Government Subsidy Strategies for Biomass-Based Industries：Incorporating the Feedstock Acquisition Process

Given the benefits of biomass utilization, governments are providing an increasing number of subsidy policies for biomass-based industries. Although one of the major barriers to the development of the biomass industry is its high feedstock costs, it remains unclear how effective different subsidy policies are in helping stakeholders cope with such high costs. In this paper, we categorize biomass-related subsidies and explore their effectiveness by developing a biomass feedstock supply model. First, we examined biomass subsidies in two representative countries, China and the United States, and found that all biomass subsidies can be grouped into four categories according to the types of costs they seek to mitigate: biomass procurement and biomass transport subsidies for biomass utilization improvement and product and operating subsidies for specific biomass industry development. Then, we developed a game-theoretic model of the interactions between the government and biorefineries and compared the effectiveness of the subsidies. The results indicate that if government expenditure is considered, then the biomass transport subsidy should be adopted to increase biomass utilization. However, the biomass procurement subsidy allows for more even use of biomass across different supply chains and biorefineries. The product subsidy can be effective in promoting biomass utilization in specific biomass industries. Considering the government expenditure, a mixed subsidy that subsidizes operating and unit product costs should be adopted to enhance the profitability of specific biomass industries if the industry to be supported is quite unprofitable; otherwise, the product subsidy should be adopted