ETS linkage ‘will do nothing for biomass’
September 4, 2012
By Argus Media
September 4, 2012, London, UK — The linking of the Australian and EU emissions trading schemes (ETS) from July 2015 will not stimulate investment in the biomass sector in the short term, industry association Bioenergy Australia has told Argus.
Australia's current system implements a carbon floor price of A$23/t CO2 equivalent (CO2e), which works out at around €19/t CO2e. This floor price was due to be lowered to A$15/t CO2e — or €12.40/t CO2e — in 2015 under existing legislation but adopting the EU's ETS could see prices drop even further, favouring coal generation over biomass in the country.
“Part of the announcement of linking the Australian and EU ETS is that the floor price will be removed. The current price is $23/t and currently the EU price is somewhat lower,” Bioenergy Australia said. “As such, linking the schemes will do little in the short term for bioenergy growth in Australia.”
Current EU ETS prices are around €7.70/t for the EU allowance (EUA) December 2012 contract, and as low as €2.60/t for the certified emission reduction (CER) December 2012 contract. Unless the carbon price becomes more bullish with the extra demand coming from Australia, the investment case for biomass will be much more challenging.
Subsidy legislation is also bearish for the market, with a recent law restricting the types of biomass which are eligible under support schemes, according to Bioenergy Australia.
“Much of the support for the local bioenergy industry stems from the renewable energy target (RET), and its renewable energy certificate (REC) price,” the association said. “But recently, native forest biomass was removed from the RET, which has stopped a project or two in its tracks.”
The removal of the fuels from the RET is designed to reduce the incentive to use native forests as bioenergy, although it does not ban the practice.
Plantation Energy Australia's 250,000 t/yr pellet production plant was mothballed at the end of January this year after the rise in the Australian dollar against the US dollar made the cost of production too expensive relative to the company's US competitors. This halted wood pellet shipments to utilities in Europe such as Electrabel and Essent, and Japanese trading house Mitsui.
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