Bioeconomy: Markets, implications, and investment opportunities

Kircher, Manfred Article Bioeconomy: Markets, implications, and investment opportunities Economies Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel Suggested Citation: Kircher, Manfred (2019) : Bioeconomy: Markets, implications, and investment opportunities, Economies, ISSN 2227-7099, MDPI, Basel, Vol. 7, Iss. 3, pp. 1-36, https://doi.org/10.3390/economies7030073 This Version is available at: https://hdl.handle.net/10419/257005 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ economies Review Bioeconomy: Markets, Implications, and Investment Opportunities Manfred Kircher KADIB Kircher Advice in Bioeconomy, 60431 Frankfurt am Main, Germany; [email protected]; Tel.: +49-69-95104772 Received: 27 May 2019; Accepted: 5 July 2019; Published: 12 July 2019   Abstract: In order to achieve the objectives of the Paris Climate Change Agreement, the conversion of our economy, which is still dominated by fossil carbon, to the bioeconomy model must be completed by 2050. This requires a shift from oil, gas and coal to agricultural, forestry and marine raw materials and will affect the global processing chains for energy, fuels and chemicals. However, the land required for the production of raw materials is competing with the production of food and animal feed. In addition, future land use must better take into account planetary boundaries and the preservation of ecosystem services. In order to achieve economic, ecological and societal sustainability, the necessary measures must therefore be geared towards the UN’s sustainability goals. Against this background, the future bioeconomy will have to concentrate on the food, chemical and heavy fuel sectors. Important sub-areas are alternative animal protein for nutrition, feedstock efficiency in the processing of bio-based raw materials, and the expansion of the raw materials spectrum. This requires enormous investment in industrial facilities, the integration of newly emerging value chains and the necessary infrastructure. The annual global investment requirements for renewable energy, bio-based chemicals and fuels, and ecosystem services is estimated at USD 1–2 trillion over the next three decades, equivalent to about 1.3–2.6% of global GDP. This article discusses the implications and guard rails of the bioeconomy model, as well as capital needs and possible sources. Keywords: bioeconomy; biomass supply; bio-based feedstock; bio-based fuel; bio-based chemicals; planetary boundaries; biomass processing; competitiveness; investment criteria; investment requirements JEL Classification: 1.17 1. Introduction The Paris Climate Convention calls for achieving “a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century” (UN 2015a), and in 2018, the Intergovernmental Panel on Climate Change (IPCC) reaffirmed that in order to limit global warming to 1.5 ◦C, anthropogenic CO2emissions must be reduced by 45% between 2010 and 2030, and to net zero by 2050 (IPCC 2018). This means that the global economy, which is still largely based on fossil raw materials, must be converted to renewable energy and carbon sources. Appropriate alternatives are offered by bio-based raw materials that can be supplied by agriculture, forestry and marine resources. The economic model based on these raw materials is known as the bioeconomy. The traditional bioeconomy is mainly integrated into the sectors of agriculture, forestry, fisheries, food and partly into the fuel and chemical industry. In the EU, it currently accounts for EUR 2 trillion or 15% of gross national product (EU-Commission 2012); global trade in bio-based products is reported to have reached 13% by 2014 (El-Chichakli et al. 2016). This existing bioeconomy needs to be further developed in the context of raw material change. Sillanpää and Ncibi (2017b) and Economies 2019,7, 73; doi:10.3390/economies7030073 www.mdpi.com/journal/economies Economies 2019,7, 73 2 of 36 Birner (2018) provide comprehensive overviews of the various bioeconomy concepts that focus on geopolitical, socio-economic or environmental issues, depending on the interests at stake. More than 50 countries have developed strategies for this, including Europe (German Bioeconomy Council 2018). Its vision is “a transition ( . . . ) towards an optimal and renewable use of biological resources and towards sustainable primary production and processing systems. These systems will need to produce more food, fiber and other bio-based products with minimized inputs, environmental impact and greenhouse gas emissions, and with enhanced ecosystem services, zero waste and adequate societal value” (EU-Commission 2014). It is obvious that the expansion of the bioeconomy requires enormous investment, not only in the production of bio-based raw materials, but also in global supply chains and industrial processing. In order to avoid poor investments, care must be taken not to overburden natural resources. Therefore, planetary boundaries and the preservation of ecosystem services must be taken into account. In order to achieve comprehensive sustainability, the EU’s bioeconomy vision also explicitly refers to the United Nation’s (UN) 2030 Agenda for Sustainable Development, which has defined 17 Sustainable Development Goals (SDG) (Table 1) (UN 2015b). Table 1. 17 UN Sustainable Development Goals. SDG with a reference to the bioeconomy underlined. (UN 2015b modified). SDG Goal 1 No poverty 2Zero hunger 3Good-health and well-being 4 Quality education 5 Gender equality 6 Clean water and sanitation 7Affordable and clean energy 8Decent work and economic growth 9Industry, innovation and infrastructure 10 Reduced inequalities 11 Sustainable cities and communities 12 Responsible consumption and production 13 Climate action 14 Life below water 15 Life on land 16 Peace, justice and strong institutions 17 Partnerships for the goals This article first presents the challenges of the transition to the economic model of the bioeconomy and discusses the implications for the future supply of food and feed, for the stability of ecosystem services and the limits of planetary boundaries. Since raw material resources will also be limited in the bioeconomy, the priorities that can be set for bio-based products will be further discussed. It is obvious that the markets can be derived from this for long-term profitable investments. Finally, the need for investment in selected markets will be considered, and options will be discussed regarding sources from which the necessary investment funds can be procured. Overall, this article seeks to explain the potential and complexity of bio-economic value chains and to help to make robust investment decisions. Economies 2019,7, 73 3 of 36 2. Sustainability Guard Rails Only two decades ago, dwindling fossil resources were considered the main driver of raw material change; since then the ecological effects of the present economic system have come to the fore. As a result, the limits of the planet’s natural material cycles have been scientifically investigated for the first time, and the concept of planetary boundaries was published in 2009 (Rockström et al. 2009a,2009b). These are intended to maintain the planet in a stable state that also tolerates changing conditions in certain fields. They were last reviewed in 2015. Figure 1(Rockström et al. 2009b) shows the examined indicators and their current state. The water systems and the ozone layer of the stratosphere were classified as safe. The climate and the sustainability of land use, on the other hand, are classified as endangered. The state of genetic diversity and the cycle of phosphorus and nitrogen are considered disturbed (Steffen et al. 2015). Economies 2019, 7, x FOR PEER REVIEW 3 of 35 fore. As a result, the limits of the planet’s natural material cycles have been scientifically investigated for the first time, and the concept of planetary boundaries was published in 2009 (Rockström et al. 2009a, 2009b). These are intended to maintain the planet in a stable state that also tolerates changing conditions in certain fields. They were last reviewed in 2015. Figure 1 (Rockström et al. 2009b) shows the examined indicators and their current state. The water systems and the ozone layer of the stratosphere were classified as safe. The climate and the sustainability of land use, on the other hand, are classified as endangered. The state of genetic diversity and the cycle of phosphorus and nitrogen are considered disturbed (Steffen et al. 2015). Figure 1. Planetary boundaries (Steffen et al. 2015). Permission to republish by W. Steffen. Thus, four resources which are essential for the bioeconomy are considered to be endangered. Land use and biodiversity, as well as the plant nutrients phosphorus and nitrogen, affect agriculture and forestry in particular, and thus, the foundations of the bioeconomy. For investors, these are risk factors that must be taken into account. The model of ecosystem services adds an economic dimension to the planetary boundaries (Costanza et al. 1997). The natural ecosystem is the basis of human well-being and economic activity. For example, it provides biomass through plant photosynthesis, irrigates agricultural land as part of the natural water cycle and pollinates plants with insects. Therefore, the ecosystem can be understood as a valuable service; it was valued by Constanza et al. at USD 125 trillion (2011) (Costanza et al. 2014). Thus, ecosystem services contribute significantly to the global gross national product (GDP) of USD 80 trillion (2017) (Statista 2018a). Possible damage to these services therefore amounts to an economic loss. Investors must understand these factors and their potential risk in order to make responsible and successful investments. Weighing up the pros and cons and choosing the right timing for an investment requires an analysis of the current situation. This will be done in the next section. 