Agriculture-based biomass energy supply — a survey of economic issues

Abstract There is a large potential for the production of energy crops on agricultural land. Most of the biomass produced has alternative use as food, feed or fiber. In most cases, energy utilization of the biomass is far from competitive given today's prices. If dedicated energy crops are to be more competitive in the future, fossil energy prices must increase relative to the price of food, feed and fiber. Considerable spread exists among published future fossil fuel price forecasts. From currently available evidence, there is small hope that fossil energy prices will increase relative to the price of food and feed. The impact on the greenhouse gas balance is the most important positive factor for biomass energy, compared with fossil energy. For the time being there is no consensus among economists about the magnitude of the environmental costs of greenhouse gas emissions. Reasonable values on the external effects are in most cases not enough to make agriculture-based biomass energy competitive. Considerable government subsidies are needed. There is, however, no economic justification for such subsidies. Biomass energy systems using low quality biomass, originating as a by-product from the production of food, feed and/or fiber, is the most promising niche for energy from agricultural biomass.