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Bioenergy Options for New Zealand

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Bioenergy Options for New Zealand BIOENERGY OPTIONS FOR NEW ZEALAND ANALYSIS OF LARGE-SCALE BIOENERGY FROM FORESTRY Productivity, Land use and Environmental & Economic Implications New Zealands EnergyScape Contributors to this report Peter Hall, Barbara Hock, Dave Palmer, Mark Kimberly, Steve Pawson, Christian Walter, Phil Wilcox and Michael Jack Next generation biomaterials Donna Giltrap, Anne-Gaelle Aussiel, Jagath Ekanayake, Peter Newsome, John Dymond Maribeth Todd, Wei Zhang, Suzie Kerr Adolf Stroombergen This report is the 4 th output from the Bioenergy Options for New Zealand project. It builds on previous studies described in the Situation Analysis, Pathways Analysis and Bioenergy Research Strategy . Analysis Of Large-Scale Bioenergy From Forestry: i Acknowledgements Scion acknowledges; - the support of FRST for funding the Bioenergy Options Project - the valuable contributions made by many contributing authors - review comments from staff from Scion, Landcare, Motu, Infometrics, EECA, MAF, and MED Bioenergy Options for New Zealand ANALYSIS OF LARGE-SCALE BIOENERGY FROM FORESTRY Productivity, Land use and Environmental & Economic Implications April 2009 Lead Authors : Peter Hall and Michael Jack Editor : Margaret Richardson Scion, Energy Project, 2009 Disclaimer The information and opinions provided in the Report have been prepared for the Client and its specified purposes. Accordingly, if any person, other than the Client, uses the information and opinions in this report it is entirely at their own risk. The report has been provided in good faith and on the basis that reasonable endeavours have been made to be accurate and not misleading and to exercise reasonable care, skill and judgment in providing such information and opinions. Neither Scion, nor any of its employees, officers, contractors, agents nor other persons acting on its behalf or under its control accept any responsibility or liability in respect of any information or opinions provided in this Report by Scion. FRST - C04X0601 PROJ-12011-ORI-FRI0 Analysis Of Large-Scale Bioenergy From Forestry: ii Executive Summary Background Bioenergy Options for New Zealand studies (Situation and Pathways analyses) identified a significant opportunity for New Zealand to develop a purpose-grown forestry-based biomass resource that could meet national-scale demands for consumer energy. Such forests could utilise low productivity grazing land on steep terrain with low current financial returns. The biomass arising from these forests could be used to provide heat, electricity and transport fuels for New Zealand whilst mitigating some environmental issues (carbon, water quality and erosion). Purpose This study (Large-scale Bioenergy from Forestry) considers the potential nation-wide impacts of growing forests for energy through a preliminary assessment of the environmental, economic and land-use implications. This information can assist in determining whether large-scale forests for bioenergy is a strategic direction worth pursuing, and what particular scenarios maximise the long-term benefits. The principal focus of this study is on the production of liquid fuels, since finding renewable options for transportation is recognised as one of the greatest challenges facing New Zealand. Study methodology Four large-scale afforestation scenarios were developed and analysed. The land area selected for these scenarios specifically targeted low productivity grazing land on rolling to steep terrain. The current plantation forest estate is ~1.7 – 1.8 million ha, and there is 9.2 million ha of hill country that is either marginal land or low to moderate productivity hill country grazing. The benefits of using this marginal hill- country for afforestation are that competition with food production is minimised and environmental benefits are maximised. Forest (radiata pine) biomass productivity and costs were estimated for these land area scenarios and this data was used as the basis for assessing the environmental, land use competition and economic impacts of each of the scenarios. Afforestation scenarios Afforestation scenarios of 0.8, 1.8, 3.3 and 4.9 million ha of purpose-grown forest were considered. Location of afforestation area was dependent on the scenario; with lower afforestation area scenarios biased towards the southern part of New Zealand and higher area scenarios more evenly spread across all the regions. Recoverable forest biomass production of 640 to 900 m 3 per ha was estimated to be possible from a 25-year rotation, biomass-focused forest management regime. A significant percentage of the crop could also be used to produce saw logs for traditional markets. Environmental impacts All of the afforestation scenarios considered provided