Bioelectricity in Malaysia: Economic Feasibility, Environmental and Deforestation Implications
The Australian Journal of Agricultural and Resource Economics, Volume 64, Issue 2, Pages 294-321, October 2019
Posted: 16 Jun 2020
Date Written: 2019
We investigate the economic feasibility of bio-electricity production from biomass in Malaysia and its impact on greenhouse gas (GHG) emissions and storage, agricultural prices, agricultural employment and deforestation. For this purpose, we develop a partial equilibrium model that projects agricultural prices, production, imports, exports, domestic consumption and land use in 5‐year increments between 2015 and 2065. Our results show that by 2030 biomass‐generated electricity can supply 36.5 per cent of the electricity generated in Malaysia, 16 times more than the 2016 electricity supply from biomass. Increased bio-electricity production from biomass will significantly reduce GHG emissions and will help Malaysia meet its commitment in the Paris Agreement to mitigate GHG emission by 45 per cent before 2030. Our modelling shows that biomass‐generated electricity creates a derived demand for waste biomass that expands the area of oil palm plantations. The expansion lowers agricultural prices, boosts agricultural employment and leads to some deforestation as landowners clear rain-forest to plant oil palm trees. Nonetheless, the deforestation does not increase GHG emissions since GHG gains from bio-electricity significantly exceed GHG losses from deforestation.
Keywords: Bio-electricity; Waste Biomass; Partial Equilibrium Model; Cost Competitiveness
JEL Classification: C61, O13, Q42
Suggested Citation: Suggested Citation