Project title “Smart Specialisation”

D.4.2. Business Environment in Greece and Bulgaria

Action Leader: URENIO Research Unit - AUTH

Project Reference Nº

Deliverable Nº D4.2.3

Relevant Work-package 4

Nature R

Dissemination Level PP

Document Version 1

The Project "Smart specialisation", is Co-financed by the European Union (European Regional Development Fund) and from National Resources Copyright ©2014 - All Rights Reserved

Nicos Komninos, Stratos Manos, Nancy Martzopoulou, Dimitris Milossis, Editor(s): Isidoros A. Passas, Maria Schina, E. Sefertzi, Kakderi Christina, Milosi Maria Contributors:

Reviewers:

Table of Contents

Table of Contents ...... 2 1. Introduction: Identification of Smart Specialisation priorities in Bulgaria and Greece .... 6 1.1 The case of Bulgaria ...... 6 Smart specialisation priorities in Bulgaria ...... 7 1.2 The case of Central Macedonia ...... 12 1.3 The case of Eastern Macedonia and Thrace ...... 20 1.4 Selection of Sectors to Focus - Documentation ...... 22 2. The Agro-food Sector in Greece and Bulgaria ...... 23 2. 1: EU Policies on Agro-Food Sector ...... 23 2.1.1 EU Targets for a Sustainable Development of the Agro-Food Sector ...... 23 2.1.2 Strategies to support competitiveness ...... 25 2.1.3 Climate change and green growth Strategies ...... 26 2.1.4 Innovation strategies ...... 27 2.1.5 Product quality policy ...... 27 2.1.6 Regulations, Measures and Constraints ...... 30 2.1.7 Challenges and Opportunities ...... 34 2.2: EU Market and Trade of the Agro-food Sector ...... 35 2.2.1 The importance of the sector in the EU ...... 35 2.2.2 The EU Agro-Food Market ...... 41 2.2.3. EU's Imports of Agro-Food Products ...... 46 2.2.4 Perspectives and Drivers for the EU Agro-Food Market ...... 51 2.3 Trends in the sector ...... 54 2.3.1 Introduction ...... 54 2.3.2 Agro-Food Technologies ...... 61 2.3.2.1 Technological Innovations in the Product ...... 61 2.3.2.2 Informational and Organisational Technologies ...... 68 2.3.3 Good Practices Examples ...... 72 2.3.3.1. Integration of scientific disciplines in food safety ...... 72 2.3.3.2 Sustainable food production ...... 73 2.3.3.3 Packaging and Storage Technologies ...... 75 Latest innovations: ...... 76 3.The tourism sector ...... 79 3.1. European Policy relevant to the tourism sector ...... 79 3.2. The Market of the tourism sector in EU ...... 87 3.3. Trends in the sector ...... 94 ITB World Travel Trends ...... 94 Eurobarometer trends ...... 96 Tourism and ICT ...... 99 Smart Cities ...... 101 Forms of tourism ...... 101 Climate change and Tourism ...... 104 All Inclusive Hotels ...... 105 3.4. The Market of the sector in Greece, Bulgaria and the cross border area...... 106 a) Greece ...... 106 Indirect Benefits of Tourism ...... 110 Tourism and GDP ...... 110 Tourism and Regional Distribution ...... 111 Tourism and Employment ...... 112 Conclusions ...... 112 Tourism Organisation- Governance, Public & Private Bodies ...... 113 b) Bulgaria ...... 116 Tourism and Regional distribution ...... 117 Tourism and Employment ...... 120 Trivago research ...... 121 Conclusions ...... 121 c) Cross – border area ...... 123 c.1 Central Macedonia ...... 123 Thessaloniki ...... 127 c.2 East Macedonia & Thrace ...... 128 c.3. South-West Planning Region (District of Blagoevgrad) ...... 131 c.4. South Central Planning Region (Districts of Smolyan, Kardjali and Haskovo) ...... 133 3.5. Opportunities for young entrepreneurship and start ups in the sector ...... 137 Athletic - Sports Tourism ...... 137 Gastronomy tourism...... 138 Applications ...... 141 4. Analysis of the Energy Sector ...... 144 4.1: EU policies on Energy Efficiency ...... 144 4.1.1 The Importance of Energy Efficiency ...... 144

4.1.2 European Union 20/20/2020 Targets for the Reduction of CO 2 Emissions...... 146 4.1.3 The European Union Energy Efficiency Directive ...... 148 4.1.4 Energy efficiency targets for 2020 and 2030 ...... 153 4.1.5 The European Union’s Roadmap for Moving to a Low-Carbon Economy in 2050 ...... 155 4.1.6 Challenges and Opportunities ...... 156 4.1.7 Problems and Constraints ...... 157 4.1.8 Recent evolutions ...... 159 4.2 Energy efficiency and Renewables markets in EU ...... 160 4.2.1 Energy efficiency...... 160 4.2.2 Energy Efficiency in the European Union ...... 161 4.2.3 Energy Efficiency in industry ...... 169 4.2.4 World Energy Production and Consumption Trends – Share of Renewables ...... 1 4.2.5 European Union Energy Production and Consumption Trends – Share of Renewables ...... 6 4.3: Trends in Energy Efficiency ...... 11 Introduction ...... 11 4.3.1 Energy Efficiency Trends the Building Sector - Residential and Commercial Buildings ...... 14 4.3.1.1 Bioclimatic Design ...... 15 4.3.1.2. Thermal Protection of Building Shell and Efficient Insulation ...... 19 4.3.1.3 Building Energy Management Systems ...... 20 4.3.1.4 Renewable Energy Systems – Photovoltaic Applications ...... 26 Two promising technologies on Renewable Energy Systems ...... 27 The building-integrated photovoltaic ...... 28 Types of Technology ...... 28 Crystalline Silicon Modules ...... 28 Thin-Film Modules ...... 29 Concentrating Photovoltaic Modules ...... 30 Emerging Technologies ...... 30 Renewable Energy Systems – The Microturbine ...... 31 4.3.1.5. An Integrated Approach ...... 34 4.3.2 Energy Efficiency Trends in the Industrial Sector ...... 35 4.3.2.1 Energy efficiency for the food and beverage industry ...... 37 4.3.2.2 Energy efficiency for iron and steel making industry ...... 38 4.3.2.3 Energy efficiency for the mining industry ...... 39 4.3.2.4 Energy efficiency for the pulp and paper industry ...... 40 4.3.3 Indicative Cases of Energy Efficiency ...... 41 4.3.3.1 Improving Energy Efficiency Through the Use of Bioclimatic Design and Insulation: The Case of England’s First Passive House ...... 41 4.3.3.2. Improving Energy Efficiency Using Building Energy Management Systems: The Case of Citic Square in Shanghai, China ...... 43 4.3.3.3 Helping award winning factory boost production in Singapore: The Case of REC Solar ASA ...... 44 4.3.3.4 Improving Energy Efficiency in Commercial Office Buildings by Creating a Culture of Energy Efficiency. The Case of Hines ...... 46 4.4: Energy efficiency in Greece and Bulgaria ...... 48 4.4.1 Renewables in Greece and Bulgaria as Compared to other EU Member States...... 48 4.4.2 Energy efficiency Greece ...... 52 4.4.3 Energy efficiency in Bulgaria ...... 55 4.4.4 Two Good Practices from Greece and Bulgaria ...... 62 4.4.4.1 Social housing for elderly people in Village Kudelin, Bulgaria ...... 62 4.4.4.2 Energy retrofitting of 5 Students’ residence buildings in Democritus University of Thrace (DUTH) campus, Komotini, Greece...... 63

1. Introduction: Identification of Smart Specialisation priorities in Bulgaria and Greece

The Regions of the Greece-Bulgaria Cross border area even though they have different development origin, due the long lasting existence of Greece in the European Union, share some common characteristics and the economic crisis has caused some economic exchanges. Since the two countries were in a different political spheres for decades, the cross border areas of both sides used to be the extremes of the countries with limited potential. After 2007, with Bulgaria enrolment in the EU both areas become bridges of economic exchange. Nortnern Greece became a destination for Bulgarian tourists, the area of South Bulgaria became the destination of many Greek manufacturing companies and winter tourists. However an important issue is to define and promote common development areas in which the origin is not only avoidance of national conditions (such as lower taxes or wages or cheaper services and products) but the potential for pure common economic development which takes advantage of those two countries elements.

This study is mainly based in the RIS3 strategies developed for the Regions of Central and East Macedonia as well as the draft RIS3 report for Bulgaria all developed within 2o14. It defines the main characteristics of development for those areas in order to define those sectors of shared interest.

1.1 The case of Bulgaria

Even though this study covers the Greece-Bulgaria cross border area there is no official data for South and South West Bulgaria because Bulgaria defines strategies only on national level. As stressed in the document prepared to provide Input for Bulgaria’s Research and Innovation Strategies for Smart Specialization Smart Specialisation Strategy 1, the main characteristic of the economy is the low level of R&D spending along with the almost nonexistent linkages between research and the needs of manufacturing, and the challenging demographics of the society as a whole which drives into a comparatively poor record of innovation. The economic crisis exposed weaknesses in the economy, notably the fact employment was mainly based on low-skilled manufacturing, services, and the construction sector. High-value products and services remain a negligible part of exports, and the country’s skills and technological capabilities have remained stagnant. This trend is reflected in Bulgaria’s export and technological performance and competitiveness rankings, as regards to other countries. Furthermore, there was low absorption of the EC OP Competitiveness funding (€1,162 million), which serves as the main source of public funds available for upgrading and modernizing Bulgaria’s economy, over the 2007-2013 period. Reversing this trend will require a shift in approach and philosophy in a way that research and innovation can help Bulgarian industry to move up the value chain in knowledge-intensive companies, thereby increasing its share of high-tech exports and improving employment opportunities for advanced human capital, generating a virtuous circle of growth and better opportunities for the people.

An evaluation of Bulgaria’s innovation system reveals that the innovation agenda will be dramatically improved through more effective implementation of innovation support programs. With the next cycle of EU Operational Program 2014-2020 about to begin, the government has the opportunity to use the experience of the previous cycle to ensure that the funds are absorbed by those who have the greatest potential to ignite the country’s innovation agenda, leading to the closing of the competitiveness gap between the country and the EU.

Another important factor for the Bulgarian economy is that in 2008-2010 companies with less than 10 employees correspond to 91% of all companies and employed 29% of the workforce. Micro and small firms face a number of obstacles to becoming innovative that negatively impact their potential for growth

1 ИНОВАЦИОННАТА СТРАТЕГИЯ ЗА ИНТЕЛИГЕНТНА СПЕЦИАЛИЗАЦИЯ НА РЕПУБЛИКА БЪЛГАРИЯ 2014-2020 and, in many cases, their survival. A core objective of the Smart Specialization Strategy must be to address these obstacles, to enable small companies with little impact on the economy to become high-impact innovators that are actively engaged in developing new products and processes.

Bulgaria’s traditional manufacturing industries are facing strong price-based competition from China and the Far East, as well as quality-based competition from other EU countries. Yet Bulgaria has emerging export-oriented industries, including pharmaceuticals and ICT, with strong growth potential. For both traditional and emerging industries to flourish, they need investment in research and innovation to increase productivity and build niche competitive advantage. They also need a favorable business environment and high-quality human capital.

The Smart Specialisation Strategy document for Bulgaria results in the selection of four sectors which could significantly benefit from innovation and technology transfer based on the following key criteria: i. Targeted sector in Bulgaria 2020 ii. Government research priorities iii. Export analysis iv. Scientific relevance of Bulgarian publications v. USPTO patents by Bulgarians vi. Employment generation

The following table presents the outcome of the national case study for definition of the priority sectors for Bulgaria

Smart specialisation priorities in Bulgaria

In Bulgaria, after a quantity, quality and cross analysis were identified the following 7 potential areas for intensive technological innovation development (smart specialisation):

• Mechatronics • ICT • Bio-technologies • Nanotechnologies • Creative industries • Pharmaceutical • Food processing industry

Following those technological areas, 4 priority sectors of smart specialisation at national level were identified:

• ICT and INFORMATICS : Computer and communication techniques, electronic and optic products. • NEW TECHNOLOGIES in CREATIVE and RECREATIVE INDUSTRIES : Radio & TV, films and music, ICT games, architecture and design, equipment for alternative sports and alternative tourism. • MECHATRONICS and CLEAN TECHNOLOGIES : Mechanics, electronics, software, systems for control, energy preservation, ecomobility, electromobile cars, robotics, nanotechnology. • HEALTH LIFE and BIOTECHNOLOGY INDUSTRIES : Preservation and processing, medical substance and products, medical and curative tourism, specific foods (bio-products, yogurt, ethnic oils, wine, specific food for special categories).

The profiled sectors encounter both sector-specific and cross-cutting obstacles to realizing their innovation potential. Addressing these common problems will impact a number of industries, with a multiplying effect on economic growth.

Constraints to innovation

Sector Sector -specific constraint s to innovation Cross -cutting constraints to innovation

Food processing Lack of technological and equipment Shortage of skilled labor upgrading Lack of collaboration between the Insufficient supply chain business, university and research Mechatronics Large number of small players at lower end of communities the value chain Energy inefficiency overcoming Pharmaceuticals Lack of transparent regulation and procedures traditional costs advantages such as for early stage clinical trials low labor costs, relatively low tax burden and proximity to markets in ICT Inadequate system for protection for ICT the Middle East and the Former Soviet related assets such as service innovation and Union business process innovation

Food Processing The food processing sector has a significant share of the economy and accounts for the largest part of manufacturing in terms of employment and revenue. All segments of the food processing sector are dominated by imports, with the greatest share in meat, poultry, fruits and vegetables, and organic products.

Bulgaria has a strong tradition of food research, with a well-developed education system, and many research organizations and universities with international linkages. The country has highly qualified researchers who engage in a significant level of outward migration (especially the younger ones), as well as increasing opportunities to participate in international programs in the food and health fields as a result of EU membership. Salaries of specialists in the education and research system are very low, which negatively impacts motivation and is one reason for the relocation of qualified personnel to larger urban centers and abroad. Furthermore, collaboration between research organizations and industry is weak, with ineffective exchange of information and limited interaction. In this context, it is imperative to bridge the gap between research and the market through targeted interventions.

SWOT Analysis for the Bulgarian Food Processing

Strengths Weaknesses Strong tradition in food research, highly qualifiedLow level of R&D and innovation intensity researchers, excellent research organizations and Weak collaboration between businesses in the sector, established partnerships with food and health research universities and research institutions institutions abroad. Outdated facilities and technologies resulting in high High standards for food quality and safety and energy and water consumption Well-developed transportation and distribution network Inefficient supply chain due multiple intermediaries and Low labor costs Limited exchange of information between research Access to the EU Markets, tradition and presence in organizations and industry markets in Russia, CIS and the Middle East

Opportunities Threats Access to EU market and traditions in markets in the Higher productivity in other EU Member States Middle East and the CIS provide opportunities expansion Strong depopulation of rural areas resulting in labor and scale up shortage in rural areas where processors are located Increased demand for high-value added food products in Increasing constraints in access to financing due to EU both the export and domestic markets financial crisis Use of EU funds to invest technological upgrading, Increasing raw material prices and equipment prices logistics centers and marketing

Pharmaceuticals The Bulgarian pharmaceutical market is one of the smallest in the EU, but it has grown substantially over the past few years. The market reached 2,098 m. BGN in 2011, a 12 percent increase compared to 2010, and an 18 percent increase compared to 2009 (2012 IMS Health). Drug expenditure accounts for 2.45 percent of GDP, and the sector is expected to grow Generic drugs accounted for more than 50 percent of sales in volume terms and more than 80 percent in value terms in 2011. The most important market is the pharmacy segment, which accounts for about 90 percent of the total. About 30 percent of the over-the-counter (OTC) market is for flu and cough medicine. Pharma exports have increased sharply over the past five years, and now account for 3 percent of Bulgaria’s overall exports.

The fast-growing pharmaceutical sector is characterized by relatively cost-efficient and high-quality production at a competitive price without a high level of R&D expenditures. The sector benefits from considerable investment by both Bulgarian and foreign producers, in boosting production capability and modernizing facilities to harness competitive advantage presented by strong traditions and geographic proximity to markets in the Middle East and the CIS. Actavis and Sopharma have developed substantial exports of generic drugs to Russia and CIS countries, which could signal a turning point for their regional competitiveness. The major importers of Bulgarian drugs are Russia (27 percent of total exports), Romania (11 percent), Croatia (8 percent), Ukraine (7 percent), Germany (6 percent) and Serbia (6 percent).

The sector has marked successes in the highly competitive generic drugs markets, especially at the regional level and in markets in the Middle East and the CIS. However, as the generic drugs market is facing significant competition from generics producers in Asia, the growth of the sector is dependent upon expanding into the higher-value added market segment: the development of new drugs and medical compounds, innovative medicinal delivery systems and techniques. All these areas are highly investment intensive and it is unlikely that the pharmaceutical businesses would enter these without targeted government support using EU funds.

ICT and Informatics The ICT sector in Bulgaria is very vibrant and has shown consistent growth, even during the recent downturn. The sector has strong potential to spur innovation-based growth and promote service exports. The sector is equally divided in three key sub-segments: telecommunications, contributing 73 percent of all ICT revenues, computer programming accounts for 14 percent of revenues, information services (IS) consultancy correspondingly accounts for 6 percent of revenues. Since 2006 sector revenues have grown annually by 14 percent and its profits by 83 percent; while ICT goods and services exports have grown by a staggering 1,400 percent since 2005. Currently, ICT accounts for 47 percent of total business service export with a value created per employee in 2010 averaging 45,700 BGN: three times higher than the national average for all industries (16,800 BGN per capita).

SWOT Analysis for the Bulgarian ICT

Strengths Weaknesses High-value per employee outperforming most of the Below average R&D spending & ineffective spending of sectors funds Good R&D potential, taking into account ICT patents Inefficient system for the protection of intellectual property and ICT projects under (FP7) rights, specifically service innovation and business process Active presence of top-multinational ICT companies, innovations with local R&D and BPO centers Shortage of labor combining technical knowledge with Rapidly increasing contributions of local companies in business and soft skill sets the highest value added market segments Increasing brain drain due to relatively low salaries (from a Well-developed ICT infrastructure including high-speed global perspective) broadband.

Opportunities Threats Small but growing domestic market, access to and - Dependence on foreign companies for patent presence in global markets development Upcoming e-Government initiative will spur further innovation and growth Opportunity for technological absorption through FDI Leveraging diaspora knowledge and networks can create opportunities for higher value added further development and global capacity BPO, R&D and data centers growth opportunities are significant. ICT cluster could further develop outside Sofia. There are key areas where ICT capabilities in the country are highly competitive on a global level (semantics etc.) and could be a basis for “Centers of Excellence” development.

The ICT sector has the greatest innovation intensity of all profiled sectors and the largest number of Bulgarian R&D projects financed under the EU’s Seventh Framework Programme (FP7). The ICT sector has the highest levels of innovation intensity of all sectors in Bulgaria: it accounts for 90 percent of all Bulgarian patents in USPTO for the period of 2001-2010, as well as the largest number of Bulgarian R&D projects financed under the EU’s Seventh Framework Programme (FP7). Software, hardware, telecommunication, and information services together account for almost 70 percent of Bulgaria’s international patents, and the number of patents has increased significantly since 2004. Data processing, digital processing, software development, digital communication, and electrical computers have the highest total number of patents.

Bulgaria is recognized as a good destination for outsourcing and offshoring. Key international players are already successfully operating a number of shared or managed ICT service centers. In addition to the R&D and business process outsourcing (BPO) centers operated by key multinationals, many of which have separate R&D units, there are also a large number of local SMEs. Nonetheless, Bulgaria’s ICT sector is still far behind that of other EU countries in its share of GDP and level of FDI. It accounts for only about 5 percent of GDP, less than in Hungary and Slovakia, attracts less FDI than Romania and the Czech Republic. For ICT to become a leading driver of growth, a more forward-looking policy stance, as well as substantial targeted support, will be necessary.

Mechatronics (Machinery building and electronics) Bulgaria’s machine building sector has a heavy export orientation accounting for close to 15 percent of the country’s total exports. More than half all sector production is exported 17 , a significant portion to fellow EU Member States Germany and Italy. This positive trend; however, creates a strong dependency on international markets for future growth and for this reason the sector is vulnerable to global as well as EU economic market trends

The sector has been severely impacted by the crisis in Europe, with employment decreasing from about 132,000 in 2008 to fewer than 114,000 at the end of 2009, on a continuing downward trend. Another negative trend is the increasing age of sector employees, with the share of younger workers (under 24 years) falling from 5.4 to 4.6 percent – a loss of about 1500 young workers – during that one-year period. Almost 55 percent of all employees are more than 45 years old. The declining number of engineering students and the lower quality of engineering education as a result of the crisis are becoming key issues for the sector. The sector has relatively low innovation intensity, with only seven patents granted between 2002 and 2012. The main areas of innovation, based on these patents, are internal combustion engines and electrical generators. Local researchers have also produced an estimated 50 or more innovative products or processes that are still embedded in their respective projects and have not been patented. The sector is dominated by small players with insufficient level of value chain integration and collaboration among businesses. This prevents larger scale projects and entry into higher value added market segments. For this reason, the sector would benefit from government support to replicate sustainable models of successful clusters, such as the electro mobiles and the hydraulics components clusters; as well as to ensure the sustainability of successful pilot project EU funding could be leveraged for the much needed upgrading of the technical infrastructure, as well as to spur R&D and to promote technology dissemination innovation through developing innovation- driven products and technologies.

SWOT Analysis of the Machine-Building and Electrical Equipment Sector

Strengths Weaknesses Strong export orientation and successes in markets in Ageing workforce Western Europe, the Middle East and the CIS Declining number of students in engineering and Presence of successful international companies devolving quality of engineering higher education. providing technology transfer and dissemination that Low and ineffective R&D spending (as measured by the can spur the next level of innovation-driven growth number of patents) Successful pilot clusters developing products in the Engineering education in need of upgrading highest value-added market segments, such as automotive components and electronics, electro mobiles, LED lighting, advanced hydraulics

Opportunities Threats There are key areas where BG is highly competitive - Increased competition from Asia due to outdated (precision engineering and electronics, LED lighting, technology infrastructure and equipment depleting hydraulics) where with targeted support there is the competitive advantages associated with proximity to large potential to develop specialization as a niche player markets, low tax burden and low labor costs through and “plug” into the global value chain, through exceptionally high energy and water resource costs partnering with leading companies. Leverage cooperation with key EU R&D centers in the EU and abroad, to further develop local R&D capacity and increase the technology absorption.

1.2 The case of Central Macedonia

For the identification of innovation and research priorities for the Region of Central Macedonia in the framework of RIS3 taken into account, inter alia, the following data and inputs:

- Development Vision of Central Macedonia as expressed by the Regional Council and specialized in the strategy RIS3, - The Environmental Analysis, SWOT analysis and general strategies of Environment and Resources Innovation in Central Macedonia - The results of the consultation of stakeholders in the Region to the base text, - The recommendations of sectoral policy GSRT for Research and Innovation in preparation of FTA (May 2013) - Proposals for national strategic priorities as they have been in several key studies (FEIR, March 2013 "Strategic Framework for Development Policy on the 3rd Thematic Strategy objectives «Europe 2020», McKinsey & Company, in September 2013, "The Greece 10 Years Ahead: Defining the new National Development Model").

From the Analysis Environment (P1) for the Region of Central Macedonia have emerged some sectors and priorities which exhibit potent relate important part of GVA and employment in the Region and, moreover, can exploit existing potential for innovation and research in the Region. An initial mapping of these industries shows that they are consistent with a significant degree of national priority areas have emerged as pivotal studies for the Greek economy, the policy proposals of the General Secretariat and national priorities. These sectors are areas of regional specialization, participate decisively in Gross Value Added of the Region, employing a significant number of workers, maintain critical mass and exhibit intrinsic dynamic and extrovert.

These areas are designated as Champions Sectors and are the following: • AGROFOOD • BUILDING MATERIALS • TEXTILE & CLOTHING • TOURISM

Respectively identified technological sectors with particularly decisive role in the activation of the advantages of the economy of the Region, innovation, competitiveness and externalisation and characterized as Horizontal Support Sectors are the following:

• INFORMATION AND COMMUNICATION TECHNOLOGIES • ENERGY TECHNOLOGIES • ENVIRONMENTAL TECHNOLOGIES • TRANSPORTATION TECHNOLOGIES & SUPPLY CHAIN

From the survey of the RTDI potential of the region and the correlation with their respective regional development priorities, indicates that the analysis will focus on the above strategic priorities keeping open the possibility to differentiate them in the next phases of the project through active regular communication with stakeholders and Configuration consensus on prioritization and specificity of priorities.

AGROFOOD SECTOR

Documentation: Area of regional specialization (primary sector and food processing), critical mass of enterprises, primary production of substantial range of high quality products, export orientation, significant employment remarkable research output, growth opportunities.

Base Politics: Recognized strategic objective for the RCM is to support RTD in the agro-food sector and the strengthening of competitiveness and entrepreneurship.

Innovation Resources: Scientific expertise of Central Macedonia - compared to the national level - in the fields of Agriculture, Chemistry and Veterinary, specialized scientific fields such as Agricultural Engineering, and Important business participation in RTD projects.

Objectives: - Production and acquisition of new knowledge in the food industry for the upgrading of local products and developing new specialized food for specific population categories and special uses - Strengthening and preserving human resources and innovation skills in the agro-food sector - The support of food processing firms in internationalization of its operations, the establishment of national and international partnerships - Networking of firms, supporting innovative entrepreneurship, and disseminating the results of research and technological development.

Data and perspectives of the sector: The primary sector contributes 4.22% to the total Gross Value Added (GVA) RCM (data Hellenic Statistical Authority, 2012). Across the country, the RCM provides 20.8% of total GVA in the primary sector. These data highlight the importance of the primary sector in the country, but also a relatively small and decreasing the added value of the AMM RCM compared to secondary and tertiary sectors. The primary sector during the period 2004-2009 showed a decrease of 2 percentage points, from 6.30% to 4.35%. As regards manpower in RCM, the primary sector in 2012 employed the 13,52% of the workforce of RCM, with significant trends slowed compared with the past. According to data from Eurostat (2009) in the RCM produced 39% of fruits, 31% grain, 28% of industrial crops, and 24% of animal products in the country.

Respectively, the Region of Central Macedonia is characterized by significant manufacturing activity in the food and beverages. The industries of the sector based the RCM accounts for 14% of total relevant businesses nationwide, offering 29% of total employment in the industry of the Region (data Eurostat). The food and drink industry contributes 28.2% of the exports of the Region for the year 2012. Exports have increased 2.9% between 2008 and 2012 and 13.8% between 2011 and 2012.

BUILDING MATERIALS SECTOR

Documentation: Area regional specialization, critical mass of firms, export orientation, technological challenges related to energy and the environment

Base politics: Recognized strategic objective for the RCM support for RTD in the field of materials and competitiveness and entrepreneurship processing

Resources for Innovation: Possibility of development of new materials technology and horizontal information technology, energy and environmental efficiency, production and organizational innovation.

General objectives: - Strengthen the interface of research infrastructures (especially those that specialize in KET's), further opening these in the industry, and to public sector, focusing on the technological needs of the industry - Encourage the development of private research and innovation by strengthening innovative and outward business, establishing business will come from the area of scientific research, and attracting venture capital and intensive knowledge investments, development of demonstration projects, mainly by businesses. - Stemming the brain drain by creating jobs, both in enterprises and research organizations, improving the mobility of researchers, participation in international networks, training of human resources to meet the needs of the private sector to increase employment researchers in business, recovery network of scientists / researchers and rewards dispersion of established and young researchers.

Data and perspectives: The Gross Production Value (GVA) of the industry of building materials in 2007 amounted to € 13.047 billion or 26% of GVA in manufacturing of Greece. Market insiders had predicted the end of the year 2008 that the GVA of the industry will decrease the three years from 2008 to 2010, which was verified in practice both by the decline in manufacturing and construction activity. Today, estimates may consider that GVA is about 10 billion €. Regarding the overall construction activity in 2011, it fell further 28.5% and even more in early 2012, by 27.3%. Nevertheless, data for the year 2008, industrial production construction materials, representing 25% of Greece's GDP and sector companies employ about 1 million of the working population. While the broader industry of building materials is estimated to represent about 6% of the Gross Domestic Product (GDP).

The wider industry of building materials included in the year 2007 about 31,000 businesses. The vast majority were SMEs of which 50% are sited in Attica and 23.57% of those in Central Macedonia, with the number of people employed in the industry to exceed 91.1 individuals (2.5% of employees in the country). Moreover, the industry is a pillar of employment.

The exports of the industry in 2010 reached at least € 3.45 billion €, making the sector one of the most extroverted, since the total exports of the country this amount represents 21.2% of total exports Greece. It should be noted that in 2010 there was an increase of total exports of construction products by 17.2% compared with 2009. The main destinations of exports of construction materials products are: European Union countries, Balkan countries, Turkey, North African countries, while in some products there is export activity in very demanding markets in terms of product specifications, such as the United States of America and Canada.

TEXTILE AND CLOTHING SECTOR

Documentation: Traditionally an important sector of the Region, the third largest export, integration with primary production (cotton), technological capabilities (new materials, design)

Base politics: Recognized strategic objective for the RCM to enhance the competitiveness and transformation of traditional manufacturing sectors

Resources for Innovation: Possibility of development of new materials technology and horizontal information technology, energy and environmental efficiency, design and organizational innovation

General objectives: - The use of new knowledge in the textile and clothing and the creation of new niche products with high added value - The support of the industry of textiles and clothing in the internationalization of their operations, the development of partnerships and integration into international value chains - The strengthening of human resources and innovation skills - Networking of undertakings, entities, etc., support innovative entrepreneurship and disseminate the results of research and technological development.

Data and perspectives: The industry in Greece is in rapid decline since the late 1990s until today, without showing signs of recovery capacity. Data for the period 2003-2007 indicated bending of total turnover by 3% in those five years (€ 3,6 billion in 2007) compared to a 25% increase in total manufacturing, and 8% drop in employment that was 56,000 persons in 2007, and annual R & D expenditure of around € 1 million, or R & D intensity 0.028%.

Data for 2012 indicate a fall in production versus 2011 by 13.4% in clothing and by 22% in textiles. Nevertheless, the total value of exports amounted to € 1,32 billion against € 1,22 billion in 2011. This is due to increase by 73% of exports of primary textile (cotton). Unlike apparel exports went down by 10% and amounted to € 497 million versus € 552 million in 2011.The apparel exports showed positive signs in the last quarter of 2012. Textile exports recorded a decline in 2012 9.5% and amounted to € 368 million.

For the region of Central Macedonia the most recently updated data from the Eurostat reported in 2009. Despite the overall negative trend the textile and apparel industry in 2012 was the third strongest export sector with export value of € 656 million (of which € 503 from Thessaloniki ), contributing 13% to the value of exports of Central Macedonia. This performance was driven by Clothing (€ 277 million, 5.9%) and secondarily by Textile (51,4 million, 1.1%). The conclusion is that the industry is transformed rapidly from a situation which was dominated by the textile industry in a situation where clothing becomes dominant.

TOURISM SECTOR

Documentation: Rich natural resources, cultural heritage, accessibility, positive growth trends in the industry, possibilities inherent in the development of alternative forms of tourism, import opportunities organizational innovation.

Base politics: Recognized strategic objective for the RCM to enhance competitiveness and entrepreneurship.

Resources for Innovation: Possibility of development of new innovative tools and horizontal information technology, energy and environmental efficiency, strengthening collaborative and organizational innovation.

General objectives: - Coordination operators and enterprises on Marketing and provide total regional and / or local product (New Content, Destination Management Systems (DMS) and the corresponding institutional organization (DMO), social media, branding, etc.) - Improve competitiveness and increase value of total tourism product through networking, new technologies (ICTs - Content Management / Future internet, Automation technologies Augmented Reality, certifications, organizational innovation, etc. - Improve environmental footprint by using technologies for energy-saving, water saving, intelligent transports. - Take advantage of "smart'' buildings technologies "green" materials, etc. - Strengthening of collaborative innovation and interface of the sector with other areas of regional interest (culture, health, sports, agro-food, local crafts, transportation, education, retail, planning services, etc.)

Data and perspectives: Some data of tourism sector in RCM according to Eurostat Regional Yearbook 2013 are as follows:

Total nights in all accommodation types and campings in 2010 amounted to 7.7 million in the Region of total 66.8 million in Greece (11.53% share). The average price for all the regions of the EU-27 amounted to 2.43 million nights.

The average annual change between nights spent in hotels in RCM 2009-2007 was 3.5% which was the third in Greece and far above the average for the EU-27 (-2.20%).

Completely contrary direction had the same index for the period 2011-2009, during which the change in the Region was negative (-2.5%, fifth in Greece), while in the EU-27, the positive trend was reversed (mean growth variation: 3.5%).

For the same period shows a marginal increase in overnight camping in RCM with a mean value of 0.2%, the seventh in Greece (average EU-27: -1.9%).

In regard to foreign nights in all accommodation offered for 2010, the share of the total for the RCM was 58%, while the average EU-27 was 43%. On receipt of this District was ranked in 6th place among the Greek regions.

The combined index 'nights per 1000 residents in all types of accommodation "for the 2010 Region with 3,946 ranks 6th best in Greece with a worse performance than the average EU-27 (4.847). Suffice it to note that the corresponding indicator for the N. Aegean was 51,354.

As regards length of stay in tourist destinations, the average length of stay in all types of accommodation for the RCM in 2010 was 3.8 days when the average price in Greece was 4.7 days and in the EU-27 was 3 , one day. As no financial data on the total impact of tourism to the regional economy (direct, indirect and induced) and based on the model calculation of the total contribution of tourism to GDP, approached the corresponding figure for the RCM to € 2.326 million for 2011. Similarly, the total impact of the tourism sector in total employment was estimated that in 2012 the size of employment (direct, indirect and induced) was 78,941 - 12.84% of total employment in the region, which is less than the average size of Greece (1 in 6 employees).

INFORMATION AND COMMUNICATION TECHNOLOGIES

Documentation: Critical mass of firms, inherent nature of innovation, export orientation, opportunities to exploit new digital tools, strong research base, horizontal application technologies throughout the economy

Base politics: Recognized industry with horizontal support existence of a critical mass of businesses in RCM specialized knowledge areas but mainly in services and software general business processes to enhance competitiveness and entrepreneurship of the same and the industries they support.

Resources for Innovation: In RCM the industry has a strong research base and is a flagship of RTDI investment, in terms of number of enterprises, the overall budgets of projects and leverage of own equity.

General objectives: - Recognition of the importance of the multi-level ICT support and development to other sectors of the region, but also as tools for solving technological challenges of the champion sectors. - Development and use of technological tools regarding the ICT industry in RCM and the creation of structures of knowledge diffusion. - Coordination of entities and businesses on upgrading services and new products. - Strengthening collaborative innovation and interface of the sector with other areas of regional interest.

Data and perspectives: The ICT industry has major operations in Central Macedonia and the Greek Territory, with significant levels of exports, large number of employees and significant "performance" in most cases reflected in their economic data. The average turnover of firms of RCM for 2012 is € 1.791.314.

Concerning externalisation the is strong export activity in many firms in the region, as there are over 10 companies, which export more than ½ of the their products and services. It's very important to stress that there are companies that sell their products exclusively abroad. The average of employees in the sector amounts to <10 individuals, with large variation because there are companies with 200 people and others with no staff. At the same time, there are at least 20 companies with number of employees over 20. The distribution of the companies' activities appears as follows: industry 3%, commerce 65%, information technologies 31%, telecommunications & Services 1%. Geographical distribution of companies shows a clear superiority of Thessaloniki, 81% of companies is based in the area of Thessaloniki, while only 19% in other areas of Central Macedonia, enhancing the role of the metropolitan area of Thessaloniki.

ENERGY TECHNOLOGIES

Documentation: Key role of energy in all economic activities, large margins energy savings, pivotal role position of the region in international energy pipelines, valued RES, potential prospect of using the mineral wealth of the country, consistent with other value chains, considerable research output globally renowned

Base politics: Recognized strategic objective for the RCM to promote energy efficiency, renewable energy and reducing CO2 emissions

Resources for Innovation: Significant research output with renown at international level, promotion of modern models of investment financing energy improvement

General objectives: - The use of energy technologies on a large scale in manufacturing, services (with an emphasis on tourism), transport, construction, etc. - Support research institutions and companies active in energy technologies for the internationalization of their activities - The active and effective networking of undertakings and entities, disseminating the results of energy technologies - The strengthening of human resources and innovation skills in the industry

Data and perspectives: In energy production the RCM has few power plants and hydroelectric stations primarily in the areas of Pella and Imathia producing 16% of the country's electricity, while other RES (Wind, Solar, Biomass) 12.9%. The region has significant advantages for the further development of renewable energy (eg hydropower, wind, solar, geothermal and biomass). Also the position of the region is crucial for the energy transfer from the western to eastern Greece and from north to south, and for the upcoming international connections. The gas distribution network has expanded into an important part of the Region. In the field of renewable energy and the development needs of RCM are mainly as follows:

- Further promote the production and distribution of energy from renewable sources. - The expansion of intra-regional gas distribution networks. - Promoting the use of renewable energy in public infrastructure, homes and businesses. - The promotion of cogeneration high efficiency and the development of intelligent power distribution low voltage.

In respect to energy consumption and energy efficiency key requirements of the Region are: - Extension of the insulation, window replacement, etc. in buildings. - Support for energy efficiency in public infrastructure, including public buildings - Promoting energy efficiency in companies - Strengthening of RTDI in energy efficiency and energy savings

Noted that during the period 2007 - 2013 the District implemented measures total public expenditure 54.7 million for energy savings. Concerning energy consumption in the industry, the goal of improving energy efficiency is one of the key priorities, but also as an important area of activity in the fields of building materials and construction with the introduction of materials and energy-saving technologies.

Regarding entrepreneurship in the energy sector in the Region of Central Macedonia distinguish some major companies which have headquarters in Athens but with production units and distribution units in the region and more specifically the Greek Petroleum (HEP), the Public Power Corporation (PPC), the Gas Supply Company of Thessaloniki (CPC), the ElpedisonPower, etc.

ENVIRONMENTAL TECHNOLOGIES

Documentation: Possibility of development of environmental technologies in all economic activity, much room for improvement of the environmental management of public and private sector, support for the objectives of sustainable development, a key role in exploiting the comparative advantages of the region (primary production, food processing and tourism)

Base politics: Recognized goal for RCM the environmental protection and sustainable development

Resources for Innovation: Significant research output and potential growth of business dynamics in the field of environmental management to exploit the comparative advantages of the region (primary production, food processing and tourism)

General objectives: - The dissemination and uptake of environmental technologies in all sectors of economic activity with emphasis on tourism - Support research institutions and companies active in environmental technologies in the internationalization of their activities - The active and effective networking of undertakings, entities, etc. to disseminate the results of technology - The strengthening of human resources and innovation skills in the industry

Data and perspectives: The Region of Central Macedonia has excellent scientific performance in ERC Grants and projects RegPot) in the field of energy and environment, while the highest share of EU funding in the period 2008-2012, amounting to € 32,5 million related to the research area Environment-Energy (30%). Combining literature data and performance at highly competitive European programs are highlighted as areas of excellence the chemical processes for fuel technologies and environmental protection.

An analysis of the General Secretariat for Research and Technology (GSRT) for the participation of companies based in Central Macedonia programs for Research, Technological Development and Innovation (RTDI) 2007-2013 shows a significant participation by companies and research institutions in Energy sector. Similarly for the field of Environment there is a significant participation by companies and research institutions in programs for Research, Technological Development and Innovation (RTDI) 2007- 2013.

TRANSPORT TECNOLOGIES AND LOGISTICS

Documentation: Nodal position of the region with valuable, important transnational transport infrastructure, existing (but discredited) capacity vehicles, emphasis on cost reduction and intermodal transport

Base politics: Recognized goal for RCM to promote smart, sustainable, intermodal transport

Resources for Innovation: Significant research output, growth potential synergies with entrepreneurship

General Objectives: - The use of transport technologies and logistics from entrepreneurship and exploit synergies with the energy and tourism - Support research institutions and enterprises operating in transport technologies in the internationalization of their activities - The active and effective networking of undertakings, entities, etc. to disseminate the results of technology The strengthening of human resources and innovation skills in the industry

Data and perspectives: The Region of Central Macedonia occupies an important geographical position in Southeastern Europe and the main transport networks have transnational significance. It has significant transport infrastructure on motorways (PATHE and Egnatia, Vertical Axis Promachonas-Thessaloniki), connection of five of the six directions covering the trans-European rail network, while the port of Thessaloniki is classified in category A of the seaports. Recent the rail organisation (TRAINOSE) started collaboration with the organisation of the port (OLTH) to create a grid of rail freight services.

In the Region of Central Macedonia is the Greek Defence Industry (ELVO) which is the only construction industry tracked and wheeled vehicles in Greece. Besides military vehicles ELVO produces buses and vehicles while also doing rebuilds and upgrades vehicles. In this work about 375 employees, and several other small businesses operating around the operation of ELVO.

In the region there is a significant participation by companies and research institutions in transport projects: intelligent transport systems, congestion management in urban and interurban roads optimal operation and maintenance of transport infrastructure. The Department of Statistics, Quantitative Methods and Analysis of Supply Chain Management, Department of Mechanical Engineering AUTH, evaluated as excellent in terms of participation of projects REGPOT.

1.3 The case of Eastern Macedonia and Thrace

Identified priorities for the region of Eastern Macedonia and Thrace are:

FOOD and DRINK INDUSTRY PLASTIC - -ELASTIC PHARMACEUTICALS ELECTRONIC / ELECTRICAL EQUIPMENT INNOVATIVE BUILDING MATERIALS ENERGY, ENVIRONMENT and HYBRID TECHNOLOGIES TOURISM

More analytically, the region of Eastern Macedonia and Thrace in early January 2014 adopted a multi- criteria methodology for prioritizing areas of intervention in the productive system, which is based on two pillars: (1) national priorities based on available documents strategy, and (2) the forces of Eastern Macedonia - Thrace based on survey data of the current situation. The intervention areas were classified into four categories:

(a) Core areas of regional specialization characterized by high priority at national level and a significant concentration of power at the regional level, (b) promising or emerging areas of regional specialization characterized by a high national priority but low concentration of power at the regional level, c) the areas to be transformed, ie high concentration of power at the regional level but low national priority and (d) areas with no prospects, namely low national priority and low concentration of power at the regional level.

The result of this process is summarized in the chart below and is the basis for the recommendations that follow.

Having regard to the facts that led to the prioritization of intervention areas (relative size, critical mass, leverage R & D expenditure by sector, level of technological capacity) distinguish two main pillars of intervention in the productive system of Eastern Macedonia - Thrace:

(1) The transformation of agro-food cluster (2) The growth and consolidation of emerging sectors of the regional economy (manufacturing and tourism).

Both pillars' interventions have considerable scope for both technological as well as non-technological innovation.

The priorities for assistance under the first pillar (agro food) are:

(1) Modernization of the agro-food complex and improvement of regional value added using technologically driven innovation: - Development of new, competitive and certified as to the quality and characteristics of agricultural products. - Development of new, competitive and certified as to the quality and characteristics of products in food - beverages utilizing inputs from the primary sector. - Use of modern technologies and production systems to reduce inputs in the production process. - Reducing the cost of production and distribution of products (including energy and transport). - Utilization of alternative uses of the byproducts of the primary sector, including its use as an energy resource. - Utilization of technologies to reduce the volume and toxicity of waste along the value chain of agro-food cluster and further reduce the environmental footprint.

(2) Improvement of regional value added customization and use mature interworking, promotional and organizational innovations, including the use of ICT, strengthening the sources of uniqueness and upgrading of human resources. Such interventions include, inter alia, the results of the consultation: - Spatial planning, cadastre-mapping, land use zoning, land reforms. - Management and rational utilization of natural resources (water, agricultural land, forests, pastures, etc.) - Restructuring and balanced development of the productive sectors, promotion of multi-culture, enhance and develop the livestock, modernization of existing traditional crops, fisheries enhancement and aquaculture exploitation of forest wealth as an additional resource, targeted promotion energy, aromatic and medicinal products). - Strengthening value chains integration activities with organizational innovations. The expense of developing product innovations in the agro-food cluster will fall on companies from the food - drinks, which means that it should be supported in developing their innovative capacity in human and material resources. The same operations can also lead initiatives for new crops utilizing organizational innovations such as agriculture under contracts. The other activities mentioned above are mainly producers or farms and require intensive information campaigns and demonstration.

Priorities for interventions in the second pillar (manufacturing and tourism) are:

1) Strengthening of Product or technology driven innovation interworking, preferably by applying Key Enabling Technologies in the following sectors:

PLASTIC - -ELASTIC PHARMACEUTICALS ELECTRONIC / ELECTRICAL EQUIPMENT INNOVATIVE BUILDING MATERIALS ENERGY, ENVIRONMENT and HYBRID TECHNOLOGIES

2) TOURISM: Expansion of the tourism product through promotional and organizational innovations such as: - Create a single system of organization, operation and management of the integration of the products of the natural and cultural environment, agro-food and crafts area network tourism / culture. - Networking in the tourism industry by sectors that directly affect the tourism product (catering, transport, trade, manufacturing). - Strengthening of tourism networks and integrated tourism projects / destinations.

3) Develop promotional innovations to strengthen the branding of the marbles and the expansion of markets.

4) Acquisition or support investments in service companies serving embedded and emerging sectors of the regional economy, such as: - Certification of healthy foods, planning of bio-functional food - Information and communication technology applications in the primary sector or industrial information - Industrial design - Certification of industrial products - Marketing of agricultural products - Special forms of tourism (cultural tourism, ecotourism, medical tourism, religious tourism, winter tourism, conference tourism, gastronomic tourism, etc.) - Specialized health services (diagnosis, prevention, rehabilitation, therapy).

1.4 Selection of Sectors to Focus - Documentation

Based on this analysis we had to select a number of sectors which seem to have the maximum mutual interest for the cross border area. Regarding the two regions of the Greek side (Central Macedonia and East Macedonia and Thrace we could be based on the RIS3 strategies prepared. From the Bulgarian side we had a slight problem since the strategy is defined on country level. Therefore we had to be also based on the findings of discussions with the partners of the Smart Specialisation project. Based on in depth analysis we decided that the sectors with maximum mutual interest in the cross border area are the agrofood sector, the energy sector (with priority to clean energy and the tourism sector. These sectors are analysed more in depth below:

2. The Agro-food Sector in Greece and Bulgaria

2. 1: EU Policies on Agro-Food Sector

2.1.1 EU Targets for a Sustainable Development of the Agro-Food Sector The agro-food industries are of particular strategic interest for many governments. Policy changes in this area have direct health implications for consumers and for the welfare of farm animals. They affect landscapes and the environment like few other policy measures. The agro- food industries are critical for rural development; they provide jobs and incomes in remote regions and are often a matter of national pride. The EU is looking to boost competitiveness in this sector through its Common agro-food policy. The Common Agricultural Policy (CAP) 2 proposed the following strategy for the long-term future of the EU agriculture and rural areas and that will contribute to the EU 2020 Strategy in terms of:

Smart growth – by increasing resource efficiency and improving competitiveness through technological knowledge and innovation, developing high value added and quality products; developing green technologies and using information and communication technology, investing in training, providing incentives for social innovation in rural areas and improving uptake of research; Sustainable growth – by maintaining the food, feed and renewable production base, ensuring sustainable land management, providing environmental public goods, addressing biodiversity loss, promoting renewable energies, fostering animal and plant health, increasing resource efficiency through technological development and using results of research, further reducing emissions, enhancing carbon stocks and fully developing the potential of rural areas; and Inclusive growth – by unlocking economic potential in rural areas, developing local markets and jobs, accompanying the restructuring of agriculture and supporting farmers' income to maintain a sustainable agriculture throughout Europe. Main objectives are:

Objective 1: Viable food production • Contribute to farm incomes and limit farm income variability, recalling that price and income volatility and natural risks are more marked than in most other sectors and farmers' incomes and profitability levels are on average below those in the rest of the economy. • Improve the competitiveness of the agricultural sector and to enhance its value share in the food chain, because the agricultural sector is highly fragmented compared to other sectors of the food chain which are better organised and have therefore a stronger bargaining power. In addition European farmers face competition from the world market while also having to respect high standards relating to environmental, food safety, quality and animal welfare objectives requested by European citizens. • Compensate for production difficulties in areas with specific natural constraints, because such regions are at increased risk of land abandonment.

2 European Commission (2010), The CAP towards 2020: Meeting the food, natural resources and territorial challenges of the future, COM(2010) 672 final.

Objective 2: Sustainable management of natural resources and climate action • Guarantee sustainable production practices and secure the enhanced provision of environmental public goods as many of the public benefits generated through agriculture are not remunerated through the normal functioning of markets. • Foster green growth through innovation which requires adopting new technologies, developing new products, changing production processes, and supporting new patterns of demand, notably in the context of the emerging bioeconomy. • Pursue climate change mitigation and adaptation actions thus enabling agriculture to respond to climate change. Because agriculture is particularly vulnerable to the impact of climate change, enabling the sector to better adapt to the effects of extreme weather fluctuations, can also reduce the negative effects of climate change.

Objective 3: Balanced territorial development • Support rural employment and maintaining the social fabric of rural areas. • Improve the rural economy and promote diversification to enable local actors to unlock their potential and to optimize the use of additional local resources. • Allow structural diversity in the farming systems, improve the conditions for small farms and develop local markets because in Europe, heterogeneous farm structures and production systems contribute to the attractiveness and identity of rural regions.

Achieving all these objectives will require that public support to the agricultural sector and rural areas be maintained. Policies set at European level are therefore needed in order to ensure fair conditions with a common set of objectives, principles and rules. Also, an agricultural policy designed at EU level provides for a more efficient use of budgetary resources than the coexistence of national policies. In addition to single market concerns, several other objectives are better addressed at trans-national level, e.g. cohesion across Member States and regions, cross-border environmental problems, and global challenges such as climate change, water management and biodiversity, animal health and welfare, food and feed safety, plant health and public health as well as consumer interests.

