Bioeconomy in the Nordic Region: Regional Case Studies

Bioeconomy in the Nordic region: Regional case studies

Jukka Teräs, Gunnar Lindberg, Ingrid H G Johnsen, Liisa Perjo and Alberto Giacometti

NORDREGIO WORKING PAPER 2014:4 Bioeconomy in the Nordic region: Regional case studies Bioeconomy in the Nordic region: Regional case studies

Jukka Teräs, Gunnar Lindberg, Ingrid H G Johnsen, Liisa Perjo and Alberto Giacometti Bioeconomy in the Nordic region: Regional case studies

Nordregio Working Paper 2014:4

ISBN 978-91-87295-21-8 ISSN 1403-2511

Nordregio P.O. Box 1658 SE-111 86 Stockholm, Sweden [email protected] www.nordregio.se www.norden.org

Jukka Teräs, Gunnar Lindberg, Ingrid H G Johnsen, Liisa Perjo and Alberto Giacometti Cover photo: Johannes Jansson / norden.org

Nordic co-operation Nordic co-operation is one of the world’s most extensive forms of regional collaboration, involving Denmark, Finland, Iceland, Norway, Sweden, and the Faroe Islands, Greenland, and Åland. Nordic co-operation has ﬁ rm traditions in politics, the economy, and culture. It plays an important role in European and international collaboration, and aims at creating a strong Nordic community in a strong Europe. Nordic co-operation seeks to safeguard Nordic and regional interests and principles in the global community. Common Nordic values help the region solidify its position as one of the world’s most innovative and competitive.

The Nordic Council is a forum for co-operation between the Nordic parliaments and governments. The Council consists of 87 parliamentarians from the Nordic countries. The Nordic Council takes policy initiatives and monitors Nordic co-operation. Founded in 1952.

The Nordic Council of Ministers is a forum of co-operation between the Nordic governments. The Nordic Council of Ministers implements Nordic co-operation. The prime ministers have the overall responsibility. Its activities are co-ordinated by the Nordic ministers for co-operation, the Nordic Committee for co-operation and portfolio ministers. Founded in 1971.

Nordregio – Nordic Centre for Spatial Development conducts strategic research in the ﬁ elds of planning and regional policy. Nordregio is active in research and dissemination and provides policy relevant knowledge, particularly with a Nordic and European comparative perspective. Nordregio was established in 1997 by the Nordic Council of Ministers, and is built on over 40 years of collaboration.

Stockholm, Sweden, 2014 Contents

Executive Summary...... 9 1. Introduction ...... 11 1.1. Nordic bioeconomy in-depth study: Major goals ...... 11 1.2. Bioeconomy: Defi nitions...... 11 1.3. Nordic bioeconomy in fi gures—the Nordic Innovation Report 2014 ...... 13 1.4. The structure of this report ...... 14 2. An overview of bioeconomy in the Nordic countries ...... 15 2.1. Denmark...... 15 2.2. Finland (including Åland)...... 16 2.3. Iceland...... 17 2.4. Norway ...... 18 2.5. Sweden ...... 19 3. Regional case studies ...... 21 3.1. Lolland, Denmark ...... 21 3.1.1 Introduction ...... 21 3.1.2 Description of the region ...... 21 3.1.3 Administrative structure and governance ...... 23 3.1.4 Policy framework ...... 23 3.1.5 The bioeconomy of the Lolland Region ...... 24 3.1.6 Enabling conditions ...... 27 3.1.7 Impeding factors...... 27 3.1.8 Conclusions...... 27 3.2. Forssa, Finland ...... 28 3.2.1. Introduction ...... 28 3.2.2. Description of the region ...... 28 3.2.3. Administrative structure and governance ...... 29 3.2.4. Bioeconomy in the Forssa region...... 30 3.2.5. Policy framework in developing the bioeconomy in Forssa ...... 32 3.2.6. Enabling conditions ...... 33 3.2.7. Impeding factors...... 35 3.2.8. Conclusions...... 35 3.3. South Iceland ...... 35 3.3.1. Introduction ...... 35 3.3.2. Description of the region ...... 36 3.3.3. Administrative structure and governance ...... 36 3.3.4. Bioeconomy in South Iceland...... 37 3.3.5. Policy framework and main actors ...... 39 3.3.6. Enabling conditions ...... 41 3.3.7. Impeding factors...... 42 3.3.8. Concluding remarks ...... 43 3.4. Østfold County, Norway ...... 44 3.4.1. Introduction ...... 44 3.4.2. Policy framework ...... 45 3.4.3. Description of the region ...... 46 3.4.4. Administrative structure ...... 47 3.4.5. Development of a bio-based wood-processing industry ...... 48 3.4.6. Opportunities/Challenges ...... 51 3.4.7. Concluding remarks ...... 53 3.5. Örnsköldsvik, Sweden...... 53 3.5.1. Introduction ...... 53 3.5.2. Description of the region ...... 53 3.5.3. Administrative structure and governance ...... 53 3.5.4. Bioeconomy in the Örnsköldsvik region ...... 55 3.5.5. Policy framework for developing the bioeconomy of Örnsköldsvik ...... 55 3.5.6. The Örnsköldsvik Biorefi nery of the Future Cluster ...... 56 3.5.7. Bioeconomy in Örnsköldsvik: evolution over time ...... 60 3.5.8. Enabling conditions ...... 60 3.5.9. Impeding factors...... 61 3.5.10. Conclusions...... 62 4. Conclusions ...... 65 References ...... 67 Executive summary

Th is report by Nordregio, commissioned by the Nordic (Finland) or important national documents (Danish Working Group on Green Growth—Innovation and Bioeconomy Panel) signal long-term commitment. Entrepreneurship of the Nordic Council of Ministers Th ese activities are important for stimulating action (NCM), contributes to the knowledge about bioecono- in the regions, fi rms and research centres. Public–pri- my in the Nordic countries by investigating diff erent vate partnerships are frequently mentioned by the re- cases of regional bioeconomy in fi ve Nordic countries. spondents in the studies as favourable for developing We have tried to describe and learn from the context, the bioeconomy in the Nordic regions. However, the actions, and enabling and disabling factors specifi c to public’s role in this must develop to create a favourable each region—but these are sometimes strikingly simi- playing fi eld for bioeconomy products and solutions. lar. We have focused on the development of specifi c In the past, support has entailed collaborating in the bioeconomy activities while trying to broaden the triple helix of regional development, but what is now analysis to include the implications of a bioeconomy called for (in all cases) is the facilitation of markets, in- for regional development and policy perspectives. Th e frastructure and action by consumers. Nordic regions that have been analysed are Forssa in Bioeconomy can be an engine for creating jobs and Finland, South Iceland, Østfold in Norway, Örnskölds- economic activities in rural regions while being ben- vik in Sweden, and Lolland in Denmark. efi cial for the environment. Although the cases show Although the concept of bioeconomy has been op- examples of successful entrepreneurship, cluster devel- erationalized for some time by the EU (not least within opment, creation of specialist fi rms, and even what can the so called European Bioeconomy Observatory, and be defi ned as successful regional innovation systems in as a part of the new EU Framework Programme for Re- a bioeconomy, it is diffi cult to assess their actual impact search & Innovation Horizon 2020), it is evident in the on regional development (in jobs or economic activi- Nordic case study regions that the understanding of the ties). Certainly, many jobs have been created and sus- concept varies signifi cantly. Some Nordic regions (and tained, and this is obviously an extremely important actors) have adopted the term “bioeconomy”, whereas factor in (rural) regional development. It has not been other regions are only starting to become familiar with the explicit purpose of this project to count these jobs, the term. but based on the results of the case studies, it is obvi- Th e intensity and scope of regional co-operation be- ous that they are important from a local perspective. tween actors varies signifi cantly among the Nordic case Th e Nordic cases illustrate the possibilities of a bioec- study regions. Th is ranges from fully fl edged regional onomy in providing jobs and regional growth, not only cluster collaboration (as in Örnsköldsvik) to an actor in an urban context but also in rural environments. structure with a clear locomotive company without in- However, the large-scale impacts of a bioeconomy de- tensive regional co-operation (as in Østfold). Examples velopment still hinge on the upscaling of market de- of activities taking place within a more fragmented ac- velopment and systemic changes that would need to tor structure, with smaller bioeconomy organizations, take place in society. From a long-term perspective, the can be found in South Iceland. Th e historical develop- “glocal” nature of bioeconomy—global and local at the ment of the bioeconomy and its current path depend- same time—also opens up new business opportunities ence when it comes to building on the strong previous for Nordic rural entrepreneurs. activities colours the current co-operation in a region. From the case studies, we note a common need in the Th e Nordic cases illustrate the importance of Nordic countries and regions for a focus on true imple- long-term commitment in developing the regional mentation and defi nite action on the bioeconomy, in- bioeconomy. An arrangement such as VINNVÄXT cluding upscaling demonstration plants to larger-scale in Örnsköldsvik (a 10-year fi nancial commitment to a facilities, and opening up new export markets to bio- future biorefi nery initiative) makes it easier for several economy products and services. Th at is, there needs to other actors to commit to regional bioeconomy ini- be a focus on specifi c policy in many sectors and public tiatives. Similarly, the national bioeconomy strategies policy domains linked to these national strategies.

NORDREGIO WORKING PAPER 2014:4 9 10 NORDREGIO WORKING PAPER 2014:4 1. Introduction

1.1. Nordic bioeconomy in-depth tainable utilization of renewable resources to develop study: Major goals new processes and products. In policy-making, a bioeconomy is in many cases also seen as requiring a Th e concept of bioeconomy has become increasingly cross-sectoral approach that calls for a broad range of popular in regional, national and international policy system-level changes and innovation. discourse in Europe. Moreover, the concept has been Th e OECD has been a central actor in the bioecon- extensively discussed and included in policy-making omy discussion, and it defi nes bioeconomy in the fol- in Nordic countries. As an example, the Nordic Coun- lowing way. cil of Ministers has among other eff orts launched a Bio- economy Initiative, and in 2013, Iceland chose bioec- “A bioeconomy can be thought of as a world onomy as one of its main focus areas for its chairmanship where biotechnology contributes to a signifi cant of the Nordic Council of Ministers in 2014. Bioecono- share of economic output. Th e emerging bioec- my-related business and innovation activities are al- onomy is likely to involve three elements: the use ready under way in the Nordic countries and are cur- of advanced knowledge of genes and complex cell rently being studied by various Nordic actors. processes to develop new processes and products, Th is report by Nordregio contributes to the discus- the use of renewable biomass and effi cient bio- sion on bioeconomy in the Nordic countries by focus- processes to support sustainable production, and ing on its implications for regional development and the integration of biotechnology knowledge and policy. Case studies conducted in each of the Nordic applications across sectors.” countries cover regional bioeconomy initiatives in different Nordic settings. Moreover, the report includes a For the OECD in its Bioeconomy 2030 strategy, the brief overview of the role of policy support, governance main sectors where biotechnology can be applied are structures and other factors in promoting bioeconomy agriculture, health and industry. Th e OECD empha- in Nordic regions. Th e study aims to contribute to pub- sizes that the emergence of a bioeconomy requires an lic policy development to support innovation and en- increased focus on innovation, and it puts weight on trepreneurship for green growth at the regional level in good policy decisions as the only way to ensure the de- the Nordic countries. velopment of a bioeconomy with social and economic Th e report was commissioned by the Nordic Work- benefi ts. In addition, the OECD stresses that the new ing Group on Green Growth—Innovation and En- business opportunities created by social, economic and trepreneurship 2013–2016 established by the Nordic technological factors will require new types of business Council of Ministers. Th e in-depth study of bioecon- models. (OECD 2009) omy is intended to provide knowledge of a key topic Th e European Commission has also prioritized the of Green Growth by presenting an overview of instru- bioeconomy, which has grown in importance in EU ments and by exploring “good practice” case studies of policy. Th e EU has established a European Bioecono- innovation and entrepreneurship in the fi eld of bioec- my Observatory (European Bioeconomy Observatory onomy at the national, regional and local levels. 2014) and chosen the bioeconomy as a key area of its new Horizon 2020 programme (the EU Framework Programme for Research & Innovation). 1.2. Bioeconomy: Deﬁ nitions According to the EU, “the bioeconomy encompasses Even though the exact defi nitions of a bioeconomy the production of renewable biological resources and vary between international actors and between nation- their conversion into food, feed, bio-based products al governments, the main focus of the defi nitions is of- and bioenergy”. In its “Communication on Innovation ten on developing an economy that is based on the sus- for Sustainable Growth: A Bioeconomy in Europe”, the

NORDREGIO WORKING PAPER 2014:4 11 12 NORDREGIO WORKING PAPER 2014:4 EU considers the bioeconomy to consist of the sectors large-scale utilization of biomass, stating that the chal- of food, agriculture, paper and pulp, forestry and wood lenge is to “increase the scale of activities in parallel industry, fi sheries and aquaculture, bio-based indus- to meeting the key sustainability goals”. Th e authors tries, biochemicals and plastics, enzymes and biofuel of the article emphasize that sustainability needs to be sectors. the guiding principle in policy-making to build a com- Th e EU considers the bioeconomy to have the po- petitive European bioeconomy. (McCormick & Kautto tential to address some major societal challenges, such 2013) Based on that notion, this report and the includ- as food security and sustainable natural resource man- ed case studies discusses issues related to economic, so- agement, as well as to reduce dependence on non-re- cial and ecologic sustainability of various bioeconomy newable resources, creating jobs and maintaining Eu- activities in several regions. ropean competitiveness. In this report, we adopt the Nordic Council of Min- Currently, the European bioeconomy has an annual isters’ defi nition of a bioeconomy. Th e NCM defi nition turnover of approximately 2 trillion euros and employs of a bioeconomy is not sector specifi c; instead, it con- 22 million people. Th e EU is found to have good po- siders developing the bioeconomy as a toolbox for cre- tential for developing its bioeconomy, as it is largely ating a sustainable society in terms of both production self-suffi cient in many agricultural, forestry and some and consumption. (NKJ 2013) In particular in Den- marine products. Th e EU also has high potential for in- mark, Finland, Norway and Sweden, bioenergy in re- novation in areas crucial to the bioeconomy. Th e EU cent years has been the most important area of the bio- emphasizes that innovation and research are at the core economy, but activities are increasingly taking place in of the transition to a bioeconomy that with its cross- other fi elds as well. (Nordic Council of Ministers 2009) cutting nature can address complex and interconnect- ed challenges while achieving economic growth. (EC 1.3. Nordic bioeconomy in 2012a; EC 2012b; EC 2013) At the Nordic level, the Nordic Council of Ministers ﬁ gures—the Nordic Innovation (NCM) established a bioeconomy initiative in 2013. In Report 2014 this initiative, a bioeconomy is defi ned as an economy According to the Nordic Innovation report “Creating based on the sustainable production of biomass with value from bioresources”, the total turnover of the key the overall objective of reducing climate eff ects and bioeconomy sectors in the Nordic countries is approxi- reducing the use of fossil-based materials. Th e bioec- mately €184 billion (including agriculture, fi sheries onomy is based on increased added value for biomass and aquaculture, forestry, food industry, forest indus- materials and the reduction of energy consumption try and bioenergy and biofuels). In total, this consti- with the aim of optimizing the value and contribution tutes 10% of the total Nordic economy. According to of ecosystem services to the economy (NKJ 2013). the Nordic Innovation report (2014, p.97), the current According to the NCM, “the transformation to a volume of bioeconomy is 9% of the economy in Den- bio-based economy means a transition from a fossil mark, 12% in Finland, 18% in Iceland, 6% in Nor- fuel-based economy to a more resource-effi cient econ- way, and 10% in Sweden. omy based on renewable materials produced through Th e above mentioned report considers the share sustainable use of ecosystem services from land and of the economy represented by the bioeconomy to be water. A greater focus on research and innovation can highest in Iceland and lowest in Norway, while poten- provide us with new products developed from biomass tial is identifi ed in various sectors in all of the Nordic that will replace fossil material, combat climate change, countries. It is identifi ed that in the Nordic region, reduce waste and create new jobs.” the largest innovation and growth potential in the As noted, the international institutions at global, EU bioeconomy area is found in its cross-cutting nature. and Nordic levels seem to be optimistic about the op- Growth areas are found in a wide range of areas such portunities of the bioeconomy and call for institutional as bio-based chemicals, biorefi neries and industrial support to fulfi l its potential. However, a recent article symbiosis. Crossing horizontal sectors is identifi ed as a on the bioeconomy in Europe, reviewing current aca- central factor in the development of the bioeconomy in demic discussions, also addresses the risks related to the Nordic region. (Nordic Innovation 2014)

Figure 1: Nordic case study regions presented in this report (Map design by Julien Grunfelder)

NORDREGIO WORKING PAPER 2014:4 13 1.4. The structure of this report Aft er the national overview, Chapter 3 presents the case studies conducted in each Nordic country. Chap- Chapter 2 presents the current “state of play” in the ter 4 presents conclusions on the bioeconomy in Nordic Nordic countries, in terms of bioeconomy activities al- regions and its implications for policy-making to sup- ready taking place. Th e overview is based on earlier port business and innovation in various bioeconomy studies, mainly commissioned by national authorities, fi elds. which were available in the autumn of 2014.

14 NORDREGIO WORKING PAPER 2014:4 2. An overview of bioeconomy in the Nordic countries

Th is chapter provides a short overview of current bio- cording to a holistic systems concept). (Næss-Schmidt economy activities in each of the Nordic countries. Th e et al. 2013) To establish a strong biorefi nery sector in description is not exhaustive but is based on studies Denmark, it needs further R&D in agriculture and for- available in the autumn of 2014. Th e chapter discusses estry, and in the biological and chemical conversion of the main characteristics of the bioeconomy in the Nor- biomass. (Gylling et al. (2012); Quartz&co 2012) dic countries to build a framework to the in-depth re- Th e contribution from Danish agriculture to bio- gional case studies in each country. energy is relatively high, because 12% of the national energy consumption comes from the utilization of residues such as straw, wood chips and manure—mainly 2.1. Denmark through the use of residues from CHP (combined heat Th e following table off ers a brief introduction to the and power) plants. It is possible to quadruple or quin- bioeconomy in Denmark, including examples of inno- tuple the production of biomass from agriculture for vative bioeconomy initiatives. bioenergy without signifi cant damage to the produc- In 2012, a Growth Team, commissioned by the Min- tion of feed and food. Th ere is a technical potential, but istry of Business and Growth in Denmark, emphasized the electricity price from biogas is a barrier to its de- that the production of advanced bio-based products velopment, and it is uncertain whether farmers would has great business potential for the biotech industry, fi nd it suffi ciently profi table to harvest the biomass. as well as for the agriculture, forestry and waste sec- (Ministry for Food, Agriculture and Fisheries of Den- tors as suppliers of biomass. (Vækstteam for vand, bio mark 2008) Th e Energy Agreement of 2012 set a new og miljøløsninger 2012) Because Denmark has a pro- objective of utilizing up to 50% of manure in Denmark ductive and effi cient agricultural industry, which is for the production of biogas. An assessment of the op- also among the world’s best in utilizing agricultural eration and socio-economic costs of biogas production residues, it is predicted to obtain comparative advan- within the new framework provided by the agreement tages in relation to the establishment and development concludes that it is not likely that the objective of 50% of new biorefi neries. With approximately 1.5 million will be realized, but with the Energy Agreement, the tonnes of straw available for biorefi neries, Denmark foundation has been built for increased production of could in principle serve 3–4 full-scale biorefi neries of biogas in future. (Jacobsen et al. 2013) the size of Maabjerg Energy Concept (a biorefi nery pro- Th e Danish Bioeconomy Panel, consisting of 27 ject that combines several energy (supply) purposes ac- members representing Danish public and private or-

Table 1: Brief introduction to the bioeconomy of Denmark

Current key branches of the bioeconomy and areas The food industry and agriculture are the dominant sectors. with identiﬁ ed potential Further bioeconomy development potential is identiﬁ ed in the biotech industry and agriculture, as well as in utilizing the biomass from agriculture, forestry and waste sectors

National bioeconomy strategies and initiatives Danish Bioeconomy Panel Report 2014 Bioreﬁ ning Alliance/Green strategy 2012

Examples of innovative bioeconomy activities Maabjerg Energy Concept, bioreﬁ nery in Holstebro DuPont Nutrition Biosciences (Aarhus)

NORDREGIO WORKING PAPER 2014:4 15 ganizations, published a document in 2014 stating that exceeds €60 billion, and more than 300,000 people Denmark has all the necessary prerequisites to develop are employed in the sector. Th e value of bioeconomy an even stronger national bioeconomy. Th e document exports is currently €14 billion. Approximately 50% highlights access to raw material, technology, and the of the Finnish bioeconomy is based on forestry. Th e spear-head competences that enable future bioecono- annual growth of Finnish forestry is more than 100 my development in Denmark. However, the document million m3, of which 55 million m3 is utilized by the states clearly that certain major principles should be industry. In terms of employment, the food sector is followed to develop the Danish bioeconomy, and it an important part of the Finnish bioeconomy. Th e ag- proposes an action plan for the Danish government to ricultural sector employs 90,000 people, and the food contribute to the development of the bioeconomy in industry employs 38,000 people. Denmark. (Th e National Bioeconomy Panel 2014) Th e objective of the Finnish Bioeconomy Strategy is to increase Finnish bioeconomy output to €100 bil- 2.2. Finland (including Åland) lion by 2025 and to create 100,000 new jobs. Th e aim of draft ing the strategy was to engage stakeholders in Th e following table gives a brief introduction to the bi- a broad dialogue to contribute to its content. Its imple- oeconomy in Finland and includes examples of inno- mentation is led by the Ministry of Employment and vative bioeconomy initiatives. the Economy in co-operation with other ministries Finland has set a course for a low-carbon and re- and stakeholders. source-effi cient society and a sustainable economy. A Th e strategic goals of the Finnish Bioeconomy Strat- key role in reaching this goal is played by a sustainable egy are to achieve: bioeconomy. According to its bioeconomy strategy, Finland is well placed to become a pioneer of the global  a competitive operating environment for the bioeconomy because it has plentiful renewable natu- bioeconomy ral resources, a high level of expertise, and industrial  new business from the bioeconomy, strengths. Th e vision of the fi rst Finnish bioeconomy  a strong bioeconomy competence base, and strategy is that Finnish well-being and competitiveness  accessibility and sustainability of biomass. would be based on sustainable bioeconomy solutions. (Ministry of Employment and the Economy 2014) New bioeconomy business opportunities in Finland In 2014, when it published the fi rst Finnish bioec- will be based on the intelligent use of biomasses and onomy strategy, the government also decided that the water resources, the development of associated tech- bioeconomy would be a focus area of future Finnish nologies, and high added-value products and services. economic growth. (Ministry of Employment and the Economy 2014) According to the Finnish bioeconomy strategy, the Th e total value of Finnish bioeconomy investments bioeconomy’s share of the Finnish national economy is under implementation and planning exceeds two bil- 16%. Th e output of the Finnish bioeconomy currently lion euros. Good examples of investments in new for-

Table 2: Brief introduction to the bioeconomy of Finland

Current key branches of the bioeconomy and Approximately 50% of the bioeconomy is forest based. Agricul- areas with identiﬁ ed potential ture and the food industry are also central. There is potential to increase the use of wood for fuel. Increas- ing the use of biofuels would provide opportunities for Finnish businesses. Agriculture has the potential to produce non-food products such as ﬁ bre plants for textiles and composites.

