CASE STUDIES OF MARKET-MAKING IN THE BIOECONOMY

Transcription

1 CASE STUDIES OF MARKET-MAKING IN THE BIOECONOMY 1. Introduction Background Market-making in the bioeconomy Criteria for Case Studies Case Studies Case Study 1: Fostering More Efficient Use and an Increased Recycling of Nutrients from Manure Case Study 2: Cargill Coating Starches Renewable Binders for the Paper Industry Case Study 3: HempFlax B.v. (Netherlands), chosen as an example for the European Hemp Industry by the European Industrial Hemp Association ( Case Study 4: Protein Hydrolysates from Microalgae Case Study 5: Tomatoes Plant Waste Recycling Case Study 6: Crescentino Advanced Biofuels Plant Biochemtex, M&G Case Study 7: Novamont Italian Case Study on Bioplastics Case Study 8: Wheatoleo-Industrialisation and Commercialisation of New Biosurfactants Case Study 9: Sunliquid Technology for the Production of Cellulosic Ethanol from Agricultural Residues Case Study 10: St1 Biofuels - Distributed Bioethanol Production from Biowaste and Cellulosic Residues Case Study 11: Pine Chemicals Industry: Improving the Regulatory Framework in Order to Ensure Continuing Use of Pine Chemicals for Maximal Societal Value Case study 12: Heat Entrepreneurship Case Study 13: Abengoa Waste to Biofuels Annex Contributors to the Thematic Group s Work

2 1. INTRODUCTION 1.1. Background This collection of case studies accompanies the issues paper on Market-Making in the Bioeconomy released by the European Bioeconomy Panel in October The case studies were identified by members of a thematic working group established by the Bioeconomy Panel to provide inputs for the issues paper. The list of people who contributed to the case studies and the thematic working group is provided in annex Market-making in the bioeconomy As a world leader in advancements in bioeconomy research and innovation, the EU is well placed to improve the management of its resources and to open up new and diverse markets in food, feed, energy and bio-based products. As the EU bioeconomy strategy identifies, establishing a more competitive bioeconomy in Europe holds great potential for creating sustainable economic growth and jobs that cannot be outsourced, often in rural, coastal and industrial areas. At the same time, development of bioeconomy markets will help address societal challenges such as food and energy security, natural resource scarcity, the need for sustainable economic recovery and mitigation of the impacts of climate change. As the EU strategy highlights, the bioeconomy is currently worth 2 trillion in annual turnover and accounts for more than 22 million jobs and approximately 9% of the workforce. In the coming years, significant growth is expected to arise from sustainable primary production and food processing. In addition, the development of biorefineries will enable many sectors within the bioeconomy to convert biomass into higher-value every day products, such as food, feed, chemicals, plastics, textiles, pharmaceuticals and cosmetics, which have traditionally been manufactured from fossil carbon sources. However, since the industrial revolution, the rise of the global economy has been dependent on the extraction and use of increasing amounts of fossil fuels. As a result, much of the world s investment in infrastructure and innovation has been dedicated to enabling a fossil fuel based system. Making the shift towards a more sustainable, circular bioeconomy will therefore mean rethinking the previous linear approach of extraction, use and disposal. In this respect, there are many synergies and interconnections between establishing a bioeconomy and developing a circular economy. Development of a resource efficient, competitive bioeconomy will require the creation of new local, regional and cross border approaches between diverse sectors. But while Europe plays a leading role in much of the cutting edge science and technology enabling the bioeconomy, for a number of reasons, it has been much less successful in converting this into commercial and societally valuable innovations. 2

3 Markets have long been recognized as important drivers of innovation. As both the Commission s Strategy for Research and Innovation and its Communication on Industrial Policy recognize, more innovation-friendly framework conditions will be needed in Europe to reduce time to market for new products and services enabling the EU to compete in a worldwide marketplace. Whilst some emerging, green-tech, renewable industries have received significant legislative support for their development, many sectors within the bioeconomy have not. The absence of long term framework support and policy predictability continues to make these sectors unattractive for investment in the EU. At the same time, significant incentives and offers of longer term commitments continue to draw successful industries away from the EU bioeconomy overseas to the US, Brazil, China and South East Asia. Without putting specific market-making measures in place the EU will not meet its target of raising the contribution of industry to GDP to 20% by This report gathers different case studies from the bioeconomy and examines how they are enabled or hindered by existing policies and support mechanisms. It will seek to highlight where such measures help create new markets and, in some cases, where they present a barrier to the development of other smart and sustainable solutions through the bioeconomy. The conclusions touch upon the positive and negative impacts of the costs of inputs necessary in the EU, including raw materials, land, energy, infrastructure, logistics and skills. They also highlight the role of financing, collaboration, technology transfer, demand-side measures and communications in tackling fragmentation across the EU, which will be necessary in order to develop markets within the bioeconomy. As well as highlighting these different aspects of making markets in the bioeconomy, the thematic working group has aimed to ensure that its case studies cover as broad a range of sectors, industries and Member States as possible. There were many additional suggestions for case studies on different beneficial aspects of the bioeconomy, including, for example, case studies on the use of wood in lower carbon, energy efficient construction and the use of bio-based and biodegradable agricultural mulch films for improving agricultural productivity. However, resources available to gather and process information on these were limited and therefore, regrettably, it was only possible to cover certain sectors from within the bioeconomy. Nevertheless, it is hoped that this collection of case studies can be further examined by the Bioeconomy Panel and will some suggestions as to where further information is needed for the future Criteria for Case Studies When selecting and analysing case studies, the thematic working group was encouraged to consider the following questions: - What is the role of different kinds of innovation (technological, financial, process, etc.) in the development of new markets and the transformation of existing ones, and how can public policies best foster innovation in the bioeconomy? 3

4 - What are the necessary conditions for informed customer decisions with regard to bioeconomy? What are the specificities of the B2B and B2C communications? What distinctions can be made between business-to-business markets and business-to-consumer markets in this regard? - What is the role of consumer brands in building new markets? To what extent do they shape and/or follow consumer demand? What is the role of their sourcing policies (e.g. selecting suppliers based on sustainability and other criteria)? - What are the main legislative barriers to the sustainable development of new and existing markets in the bioeconomy? And in what way can legislation play an enabling role in the sustainable development of markets? - How do standards, or the absence of standards, influence market development in the bioeconomy? - How important are other factors such as prices of inputs (raw materials, energy etc.), the existence of appropriate infrastructure and logistical capacity, and the availability of people with the required skills? How can public policies at EU, national, regional and local levels influence these factors? - What are the principle barriers to the scaling up of investments in integrated biorefineries, especially at regional and local level? What is the influence on investment decisions of factors such as skills availability, access to finance, energy prices, and the existence of adequate transport and other infrastructure? 4

5 2. CASE STUDIES 1 BELGIUM 1. Flemish Coordination Centre for Manure Processing and Nutrient Recyling 2. Cargill Bio-based Coatings for the Paper Industry NETHERLANDS 3. Hemp 4. Proteins from Microalgae 5. Tomato plant waste recycling ITALY 6. Biochemtex Lignocellulosic biofuels 7. Novamont Bioplastics FRANCE 8. Wheatoleo bio-based surfactants GERMANY 9. Clariant Lignocellulosic Biofuels FINLAND 10. St1 Biofuels - distributed bioethanol production from biowaste and cellulosic residues FINLAND & SWEDEN 11. Cefic and Arizona Chemicals Pine Chemicals FINLAND & Austria 12. Heat Entrepreneurship SPAIN 13. Abengoa Biofuels from Municipal Solid Waste 1 NB. Where requested, contributors of these case studies had full editorial control of the finalisation of these examples. The case studies reflect the views and perspectives of the contributors. 5

6 2.1. Case Study 1: Fostering More Efficient Use and an Increased Recycling of Nutrients from Manure and phone number of key contact: Emilie Snauwaert, / Viooltje Lebuf, [email protected]; Introduction to the business case Agriculture faces serious challenges with close to one billion people already chronically hungry and up to two billion intermittently lacking food security. With an additional two billion people to provide for by 2050, global food supply will need to increase by 70%. The over cultivation of agricultural land must be avoided to protect the environment and soil fertility as 30% of global land is already degraded and climate change is resulting in a 10-25% loss in productivity in developing countries, resulting in the demand to produce more food on less land. This growing need for increasing production in a sustainable way poses a particular set of problems in terms of the depletion of vital plant nutrients. Phosphorous resources, for example, are finite but they are also essential for plant health and growth. Moreover, 90% of the world s phosphorus reserves are located in a limited number of countries, nearly all of which are outside the European continent, leading to high dependence on imports. Nitrogen, on the other hand, is not a scarce nutrient, however the production of Nitrogen fertilizers from atmospheric Nitrogen does have a significant environmental impact. Each time crops are grown on land they absorb and make use of these essential nutrients. They are then ingested by animals or humans and are in this way are largely removed from the agricultural process. Over time, this means that soils become less fertile and nutrients are sometimes added manually; this can result in an excess of nutrients in the environment and which can lead to negative environmental impacts such as eutrophication of rivers. At the same time, in Europe, a large amount of nutrients are available in animal manure and related products such as digestates, wastes, wastewaters and by-products. As demand for meat and dairy products increases both domestically and for export, many regions will experience an overproduction of manure whilst at the same time their soil nutrient levels decrease through the production of animal feed leading to rising costs and the need for imported nutrients. By closing the nutrient cycle, the problems of excess supply of manure in certain regions versus the scarcity of nutrients in others can be dealt with whilst reducing costs, lowering environmental impact and improving competitiveness of the agricultural sector. The University of Ghent, Inagro (agriculture and horticulture research and advisory centre) and VCM (Flemish coordination centre for manure treatment) are currently involved in a series of EU- and regional funded projects that focus on nutrient recovery from animal manure and digestate. Digestate is the residues left over after the fermentation of a biodegradable feedstock in anaerobic digesters. These projects include ARBOR, which aims at Accelerating Renewable Energy through 6

7 valorisation of Biogenic Organic Raw Materials ; BIOREFINE, which focuses on the recycling of inorganic chemicals from agro- and bio-industry waste streams; and MIP Nutricycle whose goal is to produce green fertilizers from manure and digestate. In all of these projects, adding value for farmers to the end-products and residues whilst reducing the impact of manure surplus is a clear end goal. Several field trials have already been carried out. But the projects also aim to advise policy makers (regional, national and EU), to stimulate transnational collaboration, and to remove legislative obstacles for a more sustainable nutrient and energy cycle. Following the implementation of the Nitrates Directive, different European regions with high livestock density (such as Flanders, Brittany, the Netherlands, Northern Ireland) have sought solutions to cope with manure surplus and the limited possibilities for application on the land. 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. The necessary infrastructure for large-scale deployment of nutrient recycling from manure and digestate will most likely develop once there is a market for the end-products. A priori, the combination of both large scale and decentralised small scale manure treatment seems to be most optimal. The business case In Europe, approximately 15.5 billion worth of mineral fertilisers are used per year. These products have a high carbon footprint due to the high fossil energy requirements needed for the production of fertilisers. In addition, the long-term application of mineral fertilisers depletes the soils of organic carbon. Finally, the prices for mineral fertilisers are increasing. Subsequently, recovered nutrients from manure or digestate can be used as sustainable and economically viable bio-based substitutes for mineral fertilisers. The European Nitrates Directive states that only 170 kg of nitrogen from animal manure can be used per hectare. This is why in some regions, the overproduction of manure compared to the regional nutrient need has forced farmers to ensure manure treatment to reduce its environmental impact. By closing the nutrient cycle, the problems of excess or scarcity of nutrients between European regions could be solved while making farming more competitive by reducing costly manure treatment operations at the same time. If recovering minerals can be made economically viable, Europe would be less dependent on imports of manufactured nutrients and would simultaneously reduce its use of chemical fertilisers. However, several regulations hamper the deployment of bio-based fertilisers. The Nitrates Directive defines a chemical fertilizer as a fertilizer manufactured by an industrial process and livestock manure as waste products excreted by livestock, even in processed form. Recovered nutrients from manure therefore cannot be used as a chemical fertilizer, because these products have the same status as animal manure, and cannot be used above the threshold of the authorized 170 kg nitrogen/ha. Subsequently, these recovered nutrients have limited economic value due to the 7

8 barriers to their market entry. Today, the fertilizer regulation (EG 2003/2003) is under revision and could increase the nutrient valorization possibilities of manure and digestate. Apart from these legislative challenges, the technological aspects of recycling valuable minerals still need some further development, although several techniques are already available at full-scale (advanced separation, NH 3 stripping and membrane filtration). While (in Flanders at least) there are only a few companies that have already invested in an installation for nutrient recovery, the investment costs essentially depend on the chosen technological pathway. Advanced separation to euro (centrifuge) Investment for Technology Current N of installations (Flanders) NH 3 stripping Membrane filtration XX 3 5 The end-products generated thanks to these technologies also need formal validation in terms of agricultural value, mineral losses to the environment and stability, etc. However, this has already been done in different EU- and regional funded projects through the set-up of field trials using these new fertilizing products as substitutes for chemical fertilisers. If nutrients can be recycled from these streams, the sectors of agrifood, water purification, chemical processing, agriculture and biogas industries would also be very likely to benefit from the initiative. Conclusions In light of the fact that current legislation inhibits the use of recovered nutrient products from animal wastes as a mineral fertilizer, there are no incentives or support for the scale up and deployment of this initiative. This is all the more regrettable considering that public policy has already given some research and innovation-based funding towards developing the necessary technology: Europe has already funded different research and dissemination projects focussing on nutrient recovery from manure and related products. Administrative bodies also seem interested in the use of alternative, bio-based products instead of chemical fertilizers. Subsequently, a revision of national and EU policy related to the use of manure products is needed in order to stimulate an increased recycling of nutrients from manure and digestates. The technology for nutrient recovery has already been developed at full-scale, but it is not yet frequently deployed. The necessary infrastructure will emerge once the end-products have an economic value so that a market can be created and investment becomes more attractive. However, in Europe, there are already several manure and digestate processing plants deploying these innovative techniques. If the product (recovered minerals) can be marketed, the possible challenges concerning these factors can be overcome. Furthermore, the recovery of nutrients can be done by relatively low-tech technology (in contrast to high tech biorefinery). At a European level, a revision of the definitions of chemical fertilizer and livestock manure in the Nitrates Directive may enable the use of recovered products from manure and digestate as a 8

