Scenario 2 drifting or steering

”Drifting or steering?” Scenario description Forestcluster Ltd’s Bio-based economy scenario process Tiina Pursula, Juha Vanhanen and Paula Tommila Gaia Group Ltd | 15.11.2011

Bio-based economy scenarios in 2030

Main Drivers ”How the critical factors develop”

• World trade & Economy

• Innovations and renewal

• Policy and regulation

• End-user Demand

• Societies

• Food

• Energy

• Natural resources

• Environment and climate change

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Outcomes 2030 ”How the world looks like”

• Business opportunities

• Value networks

• Material flows

• Markets

• Products, services and concepts

• Development of regions … Competitiveness

… Well-being

… Sustainability

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Scenario story in 2030: Drifting or steering?

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Attempts to re-organize global economical and environmental regulation and incentives continue, but with low success, which leads to slight loss of power for international organizations. Several blocks and countries focus on individual short-term economic targets, leading to confrontation and fragmented regulation. Sustainability is not a major issue on international political agenda. Global economy continues to be prone to rocky crises, and funding and incentives for renewal remain low. Globalization has to some extent turned into localization due to trade barriers and opportunistic national policies. Importance of developing countries increases in global cooperation, but these countries fail to take leadership. Funding and incentives are not sufficient for renewal. Some countries, like India and South Korea, show leadership in innovations and reduced energy and resource intensity, while many continue as before. Higher energy and material prices are the main drivers for efficiency improvements. Sustainability is a minor criterion for most people when purchasing products but sustainable consumption has become mainstream especially in old industrialized countries. Urbanization continues. Emerging economies try to boost growth by market-based opportunistic policy, leading to deforestation and loss of biodiversity and ecosystem services. Heterogeneity in available resources and wealth grow, leading to increased migration and conflicts and unbalanced development.

© mbbirdy

Scenario 2: ”Drifting or steering?”

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Main Drivers Important variables

World trade & Economy Attempts to re-organize global economical regulation continue, but with low success. Global economy continues to be prone to rocky crises, and funding for renewal remain low. Globalization has to some extent turned into localisation due to trade barriers and opportunistic national policies. Importance of developing countries increases in global cooperation, but these countries fail to take leadership. Many country blocks have different targets which leads to standoffs. Price of labour continues to direct the production site locations while global trade takes place in information networks. Markets of biomass feedstocks remain fragmented and to some extent trade barriers limit global trade. However, certain widely used easily applicable biomass fractions like sorted paper waste, process residues and energy crops are traded in regional and global biomass markets. High end intermediates from biomass (like lactic acid) remain niche products and their trade happens mainly between the business consortia, which are mainly formed along the value chain to enable providing comprehensive solutions. Funding for bioeconomy related investments and R&D is available mainly through private sources and in areas where the economy grows and bio economy concepts provide cost-effective solutions to crucial challenges, like resource scarcity. Public funding remains low, as regulation does not provide incentives for increased role for bio economy in the division of limited economical resources.

New trading routes open up as the climate change melts the Arctic sea. North West passage is in use few weeks a year and provides new options for logistics in the Northern hemisphere.


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Innovations and renewal

Funding and incentives (both market based and political) are not sufficient for renewal. Some countries, like India and South Korea, show leadership in innovations and reduced energy and resource intensity, while many continue as before. Also Latin America is eager to develop. Innovations follow economical activity and spring therefore in regions with high economical growth. Innovations are increasingly developed in business-led consortia with comprehensive value chain coverage. Social media and communities for open innovation are popular in academic world, but business-led nature of research limits the open idea exchange also in the research communities. The environment is not favourable for generic and basic research. This slows down the development of emerging technologies and directs the resources into incremental research. A growing proportion of innovations is based on application of existing technologies in different market areas and integration of varying technologies and services into larger concepts for tailored end use demand. As innovations follow economical activity, the bio economy innovation leadership is in growing economies with urgent need to solve resource depletion problems. Examples of these countries are especially India and China. Another strong focus area is in wealthier countries with relatively high level of competence, high standard of living and urban style of living with highly developed metropoles, but poor pool of natural raw materials (biocapacity). These countries, like South Korea, develop cutting edge concepts for zero-waste urban communities. In general, innovations happen where resource depletion is severe and economy is growing, and no single area or country takes overall leadership of bio-economy innovation. One country can be strong eg. in water related innovations but not in other areas of bio economy, and so on.