National bioeconomy strategies and initiatives The Finnish Bioeconomy Strategy was published in 2014 and is based on broad stakeholder involvement and ambitious goals to develop the bioeconomy

Examples of innovative bioeconomy activities Bio oil facility of Fortum in Joensuu Biogas facility of the Metsä Group in Joutseno Lignin reﬁ ning facility of Stora Enso in Kotka Sybimar ﬁ sh farming ecosystem, Uusikaupunki

16 NORDREGIO WORKING PAPER 2014:4 est-based bioproducts are the UPM investment in vehi- oeconomy in Iceland and includes examples of innova- cle fuels in Lappeenranta (completed in 2014), the bio tive bioeconomy initiatives. oil facility in Joensuu constructed by Fortum (complet- Th e OECD Territorial Review of the NORA region ed in 2013), the biogas facility in Joutseno constructed (Th e Faroe Islands, Greenland, Iceland and Coastal by the Metsä Group (completed in 2014) and the lignin Norway) recommends that the region should capitalize refi ning facility in Kotka built by Stora Enso (com- on the strong knowledge base acquired through tradi- pleted in 2015). In 2014, the Metsä Group announced tional fi shing and fi sh processing activities by develop- a bioproduct facility investment of EUR 1.1 billion in ing value-added food and non-food products from the Äänekoski. marine sector, such as new nutrients, biomedicines and In Åland, there is currently increased interest among pharmaceutical products. Many opportunities linked policymakers in the opportunities for developing the to the better use of by-products, biotechnology, and Åland bioeconomy. Th e adapted strategy to achieve a marine resources have not yet been seized and could sustainable society by 2051 provides a good starting represent further opportunities. Th e blue biotechnol- point for developing the sector, especially in the fi elds ogy area is a growing sector worldwide, with the search of energy and food production. for new biological principles and organisms that have Local bioenergy production has increased over the not yet been exploited. Nordic collaboration could re- past decade, but the area is not without challenges be- sult in a combined eff ort to screen material obtained in cause of issues related to technology and markets. A the oceans and by-products from the seafood process- potential for development has been identifi ed in greater ing industry. (OECD 2011) utilization of forest resources. Th e Iceland 2020 Strategy (Prime Minister’s Offi ce In the traditional fi sh farming sector, the fi rst pro- 2011) includes eco-innovation and sustainability is- ject for land-based aquaculture is a good example of sues. Th e Icelandic government also chose the bioecon- new production technology and methods adapted for omy as a priority area during its year of chairmanship a traditional sector. Local small-scale production of of the Nordic Council of Ministers, and the current biodiesel from fi sheries waste has increased awareness government is also implementing and funding bioec- of alternative resource utilization and environmentally onomy projects. friendly fuels. Th e challenges faced by entrepreneurs in market confi ned by size and resources are not unique 2.4. Norway to Åland, but the constraints imposed by the surround- ing sea perhaps make these more pronounced. In many Th e following table gives a brief introduction to the bi- areas, fi nding solutions implementable on a local scale oeconomy in Norway and includes examples of inno- demonstrates the need for broad local co-operation as vative bioeconomy initiatives. well as external partnerships. (Ålands Teknologicen- In the Norwegian context, the bioeconomy is de- trum 2014) fi ned as sustainable land use and the production and conversion of biomass into a host of food, health and fi bre products, industrial products and energy (Nor- 2.3. Iceland wegian Research Council 2012). Renewable biomass Th e following table gives a brief introduction to the bi- includes all biological resources (agricultural, forest-

Table 3: Brief introduction to the bioeconomy of Iceland

Current key branches of bioeconomy and Food industry dominates; other strong sectors: fi sheries and aq- areas with identifi ed potential uaculture, food industry and agriculture Many opportunities for utilizing by-products, biotechnology and marine resources more effi ciently

National bioeconomy strategies and initia- The Iceland 2020 strategy includes eco-innovation as one of the tives main future growth sectors

Examples of innovative bioeconomy activi- Utilizing by-products from ﬁ sheries, local-level food innovation ties Pink Iceland—bioeconomy services; e.g., tourism

NORDREGIO WORKING PAPER 2014:4 17 based and animal-based, including fi sh) that are either was approximately NOK 200 million for 2013 (Nordic products in their own right or raw materials for other Innovation 2014). Th e primary objective of the pro- products or processes. gramme is to promote research that increases the level, Th e total consumption of bioenergy in Norway profi tability and sustainability of production in the in 2006 was approximately 14.5 TWh when biofuel value chains of agriculture, forestry, nature-based in- is included as an input in the production of district dustries and seafood from the time that raw materials heating (Norwegian Ministry of Petroleum and En- are taken from the sea until they reach the consumer. ergy 2008). Th is represents 9% of total stationary en- Th e secondary and strategic action points addressed in ergy consumption. Approximately half of biofuel use the programme are as follows. is linked to household consumption (mainly in the form of wood), while a large part of the remainder is  Strengthen and develop associated with the combustion of self-generated bio- a. knowledge and expertise in selected areas to pro- mass in wood and wood-processing industries to cover mote sustainable bio-based industry in Norway, and domestic thermal energy consumption. Norway con- b. research-based innovation in bio-based companies sumes less bioenergy than Sweden, and this can be ex- and bioresource management. plained by structural conditions of industry but also  Implement innovative work forms that involve ac- by the fact that Sweden has far more extensive district tors in the research community, trade and industry, the heating than Norway (Langerud et al. 2007). public administration and special interest organiza- In 2008, Th e Ministry of Petroleum and Energy de- tions. cided to increase the development of power production  Use co-ordination and dissemination activities to from bioenergy by 14 TWh by 2020 (Norwegian Min- enhance the benefi ts of knowledge and expertise gained istry of Petroleum and Energy 2008). Th is requires the by the industry and public administration. district heating network to be built with a capacity of  Participate in international co-operation in order to at least 1.5 TWh per year. However, developments in strengthen knowledge building and innovation in pri- recent years have been below the target. ority areas. Th e agriculture and the fi sheries and aquaculture sectors have potential for the development of a bio- Under the BIONÆR Programme, there are four cross- based economy in Norway. Th ere is also a focus on cutting perspectives that apply to all activities, which sustainable production and consumption, emission re- include achieving complete biological closed-loop sys- ductions and adaptation to climate change, improved tems, incorporating the environmental, social and eco- resource effi ciency in new and existing biomass pro- nomic aspects of sustainability across the board, main- duction, and full utilization of all biological resources taining a consistent focus on market orientation and in closed-loop systems. Norway also prioritizes the value creation in the Norwegian bio-based industries, development of new processes, products and services, and promoting interdisciplinarity to ensure the soci- and enhanced value creation and competitiveness in etal relevance of knowledge-building under the pro- the bio-based industries. (Norwegian Research Coun- gramme. cil 2012) In the overall Norwegian context, there is a strong BIONÆR is Norway’s Research Programme on Sus- focus on developing existing industries and facilitat- tainable Innovation in Food and Bio-based Industries ing the establishment of new industrial activities in that runs for the period 2012–2021. Th e overall budget the fi elds of raw material production, processing and

Table 4: Brief introduction to the bioeconomy of Norway

Current key branches of the bioeconomy The food industry is dominant. Other important sectors are ﬁ sher- and areas with identiﬁ ed potential ies, agriculture and forestry

National bioeconomy strategies and BIONÆR 2012–2021, Norway’s research programme on Sustain- initiatives able Innovation in Food and Bio-based Industries

Examples of innovative bioeconomy Borregaard bioreﬁ nery Østfold; activities NorZymeD - Enzyme development for Norwegian biomass

18 NORDREGIO WORKING PAPER 2014:4 consumption associated with agriculture and nature- Th ere is also great potential for increasing the use of bi- based value chains and seafood in the development of a ofuels in the transport sector. (Formas 2012; LRF 2013) bio-based economy. However a major challenge for in- Th ere is potential for producing biogas from waste creasing the extraction of raw materials for bioenergy and sludge, and for increasing biogas production from from agriculture is primarily related to low profi tabil- sources already in use. Biogas production has been in- ity. Profi tability is directly or indirectly related to mar- creasing, and biogas production from Swedish farms ket characteristics and conditions of the supply chain doubled between 2011 and 2012. Compared with other as a whole. Against this background, it will be impor- energy sources, biogas from rotting waste has unique tant to facilitate increased feedstock production and potential in that it can “close” the production cycle. the industry gain framework that makes it economi- (IVL 2009; Energimyndigheten 2013) cally attractive to reap additional biomass suitable for In addition to industries based on agriculture and bioenergy purposes. forestry, the potential for a bio-based economy lies in industries such as transport and the motor industry, 2.5. Sweden construction and the chemical industry. Because a bio- based economy is seen as cross-sectoral, the potential Th e following table gives a brief introduction to the bi- for cross-sector system solutions (such as biorefi neries oeconomy in Sweden and includes examples of innova- in the form of collaboration between chemical indus- tive bioeconomy initiatives. try, forestry and energy companies) is also important. In the Swedish Research and Innovation Strategy for Th ere is also a great potential in increasing the added a Bio-based Economy, the bio-based economy is defi ned value of the renewable raw materials used by current as a resource-effi cient economy based on raw materi- process industries. For example, technology can refi ne als produced through the sustainable use of ecosystem or process raw materials into new products. (Formas services from land and water. Life-cycle approaches 2012; Statistics Sweden 2012) are central to this endeavour, as well as approaches In terms of biofuels in transport, Sweden is already that take into account the cross-sectoral nature of the a forerunner, and 9.8% of the energy used in the trans- bioeconomy. Because of its natural geographical con- port sector in Sweden was derived from renewable ditions, industry and infrastructure, Sweden has good sources in 2011.Th e use of all biofuels has increased potential to convert to a bio-based economy. (Formas notably (in particular biogas and biodiesel). (Ener- 2012) gimyndigheten 2012) However, there remains potential Current climate issues have already contributed to to increase the production of biomass and the use of new areas of use for bio-based materials in Sweden. biofuels. Th e potential increase from 50 to 70 TWh per Bioenergy composes approximately one-fourth of the year corresponds to one-third of the current consump- overall energy production of Sweden. Th e largest cur- tion of petrol and diesel for road transport. Th e great- rent source of bioenergy in Sweden is forestry, but bio- est potential is in increased use of forest biomass for energy is also produced from waste and agricultural biofuels, but there is further potential in biofuels from products. Fossil fuels for heating have already been agricultural sources. However, investments and fi nan- replaced almost entirely by biofuels. While heating cial incentives are needed to make the increase possible currently uses the largest share of bioenergy, the use and to promote solutions that are environmentally ef- and production of bioenergy in electricity is increasing. fi cient. (Börjesson et al. 2013)

Table 5: Brief introduction to the bioeconomy of Sweden

Current key branches of the bioecono- Bioenergy (especially from forestry), agriculture and biofuels. my and areas with identiﬁ ed potential Great potential for developing biogas and increasing the added value of the renewable raw materials used by current process industries

National bioeconomy strategies and Swedish Research and Innovation Strategy for a Bio-based Economy initiatives 2012

Examples of innovative bioeconomy Örnsköldsvik bioreﬁ nery cluster activities Paper Province, Karlstad Advanced biomaterials ecosystem (Inventia)

NORDREGIO WORKING PAPER 2014:4 19 20 NORDREGIO WORKING PAPER 2014:4 3. Regional case studies

Th is chapter presents the regional bioeconomy case 3.1. Lolland, Denmark studies from each of the Nordic countries. Th e case study regions (the Lolland region of Denmark, the For- By Gunnar Lindberg & Ingrid H G Johnsen ssa region of Finland, South Iceland, the Østfold region & Alberto Giacometti of Norway, and the Örnsköldsvik region of Sweden) were chosen in co-operation with the Nordic Working 3.1.1 Introduction Group on Green Growth—Innovation and Entrepre- Th e case study chosen for Denmark concentrates on neurship, with the aim of covering areas of varying the municipality of Lolland (which has a smaller geo- characteristics. Th e major aim was not to compare graphical area than the entire island of Lolland).1 Lol- their approaches but to survey bioeconomy activities in land Island is an interesting case considering that it is a variety of Nordic regions. not located in the vicinity of Copenhagen with regard Th e case study regions were selected to provide rich to aspects such as its labour market. Moreover, Lolland data and examples of good practices on bioeconomy in Island does not have a university of its own. As early as Nordic regions for discussion and, where appropriate, the 1980s, the region initiated green growth activities, adoption in other regions. Th e cases include regions particularly focused on wind energy installations, and with biorefi nery initiatives in varying stages of devel- it established a research centre (the Green Center). opment, regions with diff erent approaches to regional However, in recent years, green growth initiatives have clustering, and regions where the key companies take diversifi ed signifi cantly, especially in the fi eld of bioec- a variety of roles in the bioeconomy. Th ey include re- onomy. gions where the bioeconomy concept has largely been Region Zealand is known internationally as one of adopted and those where the term is not yet very fa- Europe’s leading regions because of its work on climate miliar. Although all the selected case study regions in- issues, renewable energies (RE) and developing solu- clude several good practices in the fi eld of bioeconomy, tions for the future. Th is has called for innovative and selecting the best performing or most advanced Nordic practical solutions that promise not only alternative bioeconomy regions was not a criterion as such. energy sources but also new jobs and improved quality Moreover, the case studies focus specifi cally on re- of life. Zealand has taken the role of a model region in gional-development-related aspects of a bioeconomy. terms of sustainable economy and green growth, and Each case study presents the current and planned bio- this has infl uenced signifi cantly its modes of govern- economy activities and policy and governance issues. ance, through strengthening co-operation between lo- Th e particular focus of these studies was the enabling cal communities, private companies, SMEs, cultural conditions and impeding factors for developing a bio- institutions, research institutions, municipalities and economy in a variety of regions with diff erent exist- the region. ing conditions in factors such as geographic location, demography or institutional settings. Th e case studies 3.1.2 Description of the region were conducted by studies of secondary sources, litera- a. Region Zealand ture reviews and document analyses, followed by study Region Zealand is one of the fi ve Danish regional ad- visits and interviews in each case study region in 2014. ministrative units created in 2007. It extends through most of the island of Zealand, except for the north- eastern area, which belongs to Region Hovedstaden or

1) Although Lolland Municipality is the main area of focus for the Dan- ish case study, the names “Lolland Island” and “Region” are used inter- changeably. “Region Zealand” is also used in the text because of relevant factors that aff ect the development of the Bioeconomy in Lolland Munici- pality.

NORDREGIO WORKING PAPER 2014:4 21 Figure 2: The Lolland region of Denmark (Map design by Julien Grunfelder)

Greater Copenhagen. It covers several smaller islands, residents, and Maribo, the second largest town, with including Lolland and Falster. Region Zealand occu- 5,923 residents. pies a territory of 7,273 km2 and has a population of Th e labour market and population of Region Zea- approximately 820,000 inhabitants. Th e region also has land are concentrated in the north of Zealand Island, an important education sector with approximately extending from the area close to Copenhagen to the 16,000 students divided into two main universities, in- larger part of the island. An OECD report (2012) concluding the University College of Zealand and Roskilde siders a major area of the Zealand Island to be part of University. the Copenhagen labour market. Peripheral locations of Region Zealand, such as Lolland, depend on their b. Lolland Municipality own labour market. Th e absence of universities or ma- Lolland Municipality, with an area of 892 km2, covers jor industrial clusters in Lolland makes its economy approximately two-thirds of Lolland Island and has a more fragile and highly dependent on fewer economic population of approximately 46,000 inhabitants, which activities. In fact, Lolland Island has been immersed in represents the lowest population density in Denmark. a strong economic depression that has left 2,000 skilled Th e largest towns in Lolland are Nakskov, with 12,866 workers unemployed, which in turn has triggered

22 NORDREGIO WORKING PAPER 2014:4 out-migration to larger metropolitan areas, and brain Th e regional governments have a strong responsibility drain, increasing poverty, disinvestment and increased to co-ordinate the municipalities’ actions and to dependency on national subsidies (Magnoni and Bassi prompt co-operation between levels of government 2009). In 1994, unemployment reached a peak of 19.3%, and other actors in the region. Th ese include munici- and 10% of the island’s population is estimated to have palities, research institutions, private actors and civil moved away between 1981 and 1998, leaving behind society. Region Zealand has its own Growth Forum a region with a growing elderly population (Magnoni with a budget of approximately EUR 20 million and re- and Bassi 2009). ceives EU co-funding. In this institutional setting, the Nevertheless, a number of areas of Lolland and Re- Growth Forum of Region Zealand has supported region Zealand used to be home to important manufac- newable energy projects fi nancially and provided a turing powerhouses, which in a number of cases have platform on which to expand the business network. been transformed to meet the expectations of today’s Municipalities in Denmark have substantial admin- markets. For instance, Lolland’s tradition of shipbuild- istrative power. While the regional government has ing fed into the production of wind turbines during the mostly an advisory function and a reduced budget of 1990s (OECD 2012). In 1999 and 2000, the Nakskov EUR 2 million per year, the municipalities are respon- harbour underwent a number of transformations, in- sible for direct implementation and aiding policy. cluding the demolition of old structures and a general clean-up, with the intention of attracting new indus- 3.1.4 Policy framework tries and meeting new local needs. In 2006, the European Commission issued a green pa- In addition, the Nakskov Industry and Environment per entitled A European Strategy for Sustainable, Com- Park (NIMP) were developed in an area of 1.2 million petitive and Secure Energy. Th e commission aimed to m2 by the Nakskov Municipality with land destined combat climate change in a more proactive manner by both for new industries and for agro-industrial pur- promoting renewable energy and energy effi ciency, im- poses. proving the European energy grid, and co-ordinating Today, Lolland has a growing industrial sector based energy supply and demand at the EU level (OECD mostly around green energies and agro-industry, and it 2012). In 2007, the Renewable Energy Roadmap estab- is the leading region in the production of wind genera- lished a mandatory target of 20% of renewable energy tor components. Th is is mainly because of the presence in total energy consumption by 2020, and 10% of fuel of Vestas Wind Systems, a world leading manufacturer consumption in the transport sector to be of biofuels. in the wind energy sector, which settled in Lolland in Although further alterations to original targets estab- 1999. Vestas is currently the largest industry of its type lished individual targets for each member state, and and is an important source of employment for the re- thus the target for Denmark rose to 30% of total con- gion. sumption to be of renewable energy by 2020 (OECD Th e joint eff ort of Nakskov and Lolland together 2012). EU policy has been accompanied by fi nancial with other municipalities focusing on “green” sustain- support for particular areas such as Lolland, which is able development based on local resources and renew- eligible for EU structural funds, and for INTERREG able energy has successfully attracted a number of programmes to Region Zealand as part of the Öresund fi rms and partnerships of various types. Th is in turn cross-border region. Lolland in particular has received has resulted in a signifi cant drop in unemployment and fi nancial contributions to initiate projects for the de- has played a role in bringing Lolland out of the severe velopment of biomass and other renewables. economic recession in which it was immersed. Denmark has been one of Europe’s most committed countries regarding climate change. In fact, Denmark 3.1.3 Administrative structure and governance was the fi rst nation to introduce a tax on CO2 emis- Th e regional structure of Denmark experienced a sions, and upon ratifi cation of the Kyoto protocol, the number of reforms in 2007, and fi ve new regions were Danish government committed to a 21% reduction in created in addition to six regional forums. Th is signifi - GHG emissions by 2012 (Bassi 2013). Th is was trans- cant structural reform changed not only the physical lated into ambitious policies and specifi c initiatives to boundaries but also the governance and the way in support the use of renewable energy and energy effi - which regional development was managed. Under this ciency, especially because sizeable power plants using new structure, the regions are responsible for produc- other sources or energy are not an option in Denmark. ing Regional Development Plans, while the Growth Fo- In addition to reducing carbon emissions, Denmark rums play a role in policy design and promotion of aims to become completely energy independent by spe- business opportunities in the region (Nordregio 2010). cializing in clean technologies. In fact, Vestas and Sie-

NORDREGIO WORKING PAPER 2014:4 23 mens combined have positioned Denmark as the world agreement of the Lolland District Council, which is leader in wind energy installations with a 27% share of a municipal policy commitment based on the use of the global market in 2008 (OECD 2012). Th e long-term renewable energy, preservation of natural capital and strategy of Denmark is to become a net exporter of en- sustainability (Magnoni and Bassi 2009). Th e idea be- ergy and to achieve complete independence from fossil hind the CTF is to activate innovative partnerships in fuels by 2050. Despite a slight rise in energy consump- order to combine the interests of industry sectors for tion of 6.7% since 1990, the shift in energy sources has testing and demonstration with the Municipality’s led to a signifi cant reduction in CO2 emissions. In need for sustainable development and renewables. Un- fact, the electricity sold in Denmark in 2007 generated der this arrangement, industries can test new technol- 41.6% less emissions compared with 1990 (Bassi 2013). ogies on a full scale and in real communities, which Aft er the recent restructuring of regional and local provides added value for industries and thus attracts boundaries and responsibilities in Denmark in 2007, investment in Lolland. Th e CTF provides an innova- Region Zealand has developed a regional development tive and comprehensive vision for the development of strategy that places renewable energy as a core priority Lolland, creating synergies between the private sector, and catalyst for other developments. Th e strategy fo- research institutions and local authorities. Yet the CTF cuses on supporting SMEs in renewable energy sectors has built on the local community as a key actor in the as well as on attracting companies from the region that long-term development strategy. Th is “quadruple he- can take advantage of the growing network and possi- lix” institutional setting, and specifi cally the CTF, has ble access to EU seed money (OECD 2012). Yet the ac- brought concrete benefi ts to the inhabitants, munici- tual role of aiding and implementing renewable energy palities and private businesses for which renewable en- policy lies at the municipal level. Th erefore, municipal ergy is the main growth driver. Table 6, from Magnoni governments are directly involved in the development and Bassi (2009), summarizes the benefi ts obtained in of this sector. Municipalities in Region Zealand have Lolland under this institutional arrangement with the shown an outstanding engagement with responses to CFT concept. the climate and energy crisis. In fact, all 17 municipalities have signed the Covenant of Mayors, which is a Eu- 3.1.5 The bioeconomy of the Lolland Region ropean movement of regional and local governments Region Zealand has specialized in the production of voluntarily committed to improving energy effi ciency energy with a major focus on renewable sources. Th is and developing renewable energy solutions in their sector benefi ts from proximity to Copenhagen, which own territories. Municipalities in Region Zealand have has a large demand for energy, and increasingly that also agreed to exceed the EU 2020 targets for carbon from renewable sources. Th ere is a longer tradition of emission reductions (OECD 2012). renewable energy in Region Zealand. However, there In 2007, the Lolland Community Testing Facili- has been a boost in the diversifi cation of sources and ties (CTF) concept was developed aft er a unanimous new projects since 2007, because of sustained support

