Why export resources when you can export ideas?

the global economy has been transformed from a material-based economy into a knowledge-based economy. Previously the main sources of wealth were material assets such as gold mines, wheat fields and oil wells. Today the main source of wealth is knowledge. And whereas you can conquer oil fields through war, you cannot acquire knowledge that way. Hence, (…) knowledge became the most important economic resource. (Harari Y.N 2016: 15)

Harari’s argument sounds familiar right? Nowadays, most governments that attempt any kind of visionary planning for the economy ,  rely heavily on the mantra of knowledge-base and knowledge development. Silicon Valley is more important for the economy than a gold mine. Yet one cannot physically conquer Silicon Valley, force its workers into labor and take over production and exports, as one would be able to do with a gold mine. Why sell gold when you can sell something much more valuable? Ideas.

Such is the case with most bioeconomy strategies as well, where bioeconomy is almost synonymous with a”knowledge-based economy”. In most industrialized countries, the discussion doesn’t revolve so much around exploiting resources, as it does around developing state of the art technologies and innovations that can add value to the already existing supply chains. Sure,  the forest sector in Nordic countries like Finland and Sweden, repeatedly advocates the need for intensified production from forests. But here too, national bioeconomy strategies are also concerned with developing innovative technologies that would enable further added value to supply chains. So it’s not so much about cutting as many trees as possible as it is about further adding value to these already existing wood-based supply chains. On the other hand,  countries like Germany and France, that are rather independent of their resource endowment with regards to both their agricultural and forest sectors, seek to develop high-tech sectors and stimulate emerging industries without necessarily relying so much on domestic biomass.

Logging_Scene_Near_Bellingham,_WA

Forest Bioeconomy in 1910 vs Forest Bioeconomy 2017 : Resources vs Knowledge? (sources Wikimedia Commons and Pixaby)

Think about it like this: if forests cover 75% of your country’s land area, and the forest industry plays a central role in the national economy, it is only natural that you would build on these assets and try to further expand and add value to your products. You try to keep production at home, from domestic resources, and since you have so much resources, you can afford to export to other countries as well. But what do you do if you don’t have enough resources but still aim high and wish to retain global economic leadership? Well, you round up a lot of smart people and make them think hard about how to further expand your technology base. At the end of the day, even if you won’t be able to export high amounts of bio-based products because you simply lack the necessary raw materials, you will always be able to export ideas and concepts.

This argument is best exemplified with technology developments in the area of lignocellulosic bio-refining. Bio-refinery is not an entirely new concept. Similar biomass conversion technologies have been under development for decades now . Yet, most of these technologies and products could not get established due to competition with the fossil-based industry and economy which ultimately failed to get them the much needed sociopolitical legitimacy . The 2008 economic crisis and the emergence of international macro/political concepts such as bioeconomy can be credited, to some extent, with reinvigorating interest in biomass conversion technologies.  Lignocellulosic bio-refineries became an attractive option mainly because they have the potential to run on alternative feedstocks , or “non-food biomass” (e.g., forest residues, wood, agricultural waste products, or biomass from plantations) without directly competing with food crops ( e.g.,  feedstocks from plant sources such as palm oil, corn, or sugarcane) which are well known for issues such as unsustainable production, land use change and food (in)security.

Yet,despite such promising features, in most countries, many such relevant bio-refinery technologies are still confined to the laboratory and pilot scale. Reasons for this are various and complex, and mainly relate to our current economy’s “lock-in” into fossil-based production and market demand patterns. But biomass availability also plays a major role. It makes sense to build industrial-scale bio-refineries if you have enough biomass going around to continuously feed them . What sense would it make invest in such facilities if you have to compete with other well established industries for wood or otherwise  rely heavily on imported biomass from abroad? So much for the ambitious claims about resource independence and sustainable sourcing.

Take  UPM Biofuels in Finland for example. The company has recently established the first commercial-scale wood-based bio-refinery in the world, located in Lappeenranta, Finland. It has an annual renewable diesel production of 100,000 tonnes/120 million liters, and a lot of wood residues to go around for producing this biofuels.  Germany, had similar ambitions. The government supported  the development of a bio-refinery experimental site in Leuna which, at potential industrial scale, was estimated to   process around 300,000 to 500,000 tonnes of wood/year (bone-dry beech wood and poplar). Yet, unlike in Finland, such  bio-refinery concepts have remained at pilot scale, not because the technology was lagging behind but because there seem to be too many uncertainties and conflicting demands on the local forests. In a country where consumption of domestic wood is shared between various established industries (e.g, the sawmill industry , the pulp and paper industry , energy use of forest wood etc.) experts are still not sure if there’s  enough wood for such industrial scale bio-refineries. Sure, integrating bio-refinery concepts in already existing supply chains (e.g., pulp and paper mills) might be an option which could bring added value through “cascade use”, but this approach is not free from criticism.

So what should countries with less or over-exploited bio-resources do? Their best bet is to continue developing state of the art technologies and export ideas. This is perhaps one of the main reasons behind  Germany’s  ambition to acquire “technology leadership” . So perhaps the focus is not so much on building domestic industrial  bio-refineries, as it is to develop knowledge and instead export ideas to other resource-rich countries that could make good use of such innovations. Even though such  bio-refinery concepts  are still far from competitiveness in Germany, this does not mean that further technology development should not be pursued. As windows of opportunity might arise, exporting ideas will be a crucial prerequisite for the knowledge-based economy.

* This blog post is based on our recent article “A forest -bioeconomy for Germany? Strengths, Weaknesses and Policy Options for Lignocellulosic Biorefineries” published in the Journal of Cleaner Production. LINK. If you do not have access to the article, message me and I will send you a personal copy.

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