Romanian Association of Wood Industry – Prolemn welcomes the adoption by the Romanian Parliament of the initiative to amend the Fiscal Code in the sense of applying a reduced VAT rate of 5% for wood materials intended for heating, delivered in various forms, including as logs, pellets, briquettes, sawdust, waste, and wood scraps. The law was sent for promulgation.
The newly adopted law is built upon the successful arguments of Prolemn during the firewood crisis of autumn 2022, when we showed that the solution is not to cap the prices of firewood and pellets (according to GEO 134/2022), but to ensure the necessary resources in the market and real support measures for the population. Among the proposed measures, support for disadvantaged groups through energy cards was implemented, and now the VAT reduction for wood biomass used for heating.
We welcome the openness of political factors to the request to initiate public policies on this topic, based on the provided alternatives. The draft law based on the Prolemn arguments was submitted to the Senate in November 2022 by Mr. Gabriel Valer Zetea, whom we thank.
It is a measure with an extremely important social impact, given that more than 3.5 million households in our country use wood – in various forms – for heating in the cold season. Coupled with measures to increase energy efficiency in the use of the biomass resource, it could be an important step to ensure the energy security of the population, because the potential of biomass in Romania is enormous.
We believe that the reduction of VAT on the sale of pellets will stimulate the use of this energy resource at the local level, with a positive effect on Romania’s energy balance. The national production of pellets is over 600,000 t, of which we currently consume only about a third, the rest being exported. The use of biomass in the form of pellets is also a form of stimulating the energy efficiency of the use of the resource, the energy yield by use in pellets is over 90%, compared to about 30% in traditional stoves.
At the same time, Prolemn draws attention to the fact that the VAT reduction measure is necessary but not sufficient. Further, concrete measures must be taken to ensure the availability of wood for the population and industry, and the prices of the wood resource remain high. The causes that created the firewood crisis in the fall of 2022 continue to produce effects.
Considering the share of firewood consumption in the heating sector, in all its forms, energy efficiency and security measures in this segment are very important. Biomass energy represents the most significant fraction, over 42% in the heating sector, while the rest is divided between natural gas, electricity, LPG, coal, etc.
Energy efficiency measures in the use of the timber resource are part of the more comprehensive principle of the superior processing of wood, the guiding principle being the use of wood in cascade, on value chains of increasing added value. Thus, the resource must go through cycles of industrial processing into products with high added value, with wood waste being directed to energy production. Currently, approximately 2 million cubic meters of waste from wood processing are used for heating – the reduction of VAT to 5% on this biomass segment has a significant social impact. An average of 60% of the wood resource that enters the wood industry is returned to energy use in various forms. Through smart policies, we can stimulate both the added value in the wood industry and the utilization of the wood resource with high energy yields.
Among the measures with immediate impact, policies can be implemented to support the installation of pellet or biomass power plants to serve households or even entire communities, efficient, powered by locally available renewable resource. The increase of only 25% of the energy yield for wood biomass would release for use in cogeneration the equivalent of 10,000,000 MWh of biomass, a sufficient amount to save and switch all coal-fired SACETs in large cities to biomass, simultaneously with the release of an additional amount of 2 million cubic meters of this valuable resource for use in wood products, according to the principle of cascading use.