Changes necessary in order to respond to the new challenges are: • to address rising concerns regarding both EU and global food security, • enhance the sustainable management of natural resources such as water, air, biodiversity and soil, • to deal with both the increasing pressure on agricultural production conditions caused by ongoing climatic changes, as well as the need for farmers to reduce their contribution to GHG emissions, play an active role in mitigation and provide renewable energy, • to retain and enhance competitiveness in a world characterized by increasing globalisation, and rising price volatility while maintaining agricultural production across the whole European Union, • to make best use of the diversity of EU farm structures and production systems, which has increased following EU enlargement, while maintaining its social, territorial and structuring role, • to strengthen territorial and social cohesion in the rural areas of the European Union, notably through the promotion of employment and diversification, • to make CAP support equitable and balanced between Member States and farmers by reducing disparities between Member States taking into account that a flat rate is not a feasible solution, and better targeted to active farmers, • to pursue the simplification of the CAP implementation procedures and enhance control requirements and reduce the administrative burden for recipients of funds. •

2.1.2 Strategies to support competitiveness

• Better functioning of the food supply chain: Better contractual relations between food chain operators are essential for an improved functioning of the supply chain. For food and drink companies, relations along the food chain have a huge impact on competitiveness. A European framework is needed to bring large and small business partners onto a more equal footing. • Smarter regulation: A better regulatory environment in Europe is essential if EU food and drink industry manufacturers are to emerge stronger and more robust, to withstand global challenges in the aftermath of the crisis. This regulatory framework should bring policy coherence and any new legislation should be based on impact assessments. Key stakeholders should be involved in discussions at the very early stages of the decision making process. • Industrial policy: A new general industrial policy that takes note of current and future challenges is needed, particularly with regard to the risk of “carbon leakage” or delocalisation on the grounds of the regulatory burden and high cost placed on businesses in the EU (particularly SMEs). • Better access to finance: Equally important is the need to maintain and improve both large and small companies’ access to finance. Throughout the economic crisis, the food industry has continued to grow and invest in innovation in spite of problems to gain access to finance, thereby achieving the long-term business objectives of the industry. • Improved skills: Policies should focus on improving the level of skills and on making EU manufacturing industries more attractive for trained professionals. This would ensure high labour productivity, competitiveness and knowledge-driven innovation. Appropriate levels of investment, resources and skills for the next generation of European food scientists and technologists are urgently needed in order to stimulate careers in the food, nutritional sciences and industrial research domain. • Balanced access to raw materials: EU food and drink industries rely on access to adequate supplies of safe and sustainable agricultural raw materials that are competitively priced and which correspond to specific high quality criteria. The design of the future, market oriented common agricultural policy (CAP) should safeguard and facilitate the production of adequate levels of European raw materials, whilst at the same time, be open to non-EU raw material, according to the specific needs of the food and drink industry. • Trade: Together with access to non-EU raw materials, EU food and drink companies, as producers of high quality foodstuffs, should be able to take part in the global expansion of markets resulting from population growth and higher standards of living. The EU food and drink industry considers trade as a fundamental part of the global food security solution. International trade can help to balance global supply and mitigate the risk of shortages. Meanwhile, whether the EU food sector can preserve its position as a global leader depends largely on the potential for improved access to export markets and an enhanced level playing field at the global level. The multilateral approach and a balanced WTO agreement, remain a priority to address distortions on global agricultural markets. The food and drink industry also looks forward to the conclusion and implementation of ambitious free trade agreements. Complementing multilateral rules, bilateral agreements should provide a better framework on food safety (SPS) and other food regulatory issues, reduce burdensome customs procedures, improve protection of intellectual property rights (including GIs) and promote international standards in partner countries. • Promotion: While competition is increasing on expanding world markets, the assets of standards), should be actively promoted. An efficient European product promotion and support policy for SMEs (which represent over 99% of the EU food and drink industry) should help to develop and sustain exports 3.

2.1.3 Climate change and green growth Strategies

Environmental aspects of agricultural and industrial production should be regarded as both a challenge and an opportunity. • Environmental sustainability: The European food and drink industry considers climate change as one of the key sustainability challenges of the 21st century. The food and drink industry is particularly vulnerable to the possible adverse impacts of climate change, e.g. on agricultural productivity. Climate change has the potential to negatively affect the long-term economic sustainability of the food and drink sector. It is vital to take a holistic approach to environmental policy-making by taking account of other, equally pressing environmental challenges, most notably, water use, but also biodiversity and land use change, all of which are intrinsically linked. Focussing on GHG emissions alone would result in overlooking other key sustainability aspects along the life cycle. This principle is particularly important in the food sector, given the dependence of food products on the environmental complexities of agriculture. • Climate change: It is vital that the challenge of climate change be addressed on a global basis, both to ensure effectiveness and to avoid compromising the competitiveness of EU industries, which would result in relocation outside Europe and increased levels of global GHG emissions. Industrial sectors exposed to international competition must have equivalent obligations. Moreover, we believe that there are other means to ensure a level playing field than by imposing trade restrictions such as border adjustment taxes. The EU commitments made in view of 2020 and 2050 must reflect the binding commitments made by industrialised countries and emerging economies worldwide. Energy-intensive EU manufacturing sectors subject to international competition must receive free allowances under the EU ETS until their global competitors are made subject to equivalent emission reduction burdens. • Adaptation and mitigation: In the event that a global agreement cannot be reached, it is essential that national governments and EU authorities provide comprehensive support to EU manufacturing industries with a view to ensuring continued cuts in EU GHG emissions while guaranteeing a global level playing field. Apart from mitigation, the negative effects of climate change, in particular on agriculture, also require an effective adaptation strategy in Europe and at the global level. • Sustainable Consumption and Production: Actors within the food supply chain are already grouped together today under the European Food Sustainable Consumption and Production (SCP) Round Table initiative in order to face current and future sustainability challenges. The Round Table is a multi-stakeholder forum comprised of 23 European food chain organisations, co-chaired by the European Commission, aiming to (i) establish common principles and methodologies for the environmental assessment of food and drink products, (ii) identify

3 Confederation of the Food and Drink Industries of the EU, CIAA reply to the consultation on the future “EU 2020” Strategy, 2010 COMP/021/10E-Final

suitable communication tools to consumers and (iii) promote continuous environmental improvement initiatives along the whole food chain 4.

2.1.4 Innovation strategies

• Development of a coherent research strategy for the agro-food sector, based on a common vision. This strategy should take into account societal challenges, levels of economic impact and the need for major, sustained levels of investment in multi-disciplinary, inter-EU knowledge transfer. • Research and knowledge infrastructure: The EU 2020 strategy should aim to develop a connected, research and knowledge infrastructure, facilitated by the EU Commission, fostering stronger links between businesses, universities and research institutions. Better links between businesses and research institutions can promote bringing new innovative processing technology and cutting-edge techniques to the market to improve efficiency and create new products. • An ‘’Innovation Union’’: The EU must revitalise its innovation strategy. The size and scope of EU initiatives must be increased; the governance structure aimed at promoting enhanced coordination of national policies and links with public funding bodies must be reinforced. To enable the EU to become an “Innovation Union”, a strong link between the private sector, academia and research institutions is urgently needed. Successful examples of such a partnership are the European Technology Platforms and the ETP “Food for Life” programme. Comprehensive research activities, which crosscut different disciplines, are also fundamental. Moreover, SMEs must be supported in order to cultivate their innovation capacities and increase their involvement in research programmes. Lastly, to tap into the wide range of new opportunities in the field of innovation, investment is urgently needed in skills and resources. Effective partnerships built on public and private funding are necessary in order to align the most important research needs and to pool resources. • Research Strategy: The future success of the EU agro-food industry lies in its capacity to produce value-added, quality products. Consumer preferences for quality, convenience, diversity and health, and their justifiable expectations of safety, ethics and sustainable food production, highlight the numerous opportunities for innovation that exist. Such a research strategy is needed to support a competitive pan-European agro-food industry, successful in global business activities, leading to job creation, improving national and European economies, promoting sustainable and ethical production systems and increasing consumer confidence 5.

2.1.5 Product quality policy Consultations on the development of agricultural product quality policy began in 2006 with a stakeholder hearing, followed by a conference in Brussels 3 on 5-6 February 2007. The Commission also launched policy reviews of the schemes for geographical indications for agricultural products and foodstuffs and for traditional specialities guaranteed. This work culminated in the Green Paper consultation and the High Level Conference on Agricultural

4 Confederation of the Food and Drink Industries of the EU, CIAA Reply to the Consultation on the Future “EU 2020” Strategy, 2010 COMP/021/10E-Final.

5 Confederation of the Food and Drink Industries of the EU, CIAA Reply to the Consultation on the Future “EU 2020” Strategy, 2010 COMP/021/10E-Final Product Quality held in Prague 5 on 12-13 March 2009.

The main messages from stakeholders included strong support for the EU’s main quality schemes (geographical indications and organic farming) and marketing standards, but also called for simplification and streamlining. Farmers, producers and consumers urged greater use of place of farming labelling. On the other hand, processors and retailers warned that it can be difficult to track the farming origins of ingredients in processed foodstuffs. For all schemes — EU, private and national — defence of the single market and simplification were also strong messages 6.

European Greens formulated the following principles for food quality 7:

Changing Green demands: • phasing out subsidies for agro-industrial development- public support for farmers must be linked to strict respect of environmental and food safety laws ( no use of dangerous pesticides, no use of antibiotics or growth promoters in animal husbandry, compliance with standards for environment and animal welfare); • specific support for organic and extensive farming, including the infrastructure for local processing (small slaughter and processing facilities); • support for those fishing methods that cause the least environmental destruction, and use of the precautionary approach to prevent over-exploitation; • taxation policies supporting the use of healthy foods (e.g. fruits and vegetables) and decreasing the use of unhealthy foods (e.g. those with high amounts of sugar, refined cereals or saturated fats); • discourage intensive and factory farming, including fish farming through strict enforcement of environmental, animal welfare and food safety legislation (the eco-conditional or cross compliance principle); • specific support (like green and blue services) for non-market functions of agricultural practices.

Enforcing the precautionary principle and Standards for sustainability Green demands: • apply the precautionary principle throughout the whole food chain and establish clear rules on liability (especially for chemical residues and GMO contamination); • enforce standards which guarantee food safety, without limiting the necessary flexibility of implementation needed to maintain and diversify regional and local food production (specific hygiene rules for local markets and small processing enterprises); • enlarge the definition of quality standards, in order to include the wide differences of food; • culture and taste (enhancement of practices preserving biodiversity and local food culture); • When defining hygiene standards, clear margins of tolerance have to be given to the official authorities and the veterinarians controlling these standards, in order to extend the flexibility and to give orientation to the individual decision; • To a limited extent and as long as no direct health risks are at stake, the rules for locally marketed artisanal products should be negotiable among the official controlling body, the consumers and the producers.

Labelling for more transparency: In order not to further confuse but to enable consumers to make the right choice when buying

6 European Commission (2009), Product quality policy, COM(2009) 234 final 7 European Greens (2009), Green Food Policy for Europe: Strengthening European food culture, (adopted at the EGP Council, Montreuil, Paris, 9th-12 October 2008). their food and in order to build up markets for quality products, efficient inspections an controls and readable labelling are essential. Current control systems focus on food safety and exclude aspects of sustainability and wholesome quality of food. Green food policy would transform the defensive food safety approach of the EU into a proactive food quality approach. Consumers need simple and relevant information for their choice. In order to counter-act the current rise in obesity, nutritional labelling on processed food must be clear and understandable.

Balancing food and energy security: The ever growing pressure on natural resources for food, feed and fuel must be substantially reduced following the sufficiency principle. North America and Europe today consume 70 % of the world's mineral oil and 40% of the world's food, yet only represent 19 % of the world's population. The EU is the world's largest importer of agricultural products and fish in the world. In order to avoid future conflicts on access to energy sources, water and land, Green food and energy security policies must tackle wasteful production and consumption patterns and lifestyles and press for a more balanced access to food and energy for all.

Fair trade and qualified market access: The only way out of the deadlock in multilateral trade talks for Europe’s food safety and the developing countries’ food security is a “qualified protection of markets” against dumping. The anti-dumping criteria should include food safety, environmental, social, animal welfare and biodiversity aspects which are supposed to be applied to direct payments inside the EU. Non compliance with these standards should initiate tariffs or levies to be implemented at the EU and Developing country borders. Such “income from qualified protection” would be retransferred directly into developing countries and give support for projects introducing these agreed practices and standards.

To achieve such a qualified external protection, the EU should: • stop all forms of export subsidies for agricultural products; • make alliances with the FAO and other UN agencies to create a multilateral agreement on this issue within or outside the WTO; • implement sufficiently effective border controls and process controls in the places of origin to guarantee food safety standards for imported products; • reduce the energy use that coincides with food and feed growth, harvesting, production and transport; • ensure that fishing by EU vessels in the waters of developing countries is sustainable and also contributes to the development of sustainable fisheries by and for the local communities.

Investing in the future -improving food research: • Instead of concentrating on gene technology and profit maximisation for large scale agro industrial enterprises, agricultural research should place its emphasis on diversification of employment and innovation in rural areas through renewable energies and adapted technologies; • Special emphasis should be given to modernising organic and low input farming through targeted research; • Fisheries research should shift from maximizing immediate output despite any environmental impact towards methods of fishing that catch only adult fish that can be used, while leaving all other fish and animals (sharks, birds, marine mammals, etc.) in the water; • Training and information programmes should be focussed on methods of sustainable food production and marketing strategies for diversified food products of high quality.

Sustainable rural-urban relations in order to achieve added value in farming and to develop markets for quality produce: • public funds must be re-oriented from market intervention to promotion of rural infrastructure which sustains local and regional quality products, investments into animal welfare, biodiversity conservation and food security; • re-conversion to environmentally friendly farming with low contaminant residues and resource saving production methods (energy, water, manure, chemicals…); • organic farming should be promoted with public aid for conversion of land and for marketing in, schools, hospitals and public canteens; organic baby food should become the norm; • subsidies that lead to over-fishing must be redirected to promote more selective fishing gears and to reduce the tremendous excess capacity of the EU fleets, to bring them in balance with fish stocks.

2.1.6 Regulations, Measures and Constraints

EU Vs US Regulations:

The precautionary principle: The EU has put the precautionary principle at the core of its risk management policy. One interpretation is that in the absence of a clear understanding of whether something is safe, caution should be exercised. By contrast, the US requires ‘scientific evidence’ to justify restrictions on the use of a particular technique. As an illustration, the EU passed framework legislation that puts the burden of proof on companies to prove that the chemicals they use are safe, in line with the precautionary principle (for example the EU Regulation on Registration, Evaluation, Authorisation and Restriction of Chemicals or REACH). By contrast, US law (for example the 1976 Toxic Substances Control Act) tends to require that government agencies prove that a chemical is unsafe, rather than requiring producers to prove that it is safe before it enters the market. The USTR has been opposed to REACH since its inception, citing its approach as a technical barrier to trade, at odds with the WTO TBT agreement 8.

GMOs: EU farmers fear a situation where they would not have the right to use biotechnology but US products entering the EU market freely would (as is currently the case for goods such as soybeans). In most sectors, GMOs result in lower production costs, through easier control of weeds, labour savings, and in some cases higher yields. The rapid adoption of GMOs in the soybean and corn sectors, where producers have been allowed to use them, suggests that, in any case, there is a genuine cost advantage for producers.

Hormone-treated beef and BST/rBGH (recombinant bovine growth hormone): Farmers’ organisations (in particular through the American Farm Bureau Federation) and US authorities complain about regulatory barriers that limit US exports of beef and pork. There has long been a dispute on the use of hormonebased growth promoters for beef production, which led to a formal WTO case. There have also been recurrent disagreements within the Codex Alimentarius on the use of bovine somatotropin (or rBGH or BST) in dairy production. On these issues, the US considers that the EU has not provided clear scientific evidence of negative impacts on consumers and that EU regulations are not scientifically based. However, doubts as to the consequences for animal metabolism, concerns for animal welfare and the fear of a decline in dairy and beef sales.

8 European Parliament, Policy Department - Structural and Cohesion Policies (2014), Risks and Opportunities for the EU Agro-food Sector in a Possible EU-US Trade Agreement, Directorate General for Internal Policies.

Authorising the use of such hormones is not on the EU agenda. However, if imports of hormone- treated beef were allowed in the EU without local producers being able to access the sector, foreign products would benefit from a significant cost advantage. Indeed, hormones used in beef production accelerate the gain in weight and lower the percentage of fat. A distortion (currently hidden by high tariffs in the EU) already exists in the dairy sector, given that the EU prohibits the use of rBGH/BST but not imports of dairy products that have made use of it (one reason being that residues of this artificial hormone are difficult to distinguish from those of natural hormones). While the gain in milk production differs a lot according to the production system, it is estimated to exceed 10 % in most intensive farming systems 9.

Ractopamin: Non-hormonal growth promoters are also used in US beef production and banned in the EU. This is the case of ractopamin, a former drug to cure asthma, which has been used for more than 20 years to increase beef weight. The Codex Alimentarius classified this drug as safe if precautions were taken when using it, but the decision was highly controversial and obtained through a very narrow vote involving countries that were apparently responding to diplomatic pressures rather than taking a genuine interest in the issue (approval through voting is a rare procedure in Codex , and a sign of major disagreement). The EU quotes the lack of scientific evidence and the risk of interference with human medication as reasons to ban the use of ractopamin in the EU. It also bans imports of meat using this chemical. The North American Meat Association finds this ban unsubstantiated given the approval of the Codex standard. Again, should there be an agreement to import such ractopamin-treated beef, the EU producers facing more stringent regulations would be at a cost disadvantage.

Chlorine: The use of chlorine and other antimicrobial rinses, known as ‘pathogen reduction treatments’ is also prohibited for poultry in the EU, while it is standard practice in the US. In 2008, following bilateral discussions, the Commission proposed EU regulatory changes that would permit imports and production of pathogen reduction treated meat, but this proposal was rejected subsequently by the EU’s Food Hygiene Regulation, by the European Parliament and by the Council. US producers as well as US authorities see the ban as scientifically unfounded and generating barriers to US exports. The dispute led to the establishment of a WTO panel in 2009.

Recently (2013), the US reopened a similar issue by asking the EU to approve peroxyacid for the cleaning of raw poultry after slaughter, which is one of the four chemicals used in the US. The EU currently only allows hot water as an antimicrobial treatment for poultry. In this area too, trade liberalisation without further convergence of legislation might generate trade distortions. While the risk for consumers is hardly an issue, EU legislation imposes testing for pathogens all along the processing chains, and the use of clear water. US legislation allows less stringent procedures and an end-of-chain treatment, resulting in lower operational costs. The fact that in February 2013, the European Commission temporarily lifted the ban on imports of US beef that was based on differing hygiene and husbandry methods in meat production (allowing entry of lactic acid-rinsed beef) was considered as a potential source of distortion of competition by beef producers.

9 Policy Department Structural and Cohesion Policies (2014), Risks and Opportunities for the EU Agro-food Sector, Directorate General for Internal Policies

Pesticides and additives: US producers, supported by a group of US senators, complain that barriers resulting from different regulatory standards on pesticides and food additives unduly restrict US exports of fruits and vegetables, quoting pears and apples in particular. Should trade be liberalised, the risk is that producers would compete on a single market while not being able to use the same chemicals, both in agriculture (pesticides) and food (additives). Here too, differences in production costs may be an issue, even though they are difficult to estimate, given the different degree of pest control needed across regions.

Agricultural Product Quality Measures:

Inform buyers and consumers about product characteristics and farming attributes. Schemes can be either ‘certification-type’ or ‘labelling-type’. Certification is best when the undertakings made are complex; these are usually laid down in a detailed specification and checked periodically (e.g. annually), for example by a certifying body. Labelling measures are best for relatively straightforward claims that are normally self-declared by producers and subject to official controls. Both certification and labelling can show that a product meets baseline standards . They can also both be used to indicate value-adding qualities beyond baseline standards — either product characteristics or farming attributes.

The Commission 10 has identified three main issues to be addressed in developing agricultural product quality policy, namely: – Information to improve communication between farmers, buyers and consumers about agricultural product qualities; – Coherence to increase the coherence of EU agricultural product quality policy instruments; – Complexity to make it easier for farmers, producers and consumers to use and understand the various schemes and labelling terms.

In this context important measures are:

Marketing standards and product directives They contain technical descriptions of agricultural products, their composition, characteristics and the production methods used. Fisheries products are also covered by a specific marketing regime. They have been adopted not only by the EU, but also by multilateral bodies. As it concern international standards European agro-food companies that compete in third markets are subject to different constraints for production standards, environmental provisions, regulatory requirements and welfare rules. This can have a negative impact on their competitive position in global markets. To prevent such repercussions and with the objective of accomplishing a level- playing field, the High Level Group members stress the need to support the respect and adoption of international trade standards. As a result new market opportunities may arise for companies to exploit under both fair and safe trade conditions.

For this purpose the European Commission, in cooperation with the Member States, should promote the legal framework for harmonized international standards (sanitary and phytosanitary provisions) which address issues such as food safety (e.g. CODEX) or fair practice in the food trade at a global level. In the same context, it should encourage European legislative requirements such as those for animal welfare, food safety and environmental protection at international level so as to achieve a level playing field while taking into account growing societal

10 European Commission (2009), Product quality policy, COM(2009) 234 final expectations. Where problems of implementing or legislating on standards are acknowledged due to lack of resources within the third countries public administrations, the European Commission should provide a higher degree of assistance through capacity building. The European Commission should further support the respect of international standards during the bilateral negotiations so as to overcome unjustified technical barriers to trade.

Geographical indications Geographical indications are names that identify products10 as originating in a territory where a given quality, reputation or other characteristic of the product is essentially attributable to its geographical origin11. The geographical indications schemes provide protection of intellectual property rights for products described by registered geographical indications; and marketing assistance, primarily by conveying information as to compliance with the geographical indication system. The schemes enhance the credibility of products in the eyes of consumers and enable fair competition between producers. There are three schemes (for wines, for spirit drinks, and for agricultural products and foodstuffs) and two instruments, the PDO (protected designation of origin) and the PGI (protected geographical indication).

Replies to the Green Paper and earlier stakeholder consultations showed widespread support for the EU geographical indications system and interest in better protection of EU geographical indications in non-EU countries. However, the geographical indication systems need to be looked at and simplified. Stakeholders pointed out the need to retain the reputation of products and ensure use of sustainable farming methods as well as a range of issues and possible improvements in the operation of current schemes. Greater clarity is needed in the relation between the different types of intellectual property and in the use of generic terms.

Representatives of producers of geographical indication products have called for greater rights and control over their use — for example, to control production (using quotas), and to control the use of geographical indication names on the packaging of processed products. In the Commission’s view, while the EU geographical indications system is essentially sound and delivers benefits to consumers and producers, the need for simplification, greater clarity and streamlining warrant a legislative reform. It is also true that not all the registered geographical indications have a reputation and a commercial potential that transcend national borders.

Organic farming Since 1991, the EU organic farming regulation has protected the identity and the added value of the ‘ organic ’, ‘ biological ’, ‘ ecological ’, ‘ eco ’ and ‘ bio ’ labels. Organic farming is defined in EU legislation and at international level in a Codex Alimentarius guideline. This means consumers can be confident of the quality of organic products and it facilitates trade in the single market and with non-EU countries. EU organic legislation was revised13 in 2007 as part of the 2004 Organic Action Plan. But the level of market segmentation along national lines is a persistent problem in the EU, partly due to the lack of mutual acceptance between private organic labelling schemes and a proliferation of organic logos.

The Commission plans the following developments for organic farming policy: – a new EU organic logo is under development. It will apply obligatorily to all EU farmed products from 2010, and should help to break down barriers to trade in organic products in the single market; – a report on the application of the new regulation will be presented to Council and Parliament in 2011; – in order to foster trade in organic products, the Commission will seek mutual recognition of organic standards with non-EU countries and will contribute to the development of the Codex Alimentarius organic guideline.

Traditional specialities The EU scheme for registration of ‘traditional specialities guaranteed’ was intended to identify and protect the names of traditional products. However, with only 20 registrations since 1992, it has clearly failed to reach its potential. Despite the low take-up, responses from stakeholders to consultations have revealed support for the current scheme. The Commission proposes to investigate the feasibility of introducing the term ‘traditional product’ as a reserved term defined within marketing standards (see section 4.2 above) and abolishing the current scheme.

2.1.7 Challenges and Opportunities

The size of the European common market holds many opportunities. Main challenges are:

Food security: Preserve the food production potential on a sustainable basis throughout the EU, so as to guarantee long-term food security for European citizens and to contribute to growing world food demand, expected by FAO to increase by 70% by 2050. Recent incidents of increased market instability, often exacerbated by climate change, further highlight these trends and pressures. Europe's capacity to deliver food security is an important long term choice for Europe. The primary role of agriculture is to supply food. Given that demand worldwide will continue rising in the future, the EU should be able to contribute to world food demand. Therefore it is essential that EU agriculture maintains its production capacity and improves it while respecting EU commitments in international trade and Policy Coherence for Development.

A strong agricultural sector: Is vital for the highly competitive food industry to remain an important part of EU economy and trade (the EU is the leading world exporter of, mostly processed and high value added agricultural products). It should encourage the synergies between crop and livestock farming, e.g. in proteins.

High quality: EU citizens demand high quality and a wide choice of food products, reflecting high safety, quality and welfare standards, including local products. In this context, the issues of access, availability and acceptability of healthy food and nutritional efficiency have also become more apparent.

Competitiveness: EU agriculture finds itself today in a considerably more competitive environment, as the world economy is increasingly integrated and the trading system more liberalized. This trend is expected to continue in the coming years, in view of the possible conclusion of the Doha round negotiations and of the bilateral and regional agreements at present under negotiation. This represents a challenge for EU farmers, but also offers an opportunity for EU food exporters. Therefore, it is important to continue to enhance the competitiveness and productivity of the EU agriculture sector. Favourable in the medium-term, the perspectives for agricultural markets are expected nonetheless to be characterised by greater uncertainty and increased volatility.

Stimulate innovation and develop new products: This must be done in way that is respectful for the environment and that guarantees secure access to agricultural raw materials.

Support farming communities: Provide the European citizens with quality, value and diversity of food produced sustainably, in line with our environmental, water, animal health and welfare, plant health and public health requirements. The active management of natural resources by farming is one important tool to maintain the rural landscape, to combat biodiversity loss and contributes to mitigate and to adapt to climate change. This is an essential basis for dynamic territories and long term economic viability.

Maintain viable rural communities : Farming is an important economic activity creating local employment; this delivers multiple economic, social, environmental and territorial benefits. A significant reduction in local production would also have implications with regards to greenhouse gases (GHG), characteristic local landscapes as well as more limited choice for the consumer.

2.2: EU Market and Trade of the Agro-food Sector

2.2.1 The importance of the sector in the EU The combined agricultural and food sector represents an important part of the EU economy accounting for 19,2m jobs (9% of total employment) and for 4,3% of GDP in EU-27. The agro- food sector is relatively more important in New Member States, particularly concerning the employment in primary sector and in rural areas.

The Agricultural Sector The agricultural sector considered in the food supply chain is a changing sector, whose activities include crop production and the raising of livestock. In contrast to the past, some farms are gradually developing into larger entities taking-on the characteristics of small companies. Agricultural holdings are in fact an important socio-economic reality in the EU countries. There are 15 million holdings (of which 2.5 million account for more than 80% of the production in EU-27), accounting for 6% of employment and having a turnover of more than € 327 million. The majority of these agricultural holdings are small units, which tend to strengthen their position through mergers, acquisitions and cooperation agreements in order to compete on global markets now characterised by rapid changes in technology and consumer habits, as well as by increasing levels of consolidation in the retail sector. Agricultural land in the EU has seen a slight reduction over time – in general, because of the spread of forests and other habitats, and greater urbanisation. This trend is expected to continue, though at a slower rate, bringing utilised agricultural area to 173.1 million ha by 2024. About a third of agricultural land is permanent pasture and a small proportion is used for permanent crops, kitchen gardens and greenhouses, leaving around 60 % for arable crops 11

Agricultural cooperatives are an important socio-economic reality in the EU countries. There exist 26.000 cooperative companies which employ almost 700.000 workers and have a turnover of more than 250 billion Euros, a figure that equates to more than 50% of the production, transformation and commercialisation of agrarian products. The majority members of these cooperatives are small companies, and therefore aim at strengthening their position through fusions, acquisitions and cooperation agreements to be able to compete in the global markets characterised by rapid changes in technology and consumer habits, as well as by increasing consolidation in the distribution channels 12 .

11 European Commission (2014)Prospects for EU Agricultural Markets and Income 2014-2024, DG Agriculture and Rural Development. 12 European Commission (2009), Report on the Competitiveness of the European Agro-Food Industry, Enterprise The Food and Drink Industry The EU food and drink processing sector is the largest and most important manufacturing sector in Europe and a main exporter of European products worldwide, representing in the EU’s manufacturing sector the 2% of GDP, 15,6% of the employment and 14,5% of total manufacturing turnover (€1.048bn). The EU consumption in food and drink sector represents 14,6% of household total expenditures. The industry consists of approximately 2 8 6 . 000 enterprises (some of which are global leaders) operating at local and regional level but also on the world market and 4.2 million employees (the biggest employer of the manufacturing sector). However, the food industry is characterised by fragmentation. There are few European multinational companies competing worldwide with a wide variety of products but 99% of all enterprises in the food sector are small and medium sized enterprises (SMEs) that few are able to compete on the global market. SMEs represent 51,6% of the turnover and 64,3% of the employment of the food and drink sector 13 .

and Industry Directorate General, Food Industry Unit. 13 Food and Drink Europe (2014), Data and Trends of the European Food and Drink Industry 2013-2014.

Source: Food and Drink Europe (2014).

Source: Food and Drink Europe (2014). In regional level, all over Europe, some regions are highly specialised in the food industry: La Rioja and Navarra (ES), Bretagne and Pays de la Loire (FR), Del-Alfold and Eszak-Alfold (HU), Açores (PT), East Riding and North Lincolnshire (UK), Kujawsko-Pomorskie and Wielkopolskie (PL), Ipeiros and Kentriki Makedonia (EL), Niederbayern and Tier (DE) 14 . •

The performance of food-drink industry in the EU member states is presented in the following table.

14 European Commission (2007), The Importance and Contribution of the Agri-Food Sector to the Sustainable Development of Rural Areas, DG Agriculture and Rural Development.

Source: Food and Drink Europe (2014), Data and Trends of the European Food and Drink Industry 2013-2014.

The European Agro-Food industry consists of several food processing subsectors, each possessing particular characteristics. A list of these subsectors with their percentage of total turnover can be found in the following table: % of subsector on the overall turnover

Subsector % of total turnover

Meat 22% Fish and Seafood 3% Processed Fruits and 7% Vegetables Oils and Fats 5% Dairy Products 15% Grain based, Starch and 16% further processed products Beverage Industry 16% Sugar and sugar based 8% products Balance 8% Source: European Commission (2009), Report on the Competitiveness of the European Agro- Food Industry, Enterprise and Industry Directorate General, Food Industry Unit.

- The meat sector is the largest sub-sector, representing 20% of total turnover. It has the largest number of SMEs and large companies after the bakery and farinaceous products category, largely based on small scale craft production. - The “bakery and farinaceous products” category ranks first in terms of value added, employment and number of companies (32% share of employees working in this category). - The top 5 sub-sectors (meat sector, bakery and farinaceous products, dairy products, drinks and “various food products” category) represent 76% of the total turnover and more than four fifths of the total number of employees and companies.

- The labour productivity in sub-sectors like drinks, animal feed and various food products is higher in the sector. This is linked to the fact that these sub-sectors require higher levels of investment.

Source: Eurostat (SBS), 2011

The European agro-food industry has not escaped the crisis shock: economic growth has slowed sharply and unemployment has increased in many countries for the first time in several years. The economic crisis has seriously affected agriculture and rural areas by linking them directly to wider macroeconomic developments affecting its cost of production. After a decade of mere income stagnation, agricultural income dropped substantially in 2009 adding to an already fragile situation of an agricultural income significantly lower (by an estimated 40% per working unit) than that in the rest of the economy, and income per inhabitant in rural areas is considerably lower (by about 50%) than in urban areas. Although food and drink industry as a whole still represents a shrinking share of EU gross value added, this share declined from 20.4% in 1995 to 15.4% in 2010.

2.2.2 The EU Agro-Food Market

The EU from being a net importer in 2009 switched to a net exporter in 2010, the EU agricultural trade surplus has been increasing every year. In 2013, another €7 billion was added to the surplus, which thus increased to €18.6 billion 15 . This is attributed to higher exports, as imports remained roughly unchanged compared to 2012 (- €0.4 billion or -0.4%). The following graph shows the evolution and structure of EU agricultural trade since 2003.

15 EC, ‘Agricultural trade in 2013: EU gains in commodity exports’, Monitoring Agri-trade Policy, 2014-1. http://ec.europa.eu/agriculture/trade-analysis/map/2014-1_en.pdf

Source: Eurostat (COMEXT) (2014)

EU's Exports of the Agro-Food Sector

EU exports by product category

Agricultural products account for a solid share in the EU's total export basket with 7% of the value of EU total goods exports in 2013, ranking fourth after machinery, chemicals and pharmaceuticals. The EU most significant export products in 2013 were: spirits and liqueurs, wines, cereal and milk preparations, wheat and other food preparations.

With agro-food exports reaching €120 billion in 2013, the EU28 became the world's number one exporter of agricultural and food products. Although globally the modest growth in total world trade in 2013 is attributed to the slowdown of developing economies, the EU export growth was stimulated by demand for particular commodities in the developing countries, and was achieved despite the strong euro in 2013. Generally a renowned exporter of high value added final products, the EU owes the growth in 2013 largely to more exports in volume of commodities, with cereals (wheat and barley) alone accounting for over two thirds of the total export gain.

According to the EC’s agricultural trade report for 2013 16 , growth in EU exports of agricultural products slowed down to 5.8% in 2013, compared to 12% in 2012 and 17% in 2011. In 2013 agricultural products accounted for 7% of total EU exports. Also, the EU market share of food and drink industry of global markets (shrinking share in world markets) slowed down to 16,1%

16 EC, ‘Agricultural trade in 2013: EU gains in commodity exports’, Monitoring Agri-trade Policy, 2014-1 http://ec.europa.eu/agriculture/trade-analysis/map/2014-1_en.pdf

in 2013 compared to 20,5% in 2002. On the other hand, data shows that between 2011-2013 the exports' value of the food drink industry increased by 13,2% compared to 2011 and amounted to €86,2 billion. Nevertheless, with €120 billion in exports, the EU28 remained the world’s leading agro-food product exporter.

Despite the strength of the euro and modest overall growth in world trade, EU exports were stimulated by demand for particular commodities in developing countries. In general, final products for direct consumption account for two-thirds of EU agricultural exports, however, in 2013 the value of commodity exports increased by 27% following a surge in cereal exports. In contrast, export growth in final and intermediate products was limited to a more modest 3–4%. Some 90% of the gains in EU export values were accounted for by increased volumes and 10% price increases. For food preparations in particular, higher quantities contributed more to the export increase than higher prices did.

In 2013 milk and cereals preparation accounted for 12.5% of EU food and agricultural exports, totalling some €8.7 billion; these followed closely behind wines (€9.1 billion) and spirits and liquors (€10 billion). Wheat and chocolate confectionery are among the EU’s other specific agro- food sector exports. The EU remains an important producer of basic commodities, but the lion’s share (two thirds by value) of its annual agri-food exports worth around €70 billion a year are ‘finished products’, such as meat, dairy products, wine and vegetable oils. In the following table we can see the agro-food exports of the EU member states by product category.

Agro-food in EU28 exports (extra-EU trade), 2012

ASource : BACI database of CEPII. Raw goods: sectors 0 to 14; processed goods: sectors 19 to 26. Extra EU28 trade. The largest exporter is France, with total extra-EU exports of almost EUR 20 billion (accounting for almost 18 % of the EU total). The Netherlands and Germany have very similar export values, close to EUR 14 billion (12 % of the EU total). The fourth and fifth largest exporters are Italy and Spain (accounting for 10 % and 8 % of the EU total respectively).

While these numbers highlight the absolute importance of the agro-food complex, they shows the relative role of agricultural goods in countries’ extra-EU trade. Agriculture makes up close to 20 % of total exports in some of the new Member States, such as Croatia, Latvia or Lithuania. However, it is also very important for Denmark and the Netherlands (20 % and 13 % of total exports). For the EU in total, agricultural trade accounts for about 6.6 % of total extra-EU trade; the bulk being in processed goods (about 80 % of the total).

Export destinations

In 2013 the level of EU exports to some of its main destinations was stagnant, while to some others, a growth (though slower) continued to be recorded 17 .

The US continued to be the EU's largest market, with a share of 13% in total EU agricultural exports. The sales to the US, which have been growing steadily since 2009, also showed an increase in 2013, but only of 1.9% (to reach €15.4), but imports (of animal feed particularly) from the US increased sharply.

Russia remained the EU's second export market, with an export share of 10%, unchanged since 2009. EU agricultural exports to Russia increased by €0.5 (+4.3%). On the other hand, the slower economic growth and the Russian government’s self-sufficiency policies have been impacting on certain EU exports, notably the poultry meat sector (a sector of considerable importance to ACP countries), cheese, as well as vegetable oils, sugar and beef meat. For all these products, Russian net imports are decreasing, by up to 20 % in some cases. Conversely, for the commodities of which Russia is a net exporter (cereals, vegetable oils), exports are increasing (by about 4 % to 5 % in the case of grains).

Amongst the top ten export destinations, the highest growth rates can be observed for EU food and drink exports to China, Australia, Saudi Arabia and Japan, with rates increasing by 30%, 18%, 16% and 15% respectively.

The largest absolute gain in exports of food and agricultural products in 2013 was achieved by China (+€1.2 billion), which was also the second fastest growing market (+19.7%) after Saudi Arabia (+20.4%). For certain dairy products exports growth to China was very strong (whey exports have more than tripled since 2008). Exports to Hong Kong went up by 10% (+€0.5 billion). Overall, China and Hong Kong together represent 10% of EU agricultural exports, equal to the share of Russia.

Exports to Saudi Arabia, which have been increasing at this rate since 2010, reached €3.9 billion in 2013. Commodities, such as wheat and barley, were the main product category leading to increased exports to Saudi Arabia, and accounted for 32% of total bilateral exports.

17 EC, ‘Agricultural trade in 2013: EU gains in commodity exports’, Monitoring Agri-trade Policy, 2014-1 http://ec.europa.eu/agriculture/trade-analysis/map/2014-1_en.pdf

Algeria, which ranks ninth in EU top destinations, also showed a growth of 13%, which was primarily driven by higher exports of cereals, tobacco and food preparations.

Instead, EU's agricultural exports to Japan in 2013 were 2.3% lower and its share in exports fell to 4.2%.

E U agricultural exports by destination (€ billion)

Source: Eurostat (COMEXT), 2014

Top EU trading partners of exports, 2011-2012 (€ million)

Source: Food and Drink Europe (2012).

In 2013, like the year before, nearly 60% of export revenues from the sales of spirits and liqueurs came from the top 5 destinations, and the US alone led with 33%. Canada was replaced by South Africa in the top- 5 destination of EU spirits (exports increasing by one third in quantity). Spirits exports to China decreased by about 20% both in value and quantity, but it was still the EU's fourth export market.

The top market for wine continued to be the US (29%), followed by Switzerland, Canada, Japan and China, all together accounting for 63% of EU sales, and showing no major changes in 2013. Wheat exports were concentrated to the Middle Eastern-North African markets, the top eight export destinations all being in that region and accounting for two thirds of EU wheat sales. Algeria alone took 20% of EU exports. Sales to these countries skyrocketed in 2013, except to Iran (-10%) where EU exports had seen a record year in 2012.

Another important product category for EU exports is cereal and milk preparations and other non-specific products. It features in particular infant food, where China and Hong account for 17% of the export

Trade statistics indicate that the European agro-food industry is maintaining its export performance and is a major player at the world markets in different kinds of processed foodstuff. It possesses a number of strengths in the rapidly changing economic scene. Nevertheless, its share appears to be decreasing overall in the long-run, to the benefit of emerging economies, such as China and Brazil. Significant challenges remain, therefore, which if not addressed, may compromise the industry’s global competitive position.

Exporting barriers

EU exporters face a number of barriers such as tariff and non-tariff barriers, diverging regulations, administrative procedures, etc. Hence, to maintain competitiveness of European manufacturing it is of primary importance to improve market access by removing all unjustified obstacles to trade and also to achieve legal certainty and combat counterfeiting.

Another developing trend is the change in trade patterns. The European agro-food industry is confronted with an overall decrease of its share in the world market. Emerging economies and large agricultural exporters, such as Brazil have triggered this by increasingly adding value to their own agricultural raw materials at the expense of food product imports.

Moreover, EU exporters face a number of barriers when trying to access third country markets with their products, such as tariffs and non-tariff barriers. Finally, customs procedures often create an extra burden for both exporters and importers who spend a lot of their time coping with administrative requirements, managing paperwork and procedures. A key issue for the European agro-food industry, as expressed by the stakeholders, is the ability to access good quality and competitively priced agricultural raw materials. This is vital not only for the manufacturing industry but also for the consumers they serve. In this context, the competitiveness of the sector has recently been questioned.

2.2.3. EU's Imports of Agro-Food Products

In 2013 the EU remained the largest importer of agricultural products, but import values were just below last year’s level at €101.5 billion. This generated an agriculture trade surplus of €18.6 billion, an increase of €7 billion on the 2012 figures. Since the EU became a net exporter of agro- food products in 2010, the trade surplus has consistently increased. Although the total value of EU imports did not change significantly, imports of particular products went u p or down. Similarly to 2012, lower prices for coffee, cocoa and sugar compensated the increase in import value of other products (fruit and nuts, corn).

Imports by product category

The top ranking product in EU agro-food imports in 2013 was coffee, although its share shrank to 7.2% (€7.4 billion) down from 8.9% in 2012. Other high-ranking imported products were oilcakes from soya bean (€7.2 billion), soya beans (€5.6 billion), and palm oil (€4.5 billion). In 2013 the unit value of imports of coffee fell by 24%, and those of cocoa beans by 8.5%, cotton by 7.5% and sugar by 5.2%, compared to 2012. Tropical fruits and spices accounted for 9% of total EU agricultural imports; oilcakes, coffee and tea, and other animal and vegetable oils (including palm oil) followed with 8%. Soya beans and fruits accounted for 6% and 5% respectively 18 .

Source: Eurostat (COMEXT), 2014

18 Food and Drink Europe (2014), Data and Trends of the European Food and Drink Industry 2013-2014.

The share of agricultural product imports in total imports in EU and OECD can be found in the next table.

Share of each sector in total imports, in 2012 (%) EU 25 and OEECD

Sector EU OECD Animal products 0.31 0.22 Cattle 0.09 0.08 Dairy products 0.76 0.48 Meat 0.39 0.35

Other meat products 0.76 0.59 Cereals 0.38 0.43 Other crops 0.51 0.43 Sugar 0.12 0.12 Vegetables and fruits 1.01 0.81 Vegetable oils and fats 0.70 0.53 Oilseeds 0.30 0.25

Fishing 0.18 0.14 Other food products 2.95 2.57 Beverages and tobacco 1.07 0.95

Source : European Commission (2009), Report on the Competitiveness of the European Agro-Food Industry,

In the following table we can see the agro-food imports in the EU member states by product category.

Agriculture in EU28 imports (extra-EU trade), 2012

Source: BACI database of CEPII. Raw goods: sectors 0 to 14; processed goods: sectors 19 to 26. Extra EU28 trade.

In 2012 the country with the highest imports of agricultural products is Germany (EUR 19 billion), thus it had a trade deficit in this industry of about EUR 5 billion. France, in contrast had a trade surplus of more than EUR 8 billion. Denmark and the Netherlands, important exporters, also rank high as agricultural importers. These countries are important processing hubs in the EU agro- food industry. Denmark, for example, is among the world's largest pork exporters, which requires substantial imports of pig feed. On the other hand, the economy of some rural areas depends largely on agricultural activity and it will still be so in the future.

EU imports by origin country

Brazil remains the EU's top import partner in 2013 (13%), but continues to lose market share to the benefit of the US, who accounted for 10% (compared to 8% in 2012). Argentina and China now both have 5%, while Indonesia, Switzerland, Turkey and Ukraine each account for 4%.

Imports from the US were the fastest growing in 2013, with an increase of 17%. This growth can be mostly attributed to higher imports of soya beans and soya bean oilcakes. These two products combined accounted for 20% of EU food imports from US: in 2013 the imported quantity went up by 67% and the value by 60%. Nuts are the single highest-ranking product (16%) imported by the EU from the US. Ethyl alcohol also accounts for a noteworthy 7.5%.

Other countries recording high growth rates in supplies to the EU include South Africa (+13%, with a particularly positive trend for various fruit and wine), Chile (+9.4%; wine, fruit and nuts, maize up), Indonesia (+8.2%; palm oil, coffee and tea, industrial alcohols up); and Turkey (+5.2%; nuts, dates and figs, olive oil up). Imports from Ukraine, which had showed the highest growth in sales to the EU in 2012, decreased to €3.8 billion (-7.3%) in 2013. While maize and rape seed imports still grew, imports of sunflower seed, oilcakes and soy beans suffered. Among ACP countries in 2013, South Africa recorded a high growth rate in exports to the EU (+13%), with a particularly positive trend for various fruits and wine.

While the EU continued to be the top importer of agro-food products from developing countries, on average since 2011 only 2.8% of EU imports of agro-food products came from LDCs. However, this import volume remained larger than the combined total for Canada, the US, Australia, New Zealand and Japan. On average, over the years 2011 to 2013, 2.8% of EU imports came from LDCs (€2.8 billion per year). The value of this trade is four times as high as the corresponding value of agricultural imports of the "Big 5" (Canada, US, Australia, New Zealand and Japan) taken together. Nearly half of EU imports from LDCs are final products, 30% commodities and 20% intermediate products. In 2013 EU imports of sugar from LDCs increased by 14% 19 .

Top EU trading partners of imports, 2011-2012 (€ million)

Source: Source: Food and Drink Europe (2012).

19 Food and Drink Europe (2014), Data and Trends of the European Food and Drink Industry. EU agricultural imports by origin 2003-2013 (€ billion)

Source: Eurostat (C)MEXT), 2014. Source: Food and Drink Europe (2012).

To conclude, Europe is the largest exporter as well as importer of food and drink products, with a positive trade balance. France and the Netherlands are the largest EU exporters, while the UK, Germany, Italy and Spain are the largest importers. As regards the export prices, EU and selected Member States have prices above the world average, a fact that may indicate a relatively high added value, as well as possible expensive raw materials in some cases. The USA remains the main market for EU products.

2.2.4 Perspectives and Drivers for the EU Agro-Food Market The future of EU agro-food sector depends on several driving forces and long-term trends:

Increased international trade in food and beverages, and cross-border mobility of investment have resulted in significant changes to traditional markets and trading patterns. An essential prerequisite for future growth and competitiveness in the European agro-food industry is the preparedness of the authorities and industry to address the impact of globalisation and to face these challenges and take advantage of the opportunities offered by globalisation. European policies and regulations, in relation to the food supply chain, should acknowledge that the European agro-food industry operates within a global network of commodities, distribution channels and mobile investments 20 .

In the global context, the liberalisation of trade, as well as the growing prosperity of a number of emerging economies, have provided new market opportunities. On the other hand, the financial crisis and rapid fluctuations in the price of raw materials create significant trading uncertainties for many

20 European Commission (2009), Report on the Competitiveness of the European Agro-Food Industry, European Commission, Enterprise and Industry Directorate General, Food Industry Unit. food and drink companies, in particular SMEs.

The completion of the Internal Market has brought huge opportunities for the food supply chain. Since its creation, it has enabled the food industry to develop considerably by providing access to 500 million consumers and to a wide range of products at affordable prices originating in all Member States. It continues to play a fundamental role in satisfying the needs of consumers and contributes an annual production of more than € 600 billion to the EU economy.

At the same time on-going consolidation in the food supply chain in favour of retailers has shifted the power relationships between the different players. Retailers are an important link between the agro-food industry and consumers. Developments in the distribution sector define the business environment for the food supply chain providing both opportunities and threats. Two different developments can be observed: the number of wholesalers to increase while the number of agro - food industry enterprises and retailers to decrease21 .

Consumption also plays an increasing role in European economic growth. In order to bring the right product to the right place at the right time, companies have developed efficient distribution systems. This requires the free movement of goods and services across borders, stimulates innovation by connecting customers faster and more directly with producers and gives consumers access to an unprecedented range of products. Nevertheless, when offering the best possible value to consumers competition is fierce. This, in turn, helps to keep inflation low, in spite of price pressures on raw materials and energy products. On the other hand, however it also creates considerable pressure for food suppliers.

The ongoing long-term process of structural adjustment of EU agriculture will continue mainly due to the productivity gains supported by technological progress and to the overall economic pressures: the volume of labour will decrease with an increase of average size of farms as area devoted to agriculture should diminish slowly. Adjustment of EU food-industry will also continue following productivity gains.

The EU has a few offensive interests, in particular in gaining access to some markets that are heavily protected by tariffs, but even more by regulatory barriers that sometimes keep foreign producers out (e.g. dairy products) or that involve significant compliance costs for EU exporters (e.g. inspection procedures for fresh products and for meat preparations, obligation to go through intermediaries in the wine sector).

The sector where the EU could expect an increase in exports is the dairy products sector. There may also be benefits in the areas of processed products, including wine and spirits, and, under certain market conditions, sugar and biodiesel. From the above data analysis, we found that the largest potential of EU export gains are in the following industries: red meat (+404 %), sugar(+297 %), white meat (289 %) and dairy (+240 %).

Concerning the EU-US trade, the largest predicted increases in EU imports from the US involve the same mentioned above industries, but the magnitude of the effects is substantially greater. Several EU production sectors would face considerable competition from lower-cost US producers. This is a potentially severe problem in the beef sector, with potentially far-reaching social and environmental consequences for some EU regions specialised in suckle cows and grass-fed veal production. However, since at present EU-US trade is very low in many products, percentage changes are to be interpreted with caution. In this context, trade gains from the elimination of tariffs will be very minor, since the agricultural value added will be affected very little, despite large increases in bilateral trade. It is predicted to fall by 0.5 % in the EU and to rise

21 European Commission (2009), A Better Functioning Food Supply Chain in Europe, Com (2009) 591 Final. by 0.4 % in the US. The larger EU Member States will see losses close to the EU average, while the Baltic countries are forecast to register the largest losses 22 .

