Driven by the growing awareness of the finite nature of fossil raw materials and their climate change impacts as well as the need for more sustainable methods of industrial production and consumption patterns, the bio-based economy is expected to expand in the future.
The bioeconomy sector is seen as a warrantor for a green economy: “the use of biomass offers solutions to many of the problems of the fossil-input-based economy: it ensures both energy diversity and security and is environmentally friendly, owing to carbon sequestration and the resulting climate change mitigation”.
As a result, expanding the bioeconomy has been identified as a strategic aim by the EU and member states, such as Germany. Also internationally, the transition to a bioeconomy garners political support. Meanwhile, the definition of the bioeconomy concept is still under discussion.
The European Commission (EC) defines ‘Bioeconomy’ as encompassing “the production of renewable biological resources and the conversion of these resources and waste streams into value added products, such as food, feed, bio-based products and bioenergy. Its sectors and industries have strong innovation potential due to their use of science, enabling and industrial technologies, along with local and tacit knowledge”.
This means that the bioeconomy intends to substitute fossil resources and to close material cycles in industrial processes by using renewable resources such as plant materials like wood and agricultural crops, animal by-products and waste.
The wood-based bioeconomy describes an important sub-sector of the overall bioeconomy. Wood-based bioeconomy can be defined as a bio-based circular economy that uses lignin-containing and, therefore, hard parts of stem, branches and twigs of plants such as trees and scrubs.
The biggest part of utilised wood originates from forests such as round timber, pulpwood and forest residues, while smaller parts of utilised wood derive from short rotation coppice and landscape residues. Furthermore, by-products and waste of wood processing and also recycled wood are utilised for material and energetic use. The wood-based bioeconomy has a high relevance for both material and energetic uses because there is no direct competition with food production.
While the bioeconomy receives increasing attention in the political sphere, its advantages, risks and further development remain uncertain, as many influence factors such as resource availability and costs, climate change, technological as well as economic development play a crucial role. The development of supportive policies at different levels will also impact on the bioeconomy. In competing with fossil fuel-based products and production processes, bio-based substitutes are encumbered by market failures, such as the limited internalisation of environmental costs of fossil fuel use.
Moreover, fossil-based production pathways can benefit from economies of scale and scope, past learning effects and a co-evolution of technologies and institutions, resulting in a lock-in into fossil fuel-based production structures and demand patterns. At the same time, investments in innovative bioeconomy pathways are associated with knowledge and learning spillovers, which, as positive externalities, result in lower levels of innovative activities than socially optimal.
A well-coordinated policy mix is required to ensure the effective functioning of the bioeconomy innovation system which can support a path transition towards a sustainable circular flow economy based on renewable resources, by encouraging not only investments in innovation but also the diffusion of innovative technologies and products and their progress towards commercial maturity.
However, how political influence factors might unfold is strongly connected to social acceptance of bioeconomy concepts. Meanwhile, uncertainties do not only apply to influence factors, but also to the impacts of the bioeconomy.
Greenhouse gas (GHG) mitigation potential and other environmental and socioeconomic impacts of biomass uses depend on a large range of allocation decisions for heterogeneous material and energetic pathways. To ensure that the transition to a bioeconomy is a sustainable one, an adequate governance framework is required.
Current State and Further Perspectives
The average share of bioeconomy sectors in the German economy slightly increased over the last years: for instance, the use of bio-based plastics in the consumer goods industry grew from less than 100 tonnes in 2004 to 37,000 tonnes in 2011.
Overall, the energetic and material use of wood has doubled over the last two decades, reaching 135.4 million cubic metres in 2012. While wood-based value creation is significant for the German economy, the material use of wood is dominated by conventional applications such as woodwork or paper industries, with limited growth expectations for the future.
Moreover, a large demand for wood comes from energetic applications, whose use of wood has surpassed material applications for the first time in 2010. On the other hand, the material use of wood for innovative applications such as the chemical industry is quite low with 2.2 percent of total wood usage in Germany.
