4. Indicators

In this chapter we develop and discuss indicators for the bio-economy and the bio-based economy that are both relevant for CE and can be estimated on the basis of the BFM. Indicators are derived from the literature and calculated using CBS data. The following indicators are considered in this report: bio and bio-based production, substitution of non-renewable materials, cascading, dependency, and the economic indicators value added and employment. Preliminary indicators were discussed during a seminar with stakeholders from industry, academia and government to validate and further develop the indicators. The insights from this seminar are presented alongside the indicators.

4.1 Production

The “production” indicator was developed to estimate the current output of the bio-based economy in the Netherlands. The production of non-food/non-feed bio-based products and materials can be considered to be an estimate of the bio-based economy. Production in the Netherlands consists of production based on biotic materials (biotic production) and production based on other materials (abiotic production). Bio-based production in turn is part of biotic production (see definitions in chapter 2). To estimate the share of the bio-based economy, bio-based production can be compared with biotic production (including food and feed), abiotic production or the total economy (including all materials). The following indicators are derived:

Bio economy= (Bio material production)/(Total material production)

Biobased economy= (Bio-based material production)/(Total material production)

4.1.1 Method

The method consists of two parts: the first explains how results are derived for physical data, the second part does the same for monetary data.

Physical (kilo) data
The Bio Flow Monitor (BFM) provides data for this indicator on kilo’s of biotic and abiotic production for each economic sector. It should be noted that adding up all sectors will result in double counting, as the output of one sector is the input for another.

Methodological steps:

1. Determine abiotic production from the abiotic BFM.
2. Determine BFM product categories in the biotic BFM that can be considered to be bio-based (see annex 7.6).
3. Take production volumes for all product categories (in dry matter) from the combined biotic and abiotic BFM.
4. Calculate what share of the total physical production is bio production, and what share of the bio production is bio-based production.

Monetary (euro) data
As it is part of the national accounts, the monetary supply and use table (MSUT), , is not split into a biotic and abiotic SUT. Therefore a different approach is taken to determine the financial value of the bio and bio-based production.

Methodological steps:

1. Determine biotic shares for each MSUT product category (categories are compatible with the BFM/MFM) on the basis of the biotic and abiotic BFM.
2. Add/adjust shares to account for differences between the physical and monetary SUTs. For example, all service categories (only part of the monetary SUTs) – including agricultural services – are set to 100 percent abiotic. Another example: biofuels are part of product categories petrol and diesel in the monetary SUT but are recorded separately in the physical SUTs. Therefore, a bio-based share, estimated on the basis of the literature, was allocated to petrol and diesel in the monetary tables.
3. Determine BFM product categories in the biotic BFM that can be considered to be bio-based. This step is the same as in the physical approach.
4. Take financial production values for all product categories from the monetary SUT of the national accounts.
5. Calculate what share of the total monetary production is bio production, and what share of the bio production is bio-based production.

4.1.2 Results

This method enables the calculation of biotic production, bio-based production and abiotic production. Biotic and bio-based production in the Netherlands in 2018 are presented in terms of their share of total production weight and value in table 4.1. We included biotic waste incinerated for energy generation and also biofuels in the bio-based production. It is debatable whether these flows should in fact be counted as part of the bio-based economy: would burning more biotic materials and using more biofuels mean that the bio-based economy is growing?
In terms of weight, only 19 percent of Dutch production can be considered to be part of the bio economy (biotic production). The biotic goods animal feed, oils and fats account for the largest quantities. Only 6 percent of total production belongs to the bio-based economy. Bio-based goods accounting for the largest quantities are solid biomass for energy generation and paper and cardboard packaging.

In terms of monetary value we see similar results in table 4.1. Notice that in figure 4.1 the total production value includes the production of services, like banking services or restaurants. These services do not a physical measurement unit and are, therefore, not part of the production in weight. However, if only the same product categories as in the physical approach are considered, i.e. not including services, 35 percent of Dutch production can be counted as bio economy (biotic production) and 8 percent as bio-based production. So by considering only products that have both a physical and monetary measurement unit, the abiotic share is lower when looked at from a monetary aspect. This might seem counterintuitive –you would expect that abiotic products like machines and electrical equipment have a relatively low weight but high value compared to biotic products like food. What you may forget is, however, is that abiotic products like some minerals (e.g. sand and clay) have a low value per kilo and that biomass is recorded in dry mass.