9 chemical fertilizer. In addition, consistency between the Nitrates Directive and the EC Regulation 2003/2003 is necessary to create a level playing field between chemical fertilizers and the manure based alternative. As for the regional level regulation (Flanders), it could be argued that recovered nutrient products from manure and digestate are a different category than animal manure, mineral fertilizer or other fertilizer. Barriers - lack of investment in necessary infrastructure - need for amendment of Nitrates directive - lack of awareness by farmers of potential for nutrient recycling Benefits - potential to save energy otherwise used in the manufacturing and import of mineral fertilisers - more efficient use of nutrients in manure - the potential for reduced use of chemical fertilisers - the additional revenue stream for the livestock sector - innovative technological pioneering throughout Europe - solution to the environmental problem of excess manure - Potential benefits throughout value chain including for the agri-food, water purification, chemical processing and biogas industries Enabling factors - EU research and dissemination funding for projects focusing on nutrient recovery - Surplus of feedstock in the form of manure - Interest in initiative by public administrations - Possibility for funding of infrastructure development through regional and rural development funding 9

10 2.2. Case Study 2: Cargill Coating Starches Renewable Binders for the Paper Industry and phone number of key contact: Katrijn Otten Introduction to the Business Case Developments within the paper making industry are being driven both by the global economic downturn and by the higher degree of consolidation coupled with overcapacity in the graphic sector. Innovative technologies have been developed and deployed, with the focus being on cost optimization at maintained high quality, whilst creating more sustainable solutions based on renewable resources. Cargill has developed high performing and innovative solutions for paper coating applications which successfully replace petroleum based synthetic binders and chemicals thus enabling cost and energy optimisation of paper making processes. Coatings usually applied in the paper and board industry are suspensions composed of pigments and latex as synthetic binder used to fix (or bind) the pigments to paper. These developments support the need for renewable papermaking processes in the creation of more sustainable products. Cargill has almost 50 years of experience within the industry, creating a solid foundation of understanding and advanced expertise. Based on this experience the company has continuously developed its product range and portfolio in order to use energy efficiently, using the lowest amounts of chemicals possible in the production. This has allowed Cargill to meet evolving and demanding environmental standards. Made from renewable resources, Cargill s coating starches are produced from cereals and they can replace the traditional fossil fuel based binders. The products are 100% biodegradable, chlorine free and support more sustainable papermaking processes. There are two main centres involved in these developments, bridging the gap between research and the market; the Application and Development Centre in Krefeld, Germany and the site in Vilvoorde, Belgium focusing on product and process development for industrial starches. Additional collaborations with suppliers, universities and scientific institutions have also aided the development of more sustainable products in the paper industry. The Business Case Since Cargill set up its Application and Development Centre in Krefeld, Germany in the mid-1960s, they have been a key player within the field, and have advanced expert knowledge in research and innovation within the papermaking industry. Specifically, Cargill has a deep understanding of various coating technologies which is a combination of production processes and the actual machinery used to apply the coating to the paper for improving printability of the paper and thus its quality and value; this is the basis for their success as a leading manufacturer of coating starches. When partnering with Cargill, customers gain access to a team of experts who combine a unique breadth of knowledge and experience. Their local dedicated sales and technical teams are regionally connected and organized to best meet customers needs and to provide a reliable service network around the region. 10

11 Paper making productions and their innovation Sustainability is important, not just due to the need to keep costs of inputs to a minimum but also to satisfy customer needs and the transition to a more sustainable, resource efficient bioeconomy. The challenge today is no longer simply to provide customers with goods and service, but also to do this with minimal impact on the environment. Made from renewable resources, coating starches such as C*Film, C*iCoat and C*iFilm series are cost effective solutions allowing the replacement of petroleum synthetic binders. Cargill products are developed to meet the technical requirements in terms of production efficiency and quality. Cargill has developed some coating starch series that are specially designed for high solids coating. These high powder solids captured the imagination of coating technologists, who have known about the advantages of high solids coating for a long time. In the coating area there is excellent rheology or fluidity (which is a physical test method indicating the flow properties of the coating during the application process which has a high influence on its processing at the normally high speeds) of the coating starches which perfectly meets the requirements of this demanding application. Advanced instrumentation techniques have helped in the understanding of rheological behaviour of starch, its interactions with other coating colour components and its interactions between the coating colours and the base paper. Mastering this complexity allowed Cargill to develop products that provide solutions for the different coating processes under a variety of conditions. There are many integral processes in the development of novel technologies within the paper making industry including desk and laboratory research, pilot schemes and customer testing. Throughout these processes, teams of senior managers from the research and development, sales and productions teams govern the process. Based on the market assessment and the ability to identify customer requirements, market needs are identified and the focus is on innovation activities. Economic and market challenges For all products from renewable resources the cost of raw materials is an important competitive factor. But the use of renewable resources also implies that cereal farmers will continue to be an essential partner in the bio-based value chain. In addition to the feedstock, because starch production, in general, is an energy intensive industry, the cost of energy is the second most important competitive factor. The economic and market challenges faced by the European paper industry over the last years have been analysed by various interactions with customers, institutes and universities. Results have been subsequently validated, prioritised and converted into new product development activities which have led and will continue to lead to new improved products that were introduced in the market enabling higher replacement rates of synthetic components. Due to the significant investment costs in machinery the paper and board industry needs to run at high machine utilisation rates in order to remain profitable. Therefore, new products and solutions have to be proven before they can be implemented in production, to avoid the risk of production downtime. This validation process can be very time consuming and intensive for the industry, requiring good knowledge and planning and involves extensive lab and pilot scale testing. 11

12 Creating and maintaining new and novel networks and connections is an important part of the successful development of new more sustainable products and processes. In this case, collaboration with other innovative suppliers to the industry, providing a constant technology feed to the pipeline of projects executed together with other companies, universities and scientific institutions, was essential. Cargill s starch operations are spread across Europe and serve the customers base from the closest location, helping to ensure that supply chains and transport distances from feedstocks to processing plants to printers and customers are kept as short as possible. This helps demonstrate the necessary diffuse nature of bio-based value chains which is distinctively different from a fossil based linear model. Conclusions Cargill s coating starches are made from renewable raw materials, are biodegradable and chlorine free. These coating starches are replacing petroleum based binders to make the papermaking process more renewable, more resource efficient and more sustainable. These innovative solutions help support the need for greener papermaking processes and are relevant for all paper making industries across Europe. Barriers - Volatility of raw material prices and high energy prices - Lack of public co-funding for pilot and demonstration plants Enabling factors - Increasing consumer demand on recyclability or compostability of end products, could help increase the focus on the use of bio-based materials in paper and board industry (consumer demand could play a factor). - The development of standards around bio-based content for paper would assist in the increase uptake and use of coatings from renewable, rather than finite fossil based resources. - Increased access to public funding for research and development activities and pilot plants would help pave the way towards the market place for new and innovative products - Drive to use renewable resources over finite ones - Potential for adding value to the agricultural supply chain 12

13 2.3. Case Study 3: HempFlax B.v. (Netherlands), chosen as an example for the European Hemp Industry by the European Industrial Hemp Association ( and phone number of key contact: EIHA Managing director Michael Carus, Introduction to the business case HempFlax aims to reintroduce industrial hemp for the production of sustainable and affordable natural fibres and shivs (woody core). In the early nineties a Dutch entrepreneur learned about the possibilities of industrial hemp. Having discovered the Netherlands' proud and long history of hemp growing and processing as well as its ecological value, he found his purpose: to reintroduce an environmentally friendly, economically sound, traditional crop to his homeland and then to the rest of the world. With this in mind, Ben Dronkers established the HempFlax company in In 1994, 140 hectares (343 acres) saw HempFlax' re-launch hemp in the Netherlands. For a crop that had not been produced for 50 years fundamental adaptations to harvesting and processing machines were required. Like any plant, hemp has specific needs for planting and harvesting but the equipment available at the time could not meet these needs. Much time and money was and still is spent on research and development to adapt the equipment to the highly specific requirements of the tough, fibrous stalks of the hemp plant. Cannabis sativa L. is the scientific name for the hemp plant. Cannabis is a tall, woody plant that will grow in practically any climate. There are different kinds of cannabis. Certain varieties produce compounds that act as medicinal or psychoactive substances, whereas others with virtually zero drug content produce mainly fibre, shivs (woody part of the stem) and seeds. We call these varieties with little or no drug content under the collective name Hemp. It is the non-psychoactive cannabis varieties that are grown as a source of fibre, wood and seed. After processing, these parts of the Hemp plant are used in a number of industrial products. Since the early nineties Hemp is a favoured as crop for traditional crop rotations. Hemp needs less input and gives 13

14 high yields without the need for any agro chemicals at all. This is rare in agriculture today. Fertilization of the soil is maintained mainly by manure from livestock, artificial fertilisers are often not necessary. Hemp fits perfectly into the normal crop rotation scheme due to its ability to improve soil structure and leaving perfect conditions for the following crop. Farmers have reported their best yields of cereals following a Hemp crop. As harvesting is done with specialised equipment the harvest is organised by HempFlax The company and appointed contractors have invested a great deal of money in specialized harvesting equipment. The grower is required to cultivate and fertilize the soil before sowing; seeds are provided to the grower by HempFlax. The best moment for sowing is early May when soil temperatures and humidity are optimal. Hemp likes a warm, moist, free draining soil for a good start in life. The harvesting starts in early August with mowing the crop. Special Hemp mowers cut down the crop and reduce the stems into 60 cm lengths. After cutting the stalks are left to cure (retting) on the field where the bast fibres will be loosened by the effect of rain and dew. During this time the stalks are frequently turned by a machine called a Hemp turner specially built for the job. When the stalks have been sufficiently retted they are picked up by an agricultural baler and pressed into neat square bales for economic transport and storage. Ready for further processing the bales are put in dry stores in the warehouses in Oude Pekela (Groningen, NL). Because HempFlax manages the whole harvest the grower only needs to invest 4 hours of labour per hectare compared to 8 hours per hectare for growing wheat. Advantages: - Labour efficient - Soil improvement - Zero chemicals use - No artificial fertilizer needed - Excellent weed control - Good for crop rotation or continuous growing. - Opportunities in Organic Situations Today HempFlax is cultivating Hemp in the Netherlands, Germany and Romania on a total area of 1200ha. Hemp fibres for innovative bio-based products Hemp fibre from the hemp plant can be used for innovative bio-based products such as manufacturing parts in the automotive industry, as well as insulation and construction materials. 14

15 HempFlax involves private owners via holding and local farmers. Hemp production and processing activities started in the Netherlands (Oude Pekala) in The company has continuously expanded since then, growing in North East Holland, North West Germany and also Romania since Case from Hemp and Kenaf fibre and PP Hemp fibre insulation material Hemp chair from Hemp Fibres and PP Door panel from Hemp fibres and PE 15

16 However, despite its environmental benefits and economic potential, hemp is not a crop that has been produced for industrial purposes for 50 years, until HempFlax started. As a result, in order to increase production and meet growing consumer demands for hemp-based products fundamental developments and modernization were required throughout the entire production chain. This included the growing, processing and marketing phases which had to be done over a short period of time. Owners and investors consequently suffered substantial financial losses in this initial phase. Indeed, the total investment cost to date amounts to 12 million. In addition to the necessary adaptation of the existing production and processing machinery, certain infrastructure developments were needed. As HempFlax s goal was to limit the growing area to a radius of 80km from the processing point, dedicated factory storage spaces for both raw material (hemp straw) and finished products were built. The construction of a decortication factory and fibre refinery as well as storage and packaging were also required. The business case Consumers and industry are becoming increasingly aware of the environmental impact of their activities. However, as there is still a need to maintain and improve living standards, the demand for products which are both as effective and which demonstrate sustainability, is on the rise. As a result, markets are being created for those producers who can deliver affordable, sustainable, high quality bio-based products. The automotive industry s commitment to lowering the carbon footprint of cars and to making them more sustainable has enabled the uptake of natural fibres like Hemp. These have applications for light-weight construction in bio-composites which ultimately lower fuel consumption. Unlike the United States, Europe allows industrial Hemp to be grown in most of its member states. In addition, a fibre subsidy was granted to producers for several years. This was especially important in the start-up period and enabled producers to decrease feedstock costs. Today however, the dedicated subsidies have been discontinued prompting fierce competition for cultivation areas with heavily supported energy crops. The HempFlax initiative came into play at the right time because there was a need for a new cash crop that could also fit well in the crop rotation (Hemp has a deep rooting system, has a favourable influence on the soil structure and curtails the presence of nematodes and fungi. After cultivation, the soil is left in optimum conditions (tilth) due to the complete weed suppression following on from the high shading capacity of hemp. A study by Bócsa and Karus 1998 reports percent higher wheat yields after the cultivation of hemp). At the time of the start-up, the region experienced low costs for main crops like potatoes, sugar beet and wheat. However, the initiative has also faced a series of challenges on its path towards market access. The 50 year gap in hemp cultivation and processing has prompted HempFlax to modernise not only the equipment to current needs but also reinvent the entire Hemp industry. This included the introduction of new types of products where no quality standards were in place and the adaptation 16