Also, there is a need to find more common ground on standards and regulations. Because there is divergence between the EU and the US on fundamental issues, such as the concept of risk management, the level of protection demanded by consumers or the role of the state, there are fears that harmonisation or mutual recognition could lower the current EU standards or undermine the fundamentals of EU consumer protection and of environment policy.

The entire European food supply chain has entered a period of structural adjustment. Consumer preferences are changing as a result of income and lifestyles developments as well as shifts in population structures and lifestyles. Demand for agro-food products will evolve with slower increase in terms of volume but the composition of food consumption will change. Income growth, urbanisation and dietary diversification will lead to new demands for quality and certified products 23 .

Customer concerns about prices, food safety and health have also imposed stringent though understandable, requirements on companies operating in the sector. Moreover low levels of labour productivity, reflecting an underlying problem of insufficient investment in research and innovation, poses a particular challenge for the sector.

Climate change will influence EU agriculture in a differentiated way: it will impact the yields and influence the management of natural resources (i.e. water). Social demand that is also driven by environmental and health concerns will likely also define the natural and social constraints on EU agricultural practices. In addition there is the wider context in which an evolving market situation, driven by exciting new technological developments in areas such as Information and Communication Technologies (ICT) and biotechnology, presents new challenges and opportunities 24 .

22 European Parliament, Policy Department - Structural and Cohesion Policies (2014), Risks and Opportunities for the EU Agro-food Sector in a Possible EU-US Trade Agreement, Directorate General for Internal Policies. 23 European Commission (2014), Prospect for EU Agriculture Markets and Income 2014-2024, DG Agriculture and Rural Development. 24 Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

2.3 Trends in the sector

2.3.1 Introduction

The vision for 2050 is a world that is able to guarantee a growing population access to and control of safe, nutritious and culturally acceptable food and to manage the necessary balance between food demand, health and nutrition requirements and natural resources. Global systems for producing and distributing food must also be more resilient, more sustainable and more equitable25 . In this context the agriculture and food system has to face in the coming years the following crucial issues:

Growth in population and increase in food demand

Between now and 2050, growth in global population, that will increase to an estimated 9.2 billion people (34 percent higher than today), is projected to bring about a 70% increase in food demand in 2050. Nearly all of this population increase will occur in developing countries. Urbanisation will continue at an accelerated pace, and about 70 percent of the world’s population will be urban (compared to 49 percent today). In order to feed this larger, more urban population, food production (net of food used for biofuels) must increase by 70 percent, annual cereal production will need to rise to about 3 billion tons, from 2.1 billion today, and annual meat production will need to rise by over 200 million tons to reach 470 million tons, while agricultural productivity has been slowing down over the last decades and resource constraints and climate change severely limit the world’s capacity to expand food production. Hence, there is a serious threat that food demand will not be met in 2050 26 .

Climate change

Agriculture both affects and is affected by climate change. Food production can create negative impacts on the environment. The sizable contribution of the animal sector to climate change and the emissions of various contaminants and effluents are examples. In addition the sector is very dependent on energy and water, two of the potentially

scarcest resources for the future. Globally, agriculture is the most climate sensitive economic sector. For 2005, agriculture accounted for 10–12% of total global anthropogenic emissions of greenhouse gases, plus, e.g. for the year 2009, ~13% of CO2 from deforestation, and for about 50% of global methane and about 60% of global N2O emissions. Climate change is also a question of mitigation, and agriculture is one of the important sectoral contributors to greenhouse gas emissions at the global scale. Without additional policies, agricultural N2O and CH4 emissions are projected to increase by 35–60% and ~60%, respectively, to 2030, thus increasing up to twice as

25 Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission. 26 FAO High-level Expert Forum, Rome, 12-13 October 2009, “How to feed the world in 2050”. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” fast as between 1990 and 2005 27 .

There are at least four ways agriculture may participate in or be influenced by GHG mitigation efforts: reduction of emissions from agricultural production; enhancement of greenhouse gas absorption by creating or expanding sinks; provision of products which substitute for emission intensive products, such as biomass for bioenergy to replace fossil fuels; and through greenhouse gas mitigation policies on agricultural input and output prices.

GHG emissions mitigation options in the livestock sector include: reduction of soil carbon losses through improved grassland and pasture management; reduction of methane emissions of livestock through better diets and genetics, and better manure management; and reduction of nitrous oxide emissions through altered diet and improved manure storage and applications methods. Withdrawing carbon from the atmosphere and storing it in agricultural and forest soils and biomass has the potential to sequester large amounts of carbon. For cropland the main options with the highest potential for storing carbon are conversion of cropland to perennial grasses, and switching from conventional tillage (moldboard plough tillage) to reduced tillage or no-till. Options with lower carbon-storing potential include changing crop rotations, elimination of summer fallow, expanding the use of winter cover crops, and improved management of fertilizer, manure and irrigation.

Establishing comparability between carbon emission reductions and carbon sequestration requires consideration of the temporary greenhouse mitigation effect of carbon sequestration relative to emission reduction (permanence) and the finite period of time that soil can accumulate additional carbon (soil carbon stock equilibrium). An additional policy issue is whether farmers are paid for carbon sequestered (gross sequestration) or whether they are paid for carbon sequestered and charged for carbon emitted (net sequestration). Given a carbon price of USD 125 per tonne of carbon permanently sequestered, a payment for gross sequestration would reduce emissions by 3.5 MMT at a cost of USD 1.5 billion while a payment for net sequestration would reduce emissions by 7 MMT at a cost of USD 300 million - twice as much carbon at one-tenth the average cost per tonne. Many of the carbon sequestration activities or mechanisms have ancillary benefits and costs which need to be taken into account when designing carbon sequestration policies. For example, reduced tillage usually reduces soil erosion and nutrient runoff, but it may increase the use of herbicides for controlling perennial weeds and thus may ultimately increase herbicide runoff. Conversion of crop land to perennial grasses may improve wildlife habitats and increase species diversity. On the other hand policy measures that are designed for addressing water quality, such as establishment of green set-asides and buffer strips can contribute to carbon sequestration 28 .

27 Friedlingstein, P. , Houghton, R. A., Marland, G., Hackler, J., Boden, T.A., Conway, T.J.,Canadell, J.G., Raupach, M.R., Ciais, P., Le Quéré, C. (2010), Update on CO2 emissions. Nature Geoscience 3. 28 European Commission (2009), Report on the Competitiveness of the European Agro-Food Industry, Enterprise and Industry Directorate General, Food Industry Unit.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Food production will be adversely affected by climate change, in particular in developing countries that are already climate-vulnerable and that already face hunger and poverty. Climate change will also threaten food safety by increasing the pressure from vector, water and food-borne diseases 29 . For a majority of regions in the world, the impact of climate change on plant productivity in agriculture is going to be negative, even when taking into account the positive effect of an increased CO2 concentration in the atmosphere.

In the near future, agriculture will have to find joint solutions for adaptation to and mitigation of climate change. Emerging technologies may reduce the emission intensity per unit of food produced, but absolute emissions are likely to grow to meet the expected increased food demand 30 .

Resource scarcity

Rising resource prices in recent years, combined with increasing global demand for resources due to a growing population and increasing wealth, have brought the issue of resource scarcity to the forefront of the political agenda. A changing world order, globalization, the effects of climate change and the risk of irreversible loss of biodiversity in ecosystems critical for food production, add to concerns about the future scarcity of resources and strengthen calls for new policies to deal with resource scarcities 31 .

Globally, food production is exceeding environmental limits or is close to doing so. In light of agricultural production prospects in a 30-40 years perspective, the following issues were identified as most critical: (1) “Classical” or “old” scarcities related to natural resource use: fertile and, freshwater, energy, phosphorus, and nitrogen; (2) “new” scarcities related to environmental limits that aggravate the “classical” scarcities: climate change including ocean acidification and biodiversity loss; and (3) societal contributions that aggravate these scarcities, but can also become important pathways for transitions to sustainable and equitable food consumption and production. Nitrogen synthesis exceeds the planetary boundary by a factor of four and phosphorus use reaches the planetary boundary. Land use change and land degradation, and the dependence on fossil energy contribute about one- fourth of global GHGs. Agriculture including fishery is the single largest driver of biodiversity loss. Regionally, loss of water through irrigation exceeds the replenishment of water resources. Simultaneously, depletion of fossil hydrocarbons will increase the demand for biofuels and industrial materials, which may compete with food for biomass. At the same time, natural resources are being depleted and climate change is pressing the agenda. Sustainable development considerations still remain under-represented

29 FAO (2009), Climate change and bioenergy challenges for food and agriculture. High Level Expert Forum - How to Feed the World in 2050. 30 Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission. 31 Food and Drink Europe (2012), Environmental Sustainability Vision towards 2030: Achievements, challenges and opportunities, www.fooddrinkeurope.eu. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” in the policy-making process. Thus, the question remains as to how best create a systematic and iterative method within the policy process for ensuring that resource consumption and pressures on the environment do not increase at rates 32 .

Given population growth and increasing prosperity and the accompanying rise in consumption, we can expect ecosystem services and entire ecosystems to collapse by 2050, if production systems and consumption patterns do not change. The various scarcities and their causes are characterized by many similarities and interlinkages. An integrated approach which encompasses natural sciences, social sciences and improved governance is required to enable a transition to a sustainable world economy and society.

Priorities and mechanisms of resource and environmental scarcities in food systems

Source: Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission.

Trends in consumption

Trends in consumption include the increasing variety of food consumed, changing dietary habits and the divergence in diet between the rich and poor, leading to a health gap. Rising income levels in emerging countries will shift diets to more protein

32 Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” rich food and will increase energy demand. The nutrition transition towards more meat-based consumption that is occurring in low and middle- income countries has world-wide consequences for food supply and places major stress on natural resources, as well as impacting on climate change. Evidence is emerging that a second transition occurs from a diet rich in animal proteins to one that is closer to health guidelines and that at the same time puts less pressure on the environment. Structural elements such as the food processing industry, the retail sector and the media play a key role in changing consumer habits.

A radical change in food consumption and production in Europe is unavoidable to meet the challenges of scarcities and to make the European agro-food system more resilient in times of increasing instability and surprise. Inspired by the fact that Europe is addressing the climate change challenge in industry and is intending to make new energy technologies a win-win-win strategy for market, labour and human welfare, the agro-food sector should now consider that there is an opportunity to positively address the challenge and be the first to win the world market for sustainably producing healthy food in a world of scarcities and uncertainty 33 .

Food Supply chain

The food supply chain is complex. It is composed of a wide diversity of enterprises that operate in different markets selling products to the various purchasers and meeting the tastes and demands of different customers. The food supply chain connects three economically important sectors: the agricultural sector, the food processing industry and the distribution sector (wholesale and retail). In this respect, several interactions occur on the farm-to-fork supply side - where basic agricultural commodities are transformed into final products. This applies also in the opposite direction, from fork to farm demand side - as it is of paramount importance that the supply process takes into account consumers needs, concerns and expectations. A schematic representation of the food supply chain can be found below:

Food supply chain

33 Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Source: European Commission (2009), Report on the Competitiveness of the European Agro-Food Industry, Enterprise and Industry Directorate General, Food Industry Unit.

The European food supply chain plays a substantial role in the European economy. It operates in a highly competitive environment and its overall production value is higher than in benchmark countries, such as US, Australia or Canada.

Changes in the governance of food supply chains are particularly central, as recent trends show interesting transformations whose combined impacts on the sustainability of the food systems is difficult to predict. Demand increases need to be mitigated through changes in food supply chains (among which are food chain efficiency, reducing or re-using waste…). The increasing concentration of resources and power into a limited number of multinational corporations and the emergence of an agro-industrial model where food products tend to become services more than products might be combined in the future with other emerging trends such as corporate social responsibility and multi-stakeholder policy platforms. As globalization intensifies, necessary food exchanges between regions of the world will increase, mainly because some regions like Asia or Middle East / North Africa will not be able to produce as much food as they will presumably consume under standard demographic assumptions. The governance and regulation of trade will therefore be at the heart of future food systems and food security, even in a scenario where maximum regional food self-sufficiency is sought 34 .

Green supply chain: High-quality raw materials are essential for achieving high-quality

34 European Commission (2009), A Better Functioning Food Supply Chain in Europe, COM (2009) 591 final. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” products. In this respect, food manufacturers depend greatly on the competitiveness of the farming sector and the sustainability of its production methods for the ingredients that they need for their products.

Research and Innovation

Investments in innovative research is necessary to create better management techniques that combine large agricultural production with low inputs, low emissions and high biodiversity value. New methodologies that embrace all elements of the agricultural system are needed. It will be also necessary to discover and simultaneously implement ways of increasing agricultural productivity, better soil management and efficiency with regard to water and nutrient use.

The RTDI should be as broad as possible, ranging from new plant varieties and animal breeds better adapted to changing conditions to farming systems with improved water and labour-saving technologies; reduction of losses and waste; and natural resource management. Technological advances are particularly needed in the staple crop sector, as well as the feed conversion efficiency in animal production, as is that on animal welfare 35 .

Investment in the implementation of existing technologies is also critical. Scientific advances have the potential to bring forward new varieties, breeds and technologies that could boost productivity and that at the same time take into account resource scarcities and environmental problems. Scientific advances have also the potential to bring forward agro-ecosystems that are both productive, respectful of ecosystems and resource saving. The research and development of innovative products and production processes are also important for the entire food supply chain and aim at satisfying the ongoing changes in consumer preferences while ensuring product diversification.

Compared to other leading industry branches, the agro-food processing industry is generally not considered as being very innovative. Recent surveys show that the European food industry is targeting 50% less of its investment in R&D than the non- food industry. Indeed, the return on investment and margins of profit are generally low and can contribute to a lack of incentives to commit to R&D projects. Although there are exceptions in some world-class companies, companies find it difficult to seek authorization for novel food products, because of the lengthy procedures and the uncertainty of the outcome. The cost factor or inappropriateness discourages many from patenting food products or new processing techniques. Moreover, the European agro-food industry is dominated by SMEs that often lack resources and qualified personnel to invest on research and innovation 36 .

35 FAO (2010), Agriculture, food security and climate change in post-Copenhagen processes, An FAO Information Note. 36 European Commission (2009), Report on the Competitiveness of the European Agro-Food Industry, Enterprise and Industry Directorate General, Food Industry Unit.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Investments in the public research sector should be increased and there is scope for European coordination to improve efficiency. Innovation not only requires better collaboration between the public and private sector but also more open innovation between different business sectors, including transport, packaging, retail, the health sector and business services. Finally, SMEs have very little R&D capability of their own and seldom possess the resources necessary in research and innovation projects.

For effective advances in the food, nutrition and health area there will be a need to devote a considerable amount of resources to the area as well as to ensure appropriate inputs from molecular biologists, nutritionists, toxicologists and consumer scientists. Continued and increased investment in relevant research and innovation at EU and national levels is critical in addressing the transition to new food consumption and production patterns that respect the interlinked global scarcities and the principles for a safety food.

2.3.2 Agro-Food Technologies

Technological innovations are critical in achieving the transitions required to make the food system more efficient and resilient. Trends in technological innovation cover a wide range of fields from agriculture to food products and from production to consumption. These technological trends will bring change in the agro-food domain that demands an adequate response by public authorities, business and the consumers. Such a transition provides many opportunities: to prevent and clean up environmental problems; to introduce new products to a European market that meet the changing needs of consumers; to cope better with shortages in labour markets, to produce abundant food at affordable prices; to reduce transport and even to simplify administrative procedures.

2.3.2.1 Technological Innovations in the Product Biotechnology The United Nations Convention on Biological Diversity defines biotechnology as "Any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use." Biotechnology makes use of a plurality of “platform technologies” such as genomics, proteomics, metabolomics, bioinformatics, genetic modification, marker assisted selection, synthetic biology. Its fields of application are in the primary sector (green biotechnologies), in the health sector (red biotechnologies) and in industry (white biotechnologies) 37 .

The primary sector employs biotechnologies in the production of feedstock for industry, as a producer of functional food, and as user of biotechnological applications such as seeds, bio pesticides, animal therapeutics and diagnostics. There is a agreement that these new technologies are introducing ‘revolutionary’ changes in terms of the amount of knowledge, processes and products 38 . The applications of

37 OECD (2009). The Bioeconomy to 2030; designing a policy agenda - Main Findings and Policy Conclusions. OECD, Paris. 38 The Royal Society (2009). Reaping the Benefits: Science and Sustainable Intensification of Global European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” biotechnology in business activities belong to the so-called bioeconomy. A recent evaluation of the total turnover of the bioeconomy in Europe states that it amounts to about 60 millions euro (50 chemical and plastics, 1 enzyme and 6 biofuels) 39 . Given the common scientific and technological platform, the integration between the three sectors is bound to develop further, as in the case of nutraceuticals, which cross the boundaries between food and drugs.

The main biotech applications in agriculture encompass marker assisted selection (MAS), genetic modification, propagation, therapeutics and diagnostics. Biotech applications important in regard to livestock are breeding, propagation and animal health. In the short run, the “most important application of biotechnology to animal health is likely to be for diagnostics for genetic conditions and for recombinant vaccines. Genetic diagnosis for diseases hold great promise, but the technology is not as advanced as other biotechnology applications” 40 . The largest commercial application of biotech in animal breeding is the application of MAS to conventional breeding programmes for pigs, cattle, dairy cows and sheep. With regard to propagation techniques, the expectations are that the cloning of GM animals to produce pharmaceuticals will reach the market, and the application of the same technology for meat production is likely to occur in non-OECD countries, in which public opinion and consumer acceptance seem to be of less importance 41 .

Biotechnology development and industrial application will be strongly linked in the future. In fact, the industry will be driven by a ‘technology push’ coming from expected advancements in fields of research such as systems biology, metabolic engineering and enzyme evolution. At the same time, biotechnological research will be subject to ‘demand pull’ created by the development of the bioeconomy. Ethical concerns will also play a major role when analyzing future trends42 . As far as ethical aspects are concerned, there are some issues still debated, such as cloning in animal production and synthetic biology. These aspects, in fact, raise critical questions concerning the difference between life and non-life or between the natural and the artificial 43 . OECD analyses GMOs, biomass energy, welfare of animal cloning, bioprospecting as critical points in the ethical debate about biotechnologies.

Some biotechnological applications may raise concerns about their social impact. For example, the so called functional foods, defined as "any modified food or food ingredient that may provide a health benefit beyond the traditional nutrients it

Agriculture, London. 39 CleverConsult (2010). The Knowledge Based Bio-economy (KBBE) in Europe: Achievements and Challenges. Brussels, Belgium. 40 OECD (2009). The Bioeconomy to 2030; designing a policy agenda - Main Findings and Policy Conclusions. OECD, Paris. 41 Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission. 42 European Commission (2009). People, the economy and our planet: Sustainable development insights from socio-economic sciences and humanities. Publications Office of the EU, Luxembourg. 43 European Group on Ethics in Science and New Technologies to the European Commission (2009). Ethics of synthetic biology. Opinion no 25. Brussels. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” contains”, raise very complex issues, as that they may weaken the efforts of public authorities to improve healthy eating styles. As in many other cases, it would not regard biotechnology per se as a cause of negative social impacts, but its combination with existing social structures, regulations and business strategies.

Biotechnology developments and their applications in agriculture have an enormous potential to fight against scarcities, as well as to address social challenges. Agricultural biotechnology is expected to have a major role in the years to come. Some areas where biotechnology will have a prominent role include increasing yields based on improved and new crop varieties (for instance drought-tolerance; reducing the use of natural resources on the one hand, and increasing the efficiency of resource usage, on the other; reducing the level of CO2; reducing poverty; increasing food safety; biofuels and recycling of food waste.

A prudential approach would state that in order to contribute to sustainable development, biotech research should: a) incorporate ethical, social and environmental implications from the design of the research; b) proceed with research that identifies institutional arrangements appropriate to avoid negative consequence of biotechnological application; c) be open to public debate 44 .

The EU's plans is to maximise the potentials of biotechnology to the benefit of the economy, society and environment. There are new challenges in this sector including a growing demand for healthy, safe food; newly emerging risks; and threats to agricultural and fishery production from changing weather patterns. However, creating a bio economy is a challenging and complex process involving the convergence of different branches of science. Industry considers biotechnology to be one of the most promising drivers for innovation and growth, but in Europe, past uncertainty over the regulatory framework and insufficient public acceptance have driven many research and development investors away from biotechnology projects for agricultural applications. As a result, the gap between Europe and other world regions, where this technology continued to develop, is steadily increasing 45 .

Genetic Modifications (GMOs) GMO R&D is based on the Gene → DNA →protein paradigm, which is now largely dismissed by theories showing a much bigger complexity of relations among genotype (genetic endowment) and phenotype (characteristics of the organism in a specific context). GMO development based on the idea that a gene can directly express a function (e.g., tolerance to drought) does not take into account the complexity of feedbacks and unintended consequences that may arise from genome modification 46 .

44 Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission. 45 European Commission (2009), Report on the Competitiveness of the European Agro-Food Industry, Enterprise and Industry Directorate General, Food Industry Unit.

46 Mattick, J.S. (2009). Deconstructing the Dogma. A New View of the Evolution and Genetic Programming of Complex Organisms. Annals of the New York Academy of Sciences 1178: 29-46. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

GM plant breeding programmes are focused on four main traits: herbicide tolerance, pest resistance, stress tolerance, and product quality, among which two dominate the approved products– herbicide tolerance and pest resistance. Most of the growth in recent years is due to ‘stacked products’, that is varieties endowed with combinations of traits (for example, herbicide tolerance + resistance to pests). Herbicide tolerance tends to be the common trait of new commercialised variety. In so far more than 34 million ha of GMO crops are cultivated in the world (about 10% of total arable land), more than 90% of cultivated land is used for four crops (soy, canola, maize, cotton) 47 .

GM traits have been conducted for 130 plant species so far. The fastest uptake of the technology has been registered for soybeans, where GM varieties account for 65.8% of global cultivation in 2008. The forecasts for 2015 are that this share will reach 88.2%; the figures for GM cotton were 47.1% in 2008, with a forecasted increase to 72.7% in 2015. Concerning vegetables, nuts, fruits, olives and wine grapes, the GM varieties on the market are very few, and that future adoption of GM varieties in this group will largely depend on consumer acceptance. The expectations are that in the years to come the developing countries will be much more involved in the commercialisation of biotechnologies, mainly for new crop varieties suitable to the local conditions, as well as for other crops that adapt to these local conditions 48 .

Costs of bio-molecular techniques are decreasing in an impressive way. In 2006, sequencing a DNA basis cost $0.001, while in 1991 it cost about $30. A whole genome sequence may cost one- tenth of the cost of ten years ago. This means that the use of these technologies may spread to small and medium enterprises. However, there are many other costs to be sustained to produce a GMO. The regulatory costs (risk analysis, test into fields) for a new variety amount to about 425 million dollars. It is said that developing one variety costs about $1 billion.

The advancements in molecular biology do not benefit only GMO technologies. There is a large variety of “omics” (genomics, metabolomics, ...) studying the genetic basis of the phenotype, and with the assistance of ICT, huge amount of data geared to understanding plant physiology can be analyzed. These applications can be used by many other technologies. MAS (marker assisted selection), for example, is an upgrade of conventional breeding practices; markers help breeders to identify more clearly which varieties to cross-breed in order to create new varieties: the time to market for products using these techniques is half that of GMOs. There are other ‘radical’ alternatives, based on the principles of applied ecology, that start with the study of relationships among species and their environment and propose ‘ecological engineering’, based on functional biodiversity, to solve most relevant agronomic problems 49 .

47 ISAAA (2009). Global Status of Commercialized Biotech/GM Crops, Brief 41-2009, International Service for the Acquisition of Agri-biotech Applications. 48 Arundel, A., Sawaya, D. (2009), Biotechnologies in agriculture and related natural resources to 2015, OECD Journal: General Papers 10(3). 49 The Royal Society (2009). Reaping the Benefits: Science and Sustainable Intensification of Global Agriculture, London. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Some of the areas where GMOs are expected to have a leading role in achieving sufficiency are 50 : - Improved and new crop varieties, adapted to local conditions - Protection against insect damage and thus decrease pesticide usage - Protect soils from erosion and compaction - Increase food safety - Improving nutritional content of crops. On the analysis and evaluation of the impact of GMOs, there is a large variety of opinions and of data, most of which are lacking clear independence and neutrality. High reputation scientific journals, such as Scientific American and Nature Biotechnology among others, have referred to violent concerted attacks, from established academic groups within the scientific community, to researchers who have presented results that outlining negative impact of GMOs. They have also shown that a great deal of research on GMOs is not feasible if not authorised by seed producers. The point is that any allegation of negative impacts is amplified by the media into public opinion, and there may be a direct effect on sales and of public administrations’ attitudes towards GMOs. On the other hand GMOs are considered by supporters as the technology that can revitalise the concept of the Green Revolution while taking into account the undesired effects that it had generated and to combine productivity, which is the main objective of Green Revolution, with ecological efficiency. GMO traits so far developed refer to a model of conventional agriculture, needing fertilizers and machinery to be fully exploited 51 .

The following are the principal barriers to GMO adoption: - Regulation . Even in most GMO- friendly countries, regulatory costs are rather high. In order to speed up the development of GMOs, some suggest a certain degree of deregulation. China is increasingly criticised for lack of regulation or controls (Arundel and Sawaya, 2009), while in the US recent court rules (alfalfa, sugar beet) show that regulation may be tighter In Europe, the rules on coexistence will consistently raise compliance costs for farmers. - IPRs . This is probably one of the major drivers for future GMO scenarios. There is an increasing agreement that the present regulatory framework creates natural monopolies and prevents innovation in fields different from those already taken by big corporations. In a different regulatory context, for example in one where open access was largely spread, public research and small farmers would play a very different role, thereby introducing GMOs in a very different socio-technical configuration. - Public opinion . In Europe, public opinion is largely negative on the issue of GMOs. GMO labelled foodstuffs are interpreted as being low-quality products, and many retailers and processors tend to position themselves as GMO-free.

Nanotechnology

50 Nath, I. (2008). Bio-Revolution. Nature (Supplement) 456: 40. 51 Standing Committee on Agricultural Research (SCAR) (2011), Sustainable Food Consumption and Production in a Resource-Constrained World, The 3rd SCAR Foresight Exercise, European Commission.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Nanotechnologies in the food industry have multiple functions: their first application is in food packaging, where they improve functionality. Other applications aim at improving taste, enhancing the bioavailability of certain ingredients, reducing the content of some elements such as sugar and salt, and slowing down microbial activity. According to the Report of the Observatory NANO 52 , the main applications of nanotechnology in three subsectors are:

In agricultural production , four main application areas: (1)sensors and diagnostic devices for monitoring environmental conditions, as well as for monitoring plant and animal health; (2) disease and pest control (including the use of novel delivery systems for pesticides, and limiting the environmental impact of agrochemicals); (3) water and nutrient controls; (4) genetic engineering of plants and livestock to improve productivity, and agriculture as a means to produce nanomaterials. It is as well the potential of agriculture as a producer of nanomaterials , which in its turn is an area which needs future research activities in: (1) waste products from agriculture and forestry as raw materials fornew nanocomposites (where research activities are quite advanced and at the applied stage), and (2) biogenesis of nanomaterials, which is still at the basic stage, and hence will need further work and investments to scale up to industrial process level.

In food processing and functional food three areas: quality control, processing technology and functional foods. Within the EU a large number of research teams work in these domains, namely in sensors, coatings and delivery systems, but in foodstuffs is still limited . The focus is to be placed on ensuring that all food contact materials like coatings and filters, as well as ingredients, are safe for human health.

In f ood packaging and distribution . In regard to food packaging and distribution, the drivers being emphasized are reducing costs in parallel with increasing sustainability and functionality.

Future developments of manotechnologies are: • Nanotechnology is likely to exert a strong impact on active packaging in the future. • Self-healing composites are unlikely to appear in food packaging materials in the foreseeable future due to the large costs, and the fact that such materials would need to be approved for food contact use or GRAS (generally accepted as safe). • Biosensor technologies still need a lot of research before being included in the food packaging material. • The drive towards greener and sustainable manufacturing means that biopolymers will be increasingly used since the associated advantage is that – in theory - recycling is no longer necessary.

Main fields of applications in nanotechnology

52 Robinson, D.K.R., Morrison, M.J. (2009). Nanotechnology Developments for the Agrifood Sector – Report of the ObservatoryNANO, online publication at www.observatorynano.eu. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Source: Robinson, D.K.R., Morrison, M.J. (2009). Nanotechnology Developments for the Agrifood Sector – Report of the ObservatoryNANO

Up to now, nanotechnologies have been emphasised as a revolutionary technology and as a key to competitiveness. With regard to vulnerability of food systems, nanotechnologies have raised some very deep concerns, as they may imply strong structural change in society and in the economy. As far as sufficiency is concerned, it does not seem that nanofood could contribute to a global reduction of the consumption footprint: on the contrary, some applications (such as those aimed at improving the taste of food) may bring about a trend of growth of consumption and incorrect nutrition.

Similar to GMOs, the application of nanotechnologies in the agriculture and food industry raises questions of an ethical nature: if ‘nano’ is incorporated into foodstuffs, should these foodstuffs have labeling to indicate what ‘nano’ has been used and for what purposes. Since the application of nano – like GM – leads to this kind of concerns, then the consumers must be involved from the stage of development of the technologies, and not only from the time when the technology is marketed. The major concern here is that society is still lacking the mechanisms to express its common voice at the stage of development of technologies.

Discoveries in nanotechnologies may affect several aspects of the agro-food industry, from food safety to the molecular synthesis of new products and ingredients. Nanotechnology, which deals with controlling matter at near-atomic scales to produce unique or enhanced materials, products and devices, is considered one of the new technologies which has a potential to bring new benefits to food products such as: food quality, packaging and transport; taste and sensory properties of food; functional foods; seed production; plant protection products. The food industry considers that in order to deliver new innovations in the food industry in Europe, nanotechnology has to be given the opportunity and the legal environment to be explored and safely utilised. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

2.3.2.2 Informational and Organisational Technologies

The European food and drink industry should provide the consumer with the right type of food at the right time and in the right place. Innovative processes, value-added products, new marketing concepts, novel ways of selling products and novel ways for the production and supply chain to co-operate to create products targeted at consumer needs will ensure that the consumer is provided with safe products and products possessing the required sensory characteristics, at maximum convenience, and at an affordable price.

Information and Communication Technologies (ICT) Over the past twenty years ICT technologies have been introduced in the agriculture and food sectors, improving food production and its transportation to the end consumers. The uptake of these solutions has been slow for a number of reasons. A key challenge for ICT in the agriculture sector is information management, both within specific domains and across the whole supply chain from farm to fork. This is compounded by specific characteristics of the sector, including the very large number of actors along the supply-chain and the heterogeneity of those actors and the consequent very poor information flow along the supply chain. A very conservative “need-to-know” attitude such that essentially information flows only “one-up, one down” makes this worse; for example, the farmer might communicate with the wholesaler or food processor but not directly with the retailer, a problem even more accentuated in complex supply chains for processed or packaged food 53 .

Furthermore, while the introduction of ICT in the supply chain has already contributed to enhanced productivity and competitiveness as well as to shifts in the power relations along the chain technological developments can also be a cause for concern. Overall, technology holds further promise in smart metering and precision farming to deal with environmental aspects and agrologistics. ICT also contributes to better risk management in farming. ICTs are invaluable as increasingly sophisticated farm management tools. For example, farming enterprises will make much greater use of decision-support systems in a drive to maximise production efficiency and minimise costs. These systems are growing in sophistication providing farmers with decision supports over a wide range of activities. The use of satellite information and imagery for agricultural use will also increase. Combined with GPS, this will enable a greater degree of precision in the application and timing of inputs and assist in enhancing sustainable production.

ICTs empower farmers as innovators by providing:

53 Brewster C., Wolfert, S., Sundmaeker, H. (2014, "Identifying the ICT challenges of the Agri-Food sector to define the Architectural Requirements for a Future Internet Core Platform", Report based on the FI WARE Project.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

• ‘smarter’ and more locally appropriate and productive inputs; • more effective cultivation and production techniques; • risk mitigation strategies and skills; • support to farmers as active participants in the innovation process.

In the production process, ICTs in combination with digital technologies introduce flexible food manufacturing techniques and intelligent in-line control: high resolution, spectroscopic in-line sensors yielding complex food structure information and for in situ control of process variables, application of artificial intelligence methods for data mining, pattern recognition and software sensors, application of integrated and pervasive sensor networks throughout the food chain recording fluctuations of quality and safety.

Food supply chain and agro-logistics To enhance competitiveness, additional research and innovation efforts are required along the entire food supply chain. Development of the primary sector is a precondition for growth and competitiveness of the whole industry as it provides the raw material for further processing. High-quality raw materials are thus essential for achieving high-quality products. In this respect, food manufacturers depend greatly on the competitiveness of the farming sector and the sustainability of its production methods for the ingredients that they need for their products 54 . Similarly, food processors play a vital role in terms of quality of products, food safety, environmental protection and animal welfare. At the same time, both the retailers and the food service channels (e.g. the packaging industry) are contributing greatly to the development and promotion of innovation. Finally it is the consumers who demand high-quality and nutritious products, preferences that have by all means to be taken into consideration. Hence, research and innovation have to be directed in a way to cover the entire chain from farm to fork.

Innovations design and process control and increased flexibility, through redesigning processing and logistics. are required. On the other hand a completely reversed engineering approach should be evolve, in which the total product development is modelled back through the chain from consumer to raw material. This innovation will lead to faster product development and more flexible processing possibilities 55 .

Advanced mathematical modelling and engineering approaches also have a role to play in optimising production lines and plants, and is extend to the food supply chain (supply chain engineering). S takeholders although stress that there is a lack of skilled personnel in the food supply chain sector, such as food scientists, technologists and engineers.

54 European Commission (2009), A Better Functioning Food Supply Chain in Europe, COM (2009) 591 final.

55 Confederation of the Food and Drink Industries of the EU, European Technology Platform on Food for Life.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Concerning food safety, the European food and drink industry's response must be to develop an integrated and holistic approach to food safety. Safety is not guaranteed only by 'safe' product manufacture; the total chain has to be taken into account. Designing safety into foods requires the integration of know-how and interventions along the research to market continuum. In relation with safety food, the supply chain should introduce improved understanding of hazards and their risks at different steps in the food chain, i.e. creating the knowledge base needed to support the rational application of control measures and the development of new methods and systems; tools to further secure the food chain, e.g. the development of systems and technologies for continuously improving the safe production and supply of foods.

Current systems of manufacturing, preservation, storage, processing, packaging, transportation and distribution, and retail show limits in their sustainability, in wasteful use of natural resources through extensive losses, and waste creation along the food chain. Reduction in uses of energy, water and materials will require close links between raw material production, processing, packaging and waste management. Valuable food raw materials are wasted and the consequence is overproduction in the primary sector. For this purpose, formulation of models to describe food and biological raw material chains in Europe are needed in order to show the sustainability of different supply chains in the context of the whole European system.

The 'Industrial Ecology Approach' aims to restructure production systems into clusters of industrial firms with output-input connections as stocks and flow of materials, energy and information, according to the principles of ecosystems. Such an approach applied to the food chain will include analysis of interlinked networks of primary food production, food processing, distribution and packaging. It will also help to identify possibilities for innovative new agro-, biotechnology-, and food industries.

In this context, Food Chain Management is to integrate and balance the interests of all stakeholders, including enterprises, consumers, and society as a whole considering of all of the relevant factors for successful integration e.g. economic efficiency, environmental control, process organisation, food safety, marketing or transaction rules, etc.

Four interrelated strategic research initiatives have been identified as decisive for the sector's ability to meet its future challenges and to overcome its inherent development problems. They focus on serving: (1) the provision of quality and diversity in food, (2) food chains through better transparency for advancements in governance, trust, efficiency, and innovation dynamics, (3) better integration of SMEs into the global and regional value chains, and (4) better understanding of the dynamics in critical success factors that will improve competitive performance and sustainability in times of globalisation and change. The value chain of food chain management is presented In the following diagram.

The value chain of Food Chain Management. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Source: European Technology Platform Food for Life (2007), Strategic Research Agenda 2007-2020, Confederation of the Food and Drink Industries of the EU.

New types of co-ordinated production, distribution, and communication networks (logistics networks) must emerge that can support changing demands, taking into account varying quality parameters, organisational conditions and different requirements of market segments. This may include, e.g. new organisational structures for flexible chain-encompassing distribution and logistics systems that utilise advanced technologies for communication, control, or tracking and tracing, developments in quality preservation, new packaging and processing technologies or organisational innovations like parallel chains that could provide opportunities to better serve the needs of consumers.

Major research challenges are: 1. To determine opportunities for innovations and improvements in the organisation of processes in production, logistics and management along the value chain, through specification of 'best practice' process organisation alternatives from production agriculture to food deliveries at the retail stage (e.g. the reduction of waste; specification of 'hot spots' in process organisations that will allow improvements in the delivery of food through appropriately focussed developments and innovations and the elimination of development and innovation barriers in processes and institutional environments; specification of a priority 'landscape' for the initiation of activities that reduce barriers and support process development, process innovation, and institutional change. 2. To analyse and model organisational network alternatives that combine efficiency and responsiveness to changing consumer demands for quality and diversity, through identification and analytical analysis of functions along the food value chain with the specification of possible linkages with other functions for the creation of value chains and the formulation of appropriate standards for connectivity; identification and European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” analysis of 'best practice' experiences in the realisation of separable functions, of major weaknesses in those functions that ask for developments and innovation, and of regulations or barriers 56 .

2.3.3 Good Practices Examples

2.3.3.1. Integration of scientific disciplines in food safety Health is strongly influenced by food consumption, and a balance between economic costs and health benefits for foods, new food technologies and diets is needed to allow policy makers and producers to make the best choices for supporting health. The development of specialised food products for specific nutritional purpose (type 2 diabetes, cardiovascular diseases, hypertension, and a range of cancer types, as well as improved infant nutrition (higher nutritional value leading to improved development of bone and cognitive function and avoidance of disease risks in later life) is a key priority for most EU governments 57 .

Advances in science are rapidly producing new, in-depth insights into the relationship between nutrition and health, which are given wide publicity in the media; this in turn creates a common interest among many stakeholders. Prevention of disease is becoming increasingly important to society, and represents one of the major targets for the agro-food industry 58 .

The Netherlands make considerable investments in high-quality research to develop new, functional agro-food products and to upgrade standard foodstuffs to high-value. "Staying healthy and fit while growing old is a new challenge, now that world citizens are living longer" 59 . Focuses are on salt reduction and saturated fats, protein innovations, better hygiene in processing and distribution methods. Examples are Sonneveld that was able to reduce the amount of salt in various bread mixes by 50%; the Dutch food entrepreneur Carezzo, who together with the European Bakery Innovation Centre (EBIC) has developed bread that contains twice as much protein but tastes just as good.

Nanotechnology and Nanosensors , can provide quality assurance by tracking microbes, toxins, and contaminants throughout food processing chain through data capture for automatic control functions and documentation. Examples, among others, are 60 :

56 European Technology Platform Food for Life (2007), Strategic Research Agenda 2007-2020, Confederation of the Food and Drink Industries of the EU. 57 European Technology Platform Food for Life (2007), Strategic Research Agenda 2007-2020, Confederation of the Food and Drink Industries of the EU. 58 European Technology Platform Food for Life (2014), Strategic Research and Innovation Agenda 2015- 2020 and Beyond: Implementation Plan under Horizon 2020. 59 Netherland Enterprise Agency (2014), Made in Holland Agri-Food, Ministry of Foreign Affaires. 60 Suresh Neethirajan & Digvir S. Jayas (2011) " Nanotechnology for the Food and Bioprocessing European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

- Horner et al. ( 2006 ) have developed an analytical technology called reflective interferometry, using nanotechnology which provides specific, rapid, and label-free optical detection of biomolecules in complex mixtures. This platform technology has provided food quality assurance by detecting Escherichia coli (E. coli) bacteria in a food sample by measuring and detecting light scattering by cell mitochondria. This sensor works on the principle that a protein of a known and characterized bacterium set on a silicon chip can bind with any other E. coli bacteria present in the food sample. This binding will result in a nanosized light scattering detectable by analysis of digital images. -A biosensor developed by Fu et al. (2008) uses fluorescent dye particles attached to anti-salmonella antibodies on a silicon/gold nanorod array. When the salmonella bacteria present in the food is being tested, the nanosized dye particles on the sensor become visible. Unlike the time-consuming conventional lab tests that are based on bacterial cultures, this biosensor can detect the salmonella in food instantly. -Stutzenberger et al. (2007) have developed a novel strategy that employs bioactive nanoparticles in the chicken feed specifically designed to bind to the biomolecular structures on the surfaces of campylobacters. The feed enriched by antibiotic- functioning nanocarbohydrate particles binds with the bacterium’s surface to remove it through the bird’s feces. -Agromicron Ltd, Hong Kong has developed a low cost Nano Bioluminescent Spray (Plexus Institute 2006 ), which can react with the pathogen strain on food and produce a visual glow for easy detection. The spray is made of nanoparticles and would work based on its reactivity with the bacteria. The higher the number of connections between bacteria and molecules, the more intense the glow produced by the particles. This spray can identify a broad range of food-related pathogens, such as Salmonella and E. coli.

2.3.3.2 Sustainable food production Ph For food, a sustainable system might be seen as encompassing a range of issues such as security of the supply of food, health, safety, affordability, quality, a strong food industry in terms of jobs and growth and, at the same time, environmental sustainability, in terms of issues such as climate change, biodiversity, water and soil quality. The Europe 2020 Strategy - A resource-efficient Europe calls for an increase in resource efficiency, to: "…find new ways to reduce inputs, minimise waste, improve management of resource stocks, change consumption patterns, optimise production processes, management and business methods, and improve logistics" 61 .

Countries' examples:

The WRAP Courtauld Commitment 2 is a voluntary agreement in the UK that aims to improve resource efficiency and reduce their environmental impact of traditional grocery products (both food and non-food) over the entire lifecycle of products. UK

Industries", Food Bioprocess Technol . 4:39–47. 61 http://ec.europa.eu/environment/eussd/food.htm European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” food and drink companies and retailers have pledged to reduce household food and drink waste by 4% by the end of 2012 against a 2009 baseline. The 49 signatories have achieved food waste savings of 270,000 tonnes per year as of March 2010 through joint initiatives that help consumers buy the right amount of food and get the most out of what they buy, and awareness-raising campaigns such as ‘Love food, hate waste’ (www.lovefoodhatewaste.com).This has resulted in a 3% reduction in the first year, demonstrating strong progress toward the 4% three-year target. Signatories include Coca-Cola, Danone, Ferrero, Heineken, Heinz, Kraft, Mars, Nestlé, P&G and Unilever.

In Norway, a joint initiative between the Norwegian Food & Drink Industries, retailers and retail suppliers was launched in 2010 with the support of the Ministries for Food & Agriculture and for the Environment. It aims to reduce food waste in Norway by 25% by 2015, with an emphasis on fresh bakery products and fresh fruit and vegetables.

The Dutch food sector is investigating how to achieve maximum returns with minimal resources and creating added value by using raw materials more efficiently or by devising innovative food systems. This involves using less water more efficiently, using energy and waste flows more efficiently and reducing CO2 emissions in the entire chain. The focus of the Netherlands is on sustainability as a total concept, in which man, animals and the environment are all part of the equation 62 . There are many examples of Dutch companies which focus on sustainable production 63 : Using the waste from sugar beet production as support material in hockey sticks, or Provalor, a company that encourages sustainable developments through the transformation of residual products from the vegetable processing sector into ingredients, natural colourings, juices and purees. Colour extracts are obtained from pepper and beet residual products. These types of natural colourings are used for example in rocket- shaped Dutch ice-lollies. Colouring from peppers is a typical example of doing more with less. Another example is EcoFuels, an initiative of Laarakker Groenteverwerking, uses it to produce sustainable energy. An advanced fermenting technique produces biogas from 120,000 tonnes of biomass, from Laarakker and other food processing plants. Every year three fermentation systems, CHP plants and a green gas plant produce 2.2 million m3 of green gas, 2,520 tonnes of green liquid CO2 and 20 million kWh of green energy. The electricity can power 6,500 homes. After undergoing several purifying and separation stages water from the biomass is used for washing or irrigation. The compost producing industry uses the remaining 1.5% of waste as compost and substrate.

Sustainable food transport: Sustainable transport requires efficient transfer between different modes of transport such as road, rail, sea, and a very small proportion of air links.

Working in partnership with its logistics company, UK Yorkshire pudding producer Aunt Bessie’s (part of the William Jackson Food Group) has successfully reduced travel.

62 Netherland Enterprise Agency (2014), Made in Holland Agri-Food, Ministry of Foreign Affaires. 63 Netherland Enterprise Agency (2014), Made in Holland Agri-Food, Ministry of Foreign Affaires.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Products are packaged and palletised to ensure maximum cube efficiency. Double- decker trailers are used for distribution and the backhaul of the transport is utilised to bring materials back to site. Primary distribution is consolidated at the third party logistics company to ensure maximum lorry load efficiency.

Kellogg Europe has two on-going projects that are testing the use of canals to transport raw materials and finished products. One project takes place in Germany where 40% of rice and corn is now transported in barges. As one barge has the same capacity as 40 trucks, there is huge potential for environmental and financial savings. It is anticipated that this will result in emissions reductions of 73% compared to delivering these raw materials by road. Kellogg UK has recently developed several strategies to reduce road miles travelled. Instead of transporting finished products from Poland to its UK warehouses by truck, Kellogg now moves them via container by sea, from the port of Gdynia, Poland, to Hull, UK. This amounted to 231 containers to the UK in 2011, reducing road travel by 180,000 miles, and reducing net CO2 impact by around 113 tonnes.

Environmental information to consumers 64 :

- Capture consumers’ attention in-store: To accommodate consumer demand, food and drink companies are providing on a voluntary basis information to consumers regarding the environmental performance of their products using a variety of communication channels, such as smartphone applications and websites.

- ‘ProxiProduit’ allows consumers to scan the barcode and obtain environmental information such as GHG emissions, biodiversity and water use. - Using an online tool, consumers in the UK (http://www.coca- cola.co.uk/environment/trace-your-coke.html), Belgium (http://www.cocacolabelgium.be/traceyourcoke/) and the Netherlands (http://www.traceyourcoke.nl/tyc/index_NL.html) can calculate the carbon footprint of a can of Coke over its lifecycle and how the footprint can be reduced by recycling.

2.3.3.3 Packaging and Storage Technologies Packaging provides many benefits, from protecting and preserving food from the point of production to point of consumption, in the prevention of food waste. The environmental impacts of used packaging vary significantly depending on composition (plastic, paper, glass, etc.) and its required functionality (different products have varying packaging specifications). The innovations and technologies for improve food packaging and storage are many. Main focus is to optimising packaging use throughout the product life-cycle and to minimise the adverse impacts on the environment, while ensuring that food safety and quality are not lost 65 :

64 Food and Drink Europe (2012), Environmental Sustainability Vision towards 2030: Achievements, challenges and opportunities, www.fooddrinkeurope.eu.

65 Food and Drink Europe (2012), Environmental Sustainability Vision towards 2030: Achievements, European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

- The electronic tongue for inclusion in food packaging that consists of an array of nanosensors that are extremely sensitive to gases released by food as it spoils, causing the sensor strip to change color as a result, giving a clear visible signal of whether the food is fresh or not, developed by Ruengruglikit, C., Kim, H., Miller, R. D., & Huang, Q.

- The grain quality monitoring nanosensors that are being developed by researchers at the Canadian Wheat Board Centre for Grain Storage Research, University of Manitoba, Canada to detect the source and the type of spoilage in food storage environment.

- The perforating machine manufacturer PerfoTec has developed a ‘respiration measurement device’ that precisely measures how much air each product requires. The perforating machine can then laser the packaging film with the optimum degree of perforation. Supermarkets, warehouses and other packagers can consult a website to quickly discover the correct settings for the laser. The technology improves ‘best before’ dates by up to 7 days. All the fruit and vegetable processing firms in France use it and the invention is also gaining ground in England, the United States and the Netherlands.

Latest innovations: From "electronic tongues" that can "taste" products to bacteria-battling nanoparticles that are 50,000 times thinner than human hair, researchers are hard at work on some mind-blowing innovations. The following six technologies won't just protect food from contamination or make eating easier; they stand to change the way food and beverages providers operate 66 :

(1) Edible packaging : In the future, you will eat your dinner and, instead of tossing the packaging in the trash or recycling bin, you will eat that, too. At least, that's what some industry experts are saying. Just within the last year, a research team at Harvard University, led by Professor David Edwards, generated multiple edible and tasty food containers called WikiCells . Taking inspiration from an apple, which protects its matter with edible skin, the team's inventions thus far include pumpkin soup in spinach membrane, lemon juice in a lemon membrane and melted chocolate in a cherry membrane. While Bontan Ame, an edible rice paper-wrapped candy, has been available in Japan for over a century, Edwards said he still had some stability issues to iron out, he predicted the breakthrough innovation could be available on the market within the year "in a limited way" but that, long-term, this is "the future of packaging."

(2) Micro packaging: Using nanotechnology, a research team at Texas A&M University has developed what may possibly be the next food packaging miracle: micro-film . The challenges and opportunities, www.fooddrinkeurope.eu.

66 Davide Savenije (2013), 6 futuristic food packaging technologies that could change everything, Food Dive.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” material, which is thousands of times thinner than human hair, consists solely of water, a soluble polymer and 70% clay particles. While Jaime Grunlan, the associate professor who led the endeavor, asserts that the film is "basically dirt", the packaging is significantly more eco-friendly than plastic, has the preservation qualities of glass and could hold the fizz in a soda better than anything currently out on the market. Meanwhile, Bayer, the chemical and pharmaceutical company, has developed a plastic film called Durethan using clay nanoparticles that prevents oxygen, moisture and carbon dioxide from decomposing food products. Similarly, Nanocor, a nanoclay technology developer, has created nanocrystal-embedded plastic that prevents the escape of oxygen from beer bottles, significantly extending their shelf life up to 18 months. While companies such as Pepsico and McDonald's are still wary of any negative associations elicited by the word "nanotechnology", the food and beverage industry is looking on with rapt interest, hoping that researchers can get a handle on micro packaging and how to use it safely and effectively.