3. The Current Economy At present, the world economy is essentially based on coal, natural gas and crude oil. These fossil fuels supply energy and carbon to industries that produce electricity, heat, chemicals and fuels, as well as to heavy industry. The world oil market alone was estimated at USD 1720 billion in 2015 (Desjardins 2016). By comparison, the world market for unprocessed metals is around USD 660 billion (Desjardins 2016). Crude oil feeds the chemicals value chain, which directly generates USD 1100 billion. Taking the downstream sectors into account, chemicals contribute 7% to global GDP (USD 5.2–5.7 trillion in 2016 (Statista 2018b; CEFIC 2019). The chemical industry is thus in a similar Figure 1. Planetary boundaries (Steffen et al. 2015). Permission to republish by W. Steffen. Thus, four resources which are essential for the bioeconomy are considered to be endangered. Land use and biodiversity, as well as the plant nutrients phosphorus and nitrogen, affect agriculture and forestry in particular, and thus, the foundations of the bioeconomy. For investors, these are risk factors that must be taken into account. The model of ecosystem services adds an economic dimension to the planetary boundaries (Costanza et al. 1997). The natural ecosystem is the basis of human well-being and economic activity. For example, it provides biomass through plant photosynthesis, irrigates agricultural land as part of the natural water cycle and pollinates plants with insects. Therefore, the ecosystem can be understood as a valuable service; it was valued by Constanza et al. at USD 125 trillion (2011) (Costanza et al. 2014). Thus, ecosystem services contribute significantly to the global gross national product (GDP) of USD 80 trillion (2017) (Statista 2018a). Possible damage to these services therefore amounts to an economic loss. Investors must understand these factors and their potential risk in order to make responsible and successful investments. Weighing up the pros and cons and choosing the right timing for an investment requires an analysis of the current situation. This will be done in the next section. Economies 2019,7, 73 4 of 36 3. The Current Economy At present, the world economy is essentially based on coal, natural gas and crude oil. These fossil fuels supply energy and carbon to industries that produce electricity, heat, chemicals and fuels, as well as to heavy industry. The world oil market alone was estimated at USD 1720 billion in 2015 ( Desjardins 2016 ). By comparison, the world market for unprocessed metals is around USD 660 billion ( Desjardins 2016 ). Crude oil feeds the chemicals value chain, which directly generates USD 1100 billion. Taking the downstream sectors into account, chemicals contribute 7% to global GDP (USD 5.2–5.7 trillion in 2016 (Statista 2018b;CEFIC 2019)). The chemical industry is thus in a similar order of magnitude to the global food and beverages market, which is estimated at USD 5650 billion (Cision 2018). These figures demonstrate the great economic importance of fossil energy and carbon sources. As early as 1972, the Club of Rome drew attention to the limitations of these resources (Meadows et al. 1972) , and since then, oil production in particular has become more expensive. Although the need to switch to renewable resources has long been accepted in principle, in industrial and social practice, it is too often treated as an issue of the distant future. The economy has adapted to rising raw material and energy costs and adjusted product prices accordingly. Even the increasing public and political perception of CO 2 emissions and climate change since the 1990s has had little influence on the growth of the fossil-based global economy (OECD 2017). Since 1990, the carbon intensity of the global economy has been reduced by only 4% (UN 2018). The world consumes 5.1 billion tons of oil (2018) (EIA 2019a), 7.6 billion tons of coal (2017) (EIA 2019b) and 3 billion tons of natural gas (EIA 2019c) annually. The by far predominant share of 96% is used to generate energy (heat, fuel, electricity) and around 4% is used to produce chemicals (Germany, 2011) (CheManager 2013). As Germany has above-average chemical production, the share of chemicals can even be estimated to be less than 4% worldwide. Only the small share of 8% of crude oil, 1.7% of natural gas, 0.02% of coal goes into chemicals (Heede and Oreskes 2016). In spite of continuously rising production costs and advancing climate change, investments continue to be made in increasingly difficult fossil deposits. Obviously it doesn’t seem easy to accept the necessary raw material change. Both the high energy and carbon density—as well as the favorable logistics—of fossil raw materials tempt us to follow the conventional path, especially since a great deal of capital is tied up in profitable and well-coordinated industrial plants. The associated value chains from raw material suppliers through producers to end markets are linked extremely efficiently by a global infrastructure of pipelines, oil and gas tankers, coal ships and railways. In this way, resource-producing countries and value-generating regions are linked together over sometimes very long distances (BPB 2014). The Middle East, the successor states of the Soviet Union and West Africa are the leading producers and exporters of oil, while Europe, Southeast Asia and China are the most important importers. The production of chemicals is an important added value of oil; 75% of chemical production is based on the oil fraction naphtha (VCI 2017a). The leaders are China (rank 1), the EU (2) and the NAFTA countries (3) (CEFIC 2017). It is noticeable that only the NAFTA countries have their own resources; Europe and China depend almost entirely on imports. However, a look at the UN’s sustainability goals for the fossil-based economy reveals a mixed picture. On the one hand, since the beginning of the 20th century, fossil raw materials have enabled a revolutionary wave of innovation in pharmaceuticals, plastics, chemicals, energy sources and fuels. In these fields, completely new economic sectors have emerged that have created jobs and prosperity. This applies above all to the regions that generate added value, especially in the industrialized countries (Sillanpää and Ncibi 2017a). However, this is at the expense of sustainable production and consumption (SDG 12). Today, it is clear that fossil energy is not clean (SDG 7), and therefore, that our cities, industrial plants and infrastructure are not sustainable (SDG 9, 11). The fact that access to fossil raw materials and also the benefits from their value creation are unequally distributed violates SDG 10. OPEC and OECD nations are on the winning side, but other countries are left empty-handed. Furthermore, the current economic Economies 2019,7, 73 5 of 36 system leads to a loss of ecosystem services, the financial magnitude of which is not yet adequately perceived by industry, society and politics. The loss is estimated at USD 4.3–20.2 trillion per year. Of particular relevance is the emission of CO 2 (Costanza et al. 2014). In particular, the resulting climate change (SDG 13) calls for fundamental change. 