Monitoring the biobased economy from a macro-economic perspective

1.1 Background

The Dutch government has set goals to use 50 percent less abiotic resources by 2030 and achieve a fully circular economy (CE) by 2050. Reduction of abiotic resources can be achieved in a number of ways:

1. more efficient use of primary resources;
2. better use of secondary resources;
3. substitution of abiotic by biotic resources.

The third option will result in a more bio-based economy. This report describes the development, estimation and validation of indicators for a bio-based economy.

The size of the Dutch bio-based economy has been estimated in the past, among others by CE Delft, RVO and WUR (Goh et al, 2016; Groenestijn, 2019; Kwant et al., 2018; Lieshout et al., 2018). At the request of RVO, CE Delft developed a method based on national statistical data: in a nutshell they estimated the bio-based economy by applying bio-based shares to the production of (potentially) bio-based products. This method was improved in the H2020 Biomonitor project (https://biomonitor.eu/) by measuring the bio-based economy as part of the bio-economy and the total economy, including 100 percent biotic and abiotic products. To do this, the Material Flow Monitor (MFM) – which contains all material flows to, from, and within the economy – was extended (Berkel , van and Delahaye, forthcoming). The MFM is already used to derive indictors to monitor the transition to a CE (Hanemaaijer et al., 2021). In this report, the MFM is augmented to include the bio-based economy. The resulting Bio Flow Monitor (BFM) is used to develop CE policy relevant indicators.
The bio-based economy is not only relevant in the domestic context; with its EU Bio-economy Monitoring System, the European Commission is also taking steps to track the progress of a sustainable and circular bio-economy¹⁾.

1.2 Goals

The research presented in this report aimed to:

1. Compile the Bio Flow Monitor (BFM) dataset for 2018. This dataset contains two supply and use tables for dry matter: one for biotic material flows and one for abiotic flows.
2. Identify and compile potentially relevant indicators for CE policy. These include production, substitution, cascading, dependency and economic variables.
3. Validate the plausibility of the indicators. One way to do this is through a stakeholder meeting.

2.1 Definitions used in this research

Bio-economy: “The Bio-economy encompasses the production of renewable biological resources [agriculture, forestry, fishery] and their conversion into food, feed, bio-based products and bioenergy.” (Nattrass et al., 2016, p.15)
Bio-based economy: The bio-based economy is a subset of the bio economy, encompassing the conversion of renewable biological resources (from agriculture, forestry, fishery) into bio-based materials, products, fuels and energy sources.

Figure 2.1 depicts the bio-economy and bio-based economy as part the total carbon economy. Biomass as an energy carrier can be considered as a subset of the bio-based economy. In this report we focus on the bio-based economy as a whole as indicators for bio-energy are already available from a micro-economic approach (e.g. Linder et al., 2021).

2.2 Sustainable use of biomass

A transition to a more circular economy could possibly increase demand for biomass. Biomass can be used as a substitute for non-renewable resources like fossil fuels and building materials. If CE is to contribute to a sustainable society, it will have to be beneficial for the environment. It is therefore is paramount that only sustainably produced biomass is used. The Social and Economic Council of the Netherlands recently reported on the requirements for sustainably produced biomass by (SER, 2020).
The present report considers only quantities of biomass irrespective of how they are produced and how sustainably they are used. A quantitative analysis is considered the first step after which it becomes easier to zoom in on the sustainability of relevant types of biomass. This second step is beyond the scope of this report but should be further researched.

2.3 Different kinds of biomass

Biomass consist of all kinds of plant and animal-based organic matter. The content or origin of biomass determines how it can be used and how it can play a role in the transition to CE. In this report neither the content of biomass, for example fibre or nutrients, nor the origin – plant or animal– is considered. Also, biomass in terms of carbon content, which was part of a pilot study, is beyond the scope of this report. However, to make biomass from different origins more comparable all materials are converted to dry mass.

3.1 Introduction

The starting point for the Bio Flow Monitor is the Material Flow Monitor (MFM) that is already used to derive CE relevant indicators for the ICER (Berkel, van and Delahaye, 2019; Hanemaaijer et al., 2021). The MFM, compiled by Statistics Netherlands, describes the physical material flows, measured in million kilos, to, from and within the Dutch economy. The MFM consists of a supply table and a use table. These tables distinguish around 350 goods (e.g. raw materials, semi- and final manufactures), natural resources (e.g. minerals, natural gas and wood) and residues (e.g. waste and CO₂ emissions). They also cover around 130 economic sectors, households, imports, exports and the environment. As the MFM complies with internationally agreed statistical standards of the System of National Accounts (SNA) and the System of Environmental Economic Accounting (SEEA), it can compare physical flows with their economic counterparts like GDP and employment.
In the MFM, 100 percent bio-based products – like wheat and timber – are already distinguished. However, for products that may have either a biotic or abiotic base (e.g. plastic) and products that consist partly of biomass (e.g. furniture), the bio-based share cannot be determined. As explained in the methodological section below, by applying bio-based shares to the MFM and converting everything to dry matter, the Bio Flow Monitor (BFM) is compiled. This results in two supply and use tables: one with only biotic flows and one with only abiotic flows. These tables are used to derive CE relevant indicators related to the bio-based economy.

