The National Bioeconomy Panel. Denmark as growth hub for a sustainable bioeconomy

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1 The National Bioeconomy Panel Denmark as growth hub for a sustainable bioeconomy Statement by the National Bioeconomy Panel September 2014

2 Denmark as growth hub for a sustainable bioeconomy Statement by the National Bioeconomy Panel Photo: Colourbox In the writing of this statement, the participation of ministerial representatives has been confined to professional advisory assistance. Accordingly, they take no position on the panel s specific recommendations. The National Bioeconomy Panel Leading companies, researchers and organisations make up the 27 members of the National Bioeconomy Panel. This entity is tasked with offering concrete ideas and advice to the government to turn Denmark into a bioeconomic growth hub. The panel s central task is to draw attention to opportunities for specific measures, which ranging from primary production via processing to consumption may advance the sustainable bioeconomy in the short and long term. Read more (in Danish) about the National Bioeconomy Panel at:

3 Danmark som vækstcenter for en bæredygtig bioøkonomi The future economy needs to be increasingly based on sustainably produced, renewable biological resources. In Denmark, we are in a good position to develop such a bioeconomy: we have the raw materials (the biomass) from, for instance, agriculture, forestry and fisheries; we have strong biologically based industries; and we have the required research and innovation capacity. Overall, the National Bioeconomy Panel finds that Denmark has the potential to strengthen as a bioeconomic growth hub, and hence be among the frontrunners in further developing, producing and exporting solutions within a host of new bioeconomic value chains. Notwithstanding its focus on new bioeconomic value chains, the National Bioeconomy Panel wishes to highlight the potential for adding more value to existing value chains. Moreover, many new bioeconomic value chains will start from existing sustainable value chains, e.g. by making new products from waste streams. This may further contribute to improving the economy of existing sustainable value chains. The National Bioeconomy Panel finds that the bioeconomy in Denmark is able to help create solutions to global challenges and, at the same time, foster growth and employment in Denmark. Realising the potential will require risk-taking, interdisciplinary cooperation and a conducive environment. In the present statement, the panel sheds light on some general barriers which inhibit the development of new bioeconomic value chains in Denmark, while suggesting specific interventions to overcome such barriers. Finally, the panel proposes a series of normative principles for future framework conditions capable of accelerating progress in this field. What is the bioeconomy? It is an economy in which the basic building blocks used for production of energy, chemicals and materials originate from renewable biological resources, including plants and animal waste. Products encompass, for instance, foodstuffs (and foodstuff ingredients), animal feed (and feed ingredients), biobased products (biomass-based chemicals, biomaterials, etc.) and bioenergy. Research and development plays an important role in developing bioeconomic value chains. What can the bioeconomy do for us? The bioeconomy is important for our transition from a fossil-based to a more biobased and sustainable society. The bioeconomy can: 1. Lessen our dependence on fossil fuels and raw materials. 2. Reduce our burden on the environment and climate. 3. Create economic development and new jobs, including in rural districts. 4. Increase resource efficiency (better utilisation of raw materials). 5. Boost technology exports and competitiveness. 6. Enhance value creation by getting more or more valuable products out of the raw material. 7. Foster the recycling of nutrients (including, for instance, phosphorus). 8. Complement food production and advance sustainable crop cultivation. 1

