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Since 1970, the use of bioenergy in Sweden has increased from 42 TWh (151 PJ) to 116 TWh (418 PJ) in 2006. The latter is 12 MWh/capita (46 GJ/capita) or an average bioenergy utilisation of 1,5 kW/capita. The most important explanation for the successful industrialisation of bioenergy in Sweden is a continuous political support for bioenergy as an alternative to being dependent on imported oil. While other alternatives –in particular nuclear power – have been politically controversial bioenergy for heating has had support from all parties, and policies have been unchanged when governments have changed.
Important policies have been general. Though research priorities have changed over the years, the principle that fossil fuels have been taxed so as to provide a competitive advantage for bioenergy in the heating sector has been followed. The resulting industrial development has been more successful then any planner could foresee. Competition between bioenergy suppliers has been fierce and he development of supply-chains and logistics have made it possible to keep the nominal price of solid biofuels at roughly the same level throughout the period.
Dedicated plantations, usually the major sources in bioenergy planning, are negligible after the market driven evolution in Sweden. Instead by-product in forest- and food-industries, in forestry and agriculture together with recycled biomass are the major sources.
One important policy issue to provide opportunities for investments in significant co-generation plants has been openness to imports of biofuels. While the open market strategy has been important to give investors comfort regarding availability of competitive fuel supply, most solid biofuel used is supplied from Sweden itself. This open borders strategy has been supported by Svebio.
An effective, but not cost-efficient, policy instrument has been the electricity certificate and compulsory quota system. The bioenergy companies in Svebio have enjoyed significant wind-fall profits and electricity production has increased. New investments, in particular in industrial co-generation, have been made as a result. Svebio has said it is profitable to our members but inefficient.
There are two destructive policy measures – often presented as supportive:
The European emission trading system is far from the theoretical ideas of tradable emission rights. Free, periodic allocation of allowances makes the system a concession system in practice. The worst effect in Sweden was that the very few district heating plants who had kept firing fossil fuels until the base year were rewarded with valuable emission rights they could sell. As no plants rely on fossil fuels today, this was an absurd cash reward of the last fossil fuel campaigners. The present government has removed the problem by removing all free allocation to existing energy plants!
The worst policy measure was an investment subsidy introduced for installation of bioenergy boilers in single family houses in 2005. The industry protested and predicted the destructive effects. In the first 9 months of 2005 the industry sold 12 000 bio-burners on a steadily growing market. When the subsidy was introduced in 2006, 21 000 burners were sold in 9 months. Companies invested in production capacity and employed and trained people. Then the government ran out of money and the subsidy was not offered. In the first 9 months of 2007 only some 4 000 burners have been sold and the industry is in crises.
We know, from experience of successes and failures, that general and stable conditions are best for developing an industry. We also favour environmental taxes on fossil fuels over subsidies to bioenergy. Transaction costs are often underestimated in policy making, and decisive in the real market.
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