ECN publication
The role of policy in mitigating risks of second generation biofuel projects
Published by: Publication date:
ECN Policy Studies 3-5-2010
ECN report number: Document type:
ECN-M--10-063 Conference Paper
Number of pages: Full text:
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Presented at: 18th European Biomass Conference and Exhibition, Lyon, France, 3-7 mei 2010.

Because of perceived technology risks, biofuel projects employing advanced production technology turning lignocellulosic feedstock into second generation biofuels face a much higher cost of capital compared to projects using conventional, first generation technology. To overcome this investment hurdle and achieve a significant contribution of second generation to the biofuel mix in Europe, a certain level of policy support will be required in the short to middle term. A number of policy options and combinations were tested for their effectiveness and efficiency in bringing advanced biofuels on the market. A high initial investment subsidy together with the double counting mechanism, the latter already proposed in the European Renewables Directive, can achieve a market share of almost 20% by 2020 at a policy cost of less than 1 billion eur. However, to fulfill its purpose best, double counting must be discontinued when learning effects have lowered the cost of the technology sufficiently to compete with first generation, otherwise it reduces the long-term size of the biofuel market and suppresses the production volumes of advanced biofuels.

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