Solid Bio-Fuel and Its Potential in the Russian Market

Subject: Economics
Pages: 20
Words: 5813
Reading time:
21 min
Study level: Master

Introduction

The use of fossil fuel brings about environmental pressure as well as pressure on international relations. The strains that occur on the environment like the occurrence of the acid rain, the increasing problem of global warming that brings about change in the climate, and the occurrence of smog are among the challenges of fossil fuel use (Pendray, 2007).

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There comes about tensions globally originating from the political and geographical separation between the demand and supply of the fossil fuels. In the current day, trade of petroleum brings about great tension, although the rising reliance on the trade in international natural gas may eventually make a contribution to these tensions.

The fossil fuels are part and parcel of the present world economy. Whatever the economic activity, it makes use of the fossil fuels and such economic activities may include carrying out the harvesting of the non-fossil fuels, processing, and transporting them. The combustion of the fossil fuel gives out carbon dioxide and this implies that whatever the renewable energy which has dependence on the energy infrastructure that is there, inherently gives out some proportion of fossil fuel carbon dioxide also.

According to EIA (2006, b), “Coal has the greatest carbon dioxide emissions per unit of energy, between 24 and 27 kg-C/GJ depending on the type of coal” (Pg, 50). There is less production of carbon dioxide by the oil derivatives for every unit of energy that is given out. The emissions of the carbon dioxide from the oil derivatives are dependent on the kind or type of fuel (EIA, 2006, b). The least emission of Carbon dioxide for every unit of energy is realized in the natural gas.

In considering electricity, this is a secondary source of energy and therefore the emission of the Carbon dioxide gas depends on such factors as the mixture of the fuel that is used to make or produce the electricity, the efficiencies in the conversions and the losses that are incurred in the course of carrying out the transmission. According to EIA (2006E, pg1), “The assumed fuel mixture is based upon the 2005 United States electricity production mix. The coal-based electricity generation provided 49.7 % of U.S electricity generation in 2005”. At this time, there was very rare use of petroleum in the generating of electricity which formed only 3 percent of the total market. The market is dominated by natural gas which forms about 18 percent. The rest of the production of electricity came from sources such as hydroelectric source, nuclear source among other sources of renewable energy (Pendray, 2007).

There have been efforts to bring down the level of the consumption of the fossil fuel in the major consumers of energy such as the United States of America and the E.U member countries. Among the most effective measures that have been taken is ensuring the increase in the energy efficiency. Even if efficiency in oil consumption brings about effectiveness by bringing down the level of the consumption of fossil fuel, consumption of some fuels must be there, and most likely the non-fossil fuel.

The next measure which is among the most well-liked measures is to come up with a replacement of the fuels that are there which can bring about leverage of the fuel infrastructure that is there. Even if this measure calls for minimal development in the infrastructure, it brings about limitation in the field of prospective replacement fuels. The fuels to have been used as a substitute goes with the similar cost in terms of transportation, storing, and employ the similar characteristics as those fuels that are already being used and at the same time being less costly to a level that the market can be in a position to adopt.

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The last approach or measure to bring down the level of the consumption is to ensure matching of the demand and supply of energy. There has been coming up of energy needs for the reason that they have been less costly and not for the reason of material characteristics. Such needs of energy can meet their satisfaction by other sources of energy. Taking the case of the United States of America, this nation has chosen biomass as being one of the basic alternatives to fossil fuels.

Wood is among the raw biomass resources. According to Pendray (2007), this kind of energy source was initially dominant among the societies in the course of the early development in these societies. These fuels (wood) gave out large amounts of energy that was used for heating which was dense in relative terms and could be handled easily. Other than heating, the other uses of this kind of energy were cooking as well as industrial processing. So far, there are still those countries that have a great reliance on this kind of source of energy, although trees are being used in such a way that is not sustainable (Braaten., 1999).

The economies that are modernized moved away from wood as a source of energy towards the fossil fuels that is of a lower cost. These new kind of energy source gave out the energy density that was higher, had uniformity that was greater, the handling of this kind of fuels was simpler and they were generally cheaper as compared to wood.

