Towards ideal growing conditions for the BioEconomy
"Think big and act soon" 1. Introduction
"The world's current economic model is an environmental "global suicide pact" that will result in disaster if it isn't reformed. We need Economic Innovation", United Nations Secretary General Ban-Ki-Moon already said in 2011 during the World Economic Forum in 2011. But only innovation is not enough. We need new business models to sustain economic growth while reducing the impact on the environment. Since the industrial revolution, the rise of the global economy has been dependent on the extraction and use of increasing amounts of fossil fuels.
One of these new models is the Biobased economy. In this economy it evolves around how to efficiently use natural resources and biomass for the production of raw materials. In addition it is of utmost importance to also give the right value to those materials and not cause depletion or land waste elsewhere. To make the shift towards a circular economy which is more sustainable and includes the BioEconomy, will therefore mean rethinking the previous linear approach of extraction, use and disposal.
The analysis of the current economic situation shows how the BioEconomy represents a significant share of the overall European GDP and Employment. The BioEconomy is currently worth €2 trillion in annual turnover and accounts for more than 22 million jobs and approximately 9% of the workforce. Despite the importance of the sector at European level, the 28 Member States apply different rules to the use of biomass (crops, agricultural residues, by-products) that is the starting point of the BioEconomy value chains. Similarly many of the BioEconomy end products, such as biofuels or bioplastics, are treated differently in the various EU Member States. More importantly, their fossil equivalents are not subject to the same levels of scrutiny and control as biobased values chains. Some essential industrial materials such as plastics currently have market shares of 1% or less. The fossil industry enjoys advantages of scale, infrastructure and habit. While growth rates are healthy, markets shares will be at low single digits in 15-20 years from now and the full potential of the bioeconomy will be untapped. We need to give the BioEconomy more space in the existing economic models so that its market share and societal impact can increase even further. This would be a welcome development for tackling some of the modern day global societal challenges, such as climate change and dependence on dwindling fossil resources. One of the main aims of the BioEconomy and of the development of a circular economy is to work towards achieving a more sustainable society.
We are in need of a holistic approach in which cooperation with all stakeholders is key. We live in an even more and more connected world in which the lines between consumers and producers are disappearing.
To create markets for the BioEconomy we need:
- To raise consumer awareness of the advantages of Biobased products
- New local, regional and cross border approaches between diverse sectors and stakeholders in the EU (a Biobased Economy ecosystem).
- A legislative and fiscal framework and policy predictability to make the BioEconomy more attractive for private investments and to rebalance the competitive environment in its favour.
This document discusses how we can work towards ideal growing conditions for the BioEconomy and how we can overcome obstacles on the internal market for the BioEconomy. It also provides recommendations and concrete actions to be taken in order to stimulate the development of the BioEconomy. As a source of inspiration, the BIO TIC Roadmap (2015) "The BioEconomy enabled - a roadmap to a thriving industrial biotechnology sector in Europe" was used.
2. Ideal growing Conditions for the BioEconomy Condition 1: Awareness Strategy
Generally it can be said that the awareness of Biobased products is poor. Along the entire value chain, consumers and producers are unfamiliar with the advantages Biobased products have to offer. Whereas stakeholders are familiar with concepts like recycling and sustainability, "Biobased" does not ring a bell. Second, the costs of Biobased raw materials and products compared to fossil fuel based products are typically higher, in large part as a result of low economies of scale. This in combination with the lack of awareness causes that Biobased products are facing a competitiveness challenge. Consequently, even if products are made more competitive in relation to fossil fuel based products, the question remains whether the products will actually be bought by consumers. This combination causes hesitation to shift the production process from fossil based to Biobased. One example of a project faced with the lack of awareness is the Flemish Coordination Centre for Manure processing and Nutrient recycling. The recovery of nutrients from manure can have both environmental and economic advantages. This is all the more important in light of the rising awareness of the depletion of natural resources and the increasing prices for natural resources and energy. In this context a lack of awareness by farmers of potential for nutrient recycling was experienced. (source: http://ec.europa.eu/research/bioeconomy/pdf/13-case-studies-0809102014_en.pdf)
It is necessary to improve public perception and awareness of industrial biotechnology and Biobased products. It requires a different mind-set of stakeholders. This can be achieved by informing them about the Biobased Industries through for example an EU Wide Campaign. The aim should be that stakeholders know about the advantages and additional functionalities of Biobased products, stimulating increased demand for such products, which eventually has a potential positive impact on the cost-effectiveness of Biobased products, thanks to economy of scale. In short it can be said that creating trust and transparency at all levels is the key to success.
- Decide on how to create a campaign or action plan to raise awareness.
- Generate examples of 'easy to grasp' advantages of Biobased products.