4 9. Contribute to nature preservation, e.g. by harvesting biomass from river valleys. Denmark s general positions of strength in the bioeconomy The National Bioeconomy Panel finds that Denmark has numerous positions of strength, which serve to underpin the development of a stronger national bioeconomy. We have the raw material foundation (biomasses), we have the technologies (biorefining, biological production, etc.), and we have the core competencies in, for instance, agriculture, forestry, food production, fisheries, technologies, energy, logistics, IT, service sectors, research, development and advisory assistance. We have a longstanding tradition of continuously developing and optimising the traditional bioeconomic value chains in areas such as food and feed production, energy and forestry. We are also skilled at integrating systems and actors, and at working across disciplines and sectors. Promising Danish value chains The Bioeconomy Panel sees great development potentials within practically all types of bioeconomic value chains in Denmark. However, the value chains are presently at widely varying stages of development, and each type of value chain spans a wide range of biomass uses. Some of the value chains are already commercial and have been so for many years (food and feed production as well as certain forms of bioenergy), while others are close to marketability (e.g. bioconversion of straw into sugar). Yet others hold vast potentials, but will require research and development to reach commercial viability (e.g. substantial parts of the value chains based on marine biomass). Each value chain will chart its own course of progress. Some value chains are best developed in centralised (typically rather large) bioeconomic plants, while other value chains are suitable for smaller, decentralised plants. Annex 1 presents examples of significant potential new bioeconomic value chains based on a wide spectrum of different types of biomass. All this goes to illustrate the diversity, potentials and challenges in the field of new bioeconomic value chains. Barriers Given such vast potentials, new bioeconomic value chains might be expected to be advancing in leaps and bounds in Denmark. However, some barriers are inhibiting the development of many of the value chains. The Bioeconomy Panel wishes to highlight the following barriers, of which some restrict the progress of several value chains, while others are specific to particular value chains. 1. Lack of market pull A series of new biobased products (e.g. biomaterials and bioenergy) cannot at present compete with equivalent existing products made using, for example, crude oil or some other fossil material. Numerous reasons underlie this. The price of fossil fuel does not take account of the actual environmental and climate burden, while many bioeconomic value chains remain at the development stage, hence being unable to compete with fossil-based production, which has been refined and streamlined over many years. Likewise, lacking market pull poses a challenge to the opportunities for developing and optimising a series of new and more sustainable bioeconomic value chains in food and feed production. 2

5 2. Lack of political objectives Parts of the bioeconomy depend on political backing to be able to flourish. Accordingly, it is essential that the EU set objectives that can help foment the market pull, while stable and predictable framework conditions for development must be created. This will make it possible to attract investment into a field whose support system has a major bearing on the investment climate. 3. Restrictive regulation New bioeconomic value chains often step into uncharted territory that cuts across sectors, where regulation and delimitation of ministerial powers are blurred. This can complicate procedures substantially for businesses. Existing regulation often hampers the development of new value chains and of more resource-efficient utilisation potentials. The regulation has, of course, been drawn up with a particular and desirable goal in mind, but this goal can impinge on bioeconomic development. This is exemplified by the regulation of biosludge and the utilisation of organic household waste. 4. Insufficient sustainability criteria While the bioeconomy must be set on a socially, environmentally and economically sustainable footing, there is a lack of clear and operational sustainability criteria applying to all types of biomass. As of today, there are requirements for biomasses used as biofuels, certification schemes for solid biomass, and a duty to buy sustainable timber for state purchases and buildings, etc. 1 Yet another problem is that the products with which the bioeconomy must compete are not necessarily sustainable or covered by sustainability criteria. 5. Difficulty of moving from research to pilot projects and from pilot to full-scale projects Transition from the research stage to the first pilot and demonstration projects, and not least from pilot and demonstration projects to full-scale industrial production, is difficult for new bioeconomic value chains. The technology must be fully able to compete with the fossil-based products from day one, since there are no provisional niche markets where the development investment can be recovered, as in the case of other economies of technological development. Consequently, the threshold for transition to purely commercial operation is technically high, while the chances of attracting the necessary private seed capital are limited by the difficulty of subsequently recovering development costs through the market. For instance, some value chains give rise to a pronounced need for research or for building pilot or demonstration plants, while others imply a struggle to raise funds for full-scale plants. Moreover, the development of many value chains call for further training at all levels from the unskilled worker to the graduate professional, just as a number of problems related to the working environment may have to be addressed. 1 Government circular No of 25 June 2014 on ensuring the sustainability of timber in state contracts regarding the purchase of goods, services and construction works. The circular lays down a number of detailed criteria for the sustainability of timber. 3