4. The Necessary Change in Raw Materials Since 2016at thelatest, when theParisClimate Agreement senta strongmessage, climate protection has been seen as the number one priority around the world. On 4 November 2016, the agreement was ratified by 92 states, and 163 states had already prepared climate protection programs. The limitation of global warming to below 2 ◦ C above the pre-industrial level was binding under international law. This target requires global emissions to be reduced by 80–95% by 2050 compared with 1990 levels (EU-Commission 2011). This can only be achieved if future emissions do not exceed the so-called greenhouse gas budget of 1000 gigatons of CO 2 equivalents by 2050. Even if the USA leaves the treaty as announced in 2020, the key measure of limiting emissions to the agreed emissions budget will remain (World Resources Institute 2018). In fact, in recent years, a significant reduction has been achieved in individual regions through the introduction of renewable energies and fuels and the optimization of technical facilities and processes in energy generation, mobility and manufacturing. For example, the European Union (EU) reports to be on track to reduce emissions by 20% in 2020 compared to 1990. Emissions were reduced by 22% between 1990 and 2017, while the economy grew by 58% over the same period (EU-Commission 2019). This goal was achieved by, among other factors, intensifying the bioeconomy. In Germany, for example, 9200 biogas plants are operated primarily to generate electricity (2017) (Statista 2018c). Germany consumes 2.2 million tons of wood pellets per year for heating houses (2016) (DEP 2017), and produces 738,000 tons of bioethanol (2017) (BDB 2017) as well as 1.8 million tons of biodiesel per year (2015) (FNR 2016). The German chemical industry uses 2.5 million tons of bio-based raw material per year (2015) (VCI 2017b). However, there is still a long way to go before the raw material change is complete: in 2016, the share of renewable electricity in Germany was 33% (21% of that bio-based (2017) (BMWi 2019), bioethanol and biodiesel reach 6.1% in fuels (2016) (BDB 2017) and 13% of chemical raw materials are bio-based (VCI 2017b). Although the modern, industrial bioeconomy is still in an early stage of development, it is believed to have considerable growth potential in the coming years. For example, the European Chemical Industry Council has stated that “the bioeconomy is the key to unlocking the potential of many established and new economic sectors” (CEFIC 2018). The global turnover of bio-based fuels, chemicals and polymers is expected to grow from USD 203 billion in 2015 to USD 400 billion in 2020 and USD 487 billion in 2024 (BIO 2017). Companies in other industries are also being forced to reduce the climate footprint they create with their direct activities and that of their suppliers. An analysis of German listed companies has shown that they are on a climate path that can lead to an average global warming of 4.94 ◦ C (2016) (right.basedonscience 2019). Leading companies have announced that they will organize their production in a climate-neutral manner. Important measures mentioned are the use of emission-free energies and compensation measures that lead to emission savings outside the company (Bosch 2019; Mercedes 2019). Carbon capture and sequestration (CCS) technologies are being discussed as another method of reducing emissions. However, due to the stoichiometric conditions, CCS has only limited capacity. CO 2 is 3.67 times heavier than carbon. The combustion of 1 ton of coal, 80% of which consists of carbon, therefore produces almost 3 tons of CO 2 . A widespread application of CCS would therefore require a very large infrastructure. Overall, a continuation of the previous incremental approach is therefore not sufficient. Instead, industry must prepare itself to switch consistently to non-fossil energies and carbon sources and to dispense with the exploitation of a large part of the reserves not yet mined. The remaining emissions budget of 1000 gigatons of CO 2 equivalents corresponds to about one third of the CO 2 potential of the Economies 2019,7, 73 6 of 36 known fossil reserves. This means that the production volume which is tolerable from the present until 2050 within the framework of the emissions budget has been named. Overall, reserves of oil, gas and coal, which together correspond to 2700 gigatons of CO 2 equivalents, are considered economically recoverable (Table 2). If, however, only 1000 gigatons may be emitted by 2050, this means that only 37% of the reserves may be used. This total volume is divided between 70% of the known reserves of crude oil, 55% of natural gas, and 20% of coal that may still be produced (Table 2) (McGlade and Ekins 2015). Table 2. Global reserves of coal, natural gas and crude oil (2013, Heede and Oreskes 2016 ), contained carbon and CO 2 -equivalents as reported in 2015 and to be produced by 2050 (McGlade and Ekins 2015). Gb: gigabarrel; Tcf: trillion cubic feet; Gt: gigaton). Fossil Feedstock Reported Reserves To Be Produced by 2050 Volume Carbon Contained (Gigaton) CO2-Equivalents (Gigaton) Share of Total Reserves CO2-Equivalents (Gigaton) Share of Reported Reserves Oil & NGLs 1688 Gb 171.2 629.9 22.9% 439 70% Natural gas 6558 Tcf 95.6 350.4 12.8% 192 55% Coal 892 Gt 479.5 1756.9 64.3% 368 20% Total - 746.2 2734.2 100% 1000 37% Consequently, firstly, two thirds of the fossil reserves stored in the ground must not be extracted. This demand has a direct impact on investment decisions that affect fossil energies, because investments that still flow into resources that cannot actually be mined in the future become a risk. This is an estimated USD 700 billion per year (Carbontracker 2013), some of which are classified as lost or have to be diverted to new investment fields. Overall, the value of stranded fossil assets is estimated at 1–4 trillion USD (Mercure et al. 2018). The financial sector therefore sees transactions based on fossil raw materials, especially coal, as risky, and the avoidance of such transactions is increasingly becoming an instrument of risk management. In 2018, Allianz published the following decisions: “(i) Withdrawal from insuring single coal-fired power plants and coal mines in operation or planning, effective immediately; (ii) exclusion of coal risks by 2040 in Property and Casualty business and in proprietary investments; (iii) joining the Science Based Target Initiative: Commitment to the long-term development of a carbon-free economy” (Allianz Group 2018). Other financial institutions announced similar strategy changes (BNP-Paribas 2015;Bank of America 2019;Kaye 2017). This affects all sectors associated with the production, conversion, or trading of fossil raw materials (Table 3). 4.1. The Future Sources of Carbon The obvious alternative to fossil carbon sources is biomass, because fossil resources were ultimately biomass that was converted by geological processes into coal, natural gas and oil over a period of 350 million years. The combustion of today’s biomass also emits CO 2 , but this is returned to biomass via the natural carbon cycle, and therefore, does not contribute to increasing the CO 2 concentration in the atmosphere. However, biomass has two decisive disadvantages compared to fossil carbon sources: The energy and carbon density is considerably lower (Kircher 2017). This is mainly due to the high proportion of oxygen in biological materials (Table 4). Economies 2019,7, 73 7 of 36 Table 3. Industrial sectors and examples of applications based on fossil resources. Industrial Sectors Fossil Feedstock Production Construction Sector Chemical Sector Fuel Sector Power Sector Heat Sector Applications Coal mining Road surfaces Pharma Automotive mobility Electrical devices Heavy industries Oil, gas production Roofing Automotive Shipping Lighting Industrial processing Logistics (pipelines, tankers) Concrete Household appliances Aviation Air conditioning Heating homes Oil-refining Steel, aluminium Packaging Machine fuel Rail services Heating offices - Glass Construction Cooking (Africa) Automotive mobility Heating commercial buildings Table 4. Composition and energy content of fossil carbon sources, biomass, sugar and vegetable oils. (Herrmann and Weber 2011;Michelsen 1941). Carbon Sources Carbon % Hydrogen % Oxygen % Energy MJ/kg Fossil Carbon Sources Coal 60–75 6 17–34 25–33 Gas 75–85 9–24 Traces 32–45 Oil 83–87 10–14 0.1–2 43 Biological Carbon Sources Straw 144 6 50 10–25 Wood 50 6 41 14–16 Sugar 240 7 53 16 Safflower oil 377 12 11 39 1lignocellulose; 2glucose; 3linoleic acid. In fact, biomass is just as suitable as fossil raw materials to generate heat and electricity and to be transformed into fuels and chemicals. Today, biomass already provides 10% of the world’s energy (2016) (WEC 2017), 3% of road transport fuel (2011) (Wackerbauer and Lippelt 2011) and 10–13% of chemical raw materials (BIC 2016;Piotrowski et al. 2015;VCI 2017a). In particular, many elastomers, polymers, surfactants, paints and coatings, lubricants, paper and cellulose, textile fibers, pharmaceuticals and skin care products are biobased (Figure 2). Biomass can come from agricultural, forestry and marine sources, and the technologies to generate the aforementioned products are either available or under development. Economies 2019,7, 73 8 of 36 Economies 2019, 7, x FOR PEER REVIEW 7 of 35 Table 4. Composition and energy content of fossil carbon