Table 6: Lolland’s CTF beneﬁ ts (based on Magnoni & Bassi, 2009, p. 1156)

Lolland Municipality Industry R&D Policies

 Sustainability  Branding  Full Scale Research  Bottom-up Tools to Reach Macro-political  Branding  Cheaper Test & Dem-  Technical Knowledge Goals for Sustainability onstration  Economic Growth  Socio-Economic and Competitiveness  Faster Access to the Analyses  Growth in the Periph-  Competitiveness Commercial Market  Well-deﬁ ned Geog- eral Areas of the EU  Population Growth  Society Tests raphy, Demography,  Job Creation New Economy and Energy  Real Situations, Real Systems Education Systems, Real Popula-  Innovative Supply tion, Real Society Systems

24 NORDREGIO WORKING PAPER 2014:4 from the Growth Forum, which has invested more potentially provide more employment? What can ben- than EUR 30 million in 40 projects. (OECD 2012). To- efi t the region (and its various parts) the most? Lolland day, renewable energy resources in Region Zealand in- is expected to focus more on the larger fi rms in the im- clude wind, solar, biomass for biofuels and other sourc- mediate future because it is believed that this is where es, as well as experimental sources such as hydrogen. the impact can be the greatest. Yet, focusing on the in- Lolland–Falster was the fi rst Danish region to con- terests of large companies risks losing the original con- struct and install wind turbines in the 1980s. cept of supporting the interests of small communities Biomass represents 70% of renewable energy pro- and SMEs. duction in Denmark, with wind energy being the sec- Plans for realizing the bioeconomy in Lolland con- ond most important source, accounting for more than sist of a combination of hands-on activities, strategies 20% of total renewable energy. (Bassi 2013). From an and visions. One structure that has already been im- early stage, Region Zealand transformed its landscape plemented is the so-called regional advisory group, or for intensive agriculture and thus has enormous poten- “sparring group”, for developing ideas and bringing tial for biomass production. projects to bodies such as the national Danish bioec- Region Zealand accounts for 18% of Denmark’s to- onomy panel. Furthermore, the region is a member of tal agricultural land. However, the agricultural sector a national innovation network, which allows them to has been aff ected by signifi cant cuts in EU and national utilize “catalysing” resources, such as project develop- subsidies. For this reason, farmers are increasingly fo- ment, clustering advice, innovation networking, and cusing their activities on the production of environ- an understanding of global trends, to help the fi rms in mental services and specializing in the production of the region to develop in the fi eld of bioeconomy. One biomass. In this context, Lolland is known for its suc- long-term strategy is to improve regional “framework cessful transformation into a “green region”, which has conditions” to participate in the national green econo- led it not only to become a climate-neutral region but my/bioeconomy strategy; this includes removing any also to boost its economy, previously immersed in a barriers to developing new ideas and activities. In ad- deep economic depression. Lolland gradually capital- dition, the strategy is intended to use outlooks (beyond ized on land availability and the existing network and Denmark and the EU) to provide strategic knowledge, experience developed through the CTF. methods and models for use by the regional actors. A Th e bioeconomy and resource effi ciency are clear Baltic perspective and knowledge of alternative experi- priorities of Region Zealand and the island of Lol- ences is desired. land. Biofuel production in Lolland was established Th e co-creation process is seen as an important in collaboration with public–private partnerships. Th e “method” of realizing a bioeconomy in Lolland. Th is biofuels produced include rapeseed oil, biodiesel from is envisaged to include meetings, development of clus- algae cultivation and bioethanol from agricultural pro- ters, and utilization of the quadruple helix concept. duction. Visionary work includes a toolbox (of examples) to Based on the information gained from a fi eld study visualize what could emerge from the bioeconomy in conducted in Lolland in 2014, the region is very prag- diff erent settings and places. Back-casting—having a matic in regard to the bioeconomy: it has plant produc- vision and thinking how to make it happen—is part of tion, high-tech production and biotechnology, and it the process and is an exercise at both the macro and should be able to do much more. Th e ambition is to ini- micro level. tiate more activities and to change fundamental structures in the long run, realizing that the bioeconomy Green Center, Lolland is perceived to be about “what can be extracted from Th e Green Center is a business and research unit plants”, “making the most of bio-based value chains”, working with agricultural, agribusiness and eco-tech- “optimizing and creating symbiosis” and “cascading- nology industries in Lolland. Th e Green Center (GC) production”. New types of products are probably the was founded 25 years ago in 1988 on Lolland Island to most diffi cult path, and this is seen more as a long-term help farmers to innovate. Th e Green Center is part of strategy. the “Råhavegård” knowledge centre, yet it is an inde- Companies (including farmers) are good at optimiz- pendent institution with 12 employees. Th e centre has ing production. According to the respondents, what modern laboratories, which off er biological, botanical can be improved are the management of waste streams and environmental analyses, and development facili- and the creation of synergies between fi rms. One re- ties. It also has a separate GMP laboratory. Th e centre gional dilemma is whether Lolland should focus more owns 250 acres of farmland, of which 70 acres are ex- on large fi rms or smaller fi rms. What kind of fi rms can perimental fi elds. Th e Green Center´s main tasks are

NORDREGIO WORKING PAPER 2014:4 25 innovation in food and agroindustry, plant production was business development based on new products and and management assistance in general. Yet the centre better utilization of existing production. Its current ac- also generates new products, production and man- tivities are strongly oriented towards “natural science”, agement opportunities for its customers and business but because it has an impact on regional development partners while focusing on sustainability. For instance, (and fi rms in this area), it takes a rural development the Green Center focuses on optimizing the utilization perspective. of biomass and works with both naturally occurring Today, integrated solutions (industrial symbiosis as and intensively produced biomass from agriculture. well as industry–community interactions) are one im- Th e Green Center is trialling techniques to culti- portant focus area in relation to developing the bioec- vate algae on a large scale. Intensive agriculture could onomy. Th is is strongly related to projects on “side cur- produce CO2 and nitrogen, which can be used in the rent” management (fl ows of material or energy not yet production of algae. Th e potential uses of algae include utilised) and new products. purifying water by removing nitrate deposits from in- From a “cluster” perspective, the Green Center col- tensive farming, and sewage treatment. Th e Algae In- laborates with (small) fi rms in their projects, and the novation Centre, Lolland (AIC) was initiated by the knowledge permeates practices and the market in this Green Center in 2010 in partnership with Aalborg way. It is less interested in actual patents but rather University and Roskilde University. “Th e project aims in allowing fi rms in the projects to develop solutions to establish a demonstration and pilot plant for algae or products aft er the research projects. Th is may not cultivation experiments, and conduct research on how be so diff erent from organizations such as Processum society and businesses can optimally utilize algae pro- in Sweden—the diff erence being that it is not such an duction technologies”. Th e AIC focuses on three main organized cluster, and it does not have personnel such activities. as a patent engineer. From a practical perspective, it should be mentioned that it also lends land (located  Establishment of a demonstration and pilot plant close to the Green Center) for experiments and prod- with algae cultivation experiments at the Green Center, uct development. Hence, there are some similarities to Holeby the activities studied in the Icelandic case study, in the  Networking Activities: Identifying local, national sense that smaller producers can obtain resources and and international partners assistance to develop products and new processes or  General information activities techniques in “fi eld laboratory” settings. As in most regions the issue of short-sightedness, Network and Cluster Activities are a major part of the not least politically, is mentioned as an impeding fac- Green Center’s activities. Th e Green Center works on tor in developing the bioeconomy. Th ere are few “low- the development and growth of agriculture and the hanging fruits” available, so the development of the processing sector, focusing on business co-operation, bioeconomy will require long-term funding, and it experience exchange groups, product development, lo- should be allowed to develop just as other sectors have gistics and marketing, quality development, communi- in the past. In fact, the interest in the region came ini- cation and branding. Th e Green Center serves as a cat- tially from “above”, but once politicians realized that alyst by pulling together knowledge, core competences there were few “low-hanging fruits”, or short-term re- and the right partners. Th e Green Center co-ordinates sults in relation to the economy and jobs, their interest a variety of activities aimed at facilitating the emer- waned. According to the respondents, the bioeconomy gence of new technology applications and spin-off pro- should not be judged on short-term market possibili- jects. Networks and clusters include From Cluster to ties alone. Some large-scale projects related to biomass Cluster, Agro Valley Denmark, Food Platform Zealand have actually been abandoned owing to lack of fund- programmes, and contracts with regional partners. ing, and today, many projects have to be “close to the Th e Green Center has a broad focus on “land” and market” to be fi nanced. Th is is not always possible in “goods”: what can be produced, what can it be used for, the long-term development of solutions for realizing and how can it be developed and integrated? From the the bioeconomy. outset, there was a regional development dimension In Lolland, the bioeconomy actors actively take a built into the centre (considering factors such as em- holistic perspective in the regional planning cycle. For ployment, the economy and regional attractiveness). example, they attempt to develop the idea that when Th ere was a decline in the number of jobs in rural ar- the local biogas company is developed, there should eas, and local politicians thought of using farmland be a focus on upgrading to transport gas by building a in a more innovative way. Th e direction of the centre transport centre. To move their solutions “closer to the

26 NORDREGIO WORKING PAPER 2014:4 market”, the enablers include regulations and econom-  Weak urban networks: diffi culty of connecting with ic incentives. For example, for the algae development neighbouring regions project, this would imply taxes on nitrogen in the waste  Fragile economic development water, electricity taxes on sewage pumps, or anything  Renewable energy sectors’ continued dependence on in the fi eld of technology rules. Th is would put a de- public subsidies. Renewable energy will not be an alter- mand for new solutions on the market. native to conventional fuels without large public subsi- Concerning confl icts related to bioeconomy appli- dies cations, it is important to consider that usually, when developing an innovation in the bioeconomy, the de- 3.1.8 Conclusions veloper is generally competing with an established en- Th e Lolland region has focused on the green economy tity somewhere else in the economy. According to the for a relatively long time. In addition to providing prac- respondents, there can be both explicit and implicit tical and innovative solutions for local and regional confl icts that oppose this development. Th is “thing” problems, the focus on the “green economy” represents against which the innovator competes is probably an a signifi cant export potential for the larger region of important part of a regional economy somewhere else. Zealand. However, it should be stated that job creation Th ere may be short-run implications for that economy and an economic boost from green economy renewable that must be considered, even though it may be con- energies has occurred in Lolland, but the impact should tended that this region should also fi nd something not be exaggerated. Th e green growth is expected to of- sustainable to develop. Areas with substantial energy fer only a limited solution to the structural challenges resources (e.g., Norway) produce nitrogen fertilizers, of Lolland. Having stated this, we note that actors in while the Green Center is attempting to fi nd substi- the region are at the forefront in thinking about new tutes, or to recycle such fertilizers from algae. ways to structure industrial symbiosis. Today, in relation to developing the bioeconomy, integrated solu- 3.1.6 Enabling conditions tions (including symbiosis and industry–community Th e potential for other sources of renewable energy, interactions) represent one important focus area. Th is such as agricultural residues and related technologies is closely related to projects dealing with side current for energy production as a way to create new employ- management and new products—and being early in ment opportunities, has been seen as important for the this fi eld can potentially off er fi rst mover advantages region. Currently, the production of renewable energy over other regions and large fi rms. in Zealand includes wind, solar and agricultural bio- From a governance perspective, there is a feeling mass. of “bottom up” or “involvement” in the way in which Zealand has managed to switch its focus from the the bioeconomy is developed or explored. Co-creation deployment of renewable energy to technology de- processes are seen as an important “method” for real- velopment and the provision of testing facilities for izing the bioeconomy, and this is envisaged to include renewable energy. Th is has proven to be a successful meetings, development of clusters, and utilization of form of branding for the region, which local communi- the quadruple helix concept. From an outside perspec- ties and municipalities support. Th is example suggests tive, this is probably important because it helps to build the importance of including local communities to gain a common vision and understanding of priorities and support for the deployment of renewable energy. Local actions. However, we also notice that this is a sort of support from the business sector and local communi- governmental organized bottom-up approach, where ties has also been a success factor in providing renew- the main actor working to develop the bioeconomy able energy testing facilities. is the region, and it seeks other actors. Th e region is also active at the top, and it participates in the national 3.1.7 Impeding factors bioeconomy panel to devise strategies on the national A number of factors impeding the development of the scale. bioeconomy have been identifi ed in Lolland. Another interesting aspect of the region’s work with a bioeconomy for Zealand (and Lolland) is its  Location disadvantages: lack of accessibility to eco- plans to realize a bioeconomy, which are a combina- nomic activities and infrastructure tion of hands-on activities, strategies and visions. For  Low density: diffi cult and expensive implementation instance, there are groups being formed for strategic of strategies that eff ectively improve the effi cient use of work on the regional bioeconomy, and as part of this, resources (water, energy) there will be a collection of examples to inspire and  Out-migration (particularly of young people)

NORDREGIO WORKING PAPER 2014:4 27 inform. Catalysing business and innovation resources focus is on the analysis of innovation in green growth are coming into the region to help to develop the fi rms, and the bioeconomy, and the concentration of environ- by consulting on ways to develop both techniques and mental expertise in the region. market aspects. It is worth noting that there is an un- Th is case study report is based on a study of second- derstanding that the framing conditions in the region ary sources and interviews with key stakeholders at the are important if the bioeconomy is to develop and that local, regional and national levels as well as representa- these framing conditions can be changed. Such condi- tives from private companies and educational facilities tions can include rules, planning structures, fi nancial in 2014. Th e report presents the characteristics of the sources, regional support and strategies. region and its economy, as well as the policy frame- Th e region of Lolland off ers interesting insights into work for developing bioeconomy in the Forssa region. the process of developing the bioeconomy, in the larger Based on information gathered in the interviews, regional context of Zealand. It shows a Green Center the report outlines the main actors in the bioeconomy that is working on hands-on solutions and systemic in the region and discusses the main drivers of devel- change projects, and is experiencing the day-to-day opment. It also discusses the main impeding factors to aspects of the framing conditions and the problems as- development and concludes by summarizing and dis- sociated with funding, time frames, marketability, and cussing the current situation and future potential for “fashion”. It is a region that is advanced in developing developing the bioeconomy of the region. a bioeconomy “work programme” with components that we did not see in some other regions. Th is agenda 3.2.2. Description of the region will be interesting to follow and assess, to understand Forssa is located in South-west Finland, 100 km from whether it can create an impact on the way in which the Helsinki, and in a logistically favourable location at the region develops. midpoint between the three largest cities in Finland. Finally, it can be stated that the experience of Lol- Th e Forssa sub-region is one of the three sub-regions of land can certainly be replicated in other rural commu- the Häme region. It consists of the city of Forssa and nities elsewhere as long as the local conditions are duly four municipalities: Jokioinen, Tammela, Humppila taken into consideration. In this respect, it is important and Ypäjä. Th ere are approximately 37,000 inhabitants to realize that the economic resurgence of Lolland has of the Forssa sub-region, of which 17,700 live in the city mainly been a result of local initiatives rather than any of Forssa. sort of national-level intervention, although national Th e history of Forssa began in 1847, when the Swed- overall policy towards a green economy has played a ish-born Axel Wilhelm Wahren founded a cotton central role. Yet the success is remarkable considering mill by the side of the Loimijoki River. Industrializa- the absence of universities or large industrial clusters tion gathered speed, and the town grew and developed in the region. Moreover, resources are not very specifi c alongside the factory. In addition to the factory build- in Lolland, and they diff er little from those in many ings, Wahren arranged to build homes, a hospital, a other Nordic regions. What can be learned is pragma- library, a general store and a school. Forssa developed tism towards the bioeconomy. In this region, there is a in the 19th century as a city associated with the textile focus on both small and large fi rms, plant production industry. In the 20th century, the construction indus- and developing the basics of the bioeconomy, high-tech try took off , especially in the 1960s. Currently, the key production and renewable energy systems solutions. In sectors of the local economy in Forssa include the fol- addition, linking the bioeconomy to societal develop- lowing. ment was built into the early strategies and actions. For instance, a regional development dimension was built  Th e food industry into the Green Center, which was to contribute espe-  Th e construction industry (manufacturing of con- cially to employment, economic development, and re- struction products) gional attractiveness.  Environmental technology (recycling, waste management, energy) 3.2. Forssa, Finland  Electronics  Information and communication technology By Jukka Teräs  Th e metal industry  Th e printing industry 3.2.1. Introduction Th is case study introduces and analyses the bioeconomy in the Forssa sub-region of south-west Finland. Its

28 NORDREGIO WORKING PAPER 2014:4 Figure 3: Forssa sub-region (Map design by Julien Grunfelder)

3.2.3. Administrative structure and governance Finland. Th e regional councils operate as regional development and regional planning authorities and are National thus the units in charge of regional planning and look- Finland is a country in Northern Europe with a popu- ing aft er regional interests. Th ey also conduct research, lation of 5.45 million. Finland joined the European planning and analyses. Th e emphasis of the work of the Union in 1995. Central and local governments are the regional councils is on both long-term planning and basis of Finnish democracy. Th ere were 336 munici- rapid reaction in current aff airs. Th e councils also im- palities in Finland in 2013. plement and co-ordinate a number of various national Th e key local actors are the municipalities and the and EU projects. Two major regional state administra- local companies or indigenous fi rms. Th e municipali- tive bodies are the Centres for Economic Development, ties—oft en in co-operation with other regional and lo- Transport and the Environment (ELY) and Regional cal actors—have established local development compa- State Administrative Agencies (AVI), responsible for nies, technology centres and start-up company centres basic public services, legal rights and permits, occupa- to promote local entrepreneurship. Regional councils tional safety and health, environmental permits, and play a signifi cant role in the regional development of safety. (Suomi 2014). Th e SRDAs (sub-regional devel-

NORDREGIO WORKING PAPER 2014:4 29 opment agencies) are organizations between munici- (FSKK) is owned by fi ve municipalities: Forssa, Hump- palities and regions. pila, Jokioinen, Tammela and Ypäjä. Th e mission of the In addition to the Finnish parliament and the gov- FSKK is to create operational conditions for diverse ernment and ministries, the national interest groups businesses and for the active development of the For- include organizations of the Finnish National Inno- ssa region. Th e main roles of the Development Centre vation System, such as Tekes (Th e Finnish Funding are acting as an adviser of industry, regional economic Agency for Technology and Innovation), SITRA (Th e planning and implementation in co-operation with the Finnish Innovation Fund), VTT (the Technical Re- municipalities and businesses, marketing the region search Centre of Finland), and the Invest in Finland and undertaking development projects. offi ce. SEKES is a national association of sub-regional development companies. 3.2.4. Bioeconomy in the Forssa region “Bioeconomy” as a term is relatively new in the Forssa The Regional Council of Häme and Forssa Region region. According to the interviews in the region, the Development Centre Bioeconomy concept in Forssa was launched as part of Th e Regional Council of Häme, the members of which the Forssa Brightgreen concept approximately fi ve are municipalities around the Forssa, Hämeenlinna years ago. However, activities usually connected with and Riihimäki areas, develops the region and super- the bioeconomy were already present in the Forssa re- vises regional interest both in Finland and globally. gion from the early stages of its industrialization. Axel Th e Regional Council of Häme gathers and processes Wilhen Wahren emphasized the symbiosis of agricul- various regional development perspectives and evalu- ture and industry, even in the 1840s. Th e Mustiala ag- ates the feasibility of their implementation. Th e council ricultural institute was established in 1840. Th e MTT works in close co-operation with municipalities, state Agrifood Research Finland, the leading Finnish re- offi cials and businesses as well as other development search institute operating under the Ministry of Agri- partners. (Hämeen liitto 2014). culture and Forestry, located its main operations in Th e Development Centre of the Forssa Region Jokioinen in the Forssa region in the 1970s and early

Table 7: Key actors and activities of bioeconomy in the Forssa region

Sector/Activity Main Actors Description

Food industry HK Ruokatalo 2,000 jobs

Atria Large-scale investments in Forssa by large food companies SME companies (e.g., Makuliha, Jokio- isten Leipä) Innovative SMEs, such as Lähiruoka

Envi Grow Park, Eco Industrial Park, Envor Group, LHJ Group, Watrec Flagship project: a bioreﬁ nery with an estimated investment of €100 million, Cleantech Companies FSKK, MTT, HAMK planned to open in 2015

MTT Center of Expertise MTT Agrifood Research Building on the long-term expertise of MTT Agriculture, food, and circulation companies, TSKK, HAMK Loimijoki Food Valley initiative by FSKK (planning stage)

Green logistics initiatives Municipalities, HAMK, Regional Coun- Green Growth & logistics-related devel- cil of Häme opment projects (e.g., HEA; Humppila Eco Airport and Logistics Centre)

Textile recycling HAMK in co-operation with municipali- Public–private pilot projects (e.g. Tex- ties, VTT, LAMK, SYKE, National Con- Vex Humppila, R&D work) sumer Research Centre, Envor

Education and training/natural re- HAMK, HAMI (Häme Vocational Insti- Degree programmes and training with sources tute) a focus on the bioeconomy

Forssa is the pilot region.

