Journal of Forest Economics > Vol 23 > Issue 1

Global trade impacts of increasing Europe's bioenergy demand

Craig M.T. Johnston, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison, United States, craig.johnston@wisc.edu G. Cornelis van Kooten, Department of Economics, University of Victoria, Canada,
 
Suggested Citation
Craig M.T. Johnston and G. Cornelis van Kooten (2016), "Global trade impacts of increasing Europe's bioenergy demand", Journal of Forest Economics: Vol. 23: No. 1, pp 27-44. http://dx.doi.org/10.1016/j.jfe.2015.11.001

Published: 0/4/2016
© 0 2016 Craig M.T. Johnston, G. Cornelis van Kooten
 
Subjects
 
Keywords
JEL Codes:Q17Q23Q31Q42
BioenergyWood pelletsForestryVertical and horizontal markets
 

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In this article:
Introduction
Methods
Results
Summary and conclusions

Abstract

European governments are rapidly turning to biomass to comply with the EU's legislated renewable energy targets for 2020 and 2030. To do so, EU member states will likely have to increase imports of biomass from timber rich regions, which will undoubtedly disrupt international wood product markets. In this study, a static global forest trade model of coniferous wood products is used to examine the effects of expanded demand for wood pellets in Europe to generate reliable electricity. Positive mathematical programming (PMP) is used to calibrate the model to 2012 bilateral trade flows. To assess the impact of increased wood-pellet demand on global forest products, we consider a scenario where EU demand for wood pellets doubles. Model results suggest increases in the world prices of industrial roundwood (1%), particleboard ($34/m3), fibreboard ($30/m3), pulp ($65/t) and pellets (71% to 128%), while the prices of sawnwood and plywood & veneer are projected to fall by $12/m3 and $4/m3, respectively. The gains and losses are unevenly distributed between timber rich and timber poor regions; Russia, Canada and the U.S. experience large net welfare gains of $706 million, $544 million and $416 million, respectively, while Asia loses $1.8 billion. In the forest products sector, the gains outweigh losses with economic benefits increasing by some $4.9 billion, but this is a cost to the consumers of electricity and/or taxpayers in the regions implementing these renewable energy policies. The price of wood pellets is projected to rise between $107 and $154 per tonne. The findings highlight the need to account for the interconnections among softwood forest products globally.

DOI:10.1016/j.jfe.2015.11.001