Trading biomass or GHG emission credits?

Global biomass potentials are considerable but unequally distributed over the world. Countries with Kyoto targets could import biomass to substitute for fossil fuels or invest in bio-energy projects in the country of biomass origin and buy the credits (Clean Development Mechanism (CDM) and Joint Implementation (JI)). This study analyzes which of those options is optimal for transportation fuels and looks for the key variables that influence the result. In two case studies (Mozambique and Brazil), the two trading systems are compared for the amount of credits generated, land-use and associated costs. We found costs of 17-30 euro per ton of carbon for the Brazilian case and economic benefits of 11 to 60 euros per ton of carbon avoided in the Mozambique case. The impact of carbon changes related to direct land-use changes was found to be very significant (both positive and negative) and can currently only be included in emission credit trading, which can largely influence the results. In order to avoid indirect land-use changes (leakage) and consequent GHG emissions, it is crucial that bioenergy crop production is done in balance with improvements of management of agriculture and livestock management. Whatever trading option is economically most attractive depends mainly on the emission baseline in the exporting (emission credit trading) or importing (physical trading) country since both bio- and fossil fuel prices are world market prices in large scale trading systems where transportation costs are low. Physical trading could be preferential since besides the GHG reduction one could also benefit from the energy. It could also generate considerable income sources for exporting countries. This study could contribute to the development of a methodology to deal with bio fuels for transport, in Emission Trading (ET), CDM and the certification of traded bio fuels.