Macroeconomic Evaluation of a National Biomass Action Plan for Austria

A scenario analyses the macroeconomic effects of launching a biomass action plan (to increase the share of biofuels to 20 percent and renewables as a proportion of total energy consumption to 45 percent by 2020). This rise in biomass demand will result (compared to a basic scenario without the biomass action plan) in an increase of raw material costs and electricity prices due to subsidies for green electricity generated from biomass. Consequently, investment in manufacturing will be effectively damped. Higher energy prices will also drive up consumer prices, while the disposable income of private households declines because (to achieve revenue neutrality) subsidies need to be counterfinanced. More investment by utilities in expensive technologies (biomass) will provide a strong boost to overall demand for investment and thus a slightly positive effect on the overall economy. Consumption of fossil fuels will drop sharply so that CO2 emissions come down as well.