In addition to looking at the total amount of products, we can also look at products produced by a specific economy activity. Figures 4.2a and 4.2b present the estimated bio-based shares for the production of textiles and furniture. Carpets are most dominant bio-based products in textile production, while in the furniture industry, bedroom furniture has the largest bio-based share.

4.1.3 Discussion

This indicator is useful to show the shares of biotic and bio-based production in the Dutch economy. It clearly shows that at present, a small part of the production is bio-based. The indicator did not trigger any discussion during the stakeholder seminar, probably because it is highly aggregated and the outcomes are not surprising. The high level of aggregation means the indicator is unlikely to be useful for monitoring over a short-term period, as it would not reflect gradual developments in some industries or products. It might reflect progress after five or ten years if there are major shifts towards producing more bio-based products in the Netherlands. Another option is to monitor specific product groups, like textile and furniture, that have a high potential for a bio-based transition. However, for these detailed figures to be robust enough for monitoring, they need to be reconciled with outcomes of bottom-up research (see e.g. Bakker (2021) for textile). Double counting of materials also makes this indicator less straightforward; this will have to be eliminated, or alternatively an indicator that considers value added per sector could be used (see section 4.5).

4.2 Substitution

Substituting non-renewable resources by sustainably produced biomass is part of the transition to a more circular economy. The BFM contains information on types of materials used in the production process. Therefore the following indicator can be estimated:

Substitution= (biotic input)/( nonrenewable input+biotic input)

Non-renewable input: input of non-renewable materials (=abiotic materials) that can potentially be replaced by biomass.
Biotic input: input of biomass used instead of non-renewable materials in the production process.

In a way this substitution indicator is very similar to the production indicator. The production indicator estimates the bio-based share of output, which is very similar to the bio-based shares of input: bio-based materials in produced products are also taken into account in the input. You could say that the bio-based production of the bio-based industry gives an indication of the substitution potential of that industry. The main problem is that not all abiotic materials in products can actually be replaced by biotic ones. What we need to know is what share of the abiotic materials in a product can be replaced by bio-based materials. There is no point in taking non-renewable materials into account that cannot (currently) be substituted by biotic materials, such as glass for windows. On the other hand there is also no merit in taking biomass input such as food into account that is not used to substitute abiotic materials. Also, substitutes for certain products might not always be made by the same industry: basic metal industries will not start to produce wooden beams. An increase in demand for wood-based buildings would result in a shift from the use of metal beams, produced by the metal industry, to wooden beams, produced by the wood industry. In this case substitution takes place due to a shift in economic activity. This indicator therefore requires a focus on relevant industries and products in which fossil and other non-bio resources are replaced by bio-based alternatives. This was confirmed by experts during the stakeholder seminar. For example, it would be very interesting to determine what share of plastics is bio-based; these bio-based plastics have probably replaced fossil-based plastics. The experts further suggested that our data be used to make this indicator for specific industries (e.g. chemical industry, power plants, construction sector) and subsequently discuss the results with relevant companies and industry associations for the purpose of validation.

4.3 Cascading

The aim of cascading is to use biomass for the highest value applications possible (Bos et al., 2014). Biomass obtained from nature is transformed through processing and the value of the ensuing products increases. The different levels of value are often presented as a pyramid: the widest layer at the bottom of the pyramid represents large volumes of relatively low-value biomass. Higher up in the pyramid this biomass has been transformed into other products that typically have smaller volumes but a higher value.
These value pyramids have variously been developed based on different definitions of value. For example, the Dutch Ministry of Agriculture, Nature and Food Quality prioritizes biomass applications based on their societal value, cascading and the length of time the CO₂ stored in the biomass is extracted from the atmosphere (LNV, 2020, p. 22), assigning the use of biomass to improve soils and as food the highest priorities. Bos et al. (2014) developed value pyramids based on the financial value of biomass applications. In both cases final use in the pharmaceutical and meat industries are considered the highest value applications of biomass. Yet another approach for cascading was developed by Piltz et al. (2021) in the context of the BioMonitor project. In this method, the more processing steps a product has gone through, the higher the value level it is assigned. This requires a detailed understanding of the various production processes biomass is used in.

