Biomass Forwards and Futures Market to Support Bioenergy Development

Abstract

The potential for increased production of electricity and fuels from forest biomass, and the prospect of US limits on greenhouse gas emissions suggest that the demand for biomass may increase significantly. There is significant potential for volatility in the price of biomass leading to disruption of supply of biomass to plants. There are great opportunities for biomass power generation to offset and sell carbon credits especially after the success of European Emission trading scheme and sustenance of voluntary markets in US. But there are major risks too, with uncertainties about regulation, future of carbon markets and taxes, prices, and technologies. These risks dampen investor confidence in the biomass projects. We analyse the possible policy and market solutions to this problem and present a solution through development of a biomass futures market.