- Generate examples to show that the quality of Biobased products is of a similar standard as fossil based products or in case of higher prices for BioBased products, generate examples showing that the quality of Biobased products may be better.
- Create a story that can be used to engage citizens. Designers and creative thinkers could play a huge role in this. Storytelling has been a very effective and often used design methodology.
- Create a label that communicates all components used in the production process of Biobased Products. This is a way of gaining the trust of the consumer: knowing what you buy. The Biobased content really present in the final product should be transparent.
- Maintain a high energy advocacy programme.
Good Example: Tomatoes Plant Waste Recycling. this project employed various
Communication strategies to raise awareness of the initiative and its products, including
conferences, workshops and the production of newsletters. However, the difference in
languages and cultures across industries did present a challenge in terms of establishing
value chains. Source: http://ec.europa.eu/research/bioeconomy/pdf/13-case-studies-
Product cost-competitiveness is one of the main hurdles for the development of the Biobased Economy and the accompanying Biotechnology Industry.
The high production costs of Biobased products cause the retail price of the products to increase, reducing the competitive capabilities of Biobased products. This is also interlinked with the lack of consumer awareness about the advantages and (additional) functionalities of Biobased products as well as the accompanying technologies for the production process.
An important element of high BioBased products price derives from feedstock supply. Costs of feedstock are high in Europe, mainly due to the fact that we do not optimally use what we have. This has negative implications for the cost-effectiveness of feedstocks. Additionally, producers working with by-products face the difficulty that feedstock quality varies.
Ensure that sufficient financing possibilities are available for the further development of Biobased technologies. If technologies for the production process are improved they are expected to positively impact on lowering the costs of the production process and eventually lowering the prices of the Biobased products. This goes hand in hand with the need for awareness raising on the advantages and (additional) functionalities of Biobased products. Informing consumers through campaigns about this will be one of the possibilities. Product cost competitiveness can be easier reached if there is a change on both the demand side and the supply side.
In relation to the feedstock example the recommendation is to improve opportunities for feedstock producers within the BioEconomy. It is necessary to inform producers about what can be done with by-products (bio-waste). Synergies should therefore be developed between those stakeholders involved in producing by-products and those stakeholders involved in reusing by-products for their conversion into new Biobased Products. Bio-waste producers should be aware of the opportunities they have for using their product for bioprocessing. Concluding, it is recommended to develop a system whereby all stakeholders learn to better use what we have: use all resources, improve logistics and use abandoned land.
- Creating a regulation prohibiting the use of non-biodegradable plastic bags as stimulation for the BioEconomy and a way of setting an example for future BioEconomy legislation.
- Decide on how to sell higher costs for BioBased products to consumers. This is also related to enhancing consumers' trust and awareness raising. (See the Cross-cutting General Recommendation concerning awareness-raising.)
- Industry and producers often are hesitant to produce Biobased products because of the higher costs of by-products and the production process; therefore it needs to be decided how you can sell higher costs of by-products and a more costly production process to industry/producers.
- Realize that land use for the production of Biobased products should be seen more as an opportunity for development than a threat. Due to decreases in for example meat production, land becomes available which can be used for the BioEconomy.
Good example: Novamont Italian Case Study on Bioplastics
One sector affected by the lack of competitiveness is the chemical industry in Italy. Plastic producing plants were in decline due to competition from plastic producers from for example France and Germany. The shift towards a biobased production process was a necessary approach to boost competitiveness in the sector in which virtuous innovations led by the bioeconomy were applied. (source: http://ec.europa.eu/research/bioeconomy/pdf/13-case-studies-0809102014_en.pdf, page 31)
Condition 3: Create a coherent framework of legislation for the BioEconomy Although the internal market is not fully completed yet, generally it is felt that the internal market is reasonably open and there are reasonable conditions for cross-border trade. However, mutual recognition of Biobased products and biomaterials can be problematic from time to time. Custom rules are not the same for residues, by-products and Biobased (end-) products in all Member States. Also, improvements can be made in developing public procurement initiatives and land use rules. Large areas of land are necessary for BioEconomy-related use of crops, more or less 5 to 10 million hectares is seen as a reasonable ball park estimate. The current decrease in meat production means that land becomes available. This land could then be used for the BioEconomy. The current focus on resource efficiency should eventually also lead to reserves of land becoming available. One may argue that “the Land is there, now we need the rules” for its optimal use. However, we should not forget to pay attention to Biodiversity. A balance should be found between enhancing the BioEconomy and recovering and preserving Biodiversity as much as possible. For Europe this means, working towards healthy food production and more Biobased products in surroundings where recovery and preservation of biodiversity is ensured. Currently, one can argue that if a legislative framework for the BioEconomy is in place at all, it is certainly a fragmented framework of rules. There is not one piece of legislation for the BioEconomy and in relevant pieces of legislation sometimes a specific reference to BioEconomy is even missing. Consequently, the main problem is that there is a lack of coherence of legislation. A clear framework is necessary, either through umbrella legislation or through clear references to the BioEconomy in relevant pieces of legislation. Another aspect is that compared to the US and Canada, there is very few national legislation in the area of BioEconomy, causing that it is very hard for European businesses to compete at an international level. If European or national legislation exists there is a risk of non-implementation and even if implementation exists, there is insufficient control. One example is the situation in Italy where at least 30% of single use bags in the market are falsely marketed as being biodegradable. Even though they claim to be and are labelled as such, they are not in compliance with EN13432 (the norm for biodegradable and compostable packaging). Consumers then purchase the bags believing they are in compliance with standards when in fact they are simple polythene which when used to collect and dispose of organic waste fail to biodegrade contaminating organic matter. It is therefore necessary for local authorities to undertake controls and checks on products claiming to be biodegradable to eliminate counterfeits from the system. ( source: http://ec.europa.eu/research/bioeconomy/pdf/13-case-studies-0809102014_en.pdf)
Actions: - Scan legislative activities for the coming years; what is in the pipeline? What are the hooks? Where can we try to include references to the Biobased economy?