(3) Smart packaging: What if food packaging could tell consumers whether and when it's good or bad to eat? A team of researchers at the University of Connecticut, Rutgers University and Kraft Foods are looking into something called the "electronic tongue", an innovative technology that can effectively "taste" food through sensors embedded in the packaging. If the food is contaminated or spoiled, the packaging will change color, alerting the consumer whether it can still be cooked or needs to be thrown out. Similarly, scientists in Holland are creating smart packaging with a "release on command" insta-preservative that salvage food right before it goes bad. Even the U.S. military is looking into smart food packaging: for national security reasons, the military hopes that researchers successfully develop "super sensors" that detect whether or not food is contaminated.

(4) Anti-microbial packaging: Anti-microbial packaging does not just shield food from bacteria, it actively acts against it. An Israeli graduate student named Ronen Gottesman has produced "killer paper", an anti-bacterial silver nanoparticle-coated paper that can fight to keep germs out of food. Gottesman said, "The smaller the size of the particles, the more effective they are against bacteria." Similarly, Kodak is generating anti-microbial packaging that can absorb oxygen and keep food fresh.

(5) Water soluble packaging: MonoSol, a U.S. water soluble product manufacturing company, has created Vivos edible delivery systems , which are, essentially, food pouches that dissolve in water.The plastic film packaging, which dissolves faster under hot water, supposedly cannot be tasted when eaten. MonoSol claims its product is convenient for on-the-go consumers and could be used to package such liquid-friendly fare as drink powders, cereals, soups and sauces. While MonoSol contends they are fielding interest from multinationals, the technology would need to be customized to each individual product and currently still requires secondary packaging to protect against contamination.

(6) Self-cooling, self-heating packaging: While consumers and industry executives have long fantasized about self-cooling and self-heating food and beverage packaging, European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” the reality is that there is no record of commercial success... yet. Two recent innovations aim to change that. While Joseph Company International launched the Chill Can last year without too much global fanfare, the 19-years-in-the-making, EPA Stratospheric Award-winning "Microcool" technology adsorbs carbon dioxide from the atmosphere which is released when the activitation button is pressed, causing the liquid inside the can to drop to 30 degrees Fahrenheit within a matter of minutes. Similarly, HeatGenie and Crown Holdings have developed a self-heating component called HeatGenie which can heat a product to 145 degrees Fahrenheit in two minutes and is to be embedded at the bottom of a product's packaging. While the success of these particular technologies is up in the air, the convenience and marketing potential for temperature-changing packaging technology is clear.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

3.The tourism sector

3.1. European Policy relevant to the tourism sector Over recent decades, tourism has become one of the fastest and largest growing economic sectors in the world. Despite occasional shocks, international tourist arrivals have shown an uninterrupted growth: from 25 million in 1950 to 278 million in 1980, 528 million in 1995 and reaching 1.1 billion in 2014, a 4.7% increase over the previous year, according to the data analysed in the latest issue of the UNWTO World Tourism Barometer, while for 2015, the forecasts for international tourism are to grow by 3-4%, further contributing to global economic recovery. As for Europe, tourism is an economic activity capable of generating growth and employment in the European Union, while it contributes to the development and economic and social integration, particularly of rural and mountain areas, coastal regions and islands, outlying and outermost regions or those undergoing convergence. European tourism though, comes across many challenges nowadays, the most significant being the following: • Global economic crisis • Competitiveness of other destinations and the diversity of tourist attractions on offer • Effects of climate change • Seasonal fluctuations of tourist activity • Demographic developments in Europe • Growing impact of information and communication technologies

Over the past years, the foundations for a European tourism policy have been laid through a number of strategies and the European Commission in cooperation with the Member States and associations representing the sector has developed a series of actions intended to strengthen European tourism and its competitiveness. The strategies for a competitive and sustainable tourism set out at EU level in the previous years were: ‹ 2001 - Communication on “Working together for the future of European tourism” ‹ 2003 - Communication on “Basic orientations for the sustainability of European tourism” ‹ 2006 – Communication on a “Renewed EU Tourism Policy” ‹ 2007 – Communication on “An Agenda for a competitive and sustainable European tourism”

In response to the importance of the tourism industry to the European economy and taking into account the pressures facing the industry from the financial crisis and the challenges outlined above, a high-level meeting of ministers and industry stakeholders was held in Madrid in April 2010. This led the European Commission to set on 2010 a new policy framework titled: “Europe, the world's No 1 tourist destination – a new political framework for tourism in Europe”, that takes into account the new EU priorities set out in the “Europe 2020” Strategy for growth and employment, and the Lisbon Treaty. With this policy, the EC aims to encourage a coordinated approach for initiatives linked to tourism and define a new European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” framework for action to increase its competitiveness and its capacity for sustainable growth. It is intended to be implemented in close cooperation with the Member States and the principal stakeholders in the tourism industry. The newly developed framework for tourism is structured by four main priorities:

• To stimulate competitiveness in the European tourism sector • To promote the development of sustainable, responsible and high-quality tourism • To consolidate the image and profile of Europe as a collection of sustainable and high-quality destinations • To maximise the potential of EU financial policies and instruments for developing tourism

The Implementation Rolling Plan of the new tourism action framework that is regularly updated (last update: May 6th 2013), contains and monitors 21 specific actions planned to benefit all countries in the European Union, as each one of them, to differing degrees, has an interest in developing its tourist potential. These actions complement the policies of the Member States and aim to coordinate efforts by determining measures which provide a real European added value. The success of this strategy will depend on the commitment of all stakeholders and on their capacity to work together to implement it. The proposed actions are distributed in the three of the four priorities, as follows: Priority 1. Stimulate competitiveness in the European tourism sector 1. Develop a coherent strategy for diversifying the promotion of tourist services and capitalise on Europe's common heritage, particularly by creating a European Heritage Label, alongside actions such as European Heritage Days or the European Union Prize for Cultural Heritage. 2. Encourage the integration into tourism strategies of “natural” heritage, which will also benefit from labelling initiatives. 3. The Commission will launch an “ICT and tourism” platform for stakeholders to facilitate the adaptation of the tourism sector and its businesses to market developments in new information technologies and improve their competitiveness by making the maximum use of possible synergies between the two sectors. 4. In preparing its forthcoming communication on electronic commerce in the internal market, which will assess the implementation of the electronic commerce Directive, the Commission will examine the possibilities for strengthening the integration of the tourism sector in this context. 5. In order to support training in the tourism sector, the Commission will endeavour to promote the opportunities offered by various EU programmes such as Leonardo da Vinci or the Competitiveness and Innovation Framework Programme (CIP) with its “Erasmus for young entrepreneurs” and “E-skills for innovation” strands. 6. Provide a voluntary tourism exchange mechanism between Member States, enabling in particular certain key groups such as young or elderly people, European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

people with reduced mobility and low-income families to travel, particularly during the low season. 7. Develop a voluntary online information exchange mechanism to improve the coordination of school holidays in the Member States, without prejudice to their cultural traditions. 8. In its annual communication, “Consumer Markets Scoreboard”, the Commission will monitor the market by measuring European consumer satisfaction with various tourism services (transport, hire, accommodation, travel, package tours). 9. In the short term, the Commission will develop a pilot project aimed at networking research institutes, universities, public and private monitoring units, regional and national authorities and national tourism offices. 10. In the medium term, based on the results of the pilot project, the Commission will promote the implementation of a “virtual tourism observatory” to support and coordinate research activities by the various national research institutes and provide socioeconomic data on tourism at European level.

Priority 2. Promote the development of sustainable, responsible and high-quality tourism 1. Develop, on the basis of NECSTouR (Network of European Regions for Sustainable and Competitive Tourism) or EDEN (European Destinations of Excellence) initiatives, a system of indicators for the sustainable management of destinations. Based on this system, the Commission will develop a label for promoting tourist destinations. 2. Organise awareness-raising campaigns for European tourists concerning the choice of destinations and means of transport, relationships with the local population in the destinations visited and combating the exploitation of women and children. 3. Develop a European “QualityTourism” brand, based on existing national experience, to increase consumer security and confidence in tourism products and reward rigorous efforts by tourism professionals whose aim is quality of tourism services for the customer’s satisfaction. 4. Facilitate identification by the European tourism industry of risks linked to climate change in order to avoid loss-making investments, and explore opportunities for developing and supplying alternative tourism services. 5. Propose a charter for sustainable and responsible tourism and establish a European prize for tourism businesses and destinations respecting the values set out in the charter. 6. Propose a strategy for sustainable coastal and marine tourism. 7. Establish or strengthen cooperation between the European Union and the main emerging countries (China, Russia, India, and Brazil) and Mediterranean European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

countries to promote sustainable and responsible tourism development models and the exchange of best practice.

Priority 3. Consolidate the image and profile of Europe as a collection of sustainable and high- quality destinations 1. Create a “Europe Brand” in cooperation with the Member States to complement promotional efforts at national and regional level and enable European destinations to distinguish themselves from other international destinations. 2. Promote the “visiteurope.com” website in order to increase the attractiveness of Europe as a collection of sustainable and high-quality tourist destinations, particularly among emerging countries. 3. Encourage joint promotional actions at major international events or large- scale tourism fairs and exhibitions. 4. Strengthen European Union participation in international bodies, particularly within the context of the World Tourism Organisation, the OECD, T20 and Euro-Med.

Concerning Priority 4. Maximise the potential of EU financial policies and instruments for developing tourism, this objective will be fulfilled as long as the Commission steps up its efforts to coordinate the various in relevance policies, aiming to ensure that the needs and interests of the tourism sector are fully taken into account when formulating and implementing these policies. It is generally acknowledged that a better integration of tourism into its various policies is required, along with the proper application of the legislation in force in order to release the sector’s full competitive potential. On the other hand, tourism is a cross-cutting sector, involving a big diversity of services and professions and impacting on a variety of sectors. Therefore, actions to maximise the potential of EU financial policies and instruments refer to better integrating and coordinating tourism with other EU policies, such as passengers' rights, consumer protection and the internal market, as well as promoting and mobilising EU support instruments and programmes and reinforcing support and coordination actions in favour of tourism. This ensures sufficient budget for tourism-related measures, e.g. in the 2014-20 programme for the Competitiveness of Enterprises and SMEs (COSME), which contains provisions regarding the improvement of framework conditions for the competitiveness and sustainability of EU enterprises, particularly SMEs, including the tourism sector. In the context of this framework, the EC has initiated some Preparatory Actions triggering the sector’s competitiveness and the development of innovative, quality tourism products and services: Preparatory Action « Sustainable Tourism » - Iron Curtain Trail

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

It is aiming at highlighting the increasing importance of cycling tourism, its benefits and regional economic impacts promoting a transnational cycle-tourism trail, which follows the former “iron curtain” border. Preparatory Action « CALYPSO »

It aims at encouraging tourism activity during the off-peak season, helping disadvantaged people (seniors, youths, disabled and families facing social and/or economic difficulties) go on holiday. It is intended to create economic activity and growth all around Europe, to improve seasonality patterns in the tourism sector, to create more and better jobs and to contribute to the construction of the concept of European citizenship. Preparatory Action European Destinations of Excellence “EDEN”

Its objective is to enhance the visibility of the emerging, nontraditional European tourist destinations and award sustainable forms of tourism while promoting the networking between awarded destinations which could persuade other destinations to adopt sustainable tourism development mode.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Preparatory Action Launch of an ICT and Tourism Platform

It is aiming to facilitate the adaptation of the tourism sector and its businesses to market developments in new information technologies. Practically, it harmonises business processes, data exchange architectures and standards, for the Tourism sector, at European or international level.

Preparatory Action Virtual Observatory for Tourism

The objective is the VTO to become a central source of information for policy makers, tourism stakeholders, researchers, etc in need of reliable information, analysis of the performance and trends of the sector.

Preparatory Action Promotion of European and Transnational Tourism products with special emphasis on cultural and industrial products European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

This is the most recent preparatory action, announced in June 2014, with the objective to develop and /or promote the European Routes, based on European cultural and industrial heritage. The routes can by physical or virtual, should have a transnational or European dimension and can be already recognised as official Cultural Routes by the European Council (but this is not compulsory to already have this label). Additionally to the policy framework developed by the EC on 2010, the European Parliament in September 2011 adopted a resolution on “Europe, the world’s No1 tourist destination – a new political framework for tourism in Europe”, through which it welcomed the strategy presented by the Commission and pointed out that it represented a solid basis for the development of a competitive, modern, high-quality and sustainable EU tourism sector, accessible to all. However, it deplored the lack of coherence among EC Directorates-General related to tourism and called for better internal coordination. In order to address cross-cutting tourism-related issues, it stressed the need for close cooperation between the EU, international, national, regional and local authorities on the one hand and tourism stakeholders on the other . Considering the cross-border aspect, that is of great interest for us and the “Smart Specialisation” project, the EP calls on the Commission to consider introducing two new principles for tourism: “ interregionality ” and “ complementarity ”, in order to promote joint planning and cooperation for tourist services within a single geographical area. These can be addressed either between neighbouring regions belonging to different Member States or at a specific thematic level between regions linked by common elements. Following the previously mentioned issues, a report prepared for the DG Enterprise & Industry, on September 2012, examining the impact of different EU policies and their legislative and non-legislative initiatives on tourism and its competitiveness. Thus, synergies with tourism policy have been identified, allowing policy makers to capitalize on them for better mainstreaming of tourism into their future work programme. It seems that a large number of other European policies have a direct or indirect impact on tourism, which can be included in the following categories: o Agriculture and rural development o Climate change o Competition o Education and culture o Employment, social affairs and inclusion o Energy o Enlargement o Environment o Health and consumer protection o Home affairs European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

o Communications Networks, Content and Technology o Internal market and services o Justice o Maritime affairs and fisheries o Mobility and transport o Regional policy o Research and innovation o Taxation o Trade and o Development and cooperation.

Some of the main EU policies and programmes, under the Multiannual Financial Framework 2014-2020, impacting tourism are the following: • European Regional Development Fund (ERDF) – supporting more sustainable patterns of tourism to enhance cultural and natural heritage, etc. Environment and transport are also financed by the Cohesion Fund. • European Social Fund (ESF) – co financing projects to enhance productivity and quality of employment and services in the tourism sector through education and training. Targeted training & small start-up premiums for tourism micro- enterprises. • Creative Europe and ERASMUS for All– enabling people to travel abroad to learn or train, including the tourism sector and the cultural creative industry (CCI). • European Agricultural Fund for Rural Development (EAFRD) – support for improving the quality of agricultural products and the rural environment, and encouraging tourism as a way to diversify the rural economy. • European Maritime and Fisheries Fund (EMFF) – encouraging diversification of fishery dependent areas through alternatives such as eco tourism. • Programme for the Competitiveness of Enterprises and SMEs (COSME) – supporting the entrepreneurship, business creation and growth. • Research supported under the Horizon 2020: Framework Programme for Research and Innovation - (ICT, satellite applications, cultural heritage, land use) may assist the tourism sector.

The above mentioned instruments and programmes support the on-going actions and initiatives envisaged and outlined by the EC in the tourism area and are to be implemented in collaboration with national, regional and local public authorities, tourism associations and other public/private tourism stakeholders.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

3.2. The Market of the tourism sector in EU Encouraging the development of the Travel & Tourism sector is all the more important today given its important role in job creation, at a time when many countries are suffering from high unemployment. The sector already accounts for 9 percent of GDP, a total of US$ 6 trillion, and it provides 120 million direct jobs and another 125 million indirect jobs in related industries. This means that this industry accounts for one in eleven jobs on the planet now, a number that could even rise to one in ten jobs by 2022, according to the World Travel & Tourism Council. Despite the uncertain global economic outlook, which has been characterized by fragile global economic growth, macroeconomic tensions and high unemployment in many countries, the tourism industry has managed to remain relatively resilient during the previous year. As the World Economic Forum points out, the sector has benefitted from the continuing globalisation process as travel has been increasing in mature markets and has been driven by the rising purchasing power of the growing middle class in many developing economies. In such a context, tourism has continued to be a critical sector for economic development and for sustaining employment, in both advanced and developing economies. A strong tourism sector contributes in both direct and indirect ways to development and the economy. It contributes directly by raising the national income and improving the balance of payments, and indirectly via its multiplier effect and by providing the basis for connecting countries, through hard and soft infrastructure—attributes that are critical for a country’s more general economic competitiveness. In the latest publication issued by Eurostat (March 2015) it seems that in year 2014, the number of nights spent in tourist accommodation establishments in the EU have reached a new peak of around 2,7 billion nights, more than 1,7% compared with year 2013. Following the decline observed in 2009 with the beginning of the financial crisis, there has been a steady increase in the number of nights spent in tourist accommodation establishments in the EU over the last 5 years. This pattern can be observed for nights spent by both resident tourists and non-residents ones (EU residents visiting other EU Member States as well as non-EU residents).

Figure 1: Number of nights spent at tourist accommodation establishments in the EU (bn nights)- Source Eurostat

France with 403 million nights spent and 1,2% decrease compared with 2013, and Spain (401 million nights and 3,1% increase) are continuing to be the top 2 Member States in terms of tourism nights in 2014, followed by Italy (370 million with 1,8% decrease) and Germany (366 million and 2,9% increase). The number of nights spent in tourist accommodation European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” establishments in 2014 grew, in comparison to 2013, in the majority of Member States for which data are available, with the largest increases being recorded in Latvia (11,1%), Belgium (7,2%), Portugal (7,1%) and Greece (6,9%). In contrast, Slovakia (5,5%), Finland (1,9%) and Italy (1,8%) presented the largest falls.

Table 1: Nights spent at tourist accommodation establishments-January to December 2014 – Source Eurostat European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Figure 2: Evolution of the number of nights spent at EU-28 tourist accommodation establishments, January to December 2014 and January to December 2013 (Million nights) - Source: Eurostat

Analysing the type of visitors by residence country, Malta and Cyprus, the two Mediterranean island Member States have the highest shares of nights spent by non-residents in 2014 (96% and 94% respectively) followed by Croatia (92%), Luxembourg (88%) and Greece (79%), while the lowest share have Romania (18%), Poland (19%) and Germany (20%).The number of nights spent in tourist accommodation establishments by non-residents in the EU has larger growth (+2,3%) between 2013 and 2014 that those spent by residents (+1,1%). In 2014, the largest increases in nights spent by non-residents were observed in the Netherlands (10.2%), Latvia (9.9%), Denmark, Portugal and Romania (all 8.3%) and Greece (8.0%), and by residents in Latvia (13.9%), Malta (11.2%), Hungary (8.2%) and Belgium (8.1%). In number of nights spent though, Spain and Italy recorded the highest number by non-residents in their tourism accommodation establishments (260 million and 184 million respectively). Concerning domestic (residents) tourists, the number of nights spent in tourist accommodation has risen by 0,3 % in 2014. Latvia recorded an increase of 12,9 % while in nine out of the 27 Member States where data is available, nights spent by domestic tourists decreased, with Lithuania and the United Kingdom recording a drop of more than 6,0 %.

Figure 3: Percentage change in number of nights spent at tourist accommodation establishments, 2014 compared with 2013 (%) – Source Eurostat European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Similarly to the afore mentioned analysis from Eurostat, the latest UNWTO World Tourism Barometer (January 2015) reports that Europe was the most visited region in the globe in 2014 with over half of the world’s international tourists, receiving an increase of 22 million arrivals, comparing to 2013, reaching a total of 588 million. Northern and Southern/Mediterranean Europe were the leaders showing a growth of 7% while in Western Europe the2% increase denotes a more modest result. Central and Western Europe though, stagnated after three years of strong growth. Specifically for the EU, the UNWTO Barometer reports 457 million arrivals for the 28 countries as a whole, an increase of 5%, higher than in 2013 (4%). The UNWTO Barometer doesn’t provide any data for other tourism indicators, but in the UNWTO – Tourism Highlights 2014 we can find analysis on tourism receipts. International tourism receipts are the earnings generated in destination countries from expenditure on accommodation, food and beverage, local transport, entertainment, shopping and other services and goods. In macro-economic terms, expenditure by international visitors counts as exports for the destination country and as imports for the country of residency of the visitor. Tourism is a vital source of foreign currency earnings and an important contributor to the economy for many countries, creating much needed employment and opportunities for development. According to this data analysis, in 2013 international tourism receipts in destinations around the world grew 5% in real terms (taking into account exchange rate fluctuations and inflation) reaching 873 billion Euros. The growth in receipts reflects the growth in international arrivals, confirming the strong correlation between these two key indicators of international tourism. In Europe, which accounts for 42% of all international tourism receipts, the largest growth in 2013 was recorded, meaning in absolute figures that receipts were raised by30 billion Euros reaching 368 billion, partly boosted by a stronger euro. In the world’s top 10 tourism destination ranking based on the receipts generated, five (5) positions are held by European countries (Spain, France, Italy, Germany and UK) and USA is ranked in the first place. While in the top 10 destination ranking based on arrivals, France holds the first place followed by USA. All the rest four European countries are in this list as well.

International Tourism Receipts Rank US$ Loc al currencies Billion Change (%) Change (%) 2012 2013 12/11 13/12 12/11 13/12 1 United States 126,2 139,6 9,2 10,6 9,2 10,6 2 Spain 56,3 60,4 -6,3 7,4 1,5 3,9 3 France 53,6 56,1 -2,2 4,8 6,0 1,3 4 China 50,0 51,7 3,2 3,3 0,8 1,4 5 Macao (China) 43,7 51,6 13,7 18,1 13,2 18,1 6 Italy 41,2 43,9 -4,2 6,6 3,8 3,1 7 Thailand 33,8 42,1 24,4 24,4 26,7 23,1 8 Germany 38,1 41,2 -1,9 8,1 6,3 4,5 9 United Kingdom 36,2 40,6 3,3 12,1 4,8 13,2 10 Hong Kong (China) 33,1 38,9 16,2 17,7 15,8 17,7 Table 2: International Tourist Receipts – Source UNWTO

The biannual Travel and Tourism competitive report 2013 by the World Economic Forum assessed 140 countries worldwide under 14 pillars and 79 indicators. In line with statistical data on international tourist arrivals, the report denotes that Europe remains the leading region for Travel & Tourism competitiveness, with all of the top five places taken by European countries. Likewise, 13 of the top 20 countries are from the region. Switzerland is ranked 1st out of all countries in the 2013 Travel and Tourism Competitive Index, a position it has held European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” since the first edition of this Report in 2007. Germany, Austria, Spain, and the United Kingdom complete the top five, while France and Sweden are among the top 10 overall. Greece is ranked 32nd, down another three positions since the last assessment. UNWTO’s new study in the field of long term forecasting gives a long-term outlook and assessment of the development of tourism for the two decades from 2010 to 2030. This updated forecast has incorporated an analysis of the social, political, economic, environmental and technological factors that have shaped tourism in the past, and which are expected to influence the sector in the future. According to the study: Tourism Towards 2030 , the number of international tourist arrivals worldwide is expected to increase by an average of 3,3% a year over the period 2010 to 2030. Over time, the rate of growth will gradually slow, from 3,8% in 2012 to 2,9% in 2030, but on top of growing base numbers. International tourist arrivals in the emerging economy destinations of Asia, Latin America, Central and Eastern Europe, Eastern Mediterranean Europe, the Middle East and Africa will increase at double the rate (4,4% per year) of that in advanced economy destinations (2,2% per year). It is expected that in 2030, emerging economy destinations will hold the 57% of international arrivals (versus 30% in 1980) and advanced economy destinations will hold the 43% (versus 70% in 1980). Europe and the Americas will grow more slowly than the rest of the regions (Asia & the Pacific, Middle East and Africa). The global market shares of Asia & the Pacific (30% in 2030 vs. 22% in 2010), the Middle East (8% vs. 6%) and Africa (7% vs. 5%) will all increase due to their faster growth. As a result, Europe (41% from 51%) and the Americas (14% from 16%) will experience a further decline in their share of international tourism, mostly because of the slower growth of comparatively mature destinations in North America, Northern Europe and Western Europe.

Figure 4: Tourism Towards 2030: Actual trend and forecast 1950-2030 – Source UNWTO

According to the latest Eurostat statistics on the tourism industries in the EU, published on December 2013, more than one in seven enterprises in the European non-financial business economy belonged to the tourism industries (data findings of year 2010). In these 3,4 million enterprises it is estimated that 15,2 million persons are employed. Enterprises in industries with tourism related activities accounted for 11 % of the persons employed in the non- financial business economy and 29 % of persons employed in the services sector. As recorded by the findings, more than one in two enterprises in the tourism industries European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” operated in accommodation or food and beverage serving activities, holding 8 % and 44 % respectively. Taking into account though the number of persons employed, the weight of these activities was even stronger as they are representing nearly 2 out of every 3 jobs in the tourism industries. However, in terms of turnover and value added, their share was 34 %, while the share of real estate activities accounted for 32 % of the turnover and 40 % of the value added at factor cost generated by the tourism industries.

Table 3: Key economic indicators for the tourism industries, EU-28, 2010 - Source: Eurostat

Data analysis on a geographical basis shows that 56 % of the 3,4 million enterprises related to European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” tourism industries in the EU in 2010, were located in four Member States: 561.319 in Italy, 473.932 in Spain, 438.861 in France and 426.330 in Germany. In terms of employment Germany recorded 2,7 million persons employed in the tourism industries, followed by the United Kingdom (2,5 million), Italy (1,8 million) and Spain (1,7 million) (no data available for France and Greece). The highest shares of employment in the tourism industries in the total non-financial business economy were observed in Ireland (18 %) and the Netherlands (15 %), followed by Austria, the United Kingdom and Spain (14 %) (Note: data on total employment in the tourism industries is missing for a significant number of countries).

Table 4: Number of persons employed, 2010 - Source: Eurostat

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

3.3. Trends in the sector ITB World Travel Trends As the ITB World Travel Trends Report 2014/15 (commissioned by ITB Berlin from IPK International, organisers of the 22th annual World Travel Monitor Forum) shows, the world travel industry achieved strong growth this year despite threats and the uncertain world economy. Outbound travel grew by 4.5% in terms of trips while spending grew by 2% by trip on average and by 6% in terms of total global outbound travel turnover. Asia, South America and North America were the main growth drivers while Europe generated solid growth. Inbound tourism grew well with a 4.8% increase in international tourist arrivals, with the Americas, Asia and Europe all performing well as destinations. The forecast for 2015 is again positive with a 4-5% growth forecast by IPK’s World Travel Monitor for outbound travel as the world economy gradually improves. Asia is projected to remain the strongest growing outbound market while Europe and the Americas will show solid growth as well. In the last five years, people around the world have been increasingly travelling abroad on holiday, although different trends regarding the types of holiday can be seen, according to the World Travel Monitor. Sun & sea holidays have grown by 18% over the last five years and remain the most important category with 28% of all holiday trips. However, touring holidays have grown by 32% to a 23% share of the holiday market, thanks in particular to more tours by Asians. In contrast, countryside holidays have declined by 17% over the last five years and now only represent 11% of all holidays. The boom market segment, however, has been city trips/breaks which have increased by 58% over the five years to reach a 20% market share. This dynamic growth has been supported by the increase in low-cost flights and expansion of budget accommodation. According to World Travel Monitor figures, Paris is the world’s top metropolitan destination with 18.8 million international arrivals in 2013, followed by New York, London, Bangkok, Barcelona and Singapore. In 2014 online bookings continued to boom with a further 7% rise resulting to a 66% share of all travel bookings worldwide but there are signs they could be reaching saturation level at about 70% in mature markets. The global market share of travel agency bookings has more or less stabilized at 24%, according to World Travel Monitor figures. Meanwhile, there was a sharp increase in bookings by smartphone this year. China with a 10% share took the first place in the share rankings, followed by the USA (7% share) and Japan (5% share). Social media channels such as review portals, blogs and forums have also become very popular for planning trips and are used intensively by more and more travellers around the globe.

Sharing economy The experts participating in the last World Travel Monitor Forum in Pisa, Italy (October 2014), elaborated greatly the individualisation of customers trend and the so called “sharing economy” which poses a major challenge to the traditional travel business. It is based on the idea of using available resources more efficiently, whether this is accommodation, car transportation or other activities. Technology-based “sharing economy” firms are increasingly penetrating the travel industry by offering consumers far more individualised choice than traditional suppliers and are disrupting the established business model by using private resources for lower-cost commercial activities. The experts warned that traditional travel suppliers need to respond quickly and innovatively if they are to stop losing market share. The US-based accommodation provider Airbnb and the ride-sharing applications Uber and ZipCar are just two of the newcomers who are making a huge impact on the travel industry. The so-called “sharing” companies (Airbnb and competitors such as Homeaway, Wimdu and others) have grabbed a significant share of the accommodation market in recent years, due to their fast and controversial growth. According to the World Travel Monitor from IPK European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

International, over the last five years, the so-called “para-hotellerie” segment, covering different forms of private accommodation ranging from holiday homes, bed & breakfast and hostels to staying with friends & relatives, has grew by 35% to reach a 40% share of the overall world outbound accommodation market, being obviously a new segment that is driving the business. For example, Airbnb now offers around 330.000 rooms worldwide, making it one of the world’s ten largest “hospitality brand”, alongside long-established leading hotel companies. Meanwhile, fast-expanding Uber has taken a dramatic amount of business from taxi companies in cities where it operates. Moreover, the transport supplier also represents a potential threat to car rental firms if it starts to offer advance planning for longer trips. As technology experts explained, Airbnb and Uber have completely different business models compared to traditional travel companies. They are essentially technology platforms that market privately-owned assets or resources such as accommodation or cars on a commercial basis. For consumers, they are attractive because they offer lower prices, better accessibility, great flexibility, ease of use and “a user-focused mission” including transparency and interactive communications. From a business perspective, such enterprises are asset-light because they own the sales platform but not the resources. This means they can operate at low cost and also pass on legal liability to the providers who are private contractors. However, these “sharing” companies also operate in a legal “grey area” and frequently violate housing, labour, tax and other laws. Both Airbnb and Uber have faced legal challenges in many cities around the world where authorities claim they are operating illegally. Meanwhile, one interesting new trend is that other start-ups are now being launched to fill in gaps in the sharing economy, such as handover of accommodation keys and cleaning services, as there are real new business opportunities emerging around this sharing economy. Additionally, the sharing economy concept is moving into the food sector in a big way. Sites like EatWith or BookaLokal match visitors with home cooks, for a fee. Tourists are invited into hosts’ homes or restaurants to dine and experience the culinary world of a particular neighbourhood or region. As presented in the Pisa Forum, the emergence of these “sharing economy” firms is also a response to the “increasingly extreme expectations” of consumers who are leading more and more “digital lives”. The rapid growth of the web- and mobile-based companies in the travel market also reflects the relatively slow reaction of the traditional travel industry to the internet and social media channels. Although most travel companies have responded in recent years to digital opportunities, the landscape is very diverse. Some of them focus purely on generating bookings and do not have a full social business model that, in addition, can create customer loyalty and long-term brand equity. Social Media Social Media has a particularly heavy influence on travel – before, during and after a journey – and the advance of mobile technology and emergence of wearables will increase this trend. Experts predicted that the convergence of social, local and mobile technology and content will be the next transformation step for the travel industry. In general, Social Media today is used by all demographic groups and is a much more diverse landscape than just the well-known leading platforms such as Facebook and Twitter. Companies can use Social Media for marketing, brand monitoring, customer service, crisis response and diverse other business activities. Overall, experts agreed that technology will continue to impact dramatically on the travel industry by enabling companies to offer far more individualised services in the future. With the rapid growth of newcomers who are winning market share with “disruptive” business models, traditional travel companies need to respond quickly with innovative products and services to defend their competitive positions. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Eurobarometer trends The latest Flash Eurobarometer report on “Preferences of Europeans towards Tourism” was published on March 2015, after conducting a survey in the 28 Member States of the European Union, and in Turkey, the Former Yugoslav Republic of Macedonia, Iceland, Montenegro and Moldova. The survey was designed to explore a range of aspects regarding holidays in 2014 and 2015, and where possible, results were compared with the ones of the last survey. The main findings of this survey can be summarized as follows: a) Researching and planning a holiday ‹ The sun or beach is the main reason for going on a holiday (of four nights or more), followed by visiting family, friends or relatives. ‹ The natural features of a destination are seen as the main reason for wanting to return to the same place for a holiday, according to around half of respondents. ‹ Recommendations from friends, colleagues or relatives are considered the most important source of information when it comes to planning holidays, with the Internet second in importance. ‹ However, the Internet is the most common method for organising a holiday. It was used by two-thirds of people when arranging a holiday, an increase from last year. The use of the Internet to organise holidays varies greatly at a national level, from 27% in the Former Yugoslav Republic of Macedonia to 84% in Ireland.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

b) The holiday experience ‹ More than seven in ten people went away for at least one night in 2014, a slight increase from the previous year. The proportion of respondents who travelled for a minimum of one night ranged from 90% in Iceland to 33% in Moldova. ‹ Among those who went away, more than half went on a holiday lasting 4-13 nights last year, while around a quarter went on a holiday lasting 14 nights or more. A quarter went only on short-stay trips in 2014. ‹ Among respondents who went on holiday for a minimum of four consecutive nights, two in five took their main holiday in their own country, and a similar proportion went to another EU country. Around a fifth took their main holiday outside the EU. ‹ The proportion taking holidays outside their own country has increased since last year, and this is part of a longer-term trend towards more holidays outside of one’s own country. ‹ The proportion of people who travelled to another EU country ranged from 95% in Slovenia to 30% in Greece. The proportion of EU citizens who travelled outside the EU ranged from 45% in Estonia to 11% in Greece. ‹ The top holiday destinations remain unchanged since last year: Spain was the most popular destination in 2014, followed by Italy and France. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

‹ Around four in ten people took at least one holiday where the various parts of their trip were purchased separately, while a slightly lower proportion went on a package holiday, and three in ten went on an all-inclusive trip. ‹ Just over half of respondents stayed in paid accommodation for at least part of their time on holiday in 2014, while the remainder stayed only in unpaid accommodation (e.g. staying with friends or relatives). ‹ A high proportion of respondents express satisfaction with most aspects of their main holiday in 2014. Over 90% say they were satisfied with the quality and safety of their accommodation, and with the natural features of their destination. ‹ Only a minority of respondents who stayed in paid accommodation experienced safety problems during their main 2014 holiday. Only 4% of respondents who travelled at least once in 2014 registered a formal complaint during their trip.

c) Obstacles to going on holiday in 2014 ‹ More than half of respondents who did not go on holiday in 2014 say it was at least partially for financial reasons, and four in ten say it was the main reason. ‹ Other reasons, all of similar percentages to one another, were: health reasons, a preference for staying at home, lack of time due to work or study, and lack of time due to family commitments.

d) Holiday plans for 2015 ‹ Over four in ten people say they will not change their 2015 holiday plans because of the economic situation, while a third say they will change their plans but will still travel. Just one person in nine says they will not go on holiday as a result of the economic situation. ‹ The proportion of people who intend to go on holiday without changing their plans for economic reasons ranges from 76% in Germany to 12% in Greece. ‹ A holiday lasting 4-13 nights is the most popular type of trip planned for 2015. The proportion of respondents who have a good idea of the duration of trip they will take has decreased in all areas, while the proportion of those who are not planning on taking a holiday has increased. Four in ten respondents plan to spend their main holiday in their own country, and this proportion increases to around half when considering all the holidays planned (not only the main holiday). ‹ Three in ten people expect their main holiday to be in the EU and over four in ten intend to spend at least one of their holidays in an EU country in 2015. ‹ Finally, one in six respondents plan on spending their main holiday outside the EU, a proportion which rises to a quarter when considering all planned holidays in 2015. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Tourism and ICT Along with the annual increase of international tourism market, the proportional turnover of online activities in the sector increases respectively. It is estimated that in 2015 the total income of online business activities in tourism will reach 500 billion US$, meaning 35% of total, according to Mr. D. Kossifas, Head of Travel, Google Greece. This proportion will be higher in Western Europe, in which Greece is included (42%) and USA (43%), while lower figures will be observed in Asia (26%) and Eastern Europe (23%). This situation is not only due to the increase of Online Travel Agents (OTAs), like Priceline and Expedia but also to the raise of bookings through the websites of touristic enterprises (hotels, car rentals, etc). The accelerating and synergistic interaction between technology and tourism in recent times has brought fundamental changes in the industry and our perceptions of its nature. Adoption of new technologies has reshaped the entire process of tourism service development, management and marketing, as well as entire tourism industry as a whole. Due to the increasing impact on efficiency and effectiveness of tourism organisations, ICTs may be perceived as an integral part of the contemporary tourism business. In this aspect the European Commission is working with stakeholders to create an Information & Communication Technologies (ICT) and tourism business initiative – in order to boost the competitiveness of small and medium enterprises (SMEs) in the European tourism sector and to create more and smarter jobs. It is clear enough that the correct and integrated presence in the web is absolutely necessary for a tourism enterprise. It should also consist of much more than a simple, functional and integrated website through which travellers can make a booking or a purchase, like the following: V Adaptation of the website to mobile devices (mobile site or responsive design) European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

V Advertised web presence (Google AdWords, Banner Ads etc) V Advertised presence on online travel agents (OTAs) like Booking.com, Trivago, etc V Strategic presence in social media (Facebook, YouTube, Instagram etc) V Participation in online users’ evaluation (TripAdvisor etc)

ICTs provide unique opportunities for innovative organisations to redesign tourism products, to address individual needs and to satisfy consumer preferences. ICTs have also become part of the core product, especially for business travellers who now expect certain facilities to be available during their trip. The internet and the World Wide Web have revolutionised the promotion and communication functions of tourism. As in Greece only 10% of international tourist arrivals comes through the web, due to low web presence of tourism enterprises, Google developed the “Grow Greek Tourism Online” initiative. It was launched on September 2014 in the island of Crete and is expanding in all regions this year. Its aim is to train local tourism businesses in online tools in order to enhance their development throughout all year and not only during the peak season. This programme is implemented in collaboration with Ministry of Tourism, the Greek National Tourism Organisation and the Association of Greek Tourism Enterprises.

Mobile It is the new upward trend for online tourism services internationally, as Mr. D. Kossifas, from Google Greece states. It is a device growing bigger and converging in size with small tablets, as users and especially travellers, have the need for one only device. During the last year, 25% of smartphone users have made a flight or hotel booking through their device, while the respective share for tablet users is 18 %. In an international level, 22% of online tourism transaction and purchasing is implemented through mobile phones, more than any other sector (16% for entertainment tickets, 9% for retail and 7% for gaming). Japan, Australia and USA are the leading countries in mobile use for touristic transactions. In Europe the proportion for mobile phone use is 20% with leading countries UK, Italy, Spain and France. It is pretty obvious why anyone looking to sell anything in the travel industry needs to have a European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” strategy for mobile engagement and fast. “Nowadays, travellers expect to do more or less everything via their mobile and if you make that difficult, for example by not having an app or mobile enabled site, having lack of shareable content or worst of all, no wi-fi then expect to face the consequences”, as TOPOSOPHY, a destination marketing agency, claims. Smart Cities In its “15 Destination Marketing Trends to Watch in 2015” report ,TOPOSOPHY, the Greek Destination Marketing Agency, states that Smart Cities and their technology infrastructure are “Smart Destinations” for travellers as they occupy the best means to accommodate both residents’ and visitors’ needs. Smart Cities use recent advances in ICT to make buildings, transport systems, healthcare providers and businesses operate in safer more efficient and more sustainable ways. Also, making our cities smarter will ultimately allow individuals regardless of technical ability to go about their daily activities while minimising their carbon and environmental footprints. Creative clusters, citizen – sensor networks, crowd planned projects, architectural infographics, microparks, interactive info –points and many more new and existing developments are changing citizens’ everyday life and visitors’ experience as well, according to the “Future of Cities Report” by PSFK Lab, USA. Today there are 28 mega – cities worldwide, home to about 12% of the world’s urban dwellers. By 2030, the world is projected to have 41 mega-cities with 10 million inhabitants or more. Aside from attracting people to live, many authorities are convinced that the future of tourism lies in cities too. However, ensuring that the visitor experience matches the marketing type is a major challenge. It is well known how technology (In particular the “internet of things”) and the sharing economy can make real improvements to the visitor experience in simple, fun ways that visitors can engage with. This is no matter anymore for techno-geeks: smart city management has to respond to a genuine need (such as improving visitor flows, traffic or simply travellers’ desire to meet the locals) and be so easy to use that visitors take to it naturally, wherever they are from. We all have complaints when it comes to how cities are run, but there are plenty of great sources of inspiration around us and all over the world, such as Amsterdam, Barcelona, London, Chicago and many others that have implemented innovative ideas. Given these circumstances, cities and nations compete globally in an effort to capitalise on the new ICT landscape and develop innovative services and business models for attractiveness and sustainable growth. Forms of tourism In the last few decades tourism has grown rapidly, mostly because people’s lifestyles have changed. They don’t want to stay at home anymore and they spend more money on travelling than previous generations did. Travelling has also become cheaper and more affordable. The rise of low cost airlines has made it possible to afford trips to faraway countries. Today, the tourism industry offers many specialised forms of tourism, besides the traditional ones: “Sun and Sea” and “Winter-Ski“, in order to meet the increasingly diverse and unique requests of a demanding public. The following forms of tourism fall in a globally adopted categorisation, however it should be noted that these categories are not always as clear cut as they suggest, as travellers will engage in a variety of activities while being on vacation, many of which overlap with more than one category. It should be underlined though, that no matter the form or category, the sustainable approach to tourism should be ensured in any case. The main forms of alternative tourism can be found as follows: ° Adventure tourism : According to the U.S. based Adventure Travel Trade Association, it may be any tourist activity, including two of the following three components: a physical activity, a cultural exchange or interaction and European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

engagement with nature (e.g rock climbing, trekking, rafting, bungee jumping, scuba diving etc) ° City break tourism : It consists of 3 to 4 day trips to various cities around the world which combine cultural attractions with an active city life. It is a year- long source of tourist revenue, and has been a great growth driver for cities all around Europe and Asia ° Culinary or Gastronomic tourism: It refers to trips made to destinations where the local food and beverages are the main motivating factors for travel. According to the International Culinary Tourism Association, culinary tourism is defined as “the pursuit of unique and memorable eating and drinking experiences”. This means that there is a particular audience of people who are willing to travel the world in order to sample and experience authentic international cuisines. ° Cultural tourism: Travellers experience the history and culture of a destination and its people. Culture and creative industries are increasingly being used to promote destinations and enhance their competitiveness and attractiveness. The Council of Europe has launched in 1987 the “European Cultural Routes”, transnational routes that help tourists discover how Europeans have lived since ancient times. Meanwhile, UNESCO through the Creative Cities Network has endorsed creative tourism as an engaged, authentic experience that promotes an active understanding of the specific cultural features of a place. More recently, creative tourism has gained popularity as a form of cultural tourism, drawing on active participation by travelers in the culture of the host communities they visit (craft workshops, cooking lessons etc) ° Ecotourism or Green tourism: Responsible travel to natural areas that conserves the environment, sustains the well-being of the local people and involves interpretation and education ° Medical tourism : It has been a source of growth for several countries or regions, driven by the desire of people to combine high-quality, lower-cost medical services with a hospitable tourist environment ° MICE tourism : Refers to Meetings, Incentives, Conferences and Exhibitions, in which large groups are brought together for a specific purpose. It usually consists of a well planned agenda developed around a particular theme, such as a hobby, a profession, or an educational topic. The MICE tourism market is significant both for its own value added and for providing an excellent lead-in to other forms of tourism, introducing a large number of delegates to new destinations which they may afterwards prefer for their summer holidays or city breaks ° Religious tourism : Involves people travelling individually or in groups for visiting a place of spiritual significance. It is the oldest, the most important European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

form of “tourism” in the history of Mankind. It can be a pilgrimage or religious tourism excursions and cognitive orientation ° Sports or Athletic tourism : An increasing number of sports fans travel to places where special events are being held (Olympic Games, World Championships, etc) ° Spa tourism: Spas have been popular since Roman times. In 16th century Bath city in Britain became the centre of spa tourism for the rich population. During the 19th century spas emerged all over Europe. Today people go to spas for the healing effect of mineral waters as well as for offer wellness treatment , massages, steam baths and other services ° Wedding tourism : More and more couples nowadays plan their wedding ceremony abroad. Most popular place in Greece is the island of Santorini with its wonderful setting ° Wine tourism : It involves visits to vineyards and wineries which provide the visitor with the opportunity to tour the magical world of the vine yard and the wine, to become familiar with the traditional and modern methods of wine making and to taste selected local wines in conjunction with traditional flavours. In terms of the preservation and the promotion of this heritage a specific form of rural tourism has in recent years been developed in many countries (including Greece), the Wine Routes. This is a proposal to the visitor to follow a carefully selected route, which crosses the most graphic points in a viniculture zone.

