State-supported funding schemes risk distorting raw material markets, pulling the plug on Europe’s bio economy ambitions, warns Sylvain Lhôte.
Sylvain Lhôte is the Director General of CEPI, the European association representing the forest fibre and paper industry.
Let’s think about it – the wood we produce in Europe provides both a renewable and recyclable material that a myriad of bio-based products can be produced from.
Paper is one of them, the cardboard packaging that delivers your online purchases to your door is another, the panels that provide decking for your house is yet another.
More are coming from the bio-based material revolution on its way. The forest-based industry can today replace virtually all fossil-based and carbon-intensive products our society is increasingly challenged by.
Europe has all the building blocks for a globally competitive, renewable and recyclable material industry. It has access to a growing supply of sustainably managed forests, it is developing a strong recycling chain, and it has the world’s leading equipment manufacturers, the most innovative researchers and a skilled workforce.
These are the foundations of the bio economy and Circular Economy strategies the EU is spearheading.
Now imagine if I said to you that instead of building on these capabilities to advance the bio economy and the revolution in material technology, we would just turn them into ash? This is the sad paradox of the debate on renewable energy.
By focusing solely on the energy context of the bio economy rather than seeing it in a broader value-creation dimension, most energy experts are skewing the discussion away from the value that wood can bring beyond bioenergy.
Looking at jobs or added value brings a broader perspective to the debate: the industry chain from forest fibre to paper generates seven times more jobs and five times more added-value than burning wood for energy alone.
Let’s put this in the context of Europe’s Circular Economy ambitions: every cubic meter of wood creates and recreates products worth 2.38 m3 of wood. Bioenergy is not out of the picture and is already integrated in this value chain.
For instance, CHP (combined heat and power) boilers fed with production side streams such as “black liquor” have made the industry one of the largest producers of biomass-based energy in Europe.
The European Parliament and Commission have taken a holistic approach and tried at least to set some boundaries to make the rise of bioenergy compatible with the development of value-creating bio-based industries.
Driven by the narrow focus on energy, the Council on the other hand is missing the big picture. It focuses on “megawatts” but is basically ignoring the jobs and value creation benefits of making the bio economy circular.
Does the Council fully understand the full scale of what it is ignoring? If one large coal power plant of 4,000 megawatts was converted to woody biomass it would burn in one year an amount of wood equivalent to the entire annual harvest of forest in the Czech Republic.
To make matters worse, power gets produced with very little efficiency as two out of three trees end-up being burnt for nothing.
There is no doubt that the use of bioenergy will rise in Europe. Capacities of all shapes and sizes are sprouting up across the continent. Should those be fuelled by state-funded support schemes that may also distort raw materials markets for other uses than energy?
Some countries think this will not happen in their backyard, that they can, by magic, remain isolated from the dynamic of energy and raw materials markets, or that they will be smart enough to design another set of norms, controls and rules to limit this happening.
This sounds at best optimistic. These markets span across several member states. Just consider central Europe. Once triggered by subsidies, market distortion gains speed at a pace regulators can hardly follow.
We only need to look at how long it took to fix the first biofuel directive? Experience shows that it is extremely painful to unplug a power sector from subsidies, not least when public money runs out. Remember the Spanish government’s solar energy schemes?
The solution is not to cure but to prevent. The EU needs to ensure, upfront, that subsidy schemes are designed in a way that does not distort raw materials markets. This implies that future State Aid guidelines will have to consider the broader, often regional, implications a scheme would have on an entire value chain, beyond the specific power markets it traditionally addresses.
Europe has a stated ambition to make the circular economy work. Europe is leading the bio-based materials revolution. It is time policymakers realise that forest-based industries yields much more value than megawatts and that the bio economy goes much further beyond bioenergy.