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Scenario 2 drifting or steering
1. ”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
2. Bio-based economy scenarios in 2030
Main Drivers Outcomes 2030
”How the critical factors develop” ”How the world looks like”
• World trade & Economy • Business opportunities
business
• Innovations and renewal • Value networks
• Policy and regulation • Material flows
• End-user Demand • Markets
people
• Societies • Products, services and
• Food concepts
nature
• Energy • Development of regions
… Competitiveness
• Natural resources
… Well-being
• Environment and climate change … Sustainability
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4. Scenario 2: ”Drifting or steering?”
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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5. Scenario 2: ”Drifting or steering?”
Main Drivers Important variables
Innovations and Funding and incentives (both market based and political) are not sufficient for renewal. Some
renewal 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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6. Scenario 2: ”Drifting or steering?”
Main Drivers Important variables
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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7. Scenario 2: ”Drifting or steering?”
Main Drivers Important variables
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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8. Scenario 2: ”Drifting or steering?”
Main Drivers Important variables
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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9. Scenario 2: ”Drifting or steering?”
Main Drivers Important variables
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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10. Scenario 2: ”Drifting or steering?”
Main Drivers Important variables
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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11. Scenario 2: ”Drifting or steering?”
Main Drivers Important variables
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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12. Scenario 2: ”Drifting or steering?”
Main Drivers Important variables
Environment and Climate change progresses. Post-Kyoto global agreements on mitigation were not
climate change 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.
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14. Winning Concept: Efficient logistics and trading
concepts for bio-based feedstocks
Biomass
sources: Biomass
Biomass utilization:
Fields and management,
croplands logistics and Biomass-
Forests trade: based
industries:
Oceans and Collection Food, pulp End use
lakes Sorting and paper,
Handling textile
Communities Trading Energy
production
Logistics
Industrial Biorefineries
sidestreams
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