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The start of the post-petroleum era

Tuesday, 08 November 2016 Posted in BioEco Forum News, News

Is it realistic to expect large scale developments in bioeconomy considering the current low price of oil? EFI Director, Marc Palahí, believes that it is and considers the opportunities for a bioeconomy on a global scale.

Marc Palahí - Director of EFI (Photo by Saku Ruusila)

Climate change is the defining issue of our times as it exacerbates other global challenges like water scarcity, food security, poverty and migration crisis. Syria and the current refugee crisis exemplify that well. Between 2006 and 2013, Syria experienced the worst drought in modern times, which resulted in more than million people moving from rural areas to cities, already burdened by refugees from the war in Iraq. What followed is well known by all of us: one of the worst wars and refugee crisis of the last decades.

The scientific debate on climate change is finally paying off as it has also reached the highest political and economic discussion level. On April 22, 174 countries signed up in New York to the Paris Climate Change Agreement and sent out a historical message to the heart of our economy: the transition towards a low carbon economy is irreversible. The post-petroleum era is starting! An era, where the bioeconomy will be the new growth engine. Why?

The development of bioscience, nano- and bio- technology allows us to substitute almost any existing fossil-based product, including plastics, by biobased versions of them, which have a lower carbon footprint and clear environmental advantages: renewable, recyclable, and biodegradable. The wood construction sector is a very good example. The emergence of new wood-based engineering products, allow now for multi-storey wood-frame buildings—technically even over 100 storeys high. Such new products allow for efficient prefabrication approaches that result in better safety for workers and reduce building time and costs, while using wood substantially reduces carbon dioxide emissions and stores carbon for decades if not centuries. Other emerging opportunities for new bio-based products can be found in the textiles industry. Wood-based textiles can now replace petroleum-based synthetic fibres, such as polyester and nylon. The properties of wood-based textiles are similar to cotton, the production of which requires large amounts of land and water in regions where they are increasingly scarce, such as in China and India.

The examples above demonstrate that the bioeconomy is already emerging in many industrial areas of production. The challenge is now to move from niche to norm, developing it on a much larger scale.

In that sense, both research and business investments are crucial. The European Fund for Strategic Investment (EFSI) and the European Investment Bank (EIB) will need to play an important role in supporting new Bioeconomy investments. EIB and EFSI funding has already been used, for example, to establish a new biorefinery, Metsa biomill in Finland, which required a total investment of 1.2 billion euros.

The European Commission, conscious of the fact that the bioeconomy can only deliver its full potential if it becomes part of the global agenda, plans to launch next October the International Bioeconomy Forum (IBF). The IBF will be established with seven other countries: Australia, Brazil, Canada, China, India, New Zealand and USA to provide a multilateral science-based policy dialogue on the future of the Bioeconomy.

However, is realistic to expect large scale developments in bioeconomy considering the current low price of oil? Yes, is the answer. Why?

First, the Paris COP21 agreement provides a more favourable and predictable policy landscape for renewable technologies and biobased products that are key to reduce our carbon footprint. In that context, a low oil price is not necessarily a threat for bioeconomy development; as it provides governments with a window of opportunity to start pricing CO2 emissions commensurately with the environmental damage they cause. A global carbon price would internalize the environmental costs of using fossil raw materials and provide economic incentives to boost bio-based products. Second, low fossil fuel prices is already leading to less investment in fossil fuel industries. In a situation of low prices, high price volatility, and oil companies cutting their dividends, the renewables and bio-based sectors are becoming a safer bet. Finally, governments subsidizing fossil fuels to keep the prices low, can now reduce subsidies and invest in the transition to a low-carbon economy.

The bioeconomy represents a paradigmatic shift in our economy. It requires that we live within the boundaries of our planet. It means that life (bio in old greek) becomes our economic growth engine.

 

This op-ed article was published in the Catalan newspaper “Ara” on 11 October 2016.