6 Specific recommendations for the here and now The Bioeconomy Panel has the following recommendations for immediate government action, which are perceived as able to help promote the bioeconomy in the short and medium term: 1. The Bioeconomy Panel calls on the government to work intensively for the establishment of an advanced, integrated, industrial-scale biorefinery in Denmark. One requirement for moving from demonstration to industrial production is demand for biobased alternatives to products that are currently made using fossil raw materials. Such demand can be created both politically and through the market. 2. The Bioeconomy Panel acknowledges that special barriers obstruct the development of new industrial bioeconomic value chains and of a few existing ones, such as biogas. Therefore, the Bioeconomy Panel will continuously identify regulatory barriers to bioeconomic development and inform the government thereof, so that this can be analysed in more detail and serve to substantiate decision-making in future adjustment of framework conditions in this domain. In this regard, the government is called upon to look into whether the incentives structure underpins the development of new industrial bioeconomic value chains, or whether, for instance, further support for technological development is needed. 3. The Bioeconomy Panel recommends that more partnerships be established with the participation of public authorities, private sector actors and knowledge centres. These may focus on, for instance, attracting capital (including EU funds and other financial support) for the development of technologies. The government, relevant authorities, industrial organisations, the financial community and businesses can also based on the aforementioned positions of strength forge partnerships with the aim of attracting foreign capital in order to ensure continued development and the establishment of bioeconomic value chains in Denmark. 4. The Bioeconomy Panel calls on the ministries involved to cooperate and coordinate closely in relation to bioeconomic development, and to keep the Bioeconomy Panel informed of such collaboration. 5. The Bioeconomy Panel calls on industrial organisations, knowledge centres and NGOs to support relevant public authorities with knowledge and ideas for criteria capable of promoting public purchases of sustainable bioeconomic products. The Bioeconomy Panel s suggestions for the development of bioeconomic value chains The framework conditions for bioeconomic development are naturally a matter of great complexity, encompassing economic, resource-related and legislative factors and aspects. A host of these are largely beyond Danish control, being dictated by global circumstances such as the market price of crude oil or global weather conditions. Other factors are more readily shaped by the Danish public, since they are regulated by national or EU law. 4

7 Due to this complexity, the Bioeconomy Panel recommends the establishment of a series of principles to guide Danish decision makers in their continuous adjustment of framework conditions 2 in the bioeconomic field. The Bioeconomy Panel s suggestions regarding future framework conditions for the bioeconomy are: 1. Biomass should be treated as a limited resource Given the trend of global climate change, growing population and greater prosperity, the pressure on natural resources is set to intensify in coming years. At the same time, transition towards a biobased economy will increase demand for biomass. Therefore, the use of biomass must be carefully thought through, while priority must be given to food production, resource efficiency and mitigation of environmental stress. The feasibility of increasing the production and accessibility of biomass should also be closely examined. 2. It will take time to develop the bioeconomy, but we have to step into the unknown and learn as we go It is important to acknowledge that new value chains in the bioeconomy will rarely come about in a single leap, but typically step by step. To this effect, it can be advantageous to focus on developing the bioeconomy in the short and medium term, although obviously without losing sight of the more long-term development potentials. 3. The bioeconomy must develop a more resource-efficient and sustainable society In this context, the concept of sustainability should be understood in climate, environmental 3, social and economic terms. 4. Sustainability requirements should be identical for a given type of biomass The effort to address bioeconomic sustainability is to be prioritised. When introducing sustainability criteria, identical requirements should apply to a given type of biomass regardless of its end use. The requirements should, to the extent possible, be drawn up internationally or within the EU. 4 It must be ensured that all stakeholders can have their voice heard in the preparation of sustainability standards. 5. Framework conditions should stimulate the development of new bioeconomic value chains This implies, among other requirements, that framework conditions must: - be predictable, - stimulate the development of new markets, ensure job creation and mitigate the climate and environmental burden, 2 The term framework conditions refers to the overall environment enabling economic activity, which is, in principle, identical for all firms in the sector. Some of the framework conditions are determined by legislation and sector policy intervention programmes, while others concern institutions and economic structures that have arisen as a result of firms and industrial associations choices of organisation and cooperation initiatives. Finally, some framework conditions spring from international influences or from a complex of myriad interacting factors. 3 Including in relation to soil fertility and biodiversity 4 As part of its next thematic focus, the Bioeconomy Panel will look into sustainability criteria, among other issues. 5

8 - create incentives to add value and to increase resource efficiency, - focus on ends rather than means, - take into account that Danish firms need to be competitive in the international market. 6. We have to cooperate across sectors and disciplines to develop the bioeconomy The bioeconomy will be developed in new-found intersections between existing activities and actors, while entirely new actors may also enter the scene. Close cooperation between everyone involved from political, economic, scientific, environmental and social spheres, as well as from society at large is thus vital for the development of the bioeconomy. The National Bioeconomy Panel is an example of such cross-cutting cooperation. 7. We need to strengthen research, innovation and education to develop the bioeconomy Among the requirements for bioeconomic development will be employees with business-relevant training at all levels, including primary producers, people working in processing industries and specialists (including a good research environment), as well as promotion of the development and use of new technologies and modes of production from research stages through demonstration and pilot experiments to full-scale commercial plants. 6

9 Interministerial Secretariat of the National Bioeconomy Panel The Danish AgriFish Agency Nyropsgade 30 DK-1780 Copenhagen V Tel: innovation@naturerhverv.dk 7

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