The efficient investment strategy of bioenergy under climate change and green finance policies

Abstract

Bioenergy development improves energy security and mitigates climate change, but its success depends on the availability of financing sources. Since 2016, the Administrative Authority of Taiwan has encouraged the issuance of green bonds to support green projects. Still, numerous bioenergy production possibilities make the effective investment strategy distinct. This study develops a two-stage stochastic programming with a recourse model to investigate biopower and biofuel production under various climate impacts and markets to explore the optimal bioenergy development paths and efficient allocation of green funds. The results show that biofuel production is more sensitive to energy and emission prices, and thus, the risk associated with biofuel projects would be higher than biopower development. Under current market conditions, fast pyrolysis would be the significant force providing biopower, which will be replaced by torrefaction if the environmental value attached to emission price is emphasized. We also note that the optimal investment for biofuel (biopower) is between $367M–$840 M ($273M–$795 M) under current market conditions. However, once the emission trade system is established and the emission price is above $30/t, investments in biofuel become very risky, and the producers are likely to suffer losses.