4.3.1 Method

Although the value pyramid of Bos et al. (2014) is disputable we followed this approach as it makes the link with the bio-based economy and appears to match our data best. We slightly adapted their value pyramid (see 4.3.1) and aimed to determine the financial value and volume of dry matter for each level of the pyramid. The method, similar to that for the production indicator, differs to some extent between the physical and monetary approaches. The following steps were taken for both approaches:

Physical (kilo) data
The BFM provides data for this indicator on kilos of biotic use per type of good. Note that adding up all goods will give double counting of biomass in these goods, because biomass can go through different product stages, e.g. from wheat to flour to bread. Each time biomass becomes a new product it is counted anew in the SUT.

Methodological steps:

1. Assign the product categories in the biotic BFM to the relevant levels of the value pyramid (see annex 7.7 for details). For example, raw milk is assigned to agro commodities, pasteurized milk to basic food, and cheese to processed food.
2. Take domestic use volumes for all product categories from the biotic BFM.
3. Estimate the total amount of physical biomass use for each pyramid category.

Monetary (euro) data
As the MSUT (monetary supply and use table) is not split into a biotic and abiotic SUT, additional steps are needed to assign values to the different pyramid levels.

Methodological steps:

1. Determine bio-based shares for each MSUT product category (categories are compatible with the BFM/MFM) on the basis of the biotic and abiotic BFM.
2. Add/adjust shares to account for differences between the physical and monetary SUTs. For example, waste categories in the MSUT differ from those in the BFM, as in former consider only waste with a monetary value. Another example: biofuels are part of product categories petrol and diesel in de monetary SUT, but are recorded separately in the physical SUTs.
3. Similar to the physical approach: assign product categories with bio content to the relevant levels of the value pyramid.
4. Take monetary domestic use values for all product categories from the MSUT of the national accounts.
5. Estimate the total amount of monetary biomass use for each pyramid category by applying the bio-shares to the value volumes.

A few assumptions were made in order to estimate the results. First, our approach is from a product perspective. Each product is allocated to a pyramid category irrespective the industry in which it is used. So all waste is allocated to residual flows, regardless of whether it is used for energy generation, fodder or even materials. Second, we assigned the monetary value to the biomaterial simply based on the bio-shares, disregarding the actual value of the other materials used in the product: for a product with 40 percent biomass it is also assumed that 40 percent of its monetary value is represented in biomass.

4.3.2 Results

In the weight pyramid (figure 4.4a) agro commodities account for the largest share by far. These products are mainly used by the food processing industry. Pharma and chemical bio-based products account for the smallest share. In general, most biomass is located in the bottom half of the pyramid, especially if we take into account that extraction of biomass, for example grass consumption by livestock, it not taken into account. The category “Materials”, in the top half of the pyramid, also accounts for a relatively large share. Products in this category are mainly paper and wood products.

In the monetary pyramid (figure 4.4b), too, agro commodities account for the largest share, but here they are accompanied by materials and processed food. Pharma and chemical are still small, but not as small as residuals flows. The small monetary value of residual flows makes sense, as these flows have a low value or even no value at all. In general, the monetary pyramid could be said to be top-heavier than the physical pyramid.

Transport fuels and bio-energy are not included in either pyramid. There are two reasons for this. First, bio-based energy carriers are recorded differently in the monetary and the physical tables, which means they cannot be straightforwardly compared. Second, measuring volumes and values of transport fuels involves confidentiality issues that will need to be solved before figures can be published.

The order in the pyramid, as proposed by Bos et al. (2014), assumes that products with highest value are at the top. In order to check this we estimated unit values (kilo/euro) for each pyramid category. Figure 4.4c shows that unit values do indeed comply with the order in the pyramid proposed by Bos et al. This means that figures 4.4a and 4.4b do show to what extent cascading takes place, and thus, to what extent biomass is used for higher value applications.

Given the great interest in the cascading indicator during the stakeholder meeting, we tried to implement it on a smaller scale for specific material flows. To this end we conducted two more analyses: we analyzed the cascading of milk within the value pyramid; and we used the BFM to determine which sectors use bio and bio-based residuals to understand at what value level these residuals are used.

Results: Cascading of milk
To be able to validate the method, we analyzed the cascading of milk. The table below shows the weight, financial value, unit value (euro/kilo) and the milk products assigned to each level of the value pyramid. The cascading of milk clearly shows that the unit value increases with the processing of the product. These industry-specific results can easily be validated with experts.