30 NORDREGIO WORKING PAPER 2014:4 1980s. In the 1990s, an important milestone was the (Envor Biotech Oy) in addition to supply of compre- establishment of the new dump and the municipally hensive services in environmental management by En- owned waste management company Loimi-Hämeen vor Group Oy. (Envor 2014). Jätehuolto. Th e University of Applied Science in Häme LHJ Group. Originally the municipal operator of (HAMK) is the leading higher education institute spe- the dump, Loimi-Hämeen Jätehuolto is now the LHJ cializing in natural resources (agriculture, horticul- Group, a versatile expert in environmental and recy- ture, forestry), the agricultural unit (biggest and oldest cling operations for companies, the public sector and in Finland) being Mustiala in the Forssa region. HAMK producer organizations. Th e LHJ Group’s task is to take also began off ering a sustainable development training care of its customers’ material fl ows responsibly and in programme in 2008 in Forssa, and the bioeconomy has an environmentally friendly manner. Th e group’s main been one the strategic focus areas since 2006. Educa- business areas are electronics recycling, data security tion on bioprocesses and environmental technology material handling, industrial waste treatment, soil re- also supports the strategic focus of HAMK. HAMK mediation, and municipal waste management as well has been able to create new combinations of skills to as related collection, transport and expert services. satisfy certain needs in the bioeconomy fi eld. Th e En- (LHJ Group 2014) vor Group built the fi rst industry-scale composting fa- Watrec Ltd. is a Finnish company specializing in cility in 1997, and the biogas plant for packed food clean-tech solutions. Its core competences lie in biogas waste in 2009 (the fi rst of its type in Europe). Th e biom- technology, wastewater and process water treatment, ethane fuelling station for vehicles was built by Envor and environmental and energy-related consultancy in 2013. services. Th e company’s focus is to provide its clients Table 7 presents the major sectors and activities of with tailored and cost-eff ective solutions that are in the bioeconomy as illustrated by the respondents in the line with the principles of sustainable development, Nordregio study in 2014. particularly on organic waste and wastewater treat- Th e food industry has been a fl agship of the busi- ment. Th e company works with its clients on the basis ness life of Forssa for decades. In recent years, the food of long-term partnerships in several sectors, from pri- industry in Finland has been hurt by layoff s and clo- mary production to heavy industry. (Watrec 2014) sures. Despite the downturn, the food industry in the Th e key educational and research institutes related Forssa region remains one of the strongholds of the lo- to the bioeconomy in the Forssa region are as follows. cal business environment. Today, the most important HAMK University of Applied Sciences. HAMK is food industry companies in the Forssa region are the one of Finland’s largest universities of applied scienc- following. es, with units in six municipalities, two of them in the Forssa region, with a total of 1,200 students in the fi eld  HK Ruokatalo (HK Scan): Meat, poultry, meat prod- of natural resources, and a correspondingly signifi cant uct and convenience food businesses, with 500 jobs in number of competent teachers and researchers. Th e Forssa in 2013 sustainable development programme at the Forssa unit  Atria: Businesses producing meat and meat prod- produces bachelor’s degree graduates in environmental ucts, poultry and convenience food planning who have extensive knowledge of the sustain-  SMEs such as Makuliha (meat) and Jokioisten Leipä able use of natural resources, product life cycles, fi nan- (bread) cially and culturally sustainable operating principles, applied environmental technology and chemistry as In 2014, it is estimated that the food industry employs well as environmental management, legislation, busi- approximately 2,000 people in the Forssa region. In ad- ness and management. Promising R&D fi elds include dition to food industry companies, the key companies textile recycling in co-operation with regional and of the Forssa bioeconomy include clean-tech/environ- national public and private sector actors. Besides ex- mental technology companies such as Envor Group cellence in the bioeconomy, HAMK has a number of Oy. Th e Envor Group in Forssa is a family organization study programmes in technology supporting the bio- consisting of four companies: Envor Recycling Oy, En- economy. Food and bioprocesses, environment tech- vor Processing Oy, Envor Palvelut (Envor Services) Oy nology, logistics, automation and ICT, for example, and Envor Biotech Oy. Envor Recycling Oy began op- are combined with natural resources to create the new erations in 1964. Processing of paper, cardboard and skills needed in a bio-based circular economy.(Hamk cartons started in the 1970s (Envor Processing Oy). 2014) Processing of glass started in the 1980s (Envor Recy- MTT Agrifood Research Finland is Finland’s lead- cling Oy). Treatment of biowaste started in the 1990s ing research institute in the fi eld of agricultural and

NORDREGIO WORKING PAPER 2014:4 31 food research, as well as agricultural environmental fi rst subregional environment and energy strategy in research. 2007. Th e strategy paved the way for Forssa region clus- It produces innovations and solutions related to re- ter co-operation and the concept of Brightgreen Forssa. newable natural resources. MTT conducts research in Th e club was active in the years 2006–2010, aft er which eight research programmes permeating the entire or- the cluster activities were co-ordinated by the Forssa ganization. Region Development Centre FSKK. Th e research promotes consumer welfare, the competitiveness of the agricultural and food industries, 3.2.5. Policy framework in developing the bioec- the sustainable use of natural resources, the quality of onomy in Forssa production and the living environment, and the vital- ity of rural regions. MTT employs approximately 750 National researchers and other experts from 15 municipalities Th e Finnish National Strategy on Bioeconomy, pub- across Finland. Th e organization’s head offi ce and the lished in 2014, is intended to promote bioeconomy large majority of the personnel are located in Jokioinen businesses and to improve Finland’s competiveness in the Forssa region. MTT Agrifood Research Finland, and welfare while at the same time decreasing the im- the Finnish Forest Research Institute (Metla), the Finn- pact of climate change and improving resource effi - ish Game and Fisheries Research Institute (RKTL) and ciency. Th e priority areas of the strategy are to create a the statistical services of the Information Centre of the favourable operating environment for the bioeconomy, Ministry of Agriculture and Forestry (Tike) are to be to support the creation of new bioeconomy business, to merged under a new entity called Natural Resources develop and ensure bioeconomy skills, and to ensure Institute Finland as of 1 January 2015. (MTT 2014). the sustainable use of renewable resources. Th e bioec- Th e Envi Grow Park eco-industrial park is the fl ag- onomy is already high on the agendas and strategies of ship project of the Forssa bioeconomy. Th e idea of an many research organizations (such as Metla, MTT, and Eco Industrial Park was launched in Brussels in 2007 VTT), research funders (such as Tekes and Sitra), and (during a local brainstorming day and a study visit several regional actors. Th e bioeconomy strategy has to EU Brussels offi ces). Th e business idea for the Envi many linkages to, and synergies with, other national Grow Park in Forssa is to implement closed circulation strategies for agriculture and forestry, energy and cli- of energy and materials and to act as a top internation- mate as well as natural resources, among other activi- al centre of excellence in bio-based products and pro- ties. In addition, the bioeconomy is one of the themes cesses. Th e locomotive company for the Eco Industrial of the Innovative Cities Programme, which seeks to Park biorefi nery is the Envor Group. Envor announced benefi t from the strengths of the regions of Finland. in March, 2014 that it plans to make a decision by the Finland has six strategic centres for science, tech- end of 2014 whether to invest in a biorefi nery in For- nology and innovation (SHOK), all of which have ssa that would harness almost 100,000 fi eld hectares their own research strategies. One of these, the Finn- for ethanol production. Th e Envor biorefi nery will be a ish Bioeconomy Cluster (FIBIC), is strongly focused on versatile facility based on several interrelated processes bioeconomy research and innovation, although other producing sustainable energy and commercial prod- SHOKs are supporting the area as well (NIC 2014). ucts with the best available technology from natural renewable raw materials. Th e biorefi nery is based on Regional/local Envor Biotech Oy’s experience of the existing biogas In 2013–2014, the Regional Council of Häme prepared plant, which is the largest of its kind in Finland. As an a strategic programme for the Häme region, in which input, the biorefi nery would use up to 340,000 tonnes the bioeconomy and sustainable use of natural resourc- per year of energy grain (rye wheat/wheat/barley), the es is one of the fi ve strategic focal points. Th e strategic majority of which is to be collected from South-west programme includes specifi c bioeconomy initiatives in Finland. the Forssa region, such as the Envi Grow Park project, Th e Envi Grow Park concept combines waste treat- and emphasizes new business environments for the bi- ment, renewable energy production/wind parks and oeconomy. development of new bio-based products, in an integral In the Forssa region, a strategic programme has been way (see Figure 4). developed and was most recently updated in 2014. Th e An important catalyst for the intercompany rela- Brightgreen Forssa region strategy focuses strongly on tionships in the Forssa region was the establishment of the possibilities of the bioeconomy as one of the corner- the Forssa Envitech Club in 2006. Th e club contributed stones of the Forssa region. (Brightgreen Forssa region signifi cantly to activities such as the preparation of the 2012, 2014). Th e Brightgreen Forssa region, the new

32 NORDREGIO WORKING PAPER 2014:4 Figure 4: Envi Grow Park eco-industrial park (Source: Pirkkamaa, FSKK)

business development strategy of the Forssa region— Co-operation between actors i.e., the municipalities of Forssa, Humppila, Jokioinen, Active and systematic co-operation between the public Tammela and Ypäjä—is based on a “bright green” ap- and private actors has been one of the key competitive proach, focusing on business activities that are envi- advantages of the Forssa region in the fi eld of green ronmentally friendly and support sustainable develop- growth and the bioeconomy. Th e long-standing tradi- ment. Th e strategy, with a focus on environment and tion of public–private co-operation was mentioned as energy, wellness, green logistics, and technology is seen an example of far-sightedness as early as 1996, when as an important success factor in the current develop- circular economy activities and energy businesses ment of Forssa green growth and the bioeconomy. were made possible in Forssa in parallel to the development of the Kiimassuo dump. 3.2.6. Enabling conditions An important catalyst for intercompany relationships and public–private co-operation was the estab- Natural resources lishment of the Forssa Envitech Club in 2006. Th e club Th e region’s access to natural resources provides a good contributed signifi cantly in ways such as the prepara- basis for developing the bioeconomy of the Forssa re- tion of the fi rst subregional environment and energy gion. Th e region is located in the centre of Southern strategy in 2007. Th e strategy paved the way for Forssa Finland, slightly over one hour away from the Helsinki region cluster co-operation and the concept of Bright- capital region. From the view-point of biorefi neries, the green Forssa. Forssa region has a favourable location regarding re- Th e Forssa Envitech Club was active in the years sources such as grains. 2006–2010, and since then, the cluster activities have been co-ordinated by FSKK. Currently, FSKK is the key

NORDREGIO WORKING PAPER 2014:4 33 driving force for cluster co-operation in the fi eld of bio- Th e bioeconomy is seen as an integral part of green economy. Th e respondents emphasize the importance growth, not as an isolated sector, but with interrela- of informal and frequent contacts between companies, tionships and synergies with several other sectors. Th e FSKK, HAMK and the city of Forssa in the preparation Envi Grow Park concept, for example, combines waste of new public–private initiatives. treatment, renewable energy production/wind parks and the development of new bio-based products in an “Th e local and regional networking in the fi eld of integral way. Th e importance of a larger ecosystem of bioeconomy is one of the key assets: informal, daily green growth and the bioeconomy in the Forssa region contacts between public and private sector, city and is emphasized. the key companies jointly developing the Forssa bioeconomy, with acceptance of a common regional “Our knowledge base and active entrepreneurship green growth strategy.” have generated an ecosystem that attracts broader interest. With the help of the ecosystem, we need to Besides the local co-operation networks, the Forssa bi- attract new experts and new companies, which oeconomy has important national and regional net- would further strengthen the positive spiral of devel- works, especially via MTT, which has co-ordinated opment”. and/or participated in several EU and national-level bioeconomy initiatives. Other important actors to in- In the next 4–5 years, the bioeconomy know-how of the crease co-operation include bodies such as the FUAS Forssa region is planned to be disseminated to the network of universities of applied sciences, and key na- neighbouring regions in the Loimijoki river catchment tional actors and funding institutions, such as SITRA area. Th e idea of Loimijoki Food Valley is to create a and Tekes. Th e Forssa region has actively strengthened strong common platform located in one of Finland’s international networks related to the bioeconomy, in- most important agri-food regions. Th e platform will be cluding close networking with the Norwegian city of an area where local sustainable food production and Sarpsborg (a twin city with Forssa), and contacts with aspects such as the use of bio-based fertilizers as well as Gujarat, India and Serpuhov, Russia. good quality water shall be reached with the help of latest research methods and networking. Funding Based on information gathered in 2014, the Finnish Communication & branding funding system opens up a large number of potential Th e branding of regional/local bioeconomies is seen as funding opportunities for bioeconomy initiatives in one of the most important challenges in the near fu- the Forssa region. Moreover, the EU funding opportu- ture. nities complement the national funding sources. From the view-point of Forssa, more eff ort and stronger co- “We need to invite all actors to join the Forssa bioec- operation networks are needed to raise large-scale onomy initiative, including residents that are oft en funding from international funding sources. suspicious of new initiatives. A common vision of Bright Green Forssa, which everybody understands, “In fact, there is no lack of funding sources. To raise which everybody feels that this is our thing, and eve- more funding for bioeconomy initiatives, we need to rybody commits to, is a key factor of success.” focus our resources, and we need to strengthen our international co-operation networks.” Th e Forssa region has invested signifi cantly in the branding process of the Envi Grow Park and the Forssa Synergies between sectors Brightgreen Region. Additional eff orts to strengthen Th e Forssa region has a clear focus on green growth the branding work further were made in 2013. Until and sustainable development. Moreover, Forssa invests recently, the emphasis on branding work has been on heavily in branding green growth (e.g., Brightgreen businesses; now the focus will be more on citizens, the Forssa region). Th e bioeconomy is understood by the media and politicians. Future branding work eff orts in- local actors to be the symbiosis of agriculture, forestry clude aspects such as brand ownership and brand and industry. promises.

“In our region, the bioeconomy is understood, de- “Th e core group of the Forssa bioeconomy commu- pending on the respondent, as bio-waste treatment, nity has good development drive and we have been the food industry, or agriculture and forestry.” able to attract the interest of national-level actors

34 NORDREGIO WORKING PAPER 2014:4 such as SITRA, TEKES, VTT.” among smaller city regions of diversifying its limited fi nancial and human resources into too many develop- “Th e increased co-operation with other Nordic ment fi elds and programmes. If properly executed, the Green Growth and bioeconomy ecosystems would Brightgreen Forssa programme is an instrument for enable larger development projects. Moreover, it focusing on, rather than spear-heading, programmes would strengthen our international business.” and key priorities of the bioeconomy. Dividing the development resources into numerous small programmes 3.2.7. Impeding factors to avoid causing displeasure does not usually bring From the responses of the respondents, the following long-term success. impeding factors have been identifi ed. First, the bioec- Th e bioeconomy is an area where patience and long- onomy faces the old mind-set. Many people have diffi - term development pay off in the long run. However, culties in rejecting the old “smokestack industry” econ- short-term “victories” are needed in addition to rapid omy that has faced diffi culties because of factors such development steps— gradual slow development is in- as globalization. Second, the signifi cant growth of the suffi cient. Th e balance between a “sense of urgency” bioeconomy in the Forssa region would require a qual- and strategic thinking is hard to fi nd—most likely, this ifi ed labour force with a suffi cient educational level, is also true in the Forssa region. which currently is not necessarily available despite ef- Finally, it is important to note that the development forts from organizations such as HAMK. Th ird, the of bioeconomy activities in the Forssa region, although bioeconomy community in the Forssa region would systematically supported by public sector initiatives, need additional high-growth companies to accumulate has been and remains crucially dependent on private a critical mass in the regional bioeconomy cluster, and sector initiatives. Public sector actors can and should to provide inspirational case examples for potential fu- provide development platforms, but in the long run, ture entrepreneurs in Forssa. Finally, the city of Forssa they cannot act as key locomotives of regional bioec- and other municipalities in the Forssa region face the onomy initiatives. national challenge of diminishing returns and increasing costs. Bioeconomy-based regional development re- 3.3. South Iceland quires public–private partnerships and pilot installations in the municipalities. Th e weakened fi nancial By Liisa Perjo situation of the Finnish municipalities makes it more diffi cult for the municipalities to provide fi nancial sup- 3.3.1. Introduction port for bioeconomy-based development programmes Th is case study examines the bioeconomy in the South and projects. Iceland region, focusing particularly on innovation in agriculture and fi sheries, and especially on food devel- 3.2.8. Conclusions opment innovation. Agriculture and fi sheries (together Th e Forssa region is an inspiring and promising exam- with tourism) are the largest economic sectors in the ple of a Nordic bioeconomy initiative with local and region. Th e region’s ambition is to increase the level of regional commitment and long-term systematic eff ort. processing and utilization of agricultural and fi sheries However, even greater courage would be welcomed to products through food innovation and development. see the bioeconomy as a sustainable success element Th is case study report is based on a study of second- and the international extension of the Forssa region, ary sources, document analysis and qualitative inter- especially in terms of jobs and euros. views with key stakeholders at the local, regional and Forssa has the advantage of a long tradition of bioec- national levels, as well as with representatives from onomy-related know-how and expertise, especially in private companies and educational facilities. Th e re- agriculture. Th e region is defi nitively not starting from port presents the characteristics of the region and its zero but building on previous knowledge. economy, as well as a policy framework for developing Regarding the regional and local development bio- the bioeconomy (and especially food innovation) in the economy initiatives, the key public and private actors region. have succeeded in preparing a common vision. Bright- Based on information gathered in the interviews, green Forssa provides a vision that should be relatively the report outlines the main actors involved in the bio- easy to understand and commit to. Th e Brightgreen economy in the region and discusses the main drivers regional/local vision is important for attracting new of development. It also discusses the main impeding players and focusing on joint development eff orts. factors of development, and it concludes by summa- Th e Forssa region may face a relatively common risk rizing and discussing the current situation and future

NORDREGIO WORKING PAPER 2014:4 35 potential for developing the bioeconomy of the region. Th e Ministry for Industries and Innovation is the main national-level actor responsible for regional pol- 3.3.2. Description of the region icy. It has a sub authority, the Icelandic Regional De- Iceland has approximately 320,000 inhabitants, and velopment Institute, which acts as an implementation more than 60% of the population live in the capital re- body for regional policy and, among other functions, gion around Reykjavík. Th e country is divided into two monitors and supports regional development and al- NUTS 3 regions (the capital area is one NUTS 3 region locates funding. and the rest of the country is another), and it has eight Also, the Innovation Centre Iceland works under the LAU 1 areas. South Iceland (or “Sudurland”) is one of auspices of the Ministry for Industries and Innovation, the LAU 1 areas and is the focus area of this case study. and functions as an R&D and business support insti- Th e South Iceland region covers a large area of tute to promote innovation by conducting research and 30,966 km2 across the southern and south-eastern supporting businesses. It has offi ces in eight locations coast of Iceland. Th e region has approximately 26,000 around Iceland that support innovation in those areas. inhabitants (2012) and is divided into 15 municipali- At the national level, Matís Ltd.—Icelandic Food ties. Agriculture is an important sector, with 40% of and Biotech R&D—has an important role, particularly the agricultural production from Iceland coming from in the development of the bioeconomy. Matís is a gov- the region. However, fi sheries have a more important ernment-owned but independent research company role in the regional economy, and there are three fi sh- that specializes in R&D in food and biotechnology. In ing harbours located in the region (Icelandic Regional addition to its own research projects, it runs food inno- Development Institute 2013). vation centres in a variety of locations around Iceland Th ere are great diff erences between the parts of the where it provides development facilities and business region in terms of local characteristics and issues such support and expertise in food innovation. as the local economy, employment, demography, edu- At the regional level, Iceland does not have public cation and infrastructure. Fisheries have a major role in authorities as such, but each of the eight LAU 1 regions the coastal municipalities with fi shing harbours, while has a regional association of local governments. It is agriculture and/or tourism are more important for in- stated in the Local Government Act that “local gov- land municipalities. Tourism in general is expanding ernments may establish regional associations to work across the whole of Iceland and is also of growing sig- for the interest of the inhabitants in each region”. Th e nifi cance for the economy of South Iceland. In 2013, regional development activities of the regional associa- tourism was for the fi rst time the largest export sector tions are partly fi nancially supported by the state. of Iceland (followed by fi sheries and aluminium). Rev- At the local level, municipalities are self-governing, enue from tourism corresponded to 15.4% of GDP in and all of them, independent of their size, have the 2013, and it is expected that the number of tourists in same duties and responsibilities. Th e major tasks of the Iceland will increase by 18% in 2014 and by 15% in 2015 municipalities concern education and social services. (Icelandic Regional Development Institute 2013; News (Icelandic Association of Local Governments, 2014) of Iceland 2014). Currently, Iceland is in the process of reforming its Th e unemployment rate in the region for both men regional development policy and the governance sys- and women was 5.4% in 2011. Th e educational level in tem around it. Th e aim is to strengthen the role of the the region is lower than the Icelandic average, while the local governments (co-operating through the regional proportion of women with higher education is larger associations of local authorities) and to adopt a more than that of men in the region (Icelandic Regional De- holistic and integrated approach to strategic regional velopment Institute 2013). development, replacing the earlier and more ad hoc Th e population of South Iceland is concentrated approach to responding to challenges in specifi c areas along the coastline and the main national road of Ice- (interviews, 2014). land (Route 1) runs across the region, connecting the Th e central government will publish a national re- various parts with each other and with the capital area. gional development strategy in 2014, and the regions Th ere are also two airports in the area (Selfoss and will prepare their own regional development strategies Höfn í Hornafj örður) with domestic fl ight connections. based on this strategy and their own regional specifi cities. Based on these strategies, contracts will be made 3.3.3. Administrative structure and governance between the state and the regions as a basis for allo- Iceland has a two-level administrative system consist- cating state funding to regional programmes and pro- ing of the central government (national level) and mu- jects. Th e aim is to adopt an approach where the devel- nicipalities (local level). opment of a region is based on the specifi c challenges

36 NORDREGIO WORKING PAPER 2014:4 Figure 5: The region of South Iceland (Map design by Julien Grunfelder)

and potentials of the region as identifi ed by local and try in Iceland that in total contributes 26% of the Ice- regional actors. More decision-making power would landic GDP. Approximately one-fourth of the also be transferred to the regional associations of local resource-based exports in Iceland have been from the governments (interviews, 2014). fi shing industry. Th e marine sector is the most important sector in Iceland, with the greatest potential for 3.3.4. Bioeconomy in South Iceland the bioeconomy, while the potential for a land-based According to a study by Kemp Stefánsdóttir (2014), the bioeconomy utilizing the biological resources on land bioeconomy contributes to 13% of the entire Icelandic is lower in comparison with other Nordic countries GDP (2010). Th e majority of this stems from the ma- (Kemp Stefánsdóttir 2014). rine sector, which has traditionally been a basic indus-

NORDREGIO WORKING PAPER 2014:4 37 Figure 6: Illustration of the Icelandic deﬁ nition of bioeconomy (Source: Matís Ltd.)

