Title: Renewable Diesel in Finland
Original Contributor: Mikko Nikunen
Edited By: Mohammad Habibur Rahman
1. Description of the product and technology
From the environmental point of view, transportation is one of the biggest sectors which produces a large amount of emission and creates environmental pressure. Transportation mostly uses liquid fuels like diesel. A renewable source of diesel like Biodiesel can potentially reduce the environmental pressure. In Finland, transportation fuel composes a major part of the total energy scenario. Figure-1 shows the shares of energy consumption in Finland. The figure shows that the transportation sector consumes one-fifth of the total energy.
Figure 1. TEM/ Energy consumption in Finland 2016.
Renewable diesel is a second-generation biofuel, this means that its production is not competing with food production. Renewable diesel is generally produced from bio-waste or any kind of bio-based feedstock. In Finland, there are two main producers of renewable diesel- Neste Oyj (Product-Nexbtl) and UPM (Product-BioVerno) (LUT 2013). Nexbtl is currently produced from twelve different kinds of feedstocks, which are mainly vegetable oils and biowastes (Neste). UPM’s BioVerno is produced from crude tall oil, which is a side product of cellulose production process also known as softwood pulping. UPM has established a new facility in 2014 which is the world’s first advanced commercial-scale biorefinery that uses wood-based feedstock to produce biofuels (UPM). Both production processes are quite similar, the first step in the process is purifying the feedstock from salts, impurities, solid particles and water. The second step involves hydrotreating, where the raw material is fed to the reactor with hydrogen. During the process, chemical structure of raw material is modified. Finally, remaining impurities and incondensable gases are removed and the product is distilled (UPM, Neste).
2. Description of the market
The productivity of UPM’s biorefinery is about 100 000 tons per year of renewable diesel. This covers about 25% of Finland’s biofuel target in 2020 (UPM). In terms of total demand for diesel fuel in Finland , the production capacity satisfies only 5% of the annual total demand of 2,5 million tons (VTT). The other facility Neste biorefinery produces approximately 380 000 tons of renewable diesel per year (Neste). So the total share of renewable diesel in Finland is somewhere around 20% of the total diesel fuel demand. Both of these products are used as blends, which means that they are mixed with fossil-based petroleum diesel in some ratios (Neste, UPM). As not sold in pure form in general, it's difficult for the author to find the prices. UPM’s BioVerno is only consumed domestically while Nexbtl is both domestically consumed and exported to the United States where it is sold also in pure form (Neste).
3. Description of policy measures
It is predicted that the demand for biofuels in Europe will increase by approximately 5-7% annually (UPM BioVerno diesel 2017). This might be due to the EU’s target which requires at least 10% of the transportation fuel to be bio-based by 2020. Another goal for the European Union is to reduce greenhouse gas emissions by 40% within 2030 (EU 2009). Furthermore, a Finnish Government Program requires that the share of renewable energy must be at least 50% during the 2020s. In addition to that, the use of fossil oil must be cut in half and the share of renewable energy in transport sector needs to be at least 40% by 2030 (Finnish bioeconomy strategy 2014). Figure 2. compares the actual share of biofuels in the transport sector with the targeted share in recent years.
Figure 2. Share of biofuels in transport sector in Finland (2016) / Ministry of Transport and Communications
The most efficient way to manage the market is taxation since Finnish taxation can be considered quite high. In Finland, there is a CO2 tax reduction of 50% for all biofuels which meet the sustainability criteria of the "RES Directive". For second-generation biofuels, the tax is totally exempted (LUT 2013). The state also supports research and development of biofuels in Finland. Business Finland is a state-owned “funding office” whose main purpose is to offer R&D funding for companies and universities. In recent years, it had been working closely with different companies in the field of biofuels, which means that some part of these companies research funding comes from the state. In 2013, funding for environmentally friendly processes was about € 114 million among which the share of bioenergy was about 17% (LUT 2013). Ministries of the government are also directly supporting companies, for instance, Finnish Bioethanol Oy received € 30 million from the Ministry of Employment and Economy in 2015 as support to invest in a new straw-based bioethanol plant (EBTP 2015).
As mentioned before, one of the key factors for manipulating the market is taxation. By cutting down taxes for bio-based fuels or increasing taxes for fossil fuels, markets can be diverted towards bio-based fuels. Both of the actions have been taken in Finland. It is clear from different reports that Finland is excelling in achieving the EU 2020 goal. Another important factor is the support of research and development. Finland is currently a leading expert in this field. Two large-scale biorefinaries are currently in action and at least a few more are in pipeline to build or launch. This are the success of the bioenergy policies. Encouraging with certificates are also fruitful. Products holding certificates are also the result of the policies, for example, UPM BioVerno has achieved a total of 14 certificates including ISCC EU, ISCC PLUS, RSB EU RED, RSB low ILUC and national certificates of Finland. To be mentioned, UMP received the world’s first RSB low ILUC- certificate (UPM).
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