Bioenergy system is complex; it includes many phases starting from the production/preparation of raw materials (harvesting, grinding, etc.), the transportation, and the conversion of raw materials into fuel, transportation of fuel, its distribution to the consumers and its final utilisation. Such complex system needs clarity at all levels.
It is essential that National and European policies include adequate legislation, rules, regulations and standards in order to ensure sustainable production, conversion, marketing and use of wood as fuel8 (ANNEX 1).
A large number of areas in legislation affects bioenergy.
The legislation regulating bioenergy is a very crucial issue in a European framework because of national laws, financial regulations, and specific limits for wood fired emissions and woodfuels standards. They could differ from country to country and in many cases all these rules are strictly applied.
For example, the Austrian Federal law allows provinces and municipalities to formulate the targets of environmental planning. Federal and provincial governments on the other hand are subsidising almost all technologies based on RE. Incentives are available for the production of energy crops (by the Federal Ministry of Agriculture), for the conversion of energy crops, and for the utilisation of energy from them. Also the standardisation of fuels is well established.
The Swedish system of energy and environmental taxation distinguishes between taxes on industry and taxes on other users. In 1996, free competition was introduced in the electricity market. Financial incentives such as Energy Technology Fund provide support for development and demonstration of clean energy. The government grants carbon dioxide tax and sulphur tax is not levied on biofuels and waste. An increase in taxes on fossil fuels is expected which will make RE more attractive. Wood fired emission standards have also been identified.
Land tenure is an important issue in some countries. Small forest property sizes in Portugal and Spain inhibit economic extraction of residues. Small farm size in Spain inhibits the establishment of energy crops. In Germany, the old co-operative farms are very large, typically 1,500-2,000 hectares each which very well offer possibilities for economies of scale. In Sweden, tenure of farms is a constraint to the establishment of SRC.
In Italy there are critical contractual issues. The lack of co-ordination among different parties responsible for the various operations result in many concerns regarding how to organise supply and use chain. For SRC land use, it is influenced by taxation and land values, whether in agriculture or in forestry. In Germany, SRC may be grown on both agricultural and forestry lands. In the UK, SRC is considered only as an agricultural crop.
In many other European countries, mainly the East Side, there is a deep lack of regulation. For example, in Hungary, there are hundreds and thousands of hectares of agricultural fields available that may be easily converted into energy plantation and or forest areas inasmuch as agricultural production is undergoing a recession. However, the lack of law enforcement and the poor financial conditions, do not encourage farmers to produce them. Moreover, this lack of financial support system makes thermal use of biomass not competitive even in agricultural energy supply sector with the exception of some areas.
Forests cover around 54 percent of the total land of the Republic of Slovenia; in 1995, 41,000t of wood and wood wastes were utilised for heat purposes in CHP plants. The production of electricity using wood residues corresponded to 0.06 percent of the total electricity production. The main difficulty, however, for using biomass to generate electricity, is that the Energy Law is still being formulated. There are other limitations as well: Lack of initiative from the State, lack of tradition in the use of biomass, fiscal policy and inefficient use of biomass energy.
In Europe, a large number of financial regulations, such as subsidies, advantageous tax-rate, and low interest loans are enforced by local, national and European authorities in order to stimulate bioenergy initiatives and to make bioenergy technologies competitive. Furthermore, many market stakeholders, banks, and private investment funds offer financial support. Such financial resources may be divided into two main groups: Governmental incentives and Other financial resources.
Government incentives are often investment subsidies, feed-in tariffs, payback regulations, and tax regulations. Some examples are:
_ Flexible depreciation of RE investments
_ Favourable tax treatment for third party financing of RE
_ Start up subsidies for new production plants and job creation
_ Financial incentives for consumers to purchase RE equipment and services
Other financial resources from private investors as well as governmental organisations include the following:
_ Venture capital
_ Low-interest loans
_ Third party financing
Banks and private investment funds offer so-called "green funds" addressed to capital markets that are financed from accounts attracting lower interest rates. The bank passes on the margin that is allowed by lower interest rates to the RE investor in the form of discount rates.
In certain countries "green tariffs" are introduced by energy distributing companies as the result of voluntary environmental solidarity of large groups of consumers who buy "green electricity" to a rate higher than normal9.
Forestry Department "Wood energy today for tomorrow"the role of wood energy in
Europe and OECD, March 1997.
9 European Financial Guide - Renewable Energy - focus on Biomass - November 1998.