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According to the interviewees, the Icelandic bioecono- low. Th ere is a good potential for increased value added my has good potential, especially for further process- in processing the products further instead of exporting of by-products from fi sheries and agriculture. Al- ing unprocessed raw materials (interviews, 2014). gae, and to some extent local forest resources, are the In Iceland, the bioeconomy has a good potential for only main resource in the Icelandic bioeconomy that is developing the regions located outside the capital re- not yet utilized. Th e main potential is therefore linked gion—85% of the workplaces in the bioeconomy are to more effi cient use of the existing resources as well as outside the Reykjavik region, and these comprise a sig- creating ways to utilize and process these resources to nifi cant part of the total number of workplaces in the create higher value added (interviews, 2014). regions (Interviews, 2014). Th e potential is high, not only when it comes to uti- In the South Iceland region, fi gures or estimations lizing unused material but also in developing ways to of bioeconomy potential and innovation as such are utilize the by-products in a way that creates more value not available. However, as noted above, fi sheries and added. In many cases, the by-products are already uti- agriculture are large and important sectors. Unlike lized, but the value added and the level of processing is Iceland as a whole, the region is strong in agriculture

38 NORDREGIO WORKING PAPER 2014:4 and has an important national role in the sector. Tour- that previously were wasted and to make them into ism is also expanding in the region, bringing new op- bouillon. In Hornafj ördur, the farmers co-operate with portunities and challenges. a local grocery store that supplies them with waste to Th is case study focuses on bioeconomy innovation use as feed and fertilizer which is another example of in the South Iceland region related to fi sheries and ag- an activity aiming to increase resource effi ciency. (in- riculture, and in particular to food innovation. Food terviews, 2014) innovation has been promoted in the region by the state-owned Matís Ltd., Innovation Centre Iceland, as 3.3.5. Policy framework and main actors well as local and regional actors. Th e innovations de- Iceland has traditionally been dependent on natural veloped in agriculture and fi sheries and food innova- resources, but the idea of promoting innovative ways tions are oft en small in scale but may have the potential to utilize the existing resources more effi ciently to in- to contribute to the development of companies and the crease the added value of the product has systemati- regional economy as well as to increase the effi ciency of cally been prioritized at the national level since the the use of natural resources (interviews, 2014). early 2000s. A specialized national funding instru- Th e innovation activities related to food or agricul- ment to increase the value of marine products (AVS) ture and fi sheries are based on both product and pro- was established in 2002. Th is illustrates the govern- cess innovations. Th ere have been many small-scale in- ment’s wish to stimulate further processing of fi sh novation activities taking place in the food innovation products, which is an important part of the Icelandic centres of Matís. Th ese include developing ways to ex- bioeconomy (interviews, 2014). port cod liver, developing green “kale snacks”, “potato Currently, bioeconomy activities are prioritized as chocolate” and other innovative snack products, dried an important area for national funds for R&D. Moreo- fi sh products as souvenirs, raw goat sausages and the ver, in the national business strategy that is currently development of hot smoked mackerel products. Fur- in preparation, the bioeconomy is expected to have a thermore, the farmers in the region are interested in central role. One of the latest developments in bioec- the possibility of cultivating rapeseed in Iceland, and onomy policy has been the establishment of the bioec- one farmer is producing rapeseed oil while using the onomy as a main focus area of the Icelandic presidency waste from the production methods to produce feed of the Nordic Council of Ministers. Th e preparations for his livestock (interviews, 2014). began three years before the presidency year of 2014, Th e use of waste fl ows has been developed in con- and they were an important step for the development nection with fi sheries. Th ere was a development pro- of the bioeconomy in the country because during the ject on using fi sh waste as fertilizer, but the activity did preparation phase, all business sectors co-operated not continue aft er the project ended. However, some and agreed that the bioeconomy is a signifi cant oppor- of the fi sheries are currently supplying their waste to a tunity and an important issue for Iceland to prioritize fi sh oil producer free of charge, while they earlier had (interviews, 2014). to pay to dispose of the waste. Th e lobster industry is As a small country, most of the important policy- important in many parts of the region, and the com- related developments on the bioeconomy in Iceland panies have developed ways to utilize the lobster parts have taken place at the national level; even though the

Table 8: Examples of food-related innovation activities in South Iceland

Examples of food-related innovation activities in South Iceland

 Developing innovative ways to utilize and increase the added value from the by-products of ﬁ sh processing

 Developing new types of lobster packaging to enable more efﬁ cient transport

 Developing different types of small-scale food products to be sold to tourists and visitors and in some cases to export (e.g., sheep milk cheese, smoked eel, smoked mutton sausages, hot smoked mackerel, raw goat meat sausages, veg- etable snacks, smoked goose)

 Growing rapeseed (not traditionally grown in Iceland) and utilizing the by-products from rapeseed oil production

 Experimenting with using ﬁ sh waste as fertilizer

 Direct retailing of fresh fi sh from the local area to inhabitants, visitors and hotels (in most cases, it is only possible to buy frozen fi sh in supermarkets, even in fi shing villages)

NORDREGIO WORKING PAPER 2014:4 39 country is now aiming to strengthen the role of the omy has been central. In general, the regional actors subnational levels (see the following chapter on region- consider the Matís Food Innovation Centres crucial for al policy). Approaches to the bioeconomy have been the development of food innovation in their areas. It included in earlier strategies, such as the Iceland 2020 has been found to be important that the centres pro- strategy of 2011, which among other priorities empha- vide not only business support and consultancy but sized the importance of eco-innovation. According to also opportunities for companies to “get their hands a Nordic Innovation report entitled Innovation in the dirty” and in practice develop products in co-opera- Nordic Bioeconomy, the Iceland 2020 strategy is an tion with the Matís experts (interviews, 2014). important policy document for developing the bioec- Some of the municipalities in the region have active- onomy, but according to the interviews conducted in ly supported the work of Matís. For example in Hor- connection with this case study, the strategy is no long- nafj ördur, the municipality has supported Matís fi nan- er in all cases very actively followed in policy-making cially and has provided a house for testing facilities at a or implementation. Th ere was a change of government lower rent. In Hrunamannahreppur, the municipality following the elections of 2013, and the strategies and is attempting to include more neighbouring munici- plans of the new government are still being prepared palities to support the local food innovation centre to (Prime Minister’s Offi ce 2011; Interviews 2014; Nordic ensure that it is possible for the centre to continue its Innovation 2014). activities in the area (interviews, 2014). Th e establishment of Matís Ltd. in 2007, merging Th e University Centre of South Iceland, owned by three previous research institutes, has been a stepping the municipalities of the region, is also becoming an stone in developing the bioeconomy, and the role of the increasingly important actor in food innovation in the institute in the development of the Icelandic bioecon- region. It already provides the inhabitants with op-

Table 9: Matís – Icelandic food and biotech R&D

Matís—Icelandic food and biotech R&D

Matís is a government-owned, independent research company, founded in 2007 following the merger of three former public research institutes. The company supports the industry and government in improving the way in which limited resources are used and minimizing generation of waste by improving utilization.

Matís focuses on the development and improvement of methods of sustainable production and utilization of products to stimulate innovation and the economy, and to reduce strain on the environment. The company also helps businesses in the food and biotech industries to increase the value of food processing and food production through research, development, and dissemination of knowledge and consultancy, as well as to ensure the safety and quality of food and feed products.

Approximately 100 people are employed in Matís’s ofﬁ ces, laboratories or food innovation centres located in eight cities or towns around Iceland. The turn-over in 2013 was around $USD11.5 million, of which 30% comes from the Icelandic Government.

Matís’ employees include many of Iceland’s most competent scientists in the ﬁ elds of food technology, food research and testing, and biotechnology. Matís’ specialized ﬁ elds include bioeconomy, biotechnology, enzyme isolation, processing technology, traceability, genetic analysis, chemical and microbiological testing, investigating the physical and chemical properties of food, quality and safety of aquatic and marine catches, and feed technology for aquaculture and environmental research.

Main assignments:

 Analysis and consulting

 Biotechnology and biomolecules

 Food safety, environment and genetics

 Resources and products

Website: www.matis.is/english

40 NORDREGIO WORKING PAPER 2014:4 portunities to participate in distance studies at many the local economy is greatly dependent on the geother- universities around Iceland, and it has contributed to mal water supply. Now the ambition of the municipal- increasing the education level of the region. At the mo- ity is to promote innovations in the greenhouse indus- ment, it is preparing a specifi c education programme try with the help of the Matís food innovation centres (two-year diploma education) in food development as a way to increase the value added from the industry and innovation. Th e programme will be developed in (interviews, 2014). co-operation with companies that can participate in shaping it to fi t their needs and those of their employ- Co-operation between actors ees who participate. Th e programme is funded by the Matís has been especially actively in promoting co-op- municipalities and the companies that pay for their eration between actors in the local communities. Matís employees’ participation. Matís also has an important has the capacity to work with local companies and em- role here, as its experts will organize the content of the ployees, and to encourage and support their innovative courses (interviews, 2014). ideas. It is emphasized that it is much easier to start Th e Regional Association of Local Authorities in developing new ideas if support and the facilities need- the region (SASS) also provides business with support ed are available “next door” instead of Reykjavík. Th is and helps companies with innovative ideas to “take the link between the public R&D institute Matís and the next steps”, and in that way also contributes to devel- private sector SMEs has been found to be essential. In oping the bioeconomy. Among other functions, it as- many cases, it seems that that the opportunities for in- sists companies with strategic budgets and marketing creased innovation activities are considered to be high- plans. SASS has offi ces in several parts of the region ly dependent on whether Matís (and its food innova- and co-operates with Matís in reaching out to the tion centres) and/or Innovation Centre Iceland are smaller, more remote municipalities with few innova- physically located in the local area (interviews, 2014). tion activities and encourages innovation by providing Matís has actively encouraged parties such as farm- education and courses. When Matís can provide the ers or food processing companies to develop their ideas content expertise concerning food development and further and has encouraged more people to use the innovation, SASS has the resources to help the compa- food innovation facilities. Th is has not always proved nies with project applications so that they have oppor- to be the most suitable approach because it is diffi cult to tunities, for example, to develop their products further activate people who lack the drive and interest to con- with help from Matís (interviews, 2014). tinue with their ideas aft er the fi rst stages. Th erefore, Matís now focuses on fi nding people with innovative 3.3.6. Enabling conditions food development ideas and matching them with those who have access to the necessary materials (farmers Natural resources and fi sheries). Th is approach is expected to yield better Access to natural resources provides a good basis for results, and it may also promote co-operation between developing the bioeconomy of South Iceland. Th e reactors. However, it is stated that it would be desirable gion has a strong tradition of agriculture and fi sheries, if the municipalities and other actors in the local com- which provide a basis for innovative activities to pur- munities to participate more actively in promoting sue goals such as increasing the effi ciency of resource food innovation and attracting the inhabitants to use use or the value added of products. Th e bioeconomy is the food development facilities (interviews, 2014). of particular interest for a country like Iceland, which As an example of good practice, the Nyheimar house cannot compete with other European countries in ar- in Hornafj ördur promotes co-operation between dif- eas such as industry and relies on its natural resources. ferent types of actors and has successfully created links Increasing the level of processing of natural resources between actors at the local, regional and state levels. In and thereby increasing their profi tability therefore has the house, they have the opportunity to work together. good potential for Iceland. Th e profi tability of develop- Th e offi ces include employees from organizations such ing the value added of natural resources is an impor- as Matís, the Innovation Centre Iceland, the University tant factor driving the development and increasing in- Centre of the University of Iceland, and companies in terest in the bioeconomy of Iceland (interviews, 2014). need of offi ce space to develop their businesses (inter- Th e access to energy from geothermal hot water is views, 2014). another natural resource-related driver of the bioeconomy. For example, the greenhouse industry is impor- Funding tant for the municipality of Hrunamannahreppur, and Funding from the state level through the Innovation the development of the greenhouse industry and thus Centre Iceland and other organizations is an important

NORDREGIO WORKING PAPER 2014:4 41 driver and is especially necessary for smaller compa- in the region in strengthening the link between tour- nies. Funding is available particularly for the starting ism and local food production (interviews, 2014). stages of innovative initiatives as well as for exporting. Funding can be applied for from national cross-secto- 3.3.7. Impeding factors ral funds for research and development, general funds Some challenges for the development of bioeconomy in for purposes such as agriculture or specifi c funds such Iceland and in the South Iceland region in particular as the AVS fund (for increasing the value of marine have also been identifi ed. Some of these challenges are products). Th e municipality of Hornafj ördur has in- specifi c to the South Iceland region and are related to vested in innovation in its territory by establishing its its specifi c characteristics, while others are more gen- own fund for innovation, which has functioned as a eral. driver for innovative projects in the area (interviews, One of the impeding factors identifi ed by many of 2014). the interviewees is related to company culture or in- In 2014, Matís has had access to funding from the novation culture. Th e companies are oft en small, and Icelandic Nordic Council of Ministers’ NordBio presi- therefore they prioritize a focus on their core business. dency programme, which among other provisions al- Th is has been found to have an eff ect on the innovation lows Matís to support companies in their food develop- culture. Th erefore, encouragement from experts and ment ideas without each company applying for funding their help in applying for funding and handling the re- separately. Th e NordBio programme as such consists lated bureaucracy are essential to promote innovation of various projects involving several sectors, and in- (interviews, 2014). novation and sustainability in food production are important areas under the “Innovation in the Nordic Policy and governance bioeconomy” project. Th e current subproject on food In terms of policy and governance-related aspects, it innovation that Matís is implementing is a pre-project, has been noted that the Icelandic governance system and in future, the project will be extended to all Nordic with majority governments can have a negative eff ect countries (interviews, 2014). on strategic working, as changes in government oft en In the spring of 2014, Matís made an open call for result in the cancellation of plans and programmes es- ideas. Th e applicants described their specifi c challenges tablished by the previous government without a broad with their ideas, and Matís would then assist them. Th e political consensus (interviews, 2014). issues with which the applicants would need assistance Th e regional policy framework in Iceland has not cover a wide variety of specifi c problems in areas such been a strong focus area, but it is now being reformed as packaging or measuring and testing products. Usu- (see chapter 2). Th e aim of this policy reform is to es- ally, the companies have to apply for funding separate- tablish regional development strategies based on the ly, with assistance from Matís and SASS, but this new potential and challenges identifi ed by local and region- approach decreases the bureaucracy and increases effi - al actors. (interviews 2014) ciency as it removes several steps. Th erefore, Matís has However, formulating and implementing regional also applied for funding from the central government policy is challenging in a country with a small popula- to continue this approach (interviews, 2014). tion and a low population density. Many regions (including the South Iceland region) are geographically Synergies between sectors large with very diff erent types of areas in terms of fac- Th ere are already clear interrelations and synergies be- tors such as population density, economy and proxim- tween the sectors of fi sheries and agriculture in the re- ity to Reykjavík. (interviews, 2014) gion in terms of activities such as utilizing waste In South Iceland, developing a joint strategy for the streams. Th e regional actors also link the development entire region will be challenging, as the parts of the of food innovation to the development of tourism. Ag- region have very diff erent characteristics and so have riculture in Iceland has previously focused on mass diff erent potentials and needs. For example, the town production intended to make Iceland self-suffi cient, of Selfoss is nearly an urban area close to Reykjavík, but now there is expected to be potential in exports, whereas most parts of the region along the south coast and in particular in selling products to tourists. Food are extremely sparsely populated rural areas with small innovation has great potential in connection to in- settlements. However, because of the sparse population, creasing tourism, and it has been noted that many local it is not possible to make specifi c plans for the various hotels and restaurants already use local food products. parts of the region either, as many large areas have very Many of the food innovation products developed are few inhabitants. From a regional development perspec- sold particularly to tourists, and there is clear interest tive, this is a governance challenge for developing a

42 NORDREGIO WORKING PAPER 2014:4 bioeconomy in a large and varied region with sparse companies should build their markets in Iceland (in- population (interviews, 2014). terviews, 2014). From a policy perspective, it has also been noted In food innovation, the level of innovation required that although the expanding tourism sector brings by the Innovation Centre Iceland for funding can also great opportunities—for example, by creating markets be a challenge. Th e requirement for the novelty of the for food innovation—policymakers need to ensure that product can be too ambitious in cases where the idea is confl icts between sectors do not arise over increasing not entirely new (which is oft en the case in food inno- tourism. For example in land use planning, there is a vation) but may still have the potential to contribute to need to consider the sustainability of tourism and to the local economy, for example when new methods are ensure the availability of good land for agriculture (in- applied in the local context (interviews, 2014). terviews, 2014). It has also been emphasized that a lack of public funding resulting from the fi nancial crisis is naturally Human resources a barrier for the development of bioeconomy. Th ere is In South Iceland, the lack of an educated labour force is a need to increase the availability of funding both for identifi ed as a factor with a negative infl uence on in- companies and for regional development in general novation. Th e education level in the region is below the (interviews, 2014). It has also been noted in a report Icelandic average, which is why the competence of the from Nordic Innovation on Nordic bioeconomy that experts from Matís and Innovation Centre Iceland is the Icelandic market is characterized by small compa- considered to be very valuable in the region. Th ere is a nies with limited resources where access to fi nancing University Centre providing distance learning oppor- oft en is the main barrier to innovation. tunities in many locations across the region, but the competence supply could be strengthened by interna- 3.3.8. Concluding remarks tional co-operation and networking with international Th e region of South Iceland has a long tradition of pri- experts (interviews, 2014). mary production in agriculture and fi sheries, and the Th e local communities are very small; therefore, they interviewees are positive about the potential of the re- are vulnerable to out-migration of individual employ- gion to increase the added value of the biomass materi- ees, and it is oft en not possible to fi nd new people to fi ll als of agriculture and fi sheries. Th ey also fi nd potential positions. Since Matís’s previous expert in Hornafj ör- for using the resources more effi ciently and utilizing dur moved, nobody else has been employed, which is waste fl ows. Th ese factors can increase the value of eco- also related to the resources of Matís. At the moment, system services for the regional and local economies of it is unclear whether there will be a new employee in South Iceland. Hornafj ördur, but the municipality is working actively Innovation is central for contributing to the develop- to make it possible (interviews, 2014). ment of the bioeconomy and fi nding ways to increase Another example concerns the lobster cluster of the added value of goods such as agricultural products. Iceland, where a very active employee at the Regional Food innovation is particularly relevant to the rural Association of Local Governments (SASS) was co-or- and sparsely populated region of South Iceland, as it dinating the joint R&D projects of the lobster compa- can build on local competences and knowledge of pri- nies. Since the employee resigned, the lobster cluster mary production but does not necessarily require high has been much less active. Th e small size and lack of technology competence or facilities. Th ese factors make critical mass mean that in-migration or out-migration food innovation ideal for this type of rural region, even of an individual highly qualifi ed employee can have a though the generally low education levels still hinder signifi cant impact (interviews, 2014). development. In South Iceland, innovative approaches have been taken to both developing new food products Funding and utilizing waste streams. Some challenges concerning the availability of funding Th e innovative projects in South Iceland are mostly were highlighted by the interviewees. As noted above, not based on high technology or entirely novel innova- funding is accessible in the fi rst stages of innovation tions. Instead, they are small-scale innovations where processes as well as in the export stages. However, there the role of local knowledge and the competence of the is a gap in scaling up innovation, and it is diffi cult to local people are central. However, although the inno- obtain funding for purposes such as buying machinery vations are oft en small in scale, they are important for or marketing. It is important to have funding for the the local and regional economies, as they have the po- intermediate stages between the fi rst idea and export, tential for positive outcomes, such as increased profi ts. as it has been found that oft en before they can export, At the same time, utilizing the biomass more effi ciently

NORDREGIO WORKING PAPER 2014:4 43 also contributes to improved environmental sustain- in the summer of 2014, but it is clear that these alterna- ability. Th is clearly illustrates how developing bioecon- tive ways of funding and supporting companies may omy does not necessarily have to rely on high technol- have signifi cant potential especially for food innova- ogy and advanced large-scale solutions. It shows that tion in SMEs. local solutions based on local knowledge can also be At the national policy level, the regional policy important in their specifi c context. In South Iceland, framework is currently under revision, and it seems companies also have a great need for outside expertise that the new regional policy approach could be benefi - and support to engage in innovative activities. Th is is cial for developing the bioeconomy. Th e framework is related to both the small size of the companies, chal- intended to move away from sector-based policy-mak- lenges in human resources and the overall low educa- ing towards a more cross-sectoral and holistic regional tion level. Th e importance of the experts representing development approach, which is well in line with the the national-level actors, Matís and Innovation Centre integrated and cross-sectoral approaches that are re- Iceland, is continually emphasized, and the innova- quired to develop the bioeconomy. Another aim of re- tion potential of the region is found to depend on their forming the regional policy framework is to strengthen presence in the region close to where the companies are the role of the local and regional levels and to decen- located. tralize policy-making, which may further contribute to In the case study, it becomes clear that in addition ensuring that regional policies are properly anchored to providing expertise and support in local communi- in the characteristics and opportunities of each re- ties, policy-making in rural regions also needs to focus gion. Th is would also be benefi cial for developing the on educational factors such as developing the skills and bioeconomy where knowledge of the local and regional competences of the local companies. In South Iceland, needs and potential is needed. an education programme at the University Centre has been planned. Th e planned programme will focus on 3.4. Østfold County, Norway food development and will be fi nanced by the municipalities. Th is could be an important step in increasing By Ingrid H G Johnsen the competence level in the food industry. In addition to the need for consultancy and sup- 3.4.1. Introduction port, the companies with innovative ideas also re- Th is case study focuses on wood processing as part of quire access to funding. Th is is particularly essential the bioeconomy of Østfold County in Norway, and spe- in predominantly rural areas that are mainly based on cifi cally on one of the world’s most advanced biorefi n- primary production, such as South Iceland, because eries, Borregaard. most companies are very small and have very limited Th e European Commission refers to the bioecono- resources. In general, the funding available from the my as an important element of Europe’s reply to the state is an important driver of the bioeconomy in the challenges ahead regarding concerns such as limited region. However access to funding for scaling up pro- and fi nite natural resources and climate change (Euro- duction and marketing has been lacking, which has pean Commission, 2014). Th e bioeconomy encompass- created a gap in fi nancing. It has also been noted that es the sustainable production of renewable resources the requirements for funding for innovations may in from land, fi sheries and aquaculture environments and many cases be too strict and thus not suitable for food their conversion into food, feed, fi bre bio-based prod- innovation projects. If the bioeconomy in rural regions ucts, and bioenergy as well as related public goods. It is to be promoted, it is important to ensure that suit- includes primary production, such as agriculture, for- able funding instruments are available not only for estry, fi sheries and aquaculture, and industries using/ projects with very high overall innovation value but processing biological resources, such as the food and also for those that are innovative in their own regional pulp and paper industries, and parts of the chemical, contexts. biotechnological and energy industries. Th e subproject of the NordBio project (within the According to a study on the bioeconomy of the Nor- Icelandic Nordic Council of Ministers Presidency dic countries (2014), the forestry industry comprises programme) is a good example of an approach where 14% of the total bioeconomy of Norway (Nordic Inno- support is made available for companies with less bu- vation, 2014, p. 15). Th e forestry industry is a generic reaucracy and increased effi ciency. In this project, term used for a large group of industries that all have companies can apply for direct assistance and support wood as their main raw material. Th e industry can be from Matís, which has been granted funding for this divided into two main groups: (1) timber/lumber, and purpose. Th e outcomes of the projects will be presented (2) pulp/paper.

