T&E Biomass Report
T&E Biomass Report
T&E Biomass Report
Summary
The European Commission is currently consulting on the EU emissions trading system (ETS)
with a view to revising it for the period 2021-2030. The current EU ETS only accounts for
smokestack emissions but erroneously rates the carbon emissions of biomass burning at zero.
This is based on the assumption that the biomass emissions have been saved during the
growth phase and accounted for in the land-use sector. Yet, as most biomass production lacks
any kind of sustainability criteria and as land-use accounting is incomplete, this assumption is
wrong and biomass usage can actually increase greenhouse gas (GHG) emissions. This
briefing reviews the current use of biomass under the EU ETS and proposes steps to ensure
that biomass use is only incentivised when it delivers real GHG emissions reductions. Biomass
emissions in the EU ETS are in the range of 90 to 150 million tonnes of CO2 equivalent, which
represents between 4 and 7% of the overall emissions allowances. The ETS already has
serious problems and fixing the biomass accounting error can be another step towards a
stronger EU ETS and a more consistent EU climate policy.
Introduction
The EU emissions trading system (EU ETS) is currently under review. As stated by the
Commission communication on Energy Union1, the ETS is being held up as the cornerstone of
EU climate policy, and therefore it is important to ensure that it works properly. Until 16 March
2015 there is an open consultation2 on the directive for all citizens and organisations. It
represents a political opportunity to solve some of the loopholes that the system has. This
paper focuses mainly on the accounting criteria that biomass usage has under the emissions
trading legislation. Even if this problem is reflected in other pieces of European legislation, the
EU ETS will enable the spearheading of reform of this accounting problem overall.
The main arguments used to promote the use of biomass in the EU are that it is a renewable
energy source, that it can increase the energy independency of the EU and its potential to
reduce GHG emissions. Several EU energy directives promote the uptake of biomass for
different energy purposes, including electricity and heat generation and biofuel production. The
two main directives driving the uptake of bioenergy are the Renewable Energy Directive (RED)
and the ETS. The RED is the main driver behind bioenergy uptake, as it obliges countries to
increase the share of renewables in their energy sector. However, this paper focuses on
biomass use in the ETS, which represents an additional incentive for the use of bioenergy.
1
2
http://ec.europa.eu/priorities/energy-union/docs/energyunion_en.pdf
http://ec.europa.eu/clima/consultations/articles/0024_en.htm
A clear example of biomass not being either sustainable or carbon neutral are the wood pellets
being supplied to the EU power sector from south-eastern United States forests10. According
to NRDC, forestry on private land in the region is conducted with few restrictions and little
oversight. Practices such as large-scale clearcutting, old-growth logging, wetland logging, and
the conversion of natural forests to plantations are mostly unregulated and are often practiced
in sensitive habitats with little protection for species. Demand for wood pellets is increasing
loggings in the southern US forests and increasing amounts of pulp wood (ie. whole trees) are
used in their manufacturing. In the absence of any kind of carbon accounting or sustainability
standards, the emission reductions not even considering other environmental impacts
attained by using these wood pellets is highly questionable. According to the US Energy
Information Administration11, wood pellet exports doubled in 2013 in response to growing
European demand. More than 98% was exported to the EU.
In Europe altogether the use of wood has increased from 798 million m3 in 2000 to 942 million
m3 in 2011, leading to increased extraction of roundwood and residues from forest. This
increased biomass demand constitutes a pressure on forests carbon stocks compared to a
situation where there had not been additional wood demand for energy. The energy sector is
the main driver behind the increase12.
In 2012, bioenergy (bioelectricity, bioheat and biofuels) was the main contributor towards the
renewable energy targets in the EU. In 2012, the consumed bioenergy amounted to 99 Mtoe,
representing 62% of renewable energy consumption and 8.7% of total EU final energy
consumption13. Figure 1 below shows the final energy demand of bioenergy by member state
and type.
14
NRDC, 2014. The Truth About the Biomass Industry: How Wood Pellet Exports Pollute Our Climate
and Damage Our Forests. NRDC fact sheet. http://www.nrdc.org/energy/files/wood-pellet-biomasspollution-FS.pdf
11
EIA, 2014. U.S. wood pellet exports double in 2013 in response to growing European demand.
12
http://ec.europa.eu/enterprise/sectors/wood-paper-printing/files/indufor-report-part2_en.pdf
13
European Commission, 2014. Commission Staff Working Document. State of play on the sustainability
of solid and gaseous biomass used for electricity, heating and cooling in the EU.
14
European Commission, 2014. Commission Staff Working Document. State of play on the sustainability
of solid and gaseous biomass used for electricity, heating and cooling in the EU.
10
Bioenergy demand is expected to increase in the following years, as can be seen in Figure 2
below. For 2020, bioenergy is expected to be contributing 57% of all renewables, growing from
99 Mtoe to 139.5 Mtoe. It seems bioenergy is the main way chosen by EU member states to
reach the 2020 renewable target. Bioenergy consumption is expected to increase by 41%
between 2012 and 2020.