17 of the process to fit the modern customers needs. Considerable time and money has been spent on addressing these issues, allowing the start-up losses to soar. In addition, very few supportive measures were in place at the time of the company s launch. There were frequent discussions about modifying the End of Life Vehicle directive in favour of green materials but, to date, this has not been accomplished. While a German market introduction programme for natural insulation materials has existed in the past, some current Members State regulations pose significant barriers in terms of market access. Nevertheless, HempFlax has grown to be a professional hemp processing company currently employing 22 people. The company has enabled the development of state of the art Hemp (bast fibre) decortication and fibre separation technology (breaking the woody core, separation of bastfibre and shivs (woody core), cleaning of fibres) which is now available on the market. In addition, contracting 1200 ha of hemp in the Netherlands, Germany and now Romania provides an important source of income to farmers and benefits the rural economy in general. The challenges for B2B and B2C communications on HempFlax mainly concerned the fact that in the early nineties until early 2000, hemp was stigmatised because it was associated only with recreational drugs. Subsequently, processors have successfully differentiated themselves from this other use. Conclusions Communication and awareness raising: In order to achieve the overall objective of using industrial hemp as a sustainable, bio-based alternative for non-renewable manmade fibres, several communication efforts were necessary and, indeed, are still ongoing. Communication and dissemination are helping to raise awareness about natural fibre materials with both industry and to the public. Today, hemp-fibre composites are used in many middle and high-class automotives. Whilst this market has the potential to expand further, other sectors such as the furniture industry could also make good use of this new material group. Unfortunately, these sectors are currently unaware of the existence of such a sustainable, renewable bio-based alternative, making communication on the subject all the more necessary. Standardisation and authorisation: As an emerging sector, another significant challenge that the Hemp industry faced was that tests and standards, in both the automotive and the construction industry, were originally set up for conventional materials but they were not in place for natural materials. This lack of evaluation criteria initially posed a barrier to market entry for hemp products as these are necessary for industry to have assurances of the quality and safety of products and materials. Today, in the case of hemp fibre and shiv based products, there are several technical hurdles in the field of standards and regulations: - Lack of specifications which results in prejudices against bio-based properties - Irrelevant or misleading information for the consumer - A lack of compliance with less important specifications due to the intrinsic, physical properties of bio-based products - A lack of incorporation of bio-based alternatives due to a low level acceptance or awareness 17

18 Support for Innovation Innovation plays an important role in enabling new functionalities for fibres to meet the quality standards of the market. Innovation can, for instance, help provide extremely low weight biocomposites for automotive interiors such as door panels made using natural fibres which have only 40% of the area weight of glass fibre reinforced plastic alternatives. Adapting fibres to market needs, so that they can be used in conventional applications and technologies, has increased their market potential tremendously. In addition, the whole supply chain benefits from the developments in the natural fibre sector because it encompasses a large number of actors, from farmers to processors, to Tier 1 companies and Original Equipment Manufacturers. Today, every European car contains an average of 2 kg of natural fibre, but the technical potential reaches up to 5 times more, amounting to tonnes of natural fibres per year. Tackling Regulatory Barriers The increased use of hemp as an insulation material is currently hampered by individual Member State building regulations and a lack of coherence in policy. For example, current legislation does not recognise some of the intrinsic benefits of bio-based insulation and imposes unnecessary limits to its use. Legislation could, instead, play an enabling role in creating new markets for bio-based products if it considered the energy savings throughout the entire life cycle of a product, rather than focusing only on the use-phase. In addition, if legislation was such that the use of renewable materials was, to a certain extent, compulsory, bio-based alternatives would have a real market opportunity. Cost barriers levelling the playing field With regards to the price of inputs, the cost of raw material is one of the most important price components of bio-based products. The heavy focus on subsidising bioenergy has had a hugely increasing effect on the cost of growing. Farmers indeed benefit from a higher income if they grow biomass crops for bioenergy purposes rather than for bio-based products. Unfortunately, the great potential of bio-based products, including those produced from hemp, cannot be realised due to this existing political framework. On the other hand European hemp fibres are completely unprotected by the competition from imported exotic fibres like jute, kenaf or sisal, which may not even show a sustainability certification like imported biofuels. The social and environmental standards of these tropical fibres can be low. The EIHA is calling for a binding sustainability certification for all imported (and domestic) natural fibres to guarantee fair competition. Conclusions Overall, hemp processing is based on one third technology and two thirds operator skills. Investment decisions are however also based on the transportation distances between the growing region and processing installation. Subsequently, putting in place the necessary infrastructure for processing is required in feasible growing regions such as Romania for example. 18

19 EU, national and regional public authorities hold at their disposal many possible instruments to support market development. These include investment support, market introduction programmes, support for communication and dissemination, public procurement and incentives to use materials with lower carbon footprint in automotive, construction and consumer goods. As for the more specific case of natural fibre products like hemp, modifying and adapting existing regulations to the properties of natural fibre products (especially, but not only for insulation material), the development of new norms and standards, as well as including natural fibre products in the emission trading system could drive the market uptake. The bio-based material market is at the heart of the bio-based economy and hemp fibres are an important part of this economy. The combination with bio-based polymers for fully bio-based biocomposites is especially relevant in that context. A level playing field between energy and material uses of biomass is essential and existing incentives for biofuels and bioenergy should be opened for hemp-based products too. The main barrier for the scale up of investment in integrated biorefineries is the missing market opportunities for by-products like hemp shivs (woody core, pith) and dust. In the absence of a viable commercial and local market for hemp by-products the business case cannot be profitable. Subsequently, incentives for the development of new markets for these by-products should be developed. A prime example is the development and use of shiv in the construction market. The marketing and development of products like Hemcrete as a construction material should be stimulated in other EU countries, like it has been done in France and the UK. A healthy growth of the EU hemp industry with reliable suppliers of hemp fibres and other hemp products to the various markets will enable the successful integration of natural hemp fibres in the value chain. For instance, a continual and reliable supply is of utmost importance for the automotive industry. The insulation and construction industry as well as furniture and the whole reinforced (biobased) plastic market also hold great potential. Barriers - The need for direct structural funds towards putting in place infrastructure for hemp cultivation and processing in member states with high potential to contribute to this market - The need for investment support, market introduction programmes, support for communication and dissemination, public procurement and incentives to use materials with lower carbon footprint in automotive, construction and consumer goods (eg. through Horizon 2020 and regional smart specialisation strategies) - The need to modify and adapt existing regulations to the properties of natural fibre products (especially for insulation material: fire rating regulations, insulation value, heat transfer delay, regulation of moisture) as well as conducting high quality LCAs. - The need to develop new norms and standards, as well as to include natural fibre products in the emission trading system ETS) - The need to level the playing field between energy and material uses of biomass: existing incentives for biofuels and bioenergy should be opened for hemp-based products too - The absence of incentives for member states for the development of new bio-based markets (directives and bans in construction and insulation due to GHG reductions and for mulch 19

20 films to avoid micro-particles from fossil plastics films); these and additional instruments have to be evaluated. Benefits and enabling factors - Non labour intensive creating higher profit margins within the value chain - Potential for soil quality improvement - Zero chemical use or artificial fertilizers not needed - Good potential for crop rotation and continuous growing maximising land use efficiency - Numerous applications as materials where non-renewable feedstocks would otherwise be used - Applications in food and feed sector - Compatibility with organic farming 20

21 2.4. Case Study 4: Protein Hydrolysates from Microalgae and phone number of key contact: Dr. Nieves Gonzalez Ramon, Feyecon, +31 (0) Introduction to the Business Case Proteins are of major importance in human nutrition and the lack of them is one of the biggest factors in malnutrition. Proteins that are used as a food additives or supplements are currently produced from whey and milk sources and can therefore provoke milk protein allergies. Proteins obtained from whey and milk sources have also been shown to have a higher carbon footprint than proteins isolated from plant-based origins. Microalgae have been identified as an alternative source of protein, although initially the availability, high cost of production and difficulties incorporating the algal material food preparations hindered the use of this source. More recently, increased availability of algal biomass and the development of methods to extract other interesting components with the proteins, have balanced the initial high growing and harvesting costs. Comprehensive analyses and nutritional studies have demonstrated that algal proteins are of high quality. The amino acid composition of the proteins from algae shows a more balanced proportion of the essential amino acids than other currently produced vegetable proteins. Furthermore, algae do not contain any substances with detrimental nutritional effects, providing a niche in the market. In 2010, a project in the Netherlands to develop the large scale production of the algal species Spirulina (that contains up to 60% protein) was initiated. Spirulina is a good example of a high nutrition food that can be grown quickly with low energy demands in comparison to other natural products such as carrots and spinach (1 g of Spirulina and between g of carrots/spinach, provide the same amount of micronutrients and Spirulina is cheaper to produce). One of the main consumer markets of the protein hydrolysates from Spirulina is in the sports industry, for the increased formation and repair of muscles and bones after exercise. The Business Case From the numerous species of microalgae available, Spirulina was chosen because the downstream process of protein extraction is more economical in comparison to other species because they lack a hard cell wall, facilitating extraction of the proteins. Also, unlike other species, Spirulina is one of the few species of microalgae that is easy to cultivate as a monoculture because it grows at a high ph, which helps to avoid contamination in large scale cultivation systems. The scaling up process required investment in simple stainless steel tanks with mild heating (up to 50 C) and equipment for protein separation and analysis. To date, research and innovation in Industry, have neglected microalgae strains because investments into the basic microalgae research was not producing high business benefits. 21

22 Microalgae culture in open pond Protein hydrolysates and bioactive peptides have an immune modulatory action that can benefit the immune defense system and the digestive tract. This contributes to the growing demand for these products as alternative nutrients in the food and food supplement market. The proteins extracted from Spirulina are considered biologically complete, providing all eight essential amino acids in the proper ratios and are in a form that is five times easier to digest than meat or soy protein. The number of products that can be made from algae is extremely broad due to the large variety of species and compositions. Spirulina has a bulk price range from 5-10 Euro/Kg of dry weight for supplies above 500 Kg. Spirulina and the protein hydrolysates that can be extracted have numerous product applications including: - Feed for livestock and aquaculture and as a fertilizer - A water-holding agent in meat products to improve moisture - Replacement of additives such as E450, E451 and E452 - Protein supplement replacements for hypoallergic milk (hypoallergic milk is available on the market with the product being sold at euros/kg; the global production was tons in 2007 with a market of 6 billion euros) - Food additive applications to increase shelf life by acting as an emulsifier or as a foaming/ dispersing agent - Protein and nutrition supplements in the sports industry (pre-digested proteins that can be taken up directly by the body allowing faster muscle recovery after intensive sport) Currently there are no large scale European producers for Spirulina. The production of microalgae is compatible with national needs, as food research in the Netherlands is an established priority. The production of protein hydrolisates from algae has strengthened the diversity of products that can be obtained from the bio-based value chain and render direct benefits to the aquaculture and preventive health sectors. This project benefited from the Food and Nutrition Delta research funding programme in the Netherlands. Challenges within the industry Due to the physical and biological properties of microalgae, the development of tailor-made processes for the extraction of the proteins has been essential. In order to determine the economic viability of such processes the costs and availability of microalgae as a raw material, the preparation of protein hydrolysates from algae biomass and the economic evaluation of the full process have been investigated. There is an estimated yield of 30% in the final product in the case of Spirulina and therefore revenues of such volumes are conservatively estimated at 15000/Tonne product. Actual 22

23 retail prices may be much higher, but should also consider costs of logistics, distribution, marketing and retail. Overall, it is estimated that, after protein extraction, 30% of the remaining algae biomass can still be further used as fertilizer or for biogas production. Issues that need to be overcome for marketing of the protein hydrolysates from algae include the lack of texture and consistency of dried protein hydrolysates biomass from algae, the dark green colour of the proteins and the slightly fishy smell that is sometimes undesirable for food industry and customers. Currently there are only a few commercial algae-based products available due to poor marketing and the economic, legislative and administrative barriers of getting new products approved by regulating authorities; specifically the EU Novel Food regulations. Furthermore there are commercial barriers due to lack of investments in large-scale production facilities. Therefore, despite the potential for protein hydrolysates from microalgae on the market, this nutrient source has not gained significant importance as a food or food substitute to date. Results/Conclusion There are numerous measurements that will influence the industry in the future, including: - The production of a uniform framework for the launching of a new product in a plurality of countries or regions would aid market development in the bioeconomy for the products such as the protein hydrolysates from algae. - Homogeneous market legislation globally (such as in Europe, US, Japan, Emerging economies) should be a priority in order to develop new markets for the microalgae and their productions. - Investment decisions within the industry are directly affected by both the availability of a skills workforce, and access to initial finance for research and development - By amending public policy such as novel food regulations at EU, national, regional and local levels the market uptake of microalgae utilisation could be driven forward. Barriers - Novel foodstuffs regulation - associated costs of seeking approval - Lack of financing for deployment of process particularly for research and development pilot plants - Technological barriers to production of more consumer-friendly product (colour and taste) - The need for a pan-european marketing strategy Benefits and enabling measures - Lower carbon footprint than other proteins - High in micronutrients with health and immunity benefits - Easier to digest than meat or Soy proteins - Regional R&I funding in the Netherlands - Applications in food and feed sectors 23

