The role EU public financing plays in creating a new Bioeconomy and a biobased industries sector
A fully functioning, widely deployed Bioeconomy can make a major contribution to the EU Green Deal agenda towards meeting our climate and sustainability targets over the next decade and up to 2050.
Following publication of the EU Bioeconomy Strategy in 2012, updated in 2018, there was a notable surge in public funding for bioeconomy-related R&D activity in innovative technologies across Horizon 2020 and other EU programmes such as LIFE, ESIF, etc. However, despite this collaborative, impact-driven cross-sectoral activity linking the best academic researchers with industry, the capacity to progress and transform such development to commercial reality has too often remained stubbornly elusive. As such, the Bioeconomy has struggled to make inroads against the continuing dominance of the fossil-based industry benefiting from economies of scale and a range of government supports. This is primarily due to the high risks related to bioeconomy investments.
In fact, developing biobased solutions and investing into biorefineries leads to a triple risk.
First comes the risk linked to the access to the biobased feedstock. New logistic supply chains have to be developed to ensure a sustainable access to biomass, while limiting the competition of usage with existing biobased applications (food/feed, textile, paper, timber and energy).
Secondly, and above all is the technological risk. As you change the feedstock, you must adapt the processes and technologies accordingly. However, the dominant petrochemical technologies, developed over more than 80 years based on fossil resources, are not optimized to valorise biobased feedstocks. Biotech is most of the time better adapted. Even chemical processes mut be changed completely. All these new technologies must be developed up to industrialisation, with the inherent associated risks.
Finally, the risks associated to markets cannot be ignored. In a saturated market, newcomers have to fight against established competitors. This is true not only for “drop in” products, where biobased industries have to compete with the 80 years’ experience curve of petrochemical industries, but also for new products with new functionalities. The market needs addressed by the new functionalities are already fulfilled by established products. Biobased industries have to compete on both price (linked to experience curve) and market acceptance issues.
Based on these considerations, biobased industries carefully evaluate the risks before investing in the large scale and capital-intensive infrastructure required for establishing commercial scale factories and advanced biorefineries.
In order to seek to address this lack of “first-movers” on the industry side, public co-funding will continue to be a required approach to resolve this market hurdle. Such funding can be pivotal for de-risking investment while leveraging additional funding and mobilising resources from the private sector, as already exemplified by the BBI JU public private partnership which has operated over the Horizon 2020 period.
The BBI JU is a public-private partnership between the European Union and the Bio-based Industries Consortium (BIC). The partnership when set up in 2014 had the ambition to invest €3.7 billion by the end of 2024 – €975 M from the Horizon 2020 budget, and the rest leveraged from industry. With the last H2020 call recently completed and final grants under approval, BBI JU has funded over 140 projects and is set to achieve a targeted leveraging effect of 2.8. The larger budget, higher TRL Demo and Flagship projects focus on scalability and replicability. Such FLAGSHIP projects, of which up to 13 will have been funded over Horizon 2020, have led to new types of biorefineries operating at pre-commercial scale for the first time in Europe, are well distributed across the EU and address very different business models and different feedstocks, and are projected to reduce over 600 000 tons of CO2 emissions per year, while creating thousands of jobs, mostly in rural and coastal areas.
Two examples regarding the French territory. Firstly, the FARMŸNG project, coordinated by the French rising start-up ŸNSECT. Funded in the frame of the BBI-JU, FARMŸNG aims to establish the largest global fully automated flagship industrial plant near Reims, France. The plant will produce premium proteins from a specific insect – the mealworm – for animal nutrition, hoping to address the human nutrition market in the coming months thanks to a very recent EU Novel food classification of the Tenebrio molitor mealworm. A second example is the AFTER-BIOCHEM project, coordinated by the French start-up AFYREN-NEOXY, which obtained a 20 million euro grant from BBI-JU. The project is aiming to develop the first all-in-one biorefinery within the « CHEMESIS » chemical platform sited in Carling Saint-Avold, France. It will create multiple value chains based on the transformation of the sugar industry’s co-products as well as other non-food biomass feedstocks into bio-based and natural organic acids for various applications. The biorefinery will have a positive impact on the regional economy by creating nearly 60 direct and up to 200 indirect jobs.
And so we now move on to Horizon Europe and a heightened emphasis on systemic innovation leading to economic, social and environmental impact. Included within the second pillar, commanding 56% of the overall agreed €95.5B budget, is the part of the programme that will finance the industrial partnerships and closer-to-market research. The main goal of Horizon Europe and particularly Pillar 2 is to address global challenges including climate change and the Sustainable Development Goals. There are a number of Clusters corresponding to these global challenges including Cluster 6: “Food, Bioeconomy, Natural Resources, Agriculture and Environment”, which includes the contribution of the bioeconomy for the provision of sustainable biomass, grown in a way which respects climate and biodiversity goals and sustains ecosystems integrity, and its conversion into bio-based products and nutrients as a substitute for fossil and mineral-based ones.
Cluster 6 also looks to promote small-scale, bio-based solutions and innovations in farming at the interface between agriculture, aquaculture and forestry, as a means to unlock the potential of the circular bioeconomy and create attractive jobs in the rural community. This aligns with an emerging reappraisal of the biorefinery model within the bioeconomy sector, with a recognition that the centralised large biorefinery model for the production of bioenergy/biofuels will always struggle to compete with the mega-scale fossil refineries, and that the better approach is to look to deploy smaller scale regional biorefineries using local biomass feedstocks for the production of higher value biomaterials and bio-actives.
The European Partnerships dimension within Horizon Europe will also be very much to the fore, encouraging wide participation of partners from public and private sectors, while seeking to address common priorities jointly with Member States. Partnerships will seek to develop close synergies with national and regional programmes, bringing together a broad range of actors to work towards a common goal, and turning research and innovation into socio-economic results.
A new approach will encourage projects to combine Horizon Europe funding with complementary programmes available at national level including Structural Funds and Rural Development, ESIF, and the Recovery and Resilience Facility under the Covid Recovery Next Generation EU mechanism. Aligning with regional smart specialisation strategies will further contribute to de-risking investments and facilitating the development of local, regional, and rural bioeconomies as referenced above.
While public funding and the industry investment it leverages can continue to drive the development of a functioning bioeconomy, it is also vital to bring external investors closer to the bio-based sector. The new EIC Accelerator programme within Horizon Europe (Pillar 3 Innovative Europe) has a role to play here, supporting the most innovative SMEs including start-ups to scale up their ideas across all sectors, including the bioeconomy. This gives visibility and validation and, as the Pilot in Horizon 2020 has already shown, often encourages other investors to get involved and support the journey towards the marketplace. Also, the European Investment Bank (EIB) and the European Commission has initiated the European Circular Bioeconomy Fund (€250m) to take up the challenge of bringing capital and innovation closer to unlock the economic potential of the circular bioeconomy. The expectation is that this will, again, give added visibility to the bioeconomy sector and the returns achievable, thereby encouraging other external investors to come on board.