44 NORDREGIO WORKING PAPER 2014:4 Over recent years, the pulp and paper industry has vices, Agriculture & Food, Fisheries & Coastal Aff airs, struggled with low profi tability for reasons such as Trade & Industry, and Environment, as well as Th e tougher market conditions and tighter regulations. Norwegian Research Council and Innovation Norway, Th is has resulted in multiple closures and layoff s. led the strategy development. Greater competitiveness and profi tability is vital for Th e National Strategy for Biotechnology (2011–2020) the wood-processing industry to adjust to new market has its origins in the research report (White Paper no. conditions, and there has been a focus on upgrading 30, 2008–2009), where it was determined that a bal- the industry towards more sustainable and innovation- anced strategy for fundamental research, industrial re- intensive activities that can contribute to resource search, and the development and commercialization of effi ciency, including reduced costs and a smaller en- biotechnology should be developed. Th e strategy iden- vironmental footprint. Such a shift involves moving tifi es four thematic priority areas where biotechnology away from classical mass production towards a highly can address social challenges and where Norway has knowledge-intensive and innovation-oriented indus- national advantages. Th e four areas are as follows: try. Østfold is the home of the biorefi nery, Borregaard,  Aquaculture, seafood and management of the ma- which is located in the county’s administrative seat, rine environment Sarpsborg. Biorefi neries produce bio-based chemicals,  Agro-food and biomass production biomaterials, biofuels and bioenergy from bio-based  Environmentally friendly industrial processes and raw materials, side streams and waste in highly opti- products mized and resource-effi cient processes as a part of local  Health, health care and health-related industries and global value chains and business ecosystems (Nor- dic Innovation, 2014). Borregaard has developed from a Th e main aim of the strategy is not only to ensure con- traditional wood-processing company to an advanced tinued investment in research, development and the manufacturer of bio-based chemicals. Th is makes it commercialization of biotechnology but also to ensure an interesting case that illustrates how companies can that biotechnology is applicable in various sectors change their knowledge base and make a transition to across the country. To achieve this, there is a need for the bioeconomy. A relevant question in this regard is updated regulations, good interaction between re- the role of the regional support system and the extent search and technology communities and those who ap- of regional spill-over. Th is case study focuses on identi- ply the knowledge, and good interaction between re- fying the key network actors linked to wood processing search and society. and the role of the region in supporting the develop- Wood is an important natural resource in Norway, ment of this sector. with the pulp and paper industry being the sixth larg- Th e fi ndings of the report are based on secondary est industry in Norway, accounting for approximately sources and qualitative interviews with representatives 6% of total national exports (Oxford Research, 2013). from the Country Council and Borregaard. Th e next However, over recent years, the sector has struggled section provides an overview of the policy framework with low profi tability, and employment throughout related to the bioeconomy of Norway. Th e overview the forest industry has fallen drastically. Th is particu- is followed by a description of the Østfold region, in- lar crisis places great focus on the development of ad- cluding the administrative structure, including a more vanced material technologies and their commercializa- detailed description of the development of the wood- tion, involving a shift from classical mass production processing industry and Borregaard as a relevant case towards a knowledge-intensive and innovation-orient- in this regard. Th e last two sections conclude the fi nd- ed industry (Ibid.). Such a shift has been encouraged ings and discuss the opportunities and challenges for through research, development, innovation and invest- the region to develop the bioeconomy further. ment projects directed towards the forest industry and fi nanced by the companies but is also supported by the 3.4.2. Policy framework Research Council of Norway, Innovation Norway and Norway has particularly strong competences in the bi- other actors. otechnology fi eld, and its long-term strategy is to create Innovation Norway, a state-owned company work- a knowledge-based economy using renewable raw ma- ing to promote innovation and development of Nor- terials from the agricultural, forestry and marine sec- wegian enterprises and industry, supports bioeconomy tors. Th is is specifi cally stated in the National Strategy activities through a network called Industrial Biotech for Biotechnology. Th e Ministry of Education, in col- Network Norway. Th e network comprises 36 actors, in- laboration with the Ministries of Health & Care Ser- cluding Innovation Norway, the Research Council of

NORDREGIO WORKING PAPER 2014:4 45 Norway and SIVA (Th e Industrial Development Cor- higher population density (Østfold Analyse, 2014a). poration of Norway). Th e network’s main task is to con- Furthermore, although agriculture makes up an im- tribute to increased innovation through cross-sectoral portant part of the economic activity in the region, co-operation, dissemination of knowledge, and stimu- 83% of the population live in urban areas (Ibid.). lating new projects and industrial partnerships. Th e Norway is divided into 160 functional labour mar- network is instrumental in realizing the Government’s ket regions (Gundersen and Juvkam, 2011). Borregaard national strategy for biotechnology, and it establishes is located in Sarpsborg, which is part of the functional contact with international research institutions and labour market region of Fredrikstad/Sarpsborg, which markets. SIVA especially works to connect communi- includes Hvaler, Rakkestad and Råde. (NIBR report ties on the regional, national and international scenes 2013:1). While Fredrikstad/Sarpsborg is the core of so that they can work together to fi nd solutions to the its own labour market region, a signifi cant number challenges related to activities such as food production, of people commute to Oslo from these cities. For in- raw material shortages, environmental pollution, ener- stance, in 2009, 14,213 people commuted from Østfold gy supply, and climate change. New technologies, espe- county to other domestic counties, while 6,713 com- cially biotechnology, and the need to replace petroleum muted to Østfold country from other domestic coun- with renewable raw materials are the two main driving ties. In addition, in 2008, 2,096 people commuted from forces behind the focus on bioeconomy in Norway. Sweden to Østfold and 310 people from Østfold to Swe- Innovation Norway also has three support schemes den (Østfold Analyse, 2014b). Th is demonstrates that related to bioeconomy; namely, programmes on en- Borregaard is located in a region that belongs to a large vironmental technology, biorefi neries and bioenergy. functional labour market, including the capital region Th e programme on environmental technology pro- of Oslo. vides subsidies for Norwegian companies for estab- Traditionally, Østfold has been dominated by man- lished projects focusing on purifi cation, environmen- ufacturing industries; however, there have been major tally friendly products and production processes, more changes in industry structure over the past 30–40 years, effi cient resource management, and technology sys- where the county has gone from being dominated by a tems that reduce environmental impact. Th e biorefi n- large processing industry (including wood processing) eries programme provides support for companies in an and commodity production to having a more diverse early pilot phase of processing biomass. Finally, the bio employment structure. In manufacturing, the number energy programme is intended to encourage agricul- of jobs has decreased by more than 10,000 over the past tural and forest users to produce, to use and to supply 25 years. Moreover, while there has been a decline in bioenergy in the form of fuel or heat. manufacturing employment and to some extent in pri- Th e Research Council of Norway also focuses on mary industries and transport/communications sec- the bioeconomy through the BIONÆR programme. tors, there has been an increase in the number of jobs Th e scope of BIONÆR does not cover the entire bio- in all other sectors. Th e largest growth has been in the economy, and there are other programmes and fund- public service, merchandising, fi nancial and commer- ing instruments through the Research Council that cial activities and private services. provide funding for research activities that concern the Although Østfold has seen the sharpest decline in bioeconomy. the number of jobs in manufacturing, the population is growing, and there is a large net infl ow from other 3.4.3. Description of the region counties to Østfold (Vareide and Storm, 2012). It is Østfold County is situated in south-eastern Norway, the attractiveness of the county as a place of residence bordering Akershus and south-western Sweden (Västra that is the main driver of Østfold’s population growth Götaland County and Värmland), and covers an area (Hauger, 2011). However, there is a defi cit in the num- of 4,182 km2. It is one of the 19 NUTS 2 regions in Nor- ber of jobs in the region, especially related to manage- way and part of the larger NUTS 3 region of Sør-Øst- ment and academic professions. Approximately 30% landet (NO03) together with the counties of Buskerud, of the labour defi cit is related to workplaces occupied Vestfold and Telemark. by people with university or college degrees. It is par- Th e total population of Østfold County is approxi- ticularly in the natural and engineering sciences, social mately 285,000, with Sarpsborg and Fredrikstad com- sciences and law that the labour defi cit is greatest and prising the fi ft h largest urban area in Norway (with a has increased the most in Østfold over the past 10 years total population of approximately 130,000). Østfold is (Ibid.). As a consequence, many people choose to com- relatively densely populated, with 70 people per km2. mute to the neighbouring regions to work (e.g., Oslo Only Oslo, Akershus and Vestfold Counties have a and Akershus in Norway or Västra Götaland County

46 NORDREGIO WORKING PAPER 2014:4 Figure 7: Østfold County (Map design by Julien Grunfelder)

and Värmland in Sweden). Figure 8 provides an over- correspond to those of the municipalities: county coun- view of Østfold County and its municipalities. cil (municipal council), county executive board (municipal executive board) and chairman of the county 3.4.4. Administrative structure council (mayor). Some counties also have a county Norway is divided into two administrative levels in ad- government. Among the counties’ duties are mainte- dition to the central administration: counties and mu- nance of county roads, planning and support for public nicipalities. Both of these administrative levels are gov- transport, secondary education, public health, cultural erned by elected bodies, county and municipal councils. heritage, cultural work, regional development and land A council and a mayor head each municipality. management. Th e county council is responsible for maintaining At the national level, it is the Ministry of Trade and some public management and service-producing tasks Industry that has overall responsibility for industrial within the county. Th e county council is directly elect- and innovation policy. Th e Ministry’s overall objective ed by county residents at the municipal and county regarding business and innovation policy is to promote elections. Th e politically elected bodies of the county value creation in the Norwegian economy. In White

NORDREGIO WORKING PAPER 2014:4 47 Paper No. 7 (2008–2009) entitled “An innovative and 3.4.5. Development of a bio-based wood- Sustainable Norway”, it is stated that industrial poli- processing industry cies are related both to research and education policy Traditionally, wood processing has had a stronghold in and to rural and regional policy. Th e white paper is the Østfold County with three large factories—Borregaard fi rst in which the Government promotes guidelines in Sarpsborg, Norske Skog Saugbrugs in Halden and for initiatives to facilitate long-term sustainable value Peterson2 in Moss. Th ese factories mainly have pro- creation. In the paper, it is stated that sustainable value duced paper pulp, wood-based chemicals and wood fi - creation will be achieved by promoting: bre. However, in recent years, multiple closures and sales in the Norwegian pulp and paper industry be-  a creative society with good conditions and a good cause of increased global competition and low profi ta- climate for innovation, bility have characterized the industry. For instance,  creative people who are able to develop their resourc- Norske Skog, which is one of the largest and most modes and expertise and put them into practice, and ern production units for newsprint and magazine pa-  creative enterprises with public and private organi- per in the world, has been forced to shut down its activ- zations that develop profi table innovations. ity in the plant in Follum in central and eastern Norway. Borregaard, on the other hand, has moved away from Th e various ministries’ objectives, initiatives and in- paper production and has instead upgraded its knowl- struments constitute the framework that is referred to edge base and invested heavily in the chemicals mar- as the innovation system. Th e various ministries gener- ket. ally use the same instruments, such as Innovation Nor- Borregaard, headquartered in Sarpsborg, operates way (the Norwegian Government’s instrument for in- globally and has subsidiaries in 20 countries. It has a novation and development of Norwegian enterprises turnover of 500 million EUR3 and has 1,050 employees and industries), the Research Council of Norway, SIVA in plants and sales offi ces in 16 countries throughout (the Industrial Development Corporation of Norway, Europe, the Americas, Asia and Africa. dealing with the establishment and development of in- Th e Kellner Partington Paper Pulp Co. Ltd. was es- novation networks consisting of business parks, incu- tablished in Manchester in 1889, and the construction bators and science parks), and the county councils in of pulp and paper mills in Sarpsborg started soon aft er- promoting and managing their programmes and initi- wards. Th e fi rst pulp mill was completed in 1891. Th e atives, and public funding agencies that play an impor- early years were characterized by strong development tant role in the regional economic development. Th e and by the construction of mills, a carbide plant and four main public stakeholders are as follows. a hydropower plant. In 1909, Borregaard was already Norway’s largest industrial employer. In 1918, the com-  Innovation Norway pany was bought by Borregaard for 100 million NOK.  Th e county council Th is purchase was designated a major national event  Th e county governor in which the Forest Owners’ Association played a key  Th e municipalities role. Hjalmar Wessel became the fi rst director general of the company. Borregaard bought Denofa–Lilleborg Th e various public stakeholders have diff erent focus ar- (a Norwegian industrial company that produced oil eas and priorities but seek a synchronized regional de- and fatty acids for food processing, among other pur- velopment through co-operation in joint ventures poses) in 1959 and Stabburet (a Norwegian food pro- where possible and appropriate. Th e regions that see ducer) in 1975. the largest eff ect of the public support system are those In 1986, Borregaard merged with the chemical di- that succeed in regional co-operation between indus- vision of the Orkla Group (a Norwegian conglomer- try, government and other actors, and where the sup- ate operating in the branded consumer goods, alumin- port instruments can be utilized optimally based on an ium solutions and fi nancial investment sectors). Th e appropriate policy and innovation strategy. company was owned by the Orkla Group until it was listed on the stock exchange in October 2012.

2) Th e company was closed in 2012

3) 400 billion NOK

48 NORDREGIO WORKING PAPER 2014:4 Development towards knowledge-intensive activities energy and is completely independent of fuel oil. Th e High-cost countries are becoming increasingly inter- concentrated residues from the production processes nationalized and technologically advanced, and conse- are used for heat and power production, and the dilut- quently knowledge plays a key role in corporate com- ed residues are converted to biogas for its own heating petitiveness. Th e knowledge economy emphasizes purposes. In the end, only 2–3% of the raw material ex- “production and services based on knowledge-inten- its as waste. sive activities that contribute to an accelerated pace of Th e main strategy of Borregaard has always been to technical and scientiﬁc advance, as well as rapid obso- exploit the raw material in the best possible way. Th e lescence” (Powell and Snellman, 2004). Th is is espe- business model thus focuses on exploiting the whole cially relevant for Norwegian companies, many of bioresource for value-added products. Th e company which have a far higher cost than fi rms in most other develops and supplies specialty products for a variety countries. of applications in the specialty cellulose, lignin, fi ne Over the years, Borregaard has changed its prod- chemicals and food additive industries. Th e raw mate- uct base from cellulose for paper to the production of rial comes mostly from within a radius of 10 km from chemicals such as lignin and vanillin. In the 1980s, the the headquarters in Sarpsborg, avoiding expensive and company had already started to specialize its produc- environmentally harmful transport and creating jobs tion and to create a narrower product base. At the same locally. Nevertheless, transport/logistics comprise one- time, its production became increasingly complex. In third of the cost of raw materials. the 1990s, Borregaard restructured the world market By using natural, sustainable raw materials, Borre- by acquiring competitors in the lignin market. Th e gaard produces advanced and environmentally friend- background for this was that the market had become ly biochemicals, biomaterials and bioethanol that can dominated by small enterprises competing against replace oil-based products. Th e company also holds each other, which led to low profi tability. By acquiring strong positions in the market for ingredients and fi ne the competitors, Borregaard became suffi ciently large chemicals. Th e activities are related to many value to focus on research and development (R&D), and the chains in the business ecosystem, and the end products Sarpsborg headquarters became the centre of R&D. are not produced alone but in co-operation with, and Th e specialization strategy allowed the company to en- tailored for, the companies producing the end prod- ter markets with more stable and higher prices. ucts. Th e activities conducted in the headquarters in Th e company’s current product base can be divid- Sarpsborg are highly knowledge intensive, with a ed into four main groups: (1) cellulose, (2) lignin, (3) strong focus on R&D and ways to produce new and vanillin and (4) second-generation bioethanol. Th e sustainable products from wood. In line with its strate- products are made from both cellulose and lignin, and gy for specialization and increased value creation, Bor- unconvertible remnants are used for biogas production regaard invests considerable resources in R&D; 3–4% or for bioenergy. Th e main product from cellulose is of its turnover is used for innovation (compared with specialty cellulose, which is used in the production of 0.5% in the traditional wood-processing industries), cellulose ethers and acetates, and has markets in Eu- and 9% of Borregaard’s employees work in R&D. rope and Asia. Th e hemicellulose fraction is the raw Extensive investment in R&D is directed towards material used in the production of bioethanol, which the development of value-added products from renew- has markets in Norway and the EU. Of the bioethanol able raw materials. Th is explains how Borregaard has production, 80% is used by industry and 20% as bio- managed to upgrade its product portfolio and become fuel, which is a result of the market conditions for bio- a world leading biorefi nery. fuels in Norway. Lignin is sold around the world and at all quality grades, and it is the raw material for vanillin Product base production. Th e restructuring of the product base has been a gradual process, and the company has developed from pro- Regional and national collaboration ducing paper and pulp to becoming a spruce-based bi- Th e future competitiveness of the wood-processing in- orefi nery focusing on wood chemistry and other dustry is largely dependent on signifi cant research ef- selected niches of organic chemistry, using wood forts. Borregaard’s production and services are largely (mainly Norwegian spruce but also storm-felled wood based on R&D-intensive activities, which require ex- from Sweden) as the main raw material. Today, Borre- tensive expertise, knowledge, research skills and facili- gaard is one of the world’s most advanced and sustain- ties. Most of the R&D is conducted in the company’s able biorefi neries. Its production is based on renewable own laboratories, although research projects are also

NORDREGIO WORKING PAPER 2014:4 49 conducted in collaboration with the regional research The public support system organization Østfold Research as well as by other re- Because of its location close to the capital region, Øst- search institutions such as the NTNU and Sintef. How- fold does not receive district funds (“distriktsmidler”). ever, the concentration of knowledge and competence However, the county council receives regional develop- is largely limited to Borregaard, which employs highly ment funds that are allocated to projects that match the skilled engineers to work in its in-house R&D depart- priority goals and strategies in the regional development. Th e highly skilled employees are largely recruitment programme (Østfold County Council, 2012). One ed from abroad, and recruitment is facilitated by Bor- such priority area has been competence development regaard’s well-known international brand, which and investigating how the region can attract highly makes it easy to attract foreign employees to the region. skilled workers. Th e region also has a strategy for the Technicians who work in the plant in Sarpsborg, on the increased utilization of biogas. However, Borregaard is other hand, are oft en recruited locally. not involved in this project, as it mainly produces It is evident from the interviews that Borregaard is bioethanol for export to Switzerland. a highly self-suffi cient company and that there is lit- Borregaard has received extensive support from tle collaboration between the company and regional government schemes. Th e public support system has stakeholders such as the county council. However, Bor- been especially important for the development of new regaard contributes to the local environment through technology for the production of bioethanol and green a variety of development projects. One such project is chemicals from biomass, because the development of its collaboration with the local high schools through bioethanol is still characterized by high costs and tech- the initiative called Kunnskapsfabrikken (“the Knowl- nological risks. One way that Borregaard has managed edge Factory”). Th e Knowledge Factory is a place where to distribute this risk is to rely on a diverse product Borregaard welcomes visiting students from middle portfolio of value-added products, with bioethanol be- schools and high schools. Th e plant is designed to be ing one important by-product (Klitkou, 2013). a showroom for Sarpsborg and Borregaard’s history, Innovation Norway is the strongest support in- production and end products, and demonstrates edu- strument of the public sector, and Borregaard is part cational and career paths linked to a career at Borre- of its regional board. In 2010, the company received gaard. Th e initiative is an important measure for com- 58 million NOK from Innovation Norway to support petence development and future recruitment of local construction of the BALI Biorefi nery Pilot plant for young people. Furthermore, Borregaard has sponsored second-generation bioethanol in Sarpsborg. Th e back- the Ispiria science centre in Sarpsborg, a learning cen- ground for receiving the funding was the development tre focusing on mathematics, science and technology. of new technology to produce biofuels and valuable Th e aim is to encourage more young people to choose green chemicals from forest waste, straw and wood science, as well as to highlight the importance of an chips. Th e goal was to recover the tree-strengthening understanding of, and knowledge about, science and material lignin from almost any wood-based raw ma- technology. terial. In 2014, Borregaard received an additional NOK Borregaard is collaborating extensively with organi- 18.8 million in support through the BIONÆR pro- zations outside the region. To recruit highly trained gramme, administered by the Norwegian Research engineers, the company has established a trainee pro- Council (Borregaard, 2014). gramme together with the NTNU in Trondheim. Th e In 2009, Borregaard received public funding to con- summer trainee programme in process chemistry wel- duct a life cycle assessment study of cellulose, ethanol, comes four to six students each year to work in Borre- lignin and vanillin together with Østfold Research gaard’s research labs. (Klitkou, 2013). In the same year, Borregaard received Th e regional collaboration also involves local forest 19 million NOK from the Research Council of Norway owners, who provide Borregaard with raw material for for a fi ve-year project entitled Biomass2Products. Th e their production. Th e competitive advantage is thus main objective was to develop a biorefi nery concept for based on proximity between the suppliers in the region production of marketable products and cost-effi cient and the large industrial companies like Borregaard. processes for production from biomass. Th e project in- Among other advantages, this contributes to effi cient volved research partners from NTNU, the independent trading of timber and lower transportation costs than research organization Sintef, and the Norwegian Uni- in other counties. However, there is still little collabo- versity of Life Sciences (NMBU). In the same year, Bor- ration between Borregaard and other related compa- regaard received NOK 35 million in EU FP7 funding nies in the regional business environment. for two project proposals sent in response to the Joint Biorefi nery Call (Ibid.). Borregaard has used some of

50 NORDREGIO WORKING PAPER 2014:4 the funding to build the BALI plant. exploitation subsystems linked to global, national and Th ere have also been more extensive eff orts to de- other regional systems (Cooke, 2004). Th e cluster con- velop the biorefi ning industry in Østfold. Innovation cept is narrower than the RIS concept because clusters Norway at one point initiated the development of a tend to be sector specifi c, while an RIS can encompass biorefi nery cluster through the Norwegian Centres of multiple sectors. Oft en, clusters and RISs coexist in the Expertise Programme (NCE), which is intended to en- same territory. hance clusters. However, the process was stopped aft er Although Borregaard itself possesses many of the a clear recommendation from Borregaard that the NCE characteristics of a cluster in that the company has programme would not be benefi cial for the develop- research divisions, fi nancial institutions, and connec- ment of the industry. tions with the public support system and with higher While Borregaard has the advanced technology and education actors, there is no established regional clus- knowledge to develop by-products such as bioethanol, ter related to biorefi ning in Østfold. Th e reason for this it is still dependent on public support both to fi nance is that Borregaard is only one company, while a clus- the initial stages of the product development process ter is normally linked to other companies within the and to drive the development of alternative and envi- same industry. Furthermore, the company itself con- ronmentally friendly products. Its location in Norway trols most of the value chain, and there is weak col- creates challenges in terms of high wood prices as well laboration with actors such as other companies and re- as the Norwegian government’s unpredictable biofuel search institutions in the region. One could argue that policy, which lacks incentives for producing products the activities of Borregaard are more integrated with such as bioethanol. the national innovation system, where innovation ac- Th e projects that have been supported fi nancially by tivity takes place in co-operation with actors outside the public support system are also fi rmly based on co- the region, such as science parks with R&D depart- operation with other research institutions and can be ments that are related to larger organizations or pub- seen to have a positive impact on knowledge sharing lic research institutes (Asheim and Gertler, 2005). In and networks between Borregaard and external part- the case of Borregaard, R&D intensive activities either ners. happen within the internal R&D department or in projects (oft en supported by the public system) and/or to- Network characteristics gether with larger research institutions located outside Th e business and technology infrastructure at Borre- the region, such as NTNU in Trondheim. Th is demon- gaard currently includes a number of elements usually strates that there is little direct collaboration between attached to successful clusters and regional innovation Borregaard and other actors in the region. Rather, the systems. collaboration happens in networks at the national and According to the academic literature, a cluster can international levels. be defi ned as “a geographically proximate group of in- Figure 9 illustrates the importance and closeness of terconnected companies and associated institutions in the various resources to which the Borregaard R&D a particular fi eld, linked by commonalities and com- department relates (closeness and importance are illus- plementarities” (Porter, 2000, p.254). In general, the trated by proximity and size of the circles). It is rather cluster can be regarded as a form of network that oc- inaccurate, but it is a way to illustrate our impression curs in a geographic location, in which the proximity from the case study. of fi rms and institutions ensures certain forms of commonality and increases the frequency and impact of 3.4.6. Opportunities/Challenges interactions (Porter, 1998). Th is defi nition means that a Th ere are opportunities to develop further the area of cluster requires a group of fi rms and related economic the bioeconomy in Østfold that is related to wood pro- actors and institutions located close together that draw cessing. Th e Borregaard case shows that by investing in productive advantage from their mutual proximity and knowledge-intensive activities and the development of connections. niche products, it is possible to be located in Norway In addition to the characteristics of a cluster, a Re- and at the same time to have a competitive advantage gional Innovation System (RIS) oft en has organiza- in the global market. In addition, the public support tions that work with the development and spread of system has created conditions for Borregaard to devel- knowledge, such as universities and colleges, R&D op products that are less economically benefi cial (e.g., institutes, technological centres, incubators and sci- biofuel) but that ease the transition from dependence ence parks (Isaksen and Asheim, 2008). An RIS can be on fossil fuels to bio-based fuels. characterized as interacting knowledge generation and However, there are still challenges for the future de-