24 2.5. Case Study 5: Tomatoes Plant Waste Recycling and phone number of key contact: Dr Leon A. Mur, Managing director Introduction to the Business Case The Netherlands has a world leading horticultural sector which produces and supplies much of Europe s vegetables with 50% of Europe s vegetable growers based in this member state. One of the main crops produced is tomatoes which are normally grown in greenhouses where the plants are trained vertically to grow to an average of 20m in length. Once the tomato crop is finished, in around October or November, there is a large amount of plant waste remaining in the form of tomato plants and stems. Disposing of this waste has, historically, represented a cost burden to vegetable growers who have to pay for its removal either for incineration or composting. In the case of composting, as the region has an abundance of organic waste from the horticultural industry, there is little additional value to be gained through the production of compost as a side stream Therefore, a collective of organisations was formed to create new value chains by find ways to use this waste stream more innovatively. This case study represents an integrated approach to isolate and/or convert the organic waste stream into products such as food, fibers, packaging and crop protection products (Figure 1). Figure 1. The current sector: Biobased production pipeline from tomato by-products 24

25 The Project Partners Numerous sectors and companies were involved in the industrial development of the tomato-based by-products including; Smurfitt Kappa; Provalor; Koppert Biologics; TNO; Wageningen University; Biobase Westland; The Greenery; various tomato growers; the food industry; the packaging industry and recycling companies. Development of the project The collective of companies, institutes and academics, worked together to develop innovative solutions in pre-processing technologies and screening methods to test for valuable bio-active compounds in the tomato plant waste. The different wastes that were considered included fibres from the plant stems, fluid, also from the plant stems which is rich in antibacterial agents and the tomatoes themselves which would otherwise be discarded if market price fell too low or if the tomatoes did not meet retailer/consumer requirements in terms of quality and appearance. The cooperative focused on developing integrated approaches centered on development of strong value chains and creation of biomass hubs to minimise the cost of transportation of biomass. To measure and evaluate progress different objectives were set. These included the development of feasibility studies to analyse technical development and economic viability; market research; business modelling of bio-based products in new supply chains; the development of communication strategies; trials of new products on the market and the co-development of strategies between growers and retailers. It was also necessary to invest in infrastructures for the collection, storage and refining of the organic waste streams. Communication strategies employed to raise awareness of the initiative and its products included 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. Furthermore, the concept of turning waste streams into food or feed products was a difficult to communicate to the public who are wary of the concept. At the time of publication, the project is approximately at half way point with the time frame running between The initiative required an investment cost of approximately 15 million. Project Benefits: - Sustainable supply chain development - Production and use of natural compounds for crop protection - Conversion of costs into revenues - Production of foods associated with health benefits (fibres) - Contribution towards the development of a circular bioeconomy - Additional business model for horticultural industry- increased profitability Barriers: - Currently, the use of organic waste for food or fibre (materials) products is not possible due to legislative barriers - Restricted access to finance, infrastructure (efficient transport of organic waste and intermediates), stability and cost of energy prices represent significant challenges 25

26 - Ensuring a constant supply of biomass of consistent quality is a challenge when producing bulk products from seasonal feedstocks - Standards have a direct effect on the price of bio-based products; if sustainability standards are higher and require more resources to comply with for bio-based products than for conventional products consumers and end markets are not willing to pay more. - Prices of input materials and processing costs are crucial for the successful production of biobased products. Enabling factors: Public policy has also helped foster innovation through national and regional funding for projects within the bioeconomy and through the support of industry seeking sustainable, cost effective solutions. For example the Dutch government and EU are supporting the feasibility (technological and economic) studies and the Dutch government is helping to remove existing regulatory barriers. 26

27 2.6. Case Study 6: Crescentino Advanced Biofuels Plant Biochemtex, M&G Key Contact: Piero Cavigliasso Introduction to the Business Case The Biofuels market in the EU is primarily driven by the Renewable Energy Directive (RED) and the Fuel Quality Directive (FQD), which aim to obtain a 10% binding target for renewable energy in transport by 2020, and reduce greenhouse gas (GHG) emissions by 6%, respectively. According to the RED, by 2020 there will be a demand for approximately 30 million tons per year of biofuel in the EU. To meet these targets, innovative technologies have been employed to develop and produce advanced biofuels from sustainable biomass. The cellulosic ethanol initiative which is presented in this case, was conceived to appraise the whole value chain from field to tank. The concept behind the business model, developed by Biochemtex, was to build a plant where biomass is available, allowing full compatibility with local needs. The feedstock used to produce cellulosic ethanol is locally sourced from agricultural residues such as wheat straw, rice straw or from energy crops grown on marginal lands. The possibility to utilise marginal and partially contaminated land to grow perennial non-edible crops also provides an effective solution to improving soil quality and fertility. This business model allows farmers to generate new net incomes in addition to the conventional food production. The Business Case There have been significant advances in the biofuels industry in both the EU and the US over the last decade. Due to significant development of innovative solutions in the biofuels sector across the EU, the EU is now a frontrunner for biofuel production in the world. This was enabled by industrial scale initiatives of leading EU companies such as BetaRenewables, Abengoa, Dong and Clariant. Furthermore, the development of the world s first commercial scale cellulosic ethanol plant developed by Biochemtex in Italy (Crescentino) hugely benefitted the industry. This plant, which is managed by IBP and BetaRenewables, is capable of producing up to tons per year of cellulosic ethanol. In this plant, a feedstock mix of wheat straw and arundo donax are used to produce ethanol. Rice straw (which is considered to be a waste product in the local area) is also going to be used in the near future. The goal is to demonstrate the compatibility of cellulosic ethanol production with the local territory and its agricultural schemes and habits, and avoid impact on exhisting uses of biomass, and in this way prevent its price fluctuations. Research and development and technological leadership were crucial for the progression of the project and for the construction of the biorefinery. Furthermore, financial support which was provided by both private investors (Biochemtex) and by public funds (Piedmont Region, Italian state, EU) was crucial to the realisation of this transformative sustainable development. The construction of commercial biorefineries, particularly those that are the first of their kind is extremely capital intensive. Therefore it would not have been possible for Europe to be the first region to realise this ground-breaking development without significant public and private contributions. 27

28 Infrastructure The plant was built on the brown field site (formally an industrial area) of an abandoned steel works, with most infrastructures already present. The site was adapted accordingly and took approximately two years to build. The total investment cost of the infrastructure development was more than 150 million euros. The ground-breaking nature of this renowned project has attracted a great deal of interest both within the EU and from many other nations who have recognised the potential of ligno cellulosic bioethanol production. The inauguration event in October 2013 attracted more than 800 visitors globally with predominantly business to business interactions that resulted in positive feedback. The positive impact of cellulosic ethanol production are highlighted below - Utilization of locally sourced sustainable biomass (rice straw) that would otherwise be considered waste, resulting in high energy efficiency - Local farmers have the opportunity to generate new income streams from the utilisation of marginal land that would not otherwise be used, and to make a profit from rice straw, which has previously been considered a waste product. Many farmers around the world simply burn rice straw when present in excess quantities causing additional CO2 emissions and local air pollution problems - Huge GHG emission savings (up to 80%) vs fossil fuel - The creation of highly technical jobs which cannot be outsourced in the EU s world leading industrial biotechnology sector - Technology innovation and development of proprietary expert knowledge (patented) which attracts international interest and encourages investment in sustainable technologies - 100% Water recycling - Regeneration of an industrial wasteland simultaneously revitalising and bringing prosperity to this region. Challenges in the development of the bioethanol industry Throughout the development process, the cost of raw materials was a very important factor, as was the logistical transport of plant material from the field to the biorefinery. Additional costs that were carefully considered and calculated included purchasing of enzymes/yeasts and maximising the subsequent process efficiency. In the future, efficiencies may be improved by i) obtaining a higher product yield from biomass; ii) by the development of new processes that would enable the utilisation of broader feedstock such as agricultural residues, Municipal Solid Waste (MSW), industrial wastes and by developing additional applications for the bioethanol that can contribute to the bioeconomy, such as in the biochemical industry. (For example bioethanol is currently being produced in the EU for the production of high value chemicals and pharmaceuticals.) Aside from the previously mentioned RED and FQD targets, there are no other specific national measures or incentives in place to help foster the development of biofuels and to help biofuels access the market. The lack of a long term and stable policy framework was the main barrier in accessing the market and in order to raise investor confidence, a stable policy framework is required until at least The current debate on the future of biofuels in the post-2020 EU strategy 28

29 continues to damage investors confidence in this area in which the EU has significant technological strengths with the ongoing impact that European biofuels industries invest not within but outside the EU in a globally competitive world. However, the EU Commission (in the framework of the FP7) did support the construction and operation of the Crescentino plant. Although this is not a direct market support, it helped pave the way towards finalising plant construction and ultimately helped put in place some of the necessary supports to help EU produced cellulosic ethanol reach the market. Results The first commercial plant that converts local lingo cellulosic material residues, wastes and dedicated crops into bioethanol has been developed by Biochemtex, in Italy. It demonstrates the capabilities that can be achieved in the biofuels sector in the EU with no or minimal (only in marginal and unused areas) change in land use. Overall, the project has established a new kind of relationship between the biorefinery and the agricultural sector, which will lead to new opportunities for farmers. A lack of certainty and predictability around the development and implementation of public policy can have a devastating effect on emerging industries. On the other hand, supportive and enabling public policy development has the effect of attracting the kind of investments and loans from banks and industries necessary to establish such a transformative new industry. Furthermore, politically intervention can have a negative impact on the availability of certain feedstocks in terms of price and availability. This puts the EU at a disadvantage to other countries such as the US and Brazil where supportive agricultural policies are put in place to underpin the development of the bioeconomy. Conclusions Barriers - The need for adoption of market stimulation measures for 2G bioethanol such as the adoption of a specific binding targets for advanced biofuels, either as part of the Renewable Energy Directive or based on the US Renewable Fuels Standard - At an EU level, a decision in favour of a binding target for truly advanced biofuels in 2020 and beyond is needed as quickly as possible. - The lack of a long term, stable, predictable and supportive regulatory framework for sustainable advanced biofuels with a clear development trajectory up to 2030 that clearly demonstrates a full acceptance of the role of advanced biofuels in decarbonising transport and in reducing EU dependence on imported fossil sources - The need for dialogue around the benefits of moving away from fossil fuel sources towards renewable sources of second generation fuel in the context of their environmental, economic and socioeconomic benefits - Lack of supportive fuel specifications for ethanol blending above 10% - In order to allow bio-based chemicals to enter the market there is a need for a clear certification and labelling system which ensures that only the chemicals and products that are bio-based are labelled accordingly. This will provide certainty of sustainability and biobased content for consumers and will help build confidence in bio-based products. 29

30 - The need to facilitate access to combined EU funding for high financial risk investments in first of their kind and flagship biorefineries in Europe, where possible building on abandoned industrial sites in order to encourage regional rejuvenation Enabling factors - The drive of the Fuel Quality Directive and the Renewable Energy Directive to reduce CO2 emissions in the transport sector - The potential to reduce CO2 emissions by up to 80% - Abundant, sustainably sourced feedstock (wheat straw, arundo donax, rice straw) - Potential to create jobs and growth throughout the supply chain from primary production to end consumer product - Ongoing B2B and B2C communications efforts - Demand by manufacturers and consumers for lower CO2 emissions fuels for cars - EU technological leadership in the field of lignocellulosic biofuel development - National, regional and industry investment in demonstration biorefinery 30

31 2.7. Case Study 7: Novamont Italian Case Study on Bioplastics and phone number of key contact: Giulia Gregori, Introduction to the business case This case study from Italy demonstrates how two different environmental problems have been addressed through the development of legislation resulting in technological, economic and environmental benefits. - Organic part: 10 million tons The first problem considered was the need to address the management of waste (Municipal Solid Waste production 30 million tons, of which 10 million are organic) in compliance with the Waste Framework Directive and the Landfill Directive. The second, the need to recover nutrients, to improve soil fertility (6% of Italy is desertified) and agricultural productivity by using compost, through the collection and processing of organic household waste (biowaste). The third, addressed the overconsumption of plastic bags used by consumers and food retailers and the need to produce and dispose of these in a more environmentally sustainable way reducing the risk of littering and its consequences on the environment. The last one improved the conditions for growth of the market for bio-based products, acting as a primer for new investments in the Bioeconomy The move to address these issues was prompted by both the Waste Framework Directive and by the Landfill Directive. In Italy, numerous legislative measures had been implemented since the late 90 s to ensure the recovery of organic household waste gathered through separate collection. It was further decreed that organic waste should be collected in containers or should to be emptied in compostable and biodegradable bags. Simultaneously, the need to tackle the overconsumption of plastic bags was addressed by a ban on non-biodegradable single-use plastic bags bags in January The ban encouraged the use of both durable, thicker, reusable plastic bags and compostable single-use plastic which can be re-used as multi-purpose waste bags and are suitable for collecting residual waste (any waste that cannot be separated before collection), and for biowaste (e.g. kitchen waste) and was in line with European standards on compostable packaging. This approach is improving the quality and quantity of biowaste collection and recycling. Fewer non-biodegradable plastics are contaminating compost. The risk of a non-biodegradable bag being improperly used to collect biowaste is eliminated if the householder only receives biodegradable compostable bags. This, in turn, improves the quality of organic recycling and brings important environmental benefits Bioplastics are a broad family of materials with widely varying properties. Ultimately, bioplastics can find a place in market segments where conventional plastics are used and where biodegradability represents added value for the entire system. In many of these market segments bioplastic alternatives are already available today. However, they face market entry barriers when compared with fossil-based plastics which can be cheaply made and which are not required to demonstrate sustainability. One of the big advantages of bioplastics is that they use renewable raw materials, such as biomass, as the base feedstock. This means that the carbon source is CO 2 absorbed from the earth s 31

