DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS

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106 • DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS procurement, increased research funding or other economic support. 139 The construction of a second-generation bioethanol plant in Maabjerg (The ‘Maabjerg Energy Concept’ or MEC plant), projected to come online in January 2016, further illustrates that there is a willingness to invest from both private and public stakeholders. 140 While the increased valorisation of existing waste and by-products is the focus of this analysis, there are several other ways to derive additional value in the bioeconomy. As highlighted during an interview by Mads Helleberg Dorff Christiansen from the Danish Agriculture & Food Council, there is large potential to continue the optimisation of input factors, such as crops with higher resilience and yield, improved livestock breeding, elimination of fertiliser leakage, and better feed. Another option is to deliberately modify plants to produce more auxiliary biomass to be used in bio-refineries. According to a study from the University of Copenhagen, it would be possible to produce an additional 10 million tonnes of biomass without significantly altering regular land use or output from agriculture and forestry sectors. 141 The report claims that products worth between EUR 1.9 and 3.5 billion could be generated from processing this biomass (mainly for fuel), while generating 12,000 to 21,000 new jobs. BARRIERS AND POTENTIAL POLICY OPTIONS The following paragraphs provide an initial perspective on the barriers limiting the ‘value capture in cascading bio-refineries’ opportunity (see Section 2.2.4 for the barriers framework). Although there were some variations in emphasis from the sector experts interviewed in the course of this study, the central message was clear: the largest barriers preventing an acceleration of next-generation bio-refineries are technology and capital. The full value of organic waste and by-products cannot be extracted unless emerging technologies are supported to reach beyond R&D stage to commercial deployment. This study did not encounter any bio-refineries that use microbial or enzymatic processes to produce bio-based materials such as plastics at industrial scale, indicating that such technology is still at the development stage. Building an efficient bio-refinery operation is also capital intensive. The financing of the MEC plant at EUR 300 million would – if they were to take it on alone – represent 9–12% of the balance sheet of leading companies in the sector. Payback depends partially on the ability to use current technologies (such as bioethanol and biogas) as platforms, and then add to the biochemical cascade more advanced technologies when they become commercially viable. While the revenue streams from the high-value, low-volume products such as nutraceuticals combined with bulk biofuels or other chemicals could ensure profitability, the competitiveness of the products would be increased if the prices of alternatives derived from petro-based resources reflected their true costs (externalities). Unintended consequences of existing regulations also stand in the way of the biorefinery opportunity. It is important to keep in mind the complex and internationalised regulatory landscape for the food & beverage sector. Denmark, like other European member states, has only limited control over legislation governing raw material and product handling, as well as waste treatment, which is set at EU level. The most prominent example is the more extensive restrictions on animal by-products being rendered into animal feed, following the breakout of bovine spongiform encephalopathy (BSE) in the 1990s. This animal by-product legislation restricts some animal parts from being used in bio-refining. Several sector experts indicate that sometimes Denmark has chosen to implement this legislation more strictly than its peers. While parts of the legislation governing food safety and waste treatment may have the unintended consequence of preventing advancement of new bio-refining operations, interviews indicate that in many cases it is more the complexity of the regulatory 139 The National Bioeconomy Panel, Anbefalinger: Det gule guld – halmressourcens uudnyttede potentiale (2015). 140 Adding to the existing 800,000–900,000 tonnes capacity to convert biomass into biogas, the new plant is expected to convert 300,000 tonnes of yellow biomass to 80 million litres of bioethanol. The total investment of ~EUR 300 million comes from key industrial stakeholders such as DONG and Novozymes, but also from the EU (EUR 39 million) and Innovation Fund Denmark (EUR 40 million). 141 Gylling, M. et al., Department of Food and Resource Economics, University of Copenhagen, The + 10 million tonnes study: increasing the sustainable production of biomass for biorefineries (2013). The potential also includes better collection of biomass from farmland, road verges, waterweed and cover crops.
DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • 107 framework than the restrictions themselves that act as a barrier. The complexity creates uncertainty and imposes the significant administrative costs of understanding how to comply and going through the process of acquiring the required permits. It should therefore be noted that the regulatory situation in the case of each potential bio-refining value-generation opportunity needs to be investigated closely. To address these barriers, the following policy options could be further investigated. They are the result of an initial assessment of how cost-effectively different policy options might overcome the identified barriers (see Section 2.3.3): • As a starting point, including bio-refineries in the government’s long term strategic plans. This could guide and reassure investors—even more so if accompanied by a policy package to deliver the strategy. 142 • In the short term, providing capital to deploy commercial-scale versions of mature bio-refinery technologies. Promising policies include providing low-cost loans or loan guarantees for the deployment of mature bio-refining technologies for example through existing Danish business support schemes, and financing at market rates that is better tailored to investors’ needs (as provided for example by the UK Green Investment Bank in municipal energy efficiency). Public-private partnerships to finance the deployment of mature bio-refining technologies also hold promise. An interesting example is the Closed Looped Fund NY that provides zero- or low-interest loans to municipalities or companies, albeit more active in developing recycling infrastructure. 143 • In addition, creating markets for bio-refinery output. Pricing externalities, setting targets (e.g. a minimum target for second-generation fuels within the EU’s biofuels target) could contribute to such market development. • In the longer term, stimulating development of advanced, high-value bio-refining technologies. The government could set up or fund cross-institutional R&D clusters to accelerate the move into high-value chemicals, nutraceuticals, pharmaceuticals etc. These could take on various forms, like the UK Catapults, a powerful example of public private partnerships in R&D, or the German Fraunhofer Institute, which plays an important role in European innovation with its long-term perspective and clearly defined mission to support application oriented research 144 • Complementing these measures with a business advice service. The primary goal would be to help bio-refinery entrepreneurs navigate a relatively complex regulatory and policy environment, but it might also help the bio-refinery community shape this environment. • Identifying and communicating necessary changes to EU policy (or its national implementation) to address the unintended consequences of some safety-focused regulations that unnecessarily restrict the trade in bio-refinery feedstock or products. 142 In the G7 Germany, the USA and Japan have specific national bioeconomy strategies with targets. While France, the UK, Italy and Canada do not have a dedicated strategies they provide support for the biobased economy on the ground. Though some of these strategies and other programmes provide specific support to biorefineries, none places cascading bio-refining at their core. For more detail, see German Bioeconomy Council, Bioeconomy Policy: Synopsis and Analysis of Strategies in the G7 (2012). 143 www.closedloopfund.com/about/ 144 UK Catapults: See e.g. www.catapult.org.uk/; Fraunhofer Institute: See e.g. www.fraunhofer.de/en/publications/fraunhofer-annual-report.html
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DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS

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