NORDREGIO WORKING PAPER 2014:4 51 Figure 8: Mapping of key resources related to Borregaard’s R&D department

velopment of the industry. At the national level, these wood-processing industry by creating good market challenges are related to the general framework condi- conditions for future growth and encouraging greater tions; high costs in Norway make it diffi cult to compete willingness and opportunities for innovation/R&D in in the global market, and Norway does not have com- fi rms. petitive framework conditions at the same level as other At the regional level, limited access to raw materials countries. Lack of predictability is another important is another important challenge related to the develop- challenge that should be addressed at the national level, ment of the wood-processing industry, as expressed by especially in relation to the production of biofuels. In one of the interviewees. Borregaard depends on raw its current state, the biofuel policy in Norway is unpre- material from the local forestry industry, which is quite dictable and lacks incentives for companies to produce costly compared with that from other countries, and bioethanol (Klitkou, 2013). According to the interviews there are specifi c challenges in transporting the wood it is impossible to compete with the fossil fuels because from the forest. Upgrading the forestry value chain the carbon tax on fossil fuels in Norway is too low, and therefore requires substantial investments in infra- the costs of the biomass are too high. However, Bor- structure to ensure access to wood. Regarding regional regaard’s diversifi ed product base is a good strategy to collaboration, there is also a challenge in increasing the ensure that the company remains competitive. Com- knowledge spill-over between related companies. Th e pared with bioethanol, higher profi ts can be achieved regions that see the largest eff ect of the public support for products such as lignin chemicals and other value- system are those that succeed in regional co-operation added products. To meet these challenges, the national between industry, government and other actors. Th ere- authorities can maintain and facilitate a competitive fore, increased collaboration can be seen as an impor-

52 NORDREGIO WORKING PAPER 2014:4 tant way to strengthen the wood-processing industry report presents the characteristics of the region and its in Østfold. economy as well as the policy framework for developing the bioeconomy of the Örnsköldsvik region. 3.4.7. Concluding remarks Th e report is based on information gathered in inter- Th e Norwegian bioeconomy case study of the Østfold views, and it outlines the main actors in bioeconomy in County is an example of a strong locomotive company the region and discusses the main drivers of develop- dominating the bioeconomy activities in the region ment. It also discusses the main factors that may im- without signifi cant regional cluster formation. Th e lo- pede development and concludes with a summary and comotive company, Borregaard, could be regarded as discussion of the current situation and future potential more globally/nationally based than a regionally based for developing the bioeconomy of the region. company. However, Borregaard contributes to the local environment through various development projects 3.5.2. Description of the region such as the Kunnskapsfabrikken (Knowledge Factory) Örnsköldsvik is located in Sweden, 550 km from Stock- initiative. holm. Th ere are approximately 55,000 inhabitants of Th ere is no signifi cant regional cluster formation Örnsköldsviks Kommun or the Municipality of Örn- around Borregaard. Rather, the Borregaard company sköldsvik. Th e Municipality has a much larger popula- controls the whole value chain from extracting wood/ tion than the central town, as the municipality is vast forest residues to the end products (e.g., cellulose, with very large forest areas and minor areas of agricul- lignin, fi ne and basic chemicals, food ingredients, and ture. It consists of several rural communities in the ethanol). As such, Borregaard’s overall organization countryside. resembles that of a cluster, where the parts of the val- Historically, the most important economic activ- ue chain can be seen as a form of network that occurs ity of Örnsköldsvik has been trade and heavy industry. within a geographic location, where proximity ensures Th e major industrial ventures include MoDo, a pulp, certain forms of commonality and increases the fre- paper and logging enterprise established in 1903 by quency and impact of interactions. Frans Kempe´s company, Mo, and Domsjö AB. An- Th e relative low average education level in the region other historically important industrial company is does not seem to be a major challenge from the view- Hägglunds, a heavy industrial company. Currently, point of Borregaard, because its international brand M-Real (formerly MoDo) operates a pulp mill in Hu- and reputation allow it to attract highly skilled engi- sum, 30 km north of Örnsköldsvik City, and Domsjö neers. Th ere is some co-operation with the local col- Fabriker (another ex-Modo mill) operates a specialty leges to educate technicians to work at the plants. cellulose mill in Örnsköldsvik. Other notable compa- Despite the global approach of Borregaard, support nies based in Örnsköldsvik include Svensk Etanolkemi from the state-level support system (Innovation Nor- (ethanol products) and Fjällräven (outdoor equipment way) has been important for developing bioethanol in and clothing). the region. Moreover, it should be noticed that the local Today, a large part of the bioeconomy- related ac- forest owners that provide Borregaard with raw mate- tivities in the Örnsköldsvik region form a cluster built rial for their production are important regional actors around the pulp mill in Domsjö. in the Østfold bioeconomy. 3.5.3. Administrative structure and governance 3.5. Örnsköldsvik, Sweden National By Gunnar Lindberg & Jukka Teräs Sweden is a country in Northern Europe with a population of just over 9 million people and a geographical 3.5.1. Introduction area of 450,000 km2. Sweden has a history of strong lo- Th is case study focuses on the bioeconomy in the Örn- cal government involvement in public aff airs. Th e sköldsvik region in Sweden. Th e focus is on the analysis Swedish Constitution and the Swedish Local Govern- of innovation in Green Growth and the bioeconomy, ment Act state that Sweden has municipalities and and the concentration of environmental expertise in county councils. Th ere are 290 municipalities (kom- the region. muner) and 20 county councils (landstingen), which Th is case study report is based on secondary sources are sometimes called “regions”. Th ere are also 21 coun- and interviews with key stakeholders at the local, re- ty administrative boards (CABs), which are a branch of gional and national levels as well as representatives the central administration headed by a state-appointed from private companies and educational facilities. Th e governor, with their main responsibilities being eco-

NORDREGIO WORKING PAPER 2014:4 53 Figure 9: Örnsköldsvik municipality (Map design by Julien Grunfelder)

nomic planning and regional development. Since 2003, and secondary education, most social welfare func- their board members have been appointed by the cen- tions, town planning, water and sewage, environmental tral government. Th e CABs are entrusted with primary protection, refuse collection, parks and open spaces). responsibility for co-ordinating activities at the county Others are shared with the county councils, the CABs level. Th ey command a strategic view of relations be- and/or the central government (e.g., regional/spatial tween bodies at the local, county and central levels and planning, some culture and leisure activities). can therefore act as a link between central and local Most innovation policy issues in Sweden are man- authorities. CABs are also responsible for ensuring that aged by the Ministry of Enterprise. VINNOVA (the the county’s development proceeds in a way that facili- Swedish Governmental Agency for Innovation Sys- tates the achievement of national goals while taking ac- tems) executes innovation policy on a national level count of specifi c regional conditions and requirements. through funding needs-driven research, development (Council of Europe 2014). and demonstrations as well as strengthening networks, Local authorities in Sweden, but especially the mu- which are a necessary part of innovation activities. Is- nicipalities, have a wide range of functions. Some of sues concerning energy and restructuring of the ener- these are exclusive to the municipalities (all primary gy system are handled by the Swedish Energy Agency.

54 NORDREGIO WORKING PAPER 2014:4 Th is work is complemented by two semi-public re- with production of ethanol and a large number of search foundations: the Knowledge Foundation and chemicals. the Foundation for Strategic Research. Policy issues Th e Örnsköldsvik region faced a serious downturn concerning universities are handled by the Ministry of period during the 1990s, when many local businesses Education and Research. Th e Swedish Research Coun- closed, down-sized, or relocated to more central re- cil is the main body for funding curiosity-driven regions of Sweden. Th is resulted in the loss of around search. (Inno/Erawatch 2011). 5,000 jobs in the Örnsköldsvik region (Arbuthnott 2011). However, the regional decline created among the Västernorrland County and the Örnsköldsvik region local actors a sense of urgency to create new industries Västernorrland County is a county (or län in Swedish) and jobs in the Örnsköldsvik region. Th e idea of build- bordered by the counties of Gävleborg, Jämtland and ing a cluster och technology park based on the novel Västerbotten, and the Gulf of Bothnia. Örnsköldsvik is biorefi nery initiative, together with the increasing pop- one of the municipalities of Västernorrland County. ularity and awareness of clustering initiatives, paved Th e current Örnsköldsvik municipality was created in the way to regional biorefi nery cluster formation in the 1971 by the amalgamation of the city of Örnsköldsvik Örnsköldsvik region. Th e cluster company Processum with seven former rural municipalities. as early as 2003 started to gather the local and regional forces behind a joint clustering initiative in the fi eld of 3.5.4. Bioeconomy in the Örnsköldsvik region biorefi ning. Th e cluster development received an addi- Forestry industries have been important for the Örn- tional boost in 2005 when Processum received the fi rst sköldsvik area since the late 19th century. Th e bioecon- VINNVÄXT funding for the development work for the omy concentration in the Örnsköldsvik region has a “Biorefi nery of the Future”. In 2013, the industrial re- long tradition, originating from pulp mill activities in search institute SP (a Swedish equivalent of companies the early 20th century (especially the pulp mill in such as Germany’s Fraunhofer) bought 60% of Proces- Domsjö established by Mo and Domsjö AB). Th e main sum shares. products have been paper and pulp, with energy pro- Th e following table lists major actors of the bioec- duction from less refi ned parts of the raw material as a onomy in the Örnsköldsvik region, with a focus on bi- side product. Th e production of chemicals, chlorine orefi ning activities. and ethanol entered the scene in the 1930s, when the region’s leading pulp & paper company established 3.5.5. Policy framework for developing the bio- what can be seen as an early version of a biorefi nery. economy of Örnsköldsvik (Coenen 2013). A major development phase in the Örn- sköldsvik region took place during the Second World National War, when importing chemical products into Sweden In the Swedish Research and Innovation Strategy for a was diffi cult. Th e MoDo company took the initiative to Bio-based Economy, the bio-based economy is defi ned develop R&D facilities to create chemicals from the lo- as a resource-effi cient economy based on raw materials cal forest supply. Th is industry in the Örnsköldsvik re- that are produced through the sustainable use of eco- gion was one of the fi rst to combine pulp production system services from land and water. Because of the

Table 10: Key actors of bioeconomy/bioreﬁ ning in the Örnsköldsvik region

Sector/Activity Main Actors

Key companies Aditya Birla Domsjö Fabriker (pulp and bioreﬁ nery)

Akzo Nobel (specialty chemicals)

Holmen (Printing paper, paperboard, forestry and energy production operations)

SEKAB (Ethanol R&D and production)

R&D, education institutes Umeå University

Mid-Sweden University

Clustering initiatives SP Processum

NORDREGIO WORKING PAPER 2014:4 55 natural geographic conditions, industry and infra- Th ere are organized broader initiatives, such as the structure, Sweden has good conditions for conversion “Biofuel Region” project that takes a regional perspec- to a bio-based economy. tive; this is an established platform that gathers actors Bioenergy comprises approximately one-fourth of from four northern counties. (Biofuel Region 2014). the overall energy production in Sweden. Th e biggest Th ey are co-operating to develop the bioeconomy current source of bioenergy in Sweden is forestry, but (much larger than the biorefi nery cluster) within the bioenergy is also produced from waste and agriculture. larger region—for instance, in running vehicles on gas, In heating, fossil fuels have already been replaced al- and in developing the larger concept of sustainable mu- most entirely by biofuels. While heating is the biggest nicipalities with energy as a focal point. Th e munici- user of bioenergy at present, the use and production of pality of Örnsköldsvik has always been an early partic- bioenergy in electricity is increasing. Th ere is also great ipant in these processes; for example, by adopting the potential in increasing the use of biofuels in the trans- fi rst ethanol buses and cars, and providing municipal port sector. heating in the suburbs. Furthermore the municipality In addition to industries based on agriculture and itself supports the bioeconomy cluster in Örnsköldsvik forestry, the potential for a bio-based economy lies in, with SEK 500,000 annually (now as a part fi nancing for example, transport and the motor industry, the of a structural funds project) and it has a member on construction sector and the chemical industry. As a the board of directors for the cluster. Th e municipality bio-based economy is seen as cross-sectoral, the po- is also an actor in the cluster through some of its mu- tential for cross-sector system solutions is emphasized nicipal fi rms (an energy fi rm and an ethanol producer). (such as biorefi neries in the form of collaboration be- In the development of a vision of where Örnskölds- tween the chemical industry, forestry industry and en- vik should be in 2050, the fi eld of energy, climate and ergy companies). Th ere is great potential for increasing raw materials is one important aspect. Moreover, there the added value of the renewable raw materials used by is a vision that it will be a world leader in this fi eld. current process industries. Th ere is an aim of branding the region, acting as a fa- In terms of biofuels in transport, Sweden is already cilitator and having it on the political agenda. If there a forerunner, and 9.8% of the energy used in the trans- are external visitors (national or global), they are taken port sector in Sweden was derived from renewable to the biorefi nery, and there is a strong focus on the for- sources in 2011. Th e use of all biofuels has increased est sectors and all its aspects. However, for citizens and notably (in particular biogas and biodiesel). However, in the everyday life of the municipality and all its ac- there is further potential in increasing the production tors, the bioeconomy is not a major issue. Not everyone of biomass and the use of biofuels. knows that this is a bioeconomy region. Many people in the city do not know the function of the biorefi nery Regional/local bioeconomy framework area or the Processum cluster. Th ere is a visitor’s centre Th e regional and local actors that were interviewed in in the factory area, partly fi nanced by the municipality, Örnsköldsvik considered the bioeconomy issues to be but it has not been widely used so far. important. It is perceived that the bioeconomy and the forest sector in general have a strong position in the re- 3.5.6. The Örnsköldsvik Bioreﬁ nery of the Future gional development programme and that there is also Cluster some positive impact of the structural funds in devel- A recent trend in the Swedish forestry industry is in- oping this fi eld. Moreover, there are many municipali- creased interest in completely new technologies. Th is ties, counties, fi rms and universities in the region that could include processes for the production of products have the same ambition. Together, they are working on such as biofuels, chemicals and animal feed. Th is new branding the region and are focusing on the social, interest from the forest industry is explained by a de- technical and economic side of the regional bioecono- clining demand for paper, especially newsprint but also my. However, the bioeconomy does not seem to have a offi ce paper. As a consequence, the price of woody bio- crucial impact on the visions of the future development mass is falling in Sweden. Th is structural shift in de- of the region. Th e bioeconomy (mainly understood as mand for mature products is now accelerating research the forest sector and value-added industry) are deemed activities into completely new processes. to be important, but the vision for these sectors does SP Processum’s and VINNVÄXT’s “Biorefi nery of not seem to be explicit in the long run and in regional the Future” project is the fl agship project of the Örn- planning. It was perhaps more so in the past—but per- sköldsvik bioeconomy. Th e purpose of the Biorefi nery haps it has been relegated to a lower priority because of of the Future is to accelerate development in the fi eld of the downfall of the ethanol venture. biorefi ning woody biomass—in other words, together

56 NORDREGIO WORKING PAPER 2014:4 with its member companies, academic partners and equipment or in-kind work on many projects. Th is the local community, to create, promote and invent work is not included in the above calculations. products and processes based on lignocellulosic feed- Geographically, the focus of the cluster is along the stock in a triple helix setup. To do this, 80% of the pro- coastal area of northern Sweden. Th e original clus- ject funding is devoted to research and development. ter started in the Domsjö Development Area in Örn- Th e majority of this is directed towards innovation and sköldsvik but now extends from Piteå in the north to development rather than more fundamental research. Iggesund in the south. Th e core of the cluster in num- All research is done in an open innovation network ber of companies is today in the region of Örnskölds- setting. Th e remaining 20% is devoted to building the vik–Umeå. Many of the member companies are multi- innovation system. In the past three years, substantial national, which means that the core region sometimes resources have been devoted to scaling up promising extends as far as Brazil, India or Canada. Over the past projects. Th e project leaders have invested in a set of two years, intense co-operation with the chemical in- pilot equipment that can take technologies from the dustries on the west coast of Sweden has been initiated laboratory scale to a fi rst demonstration scale and have by the Processum cluster and the “Hållbar kemi” clus- created a regional test bed. ter in Stenungsund. Th e Örnsköldsvik Biorefi nery of the Future Cluster Neither the universities in the region nor the re- has 20 member companies. Most of the Cluster compa- gional fi nancing bodies and development authorities nies are in some way connected to the forest industry, are members of “Processums Intresseförening” (the the chemical industry or the energy industry (Figure association). However, they co-operate intensively with 10). Th ey base many new ideas on existing capital in- these sectors of the helix as well. Th ey are represented vestments in the mills of the pulp and paper industry. on the board of Processum and take part in activities A greenfi eld investment in an average sized biorefi n- such as membership meetings and project meetings. ery could easily amount to 1.5 billion euros. For this Th us, the structure is open to all parties of the helix. reason, a large number of endeavours in biorefi ning Non-member companies can also take part in the are dedicated to turning existing mills and infrastruc- structure at several levels. However, the only formal ture into biorefi neries. Th e same reasoning applies to owners are SP and Processums Intresseförening. energy sector utilities. Th e cluster’s main strategy in A very important area of reducing technical risk biorefi ning is to improve the existing mills to create and demonstrating promising technical solutions con- more value, new chemicals, and new materials, and cerns the scaling up of biorefi neries. It is a great chal- to turn residual streams into products and thereby to lenge going from the laboratory to the pilot scale, and increase both the economic effi ciency and that of the eventually to industrial scale, using thermochemical, feedstock usage. In other words, once woody biomass chemical and biotechnical processes. Oft en the condi- has been processed into the main product (e.g., pulp tions change drastically in the processes when scaling and paper), the number of complementary products up. Th is almost always creates new challenges and a and complementary streams in a biorefi nery set-up are need for new solutions in terms of factors such as sta- maximized. Th is process will also decrease the genera- bility of the process, incrustation, energy effi ciency, tion of waste from the production sites and improve the drying, and grinding. Th erefore, the initiative has environmental footprint of the industry even further. devoted considerable resources to fi nancing, build- Sweden´s innovation agency VINNOVA spends SEK ing and fi nalizing a pilot park. Th e scale of the pilots, 6 million each year on the Biorefi nery of the Future, and 10–100 litres, makes it possible to take the fi rst step in regional actors contribute an equal amount to match scaling up for promising technologies. Th e pilots have this funding. Th is results in a total of SEK 12 million been built using structural funds from two consecutive per year for the period 2011–2014. Th e average yearly projects. Th is development has been very important as turnover for SP-Processum has been SEK 23.5 million a complement to VINNVÄXT. In this way, Processum per year. Th e activities are devoted to biorefi ning R&D has created and opened a test bed that can be used by and cluster development. An extra SEK 12 million per member companies as well as universities. Th e pilots year has thus been supplied from EU structural funds, are geographically situated in Umeå and Örnsköldsvik. member companies, and public and private research Th e Pilot Park currently consists of 11 pilot units funds (regional and national) as well as funding from and is still growing. A total investment of SEK 15 mil- FP7 and similar EU sources. Th e VINNOVA funding lion has been made in the pilots. Considerable time was has been approximately quadrupled with money from devoted to picking pilot technologies that could not be other fi nanciers for the years 2012 and 2013. In addi- found elsewhere in Sweden, and at the same time, pilots tion, the cluster companies supply valuable research that are needed to scale up biorefi ning technologies.

NORDREGIO WORKING PAPER 2014:4 57 Figure 10: The Members of the Bioreﬁ nery of the Future cluster (source: SP Processum)

Th e pilots are: Algae pilot, Pilot bioreactor, Decanter According to interviews, the political will for change is centrifuge, Dryer pilot, Filter press, Grinder, Chemical partly lacking in terms of factors such as tax incentives synthesis reactors, High speed centrifuge, Spinning pi- and biofuel quotas. Th e technologies are ready to scale lot, Unit for continuous liquid–liquid extraction, and up, but the demand for green solutions is insuffi cient. Torrefaction pilot. Two years ago, almost all the planned scale-ups to industrial scale were aborted. One of these was the large The inﬂ uence of the cluster on the national innova- gasifi cation plant planned at the Domsjö mill. Th e fail- tion system ure to invest in Domsjö has been a very clear example According to Processum (2014), an important aspect of of these challenges. the cluster is its national infl uence in Sweden. When Th ere is an ongoing discussion of the value creation the VINNVÄXT project was started, many of the large of the bioeconomy related to the size of the companies. pulp and paper companies in Sweden were relatively SP Processum foresees that a large part of value creation uninterested in the biorefi nery fi eld. Th e example of and development in its cluster will take place in exist- Domsjö and the VINNVÄXT cluster, combined with a ing companies rather than in start-ups. Th is is mainly decline in the demand for paper products, has inverted related to the huge investment costs and the economies the situation. Today, almost all the large pulp and pa- of scale in its industry. However, the recent trends with per companies have entire units working on biorefi n- new technologies and the need for entrepreneurs to ing and new businesses, and the Swedish chemical in- develop businesses around waste stream conversion dustry has taken a bio-based route. Processum was a makes it clear that new businesses and entrepreneur- very early and successful example in Sweden, and this ships need to be developed. Th ese new businesses have has inspired others and sped up this development. proven to be more important than previously believed Th e main challenge has been on the political side. in realizing new processes and products on the market.

58 NORDREGIO WORKING PAPER 2014:4 Th e large global companies will be unable to integrate tentially contribute in the long run. Th e perception is this systematic change into the bioeconomy by them- that this will spill over into other sectors as well, with selves. an increase in interaction between the two cities.

