Cost ‐ effective policy instruments for greenhouse gas emission re ‐ duction and fossil fuel substitution through bioenergy production in Austria

Climate change mitigation and security of energy supply are important targets of Austrian energy policy. Bioenergy production based on resources from agriculture and forestry is an important option to attain these targets. In order to increase the share of bioenergy, supporting policy instruments are necessary. The cost-effectiveness of these instruments in attaining policy targets depends on the availability of bioenergy technologies. Advanced technologies such as second generation biofuels, biomass gasification for power * Correspondence to: Johannes Schmidt, Institute for Sustainable Economic Development, University of Natural Ressources and Life Sciences, Feistmantelstraße 4, A-1180 Vienna, Austria. E-Mail: [email protected] 2 production and bioenergy with carbon capture and storage (BECCS) will likely change the performance of policy instruments. This article assesses the cost-effectiveness of energy policy instruments with respect to greenhouse gas emission (GHG) reduction and fossil fuel substitution under consideration of new bioenergy technologies for the year 2030. Instruments that directly subsidize bioenergy are compared with instruments that aim at reducing GHG emissions. A spatially explicit modeling approach is used to account for biomass supply and energy distribution costs in Austria. Results indicate that a carbon tax performs cost effective with respect to both policy targets if BECCS is not available. However, the availability of BECCS creates a tradeoff between GHG emission reduction and fossil fuel substitution. Biofuel blending obligations are costly in attaining the policy targets.