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VTT TECHNICAL RESEARCH CENTRE OF FINLAND LTD
Advanced biofuels strategy to 2030 for
the Finnish bioeconomy
Full speed towards a fossil free transport sector?
f3 & SFC Seminar, Gothenburg 3.2.2016
Nils-Olof Nylund, Research Professor
Picture: UPM
208/02/2016 2
Outline
� Policy of the Finnish government
� Means of promoting biofuels in Finland
� Study on the cost effectiveness of various measures to reduce
CO2 emissions in road transport
� What is needed to make advanced biofuels happen
Ten-year objective:
� Finland is a pioneer in the bioeconomy, circular economy and
cleantech. By developing, introducing and exporting sustainable
solutions we have improved the balance of current accounts,
increased our self-sufficiency, created new jobs, and achieved our
climate objectives and a good ecological status for the Baltic Sea.
Transport:
� The use of imported oil will be cut in half during the 2020s
� The share of renewable transport fuels will be raised to 40 per cent
by 2030
http://valtioneuvosto.fi/en/sipila/government-programme
Policies to promote biorefineries and biofuels
• The main measures to promote biorefinery and biofuel development in Finland have been:
• Enhancing the development of biofuels market by• Biofuel obligation• Structural changes to energy taxes on transport
• Funding on R&D in the area of biorefining and biofuels
• Investment aid to demonstration of biorefinery concepts
• Finland bypassed 1. generation biofuels, and has a strong focus on advanced, drop-in type biofuels
Jukka Saarinen/Ministry of Employment and the Economy
Biofuel obligation
• Came into force in January 2008 and was revised in 2010
• Outcome 2014: actual share 12.3 %, calculatory share 23,5 %
Energy share of biofuels [%]
in road transport fuels
2,0
4,0 4,0
6,0 6,0 6,0 6,0
8,0
10,0
12,0
15,0
18,0
20,0
0,0
5,0
10,0
15,0
20,0
25,0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
608/02/2016 6
Biofuel obligation (Law 1420/2010)
� The Finnish obligation is flexible in the sense that the only
requirement concerns annual average biofuel content
� It leaves the following decisions up to the actors or fuel suppliers:� split between petrol and diesel
� where and when to implement biofuels (winter conditions in northern Finland are
rather severe)
� cooperation between fuel suppliers
� “banking” of biofuel deliveries
� The background document of the obligation law states that the
expectation is that biofuels eligible for double counting according to
2009/28/EC will constitute the major part of biofuels used in Finland
in 2020
708/02/2016 7
Fuel taxation
As a general rule, Finland has opted to use obligations for
biofuels, not general tax exemptions
� A completely reworked fuel taxation system has been in place
since 2011 (law 1399/2010)
� Fair and objective system with:� Energy content tax
� CO2 emission tax (well-to-wheel approach)� Biofuels eligible for double counting:
no CO2 tax
� Tax deduction for clean burning fuels
(e.g. paraffinic fuels)
� All calculation parameters based on EU data (Directive
2009/28/EC, Directive 2009/33/EC, JRC/JEC WTW data)
0,0
0,1
0,2
0,3
0,4
0,5
0,6
Diesel FAME baseline Renewable
paraffinic diesel
baseline
Renewable
paraffinic diesel
double counting
Fuel taxes (€/l)
CO2
Energy
VTT TECHNICAL RESEARCH CENTRE OF FINLAND LTD
40% Reduction of Carbon Dioxide Emissions from
Transport by 2030: Propulsion Options and Their
Impacts on National Economy
A joint study by VTT and VATT, the Government Institute
for Economic Research
908/02/2016 9
Main conclusions
� The baseline scenario of implementing only current policy measures
leads to a situation where CO2 emissions from transport sector will be
reduced by more than 20 % in 2030 compared to 2005.
� To reduce emissions further, it will be necessary to increase the use of
low-carbon or carbon-neutral energy in transport.
� Based on the economic impacts, the most cost-efficient way to reduce
emissions is to invest in the production and uptake of domestic,
advanced drop-in biofuels. Their use will not require changes in the
vehicle fleet or on the fuel distribution system.
� Biogas is also a relatively cost-efficient option for reducing transport
related CO2 emissions, but would require a significant increase in the
number of gas-powered vehicles. However, it is not possible to set
obligations for fleet renewal or powertrain choice.
1008/02/2016 10
Main conclusions
� Major part of the raw material requirements for the new Finnish biofuel
factories could be met with the indigenous supply of wood and waste
materials.
� With focused public investment supports, new technologies can be
commercialised so that domestic production is competitive in
comparison to imports.
� Because of the high price of electric cars at present, their large-scale
uptake will not be cost-effective based on their impact on GDP until
technology advancements bring down their price significantly.
1108/02/2016 11
Objective and methodology
� Main financer: Ministry of Employment and the Economy
� Objective: To evaluate which measures could deliver a 30 or 40 %
reduction in CO2 emissions in road transport by 2030 (reference year
2005)
� Execution: Modelling the effects of biofuels and other alternative
technologies on emissions and costs, costs also from the viewpoint of
the national economy
� Main partners: VTT Technical Research Centre of Finland Ltd and the
Government Institute for Economic Research VATT
1208/02/2016 12
Framework assumptions
� Vehicle-kilometres follow the Nationwide Road Traffic Forecast 2030 by the
Finnish Transport Agency (Liikennevirasto), published in the summer of
2014
� According to the agency’s forecast, transport volumes will keep rising until 2030
� The average renewal rate of the fleet was assumed to be about 6%, which
means that the average age of the fleet remains practically unchanged at 11
years
� In the calculations for the baseline scenario, it was assumed that the actual
share of biofuels will increase to 15% by 2020 and will remain steady at
15% until 2030
� It was assumed that energy efficiency of the vehicle fleet will improve with
the renewal of the fleet, on average between 1.5 and 2% for passenger cars
and 0.5% for other vehicle categories between 2015 and 2030.