Making use of wood as a source of energy brings in some controversy to a significant level. In the course of harvesting of wood there has been realization of ecological benefits as well as ecological harms. Basing on history, it has been indicated that making use of wood as a fuel can turn out to be problematic to the environment since carrying out the replacement of the forest takes a very long time. In particular instances, there is even impossibility of realizing recovery where some species of trees become extinct.

However, in the case where there has been putting down regulations that govern the harvesting of wood, benefits have been realized in terms of the quality of the forest. Making use of waste wood as a fuel brings up the level of a forest’s value. This brings in encouragement for the management of commercial forests that is more active and this can bring in improvement in the commercial forests that are there. According to Pendray (2007, P 27), “Increased wood harvesting profitability requires strong forest protection regulations to precede extensive wood-fuel use to counter the increased pressure to expand wood harvesting in to non-commercial forests”.

Wood as a source of energy comes with benefits that are ecological. These benefits come from the reduction of the net emissions that come from the greenhouse gases. However, in the course of processing the wood, there is consumption of power that comes from the fossil fuels.

In conclusion, considering wood as a source of energy was initially a preferred source of energy. While the prices for the fossil fuels go up as well the environmental concerns rise, wood may turn out to be once again a preferred source of energy. The possible benefits that come from wood combustion are substantial. Such benefits include the reduction of the emissions (carbon dioxide emissions). Unluckily, these benefits move together with the possibilities for abuse if there is no regulation of cutting down of the trees.

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Basically, there is use of wood as feedstock by those who carry out the production of the biomass pellets. Yet, there are just particular areas that are accessible to the sufficient wood resources and this brings about the search for other sources of energy as alternatives to the wood energy. Among these other alternatives is switchgrass. This kind of energy source is considered as being viable economically and this is according to Walsh (2000)

Basically, there exist two kinds of switchgrass and these are lowland switchgrass and highland switchgrass. This grass is very much resistant to disease and is adapted to even grow in those areas which are marginal in comparison to other plants such as corn. Even if there has been mentioning of switchgrass as being an energy crop that is viable, in the present day there is very minimal production of this crop. The production of this crop that is currently there is intended for obtaining the animal feeds and if not for this use, it is also intended for soil conservation and this is for the reason that there is yet the realization of the development of energy market for this crop. According to Pendray (2007), the analysis of ONRL of the availability of bio-fuel encompassed the prospective production of switchgrass and various points of pricing. ORNL carried out the calculation that 3.3 EJ could made at a price or cost 3.50 dollars for every GJ.

The costs that are associated with the cultivation of switchgrass as well as the harvesting costs are dependent on several factors. Among these factors is the environment within which this crop has to be grown as well as the value of land. Just in a similar manner as wood, the harvesting as well as the cultivation of this crop calls for the use of sources of energy, fossil fuel being among these sources. According to Jannasch, Samson, Adams and Lem (2001, p 3), “the estimated energy consumed in the course of the cultivation, harvest, and transportation is 7% of the bio-energy output”

In the growing of this crop, the use of fertilizer is not very much necessary as well as the application of the herbicides and the pesticides. The energy which is used is basically assumed to be diesel and this is during the process of harvesting as well as transportation by the equipment that is involved.

Among the biggest reasons for moving towards the direction of making use of switchgrass as a source of energy is the environmental impact it has. The benefits that come from the use of this crop include the realization of conservation of soil and water, provision of the habitat for the wildlife, and capturing of carbon. Even if the use of switchgrass as a fuel may not be as much attractive as forest residues but this crop rise the number of those areas having biomass available for the reason that it is competitive in several areas where there are no large commercial forests.

Another raw biomass resource to be considered is corn. Making use of feed-corn as being a fuel corn brings about some substantial social lack of comfort and even there arises some controversy for the reason that it has a direct impact on the supply of food all over the world. Among the misconceptions that are common is the idea that corn is, in directs terms, consumed by the human beings. In the case of the United States of America, there is use of the field corn basically as a feed for cattle as well as artificial sweeteners contrary to the use of the sweet corn which is meant for the consumption by human beings in direct terms (McKendry, 2002).

However, among the feed-corns, there are those which are utilized in the production of cornmeal and other consumable products and this cause the supply of the human food costs turning out to be sensitive to the pricing of the feed-corn. In the current day, there is use of feed-corn in the production of ethanol. The major reason behind the use of corn in the United States of America for fuel is its being in plenty and being obtained at a low cost (USDA, 2007).

