Issues
Sweden
“The use of biomass in Sweden has increased by 44% between 1990 and 1999. In 1999 it was 85 TWh, equivalent to 14% of the total Swedish energy supply. 
The existence of large forest industry and district heating systems has been an essential condition for this expansion. The tax reform in 1991 seems, however, to have been the most important factor responsible for the rapid bioenergy expansion. Through this reform, the taxation of fossil fuels in district heating systems increased by approximately 30-160%, depending on fuel, whereas bioenergy remained untaxed. Industry is exempted from the energy tax and pays reduced carbon tax. No tax is levied on fossil fuels used for electricity production. Investment grants have existed for biomass-based electricity production but these grants have not been large enough to make biomass-based electricity production economically competitive in a period of falling electricity prices. Despite this, the biomass-based electricity production has increased slightly between 1990 and 1999. A new taxation system aiming at a removal of the tax difference between the industry, district heating and electricity sectors has recently been analysed by the Swedish government. One risk with such a system is that it reduces the competitiveness for biomass in district heating systems as it seems unlikely that the taxes on fossil fuels in the industry and electricity sectors will increase to a level much higher than in other countries. A new system, based on green certificates, for supporting electricity from renewable energy sources has also been proposed by the government.”
“The Swedish taxation system has been successful in fostering an expansion of biomass in Sweden for heating. The large existing electricity production capacity (mainly hydro and nuclear), and decreasing electricity prices as a result of electricity market liberalization, have hindered a similar development in the electricity sector. The increased demand of biomass has in turn led to reduced biomass production costs as new methods and technical solutions for biomass has continuously been introduced during the last decade. These include multi-treehandling/felling in smallwood thinning, compaction equipment for logging residue, and heavy duty chippers [17]. New methods for simultaneous extraction of log and logging residues are being developed. These methods, including for example a harvester technology that accumulates the tops and branches as the stems are processes and then compacts the material into composite residue logs, could reduce both the demand for machinery and costs by 20-40% [18].
A biomass market has also developed, enabling a widening of the potential biomass suppliers, to the major heat production plants. An increasing fraction of the used bioenergy is now imported fuels. The market pressure has made a combination of increasing demand and falling prices possible but there is a risk that the relatively low profitability of the Swedish biomass suppliers will result in that some of them will leave the market of at least reduce their effort to expand their activity.
The existence of a large forest industry and well-developed district heating systems have provided a good organizational basis for the biomass expansion. Professional structures for handling products from the large forests and strong consumers in the district heating systems have probably helped the expansion significantly.”