- A decision has to be made on what is preferred: one piece of legislation for BioEconomy or references to BioEconomy in various pieces of legislation? Creating umbrella legislation could be a long-term aim.
- Developing BioBased public procurement rules
- Developing land use rules.
Condition 4: create synergies between policies
Despite the fact that the European Commission adopted a strategy on the BioEconomy in 2012, a number of policies and funding mechanisms for the BioEconomy still exist in isolation from one another. Examples of other strategies (in)directly related to the BioEconomy are the Circular Economy Strategy and the (Digital) Single Market Strategy. Where are the links between those various strategies? It is very difficult for stakeholders to operate within such a fragmented policy regime.
- It is necessary to introduce a long-term, stable and transparent policy and incentive framework to promote the BioEconomy. This means that synergies should be created between the various (European) policies that have been created and will be created in the coming years. One of the tools could be cross referencing various policies against each other.
- A first step could be to realise a European Manifesto on BioEconomy. National manifestos could be used as a starting point for this.
Condition 5: Improve Science Education A lot of improvements can be made in the area of education on all levels, starting from primary school. For one the chemical industry should be made attractive again for young people to work in. Additionally, specialised knowledge on the BioBased Industry is necessary.
- Decide on how Biobased Economy can be integrated in various study programmes that are linked to the industries involved in the BioEconomy value chain.
- Decide on how courses can be set up that are accessible to those active in the BioEconomy or wanting to become active in the BioEconomy.
Good example: Novamont Italian Case Study on Bioplastics. This project proves
that the existence of a skilled workforce in Italy was a benefit for the development of the
Condition 6: Improve access to finance Access to finance is particularly a problem for spin-offs, start-ups and SMEs, also considering high costs for patenting inventions and new products as well as the lack of harmonised Intellectual Property legislation. All this occurs within the context of a risk-adverse European Investment Climate. One of the problematic aspects is a lack of information about financing possibilities and when people know about financing possibilities they experience difficulties in the technical side of applying for financing. Part of the problem lies with the national banks. Often these banks are unaware of the wide range of European funding possibilities. This is for example the case with the Juncker Investment Fund (EFSI). Where funding for Research & Development is sufficiently available, obtaining funding for demonstration and flagship initiatives is difficult. This has to do with the 5/10 million euro mind-set for such projects that the Commission has, rather than a more realistic 500 million euro per project mind-set. The European Fund for Strategic Investments (EFSI) has been created to counter the risk-adverse financing climate, but the question remains how big the risk may be. One example is the Novamont Bioplastics case study. They experienced difficulties in accessing finance for high risk investments that are necessary for the construction of demonstration and flagship biorefineries. This worked against the development of sustainable and competitive initiatives within the EU Bioeconomy sector. (source: http://ec.europa.eu/research/bioeconomy/pdf/13-case-studies-0809102014_en.pdf, page 34)
In light of the current risk-adverse financing climate in the EU, the Juncker Investment Fund (European Fund for Strategic Investments - EFSI) has been set up and has been operational since September 2015. Projects within the BioEconomy sector could request funding from this Fund. In that way EFSI can contribute to the development of the BioEconomy. (On the last page of this document an overview of the EU funding possibilities is included.)