Around three-quarters of EU biomass supply for electricity and heating come from forestry.
Roughly one-third of the wood is roundwood (whole tree trunks) and another third woody,
industrial residues. Of the remaining third, about half are different kinds of residues from forest
harvesting operations. The volumes of roundwood and harvesting residue used for energy
which pose the biggest threats in terms of negative climate and biodiversity impacts are
expected to increase more than other sources15. The rest comes from agriculture and waste,
which are assumed to have lower sustainability risks (apart from crops used for biofuel and
biogas production). Although there is no specific data for EU ETS-regulated installations, it can
be extrapolated that the ETS keeps a similar proportion as the overall use of biomass. This
briefing only focuses on biomass use in the ETS although RED, with its lack of biomass
sustainability criteria, is a major driver.
16
http://ec.europa.eu/enterprise/sectors/wood-paper-printing/files/indufor-report-part2_en.pdf
European Commission, 2014. Commission Staff Working Document. State of play on the sustainability
of solid and gaseous biomass used for electricity, heating and cooling in the EU.
17
Eurobserver, 2015. Solid Biomass Barometer.
18
IEA, 2012. Technology Roadmap. Bioenergy for Heat and Power.
15
16
heating or industrial use are included as long as their total thermal output is beyond 20MW.
Under the EU ETS, the emissions factor is zero for all solid and gaseous biomass used in
electricity, heating and cooling19. For biofuels in aviation, the emissions factor is zero as long as
it complies with the sustainability criteria set out in the Renewable Energy Directive (RED). The
Commission20 has defined the zero-rating of bioenergy under the ETS as financial support
within the meaning of the RED21. Only biofuels and bioliquids that comply with the sustainability
criteria set out in RED can receive financial support or count towards renewable energy targets.
This means that only sustainable biofuels could get a zero-rating under the ETS. However,
biofuels are currently used mostly in road transport, which is outside of EU ETS, and there is no
EU-wide sustainability criteria for biomass used in heat and power. Although this might change
after 2020, as the Commission has proposed a sustainability policy for bioenergy in its Energy
Union communication22, for the moment solid and gaseous biomass can be used in the EU
ETS without restriction and is, by default, zero-rated. Also, bioenergy-only installations, no
matter their size, are not included in the EU ETS23.
Methodology
To gather information on the amount and source of biomass use and the resulting GHG
emissions in the ETS, the authors looked at 2013 reports sent by member states to comply
with the obligations of article 21 of the EU ETS directive, which obliges them to report on the
application of the directive. Question 5.1724 refers to biomass usage in the EU ETS and
associated smokestack emissions of CO2. The results presented below are given in a range.
The lower end of the range is underestimated because it is based on the existing information
included in article 21 reports. For some member states, such as France and Sweden, this
information was missing, although the two of them are heavy users of biomass. Denmark and
Norway didnt report it either. Some other member states (Ireland, Latvia, Lithuania, Romania
and Slovenia) decided not to report this information under article 21 reports and only included
energy content of the biomass used. According to the monitoring and reporting regulation, it is
not mandatory to report CO2 associated emissions at an installation level25. Therefore, the
scale of biomass use in the EU ETS is not totally clear. Meanwhile, the upper part of the range
European Commission, 2012.Guidance document. Biomass Issues in the EU ETS. The legal basis is
the EU ETS Directive, Annex IV.
20
Pursuant to recital 2 of the Monitoring and Reporting Regulation.
21
European Commission, 2012.Guidance document. Biomass Issues in the EU ETS.
22
http://ec.europa.eu/priorities/energy-union/docs/energyunion-annex_en.pdf
23
Annex I. EU ETS Directive.
24
Reports were consulted during the week of January 12th, 2015. The question reads as follows:
the number of category A, B and C installations using biomass;
the total emissions from biomass which are considered zero rated, i.e. where no sustainability
criteria apply or where the sustainability criteria are complied with;
the total emissions from biomass which are not considered zero rated, i.e. where sustainability
criteria apply but the sustainability criteria are not complied with;
the energy content of the biomass which is considered zero rated; and
the energy content of the biomass which is not considered zero rated.
25
Commission Regulation (EU) 601/2012, Annex X. In its subparagraph 8, CO2 emissions from biomass
only need to be included when a measurement-based methodology is used. However, the Annual
Emissions Report Template provides this information so it could be easily made mandatory.
19
is based on estimations for member states with missing information26. An average emission
factor27 was used for member states that reported energy data but not emissions data. For
those which didnt report anything, reports submitted to UNFCCC were used28.
Key results
Under the EU ETS, most biomass is used for heat and electricity generation. In 2012, the EU
consumed 86.5 million tonnes of oil equivalent (Mtoe) of biomass for heating and electricity29. At
least 50% of the biomass was consumed in EU ETS-regulated installations30. More than 10% of
installations were reported as having used biomass during 2013. The amount of GHG
emissions zero-rated in the EU ETS are in a range between 90 and 150 million tonnes of CO2
equivalent, as explained in the methodology section. This refers to smokestack emissions, not
including lifecycle emissions.
