Price Formation and Regional Economic Effects of Wooden Biomass Energy

Recently, many municipalities make use of renewable energy such as wooden biomass fuels and solar energy which contribute to CO₂ mitigation for a sustainable society. These environmental resources are usually abundant in rural regions, so economic vitalization in rural regions is expected with use of these resources. The purpose of this study is to quantitatively show the magnitude of economic contributions to the circulation of renewable resources within a region as well as export to other regions. As a first step to accomplish this purpose we construct an IO table of Maniwa City incorporating biomass trade by an interview survey approach. In the interpretation of regional economic effects, we propose two new concepts, ‘direct effect by energy substitution’ and ‘indirect effect by regional circulation’. In order to correctly calculate those effects, we also propose a new original method to construct IO tables for the economic situation when biomass energy usage is not introduced. Empirical findings show that regional biomass production and intraregional usage yield sufficient circulation effects as well as substitution effects and income reservation effects from relatively lower prices for biomass energy in the region.