sources, biomass, sugar and vegetable oils. (Herrmann and Weber 2011; Michelsen 1941). Carbon Sources Carbon % Hydrogen % Oxygen % Energy MJ/kg Fossil Carbon Sources Coal 60–75 6 17–34 25–33 Gas 75–85 9–24 Traces 32–45 Oil 83–87 10–14 0.1–2 43 Biological Carbon Sources Straw 1 44 6 50 10–25 Wood 50 6 41 14–16 Sugar 2 40 7 53 16 Safflower oil 3 77 12 11 39 1 lignocellulose; 2 glucose; 3 linoleic acid. In fact, biomass is just as suitable as fossil raw materials to generate heat and electricity and to be transformed into fuels and chemicals. Today, biomass already provides 10% of the world’s energy (2016) (WEC 2017), 3% of road transport fuel (2011) (Wackerbauer and Lippelt 2011) and 10–13% of chemical raw materials (BIC 2016, Piotrowski et al. 2015; VCI 2017a). In particular, many elastomers, polymers, surfactants, paints and coatings, lubricants, paper and cellulose, textile fibers, pharmaceuticals and skin care products are biobased (Figure 2). Biomass can come from agricultural, forestry and marine sources, and the technologies to generate the aforementioned products are either available or under development. Figure 2. Use of biomass (left; Piotrowski et al. 2015) and share of biobased chemicals (right: Piotrowski et al. 2018). However, this change in raw materials also means that the manufacturing industry is entering a raw materials market that has so far mainly served the food and feed markets. This implies an increased use of ecosystems services and, in connection with this, the observation of planetary borders becomes all the more important. Sustainability is therefore not an intrinsic property of the bioeconomy, but rather, a potential, and consequently, SDG 15 (life on land, protect, restore and promote ecosystems) is named as the SDG of highest relevance in a survey among actors of the bioeconomy (Zeug et al. 2019). In addition, there is a great need for investment in capacities for the supply of biomass, its logistics and infrastructure, as well as its implementation. Therefore, the interdependencies of the markets for food and feed, for industrial raw materials with regard to land use, biodiversity and greenhouse gas emissions are considered in the next section. Figure 2. Use of biomass ( left ;Piotrowski et al. 2015) and share of biobased chemicals ( right : Piotrowski et al. 2018). However, this change in raw materials also means that the manufacturing industry is entering a raw materials market that has so far mainly served the food and feed markets. This implies an increased use of ecosystems services and, in connection with this, the observation of planetary borders becomes all the more important. Sustainability is therefore not an intrinsic property of the bioeconomy, but rather, a potential, and consequently, SDG 15 (life on land, protect, restore and promote ecosystems) is named as the SDG of highest relevance in a survey among actors of the bioeconomy (Zeug et al. 2019). In addition, there is a great need for investment in capacities for the supply of biomass, its logistics and infrastructure, as well as its implementation. Therefore, the interdependencies of the markets for food and feed, for industrial raw materials with regard to land use, biodiversity and greenhouse gas emissions are considered in the next section. 4.2. Supply of Raw Materials 4.2.1. Growing Food Markets It is to be expected that the growing importance of biomass as an industrial raw material will have an impact on the global food supply. Although the share of biobased chemicals is still small, it accounts globally today for the consumption of about 24% of cereals and 9% of oilseeds (2017/2018) (UFOP 2017). In the USA, more than 40% of the corn harvest is absorbed by bioethanol for the fuel market (Ossewijer et al. 2015) and sugar cane accounts for 30% of global ethanol production (REN21 2016) of 100 billion liters (Johnson et al. 2018). The bioeconomy will entail providing considerably more renewable, mainly agricultural raw materials for use in industry. It is therefore to be expected that agriculture’s share of the global GDP (currently 3.5–6.4% depending on the data source (FAO 2018; Indexmundi 2018;Statista 2019a) will grow significantly. For comparison: The oil and gas producing sectors (only drilling) are reported to contribute 2–3% to the World GDP (Investopedia 2018). Even today, societies are therefore sensitive to this problem, as the “fuel versus food” discussion indicates, although only a small proportion of total biomass is used industrially. Actors in the bioeconomy therefore rank SDG 2 (zero hunger) second among the topics of the future ( Zeug et al. 2019 ). The driving forces behind the food markets are the growing world population and increasing prosperity. By 2050, 9.8 billion people will be demanding staple foods (2017: 7.5 billion) (UN 2017), making it necessary to increase the production of cereals, pulses, tubers, milk, eggs and meat by up to 35% within the next three decades. The continuation of the increase in yield through modern plant breeding will play an important role. Since 1961, the area yield has been increased by a factor of 3 (Figure 3). The improvement of seeds, plant protection, methods of cultivation, harvesting and storage remains a never-ending task and a rewarding economic field for SDG 2. Economies 2019,7, 73 15 of 36 The transport sector can also switch at least in part to carbon-free fuels. Cars, which in principle can be powered by electricity or hydrogen, now run on petrol and diesel. In 2012, these two fuels accounted for 77% of total consumption for transport (Maritime Executive 2019). However, heavy goods traffic (trucks), freight shipping, and aviation will in the foreseeable future require fuel with a high energy density that is currently only available from carbonaceous fuels. Heavy goods traffic, shipping and aviation each consume around 300 million tons of diesel, marine diesel, bunker oil and kerosene annually (Concawe 2016;Indexmundi 2019;Maritime Executive 2019), i.e., a total of 900 million tons. With a carbon content of around 85%, this volume contains 765 million tons of carbon. Together with the chemical industry, the sustainable supply of these prioritized markets with bio-based raw materials thus requires an additional carbon requirement of around 1.3 billion tons of carbon, which would correspond to around 2.6 billion tons of primary biomass (the different energy content is not taken into account in this estimate for simplicity’s sake). The provision of such a volume of biomass seems feasible, taking into account the recycling of residues and cascade use (see below). Otherwise, the SDG 12 (responsible consumption and production) will move into the distant future. Investors should take into account the predictable and increasing pressure to priorities biomass use, paying particular attention to carbon-free energy, bio-based chemicals and bio-based heavy-duty fuels. In particular, investment in chemicals is attractive because it generates 4–9 times more value added than energy (EIB 2017). However, the current framework conditions relativize this advantage, because in many countries, bio-based fuels are supported by admixture quotas, but corresponding chemical products are not. Certainly, different framework conditions have an influence on the market penetration of bio-based chemicals (nova-institute 2019). The underlying competitiveness will be discussed in the next section. 6. Industrial Practice 6.1. Biomass Transformation Previous considerations have initially focused on sustainable carbon supply in the bioeconomy. The effort and costs of processing bio-based raw materials into chemicals and fuels have not yet been taken into account. The complexity and costs of processing are a real competitive hurdle. Fossil fuels and basic chemicals are produced by simply refining mineral oil. Basic chemicals such as ethylene are easily accessible by cracking naphtha (a fraction in oil refining) (Table 7) or processing natural gas (methane). At the same time, the carbon of fossil raw materials is almost completely converted into the target product; the carbon efficiency of these processes is therefore very high. The labor intensity, on the other hand, is low. The oil refineries in the USA (total capacity 0.9 billion ton per year) (EIA 2018) , offer 127,000 jobs (DATAUSA 2019). The labor intensity is thus 137 jobs/1 million tons of oil. In contrast, biomass does not only require more processing steps (Table 7), many are technically morecomplexandeconomicallymoreexpensiveandproduceconsiderablesecondaryflows. Toproduce ethanol, sugar plants must be cultivated, harvested and the crop transported. This is followed by the refining of sugar with loss of residual biomass and finally the sugar is fermented to ethanol. In the USA, ethanol production costs of USD 408 per ton have been reported. Taking into