3.2 Methodology

Van Berkel and Delahaye (2019) describe in detail how the MFM is compiled . This section presents the methodology used to convert the MFM into the BFM (see also Berkel, van et al., 2022).
The first step is to convert the values of the MFM into dry weight (see Annex 7.5 for dry matter contents). In bio-based products in particular, water content may differ between products. Therefore adding up different kinds of biomass does not give a clear picture of the useable (i.e. not including water) amount of biomass available. This problem is solved by expressing biomass in terms of its dry matter content. This also solves the problem of changes in biomass weight as a result of changes in the water content during the production process. To convert the fresh matter values in the MFM, JRC provided conversion coefficients for agricultural products (Joint Research Centre, Gurría et al. (2017)). For products not covered by JRC we obtained data from 2.0 LCA (Merciai et al. (2013) (e.g. for abiotic products, paper and wood), and through the literature and expert guesses (e.g. for boats and furniture). A final option is apply known coefficients for products to similar products (e.g. apply wood coefficients for a door).

The second step is to convert the dry matter MFM by applying bio-based shares. Initially the same methodology is used as that used by NOVA (Piotrowski and Carus, 2017) and CE Delft (Lieshout et al., 2018). For each relevant Prodcom code NOVA estimated an EU-28 average share for 1) total production volume with any bio-based content, and 2) bio-based content of the share of bio-based production. These shares are sometimes presented as a range; for the sake of convenience we always took the average. By multiplying both NOVA shares with CBS production figures we estimated biotic and abiotic volumes for each relevant Prodcom code. For some Prodcom codes we needed to convert non-kilo physical units (e.g. pieces or m2) to kilos. To do this we linked a Eurostat conversion table for CN codes to Prodcom codes. Lastly, volumes of biotic and abiotic goods were aggregated to comply with the MFM classification, after which the bio-based share is estimated for each MFM code. In this initial stage bio-based shares for industrial production are estimated.

In the next stage bio-based shares for imports, exports and used goods are estimated. Import and export shares are estimated by linking the NOVA Prodcom shares to the international trade codes (CN). If one Prodcom code links to multiple CN codes, or vice versa the average share is taken. The method used to estimate biotic and abiotic production figures is also used for imports and exports. The bio-based shares for domestically used goods are estimated by combining bio-based production and import figures. In the end this resulted in bio-based shares for imports, production, use and exports of a wide range of MFM goods.
As not all bio-based products are covered by the NOVA Prodcom shares, bio-based shares were allocated to the remaining MFM codes based on expert guesses and the literature. Products from agriculture and the food industry were considered to be 100 percent bio-based, and for composite goods, for example musical instruments or household waste, a share was estimated. This ultimately resulted in bio-based shares for all MFM codes (see annex 7.5). A first estimate of the BFM was compiled by multiplying these shares by the figures in the MFM.

Due to differences and uncertainties in the applied shares, the BFM supply and use tables are no longer balanced. The final stage in completing the BFM is to reconcile the supply and use of goods and the input and output of sectors. This is done in two steps, first large discrepancies are reconciled manually. Subsequently, the remaining smaller differences are removed through modelling using a generalised least-square method that modifies the set of figures as little as possible while satisfying certain constraints (Bikker et al., 2012). The constraints make sure that a relation between two variables is fixed or remains within certain limits. For example, the supply of processed meat may not exceed the use of livestock by a slaughterhouse. In addition the results of the method are driven by reliability weights; these weights are devised to ensure that the figures deemed most reliable are modified least. For example, the supply side is considered to be more reliable than the use side because more source data are available.

3.3 Results

3.3.1 Biotic and abiotic supply and use tables

The results are two sets of supply and use tables (SUT) in million kilos of dry matter for 2018. The BFM is presented in annexes 7.1, 7.2, 7.3 and 7.4 as one set with biotic and another set with abiotic materials. In the tables goods, resources and residuals and economic sectors are aggregated to a large extent in order to eliminate confidential information and boost the plausibility of the data.

Even in the MFM, data at the highest level of detail are difficult to judge in terms of plausibility as underlying data are collected from sources of different quality, and often cannot be verified through alternative data sources. The additional assumptions (dry matter content and bio-based shares) applied to compile the BFM make it even harder to check the quality of the data. During the reconciliation process of the bio SUT some economic sectors (e.g. dairy, animal feed, textile, paper and plastic/rubber production) were difficult to reconcile. This is an indication that the quality of the data can be improved. Also, for some sectors the amount of packaging material used was large compared to production volumes. For the Abiotic SUTs the in- and output of the chemical sector was difficult to reconcile. Despite these concerns, the most detailed tables are available for analytical purposes from CBS on request (milieurekeningen@cbs.nl). The interpretation of the data in the SUTs and their usability to derive CE relevant bio-based indicators are discussed in chapter 4.