This example also shows that assigning goods to a certain level of the value pyramid is not always clear-cut. For example, the distinction between basic food and processed food was a challenge. Ice cream and cheese are clearly processed foods, milk ready for human consumption is definitely a basic food and raw milk is clearly an agro commodity. However, are butter and yoghurt processed food or basic food? Looking at the use side often helps to assign goods to the other pyramid levels. In this case, however, the user of both basic food and processed food may be households. The example of milk indicates that this method works and that clear definitions of the pyramid levels are crucial.

Results: Cascading of bio (-based) residuals
We want to understand whether the BFM can give us insights into the value level at which bio and bio-based residuals are used. To explore this indicator, the use table of the biotic BFM was used to determine in which economic sectors bio and bio-based waste and recycled bio and bio-based materials are used.

Here biotic residuals are biotic materials in solid waste used as input for an economic activity. Landfilling is excluded. Waste used by the waste collection industry (NACE 38) is not considered either, to avoid double counting. We grouped the BFM sectors into four categories: energy generation, agricultural sector ( including cultivation of plants and livestock), food and feed sector, and other industry (comprising all producing industries such as textile, chemical, and pharma). Nearly one third of biotic residuals are used for energy generation, mainly biomass in mixed household waste incinerated with energy recovery in waste incineration plants. Nearly another third is used by industry, mainly the paper but also the wood industry. Use in agriculture is mainly plant material for livestock and manure. In the food and feed sector, biomass use consists mainly of plant material for the animal feed industry. See figure 4.3.2b for details.

Connecting the findings to the value pyramid by Bos et al. (2014) would suggest that the applications in industry have the highest value, while the Dutch agriculture ministry prioritizes applications of biomass in agriculture and food (LNV, 2020, p. 22). Of course not all bio-based materials used in industry, like wood and paper, can also be used in the food and feed sector. However, part of the incinerated biomass could be used for application higher up in the value pyramid.

4.3.3 Discussion

We presented the outcomes resulting from this method to a group of experts for their evaluation and feedback. This indicator sparked a wide-ranging discussion and a number of suggestions and also resulted in the overarching conclusion that at the moment the indicator is not refined enough to be used. Questions were raised about the labelling of some products and whether our pyramid should focus on the bio-based economy or should also include the bio-economy. Some products are used at different levels of the value pyramid. In practice, however, these goods are assigned to the category they are primarily known for. For example, the product group ‘legumes’ is used as fodder as well as for basic food, but was assigned to basic food. Another challenge is how to treat residuals that constitute a pyramid category in themselves, but are used for several purposes at different stages of the value pyramid. The definitions for the value levels provided by Bos et al. (2014) are not specific enough to assign some goods. For example, should butter and yoghurt be assigned to processed food or to basic food? Some products, such as tobacco and flowers, do not fit well into any level of the value pyramid. The challenges we encounter should be solved with input from experts and stakeholders.

4.4 Dependency

We depend on biomass for our consumption and production activities. Production activities can involve livestock farming, electricity production and bio-based products. Some biomass is obtained from domestic extraction and waste flows, some comes from trade with other countries. Indicators that link domestically extracted biomass to imported biomass address our dependency on foreign countries.
The continued use of imported biomass for future purposes depends not only on the availability of foreign biomass but also on the production process itself. The transition to a more sustainable society demands that only sustainably produced biomass is used. If the availability of this is limited, there will be fewer possibilities to apply biomass in production processes.

In figure 4.4c bio-based goods of the BFM are allocated to the categories also used for the cascading indicator. As a result flowers, flower bulbs, plants and tobacco are not taken into account. Also, for example, soya beans and maize are considered agro commodities although these commodities are used to a large extent to produce animal feed.
Figure 4.3.2c shows that we are very dependent on import of biomass, mainly agro commodities like grain, oil bearing seeds and primary wood. Only 16 percent of the total primary input (excluding recycling) comes from domestic extraction. Extraction consist for 37 percent of animal feed among which grass. Around half of the imports consist of agro commodities of which a substantial amount is used by the Animal feed industry. Animal feed and fodder are mainly used for livestock farming, the products of which, e.g. cheese and meat, are partly used for domestic consumption but mostly exported. Losses, estimated in figure 4.5c as a balancing item, consist mainly of respiration, sewage and emissions after incineration. Recycling consists mainly of manure and food residuals used for animal feed.
Notice that ratios between biomass flows related to domestic extraction, imports and exports differ from ratios observed in the Sankey for wet matter (Hanemaijer et al., 2021). This is due to the differences in dry matter content of the products in the various flows. For domestic extraction of grass and feed the water content is assumed to be much higher than that of imported biomass product. A decision will have to be taken on whether to use wet or dry weight of biomass to derive a policy relevant indicator for dependency. For dry weight, more research might be needed to determine the exact water content of the different products.