significant environmental benefits, contributing to large volumes of stored carbon, reductions in erosion, improvements in water quality and positive impacts on biodiversity. The limiting environmental factor was water availability, especially in regions with low rainfall, and/or high levels of existing water allocation. Land-use competition The land-use competition analysis showed that forestry for biofuels could be competitive if petrol prices reached $2.75 per litre (excluding taxes). At this price, the low-end estimate of afforestation that would be viable for biofuels ranged from 0.2 to 4 million ha. The high-end estimation assumes that biofuels are not regarded as a high-risk option, and that an emissions trading scheme could significantly affect the profitability of sheep/beef farming. There are currently large areas (~2.5 million ha) of hill country grazing that are earning less than $200 per ha per annum. The cost estimates for forestry production gave returns to the forest grower equivalent to $185 per ha per annum. At this level, much of the land in the 1.8 million ha scenario would earn as much from biofuels as it currently does from sheep and beef farming. Economic impacts A general equilibrium model of the New Zealand economy was used to investigate the economy-wide effects of using local resources to produce biofuels instead of producing other goods and services that are exported in exchange for oil. A number of biofuel scenarios were compared with a business-as-usual (BAU) picture of the economy in 2050. The analysis focused on the impact of biofuels on private consumption and real gross national disposable income, two measures of economic welfare (or standard of living). The broad conclusions from the study were: Analysis Of Large-Scale Bioenergy From Forestry: iii • There is likely to be a loss in national production efficiency reflected in a decline in GDP as long as biofuels cost more to produce than importing fossil fuels. This has a negative effect on gross national disposable income. Efficiency gains in production which lead to lower cost biofuels and rising oil prices will offset this effect. • The production and use of biofuels reduces CO 2 emissions, so if there is a price on carbon, New Zealand’s liability to purchase offshore emission units is reduced. This will generate a gain in real gross national disposable income. • As oil prices are assumed to increase faster than the price of other goods, there are likely to be gains in terms of trade from domestic production of biofuels from forestry. There will also be increases in wage rates (or employment rates) from the creation of a new biofuels industry. The improved terms of trade and reduced carbon emissions liability effects lead to significant increases in private consumption, especially for high oil prices. • Lower afforestation scenarios are more likely to improve economic welfare as they utilise low- productivity land first and therefore have a lower impact on agricultural production per hectare. In the higher afforestation scenarios, larger reductions in agriculture production per hectare of afforestation occur, making gains in economic welfare less likely. • Results were sensitive to oil and carbon prices but not sensitive to the price of agricultural goods. • Efficiency gains in the forest/feedstock/processing chain had a positive impact on the future viability of biofuels Overall, the results showed that biofuels could significantly decrease the exposure of the New Zealand economy to increasing oil and carbon prices. Economic analysis of the environmental benefits was not attempted is this study. Whilst there is clearly a value (public benefit) to improved water quality, reduced erosion and increased biodiversity, these factors are difficult to quantify. The tree crops from the scenarios have an energy insurance value (stored energy), but the extent of this value is also difficult to determine. Future work Further analysis is required on: • the potential of existing forests to provide bioenergy as a transition supply whilst a larger resource is developed; • the option of using new forests to provide a range of log products (sawlog, energy chip) and the cost reductions this may enable in the price of energy feedstock; • understanding the potential of bioenergy to alleviate the volatility of oil prices; • understanding the social aspects of land use change. Work on some of these (bullet points 1-3) is under way in the next phase of the Bioenergy Options for New Zealand project. Potential scenario This study estimates that a level of new afforestation in the range of 1.0 to 2.0 million ha could be viable under future conditions where oil reaches ~US$200 per barrel. This scenario would provide good environmental outcomes and minimise impacts on existing land uses. In conjunction with use
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