The EU ETS cap for 2013 was 2,084,301,856 allowances. This means that biomass emissions
from smokestack within EU ETS-regulated installations are equivalent to 4 to 7% of overall
annual emission allowances. Biomass usage is expected to increase in the following years,
while the cap is tightened. If biomass is not delivering carbon reductions, any substitution of
fossil fuel use might be neutralised by the increase of biomass usage. Besides, given the
current surplus of around 2 billion allowances, changing the zero-rating criteria could help to
increase demand for allowances in the EU, complementing other measures such as the Market
Stability Reserve.
The biomass zero-rating in the EU ETS also represents an additional subsidy for the industry.
At a current ETS price of 7 per tonne of CO231, this equals an annual amount between 630
million and 1 billion approximately, depending on the range of actual biomass smokestack
emissions.
In the case of Denmark, Norway and France, half of their UNFCCC reported biomass emissions were
considered to fall under the EU ETS, following trends identified in other member states. In the case of
Sweden, specific bioenergy emissions were available, and typical sectors under the EU ETS were
included, such as the power and paper sector. In the case of Ireland, Latvia, Lithuania, Romania and
Slovenia, no emission data was provided, although they provided energy info which allowed to estimate
emissions. UK and Spain reported inconsistent data, although the first one corrected it after being
contacted. Denmark, Norway and Sweden were also contacted although no response was obtained.
27
Based on member states that reported both energy and emissions data. A value of 90 t CO2 eq / TJ
was used.
28
It was assumed that for the case of France, Norway and Denmark half of biomass emissions came
from EU ETS regulated installations. In the case of Sweden, more specific information was available per
sector, so those sectors generally under the EU ETS were included.
29
European Commission, 2014. Commission Staff Working Document. State of play on the sustainability
of solid and gaseous biomass used for electricity, heating and cooling in the EU.
30
Based on the authors study of reports sent by Member States to comply with the obligations of article
21 of Directive 2003/87 for year 2013. The number must be under estimated because some major users
of biomass for electricity and heat such as France, Sweden and Denmark didnt report this information.
31
Approximate price in January-February 2015.
26
European Commission, 2014. Commission Staff Working Document. State of play on the sustainability
of solid and gaseous biomass used for electricity, heating and cooling in the EU.
33
The biomass supply gap could reach 38 Mtoe according to Pyry Energy Consulting (2011),
compared to 21.4 Mtoe used to calculate the 15% stated in the text. Biomass imports to Europe and
global availability, research for Euroelectric/VGB.
34
Some sectors using biomass would receive free allowances because they are covered by the carbon
leakage provisions. Others such as electricity and district heating providers would add to the EUA
demand. Besides, if biomass would stop being zero-rated, the total cap could be changed. Therefore, it
is difficult to estimate what would be the real increase in demand if biomass is not zero-rated.
35
More than 8 billion each year. Ecofys, 2014. Subsidies and costs of EU energy.
32
3. Policy Recommendations
3.1.
The Commission should reassess the zero-rating policy of biomass in the EU
ETS directive, taking into account the uncertainty with regards to CO2 savings. Scientists have
suggested that accounting standards for GHGs should count all the carbon and other GHG
releases by the combustion of carbon as emissions, and should include additional plant growth
or reduced decomposition of biomass as an offset, which together make up additional carbon
sequestration36. One option could be to fully account for the smokestack emissions of
biomass. Another option could be to develop sustainability criteria with a minimum emissions
savings threshold for bioenergy similar to the GHG savings threshold that is currently part of
the biofuels sustainability criteria. Then only the savings part would be allowed to count as zero
in the ETS, which would be closer to reality but still relatively simple, as it would avoid full
lifecycle accounting for each pathway. These two options would be a simple way to improve
the accounting, while the European Commission further looks into how the EU ETS could
better reflect the balance of the net effect of the production and use of bioenergy and get rid of
perverse incentives that might increase GHG emissions.
3.2.
Improve reporting and transparency under the EU ETS by including the
bioenergy-only installations if they are above the 20MW threshold established for all other
installations as an informative item only while the zero-rating criteria is reassessed. Otherwise it
is hard to know the scale of the problem within the EU ETS. It should also be made mandatory
to report CO2 emissions from biomass both at an installation and member state level under the
monitoring and reporting regulation to increase transparency.
3.3.
Include ambitious environmental safeguards guiding the use of bioenergy in the
renewable energy policy for 2030, as set out in the Energy Union communication. These
safeguards should include full carbon accounting (including ILUC for biofuels and carbon debt
for woody biomass), the efficiency standards that would guide the use of biomass only in the
most efficient installations, and sustainable management criteria covering the use of residues
and wastes (including waste hierarchy and cascading use principles). It should also recognise
that the amount of sustainable biomass is limited and place a cap on the maximum amount of
biomass contribution to the EU renewable energy targets.
36
Haberl, H., et al., Correcting a fundamental error in greenhouse gas accounting related to bioenergy.
Energy Policy (2012), doi:10.1016/j.enpol.20212.02.051
10