account the carbon credit defined in the renewable fuel standard (D6 RIN), this bioethanol would be competitive with an oil price of USD 55 per barrel (Lane 2017). Chemicals for which there is no credit system would have a competitive threshold of USD 90 per barrel oil. At the oil price level of 2013, a price of biomass in the order of USD 60 per ton was estimated to be competitive (USA) (Philp 2018). Economies 2019,7, 73 16 of 36 Table 7. Processing steps to fuel (fossil petrol, bio-ethanol) and chemicals (example ethylene) from fossil oil and biomass fractions (sugar, lignocellulose). Fuel Processing Step from Feedstock to Product Chemicals Fossil Biomass Fossil Biomass Mineral Oil Sugar Lignocellulose Mineral Oil Sugar Lignocellulose Drilling Farming Farming 1 Drilling Farming Farming Logistics Harvesting Harvesting 2 Logistics Harvesting Harvesting Refining Logistics Logistics 3 Refining Logistics Logistics Petrol Refining Preprocessing 4 Cracking Refining Preprocessing - Sugar-conversion Saccharification 5 Ethylen Sugar-conversion Saccharification - Ethanol Sugar-conversion 6 - Ethanol-conversion Sugar-conversion - - Ethanol 7 - Ethylen Ethanol-conversion - - - 8 - Ethylen Economies 2019,7, 73 17 of 36 The published investment costs for bioethanol from corn alone amount to USD 0.7–0.75 per liter per year, with the largest share of 38% being spent on the processing of by-products (Cleanleap 2013). If wood-like materials (lignocellulose) are used instead of sugar, the process chain is extended by 2 further steps of preprocessing and saccharification. Investment costs will thus rise to USD 2.9 per liter of annual capacity (Tsagkari et al. 2016). If the target product is ethylene, a further chemical catalytic step will follow. Due to the complex composition of biomass and losses in processing, a carbon yield is achieved from biomass that is significantly lower than that of fossil raw materials. The considerable personnel requirements for the production and processing of biomass must also be taken into account. Biochemicals are much more labor-intensive than biofuels due to their multi-stage conversion (Table 8) (Piotrowski and Carus 2015). EuropaBio therefore expects 900,000 to 1.5 million new jobs for the EU by 2030 (EuropaBio 2019), which at the same time confirms the higher cost level of the bioeconomy. Table 8. Labor intensity in the production and processing of biomass (EU-28; 2011) (Piotrowski and Carus 2015, modified). Producing Biomass (Jobs/1 Million Tons of Biomass) Processing Biomass (Jobs/1 Million Tons of Biomass) 5400 Biofuels 5400 Bio-Chemicals 12,400 Today, biobased chemicals are established in the fine chemicals sector, where biological raw materials and biotechnological processes often offer a technical advantage. The large market for cellulose fibers can also be attributed to the bioeconomy (nova-institute 2019). However, due to cost disadvantages, e.g., PLA (polylactic acid), a biopolymer made from sugar by NatureWorks (USA) and Total Corbion (NL), has not pushed its oil-based counterpart PET (polyethylene perephthalate) out of the market. This also applies to other sugar-based chemicals such as succinic acid (BioAmber, USA; Reverdia, Succinity, both The Netherlands), (iso-)butanol (Gevo, Butamax, both USA; Green Biologics, UK) and butanediol (Novamont, Italy). Such products are successful if the more positive life cycle assessment or specific technical properties are assessed and buyers pay a premium. In fact, there is still a small but growing market for bio-based plastics (2% of the total polymer market of 6.6 million tons with EUR 13 billion in 2016 (nova-institute 2017). As mentioned, the competitiveness of such products, however, depends strongly on the oil price level or the price of biomass. At the same time, the economic challenge of using biomass becomes clear because this raw material consists of different fractions. The use of all material flows and their coupling constitutes the economic and ecological value, thus supporting the path towards sustainable industries (SDG 9), responsible consumption and production (SDG 12) and climate protection (SDG 13). 6.2. Expansion of the Raw Materials Portfolio At present, primary carbon sources (sugar, vegetable oil) dominate the production of bio-based fuel and chemicals, but when it comes to truly expanding bio-based capacities, these raw materials will reach their limits. For example, global production of ethylene from sugar would require 20–50% of current arable land (Gruhlke and Bürger-Kley 2015). The expansion of the raw materials portfolio is therefore urgently needed. Sillanpää and Ncibi (2017c) published an excellent overview about feedstock options considering the local potential in the US, in Europe, and in China. In fact, companies are already exploring the suitability of alternative raw materials. Corbion Total (Netherlands) is developing PLA based on biomass residues (lignocellulose) (Laird 2016). Lignocellulosic ethanol (fuel) is already marketed in the USA (DSM/POET, Advanced Biofuels, Synata BIO; all USA) and Brazil (Granbio). Clariant (Switzerland) is building two bioethanol plants in Slovakia and Romania, each with capacities of 50,000 metric tons per year, working with wheat straw as the raw material. Energochemica (Slovakia) is also investing in a bioethanol plant in Slovakia (55,000 metric tons per Economies 2019,7, 73 18 of 36 year) based on lignocellulose from wheat straw, which, in addition to bioethanol, is intended to produce ethylene, ethylene oxide and lignin, as well as heat and electricity, making it a model bio-refinery. Recently, the new platform chemical levoglucosenone was introduced, which in this example is produced from wood waste (sawdust) and is to be a suitable starting material for bio-surfactants, flavors, agrochemicals, biopolymers and bio-solvents (Duncan 2019). Liquid and solid industrial and municipal by-products and waste, as well as gaseous carbon (CO, CO 2 ), offer additional options for expanding the raw materials portfolio beyond food biomass (Table 9). Table 9. Valorization of various bio-based feedstock options. Feedstock Carbon Source Technology Product Development Stage Sugar cane Sugar beet Starch-derived Sugar Sugar Fermentation Bioethanol Amino acids Enzymes Biopolymers Pharmaceuticals and more Commercial Woody materials Sugar Fermentation Bioethanol Commercial Woody materials Wood gas Thermochemical catalysis Aromatics Lab-scale Liquid sewage, Solid municipal waste, manure Complex waste ingredients Fermentation Methane Commercial Municipal solid waste Synthesis gas (CO) Gas-fermentation Chemicals Commercial Biogas CO2-emission Gas-fermentation, Algae cultivation Methane, Chemicals Demonstration Steel mill synthesis gas CO Gas-fermentation, Fischer-Tropsch Ethanol, Hydrocarbons Demonstration Key concepts for the use of these previously neglected resources are cascade use and recycling. Cascading involves using all intermediates along the processing chain according to its material and energy value. Many processes already function in this way, but all too often, the material and energy potential is incompletely recorded. One model is the industrial location of Frankfurt (Germany) (Figure 8). A large company at this location produces biodiesel from rapeseed oil with glycerin as a by-product. This glycerin is introduced into its process line by a pharmaceutical company at the same site. Bio-waste from this pharmaceutical production and food waste from the neighboring region supply the site’s biogas plant, which is one of the largest in Europe. Part of the biogas is used to generate heat and electricity for the industrial site, while another part is fed into the natural gas network. Upgrading the fraction of CO 2 in biogas to methane is a future option. This cascade of material use (rapeseed oil, biodiesel, glycerin, pharmaceuticals) and energy use (heat, electricity, biogas) significantly improves raw material efficiency and the CO2footprint and is economically viable. Technologies that continue the cascade by using CO 2 emissions from biogas plants are currently being tested on a pilot scale (biogas consists of 50–60% methane plus 40–50% CO 2 ). With the use of CO 2 emissions, biogas-related CO 2 emissions could be reduced to almost zero and the efficiency of raw materials increased to almost 100%. MicrobEnergy (Germany) and Electrochaea (Switzerland) use CO 2 with the addition of hydrogen to produce methane. In parallel to the biocatalysts on which these companies rely, homogeneous catalysis for the utilization of CO 2 is also being investigated (Klankermayer and Leitner 2015). Hydrogen is available by the electrolysis of water (power-2-gas). However, this is only economical if energy is available at very low cost (e.g., excess wind, solar, geothermal, hydro-power). This is an example of how the cascade use of