4.5 Economy

Economic indicators under consideration are value added of and employment in the bio-based economy in relation to the rest of the economy. We approach these from the production side, in which the production of non-food/non-feed bio-based products and materials can be considered to be an estimate of the bio-based economy. The share of bio-based production of a sector is assumed to be equal to the share of bio-based value added and bio-based employment of that sector. We also look the consumption side: who buys these bio-based products?

4.5.1 Methodology

Both indicators are derived by assigning economic sectors to the bio-economy and the bio-based economy (note that the bio-based economy is part of the bio-economy). We consider sectors at the highest level of detail available in the MFM (see annex 7.8). The literature shows that there is no consensus on which economic activities should be considered as part of the bio-based economy (e.g. Steinbach, 2018; Kuosmanen et al., 2020; Kardung et al., 2020). In this report we make the following assumptions about the demarcation of the bio-based economy.

First, we consider agriculture (NACE A) and the food industry (NACE 10 - 12) to be part of the bio-economy but not of the bio-based economy. The rest of NACE C (Industry excluding 10-12) plus NACE D (energy production) is considered to be bio-based industry depending on the share of bio-based production. We assume that the share of bio-based production relative to the total production of a sector determines the shares of value added and employment that can be assigned to the bio-based activity. For the wood industry the share is almost 100 percent, for the iron and steel industry it is 0 percent. We omit the production of waste (both biotic and abiotic) in our share estimation. For the energy sector we need another approach, as production there is not always physical (electricity). For the energy production sector we estimate the bio-based share on the basis of the use of biotic versus abiotic materials. The remaining NACE sectors produce services and not commodities and are therefore not considered as part of the bio-based economy; e.g. restaurants, construction and institutes devoted to bio-based research.

4.5.2 Results

Figure 4.6 shows value added of and employment in the bio-based economy in relation to those in the bio-economy and the total economy for 2018. The results show the same pattern: bio-based economy accounts for around 1 percent of the total, the bio-based economy for around 4-5 percent. For the bio-based economy this amounts to employment of around 112 thousand full time equivalents and 9.5 billion euros of value added. For the bio-economy it amounts to employment of around 406 thousand full time equivalents and 29 billion euros of value added.
  

The figures described above are based on the production perspective: economic activities related to bio-based production that generate value added and/or employ people are considered. Now let us look at the demand side of the economy: who buys these products? Some products are purchased by other industries in order to produce other products (intermediate consumption). Other products are bought by households, invested, stored or bought by the public sector (final domestic consumption), or exported (excluding re-exports). In monetary values, for all bio-based products (excluding residuals), intermediate consumption accounted for 68 percent , domestic final consumption for 11 percent and exports for 22 percent. Figure 4.8 shows that agro resources are mainly used in intermediate consumption. The largest share of processed food is destined for domestic final consumption, and exports account for the largest share of basic food. For materials the difference between destination is less apparent.

4.5.3 Discussion

In order to check the robustness of the figures on value added and employment we tried to compare them with results from previous research. This is not straightforward because different definitions of the bio and bio-based economy are used, results are reported for different periods and some studies also take indirect value added employment into account (Kuosmanen et al, 2020). The following figures were found for the Netherlands: in 2013 employment of 340 thousand in bio-economy and 60 thousand in the bio-based economy (Poitrowski and Carus, 2017). It appears that our 2018 figures are higher than the 2013 figures from previous research. Although this suggests a growth of the bio-based economy, both the bio-based and the bio-economy remain small relative to the total economy. The relative small bio-based economy in combination with the assumptions that are made to derive the results is a concern when interpreting developments in time. Up to date data on bio-based shares specific for Dutch production processes are desirable. Also consensus on the scope of the bio-based economy would improve support and usability of the results.