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For corn to qualify to be appropriate viable fuel, it must possess some suitable properties (physical and chemical). According to (ERS 2007), corn is a crop that is grown largely in the United States of America. In the year 2005, there was use of 1.6 billion bushels in the production ethanol. The export amounted to 2.15 billion bushels. There exists no uniform distribution of corn in the United States of America.

In the cultivation of corn and harvesting, this calls for substantial level of energy in comparison to switchgrass as well as wood. In the research that was carried out in the recent days, there was establishing of putting much emphasis on the balances for the ethanol that is based on corn and this makes provision of data that is very much extensive and critically looked at for the energy consumption that come from cultivation (Shappouri, 2002).

There exist several disadvantages that are associated with the production of fuel-corn on the environment; the major one being the reliance of corn production business on the use of chemical substances and also on irrigation. Such chemicals as the pesticides, the chemical fertilizers, and the herbicides can cause some damage to the environment. On the other hand, irrigation causes the drawing down of the water table and even it might not be sustainable in some particular areas.

Complications are brought in the benefits that may be derived from the use of the fuel-corn by the negative environmental impacts. Even if the combustion of corn may be carbon dioxide neutral, the cultivation as well as harvesting of this crop which makes use of high energy intensity causes the effective carbon dioxide emissions be at a greater level than the rest of the bio-fuel feedstocks (Patzek, 2004).

Even if there is emission of low amounts of net carbon dioxide by the fuel-corn as compared to fossil fuels, the decreased capability to ensure sequestering carbon it has from the soil in relation to grasslands is a source of some need for attention. In summary, corn as a source of energy is cost-effective which is in the present day, an available source that is there in large quantities. However, that has not, all the time, been the case but in the course of time, there has been a faster reduction in the prices of corn as compared to the prices of oil. Pendray (2007, 37) observes that, “although corn may be cost effective as a fuel and available in large quantities, it is not as inexpensive or environmentally friendly as either forest residues or switchgrass”

Wood fuels possess the greatest energy density on the basis of dry mass. Also, this source of energy contains the highest level of moisture content that is intrinsic. For this reason, this causes the transportation that was there in the course of the early age to be more costly for wood, but there is a lower cost in the dry transportation. Corn as well as wood offers the lowest level of ash content and for this reason, this is of great benefit in the furnaces in which there is taking part of solid combustion (Thek, 2002).

There is favoring of the use of switchgrass and wood by the economic costs associated with the production of feedstock. This is because these sources are about 30 percent less costly as compared to corn. The availability of wood wastes is realized at a very low cost (king, 1999).

The negative impact that is associated with the higher cost of corn is in party justified or offset by the robust transportation infrastructure it has as well as the pre-pelleted form, causing it to be in a form that is useable as a fuel that is just coming from the field.

There is also favoring of the use of wood by the energy costs associated with the production of feedstock. There is less consumption of the fossil fuels by wood as compared to corn and switchgrass. In approximate terms, in comparing wood and switchgrass, wood is 30 percent less, and 70 percent less as compared to production of corn (Pendray, 2007). A reduction in the consumption of fossil fuel causes wood to be a source of energy having the lowest level net carbon dioxide emission among all the feedstocks.

There is varying of environmental externalities from one feedstock to the other. The use of waste wood can have quite minimal externalities (environmental) if proper regulations are put in place. Bringing up the level of the values of the forest product can in turn bring up the level of pressure to make use of the old-growth forests and bring in a negative impact on biodiversity. There must be countering of the commercial pressure to Utilize old-growth forests by the protective regulations that is much stronger.

There would be displacement of the tilled annual crops production by the production of switchgrass, bringing in a net advantage which is environmental because of the soil conservation properties it has as well as the water conservation properties. More so, there is also the ability by the switchgrass to sequester carbon in the ground to a higher level. This is because this crop has large root structures and it is as well a perennial crop.

In considering corn, this is an option that is the least in terms of being favorable environmentally. The cultivation of this crop has a larger intensity in terms of energy and chemical as compared to other energy sources such as wood and switchgrass that have been looked at. More so, the production of corn does not ensure much holding of the carbon that is found in the ground. Therefore, while the CRP land turns to undergo conversion to the production of this crop, there will be higher release of carbon to a level that is expected from the combustion of the fossil fuel (Pendray, 2007).