1308/02/2016 13
Framework assumptions
� Given these prerequisites, in the baseline scenario, CO2 emissions
will be reduced by some 21% from the 2005 level by 2030.
� The use of biofuels and improved energy efficiency will reduce
emissions, while growing vehicle-kilometres increase them
� Thus, additional measures are required to achieve a 30% or even 40%
reduction in CO2 emissions by 2030
� The report does not assess the impact of methods such as influencing
available means of transport or encouraging the renewal of the vehicle
fleet (e.g. by tax schemes)
� The primary purpose of the report was to assess the impact of different
propulsion solutions on emissions, as well as the impact of each option
on Finland’s economy.
1408/02/2016 14
Optimum
pathway
VATTAGE(VATT)
ALIISA
(VTT)
Methodology
Base assumptions:
Transport work
Energy efficiency
Vehicle sales
Baseline bio share
Additional costs
Vehicle sales
for alternative
scenarios
Added
vehicle
costs
Fuel
volumes
in different
categories
(per scenario)
Investments in
fuel production,
costs for production
or fuel imports
Costs of
refuelling
infrastructure
GDP
Employment
Private
consumption
CO2-emissions
Technology and vehicle fleet National economy
1508/02/2016 15
Principle of assessment (CO2 emissions)
0
Incre
ase in
mileag
e
+20%
Imp
rovem
en
t of e
nerg
y e
fficie
ncy
+ b
aselin
e b
iofu
el s
hare
-20%
-30%
+ B
TL
-40%
+ B
TL
Optimum
pathway
+ F
FV
+ C
BG
+ B
EV
+ P
HE
V
+ F
CE
V
Maximum scenarios
? ? ? ? ?
€ € € € €”DROP-IN”
1608/02/2016 16
Principle of assessment
� Alternative technologies were initially assessed one by one without
consideration to possible restrictions
� In the assessment, vehicle numbers were forced
to a level by 2030 that would allow achieving
a 40% reduction in emissions with that technology� I.e. an additional reduction of 20% in comparison
to the baseline scenario
� In the case of drop-in biofuels, the additional reduction is achievable
without the introduction of new types of vehicles� However, it does require domestically produced or imported biofuels that
are compatible with the existing vehicle fleet
� While drop-in biofuels are already widely used in Finland, they are less
popular in Europe
Mixing board
1708/02/2016 17
Success in the market
� The potential of any new propulsion solution depends on many factors.
The most important include:
1. Availability (= production);
2. Distribution system;
3. Compatibility with existing vehicle fleet; and
4. Price and consumer interest in the technology in question.
1808/02/2016 18
The technology scenarios
Scenarios 2 & 4 would require investments in fuel production
1908/02/2016 19
Impact on GDP
Please observe: general increase in
GDP from 2005 to 2030 predicted at 30 %
2008/02/2016 20
”Development 2030” scenario
2030 situation:
Total energy 3 400 ktoe
Fossil 2 200 ktoe
Liquid biofuels 1 100 ktoe (~ 32 %)
Biogas 50 ktoe (50 000 vehicles)
Electricity 50 ktoe (corresponding to
100 000 BEVs or 200 000 PHEVs)
2108/02/2016 21
Advanced biofuel producers in Finland
~400 000 toe/a ~100 000 toe/a
~ 10 000 – 15 000 toe/a
22
Summary and conclusions
2308/02/2016 23
Conclusions of the 2030 study
� Most cost efficient way for reducing transport sector’s CO2
emissions in Finland is investment in domestic drop-in biofuels
production
� Biogas and domestic ethanol have also relatively low cost, but
would require major change in car fleet
� The assumption on the average future price of EVs has a major
impact on their GDP effect
� Large scale use of EVs in Finland is not very cost efficient
(relatively to other options) before the price of EVs is significantly
lower than currently
Extended abstract in English at:
http://www.transsmart.fi/files/248/Tutkimusraportti_VTT-R-00752-15_liitteineen.pdf
Contact at VATT: saara.tamminen&vatt.fi
2408/02/2016 24
Prerequisites for success in biofuels
Cle
arly d
efined s
et
of
rule
s a
nd p
olic
ies
Susta
inable
feedsto
ck
Effic
ient
pro
cess
Adequate
fuel qualit
y
Adequate
bio
fuel sin
ks (
vehic
les)
Fair taxation
Suffic
ient
public
sta
rt-u
p s
upport
Sound b
usin
ess o
pport
unitie
s
Coopera
tion a
mong k
ey s
takehold
ers
2508/02/2016 25
Some clouds on the horizon for biofuels
� EU Post 2020 policies are not set, there will not be mandates for
renewable energy in transport
� Are Finland and Sweden the only EU countries believing in biofuels?
� Thermal conversion of solid biomass is needed to bring about
significant amounts of biofuels
� Who is willing to make significant investments in advanced biofuels
when the markets are uncertain?
� The VW scandal was not about biofuels, but it will certainly hurt diesel
passenger cars and indirectly biofuels
� Some people call for a ban of diesel cars
� 80 % of the biofuels in Europe are diesel substitutes,
only 20 % petrol substitutes
� At least in the Smart City context the EU
Commission only speaks about electric vehicles
TECHNOLOGY FOR BUSINESS