Modelling the promotion of biomass use: A case study of Thailand S. Wianwiwat, J. Asafu-Adjaye * School of Economics, The University of Queensland, Brisbane, QLD 4072, Australia article info Article history: Received 16 August 2010 Received in revised form 22 November 2010 Accepted 23 December 2010 Available online 28 January 2011 Keywords: Computable general equilibrium modelling Biomass Electricity Energy policy Renewable energy development abstract This study develops a computable general equilibrium model of the Thailand economy which features several energy-specific enhancements. The model is used to simulate a number of potential policies to achieve the Thai government’s biomass-generated electricity targets contained in its 15-year renewable energy development plan. Examples of simulations conducted with the model include increasing biomass-based electricity purchased from small and very small power producers and increasing other agricultural residue use in electricity generation. The results indicate that implementation of all of the biomass-based electricity promotion policies is likely to achieve the short-run target and reduce somewhat the importation of fuels. However, the policy causes a huge increase in prices of biomass. The sugarcane-based sectors are big winners, while the cassava-based sectors are big losers. The losses can, however, be partly mitigated by promoting other agricultural residue use in electricity generation. Ó 2011 Elsevier Ltd. All rights reserved. 1. Introduction Thailand is a developing country in Southeast Asia, with a pop- ulation of approximately 67 million in 2007 [1]. The average annual real gross domestic product (GDP) growth rate of Thailand was 6.6% between 1960 and 2007 [2]. Thailand’s GDP was only US$2760 million at 2000 constant prices in 1960, and per capita GDP was US$317 (Table 1). At that time, Thailand’s economy was heavily based on the agricultural sector which accountedfor 31.5% of GDP, while the contribution of the manufacturing sector was only 14.5%. Through a process of continuous transformation from agricultural to a more sophisticated manufacturing based economy, Thailand’s per capita GDP increased 8.5 times to US$2713 at 2000 constant prices in 2007, 1 while GDP rose about six-fold to US$17,315 million. Agriculture now plays a lesser role in the economy, accounting for only 8.6% of GDP. On the other hand, the manufacturing sector’s share of GDP has grown rapidly to 39.6% of GDP. The remarkable GDP growth driven by the manufacturing sector has stimulated energy consumption in Thailand. As seen from Table 1 , per capita primary energy use rocketed from 487 tons of oil equivalent (toe) to 1667 toe between 1980 and 2007. At the same period, final energy use in manufacturing increased by approximately 6.8% per annum from 3995 kilo tons of oil equivalent (ktoe) to 23,536 ktoe. A number of studies (e.g., [3,4]) have established that, in the case of Thailand, there exists a two- way causal relationship between economic growth and energy consumption. That is, a high level of economic growth leads to a high level of energy demand and vice versa. Thus, it is the case that energy is a vital input in Thailand’s economic growth and development. Thailand relies heavily on fuel imports, with almost half of its total energy supply obtained from overseas sources. For instance, in 2007 the value of energy imports was around US$ 2540 million (approximately 10% of GDP), of which 81% was in the form of crude oil. As a result, Thailand’s economy has been susceptible to fluc- tuations in prices of energy imports. To illustrate this point, Thailand’s GDP growth and inflation rate were severely affected by the three oil price shocks in 1974e1975, 1980e1985, and 2004e2008. As a consequence, given the high and rising price of oil since 2004, the government has become more aware of the need to promote domestic renewable energy, particularly biomass fuel, in order to reduce reliance on energy imports and improve fuel security. Recently, the Thailand Energy Ministry announced a 15- year renewable energy development plan (see Section 2). However, at this stage the economic impacts of this plan remain unknown. There are also no indicators of the price effects of alternative energy development strategies that could achieve the objectives contained in the plan. Consequently, in order to obtain a detailed impact assessment of the effects of promoting renewable energy, studies such as this one are essential and urgently required. * Corresponding author. Tel.: þ61 3365 6539; fax: þ61 3365 7299. E-mail address: j.asafuadjaye@uq.edu.au (J. Asafu-Adjaye). 1 Measured using purchasing power parity, the per capita GDP was US$ 8135 ranked 72nd of the world’s economies [1]. Contents lists available at ScienceDirect Energy journal homepage: www.elsevier.com/locate/energy 0360-5442/$ e see front matter Ó 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.energy.2010.12.055 Energy 36 (2011) 1735e1748