Realising the potential of gasified biomass in the European Union—Policy challenges in moving from demonstration plants to a larger scale diffusion

There is a great interest in synthetic fuels produced from gasified biomass. These are expected to substitute for oil, complementing first generation biofuels. While the long-term substitution potential is uncertain, it may amount to a quarter of current fuel consumption in the EU. Various design approaches for gasifying biomass have been under development for decades but the current EU focus is on nine smaller scale demonstration plants, involving three technological trajectories. The purpose of this paper is to identify policy challenges and discuss options for moving to a larger scale diffusion of gasified biomass in the EU. Such a move requires that technical and market uncertainties are handled by policy. Substantial demonstration and other risk absorption schemes will have to be developed to shift technical risks to society at large. Market uncertainties need to be reduced by a regulatory framework that ensures that markets are formed. A range of instruments for forming markets is assessed. It is argued that in order for the policy to be effective, markets for all three trajectories should be created in parallel. This leads us to suggest either dedicated quotas or a feed-in-law. Yet, both these instruments have drawbacks and a ‘bridging policy’ is probably necessary.