5.1. Ethanol Production and GHG Performance
A commercial sawdust-based ethanol plant of the scale evaluated in the current study would use roughly half of the sawdust generated in sawmills located in a forest region in southern Sweden having a high sawmill density, and some 10% of the total Swedish sawdust potential. The 63 million L of ethanol produced corresponds to 1.3 PJ, or 19%, of the ethanol demand required to fulfil the proposed reduction obligation in 2030 [
7,
45]. The theoretical maximum ethanol production potential from sawdust in Sweden is consequently twice the national demand expected in 2030.
The ethanol produced from sawdust will have a life cycle GHG emission of 6.7 g CO
2-eq/MJ in the base case (see
Figure 2), which is equivalent to a GHG emission reduction of 93% compared to the fossil fuel reference value of 94 g CO
2-eq/MJ given in RED II. The emission from sawdust-based ethanol is less than one fourth of the life cycle emission of 30 g CO
2-eq/MJ from the ethanol currently used in Sweden.
The results of the alternative calculations presented in
Figure 2 show that the GHG emission could have varied from 2.5 to 15.8 g CO
2-eq/MJ, depending on system design and calculation assumptions. For example, changes in the type and dosage of enzymes may have more than doubled the GHG emissions, whereas changes in the electricity mix may have increased the emission by almost 50%. This clearly shows the importance of using enzymes with low carbon footprint in combination with low enzyme dosage, together with electricity having low GHG emissions. On the other hand, capture of biogenic CO
2, which was used to replace fossil-derived CO
2, may have reduced the life cycle GHG emissions by more than 50%. A change in transportation distance had a minor impact, whereas the replacement of diesel fuel by biodiesel (100% HVO) led to a reduction in GHG emission of approximately 15%. Finally, the use of lignin pellets for the internal generation of process heat, instead of an external supply of heat based on wood chips, led to a somewhat poorer GHG performance (approximately 10% higher life cycle GHG emissions). This is due to the calculation methodology in RED II and the allocation rules regarding co-products.
The results presented in
Figure 2 regarding the GHG emissions for sawdust-based ethanol can be compared with previous studies of other lignocellulosic ethanol production systems. Becker et al. [
46] analysed the GHG emissions of ethanol production from wood chips from logging residues (tops and branches after final felling), short-rotation coppice willow, and straw, also according to the EU RED calculation method. The GHG emissions presented for logging residue- and straw-based ethanol were 5.4 and 5.2 g CO
2-eq/MJ, respectively [
46], which was similar to the base case result for sawdust-based ethanol shown in
Figure 2. Both logging residues and straw are defined as biomass residues, similar to sawdust, thus no upstream GHG emissions from the primary biomass production (round wood production and cereal cultivation, respectivley) are included. However, when a dedicated energy crop such as short-rotation coppice willow was used as feedstock, the GHG emissions were somewhat higher, 16.1 g CO
2-eq/MJ, due to the inclusion of the GHG emission during the cultivation phase [
46]. A conclusion is therefore that the economic competitiviness for willow-based ethanol systems will be somewhat reduced in a GHG reduction obligation system, compared with lignocellulosic waste-based ethanol systems (see
Section 5.2).
In a study by Lantz et al. [
47], the GHG emissions of both straw- and grain-based ethanol were calculated (winter wheat) based on the EU RED calulation method. Their results showed somewhat higher GHG emissions for straw-based ethanol, or 11 g CO
2-eq/MJ, which can be explained by higher GHG emissions from the electricity in use which was based on Nordic electricity mix. This system is reflected in Alternative B in
Figure 2, which is also based on Nordic electricity mix instead of Swedish electricity mix. The Swedish national regulations of the EU RED about the GHG calculation method were revised in 2018, including a change from the requirement of using Nordic electricity mix to the requirement of using Swedish electricity mix [
31].
The RED calculation method applied in EU legislation (
Section 4.1) is a simplified LCA approach, based on the ISO standard of LCA [
48,
49]. Several previous studies assessing the GHG emissions of biomass-based ethanol systems have applied somewhat altered calcualtion methods, e.g., including indirect effects of the production system by expanding the system boundaries, substituion effects from by-products etc (see e.g., [
29,
38,
47,
50,
51]). Depending on the aim of the study, and the life cycle GHG calculation approach, the results will differ, which can lead to different conclusions when comparing the GHG performance of ethanol production systems. However, since the EU RED calculation method is applied in EU regulations and in national policy instruments, such as the Swedish GHG reduction obligation system, this method will be applied by all actors within the biofuel sector in EU, and will be the basis of comparison of economic consequences for various biofuels.
5.2. Economic Consequences of GHG Performance
The GHG emission from the production of sawdust-based ethanol in the base case was used together with the alternatives that gave the highest (A) and lowest (F) GHG emissions in an economic assessment. These values are given in
Table 4, together with the average GHG emission for fuel ethanol currently used in Sweden. The blend-in demand required to fulfil the 2020 reduction obligation is also given, together with the calculated prices of sawdust-based ethanol.
The price of ethanol at the point of import is shown in
Figure 3. The cost of storage, distribution and net margin for sawdust-based ethanol was assumed to be the same as for ethanol currently used in Sweden (2018). The resulting comparable, GHG-adjusted, price of sawdust-based ethanol in the base case was equivalent to 0.70 €/L. In other words, the price of sawdust-based ethanol can theoretically be 37% higher than the current price of crop-based ethanol (0.51 €/L) for the fuel supplier whithout leading to an increased fuel price to the customer, due to the lower GHG emissions for the sawdust-based ethanol (6.7 g CO
2-eq/MJ) compared to the currently used crop-based ethanol (30 g CO
2-eq/MJ). Process improvement such as CO
2 capture (Low,
Table 4) would reduce the GHG emission to below 3 g CO
2-eq/MJ, and allow for a 44% higher sawdust-based ethanol price. If, on the other hand, the life cycle emission was above 15 g CO
2-eq/MJ, exemplified here by increased emissions related to the use of enzymes (High,
Table 4), the GHG-adjusted sawdust-based ethanol price would be only 22% higher than that of ethanol currently used in Sweden.