Need for further research

In the present day, there exist a large number of questions than answers regarding how sustainable the forest biomass is as feedstock for wood pellets among other sources of bio-fuels. Basing on the ecological point of view, a significant research question, as Marinescu and Bush (N.d) put it, is “whether the removal of more forest biomass than is traditionally harvested for timber will deplete the forest ecosystems of soil nutrients, decrease wildlife habitat, or harm the water tables” (pg 4).

Even if studies are beginning to be set up for as well as against the utilization of the forest biomass, this issue calls for much more research to a considerable level. From a social standpoint, the advantages that are derived from the utilization of biomass for bioenergy are clearly seen in the jobs that are more “green” which are highly paying. Ho0wever, there is still great need to carry out more research in order to have the knowledge about the trade-offs that are there with the rest of the sectors which have felt the impact of the coming up bioenergy sector.

Basing on the economic standpoint, there is a serious need to have thoroughly research about how feasible each and feedstock source is. More so, there is need for setting up extension projects to realize studying and enhancement of the access of the bioenergy sector as well as the forest land owners to the markets of carbon credit Marinescu and Bush (N.d).

This paper is going to consider the idea that solid bio-fuel as one of the promising components of financial stability of the international market and trade of fuel and energy resources. Much emphasis is going to be put on the wood pellets as being one of the examples of the bio-fuel. The case that is going to be considered is the market for the wood pellets in the E.U. The questions that are going to be looked are: What is the possible future socio-economic i9mpact behind the continuous promotion of wood pellets throughout the members of the European Union? What is the contribution of wood pellets to the market? Why the EU countries are are trying to shift their production to solid bio-fuel in the current days? How profitable is this/? What are some of the difficulties is Russia facing in the adoption of the use of the bio-fuel. In order to answer these questions, a research is going to be conducted by interviewing the Russian entrepreneurs who are working in the field of solid bio-fuel.

This research is quite important because, by establishing the benefits of the use of bio-fuels and eventual adoption of the use of this source of energy can serve to overcome fossil fuel use which is associated with some problems as a source of energy. For instance, the fossil fuels bring about environmental degradation and they are also obtained at higher costs because the prices are ever increasing.

In the next section, there is going to be reviewing of literature that is related to the use of the bio-fuel. There is going to be consideration of the studies that have been carried out by other people in the past in this field. This section is going to start by looking at bio-fuels in general terms and this is going to be narrowed down to the wood pelts in the E.U market There is going to be consideration of the economic theory in regard to what is indicated by theory concerning the contribution of bio-fuel to the economic development. This review of literature will assist in carrying out a clear analysis, linking this former research to the Russian case in order to come up with a better conclusion concerning the case under investigation.

Literature Review

In considering the history of solid bio-fuel, the search for the alternatives of biomass that is best started with an analysis of the biomass that is there and that that was there in the past Pendray, 2007). This examination or analysis involves a review of corn-ethanol. The review that follows involves heating with corns and pellets. And lastly, there is the review of the solid bio-fuel heating systems, making the review of pellets in the present art state in Europe of pellet heating (Pendray, 2007).

Taking the case of the United States of America, there has been widespread consumption of biomass as a source of energy. In the course of the initial development of the United States of America in the 10 hundred years, there was the provision of energy from wood. Then the source which turned out to follow as a dominant source was the fossil energy. However, the biomass energy still remained and even this source of energy is still there to the present day. Looking back, in the year 2003, 2.8 percent of the energy sources in the United States of America that was basically consumed was biomass energy. The largest proportion of this energy was given out by wood energy (EIA, 2006). This was followed by alcohol which gave out a smaller proportion. Even if the consumption of wood energy has, in the recent times, remained to be still there on constant basis, the consumption or use of corn-ethanol has gone to a higher level at a rate of 20 percent per year (EIA, 2006).

In the industrial sector, there has been predominant use of wood energy and especially in those industries that deal in processing the wood. There is creation of great amounts or quantities of waste wood by the paper and wood industries and at the same time requiring large quantities of process heat which is, in relative terms, energy demand that is of low quality (Pendray, 2007).

