A spatial-explicit price impact analysis of increased biofuel production on forest feedstock markets: A scenario analysis for Sweden

The present paper introduces an integrated spatially explicit framework for assessing price impact on forestry markets in Sweden. The framework is based on the “soft-link” of a price determination model, the SpPDM model with the BeWhere Sweden model. The aim is to analyse the impacts of increased forest-based biofuel production for transportation within the Swedish context by 2030. To that effect, we develop scenarios analyses based on the simulations of successive biofuel production targets, under different assumptions concerning the competition intensity for forest biomass and the use of industrial by-products. The results suggest marginal impacts on the prices of forest biomass. The average across spatial-explicit prices varies from 0% to 2.8% across feedstocks and scenario types. However, the distribution of the spatial-explicit price impacts displays large variation, with price impacts reaching as high as 8.5%. We find that the pattern of spatial distribution of price impacts follows relatively well the spatial distribution of demand pressure. However, locations with the highest price impacts show a tendency of mismatch with the locations of the highest demand pressure (e.g. sawlogs). This is a counterintuitive conclusion compared to results from non-spatial economic models. The spatial-explicit structure of the framework developed, and its refined scale allows such results to be reported. Hence, from a policy-making perspective, careful analysis should be devoted to the locational linkages for forestry markets of increased biofuel production in Sweden.