32 atmosphere rather than form newly extracted fossil sources. This has clear benefits in terms of reducing CO 2 emissions and helping to mitigate the impacts of climate change. Bioplastics are partly or fully bio-based, biodegradable, or both. Biodegradable plastics are materials whose properties and characteristics of use are very similar to those of traditional plastics, but at the same time, they are biodegradable and compostable according to the European standard UNI EN As a result of these characteristics of biodegradability and compostability bioplastics can play a valuable role in optimising biowaste collection and management, to reduce environmental impact and to contribute to the development of a closed loop of recycling with significant advantages along all the productionconsumption-disposal cycle. According to the European Bioplastics Association 2 global bioplastics production capacity is set to grow 500% by In this case, as the relevant legislative measures were put in place and promoted over a long period, industry was able to react and innovate in a timely way in order to find solutions for the provision of both types of bag. Therefore no public investment was necessary to enable adaption to the regulation. Indeed, the production of biodegradable and compostable carrier bags has acted as a primer for new investments in the bioeconomy through the development of new agro-industrial value chains and has resulted in both a reduction in waste, an increase in resource efficiency and growth in the market for more sustainable, renewable bio-based products. The business case Triggers for investment in innovation Since the late 90 s investment in innovative research enabled the production and successful marketing of biodegradable and compostable bags. The main contributing factors are highlighted below: - The significant private (national and regional) investments in biorefineries over the years in Italy created a position of technological leadership in the field of bio-based products and, in particular, in bio-based plastics (more than 1 billion Euro in recent years) - This helped to ensure that the necessary value chains, including machinery and plastics processing facilities, were put in place allowing the feasible and timely scale-up of industrial processes - Close collaboration with farmers and establishment of a strong agro-industrial value chain - A well-organised system of wet waste recycling was developed, that enabled the appropriate disposal of thin compostable bio-based plastic products contaminated by food waste. Bioplastics production and subsequent societal benefits Compostable bioplastics, represent significant benefits for the waste collection, catering and packaging sectors where conventional fossil resource based plastics would otherwise be pollutants of organic waste. The use of bioplastics lowers the level of landfill waste, contributes to the

33 development of a circular bioeconomy and retains valuable nutrients which would otherwise be lost to landfill helping to improve resource efficiency. In addition, compostable bioplastics can be recovered as nutrients through biological recycling (composting and anaerobic digestion) together with kitchen and garden waste, maximizing its transformation into valuable natural resources of nutrients for enriching soil fertility. Bioplastics and bio-based products represent high value niche sectors where the EU s expert technology and innovation components are strong. This position of technological leadership can and should be used to contribute towards sustainable EU economic and environmental development, leveraging locally sourced feedstocks to the benefit of rural and coastal communities. Challenges There were limitations to the production of bioplastics due to a lack of longterm supportive policy frameworks. There was also a lack of co-ordination between policies and actions in various complementary sectors (e.g. biodegradable and compostable bioplastics and separate collections of the organic fraction of municipal solid waste). Furthermore, the lack of specific funding instruments for the development of new technologies and their scaling up for industrial production was also a significant barrier to development. Over all, perhaps the biggest challenge to the success of the initiative was a lack of compliance to European standards and legislation by manufacturers and the lack of effective control. In Italy at least the 30% of single use bags in the market are falsely marketed as being biodegradable. In fact, although 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 In recent years there has been an increasing level of controversy regarding the use of food-based feedstocks for the production of industrial materials such as bioplastics. In reality, at current production levels, bioplastics rely on only 0.006% 3 of a global agricultural area of 5 billion hectares. Even if bioplastics capacity grows as predicted by 500% by 2016 this percentage would only increase to 0.022%. Therefore, the production of bioplastics poses no competition to the production of food. Nevertheless, without holistic evaluation and an appraisal of the benefits of bioplastics versus the level of resources used to produce them this problem will persist and will hamper the development of the industry in Europe. This evaluation should also be done in the context of the viability of continuing the status quo of producing plastics from fossil sources. Conclusions The development of biodegradable and compostable bioplastic contributed to a decrease in littering, increase of reusable bags and decrease of single use bags, Where the law was fully applied the use of compostable plastics in organic collection positively contributed in the achievement of the purity target of the local authority, conservation of valuable natural resources in the form of reusable organic nutrients and to a reduction in CO 2 emissions through the lowering of the carbon footprint of 3 European Bioplastics/Institute for bioplastics and biocomposits (October 2012)/FAO 33

34 plastic products. In addition, this initiative helped foster technological development, cutting edge industry and also helped to create jobs and growth in rural and coastal areas. This case study clearly illustrates the fundamental role of progressive environmental policy in fostering EU innovation and in delivering environmental and socioeconomic benefits. At the same time, the case highlights some of the potentially stifling impacts that fragmented policy development can have on leading EU industries. In Europe and in Italy, in this instance, the existence of a skilled workforce and existing infrastructures was a huge benefit and enabled industrial rejuvenation. On the other hand, steep energy prices and difficulties in accessing finance for the high risk, high capex initial investment necessary for the construction of demonstration and flagship biorefineries, works against the development of such sustainable and competitive initiatives within the EU bioeconomy. This project provides evidence of a successful case study that details how positive enforcement of legislation led to the effective development and marketing of biodegradable and compostable carrier bags. Overall, there was a 50% decrease in single-use non-biodegradable plastic bags and a positive change in consumer behaviour towards composting organic waste using the biodegradable and compostable carrier bags. This case provides evidence of public policies that directly impacted and modified societal consumer patterns which in turn helped solve environmental issues, with economic and technological benefits for the member state and its regions. Barriers The ongoing need for holistic and coherent policies incorporating consideration of all externalities of products and setting binding targets for product categories that contribute towards achieving EU sustainability objectives The need for the development and application of clear and unambiguous standards enabling the successful production of fully biodegradable and compostable plastic bags: this needs to be recognised and implemented in additional areas for the effective growth of the bioeconomy The need for promotion and adoption of harmonised certification and labelling schemes to establish and maintain consumer confidence in more sustainable products and processes The need for adoption by public authorities of market pull measures such as preferential public procurement, to ensure support for sustainable products, which lower CO2 emissions and use resources more efficiently, to be used more broadly across the member states. This will help to ensure more widespread environmental, technological and sustainable economic benefits through the fostering of smart and sustainable EU industries. Benefits and enabling factors - Drive to tackle littering resulting in a 50% reduction of the use of disposable carrier bags in mass retail in Italy since Improvements in biowaste collection and recycling with an 8% decrease of compost impurities and 30% decrease of GHG emission since Increased public awareness of resource efficiency, recycling and the benefits of locally sourced products helped to promote more sustainable and responsible behavior patterns 34

35 - Creation of jobs across the value chain from agriculture, R&D, green chemistry and waste management (60 jobs per 1000 tons of bioplastics) - National and regional support for uptake of innovative, sustainable niche products and revitalisation of local industries - New investments in research and innovation (new crops, reuse of food and agro waste, new biotechnological processes, etc.) - Combined industry, regional and national funding of new demonstration and flagships plants including the reconversion of disused petrochemical sites End note An opportunity for the chemical industry: virtuous innovations led by the bioeconomy to boost competitiveness in the sector The chemical industry, which had grown steadily until 2008, suffered a double-figure contraction in 2009, forcing multinationals in the sector to shut down their older sites with heavy consequences for Italy. Regardless of the crisis, the petrochemical industry cannot justify any new large plants in Western countries, much less in Italy. For example, in 2010, according to Chemsystem data, the cash cost of ethylene from naphtha was 761 per ton in Italy, and 93 per ton from ethane in the Middle East. This is the reason why the expansion of capacity for plastics is being concentrated in the Middle East; some plants have a capacity of more than 1 million tonnes per year. There is no hope for their Italian counterparts unless they are integrated or replaced with new technologies and made ready to make the quantum leap based on local raw materials that can draw on the locally-available resources, using them in an environmentally-friendly, efficient way. Italy experienced major growth in the chemical industry between the 1930s and 1980s, particularly thanks to Montedison and the results of the great innovations of Giacomo Fauser (ammonia synthesis process) and Giulio Natta who discovered polypropylene. During the 1990s, most of the Montedison plants were acquired by foreign multinationals with a view to short-term profit, and no provision was made for future growth and investment. Today, there are just 13 large chemical sites monitored by the National Chemical Observatory. All of them are essentially in an irreversible crisis. In particular, all the traditional plastic manufacturing plants in Italy are small-scale, obsolete, and have no upstream integration, therefore no prospects for profitability even in the short term. In plastics, Italy has gone from being a leader in manufacturing and exports to being a net importer (7% of internal production against 19% imports). The latest Federchimica data also show that Italy has slipped from being Europe's second-largest plastics manufacturer to fourth place behind Germany, Belgium and France. It is still second in the plastics processing sector, after Germany, but its decline as a manufacturer of raw materials can only weaken this sector, as is already evident in other fields such as the transformation of bioriented polypropylene films. 35

36 A transition towards a bio-based future is therefore not only desirable but is increasingly becoming essential. Links to relevant sites/papers/references A complete picture of the Italian experience of regulating the distribution of disposable plastic bags is given by the book Bioplastics: a case study of Bioeconomy in Italy, promoted by Kyoto Club as a contribution to the debate connected with the publication of the European Commission Green Book on plastic waste. The book can be freely downloaded at the following link: See also the video Infographic - Bioplastics: a case study of Bioeconomy in Italy at Technical Report - Italian Composting Consortium (CIC) - Biodegradable Packaging Recovery Project CONAI - Green Chemistry Observatory: Attitude of the Italian public towards the new bio-shoppers - ISPO - Strategic plan of The National Technology Cluster on Green Chemistry and the anti-crisis potential of Bioeconomy Urban Waste Report ISPRA - Cefic Chemdata International Cefic Chemdata International, Eurostat,

37 2.8. Case Study 8: Wheatoleo-Industrialisation and Commercialisation of New Biosurfactants and phone number of key contact: Jean-Marie Chauvet, Introduction to the Business Case The growing need for the replacement of fossil resources with renewable resources has created a new market for bio-based surfactants in the applications such as detergents, home care and personal care products. The French company Wheatoleo is owned 100% by ARD, a leading company in biorefinery research and development activities At ARD (located in Bazancourt-Pomacle, in the Champagne Ardennes region of France), research and development in the production of biosurfactants from co-products of the farming industry first began in Cutting-edge technologies in the fields of plant cracking, industrial biotechnology and green chemistry have been employed with the aim of utilising plant biomass to produce high value products. These research projects involved several European partners and were co-financed by the EU (FAIR-CT ). ARD is now considered as a leader in the field of pentose chemistry which ultimately led to the formation of Wheatoleo, a new biosurfactant company. Since its creation in 2009, Wheatoleo have produced and commercialised a range of new bio (based) surfactants. The first marketed products are known as alkyl poly pentosides (APPs) (also known under their trade name: APPYCLEAN). These compounds are made from pentoses (bio-based chemicals extracted from plant cell walls) and fatty alcohols. These green surfactants have applications in cosmetics and detergents, cleaning, oil fields and agrochemicals sectors. The Business Case Technical and innovative developments have resulted in new bio-based products that have both high technical performance and efficiency. They are made from a combination of extracts from sugarbeet, wheat and vegetable oil. The most innovative technological advancement was the conversion of pentoses (xylose) into the targeted surfactants molecules without compromising efficiency on the applications. This singular technology is paving the way towards unlocking the potential of added value, lignocellulosic-based chemistry. Investment of capital expenditure and the hiring of a sales force and marketing teams were required for development of the project with a current investment cost of 0.8 M Euros (invested in the development of a demo capacity/pre-commercial size biorefinery). The biggest overall challenge to the success of the project was the time it took to reach the market. Reasons for this included the need to convince end-users of the product benefits; extensive experimental testing, breaking into the competitive pre-existing fossil feedstock based market, 37

38 complying with REACH procedures (the cost of REACH studies had a large impact upon the project), access to finance and market pull. Benefits of the project: - Utilisation of renewable resources in green processes - EU technological leadership in plant-based chemistry - Job creation in rural areas - Production of non-irritant, non ecotoxic bio-based alternatives to fossil based products Conclusions The biosurfactants produced as a result of this initiative provide an excellent example of converting biomass into high value sustainable, innovative products that significantly contribute to EU economic, societal and environmental goals within the bio-based economy. Barriers - The main legislative barriers in the development of this or other new markets are the REACH procedures as complying with the necessary procedures is costly and time consuming and therefore especially difficult for emerging products developed by SMEs to manage - Lack of investment in the form of long-term supportive EU initiatives to create market pull and of support to access financing and loan guarantees puts EU industries at a disadvantage to their global competitors. In particular for investment in biorefineries to help get products to the stage of commercialisation, CAPEX expenditure is prohibitively high and payback time is long. This discourages investment from venture capitalists who normally require a quicker exit time. Enabling factors - Good B2B and B2C communications were essential to the success of this project. They helped to raise awareness of the potential of the new products and to create the initial market pull. Advances within the industry were helped by the effective communication and dissemination via exhibitions and congress (BIO World congress on Industrial Biotechnology, The European Forum on Industrial Biotechnology and the Bio-based Economy (EFIB), The Plant Based Science Conference etc.) - These types of problems could be effectively tackled by the establishment of EU market pull initiatives such as the BioPreferred Programme in the US. This raises awareness of the availability of bio-based products with public authorities and other purchasers - Technological expertise was key to the development of innovative products as was EU research and innovation funding - The establishment of a strong value chain based around a well-established agri-industrial group were also fundamental to the success of the initiative - The availability of feedstock and the ability to transform it into a higher value product with new functional benefits. 38