The importance of the bioeconomy cluster for the Perceptions of the cluster region today When the old MoDo establishment in Örnsköldsvik According to the evaluation of Processum (2014), bi- was split up, there was a discussion about the develop- orefi ning and the bioeconomy are a focus for many re- ment of a technology park around the new fi rms that gional development actors along the coast of northern emerged, and around the large player Domsjö, which Sweden, including the business incubator Åkroken in was still there. As one of the actors, the municipality Sundsvall, SP Processum AB, Solander Science Park, was invited to participate, and (obviously) this kind of ETC, Biofuel Region, Uminova and Bio4Energy. How- development is important for the municipality to stim- ever, the current challenges include the administrative ulate and take part in. Th e municipality is geographi- borders and the awkward fact that for certain initia- cally large and has plentiful forest resources, and it is tives, Processum needs to apply for funding in each of benefi cial for the municipality if these are processed in three counties. In any case, biorefi neries and the bioec- the region because this creates fi rms, employment and onomy are well represented in the documents; for ex- tax revenue. Eventually, the technology park became a ample, in the EU structural fund programmes. biorefi nery cluster that was set up around the Domsjö Processum has taken a specialist role in the regional biorefi nery. innovation system for biorefi neries. Th ree years ago, Co-operation between the fi rms and other actors Processum hired a patent engineer—a function co-fi - (municipality and academia primarily) regarding the nanced by VINNVÄXT and fi ve member companies. cluster application of VINNOVA (funded by VIN- Since 2011, 77 patents have been fi led. Th e patent ser- NVÄXT) was formalized as part of the establishment vice is open to external regional partners. Th e fact that of the triple helix. Th e municipality has a responsibil- SP bought Processum is in itself an improvement and ity for relations with other governmental actors (such a change in the innovation system in Västernorrland. as the county board) and can work on issues such as Processum now constitutes the fi rst RISE (Research In- education and relationships with citizens. It is also im- stitutes of Sweden) institute in the region. portant for the municipality to create a business envi- Th e bioeconomy is an important sector or activ- ronment where the fi rms feel welcome and can develop ity for Örnsköldsvik today. For the larger region, the in the region. coastal and inland region of two counties, the bioecon- Based on the interviews, the cluster was very much omy is less important as a part of the economy. North a technology park in the beginning, but it has grown of Örnsköldsvik, the large city of Umeå has a diverse to become a cluster about biotechnology focusing on economy and is a large university centre. Th is city is research and patents as well as traditional cluster ac- striving to be more of an urban centre than an indus- tivities such as interaction of fi rms and addressing trial city. In this region, the bioeconomy does not have their needs, such as the labour market and fi nances. as large a role as it does in some of the other cities in For a while, the cluster was becoming rather “narrow” the region. Th e universities (a technical university as around a few fi rms, and the benefi ts accrued mainly well as a branch of the agricultural and forestry univer- to those actors. Th is was perceived to be somewhat sity) obviously know what is occurring in Örnskölds- problematic because it excluded some actors, and for vik’s bioeconomy development, and one aspect of this a period, it was perhaps not as dynamic as it could is that the region is integrated, with respect to factors have been. Perhaps this even reduced the possibility of such as the labour market, because high-tech employ- impacting the regional economy as much as it could ment is created in Örnsköldsvik, and people commute have—because it was so much about developing some from Umeå for these opportunities. In recent years, individual fi rms. Now it has again become broader and Örnsköldsvik has been somewhat transformed from a more inclusive. However, with the shift to biotechnol- charmless industrial city to a more attractive place, but ogy (almost a narrower fi eld than bioeconomy), some the main diff erence is rather the creation of cultural actors are not as active as they were before; for instance, and sport facilities as well as the train (Botniabanan) the municipal energy fi rm. Th e fact that biorefi nery has linking the city with larger centres in the north and become the focus means that this cluster is rather place south. Th e bioeconomy is not perceived to play a large specifi c. Th e benefi t of this is that it is very “clear” for part in this process yet, but the interaction with Umeå, the participants what the boundaries are (it also pro- as well as nationally and globally, in this fi eld can po- vides boundaries for applying for money and linking

NORDREGIO WORKING PAPER 2014:4 59 with scientists). However, the bioeconomy is broader the past. Th e cluster is defi nitely a potential centre for than the refi nery, and the impact on regional develop- this new development. ment cannot be broad if this is the focus. Th e challenge A new development in the cluster is that more global is to also retain the actors that are less involved in the actors are present through their ownership of formerly detailed research, and the refi nery aspect of the clus- Swedish fi rms. From one perspective, this is good, and ter. At least one respondent reported that the cluster is it brings in new actors and ideas. It also opens the glob- perceived to be much more “complicated” today than al markets and off ers opportunities to co-operate with it was a few years previously. What kinds of ideas are fi rms abroad. However, the potential impact on the fu- needed to bring actors into the cluster? Is it only about ture benefi ts for both the region and the fi rms must be detailed research, or the wider picture of supply chains, considered. Where will the patents be fi led? Who will developing fi rms in practical ways, new energy systems benefi t from the licences? Where will the production or the socio-economic aspects of the bioeconomy? plants to develop new products be built? From the outset, the cluster has had the character In 2012–2013, there was increased interest in biore- of industrial resource-based supply chain integration fi ning from many companies in the pulp and paper and value creation. Th e fi rms are integrated and own industry as well as the chemical industry in Sweden, resources such as forests, process industries, energy which is looking for new feedstock with attractive en- industries, refi neries and chemical industries. Some vironmental and climate properties. Th e increasing fi rms are obviously more integrated than others, but interest in biorefi ning is a clear trend in all major for- the municipal energy fi rm is a player in many steps of est companies with specifi c new product units being the forest value chain. Moreover, many of the actors/ established. However, a disappointment in this fi eld people in the fi rms have worked in a variety of posi- is that almost all planned major scaling up of new bi- tions in a number of fi rms throughout the years and orefi nery processes to full-sized factories has been put move back and forth between the fi rms. Th is obviously on hold or aborted. Th ese major investments in green provides for easy co-operation between the actors of technology, oft en in the order of several billion Swed- the bioeconomy in the Örnsköldsvik region. ish crowns, have proven to be much more diffi cult to achieve than anticipated. 3.5.7. Bioeconomy in Örnsköldsvik: evolution Th e demand for green, climate-friendly solutions over time has so far proven to be insuffi cient to overcome the costs and risks involved in investing in new technol- Evolution of the regional bioeconomy over time—ob- ogy. In the political landscape, the necessary support servations to kick-start the bioeconomy is perceived to be weaker Th e participants in this study emphasized the impor- today in Sweden than it was fi ve years ago. In addition, tance of being realistic about the market and the poten- the rapid technological development of production of tial of the bioeconomy in the short and long runs. Th e unconventional oil and gas (e.g., oil sands and shale establishment of the sector and market will take some gas) has contributed to lowering the price of fossil feed- time. In the early stages of the Örnsköldsvik biorefi n- stocks, which makes long-term investment in green ery cluster formation, there was a belief that it would technologies more diffi cult. Nevertheless, production happen very rapidly, and there was momentum in the of unconventional oil and gas is a short-term solution, region and among the actors to expand rapidly and to and the oil price will presumably continue to rise in invest. However, the market and demand side were not the long run. However, current production of uncon- really there. Hence there were some problems with ventional oil and gas is hindering the transition to a over-investment, and both the municipality and pri- bioeconomy. Th is is especially true for full-scale green- vate actors lost a large sum of money. Part of the prob- fi eld plants, and it is valid for all developments in the lem was that the research and development took time bioeconomy area in Sweden as well as in Europe. to develop and that the incentive structures (from the government) were not as ambitious and long term as 3.5.8. Enabling conditions was necessary to develop aspects such as the use of ethanol in the car fl eet rapidly. One lesson from this expe- Natural resources rience was to have a realistic view about the develop- Access to natural resources provides a good basis for ment of the bioeconomy, but at the same time, the developing the bioeconomy in the Örnsköldsvik re- municipality and regional actors need to make a new gion. start and not neglect the fi eld because of problems in

60 NORDREGIO WORKING PAPER 2014:4 Co-operation between actors local residents described the regional community as Th e active and systematic co-operation between the “Dövik”, or “Dead Bay” in English (Arbuthnott 2011). public and private actors has been a key competitive Th e timing of the Processum initiative was correct in advantage of the Örnsköldsvik region in the fi eld of that the sense of urgency “to do something new “ was green growth and bioeconomy. An important catalyst there because of the industrial layoff s. for the intercompany relationships, and the public–pri- Th e interviews in 2014 suggest that the great com- vate co-operation was established by the Processum munication and branding challenge today is related to Cluster. the need to scale up the activities. According to many It is interesting to note that the Örnsköldsvik case respondents, some politicians think that much has al- does not represent a classic case of a cluster with in- ready been done to renew the industrial structure of tensive co-operation and head-to-head competition in Örnsköldsvik. Yet there is also much to be done by the a regional setting. Co-operation plays a signifi cantly politicians to guarantee the future success of the bioec- more important role than competition in Örnskölds- onomy in the region. vik. Competition focuses on outperforming other regions. Arbuthnott (2011) states that competition at the Industrial symbiosis intraregional level has not been perceived by the Övik It could be argued that there has always been a high cluster core actors as positive for their development. degree of “industrial symbiosis” in this cluster, but that Despite the high visibility of the Processum cluster, this aspect is becoming increasingly institutionalized there are challenges in sharing a common, great vision in terms of interactions (deliveries, values, prices). Th e of the future for bioeconomy development in the Örn- Örnsköldsvik case is seen as an example of successful sköldsvik region. Th e interviews in 2014 reveal no ma- Industrial symbiosis by several researchers and ana- jor confl icts or disagreements between the key actors, lysts. Previously, there were many more ad hoc solu- but the ambitious forward-looking common vision tions, and sometimes the fl ows were not even valued (it remains a challenge. When prompted about the need was a trade of goods and services), but now these as- for brokerage between the private and public sectors, pects are becoming more regulated. Concerning in- it was stated that confl icts or controversies were not a dustrial symbiosis, one respondent stated that the link- perceived problem for the bioeconomy of the region. ages are rather vulnerable in the sense that as soon as there is some other use/value for the products that they Funding use (residue from trees), these streams will cease, and Th e bioeconomy and related initiatives have strength- they will need to fi nd new residues to burn for central ened in importance and attracted both public- and heating and energy production. However, they are con- private-sector investments. Processum activities and stantly looking into other waste streams that are no visibility have played an important role in fund raising. longer useful. Th e 10-year VINVÄXT programme has been strategi- cally important in convincing the investors to make a 3.5.9. Impeding factors long-term commitment to the biorefi nery activities. The discussion of public sector investments and the “In fact, there is no lack of funding sources. To raise Örnsköldsvik bioeconomy more funding for bioeconomy initiatives, we need to Th e enthusiasm of the local actors in Örnsköldsvik focus our resources and we need to strengthen our faced a setback in the 2000s when some of the bioec- international co-operation networks.” onomy investments in which the public sector, especially the municipality of Örnsköldsvik, had played a Synergies between sectors signifi cant role as an investor turned out to be unprofi t- Th e bioeconomy is seen as an integral part of green able. Th e explanations include money being lost be- growth, not as an isolated sector but with interrelation- cause the market was not ready, consumers not being ships and synergies with several other sectors. ready, and the government not providing the necessary support and structures. Hence, one limitation for fu- Communication & branding ture development is that the actors will actually move Th e importance of the Processum initiative has been much slower now, and in the future. Is there a lesson signifi cant in the creation and development of the cur- for other regions to learn from the experience of Örn- rent bioeconomy community in the Örnsköldsvik re- sköldsvik in the 2000s? Some respondents advise slow- gion. Th e structural industrial change in the 1990s cre- er moves and “not putting all the visionaries in the ated a loss of thousands of industrial jobs, and some same room”. Actors should be prepared for the process

NORDREGIO WORKING PAPER 2014:4 61 to take some time and should be sure to keep an eye on and the cluster organization, has acted as the key re- the market as well. gional development tool in bringing actors together. Processum has been able to deliver and communicate “We can’t aff ord any more risk at this moment.” a systematic, long-term approach that is defi nitively needed in bioeconomy regional initiatives. Th e role of “We have to focus on the main production that we the VINNOVA national institute has been signifi cant do (energy production that we have established to- in guaranteeing the long-term approach in the Örn- day) and perhaps some pilot ventures on the side sköldsvik bioeconomy. with streams/resources that we already have. But Th e bioeconomy sectors are considered to be impor- not the large paradigm-shift ing projects.” tant. It is perceived that the bioeconomy and the forest sector in general have a strong position in the regional “It is the same for some of the other fi rms; they won’t development programme. However, in terms of strat- do the big shift unless the structures change. Who egy and the “new” bioeconomy beyond the traditional has the “endurance” to develop the projects that are forest sector, it does not seem to be included in an ex- in the range of 10–15 years? Is it only the state?” plicit way in the visions of the future development of the region. For the larger region, which dictates some In terms of incentives, structures or visions, it was of the regional development plans, the bioeconomy mentioned by the respondents that there are regional does not have a large role in the economy, which is funds, there is national innovation support (VINNO- rather diversifi ed and in which other sectors are also VA) available, and there is some possibility of fi nancial important (e.g., in the Umeå urban region). However, support. However, it is for consumers to change the there are some parallel activities that could probably be structures. Th e government could dictate and support better synchronized from a regional development per- a more stable path away from fossil fuels towards re- spective. Th ese include initiatives such as the “Biofuel newables. Consumers are obviously short-sighted, so Region” project—an established platform that collects the government needs to correct market failures. actors from four northern counties around a biofuel Th e municipality of Örnsköldsvik is expected to vision—which could be linked to the biorefi nery clus- have rather few fi nancial opportunities to support the ter and included more in the regional development vi- development of the bioeconomy, compared with large sions. From a structural perspective beyond the cluster fi rms or the national government, but it is focusing on and factory area in Örnsköldsvik, the interaction with the aspects that it can work with. For instance, the mu- Umeå, as well as nationally and globally in the fi eld of nicipality desires to improve the standard of chemistry bioeconomy, could in the long run develop new parts education in upper secondary schools to stimulate stu- of the regional economy. People are already commut- dents to continue in this fi eld at university and in the ing between Umeå and Örnsköldsvik for work because long run to contribute to the development of the bio- of the bioeconomy, and this has a potential to spill over economy. Th e municipality is also attempting to act as into other sectors as well, with an increase in interac- a “door opener” whenever possible between fi rms and tion between places and activities. the government, and to create a favourable business As the situation currently stands, the major chal- climate for fi rms to develop or to be established in the lenge remaining in the Örnsköldsvik bioeconomy clus- region. Th e most direct impacts of this development ter is the scaling up of the emerging biorefi nery devel- are much the same as those of wood, paper and pulp opment. Th at is, what are the next specifi c steps? Th e production in the region discussed above—clear fell- respondents in this study emphasized the importance ing, transport, industrial complexes close to harbours, of being realistic about the market and the potential and the smell. for the bioeconomy in the short and long runs. Th e establishment of the sector and market will take some 3.5.10. Conclusions time. Historically, the region and some actors have Th e Örnsköldsvik bioeconomy, especially the build-up been “burned” by market mistakes in relation to etha- phase of the biorefi nery initiative, is an essential part of nol. One lesson to learn from this is to have a realistic the regional change story, and it is based on accumu- view of the development of the bioeconomy, but at the lated knowledge and natural resources in the region. same time, the municipality and regional actors need Th e down-turn in the industries in the 1990s paved the to make a new start and not to neglect the fi eld because way for the biorefi nery initiative; a “sense of urgency” of problems in the past. was present. One important regional development aspect of the Processum, as the institution for collaboration (IFC) current development of the bioeconomy in Örnskölds-

62 NORDREGIO WORKING PAPER 2014:4 vik is that more global actors are present through their which in the long run may not be required for paper. ownership of formerly Swedish fi rms. From one per- However, there is a challenge in linking such a knowl- spective, this is good, and it brings in new actors and edge-intensive cluster with “wider” aspects of rural and ideas. It also opens global markets and off ers oppor- regional development. If markets and funding were tunities to co-operate with fi rms abroad. However, it available, there would probably be more job creation, must be considered that this can have an impact on fuas plants would be built for other forms of refi nement ture benefi ts for both the region and the fi rms. Where of the forest products. Th e scale of production would will the patents be fi led? Who will benefi t from the increase for those fi rms developing products such as licences? Where will the production plants to develop ethanol, coal and proteins. Moreover, there is obviously new products be built? a temporal dimension to the question of regional de- From a bioeconomy perspective, the biorefi nery velopment. In the long run, the region may have fi rms cluster in Örnsköldsvik is defi nitely a success story. to build economic activities, attractiveness and labour However, the question is how much regional develop- markets because of “narrow” growth taking place to- ment impact this “geographically” confi ned and rather day. An integrated vision for the region would seem high-technology cluster has on employment, on multi- to be a good tool for enabling this and would consider plier eff ects for the economy, societal systemic change what challenges are present that need to be addressed, and development of other sectors. It is a fact that fi rms whether they are related to competence in the work- have been created (and sustained), and they are open- force, national rules and markets, or something else. ing up new ways to make use of the forest in the region,

NORDREGIO WORKING PAPER 2014:4 63 64 NORDREGIO WORKING PAPER 2014:4 4. Conclusions

Based on the analysis of the bioeconomy in the Nordic of activities taking place in a more fragmented actor case study regions, the following conclusions and fi nd- structure, with numerous smaller bioeconomy organi- ings can be presented. zations, can be found in South Iceland, where the role Th is report by Nordregio, commissioned by the of national-level actors is central in supporting inno- Nordic Working Group on Green Growth— Innova- vation. It would seem that the historical development tion and Entrepreneurship by the Nordic Council of of the bioeconomy, and its current path dependence in Ministers (NCM), contributes to the understanding of building on strong previous activities, colours current bioeconomy in the Nordic countries by investigating co-operation in the region. In Örnsköldsvik, the clus- several cases of bioeconomy in fi ve Nordic countries. ter has developed from an old industrial site, and co- We have attempted to describe and learn from the con- operation with the authorities follows this industry’s text, actions, and enabling and disabling factors that previous position in the regional economy and com- are specifi c to each region but sometimes strikingly munity. In Iceland, the development is based on agri- similar. We have focused on the development of spe- culture, tourism and fi sheries, which are on a smaller cifi c bioeconomy activities while seeking to broaden scale and widely dispersed in the region. Hence, co- the analysis to the implications of the bioeconomy for operation is initiated by an actor with a helicopter view regional development and policy perspectives. seeking to create synergies and to facilitate innovations Although the concept of the bioeconomy has been in this particular system. operationalized for some time by the EU (not least by What the Nordic cases illustrate is the importance of the so-called Bioeconomy Observatory, and as a part of long-term commitment in developing a regional bioec- the new EU Framework Programme for Research and onomy. An arrangement such as VINVÄXT by VIN- Innovation Horizon 2020), it is evident in the Nordic NOVA in Örnsköldsvik (a 10-year fi nancial commit- case study regions that the understanding of the con- ment to a future biorefi nery initiative) makes it easier cept varies signifi cantly. Some Nordic regions (and ac- for several other actors to commit to regional bioec- tors) have adopted the term “bioeconomy”, whereas onomy initiatives. Similarly, the development of a Dan- other regions are only becoming familiar with the ish Bioeconomy Panel signals a long-term commitment term. — and together with appropriate actions, it will create As expected, in the case study regions, the bioec- a nationwide platform for bioeconomy development. onomy concept is more familiar among public sector Th ese activities are important for stimulating action in actors and large-scale industries than among smaller the regions, fi rms and research centres. Th e case study companies. Th is is interesting in itself for a number of interviews reveal the (perceived) need in the regions to reasons. First, a common understanding of a concept pick the “low-hanging fruit”, or to harvest short-term and its content can have an impact on factors such as successes, in regional bioeconomy projects. However, the ambitions, visions, tools, and sectors involved in the study respondents emphasize that a long-term per- regional development work. Second, a signal of under- sistent and systematic approach is probably more im- standing and adaption to the concept could be a meas- portant in the long run. It would seem important to ure of the ability to adopt and benefi t from EU support fi nd a way to combine these perspectives and to make measures, in the form of conceptual support, tools and sure that the former contributes to an overall strategy methods, as well as funding. for the latter. Th e intensity and scope of regional co-operation Th e public–private partnerships are frequently men- between actors varies signifi cantly among the Nordic tioned by the respondents in the studies as favourable case study regions, ranging from fully fl edged regional in developing the bioeconomy in the Nordic regions. cluster collaboration (as in Örnsköldsvik) to an actor However, the public’s role in this must develop to cre- structure with a clear locomotive company without in- ate a favourable playing fi eld for bioeconomy products tensive regional co-operation (as in Østfold). Examples and solutions—in the past, the support has been in col-

NORDREGIO WORKING PAPER 2014:4 65 laborating in the triple helix of regional development, dic region to another? Th e answer should be positive. but what is now called for (in all cases) is facilitation of Among the case study respondents, there has been con- markets, infrastructure and action by consumers. siderable interest in learning from other Nordic actors Th e general impression of the bioeconomy is that it and also in building co-operative relationships. Nordic can be a motor for creating jobs and economic activities institutions should act as intermediaries, especially to in rural regions while being benefi cial for the environ- initiate the fi rst contact to enable co-operation between ment. Although the cases show examples of success- Nordic actors. Th e increased international visibility of ful entrepreneurship, cluster development, creation of Nordic bioeconomy actors from the eff orts of Nordic some specialist fi rms and even what can be defi ned as institutions is also welcomed. For larger-scale R&D ef- successful regional innovation systems around the bio- forts and bioeconomy investments, intensifi ed Nordic economy, it is very diffi cult to assess the actual impact co-operation may off er new opportunities; for exam- on regional development (in terms of jobs or economic ple, to upscale the regionally/nationally developed pro- activities). Certainly, many jobs have been created and/ totypes or pilot plants. Th e Nordic cooperation should or sustained, and this is obviously one extremely im- include joint learning, too, between the Nordic coun- portant factor in (rural) regional development. It has tries and regions. Th e work by the Nordic Council of not been the explicit purpose of the project to count Ministers contributes to joint Nordic learning in the these jobs, but based on the results of the case studies, it fi eld of bioeconomy. is obvious that they are important from a local perspec- From the Nordic view-point, some countries have tive. What can defi nitely be concluded is that the Nor- recently launched national bioeconomy strategies (Fin- dic cases illustrate the possibilities of the bioeconomy land) or important documents to have an impact on in improving employment and regional growth, not the national bioeconomy policy (Bioeconomy panel only in an urban context but also in a rural environ- Denmark). From the case studies, we note that there is ment. However, the large-scale impacts of the bioecon- a common need in the Nordic countries and regions for omy development still hinge on the upscaling, market a focus on true implementation and defi nite action on development and systemic changes that would need to the bioeconomy, including measures such as upscaling take place in society. From a long-term perspective, the demonstrator plants to larger-scale facilities, and open- “glocal” nature of the bioeconomy—global and local at ing up new export markets to bioeconomy products the same time—opens up new business opportunities and services. Th at is, there needs to be a focus on spe- for Nordic rural entrepreneurs too. cifi c policy in many sectors and public policy domains Is it then possible to transfer the experiences and linked to these national strategies. good practices in bioeconomy initiatives of one Nor-

66 NORDREGIO WORKING PAPER 2014:4 References

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