Evaluation of biofuel production costs in relation to the new reduction obligation quota system

About the project

In the year 2017, the Swedish government proposed to introduce a reduction obligation for trans­portation fuel distributors. This would imply an obligation to reduce greenhouse gas emissions from fossil petrol and diesel through a gradual increased share of biofuels. The aim is to create im­proved conditions for phasing out fossil fuels through an increased proportion of biofuels with good greenhouse gas performance in a lifecycle perspective. The reduction obligation also means that not only production cost determines the overall economic performance of a biofuel production route, but also the greenhouse gas emissions. This is due to that biofuels with low greenhouse gas emissions can be blended in lower volumes than biofuels with worse greenhouse gas performance.

The main objectives of this work were partly to illustrate how the greenhouse gas performance of different biofuels relates to their economic value in the new reduction obligation system and partly to compare the resulting cost of greenhouse gas reduction for different types of biofuels.

The results show that of the biofuels available on the market today, the lowest reduction costs were obtained for biogas produced via digestion of waste as well as for sugarcane-based ethanol. Bio­diesel based on rapeseed oil results in the highest reduction costs. Hydrotreated Vegetable Oil (HVO) is currently produced from a large variety of feedstocks and thus results in a large reduction cost range, mainly due to the cost and greenhouse gas performance of the feedstock.

Emerging biofuels, so-called advanced biofuels, have the potential to achieve lower reduction costs than many of them produced via today’s production chains. This applies primarily to biofuels pro­duced by thermochemical conversion such as pyrolysis followed by refinery-integrated upgrading and gasification-based technology. However, in the cases where hydrogen is required for upgrading of liquids from pyrolysis or lignin polymerization, there are major cost reduction uncertainties, largely due to the origin of the hydrogen.

The project report is written in Swedish.