Figure 5: Concept map of forms of tourism – Source: National Institute of Open Schooling (NIOS) European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Climate change and Tourism In a recent report, the Bank of Greece following up a previous one published in 2011 aims at contributing to the elaboration of a national strategy for adaptation to climate change. Apparently, the climatic conditions are a key parameter of the tourist product and therefore they make it vulnerable to climate change. The high temperatures, the extreme weather phenomena, the redistribution or/and the shortage of water resources, and as well as the rising sea levels are just a few of the physical impacts of climate change that are expected to significantly affect the tourism sector. For example, surveys of the Deutsche Bank, (DB Research “Climate change and tourism: Where will the journey lead?”) and the World Tourism Organization (WTO Climate Change and Tourism: Responding to Global Challenges) require redistribution of tourist arrivals in favour of countries with lower average summer temperatures, such as the Baltic, the Benelux and Scandinavian countries, at the expense of the Mediterranean countries. As a conclusion of a report by the Bank of Greece, published in 2011 the following two main objectives of the strategic planning for Greek tourism emerged: reduction of seasonality and dispersion of the tourist product in larger part of the Greek territory. These goals can be achieved if the rich natural characteristics of the various regions of the country are identified and highlighted as well as the mild and alternative forms of tourism are promoted and emphasis of attracting targeted new groups of tourists is given and measures to limit the environmental effects of the operation of tourist units are taken. Using the climate simulation method CLM (Climate Version of the Local Model), the new report proceeds with the assessment of the man-kind interference, by simulating in Greece, the conditions relating to future periods 2021-2050 and 2071-2100 compared with the reference period 1961-1990, based on a specific scenario. The simulation is appropriate for application to tourism through the CTIS project (Climate-Tourism/Transfer-Information- Scheme), which when it is combined with the concept of Physiological Equivalent temperature (PET) provides useful and detailed information as to the "thermal comfort", as well as to the physical and the aesthetic conditions that are necessary for the holidays planning of those interested especially on “sun” tourism. In particular, and on the basis of the results of this latest report, the incidence of suffocating conditions is likely to increase in the months of July, August and September at a rate of 20% over the coming decades, while shift of thermally comfortable conditions is expected from May to April and from September to October. The above are expected to have a significant impact on the country's sun tourism, which is currently directly tied to the summer months. Eventually, in order to address the impact of climate change on tourism, six operational priorities are proposed and specifically: a) reinforcement of entrepreneurship, b) development and improvement of infrastructure, c) improvement of the knowledge and skills of manpower, d) mitigation of seasonality, e) diffusion of tourism development opportunities in all regions of the country based on their specific characteristics and their potential and f) taking tangible actions at the level of tourism destination based on its experience. In addition, actions are proposed for the efficient use of resources and the strengthening of the production and use of local inputs of low environmental footprint, contributing further to the diversification of the tourism product. The results of the climate simulation suggest that in the future the sun tourism of Greece will take place in periods other than the current high demand period, acquiring characteristics similar to those prevailing in the planet's warmest tourist areas, such as the resorts of the Red Sea, India and the Persian Gulf. This course will require the adaptation of Greek tourist offer and the design of the relevant policy on a new basis.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

All Inclusive Hotels Vacation in hotels of “All - Inclusive” type is a fairly standard type of holiday internationally and a globaltrend.. A vacation package "All-Inclusive" includes numerous services that a tourist consumes: accommodation, all meals and snacks and various activities. The “All Inclusive” holiday system is an international trend that satisfies the tourists’ need to control their holiday cost. Also, many tourists (especially families) are in favour of the convenience offered by the fact not having to go around with money in hand. The economic crisis after 2008 led to tighter budgets of travellers and increased demand of All Inclusive packages. As a result of this increased demand, the offer of hotels that work with this system has increased significantly even in traditional holiday destinations in Spain, Portugal and Greece. Therefore, in order to remain competitive, Greek tourism has to include it in its portfolio, as it includes for many years the full board or half board packages. Characteristics of All Inclusive in Greece Unlike other countries, the “All Inclusive” tourist in Greece is not confronted in the hotel. On the contrary, the amount of money spent through shopping in the local area is the second highest of all type of tourists and the money spent for food and beverage outside the hotel is 40 -50% of the expenditures of other type of tourists. The above characteristics illustrate the diversity and particularity of Greece as a touristic destination, making it internationally attractive. The maintenance of these characteristics and specifically the maintenance of a lively environment around the hotel is beneficial for the hotels also. For this purpose we should seek collaborative win-win solutions that will maintain and increase “All Inclusive” customer’s consumption in shops and restaurants - bars outside the hotel, for example: ° Understand the views and expectations of customers, especially as “AI” customers are not a homogeneous group in terms of their characteristics - thus they will be offered products that they will prefer ° Provide better information to tourists about the destination and promote its special characteristics (Unique Selling Points) - this will motivate tourists to leave the hotel in order to explore the destination and consume ° Understand and address the factors discouraging tourists to leave their hotel ° Support tourism businesses to meet the tourists’ demands and preferences ° Development of motivation and experience that will increase the added value for various categories of tourists.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

3.4. The Market of the sector in Greece, Bulgaria and the cross border area. a) Greece Tourism has been the basic lever of restarting and reconstructing the Greek economy after five years of crisis and recession. In 2014, tourism contributed to the state with 14 billion Euros direct revenues, while including air and sea transport along with internal tourism the amount reaches the 17, 1 billions. Greece, in relevance to its major competitors (Spain, Italy, France, Turkey and Croatia) has shown more than double raise of arrivals in years 2013 and 2014. According to IKA (Social Insurance Institute) data of January-July 2014, the relevant to tourism professions created 115.000 new jobs, raising the IKA revenue about 19%. The tourism stakeholders in Greece refer to it as the big success story of the last two years. Athens and other big cities, the islands and other touristic destinations were enhanced again. Tourism gave a boost to micro-, small and medium enterprises, while start-ups have emerged providing innovative services through the web. Due to the fact of the spread of tourist destinations around the country, tourism in Greece has a catalytic role in the dispersion of national income in the country's regions. On the other hand, the predominance of the "Sun & Sea" touristic theme makes tourism a seasonal activity, having as a consequence the overexploitation of natural and man-made resources during the peak months and idleness of them during winter. Moreover, the seasonal activity inevitably leads to seasonal employment with the consequent non employment of workers in the tourism sector for long periods, resulting in instability of their income and significant impact on social activity in touristic areas. Relevant data for Greece is scattered in various sources and various data for different time periods. The most recent data is presented in reports by SETE –Association of Greek Touristic Enterprises and elaborated by INSETE, the Institute of the association founded in 2013 in order to provide scientific and technical support for the promotion of entrepreneurship and quality in tourism. In the following tables, one of the most significant tourism indicators, arrivals in airports, is presented for the two consecutive last years, proving the growth of tourism sector in Greece the last years. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

2014 2014 Athens Thessaloniki (1) Rhodes Kos Herakleion Chania Corfu Zakynthos Kefalonia Aktio Mykonos Santorini Araxos Kalamata Samos Skiathos Kavala Total Type**

Jan 142.761 61.950 989 2 81 1.612 6 0 0 0 0 0 0 4 0 0 113 207.518 I Feb 119.288 56.701 1.125 0 59 1.313 5 0 0 0 0 0 0 237 0 0 292 179.020 I Mar 164.468 72.106 1.304 0 994 2.024 657 142 0 9 0 2 0 1.344 0 0 0 243.050 I Apr 255.371 115.864 58.295 23.677 108.996 49.548 27.118 4.119 2.291 2.046 2.232 3.965 2.821 2.641 1.068 5 1.366 661.423 I 124.55 May 334.468 144.834 236.951 121.974 325.142 5 121.307 64.838 24.661 19.739 18.879 31.988 4.549 8.320 15.226 15.350 8.447 1.621.228 I Jun 158.29 113.11 14.39 14.92 e 403.827 196.397 348.554 179.351 440.258 1 191.334 6 39.591 36.097 39.428 52.445 2 17.440 23.660 28.104 6 2.297.211 I 198.15 140.50 17.65 18.90 July 470.573 241.972 420.924 225.316 537.090 3 254.590 7 51.704 40.967 70.093 78.339 3 20.838 28.997 35.471 8 2.852.095 II 180.24 144.69 19.69 17.81 Aug 458.590 226.220 410.894 225.464 562.137 5 245.575 2 51.041 41.515 77.461 82.262 1 20.808 29.286 40.129 6 2.833.826 II 159.23 11.85 11.67 Sept 381.970 174.411 311.479 167.009 423.374 2 176.167 94.956 36.189 29.645 33.548 49.128 9 14.900 22.749 22.328 1 2.120.615 II Οct 316.557 123.752 138.900 67.427 203.789 69.812 55.405 13.054 4.471 6.101 5.147 12.132 2.856 11.979 1.541 209 2.139 1.035.271 II Νov 179.693 71.973 1.271 424 4.061 3.767 659 56 0 5 3 172 0 9.552 0 0 93 271.729 II Dec 160.756 90.481 319 0 491 1.764 26 0 0 0 0 0 0 1.044 0 659 255.540 II Tota 3.388.32 1.576.66 1.931.00 1.010.64 2.606.47 950.31 1.072.84 575.48 209.94 176.12 246.79 310.43 73.82 109.10 122.52 141.59 76.43 14.578.52 l 2 1 5 4 2 6 9 0 8 4 1 3 1 7 7 6 0 6 II Table 5: international tourist arrivals at main Greek airports, Jan - Dec 2014 - provisional data

2013 2013 Athens Thessaloniki (1) Rhodes Kos Herakleion Chania Corfu Zakynthos Kefalonia Aktio Mykonos Santorini Araxos Kalamata Samos Skiathos Kavala Total Type**

Jan 111.861 52.604 474 0 846 984 11 0 0 0 0 0 0 0 0 0 0 166.780 I Feb 90.196 48.573 165 3 225 935 6 0 0 0 0 2 0 2 0 0 0 140.107 I European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Mar 122.577 70.231 3.806 1.764 8.399 4.422 1.989 156 312 0 0 0 80 880 0 7 592 215.215 I Apr 174.527 85.516 47.832 19.487 75.806 38.131 25.614 3.538 4.413 841 1.133 1.517 2.611 1.934 873 22 1.188 484.983 I Ma 109.19 y 254.554 134.816 213.553 112.974 304.946 113.803 4 55.057 24.612 17.955 14.016 25.093 5.444 5.351 12.089 13.193 8.268 1.424.918 I Jun 169.20 e 314.171 176.518 321.688 168.779 421.873 148.223 2 94.412 38.484 32.497 26.609 43.406 14.087 10.859 19.772 24.492 13.921 2.038.993 I 221.08 July 372.980 202.535 375.682 205.420 519.690 171.345 2 118.680 45.306 34.765 51.505 61.296 15.129 11.986 25.810 29.818 17.245 2.480.274 I 213.21 Aug 379.060 192.000 387.398 203.633 527.937 161.964 9 122.422 45.219 33.182 56.183 65.319 17.026 11.616 24.418 33.493 16.435 2.490.524 I Sep 152.12 t 307.244 155.915 312.368 156.405 438.947 137.639 4 82.618 34.687 29.089 25.746 39.767 11.673 10.549 18.418 17.749 11.760 1.942.698 I Οct 229.491 98.812 120.614 57.290 171.551 67.158 49.013 11.227 4.932 6.160 2.340 8.019 3.956 3.985 2.183 296 2.749 839.776 I Νov 144.394 61.301 906 79 1.856 3.298 2.447 51 68 0 0 30 0 781 0 0 178 215.389 I Dec 117.303 72.997 819 0 6 1.765 4.705 0 0 0 0 0 5 0 176 0 0 197.776 I 2.618.35 1.351.81 1.785.30 2.472.08 948.60 198.03 177.53 244.44 12.637.43 8 8 5 925.834 2 849.667 6 488.161 3 154.489 2 9 70.011 57.943 103.739 119.070 72.336 3 I Table 6: international tourist arrivals at main Greek airports, Jan - Dec 2013

Dif.2014/201 3 Athens Thessaloniki (1) Rhodes Kos Herakleion Chania Corfu Zakynthos Kefalonia Aktio Mykonos Santorini Araxos Kalamata Samos Skiathos Kavala Total

Jan 27,6% 17,8% 108,6% - -90,4% 63,8% -45,5% ------24,4% Feb 32,3% 16,7% 581,8% - -73,8% 40,4% -16,7% ------27,8% Mar 34,2% 2,7% -65,7% -100,0% -88,2% -54,2% -67,0% -9,0% -100,0% - - - -100,0% 52,7% - - -100,0% 12,9% Apr 46,3% 35,5% 21,9% 21,5% 43,8% 29,9% 5,9% 16,4% -48,1% 143,3% 97,0% 161,4% 8,0% 36,6% 22,3% -77,3% 15,0% 36,4% May 31,4% 7,4% 11,0% 8,0% 6,6% 9,4% 11,1% 17,8% 0,2% 9,9% 34,7% 27,5% -16,4% 55,5% 25,9% 16,3% 2,2% 13,8% June 28,5% 11,3% 8,4% 6,3% 4,4% 6,8% 13,1% 19,8% 2,9% 11,1% 48,2% 20,8% 2,2% 60,6% 19,7% 14,7% 7,2% 12,7% July 26,2% 19,5% 12,0% 9,7% 3,3% 15,6% 15,2% 18,4% 14,1% 17,8% 36,1% 27,8% 16,7% 73,9% 12,3% 19,0% 9,6% 15,0% Aug 21,0% 17,8% 6,1% 10,7% 6,5% 11,3% 15,2% 18,2% 12,9% 25,1% 37,9% 25,9% 15,7% 79,1% 19,9% 19,8% 8,4% 13,8% Sept 24,3% 11,9% -0,3% 6,8% -3,5% 15,7% 15,8% 14,9% 4,3% 1,9% 30,3% 23,5% 1,6% 41,2% 23,5% 25,8% -0,8% 9,2% Οct 37,9% 25,2% 15,2% 17,7% 18,8% 4,0% 13,0% 16,3% -9,3% -1,0% 120,0% 51,3% -27,8% 200,6% -29,4% -29,4% -22,2% 23,3% European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Νov 24,4% 17,4% 40,3% 436,7% 118,8% 14,2% -73,1% 9,8% -100,0% - - 473,3% - 1123,0% - 0,0% -47,8% 26,2% Dec 37,0% 24,0% -61,1% - 8083,3% -0,1% -99,4% ------100,0% - -100,0% - - 29,2% Total 29,4% 16,6% 8,2% 9,2% 5,4% 11,8% 13,1% 17,9% 6,0% 14,0% 39,0% 27,0% 5,4% 88,3% 18,1% 18,9% 5,7% 15,4% Table 7: international tourist arrivals at main Greek airports, Jan - Dec 2014/2013 - difference

(1): Concerns arrivals of all passengers (Greeks and foreigners) *December 2014 data for Athens airport are estimated by SETE. ** Type I: Final data from CAA - Type II:Provisinal data from CAA/Airports- subject to revision Source: SETE, processed data from Athens International Airport, the CAA and individual airports Data is subject to changes (See above "Type")

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Indirect Benefits of Tourism According to an IOBE (Foundation for Economic and Industrial Research) study of 2012, each 1 € generated by tourism activity, induces indirect and additional economic activity of 1,2 € and thus, overall, generates 2,2 € GDP, meaning that the tourism activity multiplier is 2,2. Also, the Centre of Planning and Economic Research (KEPE) in its latest (2014) study, presents the multipliers of the individual sectors of the Greek economy which are shown in the following table along with the proportional contribution of each sub-sector in the Greek tourism activity according to IOBE study (2012). % Distribution of Touristic Income Multiplier Accommodation 45,3 2,5 Food & Beverage 18 2,5 Sea Transport 9 2,41 Road Transport 7,1 3,25 Air Transport 5,4 2,98 Trade activities 4,9 3,69 Entertainment 3,8 1,9 Travel Agencies 3,7 3,68 Car Rental 1,8 1,39 Conferences 1 4,13 Estimated Mean Value 2,65 Table 8: Source: KEPE, IOBE - Elaboration: SETE Intelligence

As presented in the table, the resulting multiplier of tourism to the Greek tourist economy is estimated at 2.65, meaning that every 1 € derived from the tourist activity causes an indirect additional economic activity of 1,65 € and thus, GDP increases by 2,65 € overall. Consequently, taking into account all previous studies and relevant data, the multiplier of the tourism activity ranges between 2,2 and 2,65. Tourism and GDP According to the Hellenic Statistical Authority (EL.STAT), the country’s GDP in 2013 was 182,4 billion Euros. It is estimated that for 2014, at current prices, it shows negative growth of 2% (consisting of 2,5% deflation prices and 0,5% growth) and it will be configured to 178,9 billion €. Tourism data shows that in 2014 Greek tourism had an increase of 11,3% (1,8 billion Euros) comparing to 2013. Adding in the inbound and cruise tourists spending (13,2 billion € and 468 million respectively in 2014), the spending of cruise lines (227 million), the spending of inbound tourists for air transport (1,177 m.€) and maritime transport (133 m.€), the spending of domestic tourism (1.58 billion €) and with a conservative estimation of the investment costs, net from imported equipment ( 200 m.€), it turns up that the direct participation of tourism in shaping the GDP in the country amounts to € 17 billion or about 9,5% of GDP. Taking also into account the multiplier effects, the total contribution is between 37 and 45 billion, in other words more than 20% and perhaps up to 25% of country’s GDP, making tourism a key pillar of the Greek economy. Type of Spending 2013 2014 Spending Inbound Tourists € 11.739 € 13.187 Spending Cruise Tourists 445 468 Spending Cruise Lines 216 227 European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Air Transport 1.077 1.177 Maritime Transport 132 133 Domestic Tourism 1.434 1.578 Investment 200 200 Direct Tourism Impact € 15.243 € 16.971 as % of GDP 8,40% 9,50%

multiplier ΙΟΒΕ 2,2 2,2 Indirect and Direct Result € 33.534 € 37.337 as % of GDP 18,40% 20,90%

multiplier ΚΕPΕ 2,65 2,65 Indirect and Direct Result € 40.393 € 44.974 as % of GDP 22,10% 25,10%

GDP € 182.400 € 178.900 Table 9: Source: SETE Intelligence Tourism and Regional Distribution Due to lack of data on the regional distribution of tourists spending, its assessment is approximate, using as an indicator the regional distribution of nights spent. This data is compared with the latest available (2012) GDP data by region. According to EL.STAT, the GDP of Greece for 2013 (for which no data per region is available) was reduced compared to 2012 and hence the relative importance of tourism in regional economies is higher than the one shown in the following table. This conclusion applies even more in 2014 where there was a further decline in nominal GDP and increase of tourism activity. share of direct direct contribution tourists GDP of of tourism distribution spending Region in regional GDP per of nights 2013 -in € 2012 -in GDP -2012 capita - Region spent 2013 million million data in € Crete 28,70% 4.372 9.067 48% 14.398 South Aegean 24,70% 3.767 6.240 60% 18.064 Ionian Islands 11,00% 1.680 3.402 49% 16.100 Central Macedonia 10,70% 1.626 26.109 6% 13.645 Attica 9,20% 1.403 94.964 1% 24.099 Peloponnese 3,20% 481 8.241 6% 13.870 Thessaly 2,60% 394 9.505 4% 12.757 East Macedonia & Thrace 2,40% 369 7.653 5% 12.270 North Aegean 2,10% 325 2.784 12% 13.394 Western Greece 2,10% 317 9.150 3% 13.431 Sterea Ellada (Central Greece) 1,70% 257 8.543 3% 15.075 Epirus 1,20% 185 4.242 4% 12.207 West Macedonia 0,50% 69 4.304 2% 15.050 European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Greece total 100,00% 15.242 194.204 8% 17.507 Table 10: Source: EL.STAT, Bank of Greece – Elaboration: SETE Intelligence

Because of the approximate calculation of the table’s elements and comparison of data from different years (spending and overnights for 2013 and regional GDP for 2012), the conclusions highlighted are mainly indicative. However, the contribution of tourism to the forming of the GDP of Crete, S. Aegean and Ionian islands is really impressive (48%, 60% and 49% respectively). Also of interest is the fact that, excluding Attica - the capital region, South Aegean and the Ionian Islands, having tourism as their main economic activity, have the highest GDP per capita while also "Touristic" Crete has one of the highest. Tourism and Employment Tourism is a labour intensive activity and as being simultaneously a highly seasonal activity, it is significant to show the sector’s employment in a peak season month and a low season month. According to IKA (Social Insurance Institute) data, on January 2014 the total salary based employment in the tourism and catering sectors was 183 thousand, on a total of 1.5 million employees in the private sector, representing the 12% of the whole. While, on July 2014 the total salary based employment in the tourism and catering sectors was 450 thousand, a proportion of 30% of the private sector. In the period January-July 2014 the total contribution to the IKA for these individuals was 104 million € higher than the same period of 2013, surpassing the revenue decrease from the other sectors by 78 million €. Employees 2013 2014 January Hotels 40.173 46.934 Travel agencies 7.069 7.946 Camping 627 769 Subtotal 47.869 55.649 Restaurants/Bars 68.161 127.006 Total January 116.030 182.655 July Hotels 205.629 236.790 Travel agencies 12.249 13.919 Camping 8.304 11.303 Subtotal 226.182 262.012 Restaurants/bars 109.559 188.176 Total July 335.741 450.188 Table 11: Source: Bank of Greece - Elaboration: SETE Intelligence

Additionally, as seen in the table below, a great proportion of the accommodation in Greece is small, family run, units. Thus, there is a high number of self-employed people accompanied by employment of members of their families. Hotels and Rooms for Rent < 50 Rooms > 50 Rooms Units Rooms Units Rooms 31.263 326.531 1.903 231.281 Table 12: Accommodation type in Greece Conclusions According to findings, Greek tourism for the year 2014: ° Contributed directly to the shaping of the country’s DGP with 9%, while its direct and indirect contribution is estimated 20% to 25%, confirming the common saying that it is the country’s “heavy industry” European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

° Constitutes the engine of the Greek economy, as in 2014 tourism showed an increase of 11,3% or 1,8 billion €, when at the same time it is estimated that the total GDP decreased by 3,5 billion € in nominal terms and increased by 0,6% in real terms due to deflation ° From each 1 € of touristic activity, an additional economic activity of 1,2 to 1,65 € is being created. As a result, each 1€ of touristic income is followed by an increase of the GDP by 2,2 to 2,65€, meaning that tourism is a sector with great diffusion of benefits to the country’s economy ° In three island regions (Crete, South Aegean and Ionian islands) it contributes directly to the creation of 50% of these regions’ GDP. The afore mentioned regions have the highest GDP per capita in the country, making obvious that tourism has a positive impact on the living standards of the areas in which it develops ° Offered in its peak, including the food & beverage sector, the 30% of the salary based employment positions in the private sector and a great number of self- employed positions in 31.000 small hotels and rented rooms businesses along with tens of thousands food & beverage businesses ° Covered with the touristic income the 75% of the trade balance deficit. This income is almost equal to the one of the exports of all other products that Greece exports (excluding ships and fuels) ° If in the previous amount we count in the amount received from air and sea transport of inbound tourism, then the total exceeds the income of all products exports, except ships and fuels.

It is clear, from all previous, the importance of tourism to the Greek economy on one hand and the dynamism of the sector on the other. This dynamism is the starting point on which to base the policies that will address the major weakness of the country's tourism, which is none other than the seasonality (about 60% of arrivals and revenue incurred in May to August and only 6% of arrivals and 3% of revenues in the first quarter of the year). Obviously, the confrontation of the seasonality can only be made by completing and enriching the basic "Sun and Sea" product, which also constitutes the largest tourism product throughout Europe. Tourism Organisation- Governance, Public & Private Bodies Besides the Ministry of Tourism, the central government regulatory authority that formulates the country’s tourism policy, and the Coordination and Implementation Authority of the Ministry, which plans, coordinates and supports the management and implementation of the actions of the Ministry of Tourism within the framework of the Operational Programmes of the National Strategic Reference Framework (NSRF) and other relevant EU policies and programmes, there are other organisations and entities responsible for tourism: The Greek National Tourism Organisation (GNTO) GNTO is a public entity supervised by the Ministry of Tourism. Its mission is to organise, develop and promote Greek tourism, within the country and abroad. By virtue of Presidential Decree 343/2001, the GNTO’S main competences consist of: ° Submitting proposals on the formulation of tourism policy ° Implementing tourism policy as laid down by the Government European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

° Establishing and implementing the country’s tourism promotion programme at a local, national and international level ° Supporting public services, local authorities and other natural or legal persons in actions aiming at the promotion of tourism ° Performing quality controls and supervising the tourism market in order to upgrade the tourism product.

GNTO consists of the Head Office located in Athens and 14 Regional Offices of Tourism, whose competences include among others: - Licensing tourism accommodation facilities, travel agencies and other types of tourism - businesses - Inspection of tourism businesses - Imposition of administrative sanctions on tourism businesses - Tourism information. Finally, GNTO’s mission to promote Greek tourism internationally is carried out by its 17 Offices abroad, as recently re-arranged geographically and administratively by virtue of article 15 of Law 4179/2013. Said article also provides for a new form of representation, i.e. the “tourism attaché” in the Greek embassies situated in countries where GNTO is not represented by one of its 17 offices abroad.

Local Authorities (Regions and Municipalities) At the local level, these authorities draw up and implement programmes and activities for tourism development and promotion in the area under their jurisdiction. These activities are not financed by central government, as local authorities make use of their own resources or European programme funds. Regarding tourism promotion activities in particular, it is mandatory for all public (national or local) authorities to obtain of prior approval of the Ministry of Tourism, with a view to harmonising their promotion plans with Greece’s overall promotion strategy.

Hellenic Chamber of Hotels (HCH) The HCH has been operating since 1935 as a public entity. It is supervised by the Ministry of Tourism and plays an important role as a statutory advisor to the State on tourism issues. Its members are hotels operating in Greece and it is managed by an Administrative Council of elected representatives and representatives appointed by the Minister of Tourism.

The Association of Greek Tourism Enterprises (SETE) SETE was established in 1991 and is a nongovernmental, non-profit organisation. SETE represents associations of tourism businesses in Greece as well as individual companies operating in the broader tourism sector. Its mission is to boost competitiveness and highlight the key role of tourism in the Greek economy. SETE is very active in the field of research and studies, and draws the multi-annual tourism strategy for the private tourism sector. It is also a key advisor to the State for tourism-related issues, as one of the social partners engaged in social dialogue. SETE has a determinative contribution to improving the quality and enhancing the competitiveness of Greek tourism with: i) interventions in the public debate on tourism, ii) international presence and action, ii) continuous research and prompt information, and European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” iv) emphasis on education and continuous training.

Marketing Greece S.A. Marketing Greece is a financially independent non-profit private organisation founded in 2013, which aims at showcasing the Greek tourism product and at providing high-standard, holistic marketing services that cover the full scope of strategic tourism destination development. In the wider context of the National Strategy for Tourism, the aim of Marketing Greece is to support the Ministry of Tourism and the GNTO to create a new tourist identity for Greece. The philosophy of Marketing Greece revolves around the axes of synergy, innovation and integrated strategy. The synergy among the Greek tourism operators-stakeholders, the emphasis on innovation, the synthesis of accumulated experience and the use of modern marketing trends and practices and electronic communication target to the upgrading of the Greek tourism product, as well as the economic and social development of the country. The interactive platform Discovergreece.com is a strategic pillar for the activation of Marketing Greece. The website displays a complete portfolio of tourism products, providing the interconnection of products with online booking systems and contributes to creating and developing online communities and campaigns in social media. Marketing Greece SA holds an office in Athens, but very soon is going to operate an office in Thessaloniki, hosted in the premises of the Region of Central Macedonia. Its aim is to develop specific actions, in collaboration with the regional authority and local tourism stakeholders in order to promote abroad and with coordinated means the seven prefectures of C. Macedonia.

The Research Institute for Tourism (ITEP) ITEP is a non-profit organisation founded in July 1996 with the initiative of the Hellenic Chamber of Hotels and other tourism professionals. Its main objective is to study the tourism sector in Greece and source tourism markets. In particular, ITEP carries out scientific studies regarding Greek tourism and Greek economy in general, examines national and international economic developments and advises state agencies on matters concerning the tourism sector.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

b) Bulgaria The most popular tourist destinations in Bulgaria are along the coastline, the ski resorts and the spa & wellness resorts. The Black Sea Coast is dominated by the larger more successful summer resorts, which are serviced by two main airports at Bourgas and Varna. The mountain destinations have grown in popularity substantially in recent years, the most successful one being at Bansko, the other two main skiing resorts being Borovets and Pamporovo. Skiing is also available in Sofia on Vitosha Mountain. Bulgaria’s spas and hot mineral springs have been noted for their recreation effects ever since the ancient Tracian, Greek and Roman times. There are over 800 mineral springs clustered in over 240 water formations of a depth reaching 2000 meters, rich in hot and cold mineral water with temperatures varying from 37°C up to 101°C. Bulgarian hydrothermal, bioclimatic, mud treatment, sea cure and other health resources are ranked among the best in Europe. Also, Bulgaria has a strong cultural heritage with seven (7) sites listed in the UNESCO World Heritage List. The tourism though is characterised by a strong seasonal demand, a fact with significant impact on the employment and the environment. According to the World Economic Forum 2013, Bulgaria occupies the 50th place among 140 countries in competitiveness of the tourism sector, holding a lower position than its neighbouring tourist destinations - Turkey, Greece, Cyprus and Croatia. The country has lost two places in the rankings the past two years as the main reason for this is lower estimates on several indicators, including pricing conditions. Referring to the forecasts of the organisation, in the period 2013-2022 the tourism sector in Bulgaria will show a small increase in tourism revenues of 2,6%, while the number of workers in the sector will decline by 2,2%. In the study, which is conducted every two years, 14 criteria related to the level of development of the tourism sector are taken into account. These include: legal framework, safety, priorities of the tourism sector, transport infrastructure, tourism infrastructure, price competitiveness, business environment, human, cultural and natural resources. Data from the same report show that tourism industry in 2012 in Bulgaria represents 12,4 % of GDP, while tourist economy contributes to the 3,5% of the GDP. Forecasts for growth in the period 2012-2022 are in average 2,5% for both cases. The National Statistical Institute data point out a positive balance in the balance of payments, which defines it as a receptive market, mainly to EU countries. Revenues from international tourism in Bulgaria in 2012 amounted to 2.916,6 million. EUR, which is 2,2% more than 2011 revenues. The number of foreign tourists in 2012 increased by 3,4%. The main inbound tourism markets for Bulgaria in 2012 are neighbouring countries Romania and Greece, followed by Germany and Russia. The most notable growth was recorded in arrivals of citizens of Russia (31%), Turkey (59%), Belarus (105%) and Moldova (33%). Decline was observed in arrivals from Israel by 31,3%, the UK 7,1%, France 7,5% and Denmark 13%. Overall, the EU remains the most important generating market for Bulgaria with a share of 63,2 percent of total tourists. Increase was registered in visits for business (7,1%) and visits to friends and relatives (8,4%). The lowest increase is observed for visits for holidays and vacation (3,1%). The World Travel and Tourism Council reported for 2014 that visitor exports generated 3.260 million Euros (12.0% of total exports) in 2013. This is forecast to grow by 7,6% in 2014, and grow by 2,9% from 2014-2024, to 4,.700 million Euros in 2024 (7.9% of total). In recent years tourism received sufficient investment and is heading for being the most dynamic sector of Bulgaria’s economy providing new workplaces as well as constant income for the State. Referring to data from the World Trade Tourism Council of 2014, the Bulgarian Ministry of Economy, Energy and Tourism presented in its report of 2014 that Travel & Tourism investment 3 in 2013 were 530 million Euros, or 6,6% of total investment. It is foreseen that it will rise by 4,6% in 2014 and by 5,5% over the next ten years to 950 million Euros in 2024 (6,1% of total). The fact that Bulgaria is a cheap and easy-to-reach destination European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” for tourists should not discourage investments in innovation in order to attract more visitors. Development of new types of tourism is the key for the future of tourism in Bulgaria. At the same time, the development of attractive packages intended for different targeted groups would also be a successful approach according to sector experts. Tourism and Regional distribution Data from the National Statistics Institute presented in the following table shows that arrivals in hotels-accommodation establishments in year 2014 show a lack of uniformity, as in previous years also. The great majority is concentrated in South East and North East regions, which include the coastal areas of the country with the sun & sea resorts. Obviously, the great proportion of arrivals are situated in Burgas and Varna, coastal districts of the afore mentioned regions respectively. Following region is the South West with capital Sofia leading in arrivals. The number of hotel beds and accommodation follow the same with the previously described regional distribution, the district/city distribution though shows a peculiarity as in the South West region Blagoevgrad holds the first place and not Sofia. Alongside, the spatial distribution of people employed in the tourism sector in the country is distinguished by the leadership of Sofia-city with 30% of the total number employed in the sector. Following are Plovdiv by 10%, Varna 9%, Burgas 7% and Blagoevgrad 6%. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Arrivals in accommodation Revenues from nights spent- Nights spent - number Statistical zones Accommodation establishments - number levs Bed-places - Available bed-nights - Statistical regions establishments - number number Districts number Of which: by Of which: Of which: by Total Total Total foreigners foreigners foreigners

Total 3163 314257 61396232 21698391 14077798 5945908 2791578 998344818 711764101

North and South-East Bulgaria 1974 241779 39874821 16149841 11832316 3392543 1843356 725566458 569435477 North-West region 206 8741 2853132 502229 56308 260184 28371 17119082 2583298 Vidin 36 960 354030 46478 10390 31317 7088 1830412 394292 Vratsa 30 1049 354084 80576 11860 34046 4601 2198633 511776 Lovech 84 4208 1328095 224748 14108 115349 6649 7272058 549798 Montana 27 1201 386486 63096 4909 31334 2983 2034398 266522 Pleven 29 1323 430437 87331 15041 48138 7050 3783581 860910 North Central region 263 11542 4049708 653968 131344 392670 79698 24555762 6636525 Veliko Tarnovo 118 5297 1851111 267452 62377 172848 42725 10464109 3186400 Gabrovo 67 3393 1187034 184993 20725 93657 8808 5316038 801699 Razgrad 16 609 221895 34822 5473 19942 2966 1251072 224554 Ruse 42 1616 560051 133966 37769 82782 21929 6259837 2192977 Silistra 20 627 229617 32735 5000 23441 3270 1264706 230895 North-East region 596 93279 15179646 6432891 5064824 1259503 798455 315326038 261398443 Varna 367 60494 10679967 4489301 3705472 859996 584217 223526316 194713284 Dobrich 153 30230 3685805 1794550 1333943 326250 204723 87316239 65643270 Targovishte 21 871 316397 65847 9870 28025 3280 2062432 461552 Shumen 55 1684 497477 83193 15539 45232 6235 2421051 580337 South-East region 909 128217 17792335 8560753 6579840 1480186 936832 368565576 298817211 Burgas 747 120986 15352680 8051983 6495433 1297569 908019 350180021 294011373 Sliven 82 2572 896468 104897 15076 46026 5935 3507450 906428 Stara Zagora 59 3843 1274834 309432 45774 116698 18678 11774002 2917413 Yambol 21 816 268353 94441 23557 19893 4200 3104103 981997 South-West and South Central Bulgaria 1189 72478 21521411 5548550 2245482 2553365 948222 272778360 142328624 European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

South-West region 605 44514 12471849 3435008 1799696 1629119 785654 184657472 119452964 Blagoevgrad 287 20032 4682199 1163068 548063 460607 175977 50107369 26320224 Kyustendil 67 3186 975971 156173 25590 76234 13225 4592239 1415467 Pernik 16 757 236944 31133 5629 19826 3076 797746 202465 Sofia 104 8307 2350450 560001 208075 210940 47340 19478878 7463938 Sofia cap. 131 12232 4226285 1524633 1012339 861512 546036 109681240 84050870 South Central region 584 27964 9049562 2113542 445786 924246 162568 88120888 22875660 Kаrdzhali 36 1139 396725 87719 16858 50625 9846 3067852 783282 Pazardzhik 61 4315 1477038 451009 50008 182319 13242 21090052 3214264 Plovdiv 173 9393 3300054 899420 251897 418293 98502 38114096 12758606 Smolyan 275 11528 3356825 568013 103378 215153 25372 22119026 5183130 Haskovo 39 1589 518920 107381 23645 57856 15606 3729862 936378 Table 13: Accommodation establishments by statistical zones, regions and districts in 2014– Source: National Statistical Institute (NSI)

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Tourism and Employment According to World trade tourism council , tourism in Bulgaria provides a relatively high employment of workforce. In 2013 the sector directly supported 100.100 jobs (3.4% of total employment). This is expected to rise by 4.3% in 2014 and fall by 0.4% to 100.000 jobs in 2024. In 2013, the total contribution of Travel & Tourism to employment, including jobs indirectly supported by the industry, was 12.2% of total employment (356.000 jobs). This is expected to rise by 3.0% in 2014 to 366.500 jobs and fall by 0.9% to 337.000 jobs in 2024 (11.4% of total). However, the employment is extremely seasonal due to the tourism conditions of the country.

Figure 6: Source: World trade tourism council, 2014

Data deriving from the National Social Security Institute (NSSI) shows that in 2012 the largest share of employees was in restaurants and catering (39%), followed by employees in bars (26%) and those working in hotels and similar accommodation (22%). Adding these activities the 87% of all workers in the tourism sector are covered. The tour operator and agency activities account for only 4% of all employees in the sector which are 127.347 people. In 2012, there was a decrease of 6% in the total number of employees in the sector, returning almost to the level of 2010. Gender structure shows that in Bulgaria the tourism industry is generally dominated by women (64%), as the most balanced gender presence was observed in the age group 25-34. The share of women in Bulgaria is considerably higher than in Europe (EU -27), where women represent on average the 55% of the total number employed in the sector "Tourism". The Bulgarian Tourist Chamber reports, that the employees in the tourism industry lack a proper qualification. In the conditions of high level of unemployment, which continues to grow, more people are hired for seasonal work without employment contracts. Jobs with the biggest demand are for cooks, bartenders, managers and unskilled workers. According to the OECD report for 2012 one of the main characteristics of the sector is the lack of adequate skills for the labour market and one of the challenges for employers will be to develop strategies that enable them to remain competitive with less, but better trained and prepared staff. On the one hand, this is due to the ongoing global economic and financial crisis, on the other hand, changes in consumer behaviour, lifestyle, general aging of the population mainly in Europe, access to information and new ICT and others. As for the enterprises of the sector it is clear from the following table by NSSI, that the total number of enterprises remained practically unchanged. Subsectors that had significant decrease are the food & beverage sector and the “other activities related to reservations and travel” sector. European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

CEA- Sector Number of Number of Number of Number of Number of 2008 companies Companies Companies Companies Companies 2008 2009 2010 2011 2012

5510 Hotels and similar accommodation 1854 1761 1679 1816 1929 5520 Holiday and other short-term 174 155 14 3 178 172 accommodation 5530 Campsites, caravans and camping- 38 41 16 11 cars 44 5590 Other accommodation 142 127 122 148 158 5610 Restaurants and fast service 6272 5640 5101 6094 6050 5621 Preparation and delivery of food on 119 109 96 79 70 a specific issue 5629 Other activities for the preparation 425 383 355 365 384 and delivery of food 5630 Activity of pubs 10160 8896 7948 8080 7595 7911 Travel agency activities 357 342 332 292 295 7912 Tour operator 623 602 573 719 747 7990 Other activities related to travel 256 259 263 182 153 and reservations Total 20420 18,318 16653 17,969 1756 Table 14: Number of companies active in the Tourism sector – Source NSSI Trivago research According to research conducted by booking search engine Trivago, average daily rates offered by hotels and other travel accommodation establishments in Bulgaria decreased in 2013 and the country continued to be the cheapest destination in Europe for the second consecutive year. As a result, demand and occupancy rates increased in 2013 and the number of both inbound and domestic tourists increased in comparison with 2012. The price decrease in 2013 was mainly initiated by hotels in summer resorts on the Black Sea coast in an attempt to attract larger groups of holiday-makers. The strong growth rate of tourism flows inbound in Bulgaria in 2013 was mainly due to the increased number of visitors from the neighbouring countries Romania and Greece with arrivals from each country surpassing a million trips for the first time in the review period. In addition, the combined number of trips made from all five of Bulgaria’s neighbouring countries passed three million in 2013. Tourists from the neighbouring countries benefit from the close proximity of Bulgarian resorts and low transportation costs of reaching their holiday destinations. Residents of Bulgaria mainly use only online booking airplane tickets, hence the overall online travel sales in Bulgaria remain limited. Most of the airlines that are operating in Bulgaria have well-developed online booking systems and a considerable proportion of leisure and business travellers consider easy to book their flights over the internet. Another significant proportion of online travel sales are preformed via tour operators, as many outbound travellers express their willingness to use the services of such agencies to plan their holidays. Online sales of travel accommodation, car rental and transport in general are, however, very limited, because the majority of operators in these areas either do not have online booking systems implemented or prefer bookings over the telephone or in person. Conclusions The analysis of the sector in Bulgaria for the year 2012 shows that: • Turnover increased by 10,6% comparing to previous year and production by 9%, reaching the levels existing before financial crisis European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

• In 2012 the rise of foreign tourists visiting Bulgaria is 34%, which is the average for Europe. The total number of tourists is 6.541 million. The review of arrivals of foreign tourists in the period of 2000-2012 shows a relatively stable growth trend • The number of enterprises in the sector is 17.564 and has decreased by 2,3% compared to the previous year. As for their size, 91,57% of them are classified as SMEs, with a large share of micro-enterprises (41,76%) • Employees in the sector reached 127 thousand people, a drop of 5,2% over 2011. The average number of employees per enterprise is 5,5 people, which is above the average for the service sector (3,3 people) • The adaptation of new ICT products, services and applications, and their effective use by tourism enterprises is regarded as a major opportunity for them to improve their competitiveness by reducing costs, differentiating products, improving their services or management • Bulgaria should focus and promote alternative forms of tourism in order to mitigate the seasonality effects (adventure, cultural, MICE, gastronomic-wine etc). • New jobs in the sector are directly related to changes in the sector very strongly influenced by the development of new ICT products & services and specialisation, individualisation, diversification, increased demands for safety & security and the principles of sustainable development and environmental responsibility . • The World Travel and Tourism Council (WTTC) predicted that by 2017, Bulgaria will be attracting over 16 million visitors per year – twice the number from 2009. This prediction is an indicator for the large investment possibilities not only within traditional areas like beach hotels or ski resorts, but also within facilities like aqua parks and golf courses. Additionally, exploration of other holiday types may prove successful as there is a promising market for archaeological tourism, ecotourism and health tourism. • Tourist arrivals towards Black Sea coast increased intensively during the last five years and are expected to grow also in the next future. The existing facilities though in some areas are not able to meet this additional demand. Although tourism growth and coastal development give rise to a number of economic benefits, they could also lead to loss of habitat, green space and biodiversity, especially in case of new constructed tourist sites, some of which are in very low populated coastal regions or neighbouring protected territories. Policymakers and coastal managers are now facing the challenging task of finding a balance between benefits of tourism growth and mitigation of its effects on the coastal environment.

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

c) Cross – border area c.1 Central Macedonia The Region of Central Macedonia (RCM) is the largest in area and second largest in population and economic activity of the thirteen Greek regions, occupying the north central area and combining bordering characteristics with centrality ones. It occupies an important geographical position in Southeast Europe and its main transport networks have transnational importance. It consists of all forms of transport infrastructure for local, inter-regional, inter- regional and international transport of passengers and goods. Among others are the two motorways (PATHE, Egnatia Odos) with Egnatia’s vertical axes to the bordering countries, the PATHE railway passing through the area, the port of Thessaloniki and the Macedonia Airport which are the second largest in Greece respectively. The region has a rich and diverse natural and cultural heritage including mythological areas (e.g mountain Olympus), the ancient cities of the Macedonian state, monuments of the Roman, Byzantine and modern era, important religious monuments, urban and rural architectural heritage, scenic landscapes varying from high mountains, National Parks and forests to lakes, rivers and beautiful beaches, rich gastronomy and traditional cultural events like the Naoussa Carnival. The RCM constitutes a significant tourist destination in Greece and as shown in table of previous section, it is the fourth best ranking in night staying among thirteen regions of Greece for the year 2014, showing an impressive improvement since it was ranking sixth in 2010. There is a significant increase of visitors from Poland (125%), Turkey (19%), Serbia and Montenegro (50%), Rumania (32%), Bulgaria (30%) and Albania (27%). According to latest data from the Hellenic Chamber of Hotels, in the year 2013 the region occupied the 11% of the total amount of hotel beds existing in Greece. The prefecture of Halkidiki holds the majority of the tourist accommodation in the region and displays the highest average occupancy rate, which is higher than the relevant country rate, and is the only prefecture in Northern Greece showing stable occupancy above 50 % for the past decade. Meanwhile, in its latest study the Egnatia Motorway Observatory showed that for the period 2004 – 2013 the first ranking in arrivals is the Thessaloniki prefecture followed by Halkidiki. Concerning night staying, it is the other way around as Halkidiki holds the first place along with the highest change in the specific period (113,9 %). European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

Changes

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 -- 2009- 2009 2013 Country Total 52.554.021 55.264.093 57.796.551 65.420.236 65.624.563 66.022.270 66.800.371 70.847.874 64.384.429 71.491.458 25,63% 8,28%

REGION OF CENTRAL MACEDONIA

Imathia 89.978 101.193 125.832 112.901 122.222 116.954 108.789 105.461 90.391 70.049 29,98% -40,11%

Thessaloniki 1.336.392 1.632.381 1.721.490 1.969.935 1.963.846 2.035.864 1.872.506 1.970.545 2.002.431 2.068.736 52,34% 1,61%

Κilkis 32.812 26.501 25.875 22.685 26.678 37.269 29.383 29.196 22.594 25.583 13,58% -31,36%

Pella 65.347 68.469 66.662 85.598 107.138 114.717 106.679 110.250 86.101 83.104 75,55% -27,56%

Pieria 746.306 698.364 689.363 867.638 1.088.410 991.083 1.044.249 1.017.062 860.630 1.053.903 32,80% 6,34%

Serres 108.856 103.461 105.525 126.433 155.979 172.025 155.160 160.913 146.451 150.195 58,03% -12,69%

Halkidiki 2.095.403 2.616.454 3.231.444 3.968.103 4.427.263 4.423.881 4.398.890 4.677.114 4.498.825 4.549.088 111,12% 2,83%

Table 15: Nights spent in all accommodation types per prefecture (2004-2013)

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation”

However, the Region has not developed significantly the sector towards a high quality and diversified tourism product. There is a strong seasonal and uneven touristic development, with dominating areas of Halkidiki and Pieria for summer coastal tourism and the city of Thessaloniki mainly for attending exhibitions and conferences. Additionally, the region displays significant environmental problems mainly related to pollution of water discharges (sea, rivers, lakes, aquifers) and urban air pollution, particularly in the metropolitan area of Thessaloniki. Touristic activities generate great quantities of liquid and solid waste overloading the often inadequate infrastructure and creating problems to the quality of water resources. These activities also require great amount of water, especially for swimming pools, having as a result the excessive use of groundwater. Also, overexploitation in the coastal areas threatens to deteriorate the environment on which tourism based its development, transforming the landscape with the uncontrolled construction of hotels and summer houses, while it has modified the society of these areas and has banished traditional economic activities as agriculture, farming and fishery.

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From consultation procedures and various texts formulated in recent past for tourism in the region, the following essential development needs have been identified: - Highlighting, with combinational means, the wide variety of tourism destinations of the RCM and exploiting the comparative advantages in order to establish itself as a single tourism destination of twelve months duration. - Ensuring the quality improvement of the tourism sector and strengthening links with other productive sectors of the region (e.g. agrofood). - Diversification of the tourism product by enhancing the urban (city breaks) and alternative forms of tourism and also cruise tourism. - Enhancement of entrepreneurship and investment in tourism, greater use of ICT. - Penetration in emerging markets. - Preventing risks to the environment deriving from touristic activities. - Dissemination of touristic development in all areas of the region.

Over the past years, studies and reports proposing Directions for the National Strategic Plan have described the general target for Central Macedonia as: the promotion of a sustainable, quality and competitive tourism, while highlighting and managing with sustainability the natural, cultural and touristic resources. The Regional Authorities of C. Macedonia, setting the context of the RIS3 strategy on March 2014, have determined the following targets concerning the tourism sector: o Coordination of stakeholders and businesses on issues of Marketing and providing total regional and / or local product o Improvement of competitiveness and increase of the surplus value of total tourism product through networking and new technologies o Improvement of the environmental footprint through the use of energy saving technologies, water saving, intelligent transport systems, "green" materials, etc.

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o Strengthening the collaborative innovation and interconnection of the sector with other areas of regional interest, (culture, health, sports, food and agriculture, local crafts, transport, education, retail etc.)

The Region has allocated funds through the new NSRF 2014-2020 for the development and utilisation of basic infrastructure aiming to promote other forms of tourism, besides the “sun & sea” model, that will expand the touristic period throughout the whole year. Archaeological tourism is a very good example as in this region all phases of Hellenic civilisation are represented. Along with the well known centres of Macedonian State (Pella, Vergina and Dion) there are places and monuments that are not enough promoted as Petralona Cave, Aristotle’s School, Chrisi castle, ancient city of Mendi and many more. Also, new entries highlight the historical map every now and then with the most recent and worldwide famous, the Amphipolis Tomb which excavation the regional authorities have supported financially, investing in its future touristic exploitation. Medical or Health tourism is another internationally rising trend and therefore the Medical Association of Thessaloniki (MATh) established in 2013 the “Health Tourism Council”, a non- profit enterprise with main shareholder the MATh and major shareholders among others the AHEPA Hospital and the Orthodontic Society of Northern Greece. As part of its actions, it explores what happens in the global environment and provides advice to those who wish to attract citizens of foreign countries for health services they provide. Health services in Greece are cheaper than Europe and North America and are much better than the ones provided in our neighbouring Balkan countries. The Council also acts for the promotion and exploitation of the potentials existing in the area of Central Macedonia, resulting to the attraction of European and neighbouring countries citizens who are seeking for medical services. Meanwhile, the Region is preparing an immense market penetration for 2015 launching the new brand name “Very Macedonia” through its participation in the largest international tourism fairs and exhibitions.

Image 1: The new website for promoting the region with the new brand name

Thessaloniki Thessaloniki, the capital of the region, attracts a great number of tourists and according to the latest report of the “Egnatia Odos Observatory”, its area is the first in tourist arrivals in Northern Greece for the period 2004-2013. More specifically, international arrivals showed a

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” rise of 15% in the period January to September 2014 comparing to the same period of 2013.Taking into account data from other relevant reports the night staying in Thessaloniki increased about 55% in the period 2004-2013 and the 45% of foreign visitors after 2010 is Cypriots, Turkish, Russians, Serbs and Rumanians. The city has a high quality and low cost hosting infrastructure, has the air and road access, but has not the necessary urban transport infrastructure and strategic sea connections. However, Thessaloniki has much potential for being a “city break” top destination, as it combines history, culture, architectural character particularly in relation to the sea element, gastronomic and wine culture, shopping, entertainment and easy access. Additionally, the city can specify its touristic profile even more as it has the appropriate infrastructure for the development of conference and exhibition tourism. In a study of the National Agency for the Organisation of Exhibitions, Congresses and Cultural Events (HELEXPO) it is presented that Exhibitions create a multiplier for turnover that is around 10. The same study shows that a typical international has the following features: • Around 600 participants • Duration of 3 days • 80% of participants are accompanied • 100% of them will visit the same destination for another purpose in the future • 80% of total expenses goes to accommodation and the commercial businesses of the area

Thessaloniki can also have a big share of the wedding tourism, as not all couples choose the islands for this event. Santorini, of course, is the leader in this concept but Athens also attracts couples from all over the world for their wedding. Thessaloniki, due to the big number of monuments but mainly because of the new architectural upgrading of the sea front can be a big competitor to Athens and attract a lot of foreign couples. Finally, the magazine Foreign Direct Investments (FDI) of the Financial Times highlighted Thessaloniki as the best European city of the future in the annual international contest «European Cities of the Future 2014», first among 468 areas in the category “Human Capital and Lifestyle”.

Image 2:Thessaloniki – The new sea front in night c.2 East Macedonia & Thrace A key feature of the region is its border position, from the country’s and also the EU’s point of

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” view, which until recently imposed serious restrictions on the northward and eastward mobility. Over the last decade, REMTh transformed from a "border region" to "Country portal” and “EU portal”. Major factors contributing to this fact is the completion of the Egnatia Motorway and its Vertical Axes and the enlargement of the EU to neighbouring countries (Bulgaria, Romania). However, throughout the period 2000-2010 the GDP per capita of REMTh has failed to exceed 75% of the EU average, despite the small but transient improvement, from 63% in 2000 to 70% in 2009, which was probably due to the fall of the EU average caused by the accession of states with a lower level of development, rather than a real growth of the regional economy. According to the latest figures, the p.c. GDP of the region in 2011 was 13.100€ and equivalent with the 57% of the average EU-28. The strong points of the region are: undiscovered natural beauties, unspoiled environment, miles of unspoiled beaches with crystal clear water, existence of the biggest wetland formation in Greece of international ecological importance (5 out of 7 Ramsar treaties of Greece are allocated in the region), diversity of wild life, strong cultural heritage including monuments and sites from prehistoric to modern times, gastronomic features, traditional events like the Xanthi Carnival and many other elements.

However, as data in previous section shows, the overnight staying in the region is the sixth lowest among thirteen (13) regions in the country. Tourism is characterized by seasonality features and as the table below presents, it hasn’t shown a stable growth as in other regions.

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Table 16: Total nights staying of domestic & foreign tourists by prefecture of the region, Source: Intermediary Managing Authority of REMTh

Tourism proves to be very important for the local economy due to its high value chain. The calculation model of the total contribution of tourism, proposed by IOBE, estimates that the contribution to the regional GDP is at 505 million € and the total employment at 10.700 workers in 2011. These data in conjunction with the recent (2013 and 2014) upward trend in international arrivals in the region make tourism an emerging sector of the local economy with much room for improvement. In particular, the tourism sector in REMTh is strongly characterised by the need to design unified touristic "destinations" with features satisfying respective tourist groups, while on the supply side it is distinguished by relatively low standards and spatial / seasonal imbalance (saturation in Thassos island and coastal area of Kavala, and shortage of supply in mainland / high demand during the summer months). There is also additional need for special tourism infrastructure facilities (marinas, convention centres, spas) and focused opportunities for providing “alternative” or special tourism that despite the diversity, the great biodiversity and the high degree of "naturalness" of the environment and cultural wealth of the region have not be developed to date. Concerning the sectors tourism & culture specifically, the strategy of REMTh aims at transforming the region into “tourist destination of excellence” thus improving by 20% the key performance indicators, by taking advantage of the emerging markets (including Russia and the Balkans) and investing in dynamic SMEs. More specifically the goals are: ° Expansion of the tourism product through organisational and promotional innovative activities including: o Creation of a single system of organising, operating and managing the integration of products of natural and cultural environment, agro-food and crafts in the tourism – culture network of the region o Networking of the tourism industry with sectors that directly affect the tourism product (catering, transport, trade, processing), and o Strengthening of tourism networks and integrated tourism programmes / destinations

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° Attract or support investments in service providing enterprises, serving embedded or emerging sectors of the regional economy as special forms of tourism : o Cultural tourism o Eco-tourism o Medical tourism o Religious tourism o Conference tourism o Winter tourism o Gastronomy tourism c.3. South-West Planning Region (District of Blagoevgrad) Blagoevgrad district is situated in the southwestern part of Bulgaria and covers the region of Pirin Macedonia. It is bounded by Kyustendil, Sofia, Pazardzhik and Smolyan regions and it reaches out to the state border with Greece in the south and to the FYROM in the west. Its location favours the development of friendly trans-border relations. An international highway and the Belgrade-Sofia-Athens railroad pass through the district. Blagoevgrad is home to two universities, the South-West University "Neofit Rilski" and the American University in Bulgaria. The beautiful and wild nature of the region kept untouched in the national parks and reserves is considered to be one of the greatest treasures of the region. The Pirin National Park is of worldwide importance and is on the UNESCO List of World Cultural Heritage. The numerous mineral springs (40 % of all mineral springs in Bulgaria), the beautiful nature and the rich cultural heritage determine the successful development of winter sports and resorts as well as eco-tourism and cultural tourism. The region has had eventful history, traces of which can be found in the archeological, architectural and ethnological heritage. There are remains from Thracian mounds and antique settlements. The mountainous roads had been once guarded by majestic medieval fortresses. Exquisite examples of architecture from the National Revival period created by gifted masters can be enjoyed in the preserved villages of Kovachevitza, Pletena, Dolen as well as in the towns of Bansko and Melnik. Bansko is one of the biggest and most attractive mountain resorts in Bulgaria and during the last years it has been developed as the best and most modern ski resort. It is situated at the foot of Pirin Mountain, 160 km away from Sofia. It is a small cosy town with many luxury and small hotels. This is the smallest town in Bulgaria but it so attractive that the number of the visitors per day often exceeds the number of the 230 native people. Melnik is famous of its old – time houses with remarkable architecture, incredible nature and above all of the strong wines of fine vintage. The town is declared to be a cultural and historical reserve and a museum town. The town is also associated with the impressive natural sand pyramids in various forms, resembling giant mushrooms. The town has also been famous for producing a strong wine since at least 1346. The local wine from the varietal Broad Leave Melnik Vine was reportedly a favourite of Winston Churchill’s. Lately, the area of Melnik is enjoying a revival of vine growing and wine making. Several new, modern wineries have been built and operate (Villa Melnik Winery, Sintika Winery, Orbelus, etc., producing high quality wine from local and international varieties.

