WORLD CITIES SUMMIT 2022

Biomass Commercialisation in Agricultural Processing: Economic and Environmental Implications

This study examines the economic and environmental implications of biomass commercialisation; that is, converting organic waste into a saleable product, from the perspective of a processor. Biomass is sold to a power plant to substitute fossil fuels in energy production.

Overview

Global warming and climate change have created an unprecedented global interest in reducing greenhouse gas emissions, especially in energy production. Biomass, or organic matter, which is a renewable energy source that can replace fossil fuels in energy production, is gaining popularity. Consequently, commercialising agricultural residues as biomass is gaining momentum in many industries including the oilseed industry (e.g., palm, coconut) and the sugar industry.

This study examines the economic and environmental implications of biomass commercialisation; that is, converting organic waste into a saleable product, from the perspective of an agri-processor that uses a commodity input to produce both a commodity output and biomass. We characterise the economic value and find that commercialising biomass, besides creating a new revenue stream, also makes the processors’ profits more robust to changes in uncertainty.

To measure the environmental impact we use total expected carbon emissions resulting from profit-maximising decisions and characterise the change in total expected emissions after commercialisation.

Findings

Our analysis reveals that while higher biomass demand or pricing increases the value of biomass (and hence, promotes energy production from biomass), these changes are not necessarily environmentally beneficial as they may increase the emissions associated with biomass commercialisation. We also characterise conditions under which biomass commercialisation is environmentally beneficial or harmful; that is, it leads to a reduction or an increase in the total expected emissions, respectively. In comparison with the existing understanding which does not take into account optimisation of operational decisions, our analysis highlights two types of misconceptions: we would mistakenly think that biomass commercialisation is environmentally beneficial when it is not, and vice versa.

Researchers: Assoc Prof Onur Boyabatli , Asst Prof Buket Avci , and PhD student Li Bin (SMU Lee Kong Chian School of Business)

Learn more about the research through the researchers’ insights in a podcast here .

Access the full study here.

This study was featured at SMU’s booth at the World Cities Summit 2022 exhibition.