carbon sources and renewable energies can be combined and create synergies. In the future, biogas could play a central role in carbon recycling. In fact, the global biogas market is expected to grow from USD 1.5 billion (2016) to USD 2.6 billion in 2025 (Kennedy 2019) . Economies 2019,7, 73 19 of 36 The chemical industry could be integrated into the carbon cycle created in this way, because the methane contained in biogas can be further processed into methanol. Methanol is a suitable raw material for many chemical process chains (Bertau et al. 2016). Economies 2019, 7, x FOR PEER REVIEW 17 of 35 Table 9. Valorization of various bio-based feedstock options. Feedstock Carbon Source Technology Product Development Stage Sugar cane Sugar beet Starch-derived Sugar Sugar Fermentation Bioethanol Amino acids Enzymes Biopolymers Pharmaceuticals and more Commercial Woody materials Sugar Fermentation Bioethanol Commercial Woody materials Wood gas Thermochemical catalysis Aromatics Lab-scale Liquid sewage, Solid municipal waste, manure Complex waste ingredients Fermentation Methane Commercial Municipal solid waste Synthesis gas (CO) Gas-fermentation Chemicals Commercial Biogas CO2-emission Gas-fermentation, Algae cultivation Methane, Chemicals Demonstration Steel mill synthesis gas CO Gas-fermentation, Fischer-Tropsch Ethanol, Hydrocarbons Demonstration Key concepts for the use of these previously neglected resources are cascade use and recycling. Cascading involves using all intermediates along the processing chain according to its material and energy value. Many processes already function in this way, but all too often, the material and energy potential is incompletely recorded. One model is the industrial location of Frankfurt (Germany) (Figure 8). A large company at this location produces biodiesel from rapeseed oil with glycerin as a by-product. This glycerin is introduced into its process line by a pharmaceutical company at the same site. Bio-waste from this pharmaceutical production and food waste from the neighboring region supply the site’s biogas plant, which is one of the largest in Europe. Part of the biogas is used to generate heat and electricity for the industrial site, while another part is fed into the natural gas network. Upgrading the fraction of CO2 in biogas to methane is a future option. This cascade of material use (rapeseed oil, biodiesel, glycerin, pharmaceuticals) and energy use (heat, electricity, biogas) significantly improves raw material efficiency and the CO2 footprint and is economically viable. Figure 8. Cascading at an industrial location Frankfurt (Germany). Technologies that continue the cascade by using CO2 emissions from biogas plants are currently being tested on a pilot scale (biogas consists of 50–60% methane plus 40–50% CO2). With the use of CO2 emissions, biogas-related CO2 emissions could be reduced to almost zero and the efficiency of raw materials increased to almost 100%. MicrobEnergy (Germany) and Electrochaea (Switzerland) use CO2 with the addition of hydrogen to produce methane. In parallel to the biocatalysts on which these companies rely, homogeneous catalysis for the utilization of CO2 is also being investigated (Klankermayer and Leitner 2015). Hydrogen is available by the electrolysis of water (power-2-gas). However, this is only economical if energy is available at very low cost (e.g., excess wind, solar, geothermal, hydro-power). This is an example of how the cascade use of carbon sources and renewable energies can be combined Figure 8. Cascading at an industrial location Frankfurt (Germany). The organic fraction in household waste (MSW) offers further potential. This waste material is available in large quantities, especially in growing mega-cities and urban regions. Today, MSW is still dumped in many countries without any use. OECD countries use MSW to generate energy through incineration. The city of St. Hyacinthe (Canada) goes one step further and produces biogas from MSW. This biogas fuels the city’s bus fleet and the residues from biogas fermentation are marketed as fertilizer (Ville de St. Hyacinthe 2017). New Delhi (India) also operates buses with biogas; here it is produced from waste water (The Hindu 2011). Sekisui Chemical (Japan) and Lanzatech (USA), on the other hand, rely on chemicals. Synthesis gas obtained from MSW by gasification is converted into ethanol by fermentation. A pilot plant was commissioned in Japan in 2017 (Lanzatech 2017). The technology is of particular interest in the coming transition phase, inwhich fossiland increasingly bio-basedraw materialsare beingprocessed, becauseit works with synthesis gas from both fossil and bio-based sources. In this way, the so-called learning curve with new technologies accelerates at an early stage. For example, steel mills produce and emit enormous quantities of synthesis gas based on coal. A demonstration plant for the production of ethanol from steel mill emissions is currently being built in a steel mill in Ghent (BE) ( ArcelorMittal 2015 ). This is a real model for a “technical” carbon cycle (Kircher 2015). Carbon is not emitted into the atmosphere, but is returned to a production process. All these examples show, firstly, the potentials of recycling carbon-containing waste, secondly, the innovative power of cross-sector cooperation, and thirdly, that traditional fossil-based industries are willing to invest in carbon-recycling technologies. The improvement of raw material efficiency, cascade use and recycling is crucial for the development of the bioeconomy and leads to the so-called closed-loop economy. This model contributes to the goals of sustainable industries and infrastructures (SDG 9), cities and municipalities (SDG 11), consumption and products (SDG 12) and climate change (SDG 13). 6.3. The Greenhouse Gas Balance After discussing the complexity of the alternative feedstock portfolio, the question arises as to how effectively GHG can be reduced and how climate change (SDG 13) can actually be tackled. Table 10 shows the share of different global greenhouse gas emissions from fossil as well as non-fossil sources (USEPA 2014). Economies 2019,7, 73 20 of 36 Table 10. Share of global greenhouse gas emission compounds (fossil and non-fossil) (USEPA 2014). Emission CO2Methane Nitrous Oxide F-Gases Fossil 65% - - - Non-fossil 11% 16% 6% 2% The largest share of greenhouse gases, 65%, is CO 2 from fossil fuels (42%), (transport 24%, industry 19%, households 6%, services 3% and others 3%) (Statista 2018e). Non-fossil CO 2 also contributes to the GHG balance. Soil is a living system that emits CO 2 (11%) by nature. Methane (16%) is released by nature from swamps and bogs as well as from livestock breeding (ruminants). Nitrous oxide (6%) is produced in the soil when the microflora degrades synthetic nitrogen fertilizers. Fluorinated gases (2%) are of industrial origin. Biogenic CO 2 , methane and nitrous oxide from agricultural activities account for 24% worldwide (Table 11) (USEPA 2014). The ecological footprint of food, feed and biomass for industrial purposes should therefore not be underestimated. Table 11. Global greenhouse gas emissions by economic sector (USEPA 2014). Economic Sector Emission Sources Greenhouse Gas Energy Power, heat generation 25% Agriculture, Forestry Crop cultivation, cattle breeding 24% Industry Production processes 21% Transport Automotive, railway, aviation, shipping 14% Buildings Air conditioning, power consumption 6% Other - 10% Not only the production, but also the processing of biomass produces greenhouse gases. Figure 9 shows greenhouse gas emissions in the bioethanol processing chain (Carvalho-Macedo et al. 2015). The largest part of the greenhouse gas is released by the steps of raw material production and ethanol fermentation, in agriculture by cultivation and fertilization, in fermentation by microbial CO 2 emission, and in both steps by machines running on fossil fuels. The importance of emissions from process energy is illustrated by the fact that sugar cane ethanol emits 2.5 times less GHG than corn ethanol. The reason for this is that only the residual biomass of the sugar cane (bagasse) is suitable for generating process energy, so that the use of fossil energy can be dispensed with. A further improvement of the sugar cane energy yield is possible by producing biogas from sugar cane waste water. The Brazilian start-up SANergyo makes this a business and was awarded first prize in a multinational business plan competition (PRP USP 2017). Biopolymers also demonstrate the significant influence of the energy source on the carbon footprint (Figure 10; (Carvalho-Macedo et al. 2015)). The use of emission-free process energies in PLA production reduces emissions by 95%. The comparison of conventional PET versus bio-PLA shows that the change in the starting material also reduces greenhouse gas