- The setting up of the EFSI fund may be a step in the good direction. The precondition for it being a good step in light of demonstration & flagship initiatives in the area of the BioEconomy is that the Commission's mind-set is changed from a 5/10 million euro mind-set to a 500 million euro mind-set, which is the more realistic amount that is necessary for such projects. How do we convince the Commission and the EIB to take greater risks?
- It is necessary to introduce a long-term, stable and transparent policy, which realizes more security for investors resulting possibly in attracting more investor in Biobased projects.
- Inform stakeholders about funding opportunities. They should know which funding opportunities exist and how and where they can apply, but those institutions responsible for distributing the funds should also know the wide range of European funds available. The focus should thus be on national banks and entrepreneurs.
Condition 7: increase cooperation between the different actors
Insufficient links exist between decision makers and stakeholders from the BioEconomy. Additionally a lack of leadership causes that even when a platform for discussion exists, a certain push for getting things done is missing.
Moreover, it needs to be noted that the value chain of the Biobased Industries is rather complicated and differs from the value chains of other industries. A large number of varying businesses are active within the industry, amongst others, the chemical industry, farmers, pharmaceutical businesses and energy businesses. The most problematic aspect of the value chain is that the consumer is not part of the value chain and does not have a say in the process. This causes that their concerns are not addressed at an early stage, with the effect that once Biobased products are actually on the market, nobody will buy them because of worries that the product might not be 'green'.
Develop stronger relationships between conventional and non-conventional players. This can be coupled with public perception and awareness raising: consumers need to know about Biobased products and what makes them attractive. Another interesting concept to keep in mind is the triple helix approach: industry, academia and government working together. This also links to incorporating different disciplines, like ICT.
Important is also to support BioClusters and Knowledge and Innovation Communities (KICs) to work together with the private sector, also in light of enhancing the possibilities for receiving funding. Also important is that partners across borders are stimulated to work together; one incentive being that some types of European funding are granted only when cross border cooperation exists.
Concerning the value chain of the BioEconomy, it is important that all those involved in the value chain know which other actors are part of the value chain. However, most importantly, consumers need to be made part of the value chain. We need a bottom-up approach where consumers are actively involved in the process, so as to deal with possible concerns of consumers at an early stage in the process. Good communication between all stakeholders at all stages of the process is key.
- Decide on how to create a platform for discussion between all players, so that legislation is not “a slap in the face” for some players in the end.
- Decide on how we can overcome possible conflicts of interests.
- Decide on who will be the leader that can make decisions and pushes for getting things done.
- Decide on how consumers can be actively involved in the value chain of the BioEconomy BBI, so that concerns of consumers can be addressed at an early stage.
The main message to be taken from the discussedconditions, recommendations and concrete actions is 'Think big and act soon'. The following example clearly shows this: Let's say Europe accounts for 20 percent of the world economy and that the Union uses 200 million tons per year of fossil derived materials, and let's say we want the BioEconomy to account for 10 percent of Europe's materials needs by 2025. That comes to about 20 million tons per year of biomaterials. Think big means recognising that this will require about 20 billion euro of capital investment in factories, i.e. 40 industrial projects of 500 million each. It will require about 5 to10 million hectares of good quality land to assure secure supply of home grown biomass. It will require mandates, bans and incentives in order that the industrialists, farming communities and regional development agencies that commit can be assured of 10-15 years market advantage in order to survive in the face of fossil material competition. Consequently, we need to start thinking on a 10 or 100 times bigger scale than we are doing today. Industrial development financing needs to be available. EFSI may be the key way forward at this stage, if the EIB will be able to think big. Part of the money should be used for awareness raising to make sure that Biobased Products will be bought. An enhanced BioEconomy will also be able to positively improve the cost-competitiveness situation. With a bottom-up approach we need to create a demand for Biobased products through marketing and advertising and with a top-down approach we need to create a legislative framework that enables those active in the Biobased Industry.
4. EU funding possibilities
More than €70 billion will be invested in research and innovation through the centrally managed calls of the European Commission
European Structural and Investment Funds (ESIF)
Between €80 – €100 billion (European Regional Development Fund / ERDF) will be invested in innovation-drivers, infrastructures and logistics.
European Social Fund / ESF
€70 billion investments in skills, life-long learning, social integration,
employment services, capacity building entrepreneurship and social innovation;
European Agricultural Fund for Rural Development / EAFRD), Maritime Investments and Fisheries (European Maritime and Fisheries Fund);
More than € 100 billion will go into funding for Rural Development
Trans-European transport connections and environmental projects
European Fund for Strategic Investments (EFSI)
5. Essential European BioEconomy References:
BIO TIC Roadmap (2015): "The Bioeconomy enabled - a roadmap to a thriving industrial biotechnology sector in Europe"