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c.4. South Central Planning Region (Districts of Smolyan, Kardjali and Haskovo) Smolyan covers the eastern part of the Rhodope Mountains with venerable coniferous forests and pastures. The main road passing through the area is the Plovdiv–Smolyan road. The nature of the Rhodope Mountains is the perfect place for winter and summer tourism, rural tourism, hunting and ecotourism. Pamporovo is a popular ski resort in Smolyan district, one of the best-known in Southeastern Europe. It is set amongst magnificent pine forests and is

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” primarily visited during the winter for skiing and snowboarding. It is a popular tourist place also in summer. The hub of Pamporovo comprises a number of excellent hotels and bars. It is a family-friendly resort and suited for complete beginners and intermediates Most of the populated areas in Smolyan district are tourist centers. In the pretty villages one can taste traditional cuisine of the Rhodopes, hear and see the famous dances and songs. There are a lot of rivers that cross the area and mineral water springs. The beautiful Smolyan lakes are located in the Smolyan kettle.

Kardzhali is a poor, agricultural (primarily tobacco-growing) region, rich in ores and minerals. The landscape is dominated by steep slopes and hilly areas. The region has more than 50 caves, natural phenomena and picturesque, deep and beautiful valleys. The nature reserves have preserved ancient forests of European black pine and species of the unique evergreen Thracian oak. The region provides excellent conditions for the development of cultural tourism and ecotourism. The artificial lakes of Kardzhali and Studen Kladenets provide good conditions for aquatic sports and recreation activities. One of the main natural attractions is The Stone Mushrooms Natural Sight, another tourist attraction located near the village of Beli Plast. The Stone Mushrooms are 3 metres high and have the harmonious forms of natural mushrooms. They all have pink spots, pure blocks and greenish cowls and are chiseled in riolythic volcano tuffs.

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The territory of Haskovo region includes the south-western ridges of the Sakar Mountains and the northernmost spurs of the eastern Rhodopes Mountain including few rivers. There are hot mineral water springs in the resorts of Mineralni Bani and Merichlery, in Simeonovgrad and the village of Dolno Botevo. There are favourable conditions for the development of cultural, rural and ecotourism. The biggest statue in the world of Virgin Mary holding the child Jesus in her hands stands on the hill of Yamacha in Haskovo. It is one of the symbols of the city. The Statue is 14 m high and is placed on 17 m foundation for which reason it was included in Guinness World Records. The statue was designed by group of sculptors headed by Petyo Aleksandrov and Nikola Stoyanov. The town attracts visitors with its sights and convenient location. The well-preserved ethnographic heritage and unique combination of natural and cultural resources complement the opportunities for tourism that the region of Haskovo offers to its guests. It has become a successful developing tourist destination due to its rich cultural and historical heritage, favourable geographic position and dynamic modern development. This is acknowledged by the numerous prizes awarded at national and international tourist exhibitions, as well as by successfully developed partnerships with towns in the United Kingdom, Austria, Spain, Portugal, Greece, Turkey, Russia, the USA and many others.

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3.5. Opportunities for young entrepreneurship and start ups in the sector In every sector the opportunities for innovation and improvement of existing services are numberless and the same applies for travel & tourism. During the last years a great number of applications, platforms, tools and services have been developed globally, meeting needs which could not be satisfied without the emergence of new technologies. Alongside, the upward trends of alternative or experiential tourism, sharing economy and personalisation of travel services triggered the businesses and a lot of start –ups with entrepreneurial ideas. Recently, the Greek start-up ecosystem has grown tremendously. Today start-up hubs are all over Greece, beyond Athens and Thessaloniki, the growth rate of new technological enterprises in different markets is large, and year-by-year the start-ups ecosystem matures more and more. The interest in Greece is that due to the small internal market most new start- up businesses necessarily directed their businesses abroad. A long road is ahead but the Greek start-ups have made a good start. In this section, recent successful case studies of entrepreneurial ideas regarding to tourism are presented, developed by Greek enterprises and start – ups, giving just few examples of opportunities waiting to be exploited. Athletic - Sports Tourism Spetses mini Marathon is an international annual sporting event comprising a 5 km, a 10 km and a 25 km run. It is the leading and most comprehensive multi-purpose sports tourism event organised in Greece by Communication Lab enterprise. The mini marathon is held every October since 2011. The running races are the main events in a three-day series of sports such as the swimming races of 3 km & 5 km as well as the children's 1000m run, the 150m swim race and the 500m run for children 0–5 years old that is called "My 1st Spetses mini Marathon". The swimming race started in 2012, with 200 athletes. Today, it is the largest in Europe with almost 1000 entries. The oldest athlete who has swum the distance Costa-Spetses is 84 years old! Athletes have come from 17 different countries, including Qatar, Australia and America. Today the Spetses mini Marathon is considered the number one sporting event in Greece outside urban centres, a holding station for sports tourism and the greatest swimming race in Europe and in the Balkans in the open sea.

Spetses mini Marathon has become a prestigious athletic event with an international

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” recognition and interest. The organisation has been nominated for several awards among significant and meritorious organisations and it has been named as one of ten “Ruban d’Honneur” recipients for The Chairman's Selection Category in the 2014/15 European Business Awards. Furthermore, it is the only athletic enterprise that participates in this European institution. In 2014, a judging committee composed by distinct members of the tourism industry awarded Spetses mini Marathon for its significant contribution at Sports Tourism category of the 2014 Greek Tourism Awards. Such distinctions have reinforced the status of the event that is now considered to be a reference point and a successful case study in the fields of sports and tourism. Spetses mini Marathon has become a prestigious athletic event with an international recognition and interest. The organisation has been nominated for several awards among significant and meritorious organisations and it has been named as one of ten “Ruban d’Honneur” recipients for The Chairman's Selection Category in the 2014/15 European Business Awards. Furthermore, it is the only athletic enterprise that participates in this European institution. In 2014, a judging committee composed by distinct members of the tourism industry awarded Spetses mini Marathon for its significant contribution at Sports Tourism category of the 2014 Greek Tourism Awards. Such distinctions have reinforced the status of the event that is now considered to be a reference point and a successful case study in the fields of sports and tourism. The figures are impressive. But equally impressive is the fact that the event is held annually in the first half of October, essentially elongating the tourist season both in the island, of which traditionally the season ended in September, and in the surrounding areas. The view of both the island and the country, thanks to the publications that received the Spetses mini Marathon, was widespread and entirely positive. The publications in Greece and abroad amounted to more than 200, multiplying the benefits in terms of the image of the place as an ideal destination for sports tourism. It is noteworthy that since the first event in 2011, over 70% of the participants return every year for the event and moreover, half of the participants return to the island the same year for holidays. “But beyond the obvious benefits, which are measurable, for me the very important is the long-term benefits to the society“, says Chief Executive of Spetses mini Marathon, Mrs. Marina-Lyda Coutarelli, CEO of Communication Lab.

Gastronomy tourism Nowadays, the role of food in the developed societies has been evolved from a basic need to entertainment. Food is a holistic gastronomic experience that is defined not only of what we eat but where we eat it, which is the history behind, who prepared it, how it was prepared and so on. Gastronomy is addressed to a wide range of consumers seeking for a deeper knowledge of what they eat, creating thus a new market eager for new gastronomic

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” experiences and willing to spend money and time for them. Gastronomy tourism has a significant advantage, as the creation of experiences requires low investment since enterprises can use their own or other professionals’ infrastructure, equipment and human resources. The basic categories of activities that can be developed are the following: - Adjustment of menus of restaurants in the local cuisine and using local products according to season - Organisation of cooking lessons by well known chefs or local cooks in a cooking demonstration form or an interactive one with customer’s participation - Local products tasting, either by thematic category or by combination - Demonstration of the production process of local products (e.g. honey, cheese, olive oil, wine) in their production unit - Organisation of trips combining various gastronomic elements and cultural/historical ones.

There are a lot of enterprises dealing with gastronomic activities in Greece, mostly tour operators and local travel agencies organising thematic tours or trips accompanied or not by cooking lessons, wineries developing their own demonstrating and wine tasting activities and individual chefs or cooks organising their own cooking lessons. “Fans of gastronomy tourism are Americans and Canadians, but there are also a lot of bookings from Indonesia and India”, states Mr. Lefteris Eleftheriadis, Head of “Places and Flavours” company that organises gastronomic tours in many places around Greece through the www.culinaryexperiences.gr website. “We do not provide plain knowledge, but there is an interaction, as we implement cooking, food photography seminars and many more”, Mr. Eleftheriadis denoted. The following list shows the websites of some characteristic examples of these: o http://www.natural-greece.gr/en/gastronomy o http://www.culinaryadventuresgreece.com/ o http://www.culinaryexperiences.gr/ o http://www.aegeanflavours.com/ o http://www.athenswalkingtours.gr/Athens-Food-Tour o http://www.cookwitheleni.com/classes.htm o http://www.cookinglessonsgreece.com/ o http://www.diktynna-travel.gr/page.aspx?id=359 o http://www.winetoursgreece.com/ o http://www.santoriniwinetour.com/ o http://www.keytours.gr/tours/athens/wine_tasting_ancient_corinth_day_tri p_from_athens-25.html o http://trigiro.com/food-tasting-and-cooking-lesson-tours-in-greece/

Apart from the above there are two enterprises that have been distinguished by their activities: Selene restaurant in Santorini island received the Gold Award as a Gastronomic Destination at Greek Tourism Awards 2015. Selene, http://www.selene.gr/ , promotes the Aegean cuisine for 30 years now and organises well known Cooking and Tasting Classes. In 2013, it was denoted as one of the 101 best restaurants in Europe according to Daily Meal’s list.

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Agreco is an initiative by the founder of Grecotel, one of the biggest hotel chains in Greece, http://www.grecotel.com/crete/agreco/welcome_1598.htm . It is a traditional farm reviving centuries-old organic farming practices in a unique expression of Greek “philoxenia”, or hospitality. This privately owned 40.000-sq estate in Rethymno, Crete is an innovative display of environmentally friendly methods for traditional and modern cultivation and breeding. It received the Silver Award as an Innovative Restaurant Concept at Greek Tourism Awards 2014.The estate, a replica of 17th century lodge, features a traditional olive press, a flour water mill, a wine press and a giant vat for grape crushing. The complex includes a church, a village square and store and a mini-zoo. Guests can experience traditional Cretan life by participating in farm activities, from baking bread and making cheese to pressing grapes or olives and crushing wheat at the antique stone flour mill. Farm tours offered on weekday evenings and guide guests around the estate. Everything grown on the farm ends up in the kitchen, where Agreco’s chef prepares the traditional Cretan dishes.

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Applications Incrediblue.com Can a start-up based in Volos, Greece become very quickly known, gather high funding and manage to make a real difference in its industry? The answer in terms of Incrediblue.com, a platform for yacht/boat hire, with a lifetime of just more than two years, is Yes. Incrediblue is a marketplace for boat rentals. Starting with a fleet of yachts and sailing boats in Greece and across the Mediterranean, Incrediblue is becoming the destination of choice for booking a boating experience online. For the first time in the industry, guests are able to directly connect to boat owners, review boat profiles with real photos and book online in a simple and secure way. Through this platform boat owners can register their boat with every detail and to offer them for rental. From their side, travellers can seek and rent direct sailing or motorboat of their choice in a very simple way. In addition, the traveller can choose himself also the captain of the vessel. Incrediblue is free for guests, while boat owners' charges are limited to a commission per booking that remains significantly lower compared to the broker industry standard. Smooth sailing is the key. With the help of the European Commission’s Jeremie Open Fund II and the Greek Start-up ecosystem, the start-up has managed to achieve incredible success, with more than 3.000 vessels in 100 popular areas of Europe, a figure which is increasing daily. The company also operates in countries such as USA, Australia and South Africa and is already setting its sights on new destinations. Incrediblue CEO Antonios Fiorakis encourages other young people to consider the path of ICT or web entrepreneurship, as it is possible to create a start-up with the potential for growth at a relatively low cost. And always remember, “your people, your team are the most important asset”, as he denotes. So, even if it is your first vacation with a boat, then through Incrediblue you can hire the ideal sailing or motor yacht and enjoy a unique experience in the Greek seas and not only.

Can innovative businesses like Incrediblue assist the further development of tourism in Greece? The answer is yes and that's why the last years there has been a global trend for non- hotel reservations experience as boat holidays offered by Incrediblue in Greece but also in other popular destinations. Unlike traditional tourist products, which usually offer stay or/and transfer to a destination, the Incrediblue boat vacations combine seamlessly stay and move and not just for one but also for many destinations, as within a week one can visit many islands or coastal resorts.

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Incrediblue focus on expanding their fleet mostly in the Mediterranean, while at the same time, important moves for the company's growth in countries such as United Kingdom have been done. With these actions Incrediblue aims to offer more and more vessels to meet the demand of the greater part of European population. In 2015 new innovative products of Incrediblue will be presented that make booking a holiday with boat even easier.

Dopios. com “dopios”, a Greek start-up founded about three years ago by ensuring a funding of 120.000 euros from Openfund, immediately starts its dynamic operation in most major tourist destinations/cities abroad. dopios is a platform/community that brings together locals with tourists who want to visit a city and to come into contact with local secrets, flavours and unique travel experiences that are not usually included in travel guides. According to the “dopios.com” manifesto, the travel experience should be much more authentic and unique for each person. “Enough with the boring and copy-paste travels. Enough with the mediocre and rigid tour guide experiences. Enough with the inability to feel the true side of a location”, say the people of dopios. The best travel stories come from trips where you knew that special someone who opened your eyes and took you off the beaten path. The natives - the locals of the worldwide travel destinations are written in the platform, and for a relative small fee, unlock the local secrets of their city to travellers. Every traveller searches dopios.com database of locals to find the proper experience package just for him/her and sees the profiles of local people on the platform, which in the sense of "community" are evaluated by its members and chosen based on what they can offer to individual traveller. Each local brings her/his own expertise and personality to the table, whatever the tourist’s travel style is. Once the traveller has narrowed the candidates down to a couple of options – it’s time to reach out and find his/her best match. For example if you are a lover of ancient Greece, someone native in Athens can offer you a tour of the “hot “ archaeological places in the city, while if you're fond of nightlife you can ask a local about ... frantically bars in San Francisco.

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dopios started by Greeks who resided in San Francisco but came to Greece to start their company. Alexander Trimis, founder of dopios says characteristically for this option, in an article published earlier in TechCrunch: "In Greece, in the midst of a crisis, you can find a number of advantages such as better access to talented people, cheaper operating costs for your business and a strong desire by the world to see a positive change in what is happening around him." It should be noted that the dopios team has launched its operation in 23 places of Greece (in cities and islands such as Athens, Chania, Corfu, Edessa, Milos, Thessaloniki etc.). In less than a year it had opened its wings in San Francisco and in Istanbul, while the amount of funding received from the Openfund will go mainly for the international expansion of more foreign destinations. In the list of destinations included countries and cities that are international tourist attractions such as Argentina (Buenos Aires), Costa Rica (Santa Teresa), France (Paris), Germany (Berlin), Italy (Florence, Ravenna, Rome), Romania (Bucharest), Spain (Barcelona, Madrid, Valencia), Switzerland (Geneva, Zurich), Turkey (Istanbul), England (London) and the USA (San Francisco, Austin, Santa Barbara).

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4. Analysis of the Energy Sector 4.1: EU policies on Energy Efficiency 4.1.1 The Importance of Energy Efficiency Despite huge investments in renewable sources of energy production, millions of tons of fossil fuel are burnt each year in order to generate electricity. Due to existing inefficiencies – from the point where this electrical energy is generated, all the way to the point where it is consumed, needless amounts of carbon dioxide are contributing to a rise in global temperatures.

Energy efficiency slows energy demand growth and reduces international energy prices. Without the cumulative impact of energy efficiency measures over the projection horizon, oil demand in 2040 would be 23 mb/d (or 22%) higher, gas demand 940 bcm (or 17%) and coal demand 920 Mtce (or 15%) higher. Beyond cutting energy use, energy efficiency lowers energy bills, improves trade balances and cuts CO 2 emissions. Improved energy efficiency compared with today reduces oil and gas import bills for the five largest energy-importing regions by almost $1 trillion in 2040.

The following map shows the extreme differentiation among world countries, concerning the energy intensity, which is a measure of the energy efficiency of a nation's economy. It is calculated as units of energy per unit of GDP. There is a great gap between some African countries as Chad (194,88 67 ), Mali (514,55), Rwanda (597,32), Ethiopia (933,53), Niger (994,53) and Uganda (1047,1) comparing to some of the most inefficient countries as Tajikistan (12,338.15), Russia (14,282.59), Korea, North (14,355.05), Saudi Arabia (15,007.27), United Arab Emirates (16,471.03), Iceland (19,309.57), Bahrain (23,640.56) and Uzbekistan (26,525.19). Greece has a consumption of 4.729,58 Btus/US$(2005), while Bulgaria has a consumption of 9.375.31 Btus/US$(2005).

Global energy intensity increased 1.35 percent in 2010, reversing a broader trend of decline over the last 30 years, according to a new Vital Signs Online article 68 . Energy intensity, has been growing faster than the global economy for the past two years, even though energy intensity overall has declined over the past decade. The article highlights reasons for these changes in emerging economies and industrialized countries, including China and the United States, and predicts that global energy intensity will return to an overall decline over the long term as economies opt for more sustainable development.

Between 1981 and 2010, global energy intensity decreased by about 20.5 percent, or 0.8 percent annually. Experts agree that during this period of decline, most developed countries restructured their economies and energy-intensive heavy industries accounted for a shrinking share of production. It is evident that new technologies have

67 Units as: Btu per Year 2005 U.S. Dollars - Consumption per Dollar of GDP, Btu per Year 2005 U.S. Dollars GDP at Purchasing Power Parities 68 http://www.worldwatch.org/energy-intensity-energy-efficiency-gross-world-product-emerging- economies-infrastructure-development

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Figure 1: Total Energy - Energy Intensity (Btu per Year 2005 U.S. Dollars - Consumption per Dollar of GDP, Btu per Year 2005 U.S. Dollars GDP at Purchasing Power Parities)

Source: http://knoema.com/atlas/topics/Energy/Total-Energy/Energy-Intensity?type=maps Data source : International Energy Statistics, August 2014

Worldwide energy efficiency had been increasing steadily until recently. Between 2004 and 2008, global energy intensity experienced its sharpest decline in 30 years, with an average annual rate of decrease of 1.87 percent. Starting in 2008–09, however, energy intensity rose again, experiencing the first rise in three decades. Increases in economic energy intensity are especially discouraging, even when temporary. While both population and consumption growing worldwide, the capacity of the world's economy to require less energy for each unit of output has been a rare positive trend for the environment. We need to find less energy-intensive ways to put people back to work and improve economic conditions.

Box 1: European energy system in figures 69 Latest data shows that the EU imported 53% of its energy at a cost of around EUR 400 billion, which makes it the largest energy importer in the world. Six Member States depend on a single external supplier for their entire gas imports and therefore remain too vulnerable to supply shocks. It has also been estimated that every additional 1%

69 European Commission COM(2015) 80 final, Energy Union Package, A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, Brussels, 25.2.2015.

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4.1.2 European Union 20/20/2020 Targets for the Reduction of CO 2 Emissions Electricity is the most versatile and widely used form of energy and global demand is continuously rising. However, the generation of electrical energy – on the larger part – relies on fossil fuels. Hence, electricity generation is the largest single source of carbon dioxide emissions today, making a significant contribution to climate change. Faced with the urgency of climate change, the world is directing its efforts towards reversing its effects by reducing carbon dioxide (CO 2) emissions. The first major step toward this direction was made in December 1997 with the Kyoto Protocol whereby 41 countries plus the European Union (then still called the European Community) committed to reduce the emission of gases that contribute to global warming. In force since 2005, the Protocol called for reducing the emission of six greenhouse gases to 5.2% below 1990 levels, during the ‘commitment period’ 2008 – 2012, thus limiting the rise in global average temperature to 2 o Celsius above pre- industrial levels 77 . The Kyoto Protocol allows parties to fulfil their greenhouse gas emission commitments jointly if they wish. In its legislation approving the Protocol, the European Union stated that it and its 15 Member States at the time would make use of this provision to fulfill the EU’s emissions commitment jointly78 .

70 Communication "Energy Efficiency and its contribution to energy security and the 2030 Framework for climate and energy policy", COM(2014)520. 71 European Energy Security Strategy, COM (2014) 330. 72 Commission estimates. The IEA estimates that EUR 1.3 trillion are needed by 2025 in generation, transport and distribution. 73 Calculations of DG Energy based on Platts market reports and IEA data for first half of 2014. 74 Eur'Observeur 2014 report. 75 Compared to a 32% EU share in overall global patents. 76 UNEP-BNEF Global Trends in Renewable Energy Investments 2014. 77 Bohringer, Christoph; Rutherford, Thomas F.; Tol Richard S. J., The EU 20/20/2020 targets: An overview of the EMF22 assessment. ESRI working paper No. 325. 78 European Commission, www.ec.europa.eu/clima/policies/g-gas/Kyoto/index_en.htm

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Furthermore, the European Union adopted the Renewable Energy Directive 2009/28/EC thus establishing a framework for the promotion of renewable energy. At the same time, the EU has adopted equally ambitious targets for the portfolio of energy supply. It aims to meet these targets by a means of a wide range of policy instruments, at the Union, the Member State and even the sub-national level. The targets set by the EU are the following: The 20% reduction of greenhouse gas emissions – thus setting them back to their pre-1990 levels - should be accomplished by the year 2020. About 50% of these emissions – in essence, all energy intensive industries – are to be regulated under the European Trading Scheme (ETS). The target here is a reduction of over 21% below 2005 levels. The second headline target is a 20% penetration of renewable energy by the year 2020 and a 10% share of energy from renewable sources in the transport sector 79 . Individual targets may differ between Member States and, for instance, some Member States are pursuing separate targets on the penetration of renewable energy in specific markets, such as transport and residential heating. To meet those targets, EU has been proved very active by issuing a systematically organised series on legislative initiatives. For example, the EU set an initiative to issue the Renewable Energy Directive that requires the simplification of the administrative regimes faced by renewable energy, together with improvements to the electricity grid, to improve access for electricity from renewable energy. It established a comprehensive sustainability scheme for biofuels and bioliquids with compulsory monitoring and reporting requirements. All biofuels used for compliance with the 10% target and that benefit from national support are required to comply with the scheme. Finally, there is an aspiration shared by all EU Member States to improve energy efficiency by at least 20% between 2005–2020 . Figure 2. Share of Renewables in Gross Final Energy Consumption

Source : Eurostat, http://ec.europa.eu/eurostat/statistics -explained/index.php/Renewable_energy_statistics

79 European Commission, Renewable Energy Progress Report, 2013

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Box 2: The ’20-20-20’ Targets: Three Key EU Objectives for the year 2020

• A 20% reduction in the EU greenhouse gas emissions from 1990 levels • A 20% rise of EU energy consumption produced from renewable sources • A 20% improvement in energy efficiency in the EU

Source: European Commission, www.ec.europa.eu/clima/policies/package/index_en.htm

4.1.3 The European Union Energy Efficiency Directive On 19 May 2010, the European Parliament and the Council of the European Union accepted the Energy Performance of Buildings Directive (EPBD) Directive 2010/31/EU recasting Directive 2002/91/EC. The recast took place after experiencing the implementation of the first EPBD Directive 2002/91/EC in the Member States and following a proposal for a recast of the Energy Performance of Buildings Directive from the Commission in 2008, which was based on a detailed impact assessment. During 2009, the proposal went through the approval process of the European Parliament and Council and a political agreement was achieved 17 November 2009. Today, the new Directive is the main legislative instrument for the reduction of energy consumption in buildings. EU countries were required to transpose the Directive’s provisions into their national laws by 5 June 2014.

Specific measures and policies

New national measures have to ensure major energy savings for consumers and industry alike. For example:

• energy distributors or retail energy sales companies have to achieve 1.5% energy savings per year through the implementation of energy efficiency measures • EU countries can opt to achieve the same level of savings through other means such as improving the efficiency of heating systems, installing double glazed windows or insulating roofs • the public sector in EU countries should purchase energy efficient buildings, products and services • every year, EU governments will carry out energy efficient renovations on at least 3% of the buildings they own and occupy by floor area • empowering energy consumers to better manage consumption. This includes easy and free access to data on consumption through individual metering • national incentives for SMEs to undergo energy audits • large companies will make audits of their energy consumption to help them identify ways to reduce it • monitoring efficiency levels in new energy generation capacities

From 2015 new energy efficiency measures will help Europeans to save 45 euros per

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The EU Energy Efficiency Directive: Buildings sector

The EU recognizes that energy efficiency is one of the most important targets it aims to achieve. Also, energy efficiency rated as a master key to enhance security of energy supply and reduce the emission of Greenhouse Gases. Buildings play a key role in the European Union energy efficiency policy 80 .

Buildings are responsible for 40% of energy consumption and 36% of CO 2 emissions in the EU 81 . While new buildings generally need less than three to five litres of heating oil per square meter per year, older buildings consume about 25 litres on average. In some cases, they even require up to 60 litres.

Today, about 35% of the EU's buildings are over 50 years old. By improving the energy efficiency of buildings, we could reduce total EU energy consumption by 5% - 6% and lower CO 2 emissions by about 5%.

Building efficiency has substantial importance to achieve the European Union’s energy, climate and resource efficiency long-term strategies:

• To achieve the long-term de-carbonization goals, the EU Roadmap for moving to a competitive low carbon economy in 2050 (European Commission, 2011a)

recognizes a potential CO 2 emissions reduction of 88% to 91% by the year 2050 as compared to the 1990 levels, that are related to the residential and service sectors. • Moreover, the Energy Roadmap 2050 (European Commission, 2011b) considers that the high ‘energy efficiency potential in new and existing buildings is the key’ to achieve a sustainable energy future in the EU, contributing significantly to the reduction of energy demand, the security of energy supply and the increase in competitiveness. • Finally, the Roadmap to a Resource Efficient Europe (European Commission 2011c) identifies buildings among the three key sectors responsible for 70% to 80% of all environmental impacts. Thus, better construction and use of

80 European Commission, DG Energy, http://ec.europa.eu/energy/efficiency/buildings/ 81 European Commission, DG Energy, Available at: http://ec.europa.eu/energy/efficiency/consultations/doc/2012_05_18_eeb/20120912_financial_support_for_en ergy_efficiency_in_buildings_consultation_report.pdf

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buildings in the EU could have an impact on about 35% of total CO 2 emissions, 42% of the final energy consumption and over 50% of all extracted materials.

In the Green Paper ‘Towards a European strategy on security of energy supply " - COM (2000) 769 of 29 Nov. 2000, the EU Commission outlined three aspects which need to promote energy saving: 1. Security of energy supply because if no action is taken , import dependency will reach 70 % in 2030, compared to 50% today; 2. Environmental issues are becoming more pronounced. 94% of greenhouse gas emissions occurs in the processes of generation and use of energy and the EU has a limited influence on the conditions of energy supply. Energy efficiency is the shortest path for the EU to attain the Kyoto Protocol targets. Therefore, it is essential for the EU to intervene on the energy needs (demand side management - DSM) by promoting energy savings in buildings and transport sectors. 3. Residential and tertiary sectors (offices, shops, hotels, restaurants, schools, hospitals, gyms, indoor pools, but industrial buildings) are the largest consumers of final energy, particularly for heating, lighting, appliances and equipment. Numerous studies and practical experience have shown that in these areas there is a great potential for energy savings.

Picture 1. Infrared photograph on a winter’s day shows that a conventional office block (left) is losing far more heat than one designed using energy efficiency techniques (right).

Source: Passive House Institute, http://www.passivhaus -institut.de/en/index.php

Key Laws

The EU legislation with regard to the reduction of energy consumption in buildings consists of the Energy Performance of Buildings Directive (2010) and the Energy

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Efficiency Directive (2012).

Programmes to promote new technologies had different significant expected impact in European countries from the point of view of the standardized levels of achievement. In this respect, Directive 2002/91/EC on the energy performance of buildings creates a common framework for the promotion and improvement of the energy performance of buildings, being part of the current initiatives of the European Communities on Climate Change (Kyoto Protocol agreements) and security of energy supply (see: Green Paper "Towards a European strategy on security of energy supply").

The Directive targets residential and tertiary sectors covering most of the building stock in the EU. Other EU documents impact on energy efficiency in buildings are:

• Directive 2002/91/EC on the energy performance of buildings; • Directive 93/76/EEC ("SAVE") - to limit carbon dioxide emissions by increasing energy efficiency; • Directive 92/42/EEC - on efficiency requirements for new hot water boilers; • Directive 89/106/EEC - the products used in construction; • COM (2000) 247 - Action Plan to improve energy efficiency in the European Community.

The existing “harmonized” Regulations can be used to implement the Directive: • Thermal insulation (based on EN 832); • Heating and DH (based on EN 14335) for new building stock; • Pitch and guidance (based on EN 832) • Use of renewables (based on EN 14335) for new building stock.

Under the Energy Performance of Buildings Directive:

• energy performance certificates are to be included in all advertisements for the sale or rental of buildings • EU countries must establish inspection schemes for heating and air conditioning systems or put in place measures with equivalent effect • a common methodology to calculate and rate the integrated energy performance of buildings • all new buildings must be nearly zero energy buildings by 31 December 2020 (public buildings by 31 December 2018) • EU countries must set minimum energy performance requirements for new buildings, for the major renovation of buildings and for the replacement or retrofit of building elements (heating and cooling systems, roofs, walls, etc.) • an assessment of heating installations in which the boilers are over 15 years old

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• EU countries have to draw up lists of national financial measures to improve the energy efficiency of buildings.

Under the Energy Efficiency Directive:

• EU countries make energy efficient renovations to at least 3% of buildings owned and occupied by central government • EU governments should only purchase buildings which are highly energy efficient

• EU countries must draw-up long-term national building renovation strategies which can be included in their National Energy Efficiency Action Plans.

Given the lifespan of buildings (between 50 and 100 years), the greatest potential for improving energy performance in the short and medium term is the existing stock of buildings. Directive aims to establish a framework that will lead to better coordination between national laws in this area. Directive has the following four objectives:

1) Establish a framework for a common methodology for calculating the integrated energy performance of buildings. 2) Application of minimum energy performance standards for new buildings and some existing buildings (e.g. greater than 1000 m 2), where they are refurbished. 3) Certification Scheme for new or existing buildings based on the above standards and public exposure of energy performance certificates and recommended indoor temperatures and other climatic factors relevant public buildings and buildings frequented by the public. Certificates must not be older than five years, include recommendations to improve energy performance and are available in stand when buildings are sold or rented. 4) Specific inspection and servicing of boilers and heating / cooling: regularly inspected boilers with a rated power between 10 and 100 kW inspected every two years boilers with a nominal power of 100 kW; inspection of the whole system in If the boilers are more than 10 kW and older than 15 years. Have recommended alternatives that could reduce energy consumption. Similar measures should be taken and cooling systems, especially for large buildings.

A reduction in energy consumption in the building sector can result from:

• Building envelope - the average loss of heat in new buildings in the EU are about half of those made in the stock of buildings built before 1945 (55 W/m 2 from 100 W/m 2). The result is a potential energy saving of approx. 50%.

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• Boilers - In the EU, there are 10 million boilers older than 20 years. Their replacement would result in a savings of 5% in energy used for heating. • Lighting - might save 30-50 % by using the most effective components of control systems by integrating natural light and other technologies. • Cooling - energy used for air conditioning will double by 2020. A 25% could save by imposing minimum efficient air conditioning equipment. • Generating green energy - saving potential can be associated with local generation of renewable energy, an electricity cogeneration plants and heat, a network connection to district heating / cooling and heat pumps. • bio- climatic design - energy demand could be reduced by up to 60 % through a design and active and passive solar systems, a daylighting and natural cooling use.

4.1.4 Energy efficiency targets for 2020 and 2030

The EU has set itself a 20% energy savings target by 2020 when compared to the projected use of energy in 2020 – roughly equivalent to turning off 400 power stations.

Up until today, approximately half of the energy efficiency improvement potential is realized due to market obstructions and ineffective implementation of the relevant legislation. Stimulation of investment actions have already took place in the EU through the initiation of the building construction and renovation sector.

At an EU summit in October 2014, EU countries agreed on a new energy efficiency target of 27% or greater by 2030. The European Commission had proposed 30% in its Energy Efficiency Communication 82 .

The 2030 Framework as proposed by the European Commission in January 2014 builds on the experience of, and lessons learnt from, the 2020 climate and energy framework. It also takes into account the longer term perspective set out by the European Commission in 2011 in the Roadmap for moving to a competitive low carbon economy in 2050, the Energy Roadmap 2050 and the Transport White Paper. These documents reflect the EU's goal of reducing greenhouse gas emissions by 80-95% below 1990 levels by 2050 as part of the effort needed from developed countries as a group 83 .

While the European Union is making good progress towards its ’20-20-20’ target, the key driver of the current European renewable energy framework – its binding targets – expire in 2020. As a consequence, the European Commission expects renewable energy annual growth to slump from 6% to just 1%, and consequently fail to meet its

82 European Commission, www.ec.europa.eu/energy/en/topics/energy_efficiency 83 European Commission, www.ec.europa.eu/clima/policies/2030/index_en.htm

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2050 decarbonization objective 84 . Business as usual is therefore not an option. An integrated policy framework for the period up to 2030 is needed to ensure regulatory certainty for investors and a coordinated approach among Member States.

At the core of the framework lies the binding target to reduce EU domestic greenhouse emissions by the year 2030 by at least 40% below the 1990 level. To achieve the overall target, the sectors covered by the EU emissions trading system would have to reduce their emissions by 43% compared to 2005. Emissions from sectors outside the European Union emissions trading scheme would have to be cut by 30% below the 2005 level. Therefore, each Member State would have to be assigned an individual target. The European Council has outlined the main principles to achieve this 85 .

(1) A minimum 27% energy efficiency increase . The European Commission, having reviewed the Energy Efficiency Directive, proposes a 30% energy savings target for the year 2030. The proposed target uses the achievements already reached as a stepping stone: new buildings require half the energy they did in the 1980s and the industrial sector is about 19% less energy intensive than it was in 2001. The European Council endorsed an indicative target of 27% to be reviewed in 2020 having in mind a 30% target.

(2) An EU Emissions Trading System reform. Accordingly, the European Union Emissions Trading System is to be reformed and strengthened. A 43% target

for the reduction of CO 2 emissions in 2030 means than the cap should be declining by 2.2% annually from 2021 onwards, as compared to the rate of 1.74% up to 2020.

In January 2014, the European Commission proposed the establishment of a market stability reserve from the year 2021 onwards. This reserve aims at addressing the surplus emission allowances in the EU Emissions Trading System that has built up in recent years and to improve the system’s resilience to major shocks. This would ensure that in the future the EU Emissions Trading System would be more promote more effectively low carbon investments at the least cost to societies.

The European Council underlined that a reformed, well-functioning ETS with an instrument to stabilize the market in line with the Commission’s proposal will be the main instrument to achieve greenhouse gas emission reductions.

84 EREC, European Energy Renewable Energy Council, Hat Trick 2030, An Integrated Climate and Energy Framework 85 European Commission, www.ec.europa.eu/clima/policies/2030/index_en.htm

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(3) New Governance System. The 2030 framework proposed a new governance framework on the basis of national plans for competitive, secure and sustainable energy combined with a set of key indicators to assess the progress that has been achieved over time. The European Council agreed that a reliable and transparent governance system will be developed to help ensure that the European Union meets its energy policy goals.

4.1.5 The European Union’s Roadmap for Moving to a Low-Carbon Economy in 2050

All the major economies of the planet will need to reduce CO 2 emissions if global warming is to be held below 2 oC compared to the temperature in the pre-industrial era. With its Roadmap for moving to a competitive low-carbon economy in 2050, the European Commission is taking a long-term approach in its objectives and sets out a cost-effective pathway for achieving much deeper emission cuts by the middle of the century.

The Roadmap is one of the long-term policy plans put forward under the Resource Efficiency Europe initiative which intends to put the European Union on course to using resources in a sustainable way.

The Roadmap suggests that, by the year 2050, the European Union should reduce its emissions by 80% below the 1990 levels through domestic reductions alone. It sets out milestones which form a cost-effective pathway to this target: reductions around 40% by 2030 and 60% by 2040. It also demonstrates how the main sectors that account for the larger part of Europe’s emissions – power generation, industry, transport, buildings and construction, and agriculture – can make the transition to a low- carbon economy in the most cost-effective manner.

The Concept of a Low-Carbon Society

In a low-carbon society, people will live and work in low-energy, low-emission buildings with intelligent heating and cooling systems. Electric and hybrid cars will be used, resulting in cleaner cities with less air pollution and an expanded network of public transport.

Many of the technologies exist today but need to be developed further. Besides reducing its greenhouse gas emissions, the European Union could also reduce its use of key resources such as oil and gas, raw materials, land and water.

Saving Energy and Resources

Energy efficiency will be a key driver of the transition. By moving to a low-carbon society, the EU could be using around 30% less energy in 2050 than in 2005.

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Households and businesses would enjoy more secure and efficient energy services.

More locally produced energy would be used, mostly from renewable sources. As a result, the EU would be less dependent on expensive imports of oil and gas and less vulnerable to increases in oil prices. On average, the EU could save € 175-320 billion annually in fuel costs over the next 40 years 86 .

4.1.6 Challenges and Opportunities

The challenges and opportunities are summarized below 87 .

• Support EU citizens to improve the energy efficiency of their houses. • Put efforts to alter consumer behaviour and energy consumption practices. • Properly balance policy-making and human behaviour. • Help the implementation of Directive 2010/31/EU to Member states. • Assist construction industry to build better quality buildings. • Increase the skills and capacity of the EU work force. • New production and distribution facilities will have to be constructed. • Large cost-efficient energy saving potential remains unexploited. • On time monitoring of primary energy consumption in order to be reduced by 20 % in 2020. • Implementation of efficiency measures in the residential, public and industrial sector to ensure that new energy practices (i.e. heating, cooling, and lighting) remain affordable. • Locate financial instruments for the requested high level of investment and apply purposeful incentives. • Better illustration of economic, societal (fuel poverty, health, unemployment), environmental and energy systems benefits. • Potential submerged market and technical problems.

Challenges also include the identification of start points and the development of respective regulations that could be used to encourage building energy performance improvement, the improvement of all public buildings to high energy performance levels, the integration of renewable energy technologies, and the removal or the implementation of measures to overcome restrictive tenancy laws that hold back energy performance improvement. Improperly regulated and managed renovation work, due to rapid increase in demand and therefore rapid growth of suppliers, could lead to poor workmanship and probably some serious failures. Therefore, appropriate

86 European Commission, www.ec.europa.eu/clima/policies/2030/index_en.htm 87 Source: European Commission, Energy Efficiency Financial Institutions Group (EEFIG) (2014). Energy Efficiency – the first fuel for the EU Economy: How to drive new finance for energy efficiency investments. Available at: http://ec.europa.eu/energy/efficiency/studies/doc/2014_fig_how_drive_finance_for_economy.pdf

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Very frequently, complete renovation can only be executed in an unoccupied building, which will involve administrative, practical and financial issues when the building is occupied. Thus, an appropriate regulation could be established when a major renovation is taking place between the tenant and the owner. Establishing unified climate zones throughout Europe would benefit the harmonization of directives and regulations and enhance the development of energy efficiency results in buildings. Also, certification and training of installers would be coordinated for instance under the EUCERT scheme in order to allow free movement of work force within Europe.

Although national administrative systems take actions to energy efficiency and European integration challenges, different national administrative structures have various responses, which sometimes are only focused on bureaucracy conformance. Such constrains might show the way to administrative convergence and improvements, institutional transformation, and better integration between politics and administration-society.

In conclusion, energy-efficient building constructions and renovations will improve people’s health, quality of life and productivity, but also, energy costs will be cut as a result for businesses and households, and hundreds of thousands of locally based jobs will be generated, mainly in the depressed construction sector 88 ,89 ,90 .

4.1.7 Problems and Constraints Although, there are some keen initiatives to improve the energy performance of Europe’s building stock, it is obvious that a range of barriers are limiting the achievement of the full potential. Barriers can be categorized in four sections; institutional - administrative, financial, societal and technical. Institutional – administrative constraints include regulatory & planning issues, institutional, structural, and problems with multiple stakeholders.

The complication of the sector and the existence of market failures result potential social, economic and environmental benefits to be reduced at EU level. Furthermore, the ambition to implement the related energy efficiency Legislation-Directives by some Member States is low.

88 European Commission, DG Energy (2012). Local investments options in Energy Efficiency in the built environment, Available at: http://ec.europa.eu/energy/efficiency/buildings/doc/local_investments__energy_efficiency_built_environment_ case_studies.pdf 89 LAUSTSEN Jens (2008), ENERGY EFFICIENCY REQUIREMENTS IN BUILDING CODES, ENERGY EFFICIENCY POLICIES FOR NEW BUILDINGS, www.iea.org/publications/freepublications/publication/Building_Codes-1.pdf 90 Staniaszek Dan et al (2013), A GUIDE TO DEVELOPING STRATEGIES FOR BUILDING ENERGY RENOVATION, www.bpie.eu/documents/BPIE/Developing_Building_Renovation_Strategies.pdf

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The main problems and constraints are described as follows 91,92 .

• Administrative and financial problems including difficulties in financing, relatively long pay-back periods and local credit risk associated with energy efficiency investments. • Lack of funds and finance on adequate quantities are commonly one of the most significant barriers for energy efficiency investments. • Low national response to integrate European Legislation by different administrative systems. • National administrative systems focused mostly on formal/institutional aspects. • Difficulties to process approvals for building integrated renewable technologies. • Disintegration, setback and gap s in the regulatory action of public planning, which affect the public sector. • Autonomous regions within Member States have implemented EPBD Directive in different level and rates. • In some countries there are multiple owners and renters of buildings, which are very difficult to agree on energy saving investments. • Lack of skills, competence and knowledge related to building professionals. • Lack of information, advice, awareness and understanding of the potential of energy savings. • Complexity and indeterminacy of the separation of expenditure and benefit between landlord and tenant. • High initial investment costs. The required time to return the initial investment cost is high, although, it has relatively high Internal Rate of Return (IRR). • Energy efficiency investments are low priority for householders and business. • Financial crisis in some European countries, which has as a result to avoid taking risks for citizens, organization and financial institutions. • Ellipse of awareness and expertise regarding energy efficiency, which obstructs further uptake of energy efficiency improvements. • Despite the significant potential for cost effective savings, energy consumption in the household sector continues to rise.

The current financial crisis is hitting all European countries, some more than others, while the lending markets have also been badly affected. Consumers and financial institutions are less willing to take risks.

91 Staniaszek Dan et al (2013), A GUIDE TO DEVELOPING STRATEGIES FOR BUILDING ENERGY RENOVATION, www.bpie.eu/documents/BPIE/Developing_Building_Renovation_Strategies.pdf 92 Economidou M. et al. (2011), Europe’s Buildings under the Microscope.

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4.1.8 Recent evolutions At the end of February 2015, the Commission, issued a Communication ( Energy Efficiency Communication [COM(2014)520] 93 ), reconfirming that “ The goal of a resilient Energy Union with an ambitious climate policy at its core is to give EU consumers - households and businesses - secure, sustainable, competitive and affordable energy. Achieving this goal will require a fundamental transformation of Europe's energy system 94 ”. As said The Energy Union strategy has five mutually- reinforcing and closely interrelated dimensions designed to bring greater energy security, sustainability and competitiveness. Energy efficiency is one of them, seeing as a decisive factor contributing to moderation of energy demand. Another interesting issue is that the communication has a clear point of view about the role of regional cooperation within a common EU framework, calling for “... an improved cooperation, solidarity and trust in the Central and South-Eastern part of Europe 95 ”, referring to the liquidity and resilience of the energy system and the region's energy efficiency and renewable energy potential.

As one out of five dimensions of Energy Union’s strategy, energy efficiency holds a central point. The Commission departs by reminding her efforts creating the appropriate framework for progress putting in place the world's leading set of measures to become more efficient in our energy consumption. (e.g. energy labelling and ecodesign legislation), in order to stress the need that more work has to be done in national, regional and local level.

There is an updated interest for more and better action on building sector, while it is stigmatising the inadequate awareness and expertise for small-scale financing. As it is clearly stated, thw Commission will “... support ways to simplify access to existing financing and offer ‘off-the-shelf’ financing templates for financial instruments to the European Structural and Investment Funds managing authorities and interested stakeholders, promote new financing schemes based on risk and revenue sharing, develop new financing techniques and support in terms of technical assistance. Financial support needs to be combined with technical support to help aggregate small scale projects into larger programmes which can drive down transaction costs and attract the private sector at scale. 96 ”.

Another interesting point is the renewed Commission’s support to initiatives as the Smart Cities and Communities and the Covenant of Mayors, which are primarily carried forward by mayors, civil society organisations, investors, financial institutions and service providers, is important for achieving progress on energy efficiency in and outside the EU.

93 European Commission COM(2015) 80 final, Energy Union Package, A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy, Brussels, 25.2.2015. 94 Op. cit., pp. 4. 95 Op. cit., pp. 10-11. 96 Op. cit., pp. 13.

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4.2 Energy efficiency and Renewables markets in EU 4.2.1 Energy efficiency The Energy Efficiency Market Report 2014 (EEMR 2014) estimates that investment in energy efficiency markets worldwide in 2012 was in the magnitude of $310 - $360 billion 97 . Investment in energy efficiency was larger than supply-side investment in renewable electricity or in coal, oil and gas electricity generation. Investment in energy efficiency is distributed unevenly across countries and energy-consuming sectors (buildings, domestic appliances, transport and industry).

Energy efficiency is the “first fuel” Energy efficiency markets deliver goods and services that reduce the energy required to fuel the world economies. Energy efficiency improvements since the 1970s in 11 IEA member countries 98 saved 56 exajoules (EJ) or 1 337 Mtoe (Million Tonnes of Oil Equivalent) in 2011. Avoided energy use was larger than the supply of oil (1,202 Mtoe), electricity (552 Mtoe) or natural gas (509 Mtoe) in 2011; these savings equate to 59% of Total Final Consumption in the 11 IEA member countries that year.

Energy savings equate to the entire fuel consumption of the European Union Energy efficiency savings of 1,337 Mtoe in 2011 in these 11 IEA member countries were larger than the combined Total Final Consumption of the European Union or of Asia, excluding China. These efficiency savings were equal to 80% of TFC in China and 87% of TFC in the United States for that same year.

Country case studies reveal active and diverse domestic energy efficiency markets This report highlights the energy efficiency market in 11 geographically and economic developmentally diverse economies, from Korea to Ireland and Canada to India. It documents more than €30 billion of dedicated energy efficiency spending in those countries in 2012. The scale, maturity and drivers of the energy efficiency market vary greatly by country. India, for example, is increasingly implementing market-based approaches, whereas Indonesia is putting in place basic market-setting standards and labelling programs. European Union member states, including Ireland, Italy and the Netherlands are putting in place a mix of policies that includes standards, grants, tax deductions, market-based instruments and approaches that leverage public funding with private third-party finance. Market developments in the 11 economies include the following: The light-emitting diode (LED) lighting market is taking off in Japan and Thailand and seeing positive signs in India. In Japan, LED sales reached $5.2 billion in 2013 and accounted for over 30% of all Japanese bulbs sold that year.

The market for energy efficiency improvements in the buildings sector has seen significant government support over the past few years in several of the countries highlighted in this report, including in Ireland, Italy, the Netherlands, Canada and Japan. The energy-saving technology manufacturing and service industries in many countries have been growing, including in Ireland and the Netherlands.

97 REN21, Renewable Energy Policy Network for the 21 st Century, Renewables 2014, Global Status Report. 98 op.cit.

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Sub-national governments and also national and supra-national governments can play a key role in driving energy efficiency markets. China’s energy efficiency service and investment demands are driven to a large extent by the government’s strong and comprehensive energy conservation policies and programs. In the European Union, the European Structural and Investment Funds allocated €5.6 billion to energy efficiency over the period from 2006 to 2013. During the new program period from 2014 to 2020, energy efficiency funding is expected at least to double.

Energy efficiency is strengthening its position as a fuel option for countries in their efforts to balance supply and demand in support of growth, energy security and environmental objectives. Improving data and analysis are helping to enhance the ability of stakeholders to understand this market – notably in terms of investment inputs, savings outputs, and the impact on energy efficiency outcomes. However, the need remains for further data and methodological improvements. At the same time, increased focus on the issues of energy security, economic growth, sustainable development and climate change mitigation, which can each be enhanced through improved energy efficiency, is likely to support a continued growing emphasis on this “first” fuel.