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Policy and regulation Attempts to re-organize global economical and environmental regulation and incentives continue, but with low success which leads to slight loss of power for international organizations. Several blocks and countries focus on individual short-term economic targets, leading to confrontation and fragmented regulation. Sustainability is a minor issue on international political agenda (or does not lead to concrete actions). Emerging economies try to boost growth by market-based opportunistic policy. Short term visions and reactivity guide regulation. In countries with resource depletion problems regulation is used as a tool to cope with the situation. Laws are used to increase resource-efficiency and limit export of critical resources. This may lead to eg. limiting of export of wood from African countries to cover only certified wood. Another aspect is increasing amount of trade barriers for securing higher national value addition of available natural resources. One example of this kind of development is the Russian taxation of round wood import. Continuing population growth and food crises lead to increased focus on food security, and supporting regulation. On the other hand many emerging economies support economic growth by incentives for industrial investments based on short-term visions and leading to loss of biocapacity, eg. supporting investments on virgin biomass-based energy production with unoptimized and relatively inefficient technology. Bio-economy lead markets are supported by policy and regulation in countries and regions like EU, which have invested (both public and private actors) on bio-economy related education, R&D and technologies.


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End-user Demand Sustainability is a minor criterion for most people when purchasing products, but sustainable consumption has become mainstream especially in old industrialized countries and other societies where living standards are relatively high. Consumption patterns depend on available natural resources and living standards while well-being standards vary from region to region. In developing countries the growing population and dominance of young generations creates a growing need for commodities and growing base of pyramid markets. Need to improve standard of living is the dominant driver and cost-efficient means to support better life are popular. This includes low-cost smart phones, modular construction, furnishing and home electronics products for improved suburban living and low-cost aseptic packaging for safe food supply. In the growing economies the commodity markets grow at a steady state fuelled by increasing middle-class and boost of foreign investments. Dietary patterns, way of living, and consumption patterns change accordingly creating increasing markets for bio economy related products like processed food, food supplements, design furniture, magazine papers and textiles for recreation use. In old industrialized countries organic food, ethical clothing and bio-based and recycled-material based carbon neutral products are popular among the segment of consumers that emphasize sustainability. These also provide a price premium for the producers. However, overall demand is slightly reducing in many product segments due to ageing population.


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Societies Urbanization continues. Heterogeneity in available resources and wealth grow, leading to increased migration and conflicts and unbalanced development. Basic needs such as food and water cause migration. Individuals are more aware of the world around them through internet and social media. Population growth is slowing down globally but growth rates vary between regions and countries. Countries with low population growth rates or diminishing populations handle consumption needs better than those with higher growth rates. However, societies with stable population rates meet new challenges through aging population and reduced productivity. Migration moves slowly towards Northern regions where water resources are sufficient and over population is still not an issue. In certain countries some communities are built on sustainable basis and bio economy has become a corner stone of every day life. In those communities transportation is based on public services run on renewable fuels and electricity while private fossil fuelled vehicles are still part of the life in most countries and communities. All over the world some consumer products are labelled with material and carbon footprints and recycled after use when possible but availability of labelled products depends on the region.