emissions, but only to a lesser extent. When comparing specific production costs, the advantage also lies in renewable energies. The conversion to low-carbon energy costs USD 10–200 per ton of plastic, while the use of organic raw materials leads to much higher additional costs. The importance of reducing energy consumption is also reflected in the climate protection measures planned by the chemical industry in the short term. Increasing energy efficiency and switching to renewable energies is regarded as a priority by German companies. The change in raw materials is only mentioned after that (Table 12) (Gruß 2019). Economies 2019,7, 73 21 of 36 Economies 2019, 7, x FOR PEER REVIEW 19 of 35 Table 11. Global greenhouse gas emissions by economic sector (USEPA 2014). Economic Sector Emission Sources Greenhouse Gas Energy Power, heat generation 25% Agriculture, Forestry Crop cultivation, cattle breeding 24% Industry Production processes 21% Transport Automotive, railway, aviation, shipping 14% Buildings Air conditioning, power consumption 6% Other - 10% Not only the production, but also the processing of biomass produces greenhouse gases. Figure 9 shows greenhouse gas emissions in the bioethanol processing chain (Carvalho-Macedo et al. 2015). The largest part of the greenhouse gas is released by the steps of raw material production and ethanol fermentation, in agriculture by cultivation and fertilization, in fermentation by microbial CO2 emission, and in both steps by machines running on fossil fuels. The importance of emissions from process energy is illustrated by the fact that sugar cane ethanol emits 2.5 times less GHG than corn ethanol. The reason for this is that only the residual biomass of the sugar cane (bagasse) is suitable for generating process energy, so that the use of fossil energy can be dispensed with. A further improvement of the sugar cane energy yield is possible by producing biogas from sugar cane waste water. The Brazilian start-up SANergyo makes this a business and was awarded first prize in a multinational business plan competition (PRP USP 2017). Figure 9. GHG balance of corn and sugar cane bioethanol by processing step (Carvalho-Macedo et al. 2015, modified). Biopolymers also demonstrate the significant influence of the energy source on the carbon footprint (Figure 10; Carvalho-Macedo et al. 2015)). The use of emission-free process energies in PLA production reduces emissions by 95%. The comparison of conventional PET versus bio-PLA shows that the change in the starting material also reduces greenhouse gas emissions, but only to a lesser extent. When comparing specific production costs, the advantage also lies in renewable energies. The conversion to low-carbon energy costs USD 10–200 per ton of plastic, while the use of organic raw materials leads to much higher additional costs. The importance of reducing energy consumption is also reflected in the climate protection measures planned by the chemical industry in the short term. Increasing energy efficiency and switching to renewable energies is regarded as a priority by German companies. The change in raw materials is only mentioned after that (Table 12) (Gruß 2019). Figure 9. GHG balance of corn and sugar cane bioethanol by processing step (Carvalho-Macedo et al. 2015, modified). Economies 2019, 7, x FOR PEER REVIEW 20 of 35 Figure 10. CO2 emissions from the production of fossil and bio-based plastics with conventional or low-carbon energy (PLA is a bio-based alternative to fossil PET; HDPE is available from fossil and bio-based raw materials) (Carvalho-Macedo et al. 2015, modified). Table 12. Climate protection measures announced by chemical industries (Germany; 2019) (Gruß 2019). Measure Planned by Chemical Industries (%) Improving energy efficiency 86 Optimising running processes 81 Increasing the share of renewable energies 60 (Increased) use of renewable raw materials 56 New business models based on circular economy 54 New production technologies 51 Use of CO2 as carbon source 18 These examples of fuels and polymers show that fuels and chemicals from biomass currently cannot be produced without greenhouse gas footprints. Emissions are generated above all by agriculture and processing. The use of sustainable energies seems to be most effective in processing. Investors who rely on bio-derived processes and products should therefore carefully analyze the raw material source and energy intensity of a particular process and examine possibilities for process integration into emission-free energy systems. 6.4. Value Chains and Infrastructure International supply chains for biomass or biomass fractions are nothing new in themselves. The German industry already processes bio-based raw materials, 62% of which come from domestic areas and 38% from foreign areas (Kircher 2018). The same applies to Europe, which “imports” 18 million hectares per year from outside, especially from Asia. This area is equivalent to 65% of the total agricultural area used for industrial purposes (Bruckner et al. 2019). The modern bioeconomy will intensify such supply chains considerably. Corn and soya from the USA, sugar beet from the EU, wheat from Russia, sugar cane from Brazil, palm oil from Malaysia, to give just a few examples, are future industrial goods. In the long term, therefore, the supply chains for carbon sources will start with fossil resources less in the Middle East and other regions, but will move to biomass regions. OECD countries in North America and Europe, emerging economies of the -0.94 0. 0.94 1.88 2.81 PET (fossil) PLA (bio) HDPE (fossil) HDPE (bio) kg CO2-equivalent per kg plastics fossil-based corn-based fossil-based/low carbon energy corn-based/low carbon energy Figure 10. CO 2 emissions from the production of fossil and bio-based plastics with conventional or low-carbon energy (PLA is a bio-based alternative to fossil PET; HDPE is available from fossil and bio-based raw materials) (Carvalho-Macedo et al. 2015, modified). Economies 2019,7, 73 22 of 36 Table 12. Climate protection measures announced by chemical industries (Germany; 2019) (Gruß 2019). Measure Planned by Chemical Industries (%) Improving energy efficiency 86 Optimising running processes 81 Increasing the share of renewable energies 60 (Increased) use of renewable raw materials 56 New business models based on circular economy 54 New production technologies 51 Use of CO2as carbon source 18 Theseexamples offuelsandpolymers showthatfuelsand chemicals frombiomasscurrentlycannot be produced without greenhouse gas footprints. Emissions are generated above all by agriculture and processing. The use of sustainable energies seems to be most effective in processing. Investors who rely on bio-derived processes and products should therefore carefully analyze the raw material source and energy intensity of a particular process and examine possibilities for process integration into emission-free energy systems. 6.4. Value Chains and Infrastructure International supply chains for biomass or biomass fractions are nothing new in themselves. The German industry already processes bio-based raw materials, 62% of which come from domestic areas and 38% from foreign areas (Kircher 2018). The same applies to Europe, which “imports” 18 million hectares per year from outside, especially from Asia. This area is equivalent to 65% of the total agricultural area used for industrial purposes (Bruckner et al. 2019). The modern bioeconomy will intensify such supply chains considerably. Corn and soya from the USA, sugar beet from the EU, wheat from Russia, sugar cane from Brazil, palm oil from Malaysia, to give just a few examples, are future industrial goods. In the long term, therefore, the supply chains for carbon sources will start with fossil resources less in the Middle East and other regions, but will move to biomass regions. OECD countries in North America and Europe, emerging economies of the former Soviet Union, South America and Southeast Asia, and developing countries, especially in sub-Saharan Africa, will benefit. Thus, new biomass value chains can contribute to poverty reduction (SDG 1), economic growth (SDG 8) and inequality reduction (SDG 10). Whether raw crops or biomass fractions such as starch, sugar, vegetable oil or processed products such as fuel and basic chemicals are delivered to global industrial centers depends on processing capacity in the biomass region and logistics costs. Due to the high logistics costs of biomass, transport distances to bio-refineries are kept short. Today’s bio-refineries receive biomass from a radius of only 50–100 km. Due to this limited catchment area, bio-refineries are preferably built in the biomass growing regions. However, the small catchment area limits the capacity of bio-refineries that use primary biomass. Large bio-refineries have a capacity of 500,000 tons of ethanol per