The right policy instruments can increase Swedish production of biofuels

In a report released today, the Swedish Energy Agency estimates that Swedish production of the equivalent of ten terrawatt hours of biofuels, such as HVO for shipping, could be a reality in 2030. But then instruments are needed that reduce risks and additional costs for those who invest in new biofuel technologies.

The Swedish instruments for promoting biofuels have so far been mainly aimed at the user side. Above all, the reduction obligation is expected to increase he use of biofuels, in the order of 50 TWh, by 2030”, the Swedish Energy Agency writes in the report  Styrmedel för nya biodrivmedel (Instruments for new biofuels).

Despite this, only 12 percent of the biofuels used in Sweden last year were based on Swedish raw materials and the fossil-based refineries plan to meet the reduction obligation by mainly importing conventional HVO from e.g. animal fats and used frying oils.

However, Sweden has good biomass resources compared to many other countries and the output is estimated to be able to increase by around 50 terrawatt hours by 2030 within sustainable limits. However, this biomass consists mainly of residues from agriculture and forestry such as branches and tops, bark, sawdust, lignin and straw, which are based on lignocellulose. To convert these raw materials into biofuels requires new technologies that are not yet used commercially.

Developing new technologies involves risks and additional costs for those who invest in them, while the benefits usually accrue to society as a whole. Therefore, investments in new technologies are often lower than what would be socio-economically optimal. The Swedish Energy Agency therefore proposes a combination of investment support. A strengthening of “Industriklivet” by 1.2 billion annually provides increased support for research, feasibility studies and demonstrations as well as full-scale investments and a targeted quota in the reduction obligation for raw materials that mainly consist of lignocellulose will promote that these are converted into fuels.

The report (in swedish)