Fuel substitution in district heating plants and CGE modeling with a forest resource

This thesis contains two papers. Paper I: Demand for waste as fuel in the Swedish district heating sector: a pro- duction function approach This paper evaluates inter-fuel substitution in the Swedish district heating industry by analyzing almost all the district heating plants in Sweden in the period 1989 to 2003, speciï¬cally those plants incinerating waste. A multi-output plant-speciï¬c pro- duction function is estimated using panel data methods. A procedure for weighting the elasticities of factor demand to produce a single matrix for the whole industry is introduced. The price of waste is assumed to increase in response to the energy and CO2 tax on waste-to-energy incineration that was introduced in Sweden on 1 July 2006. Analysis of the plants involved in waste incineration indicates that an in- crease in the net price of waste by 10% is likely to reduce the demand for waste by 4.2%, and increase the demand for bio-fuels, fossil fuels, other fuels and electricity by 5.5%, 6.0%, 6.0% and 6.0%, respectively. Paper II: Towards a dynamic Ecol-Econ CGE model with forest as biomass cap- ital This study presents a Dynamic Computable General Equilibrium model that com- bines economic and ecological aspects of forest biomass. A framework is introduced for modeling the growth of a biomass stock which interacts with economic sectors. Harvest of and demand for forest products and forest amenities are determined en- dogenously in an inter-temporally consistent way. The idea is based on aMarkovian growth model of the forest. The study demonstrates an approach for incorporating non-market values of forests, such as carbon sequestration, recreation and biodi- versity, into a growth model. A simulation illustrates harvest behavior when the economy is subjected to shocks.