39 2.9. Case Study 9: Sunliquid Technology for the Production of Cellulosic Ethanol from Agricultural Residues Key contact: Introduction to the Business Case EU legislation aiming to reduce carbon emissions in transport has helped foster the development and production of Biofuels. Bioethanol production from non-edible plant material is a key example of a biofuel that would allow a reduction in CO 2 emissions from road transport. At the same time, investment in this sector would help reduce dependence on imports of increasingly scarce and expensive fossil fuels to the EU whilst creating local jobs and generating new streams of revenue in rural and coastal areas. This case study highlights the development and commercialization of sunliquid, a cutting edge technology, which enables the conversion of lignocellulosic feedstock, such as wheat straw or corn stover, into cellulosic ethanol that can be blended with petrol and used as a transport fuel. Sunliquid was developed by Clariant, a globally operating specialty chemicals company based in Switzerland. The cellulosic ethanol produced by this process is an advanced biofuel with high greenhouse gas savings of about 95%, which, as it is produced from agricultural residues, does not compete with food or feed production. Figure 1: The sunliquid process for the production of cellulosic ethanol from agricultural residues The development of sunliquid technology began in 2006 with first laboratory research and was soon up-scaled through the development of an initial pilot plant in Munich, which started into operation in February With the technology successfully developed at pilot scale a demonstration plant with an annual capacity of 1000 tons of cellulosic ethanol was constructed in Straubing, also in Germany, which became fully operational in July The demonstration plant has been confirming the technology on an industrial scale for about two years now. Based on the findings from this demonstration plant, a process design package delivering the technological blueprint for commercial production facilities with a capacity of 50 to kt/a was finalised in

40 Figure 2: The sunliquid demonstration plant produces up to 1,000 tons of cellulosic ethanol each year energy selfsufficient and almost carbon neutral. The Business Case Sunliquid technology One of the most abundant types of agricultural residues in the EU is cereal straw, of which some 240 million tons accumulate across the EU s 27 member states each year. Sunliquid provides the ideal technology to utilize this feedstock with a broad range of socioeconomic and environmental benefits across the EU. Several long-term studies, including a study published by WWF in 2012, have shown that depending on the region and prevailing local conditions, up to 60% of the residual straw can be collected from the fields and made available for recycling without negative impacts on soil fertility. Furthermore, cellulosic ethanol from agricultural residues produced with the Sunliquid technology saves up to 95% GHG emissions compared to fossil fuels. Using the Sunliquid technology, 27 million tons of cellulosic ethanol could be produced per year in the EU which would be equivalent to the energy content of almost 18 million tons of fossil-based petrol. This means that around 25% of the EU s demand for gasoline predicted for 2020 could be met by cellulosic ethanol produced in the EU. A further study conducted by Bloomberg New Energy Finance includes other types of residue and various scenarios in its calculations and forecasts gasoline substitution potential of up to 62%. The technology developed therefore has enormous economic potential for the EU. Indeed, even by conservative estimates, advanced biofuels could supply 16% of the EU s fuel market by 2030 generating up to 15 billion in revenues and creating up to 300,000 additional jobs. Biofuels derived from food crops have been attacked in recent years with critics attributing rising food prices to their production and concerns being raised about the impacts of changing land use patterns in order to produce feedstock for biofuels. Agricultural residues, on the other hand, are, to 40

41 a large extent, a by-product of traditional agricultural cultivation with limited additional use. They are already available in substantial quantities within current agricultural practice. As a result the production of lingocellulosic bioethanol is more broadly accepted. Its benefits are increasingly acknowledged in the diversification of farmer s incomes and in the potential to create jobs in rural areas whilst at the same time contributing a valuable solution to the challenge of mitigating the impacts of climate change and contributing towards EU energy security. Investment and the Value Chain In this case, the political objective in both Germany and the wider EU to reduce carbon emissions in transport through fostering the use of advanced biofuels has been the main market driver. As a leader in industrial biotechnology, Clariant has invested significant amounts in research and innovation. Furthermore, regional and national investments have played an important role in fostering and developing this technology. For example, the total project volume for the sunliquid demonstration plant was 28 million: EUR 16 million in investment and just under EUR 12 million for accompanying research measures. The Bavarian state government and the German Federal Ministry of Education and Research (BMBF) have each put around EUR 5 million into this and other research initiatives relating to the project, the rest of the project volume is being covered by Clariant. Recently, the European Commission approved funding for the project: sunliquid large scale demonstration plant for the production of cellulosic ethanol under FP7 research programme. The project is being realized by a consortium of 6 partners from different European countries, with Clariant being the Project Leader. Several industries apart from the fuels sector are part of the value chain. This includes the agricultural sector where feedstock is sourced, the engineering sector that has been involved in the construction of the plants and the chemical and biochemical industry. Within the chemical industry, ethanol is also recognised as a chemical building block in the production of products such as biobased plastics, which provide an additional use of the cellulosic ethanol. This demonstrates the diversification of income and the creation of jobs in the logistics chain. Application Tests In January 2014, a fleet test, to demonstrate the blending potential of the cellulosic ethanol and the high quality as a fuel component, began together with Mercedes-Benz and Haltermann. Current Mercedes-Benz serial cars run on Sunliquid20 - a high quality gasoline with high octane (RON>100) containing 20% cellulosic ethanol made by using sunliquid technology. These cars are equipped with standard engines with no adaptations necessary and have demonstrated that they are able to process an E20 fuel without any problems. At the same time the fuel offers significant environmental advantages through the high GHG savings associated with the cellulosic ethanol, it contains. The fuel specifications reflect a potential future EU standard for an E20 fuel. Challenges and Marketing In order to effectively disseminate the progress made in the development and commercialisation of the sunliquid technology, Clariant is continuously communicating and engaging with all relevant 41

42 stakeholders such as industrial parties, political decision makers, academia, media and the general public on the project. Numerous technological hurdles were overcome to ensure efficient and effective cellulosic ethanol production with the sunliquid technology, such as integrated production of process and feedstock specific enzymes, simultaneous C5 and C6 sugar fermentation and an energy saving separation technology. The sunliquid technology is now mature and ready to market but market entry must be supported by the successful deployment of a long-term stable and reliable regulatory framework that fosters investment into new technologies. In addition, supportive measures to facilitate the market entry of advanced biofuels should be implemented, such as mandatory blending quotas for lingocellulosic ethanol or tax breaks for such sustainable products. Policy challenges To date, the biggest hurdle in accessing the market is the uncertainty with regards to policy. The ongoing discussions at a European level have had a significant impact on the biofuels industry as a whole by creating doubt and a lack of business case clarity among investors. An additional barrier is fuel specifications; ethanol blended in petrol for instance can only be marketed as petrol if it includes no more than 10% ethanol. However, as demonstrated through the test with Mercedes and Haltermann modern petrol engines can easily run on blends up to 20% ethanol. In order to help advanced ethanol solutions to enter the market, fuel specifications should be adopted to allow higher volumes of renewable ethanol in the system. Advanced biofuels were to be counted double towards the aim to reduce carbon emission by using 10% renewable energy in transport. However, investments have dropped significantly since the revision of the biofuels regulation has been started. The continuing uncertainty of regulations has caused delays in the deployment of innovative and beneficial technologies which have real potential to create sustainable economic growth and jobs whilst saving CO2 emissions and improving energy security. Future application The Sunliquid technology is a platform technology for bio-based chemicals and biofuels. Cellulosic ethanol is the first product entering the market, but others will follow. In addition, ethanol can be used as a chemical building block for the manufacturing of bioplastics. Furthermore, the technology provides a pathway towards accessing second generation sugars from wastes and residues which can be converted into high value bio-based chemicals and products. Conclusions The novel and innovative Sunliquid process has overcome numerous technological challenges to enable the economic and sustainable production of cellulosic ethanol. Cellulosic ethanol is the first product based on agricultural residues entering the market. This is a huge step forward for the bioeconomy and provides an excellent case to demonstrate the positive benefits that the bio-based economy can have on an environmental, economical, technological and societal level. However, first investments in the production of cellulosic ethanol technology have been delayed due to ongoing regulatory uncertainty. 42

43 As the biofuel market is driven by policies, it is crucial that the EU sets binding, ambitious and realistic targets for advanced biofuels, with a clear trajectory from 2020 to Without an adequate sub-target for advanced biofuels, there will not be a strong and positive demand for bioethanol. This would not only halt investments in new domestic production capacity, but it would also prevent vital research and development investments that would inhibit innovation in the EU. In order for the biofuel industry to advance and for the EU to gain the economic and environmental benefits associated with successful bioethanol production and marketing, a number of measures need to be addressed Barriers - At an EU level, a decision in favour of a binding target for truly advanced biofuels in 2020 and beyond is needed as quickly as possible. The European Parliament already voted in favor of a 2% mandate in 2020 while the Council in June 2014 agreed on a compromise which entails a 0.5% target for advanced biofuels - The lack of a long term, stable, predictable and supportive regulatory framework for sustainable advanced biofuels with a clear development trajectory up to Lack of supportive fuel specifications for ethanol blending above 10% - Policies that are not directly linked to biofuels can have an impact on the overall biofuel business case. For example, in Germany there is an ongoing discussion on the reform of the renewable energy law (EEG); therefore a holistic policy approach is needed. - To allow bio-based chemicals to enter the market, a clear certification and labelling system must be employed that ensures that only the chemicals and products that are bio-based are labelled accordingly. This will provide certainty of sustainability and bio-based content for consumers and will help build confidence in bio-based products. - The need to facilitate access to combined EU funding for high financial risk investments in first of their kind and flagship biorefineries in Europe. Benefits and enabling factors - Policies at national level are also critical: In Germany for example cellulosic ethanol is currently exempt from the energy tax. However, this tax exemption should be prolonged until 2020 to help cellulosic ethanol entering the market. For autogas this is already a reality today. - The aim of the Fuel Quality Directive and the Renewable Energy Directive to reduce CO2 emissions in the transport sector - The potential to reduce CO2 emissions by up to 95% - Abundant, sustainably sourced feedstock (wheat straw) - Potential to create up to jobs and 15 billion - Potential to supply 16% or EU fuel market by Ongoing B2B and B2C communications efforts - Consumer and manufacturer demand for lower CO2 emissions from cars - EU technological leadership in the field of lignocellulosic biofuel development - National, regional and industry investment in demonstration biorefinery 43

44 2.10. Case Study 10: St1 Biofuels - Distributed Bioethanol Production from Biowaste and Cellulosic Residues and phone number of key contact: Maija Pohjakallio, [email protected] Introduction to the Business Case This case provides evidence of the sustainable and cost-effective production of bioethanol. The bioethanol within this case study is produced using the newly developed process technologies called Etanolix, Bionolix and Cellunolix TM that have been developed in Finland. These technologies enable the production of bioethanol in distributed small plants that can be sourced from food industry process residues, biowaste or from cellulosic residues and waste. The fuels (bioethanol), that are produced using these processes are referred to as St1 Biofuels, are only produced from feed stocks that are based on waste-based feedstocks and process residues. As such, St1 Biofuels do not cause any direct or indirect changes in land use. St1 is a privately owned Finnish group of companies, one of which is St1 Biofuels. It has been building a network of bioethanol plants across Finland since 2007, with the goal to produce around m 3 of bioethanol for transport fuel by The St1 bioethanol is used in high blend ethanol fuels (RE85 ethanol fuel and RED95 ethanol diesel) and as a bio component in low blend petrol. These blended fuels are subsequently distributed by St1 s and other company s service stations in Nordic countries. The use of this domestic bioethanol reduces CO 2 emissions by up to 99% compared to fossil fuels. The St1 Bioethanol production plants can be built near the source of waste, which minimizes the transport costs and emissions. Side products of the process include animal feed, fertilizers, electricity, heat and/or biogas. In the case of Cellunolix TM also lignin and chemicals like turpentine and furfural can be obtained. The initial development of the Etanolix concept originated from academic research that was carried out at Technical Research Centre of Finland (VTT). In February 2006 a spin-out company owned by VTT and St1 Finland Oy was established, and the first bioethanol production from bakery waste and process residues using Etanolix technology started to operate in The present value chains include food processing industries (bakeries, breweries, confectionary, beverage, sugar production and enzymes), supermarket chains and waste management companies as suppliers of raw material. In addition, when the new Cellunolix plant goes into operation between , industrial stakeholders from the saw mills, forest and chemical sectors will be integrated into value chains. The Business Case In Finland there are a total of four Etanolix plants, one Bionolix plant and a centralized ethanol dehydration plant. A new Cellunolix plant is likely to be built in Northern Finland in St1 Biofuels will also provide Etanolix plant in Sweden, where it will be in 2015 integrated to North European Oil Trade's operations. The latter case indicates the great potential to export the St1 bioethanol technologies from Finland to other countries inside and outside Europe. Numerous accomplishments along the development pathway were met in order to successfully produce bioethanol on a large scale from waste sources. This included the initial research at VTT, the technology transfer from VTT to St1 Biofuels, the co-operation with raw material suppliers, 44

