Bioenergy versus forest conservation: a partial equilibrium analysis of the Swedish forest raw materials market

Abstract

This paper presents an economic assessment of two different policiesboth implying an increased demand for forest ecosystem servicesand how these could affect the competition for forest raw materials. A forest sector trade model is updated to a new base year (2016), and then employed to analyze the consequences of a more intense use of bioenergy and increased forest conservation in Sweden. These scenarios are assessed individually and in combination. A particularly interesting market impact is that bioenergy promotion and forest conservation tend to have opposite effects on forest industry by-product prices. Moreover, combining the two policies mitigates the forest industry by-product price increase compared to the case where only the bioenergy-promoting policy is implemented. Namely, the energy using sector (heat and power) is less negatively affected in terms of increased feedstock prices if bioenergy demand targets are accompanied by increased forest conservation. This effect is due to increasing pulpwood prices, which reduces pulp, paper and board production, and in turn mitigates the competition for the associated by-products. Overall, the paper illustrates the complexity of the forest raw material market, and the importance of considering demand and supply responses within and between sectors in energy and forest policy decision-making.