Instead of having a dependence on the fossil fuels for the provision of this heat, there has been burning of the wood wastes. By doing this, there has been realization of the reduction of the costs as well as the disposal fees. Therefore, the consumption of the energy that results from the wood waste gives a good illustration of a situation where there have been economic pressures that have brought about the large adoption of the use of the solid bio-fuel. This kind of energy took up 98 percent of the waste mills in the year 1999 (Walsh, 2000).

In the present day, a large proportion of the pellet appliances that are being sold in the countries such as the United States and the European Union countries are the pellet stoves. This kind of stoves doesn’t go in the central heating systems. They call for the operations that are inclined towards being manual like ash cleaning as well as fuel filling and therefore in overall terms, there is less demand for stove heat. The Central heating Systems have just come to the United States of America in the recent times (in the pellet appliance market). For the reason that this market has not matured, there exist no data that is extensive concerning the prices of the boiler as well as the furnace (Pendray, 2007).

There has been always reliance on the biomass fuel, in the developed countries even if this has been on varying levels. The largest portion of the emphasis that has been placed on the growth of the market of the biomass fuel lies in the transportation fuels and one of the examples being ethanol. There is also gaining of popularity by the heating systems of biomass. However, this gain in popularity is in scales that are much smaller (CA, 2005).

In considering nations in the world in terms of the use of the solid bio-fuel, there has been an increase in the adoption of this form of energy, for instance especially in the United States of America, Germany, as well as Sweden and Austria. In considering the case of Sweden, in this country, the regulations that have been laid down as well as the preferences of the customers have brought about to a significant level, various technologies in solid bio-fuels as compared to other countries like Germany and Austria.

Looking at Sweden, Germany and Austria, the developments that have been carried out in the pellet heating system, in significant terms are not similar to the developments that have been carried out by the United States of America. Having such variations or differences provides an opportunity to get to learn which kind of practices have brought about the assistance in the adoption in those countries and which practices have served as obstacles in the adoption and should therefore not be taken.

There is reliance basically on the wood pellets by such countries as Germany, Sweden and Austria. These countries have small domestic production of corn fuel and this does not give room for allowing them to use this as a preferred type of fuel. More so, there exists a great resistance (political) for making use of foods as a source of fuel as compared to the United States of America.

According to Anonymous (Tapping in to West Virginia’s renewable fuel- biomass, 2009), “in the current day, the market for the wood pellets in the European Union is actually booming. This booming results from the rules that have been laid down by the Union requiring the member countries to engage in the generation of 20 percent of electricity from those resources that are renewable by the year 2020. According to Marinescu and Bush (N.d), “wood pellets are small “nuggets” of compressed, sawdust-size wood fiber” (pg 1). In the whole world people make use of the wood pellets in the process of the generation of heat as well as energy from those resources that are renewable.

Looking at Europe in general terms, this continent engaged in the importation of approximately 92.6 million dollars of the wood pellets together with other fuels that are based on wood in the course of the initial three months of the year 2009 and this was a 62 percent raise in comparing this figure to the figure that was established relating to the same period of time in the previous year.

According to The Georgia Center of Innovation For Logistics report (2010), the market for the wood pellets is not yet mature because there is variation in the reliance on the data in terms of the wood pellets prices, the production capacity as well as the actual production from one nation to the other. However, the report puts it forward that the world market for the wood pellets is growing and will still go one growing. The demand for the wood pellets in the market is being driven by the call for the countries in world to make use of the renewable energy resources. The market growth in Europe in the period of between the year 2005 and the year 2008 stood at 27 percent (The Georgia Center of Innovation For Logistics, 2010).

The growth of the European market for the wood pellets has to a large extend been influenced by the political goals to been up the level of the use of the renewable energy. This policy will go on playing a very vital role in the growth the market for the wood pellets in the European Union member countries. The major uses of this kind of fuel are the industrial and the industrial users. In the European Union member countries, the residential wood pellet business is carried out locally with trade that is regional. On the other hand the industrial wood pellets trade is carried out on a global basis (The Georgia Center of Innovation For Logistics, 2010).

