction, in relation to the effects studied.

The agricultural scenarios showed that the overall size of agricultural land can be expected to decrease, due to urban and infrastructural development and land use changes following environmental goals (afforestation, set-aside for improvement of aquatic quality). This implies that the possibility for cultivating the bioenergy crops selected for the scenarios (rape, wheat and straw) while keeping up present agricultural strategies are limited. Globally marketed food crops can be substituted by cultivation of energy crops for a domestic market, but competition with domestically grown feed concentrates takes place already from 2012, in the low oil price, low biofuel introduction scenario – a situation which may be postponed some years by increases in crop productivity or lower fuel demand (high oil price scenario), but which will inevitably lead to increased import of either biofuel crops, feed concentrates or refined biofuel – all accentuating the need for intelligent sustainability schemes.

The comparison of energy consumption, emissions and welfare economic costs and benefits were only carried out for the present situation, and it is calculated for conversion of one kg biofuel, compared to one kg of fossil fuel, as scenarios to 2030 do not make much sense in a welfare economic context.

The table shows that the overall results on fossil energy substitution and emissions do not follow the direction of the welfare economic costs. While the largest gains in fossil fuel saving is related to the Rape Methyl Ester (RME) production chain, the welfare economic benefits show the largest positive results for 2nd generation biofuel. This is highly dependent on the co-product values and the methods for allocation of energy. On the other hand, the welfare economic losses related to the RME production are heavily influenced by the wheat production lost. This value would to some extent change if it was assumed that rape would substitute lower value crops. Also, the prices on oil and straw are crucial for the results, which can be illustrated by the fact that the scenario with higher oil price (100\$ per barrel) would reduce the welfare economic costs (e.g. to +0.06€ per kg for RME).

This analysis has focused on the potentials for domestic production of biofuels and on national consequences of such a production for environment and welfare economic cost and benefits. It is clear that given the high demand for biodiesel in these scenarios, and the corresponding land claim for rape production, this would increase the competition for land, with consequences outside the Danish territory, in terms of direct and indirect land use changes. Without such production, import of biofuels will still have such effects. Ensuring the sustainability of such changes has prompted sustainability schemes to be developed by EU, but also in different national versions. The short review of international issues related to biofuels concludes that the assessments of the sustainability of biofuels are still to some extent based on non-scientific assumptions and political trade-offs, and that both methodology and evidence need to be improved.