For innovative wood products, such as Wood Plastic Components (WPC), the Federal Ministry for Food and Agriculture prepares measures for the development of emerging markets, such as information for consumers about excellent wood products from deciduous trees. In Germany, an area of 11 million hectares is covered with wood land; the overall forest area has grown by one million hectares in the last 40 years.
Sustainability of forest management is safeguarded by the German Federal Forest Act and the Forest Acts of the German federal states (Länder). Further efforts are made regarding more efficient and environmentally friendly timber harvesting methods, especially regarding the protection of soils. In addition to forest wood, further resource potentials for the wood-based bioeconomy in Germany are wood shavings, bark, and forest residues, but also landscaping residues, scrap wood from cascade use, and wood from short rotation coppice or from certified imports.
German economic policy has committed itself to the strategic option of the bioeconomy, as laid down in several strategic papers of the Federal government such as the National Policy Strategy on Bioeconomy, theNational Research Strategy BioEconomy 2030, the Action Plan of the Federal Government on Material Usage of Renewable Resources and the National Biomass Action Plan.
However, there is not yet a comprehensive bioeconomy policy in Germany; neither has there been great pressure to establish one from the electorate, which is quite fragmented due to diverse aims and interests of society, politics and companies.
Consequently, bioeconomy sectors follow different laws and regulations for their specific sector such as the chemical industry. Some general regulations, such as the German Waste Management Act, implicitly also affect the whole value chain of the bioeconomy, but so far it does not offer many incentives for the bioeconomy to grow.
Similarly, climate policy could set strong incentives for exploring alternatives to emission-intensive fossil fuels. So far, however, policy measures which increase the costs of fossil fuels are limited to the energy sector (prominently the EU ETS and different energy-related taxes), and lack effectiveness in initiating structural changes.
The limited internalisation of environmental costs distorts competition between renewable resources and fossil fuels, as does the existence of technological and institutional path dependencies which favour a fossil-based ‘throughput economy’. Moreover, competition between energetic and material wood uses is distorted by the existence of deployment support for energetic wood uses, such as feed-in tariffs and feed-in premiums under the German Renewable Energy Sources Act, or a reduced value added tax on firewood.
Certification is an instrument to increase demand and supply for bio-based products, because at present fossil resources are still the main input factors for industrial production. Some labels and standards for bio-based products have already been developed, such as for the determination of biobased content in solid recovered fuels or for the evaluation of the compostability of plastics, and several bio-based product standards are currently under development in Europe, such as for sustainability criteria for bio-based products or life cycle assessment of bio-based products.
Some sectors, such as the packaging and the automobile sector, stimulate the production of bio-based products because they provide comparative advantages over fossil-based products. However, the majority of industries still use fossil resources because bio-based alternatives are either not available or too expensive.
Another lever to support the development of the bioeconomy is research. The pressure on technological development is high: “Technological developments must guarantee more efficient conversion techniques, resolve some of the biomass competition issues and decrease the cost of producing bio-based goods.”
However, many sustainability concerns are raised in this respect. Deficiencies in technological development and sustainability-related uncertainties can contribute to technology research staying on the laboratory and pilot scale, instead of reaching demonstration or industrial scales; the latter would be necessary to create or open up markets for bio-based products.
Besides technological development, the availability of a sustainable biomass stock is an important prerequisite for companies to invest in new technologies and shift their product portfolio towards bio-based products. Even though fossil fuels are subject to price fluctuations, in the medium term, companies can rely on resource availability, whereas for biomass several unknown factors such as effects of climate change, nature conservation consequences and cultivation decisions have to be taken into account.
On the demand side, consumers are not yet aware of the products and possibilities the bioeconomy may provide, such as the reduction of weight of materials and products or the use of environmentally friendly product components such as ecological glues.
One of the very few case studies on acceptance of bioeconomy found that consumer awareness of bioeconomy products is rather low; moreover, their advantages are not easily communicated as they have similar features as fossil-based products, but are higher in price. To bring the acceptance of bio-based products forward, communication has to be enhanced, which ranks among the aims of the European and German bioeconomy strategies.