45 continuous R&D, marketing, and the construction of new distributed plants. Capital investment for this came from the present core business of St1 group, which consists of gasoline distribution (fossil and renewable). With approximately 72 % of Finland being covered with forests, there is a high need for initiatives that make use of cellulose-based residues (as in Cellunolix ) allowing Finland to become less dependent on fossil based imports for energy production. Infrastructure The production plants are relatively small, modular-based, of moderate price and easy to build. Their size is about one hundred times smaller than the size of a conventional, first generation (run on food based feedstocks) bioethanol plant. Thus, the investments for the infrastructure are reasonable, and can be done step by step, as the network of plants grows. The average production capacity of one plant is about m 3 of absolute bioethanol per year. The Cellunolix plant that is currently under development will be slightly bigger, producing about million litres of absolute bioethanol per year. Positively Enforced Legislation EU-regulations for renewable energy and the drive for sustainability were the key market-related factors that enabled the successful innovative research and development and the scale-up production of bioethanol made from waste sources. In accordance with the EU Renewable Energy Directive (2009/28/EC), the contribution made by biofuels produced from waste and residue sources can be counted as double towards meeting member state biofuel obligations. Therefore, for fuel retailers and wholesalers this is the most competitive way to cover obligations. This puts St1 biofuels in an excellent position for marketing the biofuel that is produced from waste sources only. Furthermore, EU-regulation forbids the landfilling of biodegradable waste in 2016, which promotes the use of biowaste as raw material for other, more resource efficient, processes. Legislative Barriers In the waste hierarchy it should be acknowledged that the production of advanced biofuels from waste gives more added value than the direct burning of biowaste. The waste hierarchy, and the notion of cascading use of waste and biomass underpinning it, embedded in the Waste Framework Directive, was devised without climate policy objectives in mind. All energy use, including refining waste into advanced biofuels, is considered to be in the bottom tier of the hierarchy whereas alternative uses such as cosmetics are given precedence. This is based on the flawed notion of lumping both incineration and refining advanced biofuels into the same step of hierarchy, and completely overlooks the potential of waste based biofuels to replace fossil fuels in road transport and a potential saving of up to 99% CO 2. Furthermore policies related to bioethanol vary from country to country, and the policy frame is not long enough. The minimum binding share of advanced biofuels in traffic s energy consumption should be defined in a stable way with long term perspective. Marketing National support in technology development and in plant investments has been important to mitigate financial risks. Due to the core business of St1, existing infrastructure of service stations 45

46 provided channels that could be used to introduce the newly developed products to market; this contributed significantly to the successful marketing of the blended Bioethanol fuels. Bioethanol is a non-toxic, safe liquid fuel that can be used in existing fuel distribution infrastructures. The techniques used to make St1 bioethanol (Etanolix, Bionolix and Cellunolix ) carry the potential to be exported from Finland to other countries; both within and outside Europe. In addition, useful side products are also obtained from the processes; in the case of Cellunolix for example lignin that can be used as a solid biofuel or as a raw material in the chemical industry and turpentine and furfural. Although the use E85 (one of the high blend ethanol fuels) would be an effective way to reach biofuel targets (10% of the fuels used in transportation must be from renewable sources), the industry has not yet received enough support to bring this biofuel onto the market. Furthermore, none of the big stakeholders (oil and gasoline companies and car manufactures) share significant enough motivation to bring E85 and flexfuel cars to the markets. Societal benefits As St1 biofuel plants are and will be built all around Finland, employment opportunities that support local developments have been brought to small towns. The St1 biofuel concept is based on local production from local raw materials resulting in the initiative raising awareness and motivating citizens to accept and support the use of such biofuels in the understanding that they are supporting local businesses and using resources more efficiently. Thus St1 bioethanol production also contributes in cutting total costs of waste management. Results/Conclusions The whole concept employed at St1 biofuels is a newly created business model based on novel process technologies. The process has promoted co-operation between different stakeholders within the food industries, supermarket chains, waste management companies, forest industries, chemical industries, and farmers to contribute significantly to the bioeconomy. The utilisation of waste as raw material promotes a circular, lower carbon bioeconomy by connecting material streams of different stakeholders (e.g. the utilisation of waste and residues from the value chains form the food industry and the forestry industry). Barriers - Legislation varies in different EU countries (ie, double counting of bioethanol is not in use in every EU country) and EU regulation policy is unclear after 2020 resulting in a lack of business case clarity for investors and industry in the future - To act as catalyst for the market development, the EU needs a dedicated and binding subtarget for advanced biofuels which should be combined with ambitious GHG emissions requirements to ensure that future growth in the EU biofuels industry comes from the best performing biofuels - In the waste hierarchy, it is not yet reflected that the production of advanced biofuels from waste gives more added value than the direct burning of biowaste 46

47 - Present legislation is not obligating or striving for the use of advanced bioethanol with policies varying between countries; this includes varying taxation of different fuels - Key areas of competence with regard to the bioeconomy should be defined and special attention should be paid to ensure the quality and quantity of education within these areas. The aspects of bioeconomy should be taken into account also in the syllabuses of primary, secondary and upper secondary schools. This should include developing an appreciation of holistic life-cycle thinking. Benefits and enabling measures - Increase in global energy demand - EU-regulations for renewable energy, Renewable Energy Directive (2009/28/EC), and drive for sustainability - EU-regulation which will forbid the landfilling of biodegradable waste in 2016, and thus promote the use of biowaste as raw material for energy and products - Abundant, sustainably sourced feedstock: The utilisation of waste and residues as raw material promotes a circular, resource efficient low carbon bioeconomy by connecting material streams of different stakeholders (i.e. the utilisation of waste and residues from the value chains form the food industry and the forestry industry ). The use of this domestic bioethanol reduces CO 2 emissions by up to 99% compared to fossil fuels and will make Finland less dependent on fossil imports for energy production - Capacity for capital investment due to the present core business of St1, which consists of gasoline distribution - Motivation to produce around m3 of bioethanol for transport fuel by 2020, and the great potential to export the St1 bioethanol technologies from Finland to other countries inside and outside Europe - St1 has an existing infrastructure of service stations (network of stations in the Nordic countries), which provides channels through which the new bio-based products can be introduced to market - Strong co-operation and communication between different stakeholders throughout the whole value chain including food industries, supermarket chains, waste management companies, forest industries, chemical industries, and farmers - Small, modular-based, biorefineries that do not require extremely heavy investments and are easy to build - Technology transfer from academia: Developed as a result of academic research carried out at Technical Research Centre of Finland (VTT) - Creation of jobs and value added through a number of links in the value chains (e.g. side products & bioethanol's potential use in other applications than fuels) 47

48 2.11. Case Study 11: Pine Chemicals Industry: Improving the Regulatory Framework in Order to Ensure Continuing Use of Pine Chemicals for Maximal Societal Value and phone number of key contact: Introduction to the Business Case The Pine Chemicals Industry is a thriving multibillion Euro business that is globally operating biorefineries to produce pine tree derived chemicals that are used in numerous consumer products. This industry is as a pioneer of the bio-based economy and it provides an excellent example of the effective utilization of a renewable biomass feedstock. A co-product of the papermaking process called Crude Tall Oil (CTO) is one of the key raw materials used in the production of Pine Chemicals. CTO is a constrained raw material as it is a co-product and dependent on paper production. The availability of CTO is currently being threatened because of incentives, programmed to encourage the renewable energy targets in the EU, are diverting CTO as bio chemical feedstock towards biofuels. Plans to construct plants that can process CTO into biodiesel, directly threaten the viability of the Pine Chemical industry. With no assistance from government programs, the Pine Chemicals Industry has successfully constructed and operated capital intensive, complex, high technology biorefineries for many years. However, in order to continue to innovate and grow the Industry needs a level playing field for its key feedstock. In order for this to happen, Member States must correctly classify CTO as a co- product not a residue, remove subsidies granted to biofuels produced from CTO and make CTO based biofuels ineligible for compliance with the Renewable Energy Directive (RED) targets. The Business Case Pine Chemicals Industry: Pioneers of the Bio-based Economy CTO is fractionated into its pure components and then these components are upgraded to produce a range of value added industrial chemicals. The market for Pine Chemicals is both well established and thriving with the final products having applications over a number of different markets including: auto and truck tires, rubber hoses, printing inks, coatings, emulsifiers, adhesives, drilling fluids, mining chemicals, papermaking chemicals, synthetic oils, food additives to reduce cholesterol and soft drink stabilizers. The CTO biorefineries in Europe are significant businesses employing highly trained and skilled workers both in production processes and in R&D activities to develop new and innovative products. This industry, without assistance, is achieving the EU s bioeconomy goals, and can be used to showcase the use of co-products from one industry (paper making) for the manufacturing of products on the consumer market. Pine Chemical products are produced globally and depending on the end product and market demand, they are imported and exported into and out of the EU. With science and technology evolving rapidly, the Pine Chemicals Industry has successfully advanced with the creation of new innovative products and applications. Highlighted examples include the development of innovative products used in the ever evolving ink and adhesives markets. The 48

49 industry continues to invest a significant effort in R&D to develop products with new and beneficial functionalities, in order to meet changing market demands. Barriers to the development of the pine chemicals industry Each EU Member State has set specific targets within their energy mix to ensure that the EU meets its 20% target for renewable energy by 2020, 10% of which should be used in transport. The availability of CTO for use in the pine chemicals industry is currently being threatened as incentives and renewable energy targets in the EU are diverting CTO from the Pine Chemicals Industry to use as a feedstock for biofuels. Tax incentives and mandates that are driving the construction of plants that can process CTO into biodiesel directly threatens the viability of the Pine Chemicals industry. These plants have arisen through the implementation of the Renewable Energy s Directive (RED) that has a dual goal to increase the use of renewable energy and to reduce Greenhouse Gas (GHG) emissions. A recent independently certified and peer reviewed study showed that if products currently produced by the Pine Chemicals Industry were instead to be produced using other feedstocks (due to diversion of CTO for the biofuels industry), GHG emissions would increase offsetting any gain from diverting CTO for biofuel use. In fact the study shows that there would be no reduction in GHG or in fossil fuel use by diverting CTO to biofuel use. This means that the targets in place can irreparably damage the pine chemicals industry, cause job losses, put heavily capital intensive biorefineries at risk but will provide no improvement in greenhouse gas (GHG) emissions or reductions in fossil fuel use. In addition, as some of the CTO derived products will be substituted by agricultural products, Indirect Land Use Change (ILUC) issues may also have an impact. The diversion of CTO as a feedstock in biofuel production will significantly increase the demand of CTO. In turn, this will increase prices of CTO causing shortages to develop. Diverting this key and constrained raw material for the Pine Chemicals Industry to the biofuels industry would eventually cause major damage to the Pine Chemicals Industry whilst achieving no gain in GHG or fossil fuel reduction. This outcome would not enhance the EU bioeconomy or its goals. Results/Conclusions The Current Bioeconomy and the Effect of Currently Implemented Policies The drive for industrial companies to lower their CO 2 footprints and become more sustainable is encouraging the use of biological raw material and biological processing methods. This shift would enable industries to become more resource efficient with estimated savings of 2.5 billion tons of CO 2 equivalent per year by 2030 for the production of bio-based raw materials. The Energy and climate change policy targets for 2020 state that 10% of transport fuels should come from renewable resources and there should be on overall 20% reduction in greenhouse gas emissions. To date, policy changes aimed at boosting the bioeconomy throughout Europe have largely focused on encouraging the use of biomass directly or indirectly as a source of energy and fuel. This has resulted in consequences on the existing balance of land use, industrial use of biomass feedstock, commodity prices and jobs over the last decade. 49

50 The re-evaluation of biomass and land resources underline the need for a coherent and holistic approach towards the development of a more sustainable and competitive bioeconomy. This is essential if biomass is to be used in a smart and sustainable way. What Needs to Change: Policies and the Bioeconomy To be successful, the bioeconomy must take into account the balance of industrial use of biomass resources for multiple uses including food, feed, chemicals, fibres and fuels. To achieve this, the concepts of smart and sustainable use of biomass should be applied. Potential Impacts on the Pine Chemicals Industry Policies that are currently in place encourage the diversion of CTO as feedstock for biofuels. This could ultimately cause skilled job losses, place significant invested capital at risk and damage the innovative Pine Chemicals industry that has achieved the goals of the bioeconomy unassisted for many years. Although the Pine Chemicals Industry is small in comparison to the total chemical industry, it does provide an excellent case study on how well intended policies may in fact produce the opposite result of the original intended outcome of the bioeconomy goals. Conclusions Barriers - Lack of level playing field for the pine chemicals industry to access CTO, a constrained raw material, as a feedstock for high value products. If this is not enabled large biorefineries along with many highly skilled jobs will be put at risk - Inclusion of CTO in feedstocks as eligible for member state tax subsidies and RED targets when used in biofuels - CTO is not a residue under EU definitions, and must not be categorized as such in order to receive incentives for use in biofuels - A lack of uniform implementation of definitions in member states in line with the existing waste framework directive and case law of the European Court of Justice - A lack of requirement to show net positive environmental effect of use of CTO in biofuels compared to chemicals in the member states to be eligible for tax subsidies - A lack of certified LCA studies to compare not only the fossil fuel and GHG reduction but also compare the impact of the substitutes that would come into the market to replace the pine chemical based industrial products - Failure to address the role of the industrial use of biomass resources for multiple uses including food, feed, chemicals, fibres and fuels. To achieve this, the concepts of smart and sustainable use of biomass should be applied 50

51 Enabling measures - Communicate an understanding that utilizing pine chemicals in industrial applications is an excellent model for efficient use of a renewable biomass feedstock and incentives to redirect CTO to biofuel will not result in a reduction in either GHG emissions or fossil fuel use - Well established and thriving markets with the final products having applications over a number of different markets including: auto and truck tires, rubber hoses, printing inks, coatings, emulsifiers, adhesives, drilling fluids, mining chemicals, papermaking chemicals, synthetic oils, food additives to reduce cholesterol and soft drink stabilizers - The CTO biorefineries in Europe are significant businesses with highly trained and skilled workers 51