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Food Food crises occur relatively often due to increased demand, fresh water scarcity and lost harvests caused by unpredictable changes in weather. Increasing living standards increase the demand for meat which leads to even greater need of efficient farming technologies. In wealthy countries the supply of food is sufficient and luxury is also available for the rich ones. Increased food demand and lack of new farming land has made food production productivity an important issue. Sufficient affordable and nutritious food is needed all over the world. Yields are being improved with careful selection of suitable crops and improved irrigation efficiency. Local production is seen as part of the solution as shorter transportation decreases the amount of spoiled food. Genetical modification is as a key food crisis solving method especially in Africa, South East Asia and Americas. Europe has still not accepted GMO food due to active consumer resistance.


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Energy Higher energy prices are the main drivers for energy efficiency improvements. Global overall energy demand increases as efficiency improvements cannot fully compensate increased energy demand of the emerging economies. Due to low political incentives for renewable energy technologies the global production mix is still mainly fossil-based. Extension of fossil fuels has delayed thanks to newly accessed oil and gas fields in the Arctic regions. Resources and opportunities vary and cause energy price differences. Bio based energy solutions are sought for in regions where biological resources are vast and sufficient. Algae farming develops in regions where it supports other industries through utilising carbon dioxide produced by industrial plants, nutrients from waste water plants etc. Small scale power production is more efficient than before thanks to smart electricity grids and low-cost energy production facilities based on bio gas and other bio materials.


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Natural resources Lack of political incentives for development of sustainable and recycling based bio economy leads to non-optimal usage of natural resources and increasing scarcity of critical resources like clean water, nutrients and food, especially in the developing countries. Higher material prices are the main drivers for efficiency improvements. Agricultural products are used efficiently where it is seen profitable. E.g. cereals can provide cellulose, hemicellulose, lignin, protein and extractives for a variety of users and uses but high costs of technological solutions limit the production in developing countries. Bio based solutions for producing plastics, chemicals and other products are on the rise due to the rising prices of non-renewable resources.


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Environment and climate change

Climate change progresses. Post-Kyoto global agreements on mitigation were not achieved and climate change mitigation is based on fragmented efforts. Emerging economies try to boost growth by market-based opportunistic policy, leading to deforestation and loss of biodiversity. Carbon trade is functioning in some parts of the world. In these regions carbon emissions are expensive for both local production and imported goods and energy. Environmental problems caused by industrial production affect environment in many regions. Some countries maximise economical growth on the price of environment while other countries think more sustainably and invest in more expensive environmentally friendly technologies. China has lead the way first for fast economical growth but lately also for environmentally benign innovations and technological solutions.

Winning concepts of Bio-based economy in 2030

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”Drifting or steering?” Business as usual; attempts to re-organize global economical and environmental regulation and incentives continue, but with low success.

© David Ciemny

© mbbirdy

© mbbirdy

• Efficient logistics and trading concepts to level bio-based feedstock production and demand

• High value added products that maximize the value from the certain feedstock

• Robust mainly urban based biorefineries and production facilities with high feedstock flexibility

• Robust, multipliable and modular cost-effective solutions for improved standard of living in emerging middle class of the developing countries: housing, food and packaging, transport

• Low carbon solutions in certain regulated markets

Biomass sources:

Fields and croplands

Forests

Oceans and lakes

Communities

Industrial

sidestreams

Biomass management, logistics and

trade:

Collection

Sorting

Handling

Trading

Logistics

Biomass utilization:

Biomass-based

industries: Food, pulp and paper,

textile

Energy production

Biorefineries

End use

Winning Concept: Efficient logistics and trading concepts for bio-based feedstocks

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Weak signals of Bio-based economy in 2030

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”Drifting or steering?” Business as usual; attempts to re-organize global economical and environmental regulation and incentives continue, but with low success.

© David Ciemny

© mbbirdy

© mbbirdy

• Intensity of food production: more food from the same surface area • Phosphorus and other nutrients recycling from sanitation waste, fish waste

and other sources • Management of various (local) feedstocks and complex supply chains:

(Locally) tailored solutions for biomass supply across industries and communities

• Locally superior concepts that can be protected

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