However, while at present bioeconomy strategies across Europe admit that societal awareness is crucial for a successful transition towards a bio-based economy, the key priorities of European strategies for developing the bioeconomy focus mainly on “fostering research and innovation, primarily in the field of biotechnology; promoting collaboration between industry, enterprises and research institutions; prioritising the optimized use of biomass by implementation of the cascade principle and by utilising waste residue streams; and providing funding support for the development of bio-based activities”.
The diverse interests of different actor groups such as industry and consumers are also reflected in the voter market. The preferences and characteristics of voters determine, for example, if they are likely to support or object to sustainability policies that noticeably impact prices; this influences the outcome of political decision making processes.
Benefits & Challenges
For companies, uncertainties influence investment and innovation decisions. Key influence factor ‘innovation along the value chain of wood’ with its passive interaction pattern is depending on other influence factors, namely on the influence factors ‘technology, innovation and research policies’, but also ‘forest, environmental, and nature conservation policies’ as well as the active support of the circular flow economy.
Companies do not only ask for short-term support, but that stable political framework conditions are required over the long term.
Similarly, consumers often have little information about the risks and uncertainties associated with different types of resource uses and this directly influences their acceptance of new products. Not surprisingly, ‘willingness to pay for bio-based products’ is a key influence factor that determines the demand for bio-based products.
However, it is not linked strongly to the other influence factors—it neither influences them greatly nor is subject to major influences itself. The only factors that have an impact are the influence factors ‘public influence’, such as demand for and support of sustainability policies and bio-based products as well as ‘domestic economic development’.
An individual analysis and concept is required to enhance the ‘willingness to pay for bio-based products’. Best practice examples can be derived from supporting the increase of organic products through certification and information campaigns.
Information generation, availability and distribution is therefore crucial in order to increase the demand for woody bio-based products, but it might also require a certain individual initiative as well as willingness to act as a self-determined consumer.
Resource Availability & Distribution
The availability of resources is a crucial bottleneck for the development of the wood-based bioeconomy. The key influence factor ‘Biomass availability/forest structure’ is influenced by initiatives by policy makers and market actors, but it is also subject to external factors, such as climate change impacts.
The potential of expanding the material use of wood is at present limited, one reason being its competition with energetic uses which in Germany have been fostered by the Renewable Energy Sources Act (EEG) in the electricity sector, and the Renewable Energy Heating Act (EEWärmeG) in the heating sector.
The competition between energetic and material uses is currently distorted, because comparable deployment support for material uses does not yet exist. Increasing demand for wood leads to rising wood prices; this in turn decreases the competitiveness of wood-based products and processes compared to fossil-based ones.
However, emerging new innovative technologies and processes may reduce pressure on resources, if they allow for a more efficient use of land and biomass. Increasing efforts towards a circular economy and the use of cascade production also prove important in this regard.
The uptake and further development of alternative resources such as waste products could further relieve competition for biomass. The recycling potential and characteristics of waste products that could serve as substitutes for wood are not extensively researched yet and, at present, regulation of waste recycling is not clearly enough defined to allow for the widespread use of waste as a new resource.
Research and regulation are key components for unlocking the illustrated potential. Besides the stimulation of local and regional biomass availability, imports can play a role in expanding the resource base. However, the effectiveness of governance options for safeguarding large-scale wood imports is associated with considerable uncertainties.
The key influence factor ‘energy and climate policies’ can directly be shaped by policy makers, although coordination is required between national and European governance levels. From the scenario analysis, we can also conclude that the development of the wood-based bioeconomy in Germany is not independent of the development of the global economy.
However, the key influence factor ‘globalisation and global economic development’ in particular can hardly be influenced by national-level bioeconomy policy makers. Among other factors, experts named climate change and advances in the exploration of fossil resources as important influences, but the future development of these factors is subject to uncertainties.
The amount of wood provided by the world market will influence demand and supply on national markets. Furthermore, developments on the global markets with regard to amount and quality of products will be decisive for the development of the wood-based bioeconomy, for example, by impacting on innovation activities. Also, policy developments at the European or global level such as with regard to climate policies can have an important impact on conditions for bioeconomy development.