Modeling price-driven interactions between wood bioenergy and global wood product markets

• Model the effect of fossil fuel prices on wood bioenergy demands.
• Modify a forest sector partial equilibrium model.
• Demand for wood bioenergy products will increase gradually.
• Demand for woody cellulosic ethanol will increase with high oil price projection.

Higher and more volatile liquid fossil fuel prices have had profound effects on international energy and wood product markets. Understanding this evolving economic and technological landscape requires economic models that capture the interconnections between energy markets and wood product markets, and can be used to forecast the impact of alternative policy and market incentives. The need for such an analytic framework is underscored by the consensus that efficiently produced wood bioenergy could provide many climate benefits compared to fossil-fuel intensive substitutes.A model is presented for analysis of how increased use of wood bioenergy, in the forms of fuelwood, cellulosic ethanol from woody biomass, and electricity produced from wood, might interact with global markets for wood products; liquid, solid, and gaseous fuels; and electricity produced from other sources. It links U.S. energy markets with wood product markets and endogenizes the demand for wood bioenergy with price-driven market clearing mechanisms. Projections made with the model point to a substantial increase in demand for woody cellulosic ethanol in the U.S. for the next 30 years if oil prices remain high.