Cost-effectiveness of bioethanol policies to reduce carbon dioxide emissions in Greece

Abstract

PurposeThe aim of this study was to evaluate the cost-effectiveness of bioethanol as regards to its carbon dioxide emissions. The production of the raw material accounts for more than 50 % of the total cost as well as having a significant part of greenhouse gases emitted during the entire process. For this reason, special emphasis is given to a change in agricultural land usage influenced by the demand of biofuel. Therefore, we have estimated the extent of policy influence according to its bioethanol cost-effectiveness. A case study on bioethanol production in an ex-sugar factory in the region of Thessaly, Greece, illustrates the above ideas.MethodsA partial equilibrium micro-economic model of regional supply in the arable farming system of Thessaly was coupled to industrial processing sub-models of bioethanol production from beets and grains. The maximisation of total welfare determines the most suitable crop mix for farmers as well as the lowest cost configurations for industry and, eventually, the minimal level of support by the government for biofuel activity to take off. The environmental performance is assessed under the life cycle assessment (LCA) framework following three interrelated phases: data inventory, data analysis and interpretation. The economic burden to society to support the activity divided by avoided CO2 eq. emissions indicates the bioethanol cost-effectiveness, in other words, the cost of greenhouse gases emissions savings.ResultsThe integrated agro-industry model has been parametrically run for a range of biofuel capacities. A change in direct land use results in lower emissions in the agricultural phase, since energy crops are a substitute for intensive cultivations, such as cotton and corn. A change in indirect land use moderates these estimations, as it takes in account imported food crops that are replaced by energy crops in the region. The savings in cost vary around 160 euros per ton of CO2 eq. for the basic agricultural policy scenario. The current policy that supports cotton production by means of increased coupled area payment has increased up to 30 % the cost of greenhouse gas savings due to bioethanol production.ConclusionsAn integrated model, articulating the agricultural supply of biomass with ethanol processing, maximises the total surplus that is under constraints in order to determine the cost-effectiveness for different production levels. Results demonstrate that economic performances, as well as the environmental cost-effectiveness of bioethanol, are clearly affected by the parameters of agricultural policies. Therefore, bioenergy, environmental and economic performances, when based on LCA and the conceptual change in land usage, are context dependent. Agricultural policies for decoupling subsidies from production are in favour of cultivation in biomass for energy purposes.