Economic Analysis

There exists an incentive among the consumers in carrying out the purchase of the solid bio-fuel heaters in the case where there can be saving of the costs of using the solid bio-fuel heaters rather than using oil is higher in comparison to the extra upfront price which is paid for heating systems of bio-fuel that are much advanced. According to Pendray (2007), “the actual difference in cost between a solid bio-fuel heating system and oil heating system is unknown since solid bio-fuel systems are relatively new and thus robust technology and cost comparisons are unavailable” (page, 78).

Those furnaces that have the ability to burn either the pellets or oil are of much more value on the basis of the assumptions of conservative pricing. In considering conservative pricing, there will be saving by a residential consumer who is an average consumer by a flexible fuel furnace (oil and pellet) of one thousand nine hundred US dollars in the course of its lifetime and on the side of the commercial consumer who is average, will save nine thousand seven hundred US dollars in the course of its lifetime. In considering the case where there is no added flexibility of making it possible to use oil at the time of heating oil, the prices are lower as compared with those prices of the pellets. In line with this, the average consumer who is residential would be able to save one thousand three hundred and forty dollars and there is no any net savings that is expected among those average consumers that use the commercial pellet (Pendray 2007, P78). Pendray (2007) further observes that “the cost of fuel flexibility between solid bio-fuels and oil may be significant for new heating systems due to the costs of two separate handling systems”. Those who already possess oil-heat may derive some advantage mostly from a flex-fuel system because costs for the storage of fuel as well as the installation costs have already been met (Muster, 2000).

Policies and policy proposals

The heating of the solid bio-fuels can bring in advantages as well as some disadvantages. By the government intervening, there can be realization of the enhancement of the advantages or benefits and at the same time ensuring there is a limit in the disadvantages or the negative features. The benefits that are economic-wise have a higher likelihood of promoting an increased level of adoption in time to come. By regulating, this can lead to the realization of the large-scale adoption being carried out in a way that is friendly to the environment and bringing down the level of the possible negative impacts to a minimum level possible.

By the governments in various nations providing some help, this can as well bring up the level of adoption to promote those impacts that are favorable and among these favorable impacts is the reduction of the carbon dioxide emissions and the energy security (Pastre, 2002).

Lack of proper combustion of biomass with the high level of the emissions that result from the emissions that move with it has brought about those regulations that are related to the pellet stove both at the state level as well as the federal level in the United States of America. Basically, these regulations put focus on the stoves as well as the fireplace.

Emissions from the greenhouse gases

The production of bio-fuel life cycle as well as the supply gives out less carbon dioxide as compared to heating of the oil. According to Pendray (2007), there is release of about 754 percent less carbon dioxide from the heating of the solid bio-fuel for a similar quantity of oil heating release. For every GJ of heat that undergoes conversion from the heating of fuel compared to the heating of the bio-fuel brings about saving of more than 17 kilograms of the carbon that is emitted (EPA, 2007).

The saving of costs related to the heating system of solid bio-fuel under a one hundred dollar per one tone tax rises the net present savings that are expected for average home the average commercial heating by six thousand eight hundred dollars and for the residential heating by seven hundred and seventy six dollars. This amount in the savings clearly makes assumption that the production cost for bio-fuel goes up with the level of the carbon tax, in proportion to the consumption of the fossil fuels in the course of the production as well as the distribution of the solid bio-fuel (Fiedler, 2004)

Carrying out heating by the means of corn gives out a lower level of carbon dioxide as compared with the use of the corn to realize the production of ethanol. As on one hand the emissions of carbon dioxide that result from the heating of bio-fuel is estimated to be about 25 percent of the total emissions that originate from the heating of oil, on the other hand the production of ethanol is estimated to be of the same amount of those emissions of carbon dioxide which would come about as a result of an energy similar quantity that comes from gasoline (Farrell, 2006).

In conclusion, by the governments intervening, there can be realization of the enhancement of the advantages or benefits and at the same time ensuring there is a limit in the disadvantages or the negative features. The benefits that are economic-wise have a higher likelihood of promoting an increased level of adoption in time to come. By regulating, this can lead to the realization of the large-scale adoption being carried out in a way that is friendly to the environment and bringing down the level of the possible negative impacts to a minimum level possible.

The market for the solid bio-fuels in the European market and especially the market for the wood pellets is large. This follows the high demand for such energy sources. The high demand has arisen following the policies that have been laid down by the European Union requiring the countries to make use of the energy resources that are renewable.

References

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