52 2.12. Case study 12: Heat Entrepreneurship and phone number of key contact: The objective of this initiative was to make renewable heat available for those districts and municipalities with a constant local supply of feedstock through existing infrastructures and heating plant installations. It involves adapting existing power plants, run on fossil fuels, to also use wood ( whole trees with low commercial value, small whole trees from forest management (thinnings), logging residues like tree tops, or delimbed small trees to generate heat. In small-scale cases power production is not feasible and indeed will triple the investment and give little additional income)for local districts. The biomass used typically has no other commercial value and the forest owner is compensated between 0-5/m3. The land owner receives a small amount of compensation, the material has no other uses and thus the value is very small. If no compensation is provided then the material is left in the forest. However, if this material is used to generate renewable heat the resulting energy is sold to the customer at the price of approximately 90/MW and the value of the biomass increases to 36/m3 of biomass. The concept can be used to replace not only fossil oil but also gas heating in rural areas, towns and small industries. In larger towns district heating and combined heat and power units are possible. The generation of heat from renewable resources could also play a role in supporting the development of biorefineries. This practice is underway and is common in both Finland and Austria with this particular Finnish example dating back to the year It enables customers to rely upon renewable heat without their own personal investment in developing infrastructure and encourages contractors to invest in heating supply by creating contracts between suppliers and customers for periods of years, ensuring reliability and economic sustainability. The investment costs so far were between / MW thermal with over 500 units put in place in Finland alone. The energy sold from these plants is priced typically /MWh when fossil energy costs about /MWh. A 500 kw complete unit will cost More than 500 plants operated by private companies have been set up selling heat to public and private customers. Challenges facing the take-off of this project included the need to develop a workable concept which could be put in place in numerous locations, the need to design contract models that would be acceptable to both customer and supplier and the need for active B2B and B2C communications in order to raise awareness of the possibility of these heating systems. Market drivers for the initiative were the increasing price of oil which meant that renewable heat could be supplied either at the same cost as fossil fuel heat or lower. An enabling factor was a minor investment grant available in Finland and a partial loan guarantee made available by Finnvera, a public financing system mainly for smaller enterprises, which takes slightly more risks than a commercial bank enabling commercial financing. Finland has approximately oil heating facilities and thousands of these (of thermal capacity between 300K-3MW) have potential to generate renewable heat. In addition, when the economic benefits are clear due to higher oil price and low investment cost it is an attractive option for customers. 52

53 This type of heating option is popular with small communities, groups of businesses and buildings and can often be maintained by a small private contractor creating jobs for SMEs. It is particularly appropriate in remote areas where there is a local abundance of biomass. Nevertheless, capital availability is often a limiting factor in expansion of operations. The availability of grants and regional funds to enable this expansion could help expand networks where this could be of economic and environmental benefit. Enabling factors - Promotional activities and B2B/B2C communications to raise awareness of benefits to customers and suppliers - Matchmaking assistance between businesses and customers - Assistance in drawing up of appropriate contracts between customers and suppliers - Making financing available in the form of investment grants and loan guarantees - Support, in principal rather than practice, by local public authorities Benefits - Boost to local economy - The creation of jobs for small contractors - Support to forestry and agriculture by adding value to wastes and residues which would have to be otherwise disposed of at a cost - Lower carbon footprint than fossil fuel use for heating - The potential for using different supplies of Biomass depending on locally available options - The possibility to combine this with other biorefinery activities Barriers - Technical issues such as complying with emissions control standards and measurements which impose costs and reduce competitiveness - The lack of a functioning public procurement option for renewable energy - The lack of grants, loans and support by regional authorities - Lack of awareness of the benefits and potential by businesses and customers - Legislative restrictions on the use of certain types of biomass which increase price volatility and effect availability 53

54 2.13. Case Study 13: Abengoa Waste to Biofuels and phone number of key contact: Introduction to the Business Case The improved management of waste and residue is a priority societal issue. The sector is driven by the need to monitor and control greenhouse gas (GHG) emissions and to improve the management of waste as populations increase. Current waste management consists of landfill or incineration methods with the development of optimised greener solutions being of high importance. As the economic and demographic sectors grow, so too does the production of municipal solid waste (currently more than 500 kg/per inhabitant/year MSW). Current waste management models cannot provide environmental and sustainable solutions that allow material and energy to be effectively recovered from waste. The development of the technology involving biomass conversion into sugars and bioethanol started in 2012, and was advanced from previous technologies developed at Abengoa. Abengoa Bioenergy New Technologies have a demonstration plant and laboratory in Salamanca (Figure 1) and carry out process development in Sevilla, Spain (Figure 2). 1 2 Figure 1 and Figure 2 - The Abengoa Bioenergy New Technologies demonstration plant in Salamanca, Spain and process development in Sevilla, Spain The overall objective in this case study was to develop and position an advanced municipal solid waste solution based on maximizing recycling and minimizing biodegradable municipal waste landfilling by using second generation (2G) ethanol 2G EtOH technology in a waste to biofuels process. According to the waste hierarchy, waste to biofuels is a low environmental impact technology for municipal solid waste management, producing recyclables like paper & cardboard, bricks, metals (ferric/non-ferric), film, High Density Polyethylene (HDPE) and bio-based polyethylene (PET). This will minimise (Directive 1999/31/EC Art 5. 2 c) the landfilling of biodegradable municipal waste. 54

55 The Business Case The enzymatic hydrolysis technology developed by Abengoa Bioenergy New Technologies for biofuels production has been adapted to the use of the organic fraction of municipal solid waste as feedstock by introducing key innovative aspects in the plant design. The most relevant adaptation in the technology is related to both the municipal solid waste treatment itself and the further processing of the municipal solid waste sugar-rich fractions in order to obtain cellulosic fibres of high enough quality to maximize the conversion yields into ethanol. In that sense, municipal solid waste pre-treatment is the key to improving ethanol production and therefore a strong developmental effort has been made in this area. Innovation in the pre-treatment step includes a tailored-made design that allows: - Maximum recovery of sugar-rich fractions from municipal solid waste - Enhanced removal of inert compounds which are inhibitors of enzymes used in the enzymatic hydrolysis step and/or improve plant operation downstream - Increased flexibility to cope with seasonal variations in MSW composition, which are inherent to its origin. Furthermore, the enzymatic hydrolysis and fermentation steps have been optimized through adaptation of process conditions in order to get maximum ethanol yield at minimum enzyme dosage. Abengoa Bioenergy New Technologies is also working on developing a novel enzyme cocktail with increased efficiency at lower cost than current commercial cocktails suitable for hydrolysis of lignocellulosic biomass. Innovative developments within the industry Numerous issues needed to be overcome to develop the waste to biofuels technology, including the sufficient separation of the different waste fractions, the ability to hydrolyse very different cellulosic materials that can be found in the waste, and the development of processes to overcome the diverse composition of waste because some constituents can act as inhibitors of the fermentation process. The Abengoa waste to biofuels technology is innovative compared to traditional municipal solid waste management systems; it covers both maximization of recovery of convertible fractions and process integration, as well as production of renewable fuels whilst minimizing the generation of sub-fractions. Environmental and societal benefits Environmental advantages of the waste to biofuels technology include: - The diversion of up to 80% of landfill waste - Reduction of odours - Minimising the environmental footprint and the reduction in GHG emissions by 60% compared with gasoline - Increases recycling rates through organic fraction treatment - Prevents particle emissions, since no thermal treatment processes are involved - Improved resource efficiency through recycling of process water 55

56 Socio-economic advantages of the waste to biofuels technology include: - The creation of green jobs - Contributions to region s economy - Opportunities for local companies through the creation of new value chains and knowledge transfer and sharing - The creation of smarter cities through the promotion of clean energy and reduction of waste through diversion. Challenges In order to effectively meet the objectives of the project, it was essential to communicate the low environmental impact of the technology as an alternative to landfills or other traditional practices to the municipalities as they are directly responsible for waste management. It was also important to stress the advancements and readiness of the developed technology. Currently, municipalities own the responsibility of municipal solid waste management, but in general they prefer to externalize it because of; a lack of specific knowledge on municipal solid waste treatment; limited time in public management; existing infrastructures/investments; reliable solutions; community perception (environmental-friendly community); minimising cost (tipping fee vs taxes); implementation of existing legislation Challenges that needed to be overcome to access the market included, optimising the process in order to decrease enzyme dosage required to hydrolyse municipal solid waste, and an aim to reduce the high initial investment. It was also difficult to gain access to the waste feedstock because the waste management system is regulated via public tenders, which are sometimes are blocked due to political reasons. Public policies did help drive this project forward, for example the decoupling of environmental impacts and Economic & Demographic growth. There was also a stringent waste directive and several legislative proposals (EU Commission, EU Parliament, etc.) to regulate first and second generation biofuels. The main principle barrier in scaling up investment in this project is access to waste material. Conclusions Barriers - The need for adoption of market stimulation measures for 3G bioethanol such as the adoption of a specific binding targets for advanced biofuels, either as part of the Renewable Energy Directive or based on the US Renewable Fuels Standard - At an EU level, a decision in favour of a binding target for truly advanced biofuels in 2020 and beyond is needed as quickly as possible - The lack of a long term, stable, predictable and supportive regulatory framework for sustainable advanced biofuels with a clear development trajectory up to 2030 that clearly demonstrates a full acceptance of the role of advanced biofuels in decarbonising transport and in reducing EU dependence on imported fossil sources 56

57 - The need for dialogue around the benefits of moving away from fossil fuel sources towards renewable sources of second generation fuel in the context of their environmental, economic and socioeconomic benefits - Lack of supportive fuel specifications for ethanol blending above 10% - The need for a clear certification and labelling system which ensures that only the chemicals and products that are bio-based are labelled accordingly. This will provide certainty of sustainability and bio-based content for consumers and will help build confidence in biobased products - The need to facilitate access to combined EU funding for high financial risk investments in first of their kind and flagship biorefineries in Europe, where possible building on abandoned industrial sites in order to encourage regional rejuvenation. Benefits and enabling measures - The diversion of up to 80% of landfill waste - Reduction of odours - Minimising the environmental footprint and the reduction in GHG emissions by 60% compared with gasoline - Increases recycling rates through organic fraction treatment - Prevention of particle emissions, since no thermal treatment processes are involved - Improved resource efficiency through recycling of process water - The drive of the Fuel Quality Directive and the Renewable Energy Directive to reduce CO2 emissions in the transport sector - The potential to reduce CO2 and methane emissions - Potential to create jobs and growth - New EU waste targets for recycling and reduction of landfill through circular economy - EU technological expertise and market leadership - The creation of green jobs - Contributions to region s economy - Provides opportunities for local companies through the creation of new value chains and knowledge transfer and sharing. - The creation of smarter cities through the promotion of clean energy and reduction of waste through diversion - Impact of the Waste disposal reduction Directive: 35% Biodegradable Municipal Waste to landfill in 2016 vs (Directive 1999/31/EC Art 5. 2 c) - Compost raw material restricted to Organic Fraction from MSW selective collection (Directive 2008/98/CE Art.22) - Reuse & recycling for paper, metals and glass 50% in 2020 (Directive 2008/98/CE Art a) 57

58 3. ANNEX 3.1. Contributors to the Thematic Group s Work Emile Snauwaert, Flemish Coordination Centre for Manure Processing; Viooltje Lebuf, Flemish Coordination Centre for Manure Processing; Dominique Barjolle, Research Institute for Organic Agriculture; Christine Bunthof, Wageningen International; Eva Cudlínová, University of South Bohemia; Emilia den Boer, Wrocław University of Technology; Carmen Milan, Abengoa; Electra Papadopoulou, CHIMAR Hellas S.A.; Dr Nieves Gonzalez Ramon, Feyecon; Dr Leon A. Mur, Plantenstoffen; Christophe Rupp Dahlem, Roquette; Camille Burel, Roquette; Jean-Marie Chauvet, ARD; Yvon Le Henaff, ARD; Doris Schnabel, Ministry of Innovation, Science & Research of the German State of North Rhine-Westphalia; Monika Sormann, Department of Economy, Science and Innovation, Flemish Government; Šarūnas Zableckis, EUCC Marine Team; Holger Zinke, Biotechnology Research And Information Network AG; Rogier Van Der Sande, Executive Council of Zuid-Holland; Alexander van den Bosch; Province of Zuid-Holland; Michael Carus; nova-institute; Rob Vierhout, epure; Giildas Cotton, Association générale des producteurs de maïs; Christine Ritschkoff, VTT; Maija Pohjakallio, Finnish Chemical Industry Federation; Nour Amrani, Novozymes; Dirk Carrez, Clever Consult; Erwin Vink, NatureWorks; Henrik Zobbe, Food and Resource Economics University of Copenhagen; Catia Bastioli, Novamont; Giulia Gregori, Novamont; Asko Ojaniemi, Nordic Bioenergy; Ivar Pettersen, Norwegian Agricultural Economics Research Institute; Ana Maria Bravo, DuPont Industrial Biosciences; Ricardo Gent, German Biotechnology Industry Association; Jose Mosquera, CEFIC; Camille Burel, Roquette; Piero Cavigliaso, Biochemtex M&G; Hasso von Pogrell, European Bioplastics Association; Antoine Peeters, EuropaBio; Damien Plan, European Commission; Kjell Ivarson, Federation of Swedish Farmers; Oana Neagu, copa-cogeca; Johan Verriest, MWV; Anna Holmberg, Arizona Chemical; Ioana Popescu, EuropaBio; Claire Gray, EuropaBio; Ylwa Alwarsdotter, Sekab; Erika Jangen, Primegroup; Johan Elvnert, Forestry Technology Platform; Ward Mosmuller, DSM; Lutz Walter, Euratex; Gloria Gaupman, Clariant; Hilda Juhasz, European Commission; Juliette Jacques, AAF; Katrijn Otten, Cargill; Markus Rarbach, Clariant; Marc Vermeulen, CEFIC; Courtney Hough, Federation of European Aquaculture Producers; Meredith Lloyd Evans, BioBridge; Halina Novak; Mélanie Moxhet, EuropaBio; Corina Pîrva, EuropaBio. 58