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.

5.1 Conclusions

The Material Flow Monitor (MFM) can be extended to a Bio Flow Monitor (BFM) by using dry matter and bio-based shares of products. The BFM contains data from which meso and macro level bio-based indicators can be derived. Macro-level indicators are useful to establish a baseline, but not for short term monitoring (every one to two years) as developments in the bio-based economy are likely to be so small that they cannot be distinguished from uncertainties resulting from the method used. Meso-level indicators (at product or sector level) need to be tested for plausibility before they can be used with confidence. Lastly, the methods, scope and definitions used for some of the indicators, especially cascading, warrant further exploration and validation by stakeholders before an indicator can be derived that is suitable for monitoring.

The BFM represents two sets of supply and use tables, one for abiotic products and one for biotic products. The supply table contains data om imports, domestic production for each economic activity and extraction (arable crops). The use table contains data on consumption by sectors and households, and exports. The BFM contains data for around 130 economic sectors and 400 products. Some flows, especially bio-based flows, were small and plausibility was hard to check.

Based on the BFM data, indicators related to the bio-based economy were investigated. These indicators were related to production, substitution, cascading, dependency and economy.

Bio-based production, estimated in both monetary and physical terms, accounted for around 5 percent of total production. Consulted stakeholders did not feel this relatively small share was a point for discussion. This aggregated indicator is expected to show valid developments only over a longer period of time if a transition to a bio-based economy really takes hold. In theory, the BFM can be used to monitor specific product groups that have a high potential for a bio-based transition. However, reconciliation with other research or experts is necessary to check the robustness of the data. Regular update bio-based shares, preferable specific for Dutch production processes, are needed in order to confidently monitor developments in time.

At a macro-level the substitution indicator, which is based on inputs is similar to the production indicator, which is based on outputs. The substitution indicator provides additional insight when focused on relevant industries and products in which fossil and other non-bio resources are substituted by bio-based alternatives. The data in the BFM do not provide this kind of detailed information, and therefore no substitution indicator was derived.

The cascading indictor, compiled on both a monetary and a physical basis, shows the use of biomass for ascending levels of value applications. We used the value pyramid proposed by Bos et al (2014) but, depending on your goal, other ways of estimate cascading are open for discussion. In physical terms biomass use is largest in the lowest half of the pyramid, in monetary terms most biomass use takes place in the middle section of the pyramid. At the moment the cascading indicator is not sufficiently refined to be used for monitoring. Decisions need first to be taken on the assignment of some of the products to the pyramid categories. Also some products like energy carriers and flowers are not yet accounted for.

Dependency of biomass can be monitored with the BFM. In order to do this it is important to decide whether biomass should be recorded as dry or wet matter.

The economic indicators, value added and employment, showed a similar outcome to the production indicator: the bio-based economy makes up only a small part of the total economy. For the economic indicators, the bio-economy was even smaller, around 1 percent, as non-physical service activities were also taken into account. A clear-cut decision on which sectors should be considered as part of the bio-based economy is needed to make this indicator more robust. In the stakeholder seminar, policymakers expressed a particular interest in these economic indicators at an industry level.

5.2 Recommendations

• Develop the BFM in order to make this methodology more suitable for monitoring purposes.:
  –Decide on scope and definitions of the bio- and bio-based economy. For example: which sectors are part of the bio-based economy? How should production be assigned to cascading pyramid levels?
  – If available, detailed research data could be used to improve both data on 1) bio-based flows 2) conversion factors for dry matter and 3) bio-based content of products.
  –Replace the assumption that the share of bio-based production reflects the share of value added and/or employment by collecting data on bio-based production.
  –Add data on bio-energy production and flower/plant production.
• The composition (e.g. fiber, nutrients) and origin (e.g. animal or plant) of biomass determines how it can be used and the role it can play in a circular economy. It would be interesting to investigate whether data on composition are available and, if so, whether they can be linked with the products used in the BFM.
• Investigate to what extent the biomass used is sustainably produced. There might be information on some biomass products that are labelled as sustainable products; otherwise the country of origin might give an indication. For example, wood from Indonesia is more likely to be tropical hard wood than wood from Sweden.
• In order to make a better comparison between the abiotic and the biotic economy, all products could be expressed in terms of their carbon content. Adding figures on carbon sequestration and carbon emission in nature could give a complete picture of carbon within and between the economy and the environment. These data can be used to support policy on a low-carbon economy.

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