The GHG adjusted ethanol price presented in
Figure 3 for sawdust-based ethanol can be compared with other lignocellulosic ethanol production systems, which are described in
Section 5.1. For example, ethanol based on logging residues and straw has been shown to have similar life cycle GHG emissions as sawdust-based ethanol [
46]. Therefore, the price advantage compared to the currently used crop based ethanol would be similar for ethanol from these feedstocks in the Swedish GHG reduction obligation system. Regarding short-rotation coppice willow-based ethanol [
46], the GHG emissions are comparable with the alternative “High” in
Figure 3, thus equivalent to a possible 22% higher price compared to the ethanol currently used in Sweden.
The sort of findings presented in this paper will be increasingly valuable from the perspective of a commercial operator planning to invest in advanced ethanol production, when new economic policy instruments based on biofuel life cycle GHG emissions are introduced. These findings will also be increasingly valuable for policy makers in designing similar policy tools, thereby striving to promote advanced biofuels with low GHG emissions. The overall aim of this study was to show that the introduction of a GHG emission reduction obligation system will favour lignocellulosic ethanol. The results show that this policy instrument will allow for a significantly higher increase in the price of lignocellulosic ethanol, compared with the price of biofuels currently used with higher GHG emission. The next question would then be, whether the level of this potential price increase is enough to stimulate the large-scale commercial introduction of lignocellulosic ethanol production systems.
Several previous studies have shown that lignocellulosic ethanol production systems require economic support to be competitive with existing crop-based ethanol production systems, and especially so compared to fossil liquid fuels [
15,
52,
53,
54]. The estimated production cost in the large-scale commercial production of lignocellulosic ethanol has been reported to be up to 30% higher than the production cost using existing wheat-based ethanol production in Sweden [
47,
51]. The production cost of wheat-based ethanol is in the same range as the current price of ethanol at point of import [
47,
51] (see
Figure 3), thus indicating that future sawdust-based ethanol on a developed market could theoretically be competitive under the existing reduction obligation system as long as the life cycle GHG emission is limited to 10 g CO
2-eq/MJ or below.
A recent summary of the costs of producing advanced ethanol (i.e., from agricultural residues and woody biomass) found them to be in the range of 0.51–1.2
€/L [
15]. In a techno-economic assessment focusing on woody biomass [
16], it was concluded that the minimum ethanol selling price, ensuring profitable production, varied between 0.55 and 1.1 €/L ethanol. The lower minimum ethanol selling price refers to the cheapest white wood feedstock (no bark) available today, such as sawdust, while the higher price refers to feedstock with a high fraction of bark (80%), such as hog fuel. The production of ethanol from logging residues was found to have a minimum ethanol selling price of around 0.70–1.1 €/L. Thus, these results indicate that economic viability is possible with sawdust-based ethanol in a future developed market with large-scale production through the reduction obligation system, allowing a price of around 0.70 €/L in the base case, compared to current crop-based ethanol having a selling price of around 0.50 €/L. These results also indicate that ethanol systems based on logging residues need a somewhat higher selling price than sawdust-based ethanol, even though the two systems have similar GHG performance (see
Section 5.1.), due to a slightly higher production cost for logging residue-based ethanol.
However, the comparisons above are based on the assumption of a developed commercial market of advanced ethanol including a large-scale production of e.g., sawdust-based ethanol production at several production sites. The production cost is normally higher for the initial commercial production plants implementing an emerging technology. This is due to remaining technological risks, not fully optimised production systems, unforeseen events, etc [
51,
55]. Thus, investments in emerging technologies requires a risk compensation in form of, for example, higher selling prices, investment subsidies reducing the capital costs, etc. Furthermore, the above comparisons are based on the assumption of an optimised ethanol production system from a GHG perspective, leading to very high GHG savings compared with fossil fuels. As shown in this study, a less optimized sawdust based ethanol production system, with an emission of 15 g CO
2-eq/MJ (
Figure 3), will give an important contribution to the shift towards biofuels with low GHG emissions required for 2030, but the price advantage created through the reduction obligation system might be too low to promote such a production.
To ensure that a specific lignocellulosic ethanol production system will be sufficiently profitable and competitive in a future commercial market including a reduction obligation system, specific local conditions and actual system designs must be taken into account. For example, the alternatives presented in this paper (see
Figure 2) show that the GHG emissions could be both decreased, for example, by CO
2 capture and use, or increased, for example, by uncertainties related to the type and dosage of enzymes used. This also apply to other lignocellulosic-based ethanol production system discussed in this paper. As shown in
Figure 3, this will affect the GHG-adjusted price of sawdust-based ethanol (as for alternative lignocellulosic-based ethanol). In addition, the current market price of ethanol, which is mainly imported crop-based ethanol, may also change over time, affecting the future economic viability of lignocellulosic ethanol. To conclude, the Swedish reduction obligation system appears to be sufficient to promote the commercial production of primarily sawdust-based ethanol, among various lignocellulosic-based ethanol systems, under future conditions in a large-scale developed market of advanced ethanol. The reduction obligation system is also a long-term political tool with a suggested reduction target for 2030, which is another important prerequisite if investors are to minimize financial risks. However, in a short-term perspective, additional economic incentives are needed for the implementation of these emerging production systems.