(A continuation from the AERTOs BBE Forward-Looking Analysis. For background, see Bioeconomy: The Scenario Pathways)
Scenario Pathway 4: Green Agenda
In this pathway, the dominant logic is that of Environmental Sustainability, meaning that Europe views the bioeconomy as part of the transition to a more environmentally sustainable economy, due to its potential to contribute to reduced fossil fuel consumption, greenhouse gas emissions, and waste.
The working green paradigm is one of Think Globally, Act Locally, which means that the European bioeconomy is expected to help solve global environmental problems, both by reducing Europe’s own global environmental footprint and through the maintenance of high standards for what constitutes sustainable bio-based business.
The politics of the European bioeconomy are focused on Keeping Promises, i.e., delivering on Europe’s high-level environmental targets. Tensions between environmental and economic objectives are not resolved, but commitments made to targets are seen as politically credible and the bioeconomy is positioned as a tool for meeting ambitious CO2 reduction, renewable energy, and waste reduction targets by 2050.
Policies aim to Incentivize a Fossil phase-out. With much of the energy sector on track to phase out fossil fuel use by 2050, the emphasis for the bioeconomy after 2030 is on replacing fossil feedstocks in process industries and manufactured goods. Product standards (for both CO2 and renewable content) and carbon taxes are the primary policy tools.
The dominant technological paradigm for the European bioeconomy is Substitution at Scale. Technologies that allow for bio-based solutions to enter the economy through large-scale infrastructure akin to that of the ’fossil economy’ are dominant. For fuels and chemicals this means that strategies that involve blending through existing infrastructure are prioritized initially until new infrastructure is economically justified by very high marginal CO2 prices after 2035.
Markets treat this large-scale substitution strategy as Bankable and respond with large-scale finance. The perceived robustness of policy frameworks and infrastructure used by the bioeconomy by 2030 makes the sector attractive to both industrial balance sheet investors and project financiers.
Value chain formation occurs initially through Clusters to overcome uncertainty about economic and environmental value creation. Over time, the increasing bankability of bio-based alternatives leads to larger investors and industrials scaling up in both vertically integrated and disaggregated approaches.
Scenario Pathway 5: Bio Boutique
In this pathway, the dominant logic is that of Competitive Innovation, and Europe sees the bioeconomy as an arena to develop competitive advantages vis a vis other countries and regions, based on advanced technological capabilities.
The working green paradigm is once again Clean Tech, with the European bioeconomy positioned as a cutting-edge industrial movement creating products with both green benefits and advanced functionality. Green consumerism is an established and large market segment that includes bio-based alternatives and Europe sees itself as a pioneer of bio-based processes and products.
The politics of the European bioeconomy are most interested in Export Promotion. Political favour is given to concepts that may have advantages in global markets. The bioeconomy is expected to be fast-moving and dynamic and political support follows technological trends.
In terms of Policies, this strategy encourages European countries to create Domestic Lead Markets, usually through public procurement and tax advantages. These programmes require resolution with trade and competitiveness rules, leading to uncertainty that undermines their breadth and scope. However sufficient exceptions are carved out to support a number of pioneering companies.
Capturing investor interest in the European bioeconomy and competing on global markets requires a technological paradigm based on Patentable IPR. Companies patent process technologies and product designs aggressively, and benefit from increased harmonization in patenting in the EU, itself driven in part by the ’Clean Tech Race’ at the global level.
Markets in the European bioeconomy develop in ways that favour First Movers. Bio-based innovations attract more venture capital than in other scenarios and investors see major advantages to reaching early adopters, participating in procurement programmes, and creating strong brands for bio-based alternatives. Early movers in process technologies look to export patented solutions based on enzymes, catalysts, and genetic modification as well as a number of advanced materials applications and turnkey industrial systems.
Value chain formation occurs at Arm’s Length, with the companies with the greatest technical and IPR base wielding the greatest negotiating power and capturing the highest margins.
Scenario Pathway 6: Bio Leverage
In this pathway, the dominant logic is that of Resource Utilization, and the countries of Europe take different approaches to the bioeconomy, each looking to leverage their own natural resource and industrial bases.
The working green paradigm is the Circular Economy, and the bioeconomy in Europe is at first considered by many as an ’inherent’ part of this paradigm, since biogenic resources are part of nature’s closed loops. Over time however more pressure is put on the bioeconomy to increase its own ’circularity’, through industrial symbiosis and improved durability and recyclability of its products.
In Europe the politics of the bioeconomy are based on Strategic Assets, and those countries most active in the bioeconomy pursue something akin to industrial policy in the sector. Political priorities include promoting the sustainable exploitation of natural resources (sometimes against green opposition) and protecting jobs in strategic industries (sometimes against disruptive forces).
Domestic Policies in the European bioeconomy thus incentivize the Supply-Side of the bioeconomy. While more direct strategies at the national level risk conflict with competition rules, Member States are able to make use of European environmental strategies to promote both particular feedstocks (forest and agro-waste, especially) and subsidize the integration of key industries into the bioeconomy through support for demonstration, scale-up, and efficiency improvements.
As at the global level, the dominant technological paradigm of the European bioeconomy is that of Closed-Loop Systems. The primary variant of this paradigm is industrial symbiosis, and the bioeconomy becomes the pre-eminent practitioner of this model of integration between industries. Recycling of end-of-life products, especially those based on wood fibres, is a smaller but steadily growing element of the circular bioeconomy.
The political and technological dynamics limit the availability of capital, and as such the focus of financial markets and industrial competition is Return on Assets. Innovation and the growth of new markets become less important than efficiency and market share.
In this pathway, value chain formation produces Integrated Champions of the bioeconomy, with feedstock, processing, and brand ownership often controlled by large, integrated incumbents. In Nordic and Southern European countries the agro, forest and pulp and paper sectors forward-integrate into chemicals, while the Central European chemical companies backward-integrate into raw materials.