year (FarmProgress 2016) containing 206,000 tons of carbon. Large oil refineries, on the other hand, reach capacities in the order of 20 million tons of crude oil (Shell 2019); this corresponds to a carbon content of around 16 million tons. Bio-refineries thus reach only 1–2% of the capacity of oil refineries. Economically, this is a significant factor, because it limits the benefits of economy of scale. Therefore, investments to improve the economic efficiency of bio-refineries and the development of capacities in biomass regions are urgently required. Economies 2019,7, 73 23 of 36 7. Financing 7.1. Capital Requirements In view of the enormous scale of the raw material change, correspondingly high financial expenditures are necessary, especially in the areas of energy, fuel and chemicals. As mentioned, energy should find a carbon-free future. Capacities have been built in industrialized and emerging countries since the 1990s. It is estimated that in the next 30 years, Germany will need EUR 30–60 billion annually for the energy system transformation alone (1–2% of GDP; Acatech and Akademienunion 2017 ). The British House of Commons also mentions this order of magnitude for the energy system transformation in Great Britain (BBC 2019a). The EU Commission estimatesthatanannual investment requirementof USD180 billion (1% of the EUGDP of 2017) exists for the achievement of the climate target by 2030 for renovation and energy efficient buildings, renewable energy generation and transmission, and low-carbon transport, to name a few (EU-Commission 2018) . The transfer of this assumption to the global economy leads to a vague estimate of about 800–1600 billion US dollars per year by 2050 (1–2% of GDP per year; global GDP amounted to 80,000 billion USD in 2017). Organic chemistry relies on carbon, whether from plants, lignocellulose, waste recycling or gaseous carbon sources. Investment is particularly needed in the early transformation steps from raw bio-materials to basic mass chemicals such as ethylene, propylene, methanol, benzene, toluene, xylene or new candidates for basic chemistry such as succinate. However, the subsequent steps of chemical processing into intermediates and components remain largely unchanged. Therefore, investments in raw material processing and mass chemistry are required first. The global volume of this sector is currently 550 million tons of carbon per year. Carbonaceous fuels should be phased out in the long term, but some applications where there is no carbon-free alternative will still require carbon fuel. Therefore, there is still a need for fuels, which amounts to around 900 million tons annually. Both markets, i.e., chemicals and fuels, add up to around 1500 million tons. With an estimated investment volume of USD 1 million per 1000 tons of bio-refinery capacity (Wagemann 2012), the theoretical investment requirement is USD 1500 billion by 2050 in the chemical and fuel industry only or—if spread evenly over 30 years—around USD 50 billion per year. Taking infrastructure and other adaptation measures into account, this sum could double to the order of USD 100 billion. This would correspond to 1–2% of the worldwide turnover of the chemical industry of USD 4.8 trillion (2017) (Statista 2019c). This figure should only give an idea of the dimension required; it is far from being an accurate calculation and does not take account of technological progress, market developments and raw material supply. If declining sales of fossil raw materials disrupt or interrupt established supply chains, development could be dramatically accelerated. With this estimate, the financial sector should prepare itself to finance bio-based chemicals and fuels as well as carbon-free energy in the range of up to USD 1600 billion over 30 years—around 2% of world GDP annually. In addition, it is estimated that USD 200 to USD 400 billion per year are required to secure ecosystem services on the long term (WWF et al. 2014;Credit Suisse and McKinsey 2016). Table 13 summarizes these considerations and gives an overview of the various investment requirements. Switching to bio-based chemicals and fuels and maintaining ecosystem services is a big challenge, but also a great investment opportunity. Table 13. Estimation of the annual investment requirements till 2050 in renewable energies, bio-based chemicals and fuels, ecosystem services (USD billion per year), and share of global GDP. Investment Field Renewable Energies Bio-Based Chemicals and Fuels Ecosystem Services Total USD (billion per year) 800–1600 50–100 200–400 1050–2100 Share of global GDP 1–2% 0.06–0.12% 0.26–0.53% 1.3–2.6% Economies 2019,7, 73 24 of 36 7.2. Supply of Capital There is a growing demand for the financial system to focus more on a sustainable future ( UNEP 2015 ;FOEN 2016). In fact, investors are preparing for the post-fossil economic age and are increasingly taking sustainability criteria into account. Checking investments for compliance with SDGs is becoming a risk assessment tool (IFoA 2018). Market leaders such as BlackRock, Bloomberg, Thomson Reuters, MSCI, Standard & Poor’s and others are establishing corresponding sustainability databases and ratings. One example is the ESG Scoring Methodology (Huber et al. 2017;MSCI 2017), which analyses 37 comprehensive key issues that are broadly in line with the UN SDGs. ASN Bank (The Netherlands) is an example of a bank that has set itself a very concrete goal with a focus on biodiversity. A net positive effect on biodiversity as a result of their loans and investments should be achieved by 2030 ( ASN Bank 2019 ). Together with other banks, a separate evaluation methodology for financial transactions has been developed (Berger et al. 2018). An important part of the financial needs will be covered by the reallocation of investment budgets. The fossil sector should provide funding sooner rather than later to invest funds no longer needed for fossil resources in sustainable projects. The chemical industry is also expected to make a significant contribution. The chemical sector in the four top chemical nations China, USA, EU-28 and Japan invested USD 148 billion in 2016 (VCI 2018) and it can be plausibly assumed that the lion’s share of this was invested in plants for fossil-based processes. Instead of investing primarily in the construction and maintenance of such plants, at least part of this funding could be used to switch to bio-based processes. Such a financial reorientation would make a significant contribution to building up the capacities required for the processing of bio-based raw materials by 2050. In fact, the industry makes such investments. In just two years (2014–2015), European companies have invested around EUR 2.2 billion in pilot and demonstration projects for bio-based fuels and chemicals (Piotrowski et al. 2016). This volume corresponds to about 10% of the investments of the chemical industry in the EU (EUR 21.7 billion in 2016) (VCI 2018). The commercial and investment banking sector, which provides loans, is also turning to investments in bio-economic opportunities. BNP-Paribas (France) intends to invest up to EUR 15 billion in renewable energy projects by 2020 and up to EUR 100 million in start-ups focusing on energy system transformation (BNP-Paribas 2017). Private capital will also be refocused. While in 2005, only EUR 13 billion of private money flowed into sustainability-oriented opportunities, the total amount in 2016 grew by a factor of 25 to EUR 326 billion (Austria, Germany, Switzerland) (Wagner 2017). Another source of capital is public financing. The developed countries that are signatories to the Paris Climate Agreement announced that they would mobilize USD 100 billion for their own measures and another USD 100 billion to support developing countries (Thwaites 2015). The investment plan for Europe, the so-called Juncker Plan, aims to mobilize EUR 315 billion within three years and HORIZON2020, the EU’s program for research, development and innovation, provides EUR 80 billion (2014–2020), with a focus on sustainable energies, fuels and chemicals. Additional grants are provided by charitable foundations. The Bill & Melinda Gates Foundation supports research & development in sustainable agriculture with USD 300 million over the next three years (Gates Foundation 2017). Gates is joined by a co-founder of the Breakthrough Energy Coalition, which focuses on low greenhouse gas and sustainable electricity, transportation, agriculture, manufacturing and buildings (Breakthrough Energy 2019). Public funding and private grants go primarily to research and development projects (Technology Readiness Level (TRL) 5–7). In the financing of pilot (TRL 7–8) and demonstration plants (TRL 8–9), this share decreases in favor of private financing (Figure 11) (EIB 2017). 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