4.2.2 Energy Efficiency in the European Union

Buildings are the largest energy consuming sector in the world. They account for over one-third of total final energy consumption and represent an equally important source of carbon dioxide (CO 2) emissions. The building sector is also central to the EU’s energy efficiency policy, as nearly 40% of final energy consumption and 36% of greenhouse gas emissions is in houses, offices, shops and other buildings. Improving the energy performance of Europe’s building stock is crucial, not only to achieve the EU’s 2020 targets but also to meet the longer term objectives of the European Union’s climate strategy as laid down in the low carbon economy roadmap 2050 99 .

In 2012, the statistical findings for final energy consumption by sector in the European Union revealed that energy consumption was allocated as follows: Transport (32%), Industry (25%), and Buildings (40%). This 40% of the Buildings sector is made up of energy consumption in Households (27%) and Services (13%).

Achieving energy efficiency is a key priority for the European Commission and EU Member States. This is illustrated by the European Union 2020 objective of increasing energy efficiency by 20%. Renovating buildings is only one method of improving energy efficiency; however, it is a very interesting method for at least two reasons 1) The building sector is a large source of energy consumption, and 2) studies show that renovations of existing buildings is one of the low-cost options to reduce CO 2

99 European Commission, Report from the Commission to the European Parliament and the Council, Progress by Member States towards Nearly Zero Energy Buildings, 7-10-2013.

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Figure 3 . European Environment Agency, Odyssee energy efficiency index (ODEX) (EU-27)

Source: ODYSSEE, Enerdata, October 2010 update. Household energy efficiency; http://www.odyssee-indicators.org

Over the period 1990-2009, energy efficiency in the household sector increased by 24% in EU-27 countries at an annual average rate of 1.4%/year, as seen in Figure 10. These improvements occurred partly in the space heating area because of better thermal performance of buildings encouraged by mandatory efficiency standards for new buildings and a larger penetration of high efficiency boilers. All European Union countries have developed thermal regulations for new dwellings. These standards require a theoretical maximum heating unit consumption for new buildings. Yet, the magnitude of this impact varies between member states. The other contributing factor, as seen in Figure 10, is electrical appliances.

The introduction of new dwellings with better insulation since 1990 contributed to the decrease of unit consumption per dwelling: 12% for Sweden, around 35% for France and Netherlands, 40% for Poland, 50% for Denmark and 70% for Germany. The other factors responsible for the decrease of the unit consumption should be the retrofitting of existing dwellings and the introduction of new more efficient heating appliances (namely, condensing boilers and heat pumps), as well as behavioural savings.

Energy consumption per household differs between European Union Member States as is illustrated in Figure 8. In terms of energy consumption per household, Bulgarian households consume considerably less energy (0,72 consumption units per dwelling)

100 McKinsey & Company (2010) for examples finds that such renovations are one of the most attractive options to bring down greenhouse gas emissions cost effectively 162

European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” from Greek households (1.36 consumption units per dwelling) Both countries are below the EU 27 average (EU =1.48 consumption units, Bulgaria is consuming -51,2% of EU-27 average per household, and Greece -8.3%).

Figure 4. European Union Member States, Energy consumption by end use per dwelling, 2009.

Source: ODYSSEE, Enerdata, October 2010 update. Household energy efficiency; http://www.odyssee- indicators.org

For the EU-27 as a whole, new dwellings built in 2009 consumed about 40% less energy than dwellings built in 1990, because of new building codes (Figure 9). For large appliances, the improvement in energy efficiency results from technical improvement driven by EU mandatory Directives on labelling and voluntary agreements with equipment manufacturers. Consequently, the share of the most efficient appliances (A, A+, A++) increased from 6% in 1997 to 94% in 2009 for refrigerators, and from 3% to 95% for washing machines, for example. Figure 5. Household energy consumption by end-use in the EU-27

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Source: http://www.eea.europa.eu/data-and-maps/indicators/energy-efficiency-and-energy- consumption-5/assessment

Over the period 2005-2009, the average energy efficiency improvement rate in the EU was 1.3% p.a. Energy efficiency progress fell to 0.6% in 2009 at EU level. Differences between countries can be explained by the high energy efficiency potentials available in these countries due to outdated infrastructures (e.g. buildings, heating supply systems, etc).

As a result of energy efficiency policies, energy consumption in the European Union was reduced down to levels seen in the early 1990s, according to the latest figures released by Eurostat. In 2013, energy consumption was 1,666 million tonnes of oil equivalent, down from its peak of 1,832 million tonnes reached in 2006 101 .

Meanwhile, the EU's statistical office found that Estonia and Denmark are the least dependent on energy imports in the European Union relying on 11.9% and 12.3% of imported energy respectively. On the other end of the scale, Malta imports all of its energy, Luxembourg 96.9%, Cyprus 96.4% and Ireland 89.1%. In 2013, overall energy dependency in the EU was 53.2%.

The Benefit Areas of Energy Efficiency

• Macroeconomic Development. The impact of energy efficiency policies on macroeconomic performance still needs to be better understood and systematically measured. Energy efficiency improvements can deliver benefits across the whole economy, with direct and indirect impacts on economic activity (measured through gross domestic product (GDP), employment, trade balance and energy prices. In general analysis of GDP changes due to large- scale energy efficiency policies show positive outcomes with economic growth ranging from 0.25% to 1.1% a year. The potential for job creation ranges from 8 to 27 job years per €1 million invested in energy efficiency measures. How energy efficiency measures influence there areas depends on a country’s economic structure and on the design and scale of the underlying policies 102 .

• Public Budgets. Whether by reducing government expenditures on energy or by generating increased tax revenues through greater economic activity and/or increased spending on energy efficiency related and other goods and services, energy efficiency improvements can have important impacts on the budgetary position of national and local governments. An important impact on public budget is on reduced fuel costs for heating, cooling and lighting. One of

101 Eurostat press release, Monday, 16 February 2015 102 OECD / International Energy Agency 2014, Capturing the Multiple Benefits of Energy Efficiency

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the greatest impacts overall is the reduced budget for unemployment payments when energy efficiency policies lead to job creation.

• Health and Well-Being. Energy efficiency retrofits in buildings (e.g. insulation retrofits) create conditions that support improved occupant health and well- being. The potential benefits include improved physical health such as reduced symptoms of respiratory and cardiovascular conditions, rheumatism, arthritis and allergies. Realized health improvements generate downstream social and economic impacts including lower public health spending.

• Industrial Productivity . Industrial energy efficiency measures deliver substantial benefits in addition to cost savings – enhancing competitiveness, profitability, production and product quality, and improving the working environment while also reducing maintenance and operational costs. Introducing multiple benefits can help to better align efficiency with strategic business priorities thereby strengthening the business case for investment.

• Energy Delivery. Even utilities and other energy providers gain in a variety of ways from energy efficiency measures. Direct benefits include lower costs for energy generation, transmission and distribution, improved system reliability, dampened price volatility in wholesale markets and the possibility of delaying or deferring costly system upgrades.

Research has brought to the fore a range of areas, beyond energy demand reduction and lower GHG emissions, in which clear benefits of energy efficiency have been documented (Figure 6). Figure 6. The Multiple Benefits of Energy Efficiency Improvement 103

103 Note: This list is not exhaustive, but represents some of the most prominent benefits of energy efficiency identified to date. 165

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Source: IEA Energy Efficiency Market Report 2014 and Multiple Benefits

Most of these benefits are relevant to all countries alike, although prioritisation by individual countries is likely to vary. Experts increasingly acknowledge the important role of energy efficiency in generating a broad range of outcomes that support ambitions to improve wealth and welfare – goals that the public and policy makers both understand and aspire to achieve.

Energy Efficiency: The ‘first fuel’ with large untapped potential

Energy efficiency is taking its place as a major energy resource in the context of national and international efforts to achieve sustainability targets.

In effect, attention of energy efficiency has begun to evolve, progressing from the lack of visibility inherent in its identification as ‘the hidden fuel’ (i.e. measured and valued only as the negative quantity of energy not used) to an increasing recognition of its role as the ‘first fuel’. Energy use avoided by IEA member countries in 2010 (generated from investments in the preceding 1974-2010 period) was larger than the actual demand met by any other single supply-side resource, including oil, gas, coal and electricity – making energy efficiency the largest or ‘first fuel’. Macroeconomists have stated that energy efficiency is the surest energy supply that exists 104 .

In the face of rising energy demand, global growth aspirations and the pressing need

104 OECD / International Energy Agency 2014, Capturing the Multiple Benefits of Energy Efficiency.

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Notwithstanding this emerging role for energy efficiency, future projections reveal that under existing policies, the vast majority of economically viable energy efficiency investments will remain unrealized.

Renovation of the European Union Building Stock The importance and potential of reducing CO 2 emissions in the EU building sector is increasingly becoming the matter of debate, as the potential for energy savings in this sector becomes apparent. (A study by the International Energy Agency in its World Energy Outlook 2012, estimates that the Unrealized Energy Efficiency potential worldwide in the ‘Buildings’ sector is over 80%. In other words, 80% of the profitable investments to improve energy efficiency remain untapped in the period to 2035 105 (Figure 7). Many barriers contribute to the limited uptake of energy efficiency opportunities; one main obstacle is the lack of attention paid to energy efficiency investment opportunities by stakeholders in both the private and government sectors relative to supply-side opportunities, including new resources such as shale gas and oil. The multiple benefits approach seeks, in part, to address this barrier by rendering more apparent the benefits that energy efficiency can generate for these stakeholders. It also helps to address the challenge of the invisibility of energy efficiency (i.e. representing energy not used), by appropriately crediting it with the value of the positive impacts it triggers across a variety of areas.

Figure 7: Two-thirds of the profitable investments to improve energy efficiency remain untapped in the period to 2035

Source: IEA Energy Efficiency Market Report 2014 and Multiple Benefits

The impact is mainly through the renovation of existing buildings, which offers

105 International Energy Agency, Energy Efficiency: 2014 Market Report and Multiple Benefits.

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• A so-called shallow renovation track will completely miss both environmental targets (CO2 emission and final energy savings) while not providing substantial economic advantage • A deep renovation track, combining a focus on energy efficiency with high use

of renewables can be considered as a financially viable route, meeting CO 2 targets and at the same time demonstrating the lowest energy consumption and offering the largest job creation potential on the assessed tracks.

The Zero-Energy Building: Advantages and Obstacles The recast of the Energy Performance of Buildings Directive (EPBD) introduced in Article 9, ‘nearly Zero Energy Buildings’ (nZEB) as a future requirement to be implemented from 2019 onwards for public buildings and from 2021 onwards for all new buildings. The EPRD defines a nearly Zero-Energy Building as follows: ‘A nearly Zero-Energy Building is a […] building that has a very high energy performance […]. The nearly zero or very low amount of energy required should to a very significant extent be covered by energy from renewable sources, including renewable energy produced on-site or nearby. Acknowledging the variety in building cultures, climate and methodological approaches throughout the European Union, the EPBD does not prescribe a uniform approach for implementing nZEBs. Each EU Member State has to draw up its own definition. The EPBD requires EU Member States to draw up specifically designed national plans for implementing nZEBs which reflect national, regional or local conditions. The national plans will have to translate the concept of nZEB into practical

106 Cost-Effective Climate Protection in the Building Stock of the EU Building Stock & New EU Member States, commissioned by Eurima, Ecofys 2005.

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and applicable measures and definitions to steadily increase the number of these buildings. EU Member States were required to present their nZEB definition and roadmaps to the European Commission by 2013. The nZEB criteria, as defined in the EPBD, are of a very qualitative nature allowing plenty of room for interpretation, and different approaches to the execution. Indeed, there is little guidance for Member States on how to concretely implement the Directive or on how to define and construct this type of building.

Problems with the Zero Energy Buildings 1) Although most EU Member States reported a variety of support measures to promote NZEBs, including financial incentives, strengthening their building regulations, awareness raising activities and demonstration / pilot projects, it is not always clear to what extent these measures specifically target NZEBs. Therefore the conclusion has to be that too little progress has been made by Member States in their preparations towards NZEBs by 2020 107 . 2) New buildings are increasingly constructed to demanding energy performance levels, and the path has already been laid within EU legislation for all new buildings to have nearly zero energy requirements within a matter of years. Yet, the vast majority of existing buildings were constructed prior to any formal energy performance requirements, as a result of which, the energy performance of the stock is considerably below the best that can be achieved today. However, at current rates of renovation, the full potential for cost-effective improvement will not be achieved before the end of the century.

4.2.3 Energy Efficiency in industry Over the period 1990-2009, in EU-27 countries, energy efficiency in industry has improved by 30% at an annual average rate of 1.8% per year, with large differences among countries. Energy efficiency improvement has been realized in all industrial branches except textile. Over the period 2005-2009 energy efficiency improved by 1.5%/year with an important deterioration in 2009 due to the economic crisis. EU27 energy consumption by manufacturing branch (2009)

Mtoe chemicals chemicals steel non metallic paper food other branches machinery non ferrous wood transport vehicle textile total manifa- cturing 1990 69 82 43 27 28 46 24 12 5 8 12 357 2009 50 44 37 33 27 22 17 9 8 8 5 261 % in total in 1990 19,4% 23,1% 12,1% 7,5% 7,9% 13,0% 6,6% 3,4% 1,5% 2,2% 3,3% 100% % in total in 2009 19,3% 17,0% 14,0% 12,7% 10,5% 8,4% 6,5% 3,4% 3,2% 3,0% 2,0% 100%

What are the key drivers behind the energy consumption in selected industrial

107 European Commission, Report from the Commission to the European Parliament and the Council, Progress by Member States towards Nearly Zero Energy Buildings, 7-10-2013.

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The following figure compares the energy unit consumption of cement in EU countries as a function of the share of clinker: the higher this ratio, the higher the specific energy consumption. Figure 9: Energy unit consumption of cement in EU countries

108 European Environment Agency (EEA) : Energy efficiency and energy consumption in industry (ENER 025) - Assessment published Apr 2012, http://www.eea.europa.eu/data-and-maps/indicators/energy- efficiency-and-energy-consumption-6/assessment (Last accessed at 28/2/2015).

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The following figure displays the unit energy consumption per ton of paper as a function of the ratio pulp production to paper production: the higher the ratio, the higher the energy unit consumption. Figure 10: Energy unit consumption per ton of paper

Specific assessment When analyzing specific energy consumption trends in industrial branches, one has to account for the specificities in terms of process mix and product mix. For steel, there are basically two main production processes: the blast furnace oxygen process and the electric arc furnace process. The first one, which represents about 2/3 of the crude

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” steel production for only 1/3 for the electric arc furnace, is much more energy intensive. For paper and cement, part of the energy intensive component, pulp and clinker respectively, may be imported instead of being produced in the country, which will reduce the unit energy consumption, all things being equal[1]. Figure 8 shows a more detailed comparison of the performance (in terms of energy unit consumption) of the European steel sector across the different EU-27 countries taking into account the relative share of electric steel in total crude steel production. The vertical distance to the red line (benchmark) shows the technical improvement possible at the given process mix of the country. Figure 9 compares the energy unit consumption of cement in EU countries as a function of the share of clinker: the higher this ratio, the higher the specific energy consumption. The vertical distance from the world best practice (benchmark based on the best available in terms of specific energy consumption) shows the technical improvement possible at a given clinker/cement mix of the country; in other words it indicates the potential of energy savings. Energy unit consumption in the pulp and paper industry is very different among countries: it varies by a factor of 2-3 from a minimum of 0.25 toe/tonne to 0.7 toe/tonne (Figure 10). Low values may mean that most of the pulp is imported and high values that pulp is exported. Additional information The graph presents the unit consumption of steel, paper and cement for the year 2008, instead of the most recent year (2009), as 2009 was year of deep recession in these industries, the specific consumption is not representative. Graphs based on the specific consumption of pulp and paper industry: UC = C/ PP, with UC: specific consumption in toe/t, C: energy consumption in Mtoe (source Odyssee database), PP : physical production in tons (source Odyssee database). For all the EU countries, data are extracted from the ODYSSEE database (last update in August 2009); Source of data: national data For EU, the data sources are the following: ° Energy consumption: source Eurostat except for: ° Wood (NCE 20): source Enerdata / IEA ° Construction (NCE 45): source Enerdata / IEA ° Machinery (NCE 28-32) and transport vehicles (NCE 34-35) [in Eurostat energy consumption for these 2 branches are given together] for ODYSSEE this overall consumption has been split into 2 sub branches according to the desagregation given in the Enerdata‘ s database (coherent with IEA) ° Other branches: in Eurostat this residual branch includes also construction, wood; for ODYSSEE energy consumption of this branch has been recalculated as total industry minus sum of the energy consumption of the branches ° Intensive branches: ° Cement: physical production for EU is the sum of the production of the 27 countries (source Odyssee). Energy consumption: based on the energy consumption of 12 countries: UK, Sweden, Spain, Portugal, Netherlands, Italy, Greece, France, Germany and Belgium, Poland and Hungary (source Odyssee)

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– the consumption for EU-27 as a whole is extrapolated, based on the EU12 consumption weighted by the ratio (production EU-27/production EU-12) ° Paper: physical production for EU-27 is the sum of EU-27 countries (source Odyssee). Energy consumption: source Eurostat ° Steel: physical production for EU-27 is the sum of EU-27 countries (source IISI). Energy consumption: source Eurostat.

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Table 2: ODEX 109 by country (1998-2008) for industry 2000 - 2005 - 2008 - 100= 2000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2009 2009 2009 EU-27 100,0 99,0 99,4 98,6 98,0 94,4 91,1 88,6 88,4 88,8 -1,3% -1,5% 0,5% Austria 100 99 99 97 98 97 96 94 97 99 -0,1% 0,5% 2,5% Belgium 100 96 95 91 92 91 92 92 92 -1,0% 0,6% Bulgaria 100 97 92 83 73 63 57 53 50 48 -7,8% -6,4% -3,1% Cyprus 100 98 93 91 89 86 81 78 75 76 -2,9% -3,0% 2,0% Czech Republic 100 99 96 93 93 90 87 82 82 82 -2,2% -2,2% -0,2% Denmark 100 98 97 97 96 94 91 87 86 85 -1,8% -2,5% -1,2% Estonia 100 91 88 79 76 67 64 64 67 69 -4,0% 0,7% 2,9% Finland 100 101 99 96 92 90 89 87 87 87 -1,6% -0,9% -0,5% France 100 99 98 98 98 96 96 95 94 -0,7% -0,7% Germany 100 98 100 102 103 101 99 97 98 98 -0,2% -0,7% 0,5% Greece 100 97 95 91 88 88 92 94 96 94 -0,7% 1,7% -1,5% Hungary 100 96 92 88 84 81 76 73 71 71 -3,8% -3,2% -0,2% Ireland 100 97 93 92 92 93 92 88 88 88 -1,4% -1,4% -0,1% Italy 100 99 100 101 102 101 99 97 96 96 -0,5% -1,4% 0,0% Latvia 100 100 95 90 87 85 84 85 85 90 -1,2% 1,4% 5,7% Lithuania 100 93 88 83 76 71 62 57 -7,6% -9,7% Luxembourg 100 96 93 94 97 100 97 95 86 -1,9% -5,1% Netherlands 100 98 97 96 95 91 87 84 83 83 -2,1% -2,5% 0,0% Poland 100 95 90 85 81 76 72 67 63 62 -5,2% -5,1% -2,8%

109 Energy efficiency index of industry (ODEX) is a weighted average of the specific consumption index of 10 manufacturing branches; the weight being the share of each branch in the sum of the energy consumption of these branches in year t and the sum of the implied energy consumption from each underlying industrial branches in year t (based on the unit consumption of the sub-sector with a moving reference year).

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Portugal 100 99 100 102 106 109 110 110 110 112 1,2% 0,7% 1,5% Romania 100 103 105 103 96 87 79 75 72 -4,0% -5,9% Slovak Republic 100 102 102 102 101 98 94 91 91 93 -0,8% -1,4% 2,1% Slovenia 100 97 95 96 99 96 93 86 83 -2,3% -4,9% Spain 100 101 104 106 110 107 104 103 110 114 1,5% 1,7% 3,9% Sweden 100 99 98 96 94 92 91 91 91 -1,2% -0,5%

UK 100 100 100 97 94 92 91 90 89 -1,5% -1,1%

Croatia 100 96 94 92 94 96 96 93 91 89 -1,3% -1,8% -1,9%

Norway 100 97 94 91 91 89 86 84 83 -2,4% -2,4%

Source ODYSSEE, calculations of European Environment Agency (EEA) : Energy efficiency and energy consumption in industry (ENER 025) - Assessment published Apr 2012 , http://www.eea.europa.eu/data-and-maps/indicators/energy-efficiency-and-energy-consumption-6/assessment (Last accessed at 28/2/2015).

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4.2.4 World Energy Production and Consumption Trends – Share of Renewables Continued Renewable Energy Growth The evolution of renewable energy over the course of the 21 st century has surpassed all expectations. Developments in the early 2000s showed upwards trends in global renewable energy investment, capacity and integration across all sectors. Yet, most mainstream projections did not predict the extraordinary expansion of renewable that was to unfold over the decade ahead. Scenarios from institutions like the International Energy Agency, the World Bank, Greenpeace and others all projected levels of renewable energy for the year 2020 that were already well exceeded by 2010 110 . Global installed capacity and production from renewable technologies have increased substantially and supporting policies have continued to spread to more countries in all regions of the world.

Renewable energy provided an estimated 19% of global final energy consumption in 2012 (Figure 1), and is continuing to grow.

Figure 11 : Estimated renewable energy share of global final energy consumption, 2012

Of this total share in 2012, modern renewables accounted for around 10% with the remainder (estimated as just over 9%) coming from traditional biomass. Heat energy from modern renewable sources accounted for an estimated 4.2% of the total final energy use. Hydropower made up about 3.8% and an estimated 2% was provided by power from wind, solar, geothermal and biomass as well as by biofuels. Modern renewable energy is being used increasingly in four distinct markets: power generation, heating and cooling, transport fuels, and rural / off-grid

110 REN21, Renewable Energy Policy Network for the 21 st Century, Renewables 2014, Global Status Report.

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” energy services. The breakdown of modern renewables, as a percentage of total final energy use in 2012, was as follows: hydropower generated an estimated 3.8%, other renewable power sources comprised 1.2%, heat energy accounted for approximately 4.2% and transport biofuels provided about 0.8% 111 .

During the years 2009 through to 2013, installed capacity as well as output of most renewable energy technologies grew at rapid rates, particularly in the power sector. Over this period, solar photovoltaics (PV) experienced the fastest capacity growth rates of any energy technology. The use of modern renewables for heating and cooling progressed steadily, although good data for many heating technologies and fuels are lacking. Biofuels production for use in the transport sector slowed from 2010 to 2012, despite high oil prices, but picked up again in 2013.

On the other hand, global subsidies for fossil fuels remain high despite discussions about their phase-out, encouraging inefficient energy use while also hindering investment in renewables. Due to the continued increase in fossil fuel consumption, in essence oil and coal, the combined modern and traditional renewable energy share remained about the same with 2011, despite the fact that the share of modern renewables increased. The rapid growth in modern renewable energy is tempered by both a slow migration away from traditional biomass and a continued rise in total global energy demand.

In its World Energy Outlook report for 2014 the International Energy Agency (IEA) projects that global oil consumption will rise from 90 million barrels a day in 2013 to 104 million barrels a day in 2040. The overall use of coal is projected to decrease slowly in demand. CO 2 emissions are expected to grow by one-fifth by 2040, which puts the world’s temperature well on track to rise to 3.6 degrees Celsius by the end of this century, increasing the risk of droughts, rising sea levels, damaging storms and forest fires. According to the IEA projections, limiting global temperature rise to 2 degrees Celsius – deemed by the United Nations as the level necessary to avoid dangerous changes – would require the world to ramp low – carbon energy investments by four times their current levels – bringing annual global investment up to approximately $1 trillion. Electric grid–related challenges are ever-increasing. Problems include lack of transmission infrastructure in some locations, delays in grid connection, and sometimes the curtailment of renewable generation. At high penetration levels, variable renewables can pose challenges for electricity grid system operators. An increasing number of countries is aiding integration through improvements in grid management practices, improving system flexibility, and modifying existing grid infrastructure and technologies.

Overall, there have been significant and positive developments over the recent years for renewable energy sources. Wind power moved more firmly into Africa and Latin America; concentrating solar thermal power shifted its focus further to the Middle East and the North Africa region and to South Africa; renewable process heat fuelled industries from Chile to Europe to India; and solar photovoltaics continued to spread across the globe, with most capacity on-

111 Op. cit.

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” grid but also significant increases in off-grid markets in developing countries.

It is becoming increasingly evident that companies further shift their focus away from traditional markets in Europe and into Africa, Asia and Latin America, where strong new markets are emerging.

Markets, manufacturing and investment expanded further across the developing world and it became increasingly evident that renewables are no longer dependent upon a small handful of countries. Aided by continuing technological advances, falling prices, and innovations in financing, renewable energy sources are rapidly increasing their share in the developing countries’ energy mix.

In the past, most of the investments have occurred in fossil fuel importing countries with high GDP which could afford for renewable energy sources deployment, aiming at achieving energy diversification, climate change mitigation, economic development and other environmental protection. As shown in Figure 12, recent trends in fossil fuel prices and renewable energy sources technology cost reductions create new opportunities in two groups of countries: 1) Fossil fuel importers with lower GDP, that now find renewable energy sources as more convenient options to look at than in the past. 2) Fossil fuel exporters who see the opportunity costs and the benefits of diversifying the energy mix at home while selling fossil fuel at high prices in international markets.

One important consequence of the rapid expansion of renewable power generation has been the effect on declining generation costs. Figure 12 : High energy prices and reduced renewable energy costs encourage renewable energy expansion

Source: International Energy Agency, IEA, Pacific Summit Global Perspectives In a rising number of countries, renewable energy is considered crucial for meeting current and

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” future energy needs. To achieve a variety of energy security and sustainability goals, growing numbers of cities, states and regions around the world seek transition to 100% renewable energy in individual sectors or economy-wide, and many have already achieved their targets. Renewable technologies therefore are competing better in a wider range of circumstances.

The cost of generating renewable energy is expected to decline sharply in the future. Production costs from renewable energy sources will be reduced by 40% over the period 2015 - 2017 according to a study by the International Renewable Energy Agency (IRENA), whereas when externalities such as the environmental pollution and the deterioration of the general population’s health are taken into account, then the advantages of renewable energy sources become even more apparent.

World Trends in Energy Production / Consumption - The role of renewables in the future.

It is predicted that the global demand for energy will increase by more than a third over the period to 2035. Specifically, a 37% rise in global energy demand, driven mainly by emerging markets in Asia, Africa, the Middle East and Latin America is projected. It is further estimated that the demand for oil will grow more than 10%, for coal more than 20% and for natural gas by a remarkable 50% 112 . The largest share of the global increase in energy demand, 60%, is predicted to come from China, India, and the Middle East. By contrast, energy demand is barely expected to rise in OECD (Organization for Economic Cooperation and Development) countries. Therefore, the share of non-OECD countries in global energy demand is estimated to rise to almost two- thirds by 2035, up from one-third in the mid-1970s. This reflects a major shift in the center of gravity of the global energy system. One of the most significant changes today is the resurgence in oil and gas production in the United States. A combination of new technologies and supportive prices is unlocking unconventional resources that had previously been considered too difficult or expensive to exploit. And the effects of this unconventional revolution is being felt well beyond the United States. For example, cheap gas has edged coal out of power generation in the United States, but in Europe coal has been making a comeback at the expense of higher-priced gas. And in Asia, US gas exports will soon be competing in an LNG market increasingly dominated by major emerging economies. Emerging economies have a crucial part to play when it comes to electricity, estimated to account for a 70% increase in demand for power. Renewable energy sources will play a major role in this new power generation mix. A steady increase in hydropower and the rapid expansion of wind and solar has already cemented the position of renewables as an indispensable part of the global power mix. The share of renewable energy sources in total power generation is estimated to rise from 21% in 2012 to 33% in 2040, as they will be supplying nearly half of the growth in global electricity generation . Renewable electricity generation, including hydropower, is expected to nearly triple

112 International Energy Agency, World Energy Outlook 2014.

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” over 2012-2040, overtaking gas as the second-largest source of generation in the next couple of years and surpassing coal as the top source after 2035. Rapid expansion of wind and solar photovoltaics raises fundamental questions about power market designs: their ability to ensure adequate investment in conventional power plants and long-term reliability of supply. China sees the largest increase in generation from renewables, more than the gains in the EU, US and Japan combined 113 . Figure 13 illustrates the International Energy Agency’s projections for global electricity generation by the year 2035. The organization expects that renewable energy sources will overtake gas to become the world’s second-largest source of power generation by 2015, after coal. By 2035, they are expected to approach coal, as the primary power source, accounting for almost one-third of total electricity output. The renewables growth is led by solar photovoltaics that are expected to grow faster than any other renewable energy technology. Deploying renewables is a key component of any climate change mitigation strategy. Figure 13: Share of Renewables in Total Electricity Generation, 2010-2035

Source: International Energy Agency, World Energy Outlook, 2012

Compared to the emissions generated if demand growth was met by the 2010 energy mix, total annual CO 2 savings across all sectors from renewables amount to 4.1 gigatonnes (Gt) by 2035. 3.6 of that is in the electricity sector. This represents some 10% saving on total global CO 2 energy- related emissions in 2035, with more than 40% of the savings coming from increased wind generation.

Recent trends in renewable energy sources growth will continue and even accelerate over the next five years. Hydro remains the largest source and is estimated to continue to grow at 3% per

113 Op. cit.

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year. But non-hydro technologies will increase by 14% per year. But what is interesting is where that growth is happening. Non-OECD countries account for two-thirds of the overall projected growth in the next five years. This is no longer a rich-country sector. In 2005, the Pacific Region accounted for 17% of global generation from renewables. In 2017 this share will increase up to 28%. China alone accounts for 40% of the global growth to 2017, with large contributions from hydro, wind, bioenergy and solar photovoltaics.

4.2.5 European Union Energy Production and Consumption Trends – Share of Renewables

Some of the findings of recent statistical studies 114 , on renewable energy sources in the European Union are truly revealing of the part played by renewable energy sources in the EU energy mix. Renewable energy sources include wind power, solar power (thermal, photovoltaic and concentrated), hydroelectric power, tidal power, geothermal energy, biomass and the renewable part of waste.

Due to early adoption of legally binding EU and national targets, including national action plans and administrative reforms, Europe has achieved an ever-increasing share of renewable energies in its energy mix. The primary production of renewable energy within the European Union 28 member states in 2012 was 177.3 million tonnes of oil equivalent (toe), or, a 22.3% share of total primary energy production from all sources. The quantity of renewable energy produced within the EU demonstrated an overall increase of 81.3% between the years 2002 – 2012 (Figure 4). This is equivalent to an average annual increase of 6.1%.

Figure 14. Electricity generated from renewable energy sources, EU -28, 2002 –12

114 http://ec.europa.eu/eurostat/statistics-explained/index.php/sustainable_development_-_climate_change_and_energy

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Source: www.ec.europa.eu/Eurostat/statistics_explained?index/Renewable_energy_statistics

Among renewable energies, the most important source in the EU was biomass and renewable waste, accounting for almost two thirds (65.5%) of primary renewables production in 2012. Hydropower was the other main contributor to the renewable energy mix (16.2%).

Figure 15: Renewable Power Capacities, 2013

Source: REN21 (2014), Renewables 2014, Global Status Report.

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Despite the fact that their levels of production remain relatively low, there has been a particularly rapid expansion in the output of wind and solar energy in the EU, which accounted for 10% and 5.1% respectively of the renewable energy produced in the EU in 2012. The remaining shares were 3.2% for geothermal energy and 0.02% for tide, wave and ocean energy 115 . Two main drivers account for the increased share of renewable energy as a percentage of total final energy consumption in the EU: support schemes for renewable energy technology and the diminishing costs. As a result of policies such as feed-in tariffs, grants, tax credits and quota systems, installed capacity for renewable electricity and heat generation as well as the use of renewable transport fuels has grown steadily over the past decade.

Consumption

Renewable energy sources accounted for an 11% share of the EU’s gross inland energy consumption, as is seen in Table 1. Over one third of the energy consumed in Sweden (37.2 %) and Latvia (36.4 %) was derived from renewables in 2012, while the relative importance of renewables was also high in Austria (30.1 %), Finland (29.2 %) and Denmark (23.3 %).

Table 3 : Share of renewables in gross inland energy consumption in the EU, 2012

Source: www.ec.europa.eu/Eurostat/statistics_explained?index/Renewable_energy_statistics

115 http://ec.europa.eu/eurostat/statistics-explained/index.php/sustainable_development_-_climate_change_and_energy

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Renewable energy sources accounted for 8.9% of Bulgaria’s total energy consumption, and for Greece the percentage rose to 9.6%. Both countries are below the EU-28 average which stands at 11%. The EU seeks to have a 20 % share of its gross final energy consumption from renewable sources by 2020; this target is distributed between the Member States with national action plans designed to plot a pathway for the development of renewable energies in each Member State. The share of renewables in gross final energy consumption stood at 14.1 % in the EU-28 in 2012.

Electricity Electricity generated from renewable energy sources contributed almost one quarter (23.5%) of the gross electricity consumption in the EU (see Table 1). The growth in electricity generated from renewable energy sources during the period 2002-2012 is to a large extent the result of an expansion in three renewable energy sources: wind turbines, solar power and biomass. Although hydropower remained the single largest source for renewable electricity generation in the European Union in 2012 (54.1% of the total), the amount of electricity generated in this way in 2012 was relatively similar to that a decade earlier (overall increase of 3.9%). On the other hand, the quantity of electricity generated from biomass (including renewable waste) more than doubled, and that of the wind turbines increased more than fivefold over the same period (2002- 2012). The growth in electricity from solar power was even more astonishing, rising 252 times as high compared to ten years earlier (from 0.3TWh in 2002 to 71TWh in 2012). Over this 10-year period, the contribution of solar power to all electricity generated from renewable energy sources rose from 0.1 % to 10.5 %. Today the EU is the world’s biggest renewable energy investor. The scaling up of global production volumes and technological advances have enabled producers to substantially cut costs per unit. Most renewable energy technologies are at a relatively early stage in their learning process, but have already shown tremendous potential for learning. The biggest reduction is seen in photovoltaic modules, with prices falling by 76 % between 2008 and 2012. Every doubling of the overall installed solar thermal collector capacity has led to a reduction in production costs by 23% between 1995 and 2012. PV system prices have decreased from 30€/W in 1980 to 1.5€/W 2012 116 . Not surprisingly then, the cost of solar energy production dropped by 50% between the years 2010 – 2014. In countries such as France and Germany, the cost of domestic solar power is already lower than the price of conventional electricity supply from the grid 117 . Onshore wind turbines became 25% cheaper between the years 2008 – 2012 118 . Where conditions are favourable, for instance in places with strong winds or good solar performance, wind and solar installations are beginning to become economically viable without subsidies. The European Commission’s Energy Roadmap 2050 identifies renewable energy, energy efficiency and infrastructure as ‘no-regrets’ options – in any given scenario they are critical for decarbonisation towards 2050. It emphasizes a high penetration of renewable energy beyond 2020 as a pre-requisite for a secure, zero-carbon energy system. It also recognizes that increased

116 European Renewable Energy Council, Hat-trick 2030, An Integrated climate change and energy framework. 117 International Renewable Energy Agency (IRENA). 118 http://ec.europa.eu/eurostat/statistics-explained/index.php/sustainable_development_-_climate_change_and_energy

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” investments in high value-added renewable energy and efficiency equipment could constitute a major opportunity for the EU manufacturing industry to create growth and jobs 119 . Production costs from renewable energy sources will be reduced by 40% in the next two years according to a study by the International Renewable Energy Agency (IRENA), whereas when externalities such as the environmental pollution and the deterioration of the general population’s health are taken into account, then the advantages of renewable energy sources become even more apparent.

119 EREC, European Renewable Energy Council, Hat Trick 2030, An Integrated Climate and Energy Framework.

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4.3: Trends in Energy Efficiency

Introduction Access to clean, affordable and reliable energy has been a cornerstone of the world’s increasing prosperity and economic growth since the beginning of the industrial revolution. Our use of energy in the twenty-first century must also be sustainable. Energy efficiency in buildings or the industry, solar, wind, and water-based energy generation, the engineering of microbes to produce biofuels are a few examples of the alternatives. This perspective puts these opportunities into a larger context by relating them to a number of aspects in every sector of the economy. It also provides a snapshot of the current energy landscape and discusses several research and development opportunities and pathways that could lead to a prosperous, sustainable and secure energy future for the world.

Over the recent years, energy efficiency is gaining widespread acceptance. It is increasingly appreciated that without energy efficient practices, the use of renewables alone is not sufficient to reduce CO 2 emissions to the target-levels set by the Kyoto Protocol.

The building sector and the industry will play a crucial part here, as they are the major users of final energy consumption and the potential for energy efficiency is very high. Approaches towards energy efficiency in there sectors vary, according to the particular characteristics of each case. They may range from passive, bioclimatic designs, to innovative thermal insulation methods, to building-integrated photovoltaics, to automated energy management systems that reduce energy consumption, to more efficient and powerful mechanical equipment. These approaches may be used separately or in conjunction so as to maximize energy efficiency in these sectors.

Some interesting developments that occurred in 2013 in the energy efficiency field The efforts for energy efficiency are ongoing. Managers worldwide, whether in industrial sectors or in office buildings and shopping malls increasingly appreciate the benefits that result from cutting down on their energy consumption costs. Energy costs constitute a crucial parameter for companies and households, and for many, they seem as the most reasonable and in many cases the easiest starting point to reduce costs. Technological advances encourage this trend towards energy efficiency and present cost efficient solutions that were not available in the past. Some interesting opinions from top experts of the field regarding the recent trends are presented below:

• 2013 saw widespread acceptance among senior management of the importance of energy efficiency 120 , driven by the three trends: 1) execution to achieve publicly stated greenhouse

120 Source: http://www.greentechmedia.com/articles/read/what-will-2014-bring-for-energy-efficiency

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gas reduction goals; 2) pressure from top customers; and 3) increased funding from utilities for behavior change (through demand response) and retrofits (through incentives). Most management teams now realize that energy management can no longer be left to the backwater of "deferred maintenance" programs and local decisions. • The availability of building energy consumption information is playing an important role in driving the efficiency market. Several different factors have contributed to this, including inexpensive sub-metering solutions, energy management software (including virtual energy audit services) to compile and transform raw data points into useful information about energy use, and legislative mandates for reporting energy use. • The days of finding low-hanging efficiency fruit across utility service territories are behind us. Demand-side data analytics have emerged as a key enabler for identifying, prioritizing, and delivering the next generation of energy efficiency. Utilities are now relying on analytics to find and enable this efficiency at mass scale.

The most notable obstacles on the path to energy efficiency

• The most serious obstacle for commercial efficiency is fostering private investment and unlocking financing for projects. The fundamental challenge is a lack of uniform, reliable, and universal building performance data that project investors can use as a basis for investments in energy efficiency upgrades. Just as the creation of new financial products in other sectors is based on credit scores and other measures of investment worthiness, new investment in the energy efficiency sector demands a standard way to assess and measure value. • Lack of funding is considered one of the greatest barriers to investment in energy efficiency. Specific barriers include lack of internal capital, competition from other investments and lack of competitive third-party financing options. These are especially critical barriers in the private-sector commercial real estate market where credit-worthiness, short-term ownership, and split owner/tenant incentives add to the already-significant barriers to investment.

The problem of education and accountability in the energy efficiency era

• Energy accountability still is lacking in many organizations. While more management teams realize the importance of managing energy use, who specifically is responsible for driving improvements (operations, real estate, sustainability, etc.) remains fluid, and thus reduction programs stall. • A legacy mindset for data center operations is often encountered, which is based on longstanding manual practices. This thinking perpetuates an “always on, all the time”

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practice for operation, which is absolutely wrong and unnecessary. Many data center managers are unaware of just how much information is available through monitoring sensors, as well as how to use this information to simultaneously reduce energy use and gain time and insight for more strategic, proactive planning.

The trends in energy efficiency in the near future

• There is growing momentum in commercial property-assessed clean energy financing. • The major trends are LEDs everywhere with lighting controls, and increased adoption of enterprise energy management software. • “Airside energy efficiency” is considered by many as the next big trend, encompassing several different strategies (improved economizer utilization, natural ventilation, and demand control ventilation). One way this can be observed is in the increasing availability of utility incentive programs for “ventilation optimization." Although many of these programs are customized incentives (as opposed to “prescriptive” incentives), demand control ventilation for airside efficiency is expected to become one of the next standard offerings that utilities begin to drive as the next big category of energy efficiency measures. • Intelligent analytics will play a crucial role. Sensors have become both inexpensive and ubiquitous, efficiently providing great data in significant volumes. When combined with intelligent analytics, this data will provide unprecedented insight into data center energy use and operating behavior, enabling entirely new and likely unexpected ways of gaining efficiency and uptime safety. • The energy efficiency sector has traditionally been an industry obsessed with retrofits, while it looks past the easier, non-intrusive operational opportunities. With market education and awareness beginning to change significantly, this could be the year that operational savings get their fair share of attention and deliver their fair share of efficiency results. A 2013 study from NYSERDA showed that commercial buildings that act on a single measure are far more likely to act again in the future. Low- and no-cost operational savings represent half the savings of commercial buildings and are the natural entry point for energy efficiency.

Innovative Practices and Technologies for Energy Efficiency The industrial sector and the residential or commercial building sector are the biggest end-users of energy worldwide. Although people have set the goal for both sectors to become more energy efficient, the approach that will be used towards this end obviously will differ from sector to sector. The common ground is to be found in the technologies. A given technology, such as photovoltaics, can be used in both sectors. Also, both industrial buildings and households will benefit from heat loss reduction resulting from efficient insulation of the building shell.

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On the other hand, mainly due to the scale of the industrial projects, the specific challenges that arise from each distinct case, a uniform approach to the problem of energy efficiency in those two sectors would be seen as an oversimplification.

4.3.1 Energy Efficiency Trends the Building Sector - Residential and Commercial Buildings 121 Energy consumption in households was 82 EJ in 2005 . The associated CO 2 emissions (including indirect emissions from electricity use) were 4.5 Gt CO 2. Households are the only major end-use sector where the increase in energy consumption since 1990 has been greater in OECD countries (+22%) than in non-OECD countries (+18%).

The energy mix in households varies significantly between OECD and non-OECD countries. While OECD countries rely mainly on electricity and natural gas (with a combined share of 72%), renewables, mainly biomass, dominate the energy mix in non-OECD countries (with a share of 59%). In Russia and some other transition economies, district heating is the most important energy commodity for households.

A set of indicators has been developed to analyse trends in the energy use and CO 2 emissions of households. While aggregate indicators can be developed for all countries, more detailed indicators that focus on particular end-uses are only available for a group of 19 IEA countries (IEA19).

In these 19 IEA countries, space heating energy use is growing slowly and remains the most important energy user, responsible for 53% of household final energy consumption. In contrast, appliance energy use (mostly electricity) is growing very rapidly and has overtaken water heating as the second most important household energy demand.

Further analysis for space heating reveals that, for the IEA19, efficiency gains are being offset by increased demand as a result of larger homes and lower occupancy rates.

The energy and CO 2 emissions increases from appliances are being driven by a wide range of mostly small appliances, as well as by air conditioning in some countries. Large appliances in a group of 15 European countries now represent only 51% of total appliance energy consumption, and this share is still falling.

The building sector accounts for approximately 40% of total energy consumption in the European Union 122 . This consumption, either in the form of heating (produced mainly from fossil fuels) or in the form of electricity results in high operating costs due to the increased cost of energy and increased C0 2 emissions, responsible for the greenhouse effect.

121 International Energy Agency (2008), Worldwide Trends in Energy Use and Efficiency, Key Insights from IEA Indicator Analysis 122 Center for Renewable Energy, http://www.cres.gr/energy_saving/biomixania/biomixania_intro.htm

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The extensive use of air conditioners contributes to increased energy consumption, particularly in warm climates. Furthermore, the widespread use of electric appliances in households leads to increased energy consumption. Energy efficiency in buildings is achieved in part through the use of appropriate construction materials, and in part through the installation of effective energy-management systems. Crucial are also continuous, systematic, ongoing energy efficiency programs, be it on a managerial or technical level. Intervening in order to make a building more energy efficient may occur on the following areas: • The shell of the building, for example, thermal insulation, passive solar systems, appropriate open/close systems. • The building’s surrounding space, for example the use of appropriate vegetation. • Heating and cooling mechanical systems, lighting systems, water-heating systems and electrical appliances.

The appropriate use of the building and the efficient use of its structural components, for example, energy management, natural ventilation, making appropriate use of its thermal load. Energy efficiency today may be achieved through a series of practices and / or technological applications. According to the individual requirements of each case, case-specific solutions emerge to assist reducing energy consumption. Some of the approaches are seen in further detail below: The bioclimatic designs that attempt to connect architecture with nature. Renewable energy systems and photovoltaic applications with ever-increasing capabilities. Technological innovations, such as the next generation photovoltaic systems and the microturbine. Technologically advanced building energy management systems, advanced insulation methods, heating and cooling systems, efficient air flow and ventilation systems, and intelligent lighting systems can be used separately or in conjunction to substantially increase energy efficiency in buildings.

4.3.1.1 Bioclimatic Design The bioclimatic design of a building is a design that considers the climate of each geographical region first and then attempts to create the necessary climatic conditions in the interior of the building (thermal and visual comfort, air quality) with the minimum amount of energy consumption possible, using the available sources that the surrounding environment provides (the sun, the air and the wind, the water, the terrace) 123 . The focus here therefore is more on design and architectural elements and less on mechanical systems which are regarded as support. A bioclimatic design may include techniques such as the thermal insulation of the building shell, the passive solar systems, natural cooling and natural lighting systems and techniques, and some of the techniques for sensible energy use (thermal zones, heat storage on the construction elements of the building). Yet, the focus here is more on design and architectural elements and less on mechanical systems which are regarded as support. The concept of bioclimatic design is not new and indeed, many traditional architecture styles

123 Center for Renewable Energy, http://www.cres.gr/energy_saving/

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” work according to bioclimatic principles. Traditional techniques work and are time tested throughout the world. Bioclimatic design depends on the local climate and is based on the following principles: • The thermal protection of buildings for the winter as well as for the summer, with the use of appropriate techniques that are applied on the external building shell, particularly the appropriate thermal insulation and airtightness of the building and its openings. • Improvement of the microclimate on the exterior of the building, using a bioclimatic design for the surrounding terrace or buildings, according to the bioclimatic principles. • Directing the heat that builds up in the interior during the summer towards the exterior, with natural – not mechanical – techniques such as passive cooling and natural ventilation during the night time. • Making optimal use of solar energy for the heating of the building during the winter and for natural lighting throughout the year. This is obtained by orienteering the building and especially its openings (south orienteering is the most appropriate), with the arrangement of the interior of the building according to heating needs, and with passive solar systems that collect the solar radiation and work as ‘natural’ heating and lighting systems. In warm climates, the building must be protected from the sun, mainly with the application of shading techniques but also with the appropriate construction of the building shell.

The following conditions ought to prevail in order to take advantage of the solar energy and to arrive at increased energy efficiency: • The building windows should be sufficient in number, should be large enough, and ought to be facing the sun directly for several hours per day during the winter. That is the reason that architects prefer the southern orientation of the building. • The building should be sufficiently insulated so as not to sustain heat losses from its exterior surfaces (walls, roofs, floors, windows). • The interior of the building should be made from building materials that ‘store’ the solar heat. These surfaces then ought to radiate warmth (not become too hot though) throughout day and night. These building materials should preferably have a substantial mass (such as ceramic plates on the floor, cement, solid bricks or stones on the interior of the walls) so as to be able to absorb sufficient heat loads. • The interior of the building’s layout should be carefully planned. Spaces requiring more heat should receive more solar energy. The most important factor when it comes to taking advantage of the sun’s heat in buildings is the correct orientation of the buildings’ openings (walls and doors). Openings facing south receive more solar heat during the winter, and by use of an appropriate horizontal sunshade, very little during the summer. Openings facing north result in better lighting conditions in the building, because the light they receive is not direct but has been diffused. Such openings however (for example, windows) should have a small surface because they have little

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” to offer during the winter in terms of lighting and on the other hand the building suffers heat losses through them. Eastern or western openings are the least preferred. They should exist only when it is necessary, for reasons of viewing or lighting. In general, windows facing to the east or the west should have some form of sunshield, preferable on their exterior and of the perpendicular type. A bioclimatic design also includes the Passive Solar Systems. Those in essence are structural elements of the bioclimatic building, operating without the use of equipment or energy consumption. In a natural manner, they are used to heat or cool a building. Passive Systems fall into three categories: a) Passive Solar Heating Systems Passive solar systems are the structural elements of a building that, based on laws of physics (in particular, the laws of heat conduction), collect solar energy, they store it in the form of heat, and then they diffuse it in the interior. The most common passive solar system (system of immediate gain) attempts to take advantage of the location of the windows in the building through their appropriate orientation. Further, there exist passive solar systems of intermediate gain (solar walls, solar greenhouses, solar patios) and passive solar systems of isolated gains (panel solar collectors separate from the building). Passive solar systems are attached on the building walls facing south (they may deviate approximately 30 o to the east or west from the direction of the south) that should be clear from shading during the winter. b) Passive Systems Using Natural Cooling Techniques Natural cooling is an alternate practice to air-conditioners, seeking to maintain comfortable conditions in the building interiors during the hot summer months. The practices of natural and hybrid cooling may be applied to households and other buildings. For some building categories (for example houses or schools) their application would mean that there is no need to install air- conditioning equipment. For other categories, it would result in a substantial reduction of their energy consumption throughout the year. The basic bioclimatic techniques and systems of natural or hybrid cooling are the sun protection / shading of the building and the natural (or hybrid, with the use of a fan) building ventilation. Using natural cooling techniques, apart from reduced energy consumption, the conditions in the interior of the building are immediately improved during the hot summer months, even at high temperatures. In warm climates, a building may achieve a temperature in its interior that is 10 o Celsius below the temperature of the surrounding environment. Even when outside temperatures reach 31,5 o Celsius, the interior of the building still demonstrates comfortable conditions. In contrast to air-conditioners that have been set to relatively low temperature modes (for instance, to 26 o Celsius) and extract heat to the surrounding environment, natural cooling systems exchange heat with the external environment with a substantially milder manner. c) Natural Lighting Taking advantage of natural lighting in buildings aims at reducing energy consumption, and at improving the living conditions in their interior, combining the view, the natural light, ventilation, and efficient use of the solar energy that is absorbed. When designing natural lighting systems, architects aim to cover the building needs for lighting

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” in a natural manner to the greatest extent possible. To take advantage of natural lighting so that the building benefits from natural light sources, the appropriate techniques should be used. The aim is to reach proper illumination levels in the building’s interior. The light ought to be diffused evenly so as to avoid too much light in one part of the interior and too little on another. The lighting conditions adequacy and diffusion depend on the geometry of the building, the positioning of the openings (doors and windows, roof openings), from the photometric characteristics of the interior’s surfaces (their colour and textrure) and from the window panels (how much light can come through the panel, how much is reflected, etc.) Natural lighting is a complete lighting system: • The window panels • The framing • The shading shields (natural or artificial)

Natural lighting systems fall into 4 categories: windows and openings on the walls, roof openings, patios and lightwells. The most common natural lighting techniques, are: • Windows (on walls or the rooftop) • Patios • Lightwells • Special window panes • Materials allowing the light to come through • Transparent insulation materials • Lighting shelves, reflectors, window slats • Sunshields

The architectural design of the buildings and the respective natural lighting systems should ensure that adequate light reaches the interior of the building, also taking into account the more general requirements of an energy efficient building.

