Sustainability criteria for biomass may impose CO2 quota obligation

The price of wood chips has nearly tripled in the past year, although it is still the cheapest fuel used in Estonia at the moment.
The price of wood chips has nearly tripled in the past year, although it is still the cheapest fuel used in Estonia at the moment. Source: Laura Raudnagel/ERR

From next year, larger biomass boiler plants will be required to demonstrate that they meet sustainability criteria. If a company fails to do so, it will be required to pay a CO2 quota price, which will increase the cost of the heat it delivers to consumers.

"Fuels derived from biomass will have to demonstrate compliance with the Renewable Energy Directive's sustainability criteria beginning in 2023. If biomass fails to meet the sustainability criteria, emissions from the EU Emissions Trading Scheme (ETS) fuel must be treated as fossil emissions. In such a case, the CO2 cost will almost certainly be higher, as will the price of heat," Imre Banyasz, climate policy and international carbon markets adviser at the Ministry of the Environment, told ERR on Thursday.

Banyasz explained that the ETS already applies to boilers using fossil fuels with a total rated thermal input of at least 20 megawatts (MW.)

Currently, the EU Renewable Energy Directive applies to facilities with a thermal input rating of at least 20 MW for solid biomass fuels and at least 2 MW for gaseous biomass fuels.

"The heat produced from such boilers is [already] priced at the cost of CO2," he said.

Banyasz said that power plants can minimize their CO2 emissions by starting to use more renewable fuels.

There will be no additional costs for consumers, the Ministry of Economic Affairs and Communications said.

"There will be no additional costs, as far as we know," said Mairika Kõlvart, a renewable energy expert at the ministry.

"It is known that Estonian law (including the Forest Act) conforms to the requirements of the Renewable Energy Directive, meaning that solid biomass fuel from our forests meets sustainability criteria and thus there is no obligation to purchase quotas."

District heating: evidence mechanism not in place

Siim Umbleja, board member of the Estonian Power Stations and District Heating Association, was skeptical that the implementation of the directive would not result in a price increase for district heating.

"Unfortunately, I am unaware of the direct effects of this change. As the state does not currently have an agreement on the so-called 'proof system,' it is safe to assume there will be no financial consequence," He told ERR. "In the event that the quota system is after all broadened to include an obligation to purchase quotas nevertheless, the price of the quota will be passed on to consumers."

He said that the "verification system" would entail the forest owner providing the relevant documents to the biomass transporter, who would then give them to the boiler plant operator, who would then forward them to the Environment Board.

Umbleja said that the state is in the midst of establishing such a system, although it is still unknown how this will operate or what documentation will be necessary.

Banyasz told ERR's "AK" that the EU Renewable Energy Directive gives three ways to verify compliance with the criteria: either a national certification scheme, voluntary certification schemes or commissioning an audit. He said that audits are the quickest method, but companies can also employ voluntary certification schemes, in which they secure a certificate that biomass meets sustainable guidelines.

Indeed, we lack a national system for that procedure at the moment and we need to decide whether one is needed, Banyasz explained.

Criteria may become stricter

Kõlvart said that the EU Renewable Energy Directive is now being revised, with the European Parliament wishing to reduce the existing 20 MW requirement to 7.5 MW and the Council of Europe favoring a 10 MW capacity limit.

"Renewable biomass sources have been in the spotlight recently, and the third revision to the directive is in the works. This is likely to create even more confusion," she added.

Several dozen operators affected by the directive

Banyasz said that Estonia has 42 boiler stations in the emissions trading scheme, approximately half of which use biomass, and that beginning next year they would be required to demonstrate compliance with sustainability standards under the EU Renewable Energy Directive.

"In addition, the Environment Board identifies about 20 other facilities with a total rated thermal input above the 20 MW threshold. However, as these boilers use a greater quantity of biomass, they are not covered by the EU ETS obligation and incur no CO2 costs. These include both boiler plants and pellet producers. However, even these boilers have to employ sustainable biomass; otherwise, the biomass cannot be termed a zero-emission fuel," Banyasz explained.

Banyasz said that for the EU ETS, the overall capacity of fossil fuel facility must be at least 20 megawatts. So when a 20 MW fossil fuel plant is converted to a 15 MW fossil fuel plant and a 5 MW biomass plant, the facility will no longer be subject to the ETS obligation because the total rated thermal input of the fossil fuel plants is less than 20 MW.

Umbleja told ERR that 12 district heating generation units exceed this criteria.

Kõlvart said that the directive's requirement currently applies only to Eesti Energia, Utilitas and other major users of solid biomass fuels.

Umbleja told ERR's "Vikerhommik" morning show on Wednesday that wood chips account for between 55 and 60 percent of the fuel used in boiler facilities across Estonia.

Umbleja added that the price of wood chips has nearly tripled in the past year, although it is still the cheapest fuel used in Estonia at the moment.


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Editor: Kristina Kersa

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