Figure 16. An example of a bioclimatic design in a modern office building

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4.3.1.2. Thermal Protection of Building Shell and Efficient Insulation Insulation refers to an energy efficiency measure, which provides resistance to heat flow 124 . Naturally, heat flows from a warmer to a cooler space. By insulating a house, one can reduce the heat loss in buildings in cold weather or climate, and reduce the heat surplus in warmer weather or climate. Insulating a house has several benefits such as energy savings, cost savings and increased comfort. Barriers to undertake energy savings measures may be split incentives, relatively high investment costs, and the time and effort required to realise the energy savings.

The thermal insulation of a building shell is a basic prerequisite for the appropriate thermal behavior or any given building. Thermal insulation consists of a number of structural – building elements (building materials and insulation systems) and has a direct effect on the construction cost and the operational costs of the building. Insulation measures are generally one of the most cost effective energy savings measures. Several types of thermal insulation measures exist.

Wall, roof and attic, floor and soil insulation

Wall, roof and floor insulation may be done by fixing insulation material to the wall, roof or floor, either on the inside of outside, e.g. by using insulation plates. Different materials for walls, roofs and floors require different types of insulation measures. Buildings may for example have cavity

124 Center for Renewable Energy, http://www.cres.gr/energy_saving/

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” walls consisting of two 'skins' separated by a hollow space. This space already provides some insulation but can be filled up with additional insulation material, e.g. foam, to further improve the insulation effect. Roof insulation for flat roofs differs from insulation for steeper roofs.

Floors are usually made of wood or concrete, each requiring specific insulation measures. Another option to reduce heat losses to the ground is soil insulation, for example by placing insulation material on the soil in a so-called “crawl space” (a very low basement).

The age of a building is an important factor determining the type of insulation and the way in which it is installed, e.g. if insulation is put on the outside or inside of the construction.

Window and door insulation

Windows and exterior doors have a large impact on the heating and cooling requirements of a building. New materials, coatings, and designs have led to significantly improved energy efficiency of new, high-performing windows and doors. New high-quality windows may be up to six times more energy efficient than lower-quality, older windows. Some of the latest developments concerning improved windows include multiple glazing, the use of two or more panes of glass or other films for insulation, and low-emissivity coatings reducing the flow of infrared energy from the building to the environment. Attention needs to be paid not only to the window itself, but also to the window frame, which can significantly impact a window’s insulation level. Finally, one may consider to fit window coverings to increase insulation.

Sealing cracks

Another insulation measure that reduces the amount of heat loss is sealing cracks in the ‘shell’ of the building. Cracks cause infiltration of cold air from outside or leakage of warm air to the outside. Strips or other material can be used to seal cracks in moving parts, such as windows and doors, and in places where different construction parts are attached to each other. A carefully insulated building generally meets the needs of a properly designed - in terms of energy efficiency – building. Caution, however, should be exercised to avoid the existence of thermal bridges (parts of the building that are insufficiently insulated or not at all) that can create ‘sensitive’ spots on the building, even the creation of humidity.

4.3.1.3 Building Energy Management Systems Buildings represent 40% of primary energy use globally, and energy consumption in buildings is projected to rise sustainably. Table 4 : Areas where energy efficiency can be achieved in a building and the technologies available that can be put to use toward this aim.

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Technology Category 125 Technologies Included Efficient heating and cooling Tankless water heaters Heat pump water heaters Commercial evaporative coolers Water source and ground source heat pumps Efficient lighting Light emitting di odes (LEDs) Weather barriers and efficient insulation Weather barriers Efficient insulation

Advanced windows and window Low emissivity windows coverings Window films Window attachments

At the same time increasing resource scarcity, legal risks and growing operating costs as well as different requirements from different users, are just some of the challenges that need to be taken into consideration when thinking about energy efficiency and sustainable buildings.

The industry goes on to meet these challenges with systematic approaches adapted to the lifecycle of each building, supported by specialized services, innovative products and state-of- the-art technologies.

Efficient Heating and Cooling Between 30% and 45% of a building’s energy load can be devoted to heating and cooling 126 . The thermal needs will vary according to internal and external factors that have an effect on the thermal conditions in a room or a building. As an external factor, the solar radiation is important for the indoor temperature – particularly with regard to modern architecture with glass fronts. Besides this, the room temperature is strongly affected by the exchange of thermal energy through windows and walls as well as the loss of thermal energy through open doors and windows. Depending on the intensity, all there interactions influence the energy efficiency of a building. Internal thermal inputs from lighting, electric appliances or people, also influence the room climate. When planning a heating, ventilation, or air-conditioning system, all those internal and external factors need to be considered. Mechanical upgrades can be applied in order to increase the energy efficiency of a building. Those range from simple, for example the retrofit steam radiators with local thermostats – to substantial, such as retrofitting under-floor ventilation. Mixed-mode systems reflect this whole range. The most inexpensive way to naturally ventilate buildings in swing seasons (relies) on occupants and facilities managers to handle it. The other route is a fully technical answer, which means that everything is wired and windows open and

125 Energy-Efficient Technologies for Commercial Building Construction 126 McGraw-Hill Construction, Business Case for Energy Efficient Building Retrofit and Renovation

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” close at the command of a central computer. In this category, the most common practice is to retrofit variable frequency drives to fan motors. Whereas variable frequency drivers are a one-size-fits-all solution, most retrofits must be specific to the building. Evaporating cooling systems are recommended for dry climates, whereas heat recovery ventilators, which mitigate the temperature of incoming ventilation, should be considered for colder locations. Technology upgrades for energy efficiency in heating and cooling may include one or more of the following applications 127 :

Energy saving functions Energy saving functions for heating and cooling allow energy-optimized automation of the technical installations of a building, thus reducing energy consumption drastically.

Minimized control deviation Individual room controllers with actuators offer high-precision control within an extremely narrow tolerance band of +-0.2o Celsius; with standard room thermostats, on the other hand, the temperature fluctuates between 1 o to 2 o Celsius. The high control accuracy enables the room to have a lower setpoint, increasing energy efficiency.

Individual room temperatures – site-specific energy output In every room, an individual room temperature can be set that meets the desired comfort needs. Individual time-based programs and presence detectors ensure that the temperature is increased from pre-comfort to comfort level only when the room is occupied. In addition, they activate the energy saving mode at night as well as on weekends, holidays, and during vacation periods.

Window contact control – preventing energy waste Once the control recognizes via a connected window contact that a window has been opened, it. • automatically closes the control valves in the room, • stops energy output, and • activates the protection mode to prevent damage.

Optimized start/stop control (OSSC) – saving without sacrifice With an optimized start/stop control, the control switches the heating on at the appropriate time to ensure that the stipulated room setpoint has just been reached when occupants enter the rooms. OSSC switches the heating off before the occupants leave the room while maintaining the comfort mode. This saves energy at night, on weekends, and during vacation periods.

127 http://www.buildingtechnologies.siemens.com/bt/global/en/buildingautomation-hvac/building- automation/applications-tools/energy-savings-functions/Pages/optimization-heating-and-cooling.aspx

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Heating and cooling demand control – Optimizing energy production The energy demand signals (valve positions and temperatures) from the rooms are collected and then summarized and evaluated per heating and cooling circuit. The demand derived from this information is transmitted to the generation and distribution, where flow rates and supply temperatures are adapted to the current demand.

Demand control of the pump – saving electrical energy In the case of lower energy demand, the room control valves close and the differential pressure in the piping system increases. Constant control of the differential pressure reduces the volumetric flow and the output of the pump decreases, thus reducing the energy consumption. The speed control with variable differential pressure achieves even higher electrical energy savings.

Systematic energy generation – increasing energy efficiency By evaluating the heating or cooling demand signals, the generator temperature can be adjusted to the current temperature needs. Heat or cooling losses within the generator that are caused by unnecessarily high or low temperatures are thus minimized. If multiple heat and cooling generators are available, the priority control releases current energy demand. The sophisticated switching of the operating sequence influences the generators in such a way that they can be operated with a high degree of use – thus ensuring energy-optimized operation.

Predictive heating controller – saving energy and costs The predictive heating controller combines the following elements: outside temperature forecast, adaptation of heating curve and building model parameters, model-related forecast of room temperature, start/stop function, plus optimization of flow temperature setpoint. Due to complete adaptation of the building model parameters, commissioning and maintenance costs are cut and energy savings are reached. Excellent system management improves both the transition from boost heating to comfort mode and the behavior in case of undersized heating output.

Solar panel control – heat storage charged by solar energy

The application ensures optimum charging and discharging of heat storages. Charging takes place primarily through solar energy, then by heat supplied by a heating boiler. When using solar collectors, discharging and consumer return can be operated at two levels. The integrated charging level indication shows the operating state of the heat storage.

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Efficient Lighting Building owners and managers look to lighting technologies for improving building performance. In facilities that require few air changes, like offices and academic buildings, lighting can consume as much as 30% of total energy 128 . Daylighting control systems are easier to access. After-market systems require the least capital cost. Motion and daylight sensors are affixed directly to lamps, and the electricity savings pays back in approximately two years. If the project includes installation of lamps that lower the power density, then there is the added benefit of lowering cooling load in climates where such reductions make sense. More expensive installations include perimeter light detection and computerized lamp controls. The US Green Building Council headquarters demonstrates the most reasonably priced strategies working in harmony. Washington, DC – based Envision fashioned the office from two floors of a 1970 mid-rise, with lighting consultant Clanton and Associates. The 75,000 square foot (approx. 7,000m 2) interior was designed for a lighting load of .54 watts per sq. foot, but uses only .25 watts per sq. foot. It should be noted that good architecture and interior design plays a big part in this achievement. For example, to maximize daylight penetration, the project team configured desks to minimize glare. It also specified light - coloured carpet to reflect daylight inward. Other technological applications for more energy efficient lighting includes: Coordinated room control – intelligent lighting that saves energy costs Intelligent lighting control saves money while retaining the same level of visual comfort. For example, constant lighting control that takes advantage of daylight provides only the requisite amount of artificial light. Room control based on occupancy provides additional energy-saving potential.

Daylight harvesting – optimal usage of available daylight Automated control of solar protection facilities contributes to energy savings by allowing as much daylight in the room as possible through the use of shadow edge tracking and tracking of the position of the sun. Combined with automated lighting control, daylight harvesting control ensures that available daylight is used in an optimum manner.

Constant light control – presence dependent lighting reduces energy demand With constant light control, the lighting automatically turns off if a room is not used. Presence detectors integrated in access control or a timer provides the control. In hallways, lighting can be switched off outside of primary occupancy periods based on presence. During primary occupancy, the light is returned to an adjustable minimum level of brightness when no one is there. Automated control in all areas does not restrict user comfort. Manual control and adapting to individual needs is also possible as needed. Centralized switching off of lighting as well as lighting control dependent on daylight and occupancy reduce energy demand.

128 McGraw-Hill Construction, Business Case for Energy Efficient Building Retrofit and Renovation

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Lighting Scheduler – optimized energy consumption The lighting scheduler function can be used to centrally program all scheduled building lighting functions including individual room control. With its weekly, holiday and exception programs, it reduces the energy consumption, e.g. during non-occupancy.

3.1.3.3 Efficient Air Flow and Ventilation Systems Air conditioners, particularly in warm climates are a major source of energy consumption. Technological applications can help reduce the energy consumption resulting from the use of air conditioners and ventilation systems: Air Optimization Control – energy efficiency resulting from optimized air volume flow This modular designed application offers a number of function variants for the control of air handling plants or for optimum fan operation. Air Optimization Control optimizes the volumetric air flow, thus providing an excellent basis for energy-efficient operation of ventilation and air conditioning systems. At the same time, comfort control ensures adherence to the boundaries of temperature, indoor air quality, and humidity. Air Optimization Control is suited for individual room systems or several zones and also controls basic load heating.

Energy-optimized control of air conditioning plants The application offers energy-optimized air conditioning plant control by conditioning the air supplied to the rooms using the most favorable form of energy. The procedure continuously calculates air conditioning costs, allowing for targeted selection of the most favorable method. Optimization can be based on energy, costs, or CO2. As a result, the application helps lower energy costs and offers an excellent basis for highly efficient operation.

Air flow control – reduction of air flow saves energy If there is a need to throttle or shut off individual sections of a branching duct network without affecting other operational systems, the supply air duct must be maintained at a specific pressure. To achieve this, a modulating controller compares the pressure difference against the setpoint. In case of a deviation, the controller corrects the delivery pressure of the fan by changing the rotor speed. The reduction of air flow saves energy for air handling and distribution.

Supply air temperature control – reduction of energy input A control loop enables to control the supply air temperature. The setpoint is defined as a function of the loads in the room. This can normally only be achieved with an integrated control system,

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” enabling to collect the temperatures or actuator position in the different rooms. Energy savings are achieved as the supply air temperature is controlled depending on the largest individual load of all individual rooms. This reduces the number of individual room temperature controllers that reheat in the summer or recool in the winter.

Humidity control – resulting in lower energy consumption Direct humidity control is used in cases where the setpoints for temperature and humidity of the conditioned space must be maintained exactly at all outside air states and in case of internal heat gains and external humidity. Energy savings result as supply air or room air is cooled, humidified and reheated to the extent required.

Heat recovery control – unnecessary re-cooling reduces energy consumption Heat recovery equipment in ventilation systems can help save considerable amounts of energy. The air conditioning process is controlled in sequences. This means that, first, the maximum amount of heat is recovered and only then will the heating or cooling sequences be activated. During periods where the effect of the heat exchanger will no more be beneficial, a control loop between "stops" and "modulates" or bypass the heat exchanger is needed. Temperature sequence control at heat recovery prevents unnecessary recooling of the supply air.

Air side icing protection control – no increase of air pressure If the extract air temperature falls below the dew point at outside temperatures below freezing, ice forms on the extract air side of the heat exchanger, constricting the flow area. This occurrence must be prevented by protective equipment. The power of the exhaust air fan need not be increased with icing protection limitation control. This leads to energy savings.

Filter control – Saving energy with constant monitoring In variable air flow volume systems, flow volume control keeps the air flow volume constant in spite of increasing clogging by increasing the fan speed accordingly. If the system is operated with a reduced air flow volume, the fans are run at a disproportionately high speed until the filter monitor is triggered, which consumes energy unnecessarily. This can be avoided with a filter control via a differential pressure sensor with compensation for filter clogging based on the current air flow volume.

4.3.1.4 Renewable Energy Systems – Photovoltaic Applications

Solar photovoltaic systems can be installed on rooftops, integrated to a building's envelope, or ground-mounted. Photovoltaic applications include residential systems, larger industrial/commercial systems and utility-scale power plants, but also consumer goods. A solar

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” photovoltaic system can be either connected to the grid or off-grid. The categories that we most commonly come across today are:

• Grid-connected residential systems

Can be rooftop, integrated in the building’s envelope (used as a building component for insulation, roofing tile, shading, etc.) or mounted directly on the ground (in the garden). Connection to the local electricity network allows any excess power produced to feed the electricity grid and to sell it to the utility. Electricity is imported from the network when there is no sun

• Grid-connected power plants

Can be ground-mounted , or located on large industrial/commercial buildings such as shopping malls, airport terminals or railways stations. These produce a large quantity of PV electricity at a single point, and make use of already available space providing a part of the electricity needed by these energy-intensive consumers (in the case of industrial/commercial buildings) • Off-grid systems for rural electrification

Can be a small solar PV system covering the basic electricity needs of a household, or a larger solar mini-plant , providing enough power for several homes. These systems bring access to electricity to remote areas (mountain huts, developing countries, small islands). • Off-grid industrial applications

Very frequent in the telecommunications and transport fields: Repeater stations for mobile phones, traffic signals, marine navigation aids, security phones, remote lighting, highway signs, etc. These bring cost-effective power in areas far away from the electricity grid, avoiding the high cost of installing cabled networks • Consumer goods

Many everyday electrical appliances use PV cells: watches, calculators, toys, battery chargers, water sprinklers, lighting, etc.

Two promising technologies on Renewable Energy Systems

Technological advances are ongoing in the field of energy efficiency. The strive is for more energy efficient solutions, that have more applications than more outdated technologies, and deliver improved results in sectors where they are most needed. Such could be (1) the building integrated photovoltaics and (2) the microturbines that aim to take their respective technologies one step further.

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The building-integrated photovoltaic

Technology Description

Crystalline silicon-based PV technology is currently the most common PV material used in medium- to large-scale systems. However, thin-film PV, which uses relatively little to no silicon, is starting to gain acceptance and has had some success in building integrated applications129. Thin-film PV material currently has lower energy conversion efficiencies than crystalline silicon PV. However, the cells can be produced at lower temperatures, deposited on low-cost substrates, and can generate more energy than the energy used to produce the system when compared to crystalline silicon-based PV technology. To install these panels, the conduit for the PV system and the roof insulation layer are first concurrently installed, followed by the installation of a layer of the PVC membrane used with the previously prepared PV panels. Finally, the PV panels are connected to the conduit, then heat welded to the PVC membrane to form an integrated roofing system. This design minimizes the concerns of exposed wiring and roof penetrations associated with the installation of many rooftop PV systems.

Benefits

Facilities can become more sustainable and renewable energy systems more cost-effective if facility retrofit projects utilize an integrated approach. Replacing an old, inefficient roof system with new insulation is an approach that can provide a positive return on investment.

Types of Technology

Photovoltaic material and technologies have been growing and improving considerably. The price of photovoltaics has decreased tremendously in the last 20 years, due to increasing manufacturing scale and technology advances.

Crystalline Silicon Modules

Traditional photovoltaic cells are made from silicon crystals. These cells are combined and wired together into a module that is a flat-plate panel which can be used alone or with others. Materials presently used include mono-crystalline and poly-crystalline silicon. Crystalline-type modules are generally the most common, most efficient, and the most expensive of the commercially

129 Source: Building integrated photovoltaic (BIPV) roofs for sustainability and energy efficiency, Naval Facilities Engineering Command - Engineering and Expeditionary Warfare Center

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” available technologies. Silicon is quite abundant and non toxic. Crystalline-type photovoltaics have a strong industry base and successful track record of over 45 years in the field. Although photovoltaic modules degrade over time, crystalline-type modules are typically guaranteed through warranties to produce at least 80% of their original power after 20 to 25 years. Crystalline -type modules have a lifespan in the 25 to 30 year range but can keep producing energy beyond this range. Typical overall efficiency of crystalline solar panels is between 12% and 15% (the percentage of the solar energy they convert to electricity).

These types of photovoltaic modules are useful in most applications, and are especially useful where space is limited. In general, the system cost is considered high, and depends on the capacity and other factors such as geographic location and mounting. Potential of further cost reduction is expected.

Thin-Film Modules

Second-generation solar cells are known as thin-film solar cells. They are made from amorphous silicon or non-silicon materials such as cadmium telluride. Thin film solar cells use layers of semiconductor materials only a few micrometers thick. They are flexible and frequently used in building-integrated photovoltaic (BIPV) applications such as roof shingles, tiles, building facades, or the glazing for skylights. BIPV can be well blended into building architecture, providing an additional aesthetic option for designers. These new materials allow for cheaper resources and production, so the cost of the system—as a function of its output—is reduced.

Picture 2. Left: A building is covered with thin-film copper indium diselenide photovoltaic panels on all sides and Right: Thin-film solar cell structure.

The efficiency of thin-film solar cells is generally lower than crystalline cells—typically in the range

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” of 6% to 8%. As such, thin-film technologies require more space to produce the same amount of electricity as a crystalline-type module. Where space is not an issue, these types of modules can be a more cost-effective option.

Picture 3. Thin-film solar panels installed at El Dorado, Nevada (10 MW).

Concentrating Photovoltaic Modules

Concentrating photovoltaic modules use plastic lenses or mirrors to concentrate sunlight onto a very small piece of high-efficiency photovoltaic material. As a result, very little of the costly photovoltaic cells are used and can reach cell efficiency much higher than flat-plate systems. Concentrating photovoltaic systems are becoming a more cost-effective option for utilities and industry. Furthermore, system efficiency can be as high as 30%. However, because the system must use direct sun beams only, the modules must be moved so that they are always pointed directly at the sun. This also limits the use of concentrating collectors to the sunniest parts of the country. Concentrating photovoltaic systems are not as common in the commercial market as flat-plate technologies such as crystalline-type and thin-film modules. Additional applications are undergoing research, development, and demonstration, and are expected in the near future.

Emerging Technologies

Third-generation solar cells are being made from a variety of new materials besides silicon, including solar inks, conventional printing press technologies, solar dyes, and conductive plastics. These options are technically attractive because they are made of low-cost materials. Manufacturing could also be significantly less expensive than older solid-state cell designs.

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However, the efficiency of these technologies is expected to be a lot lower than the typical thin film.

Picture 4. Left: Concentrating photovoltaic module, and Right: Window panel using solar dye

Renewable Energy Systems – The Microturbine

Microturbines are a relatively new distributed generation technology being used for stationary energy generation applications 130 . They are a type of combustion turbine that produces both heat and electricity on a relatively small scale.

Microturbines offer several potential advantages compared to other technologies for small-scale power generation, including: a small number of moving parts, compact size, lightweight, greater efficiency, lower emissions, lower electricity costs, and opportunities to utilize waste fuels. Waste heat recovery can also be used with these systems to achieve efficiencies greater than 80%.

Because of their small size, relatively low capital costs, expected low operations and maintenance costs, and automatic electronic control, microturbines are expected to capture a significant share of the distributed generation market. In addition, microturbines offer an efficient and clean solution to direct mechanical drive markets such as compression and air-conditioning.

The microturbines explained

Microturbines are small combustion turbines approximately the size of a refrigerator with outputs of 25 kW to 500 kW. They evolved from automotive and truck turbochargers, auxiliary

130 Source: by Barney L. Capehart, PhD, CEM, College of Engineering, University of Florida, 11-04-2014

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” power units (APUs) for airplanes, and small jet engines. Most microturbines are comprised of a compressor, combustor, turbine, alternator, recuperator (a device that captures waste heat to improve the efficiency of the compressor stage), and generator.

Picture 5. How a microturbine works

Application Microturbines can be used for stand-by power, power quality and reliability, peak shaving, and cogeneration applications. In addition, because microturbines are being developed to utilize a variety of fuels, they are being used for resource recovery and landfill gas applications. Microturbines are well suited for small commercial building establishments such as: restaurants, hotels/motels, small offices, retail stores, and many others.

Picture 6. Microturbines work like jet Picture 7. A microturbine generator power engines but produce electricity instead of system at The Energy Efficient (TEEM) in thrust Bensenville, Illinois, is able to power an entire fast food store, including lighting, cooking equipment, and HVAC.

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The variety of energy consumers that are already using microturbines is large and growing fast. For example:

• A restaurant in Chicago, Illinois, gets most of its electricity from a natural-gas-powered microturbine, cutting $1,500 off its total monthly power bill. • Landfill gas-fired microturbines installed at the Jamacha Landfill in Spring Valley, California supply power on-site and back to the grid. • A textile mill in Lawrence, Massachusetts, ensures continuous operation by getting its power from microturbines. • The Chesapeake Building on the University of Maryland campus, College Park, Maryland has a cooling, heating, and power (CHP) system consisting of microturbines, chiller, and stack that uses waste heat to cool and heat the building, significantly increasing system efficiency.

Picture 8. Chesapeake Building CHP system, University of Maryland—College Park, MD

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The development of microturbine technology for transportation applications is also in progress. Automotive companies are interested in microturbines as a lightweight and efficient fossil-fuel- based energy source for hybrid electric vehicles, especially buses.

Other ongoing developments to improve microturbine design, lower costs, and increase performance in order to produce a competitive distributed generation product include heat recovery/cogeneration, fuel flexibility, and hybrid systems (e.g., fuel cell/microturbine, flywheel/microturbine).

4.3.1.5. An Integrated Approach Retrofitting existing stock to rigorous near-Zero standards is still a challenging target. ‘Right now that’s a really high bar’ says Chicago based architect Douglas Farr, founder of the highly regarded sustainable planning and architecture firm Farr Associates. Farr says the lighting industry is most dynamic about launching new sustainability technologies, particularly new LEDs. Yet, reaching near-Zero won’t happen by simply piling on new technologies. The right strategies must be determined according to climate and program. They must be designed as part of a system. For example, configuration of employee workspaces can have an impact on daylight control. And there must be buy-in from facilities managers. Teams that are more experienced and integrated are starting to find ways to really bring costs down.

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4.3.2 Energy Efficiency Trends in the Industrial Sector Final energy use in industry, including feedstocks in the chemical and petrochemical sector, was 131 116 EJ in 2005 . The associated CO 2 emissions, including indirect emissions from the use of electricity, were 9.9 Gt CO 2. Much of the growth in industrial energy demand since 1990 has been in non-OECD countries, notably China.

Most energy-intensive industrial sectors are complex involving multiple process steps and producing a wide variety of products. It is not possible to capture such complexity through a single energy or CO 2 indicator. A number of different indicators are necessary to give the full picture of energy efficiency and CO 2 trends and levels in a country.

Analysis using an indicator approach shows that there have been substantial improvements in energy efficiency in all major energy-intensive industries and in all world regions. This is often as a result of the introduction of new, more efficient technology.

On average, Japan and the Republic of Korea have the highest levels of industrial energy efficiency, followed by Europe and North America. Energy efficiency levels in developing and transition countries show a mixed picture. Generally, the efficiency levels are lower than in OECD countries but, where there has been a recent, rapid expansion using the latest plant design, efficiencies can be high.

A significant potential for further energy and CO 2 savings remains. The application of proven technologies and best practices on a global scale could save between 25 EJ and 37 EJ of energy per year (1.9 Gt CO 2 to 3.2 Gt CO 2 emissions per year), which represents 18% to 26% of current primary energy use in industry. The largest savings potentials can be found in the iron and steel, cement, and chemical and petrochemical sectors.

Industry and Energy Efficiency

Industries are major end–users of energy. Productive processes tend to be energy intensive and therefore the potential for energy efficiency in those areas is usually high. An energy audit is considered the first step for improvements in energy efficiency. This includes the monitoring of energy consumption with regard to the case-specific characteristics, and the implementation on a targeted range of measures to improve energy efficiency.

Methods to increase energy efficiency in the industrial sector may range from a simple change of the approach towards energy consumption so as to arrive at more energy-efficient practices, to medium-term or longer-term investments so as to improve energy intensity 132 - (i.e. the consumption of energy per unit of produced final product). In any case, energy-efficiency

131 International Energy Agency (2008), Worldwide Trends in Energy Use and Efficiency, Key Insights from IEA Indicator Analysis 132 Center for Renewable Sources, http://www.cres.gr/energy_saving/biomixania/biomixania_intro.htm

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” investments ought to be carried out based on technical and economic criteria so as to correspond to the particular characteristics and needs of the industry. Interventions should be made in areas where energy consumption can be reduced drastically so as to maximize their impact on energy consumption. Industries use mainly electricity or fossil fuels for their productive processes, therefore energy efficiency approaches differ. In its efforts to reduce energy costs, an industry may turn on a number of solutions: it may replace obsolete power motors with efficient high-performing energy efficient motors, it may modernize its compressed-air systems, it may fine-tune or replace its boilers, furnaces etc., it may insulate its pipes or liquid tanks, it may use automated energy- management systems. The major categories where energy efficiency may be achieved in an industry are presented below, according to the ‘electricity category’ or the ‘conventional fuels’ category. I) Production Processes Using Electricity

Ia) Motion In several production processes, motion is required, and this motion is achieved mainly with the use of electrical motors. Typical examples are conveyor belts, lifting machinery, industrial stirrers or blenders and so on.

Ib) Compressed Air In several occasions in the production process, the use of compressed air is required. To compress the air, electrical air-compressors are used. The compressed air is used to clean the industrial equipment, to move control valves and control pads and so on.

Ic) Industrial Refrigeration Industrial refrigeration systems are used by the industry to achieve low temperatures in particular areas, according to the needs of the production process, and also to preserve final products in low-temperature storage chambers or bigger spaces. Maintaining low temperatures in specific areas during the production process and the preservation of final products in industrial freezers is necessary particularly in the food industry (dairy industries or meat-processing industries etc.). The main energy efficiency measures that can be applied to the industrial refrigeration sector are: • The replacement of obsolete refrigeration equipment with energy efficient ones. This practically means that for the same end results, less energy is consumed. • Proper insulation of the low temperature storage chambers and appropriate programming for their use. • Proper insulation of the buildings that are heated or cooled. • Proper insulation of the refrigeration pipes, so as to minimize heat/cool loss to the environment.

Id) Machinery and Equipment The state of the production equipment and the machinery is a crucial factor for energy

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” consumption in an industry. Considerable energy efficiency can be attained with the replacement or upgrading of old equipment since obsolete equipment are more energy consuming and modern ones are substantially more energy efficient.

Ie) Buildings Buildings in the industry sector have increased energy consumption. Energy efficiency measures are therefore required. They can take the form of building insulation or the installation of automated energy management systems. Obviously, to reduce energy consumption in an industry, energy-saving measures have to be applied both to the production process and the operation of the buildings. In buildings or rooms used for office space, energy efficiency is achieved using the same approach that is used for the buildings in the housing sector. In buildings that the production process is taking place, the approach differs according to the particular production process itself and whether the production process is capital or human intensive, etc. The diversity in production processes that arises from the use of different machinery, the amount and the kind of fuel used means that case-specific energy audits are required so as to choose the most appropriate energy-efficiency methodology.

If) General Application Measures There are a number of energy efficient measures that may be adopted by an industrial firm and those can be applied to the firm as a whole, not just a part of it. In their majority, those are simple, low cost measures that can be applied to any industry, regardless of its particular characteristics.

II) Conventional Fuels

IIa) Production Process The production process includes all the industrial processes followed to produce the final products. Energy is consumed during the production process, either in the form of electricity, or by burning fossil fuels. Considerable amounts of fossil fuel are consumed mainly in boilers, furnaces etc.

IIb) Electricity Production A number of industries produce energy through the burning of fossil fuels. Energy efficiency can be achieved to a considerable extent by investing in heat and electricity generators. For such an investment to be economically viable, it is essential that the industry has increased heating needs combined with its electricity needs.

4.3.2.1 Energy efficiency for the food and beverage industry While the food-processing sector is typically amongst the largest manufacturing energy consumers in the world where the industry is located, and has a very high energy consumption, its energy intensity is relatively low.

Still, energy is an important input cost for the industry, typically ranking third along with capital

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” in terms of business costs; raw materials and labour are the dominant cost factors. For food manufacturing, the most important fuels are natural gas, purchased electricity and coal. Below are some applications used by the food and beverage industry to reduce their energy costs.

i) Performance solutions • Control and decision support with a Manufacturing Execution System. • Energy Manage r to monitor, target and report on energy efficiency key performance indicators. • Services, including motor-driven system energy efficiency assessments, power quality evaluations, and boiler fingerprint services.

ii) Power Solutions • Low voltage circuit breakers • Low-loss distribution transformers • Power quality • Premium efficiency motors including wash down motors and helical gearboxes. • Synchronous reluctance motor and drive systems • Variable speed drives

iii) Process Solutions • Distributed control systems and extended automation systems. • Measurement, instrumentation and analytical solutions

4.3.2.2 Energy efficiency for iron and steel making industry The iron and steel sector is the second largest industrial user of energy, consuming 23 EJ 133 in 134 2005 . It is also the largest industrial source of CO 2 emissions. Steel is produced via a dozen or so processing steps, laid out in various configurations depending on product mixes, available raw materials, energy supply and investment capital. Energy efficiency is therefore vital for the iron and steel making industry. Some of the technological applications towards this goal are shown below.

Adaptive Dimension Models tool for rod and bar mills Process instability impacts production as well as energy efficiency in hot-rolling long products. An adaptive dimension model is an advanced rolling solution that lets operators optimize

133 Exajoule (1 EJ is equal to 1.0E+18 joule) 134 International Energy Agency (2008), Worldwide Trends in Energy Use and Efficiency, Key Insights from IEA Indicator Analysis

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” production speed and energy use while maintaining full control of process requirements.

Energy Manager A scalable, modular energy decision making solution for individual steel plants or entire enterprises. This software helps automate energy savings, and reacts in real time to planned or unplanned changes in supply and demand, as well as simulating “what if” scenarios for large and complex electricity and gas networks.

Electro Magnetic Stirrers and Brakes Electro Magnetic Stirrers reduce energy use while boosting quality and productivity during stirring and braking in electric arc furnaces, ladle furnaces, and continuous casting processes.

Motor driven systems Motor and drive solutions that improve energy efficiency while offering fast, accurate and reliable control of demanding metals applications.

SVC and SVC Light Dynamic, reactive power compensation for the severe voltage variations created by Electric Arc Furnaces. SVC solutions reduce melt times, which can result in energy loss reductions of up to 4% kWh per tonne of steel. They also reduce electrode consumption up to 6% and extended the life of the furnace linings. Improved power correction leads to better use of existing power supply, reduced power losses and use, and helps eliminate utility power factor penalties.

Transformers ABB has a complete portfolio of low-loss liquid-filled and dry-type transformers designed to meet the rigors of iron and steel making. Transformers are not a commodity, and ABB’s approach is to look at the total cost of ownership. This lets you strike the right balance between your financial and process needs, and lifetime energy efficiency savings.

4.3.2.3 Energy efficiency for the mining industry Implementation of energy efficiency practices typically results in 5-20% energy savings across the entire value chain of a mining operation. Opportunities may be found for power distribution and electrification; extraction and beneficiation; infrastructure and support processes such as intelligent building automation systems, water pumping, treatment and removal; and for boiler efficiency. Shovel and dragline retrofits, allow mining companies to increase the productivity, availability and energy efficiency of their existing assets. Energy efficiency equipment and systems for the mining industry include:

• Automation and electric integration solutions

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• Conveyor system solutions • Automated Energy Manager s • Electrical systems for electric trucks • “Green” distribution transformers • Grinding solutions including gearless mill drives • High- and premium-efficiency motors • Hoists with regenerative braking and energy storage systems • Power quality solutions • Underground mine ventilation solutions • Variable speed drives and motor systems for conveyor belts

4.3.2.4 Energy efficiency for the pulp and paper industry The pulp and paper industry is the fourth largest industrial user of energy, consuming 6.4 EJ in 2005 135 . Approximately two-thirds of final energy consumption is fuel that is used to produce heat, while the remaining third is electricity, either from the grid or produced on site. Unlike other industrial sectors, the pulp and paper industry also produces energy as a by-product and currently generates about 50% of its own energy needs from biomass residues. The significant use of biomass means that the CO 2 intensity of energy use is not very high, and much lower than other energy intensive industries.

Energy use in the paper and pulp industry is divided among a number of different pulp production and paper production processes. The main processes are:

• chemical pulping; • mechanical pulping; • paper recycling; and • paper production.

Energy efficiency is achieved through a variety of approaches and technological applications, such as:

• Liquid cooled drives for paper machines • Collaborative Production Management solutions offer valuable tools to improve mill performance, production efficiency and product quality • Automated Energy Manager s to integrate energy efficiency into the collaborative automation process, by showing where and how you use energy

135 International Energy Agency (2008), Worldwide Trends in Energy Use and Efficiency, Key Insights from IEA Indicator Analysis

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• Control and process information management systems for pulp and paper mills • Direct Drive for paper machines • Drive products, control systems and services for paper mills • Electricity meters to use in conjunction with Automated Energy Manager • Electrification, Instrumentation and Composite Plant (EICP) services for new plants or expansions • High- and premium - efficiency motors • Consistency transmitters, sheet break detectors and pulp samplers • Products for paper machine optimization, paper testing, pulp testing and service and support • Low-loss ‘green’ distribution transformers • Measurement products and instrumentation to enable energy efficiency • Power distribution and electrification systems • Power Management Systems • Power quality solutions to improve reactive power compensation and power factor correction • Quality control solutions

4.3.3 Indicative Cases of Energy Efficiency To become more energy efficient, be it in buildings or the industry, is an ongoing, complex task. It may require expert knowledge, the use of modern technology, and/or the efficient use of educated and informed human resources. The following cases illustrate the different approaches toward energy efficiency: a bioclimatic house in England, the use of energy managements systems in Citic Square Building in China, the production boost in REC Solar ACA and finally, a case about creating a culture of energy efficiency. All four cases tackle the issue of energy efficiency from different perspectives and give us an insight on how energy efficiency can have a significant impact on energy consumption.

4.3.3.1 Improving Energy Efficiency Through the Use of Bioclimatic Design and Insulation: The Case of England’s First Passive House Picture 9. Underhill, England’s First Certified Passive House

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Insulation had a central role to play in the 2010 construction of the first certified Passive House in England, the Underhill House – a project recorded for the British Channel 4’s Grand Designs series. Innovative insulating products were used to extensively insulate the whole building – the floor, roof and basement walls of the structure, and played a vital role in the house getting Passive House certification.

The Underhill House is entirely glazed to the south. The rest of it is earth-sheltered and highly- insulated, creating the perfect passive solar design. The structure of the underground house is constructed from concrete, much of which has been left exposed internally to exploit the benefits of its thermal mass.

"In order to meet Passive House standards we needed insulation which could maintain good thermal performance outside of the waterproofing envelope, as this would allow us to expose concrete within and make the most of the internal space," said architect Helen Seymour-Smith who now lives in the building with her family.

"Insulation that can perform effectively in its environment for the expected lifetime of a building is key," she continued. "There's no point installing photovoltaics or a ground source heat pump if you're still leaking heat through the building fabric!"

The process of extruding polystyrene foam generates a mass of small, homogeneous closed cells which gives high design loads, low water absorption and excellent insulating properties to the insulating products used. Such features mean the material can be installed outside the waterproof envelope, the right design choice when aiming for an 'envelope' of continuous

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” insulation that minimizes heat loss:

• The insulating materials, chosen for their high moisture-resistance and compressive strength, were installed below the vast concrete floor slab, helping to avoid thermal

bridges at floor and wall junction and achieving a U-value of 0.1 W/m 2 K. • The extensive green roof, insulated and supported by rot resistant insulating materials, is a major feature of the building design and delivers an incredibly low U-value of 0.097

W/m 2K. • The insulation was used in combination with a waterproof but vapour permeable separation layer. This allowed the architect to reduce the amount of insulation required to address the so-called 'rainwater cooling effect'. • Below-ground walls were covered with tanking membrane and backfilled. A U-value of

0.11 W/m 2 K was achieved.

The Underhill House is a perfect demonstration of how a combination of effective materials and an architect's vision can result in a beautiful yet practical family home that directly addresses environmental issues.

The insulating products used, are manufactured in the UK using technology that takes CO 2 from industry and uses it as a blowing agent in order to create blue extruded polystyrene foam with a Global Warming Potential (GWP) of less than five. They offer lightweight yet robust performance, high strength and excellent moisture resistance, making it ideal for below-ground and exposed roof-top insulation demands 136 .

4.3.3.2. Improving Energy Efficiency Using Building Energy Management Systems: The Case of Citic Square in Shanghai, China

The use of energy management systems dramatically improved the energy efficiency of Citic Square, a 48-story building completed in 2000 in the heart of Shanghai, in China. The lower five floors house an international shopping center; offices, conference rooms, information technology spaces, training areas, and building services are located in a tower.

Picture 10. The Citic Square Building

136 Source: http://msdssearch.dow.com/PublishedLiteratureDOWCOM/dh_0521/0901b8038052190a.pdf?filepath=styrofoam _uk/pdfs/noreg/291-18125.pdf&fromPage=GetDoc

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The task here called for energy efficiency maximization, and the building was to be made into a “green” city landmark. The building’s glass shell, along with hot, dry summers and cold winters, represented a special challenge for the technical systems. Measures were subsequently taken, including the replacement of the heating pumps, the implementation of demand-controlled ventilation based on the carbon dioxide concentration inside and outside the building, and the optimization of the energy consumption of the escalators in the shopping center, the sun protection, and the thermal insulation.

By directing attention at the entire lifecycle of the building, its energy efficiency was maximized in an exemplary manner. Shanghai Citic Square was able to achieve 68 percent of the aimed energy savings already in the first six months.

Energy efficiency is Citic Square was maximized through the following measures:

• The replacement of the heating pumps • The use of an optimization program for the cooling system • The use of variable speed drives for the motors of the cooling tower fans • The optimization of the cold water, condensed water, and hot water pumps • Use of demand-controlled ventilation in the shopping center • The use of an optimized control solution for the escalators • Use of sun protection foil on the roof of the shopping center

4.3.3.3 Helping award winning factory boost production in Singapore: The Case of REC Solar ASA

When REC Solar ASA, one of the world’s leading solar energy companies, inaugurated its new

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” production facility in Singapore in 2010, it was the biggest single investment in the company’s history. It was also the largest investment made by any corporation in Singapore’s growing and government-prioritized clean technology sector. Costing approximately €1.3 billion to build in 2008, the integrated solar production facility is one of the largest of its kind in the world for the manufacture of solar wafers, cells and modules that harness the sun’s energy and convert it into emission-free electricity.

By integrating all three processes – wafer slicing, cell creation and module manufacturing – in a single highly automated and state-of-the-art production facility, REC Solar ASA achieves significant cost advantages. The facility itself is a benchmark of sustainability and energy efficiency, having won a Gold rating in Singapore’s Green Mark Award for best practice in environmental building design and performance.

Picture 11. REC Solar ASA’s integrated solar production facility in Singapore

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The challenge was to provide an extensive array of automation and electrical solutions that provide the facility and its manufacturing processes with fast and accurate automated production and a constant disturbance-free supply of reliable electric power.

The solutions comprised two robotics packages for the wafer slicing and cell manufacturing plants. This is where the silicon ingots are crystalized and sliced into ultra-thin wafers a fraction of the thickness of a human hair. They are then chemically treated in the cell manufacturing plant to acquire photovoltaic properties.

Power is transferred to the entire site through a smart grid connection comprising 66 kV gas- insulated switchgear and power and distribution transformers. It is then distributed to the wafer fab plant, slurry recovery and wastewater treatment plants by medium-voltage and low-voltage power distribution systems. These consist of a vast array of power and automation products that provide the safe, reliable and efficient supply of electricity to each plant.

Each power system is integrated with a power-quality monitoring system with monitoring, control and protection functionalities to ensure consistent power quality and reliability for these critical production processes. The system provides a number of vital requirements including real- time monitoring of circuit breakers, power quality analysis, energy consumption reporting, and process behavior analysis.

4.3.3.4 Improving Energy Efficiency in Commercial Office Buildings by Creating a Culture of Energy Efficiency. The Case of Hines As a developer and builder of commercial properties, Hines has always prioritized energy efficiency 137 . The company’s newly hired building engineers are immediately taught ‘that our mission is to satisfy our tenants, and the number two mission is to accomplish the first mission with the least amount of energy use possible’. As their business has grown, Hines has faced the challenge of making the onsite staff they inherit part of that culture. They have found that educating the new team properly and providing the tools that demonstrate how the building uses energy can significantly improve the building’s energy use, even before any investments in building upgrades are made. Training Forms the Basis A mission statement alone is not enough to create a team that has integrated energy efficiency into their management of a building. Pat Griffin, vice president of engineering for Hines in Chicago, states that ‘ investing in education and support of the onsite team pays huge dividends’ . He goes on to affirm that ‘a highly educated team can reduce far more energy from operating

137 http://energy.gov/sites/prod/files/2013/12/f5/business_case_for_energy_efficiency_retrofit_renovation_smr_2 011.pdf

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” existing systems than any renovation or retrofit could possibly achieve ’. Make Staff Accountable for Energy Performance Goals Most building managers want their buildings to operate well, but even for a well-trained team, the challenge is encouraging them to allocate the time to improving energy performance. In order to keep efficient energy use as a priority for their building management staff, Hines has developed a proprietary utility management program that tracks energy consumption in their properties on a monthly basis, year-over-year. All variations, both increases and decreases, from the previous year’s performance must be explained. The attention to monthly variations not only helps to improve energy performance but also to prevent decisions that save energy at the expense of tenant comfort or sound building operation. The fact that Hine’s engineering managers are held accountable for monthly performance of their buildings is considered as essential to ensure that these measures are allocated sufficient time and attention. Using Teams to Identify Opportunities and Achieve Results Many of the successful projects undertaken by Hines to improve building energy performance are initiated by the onsite teams at the buildings. Kevin Krejci, assistant engineering manager, reports that an energy task force team drawn from the building managers has been created to encourage their staff to explore innovative ideas about how to save energy. All ideas, even those that may seem too expensive to implement, are fully considered. Robin Obaugh, vice president of engineering for Hines in Houston explains: ‘We really try to run the traps: What is this product or program? What will it do for the property? What is the real cost? Having a well-trained, energy conscious team that is intimately familiar with building operations encourages creativity and insight when it comes to potential savings. Challenges and Opportunities Presented by Building Acquisitions The true test of Hines culture comes not from the buildings they have built but from their new acquisitions. Working with the existing management staff clarifies how simply raising awareness and commissioning the existing systems can significantly impact on building performance. Prioritizing and Increasing Staff Awareness of Building Performance Griffin reports that providing the building management team with an assessment of how their building performs compared to other Hines properties is often the first step to improving building performance. ‘The first thing they say to me is, ‘Nobody has ever told us that our energy consumption was high’. That awareness, combined with training and guidance on how to improve, sets the stage for higher performance, both immediately and in the long term. Once the team starts to see monthly improvements in the building performance, they become engaged. Griffin states, ‘We find that providing training and guidance, then sharing the positive results of the team’s actions, results in energy management getting into their blood. Once this happens, there is no end to what the team will strive to accomplish.

Efficiency First: Use Retrocommissioning to Identify Opportunities Before the Hines staff will even consider making technology upgrades, they focus on improving existing building performance. ‘Before we introduce any new technology’, say Obaugh, ‘we dive into exactly how the building is built, the design of its mechanical systems, and then our first effort is to make sure the building is operating as per design and to see how we could tweak that

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” performance’. Griffin points out that commissioning the building can lead to discoveries that yield large energy savings. For example, a commissioning process could reveal that equipment that is scheduled to turn off may still be running. Without a thorough process and good building automation, problems like that can go undetected. Look for Technology Improvements and Opportunities Only after the building staff is aware of how the building performs and have retrocommissioned all its systems will they then consider what kind of technology will improve building performance. By this point, the staff’s immersion into the workings of the building provides great insight into those that would benefit most from an upgrade, allowing Hines to maximize its investment in the property. Each property benefits from different technologies, but a few technologies often provide significant energy performance improvement with impressively low payback periods: Table 5 : The Case of 131 South Dearborn Location Chicago, IL Building Size (Square Feet) Gross: 1,778,502 (approx. 165,000m 2) Rentable: 1,504,264 (approx. 140,000m 2) Owner 131 S. Dearborn LLC Building Management Hines Company Cost of Improvements Operational improvements only, no retrofit costs Savings (kWh) in the First 12 Months of Hines Operation 6,232,496 of Building

Percentage of kWh Savings 23% Value of Energy Savings in the First 12 Months of Hines $525,733 Operation of Building Percentage of Energy Cost 21% Savings

4.4: Energy efficiency in Greece and Bulgaria

4.4.1 Renewables in Greece and Bulgaria as Compared to other EU Member States. The latest information available for 2012 (see Figure 16) shows that electricity generated from renewable energy sources contributed almost one quarter (23.5 %) of the EU-28’s gross electricity consumption. In Austria (65.5 %) and Sweden (60.0 %) at least three fifths of all the electricity consumed was generated from renewable energy sources, largely as a result of hydropower and biomass. Greece and Bulgaria have similar scores, and are below the EU-28 average, with their respective proportions being below 20%. Figure 16: Proportion of electricity generated from renewable energy sources 2012 (% of gross

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electricity consumption)

Source: www.ec.europa.eu/Eurostat/statistics_explained/index/Renewable_energy_statistics

Table 6 shows the primary production of renewable energy between 2002 – 2012 in the EU-28. Greece increased its primary production from 1,393,000 toe in 2002 to 2,275,000 toe in 2012. Bulgaria also increased its primary production, from 832,000 toe in 2002 to 1,638,000 toe in 2012. In Greece, biomass & waste in the biggest renewable with 53,3% of total production from renewables in 2012. It is followed by hydropower (16.6%), wind energy (14,6%), solar energy (14.5%), and geothermal energy (1%). In Bulgaria, biomass and waste amounted for 69,4% of total production from renewables in 2012. It is followed by hydropower (16,9%), wind energy (6,4%), solar energy (5,2%) and geothermal energy with 2%. Table 6: Primary production of renewable energy, 2002 and 2012

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Figure 17: Energy efficiency index by country (2000 -2009)

Public and mixed-use buildings form a significant part of the building stock and are therefore a primary candidate for energy saving measures. However, due to the low energy prices that prevailed between 1991 and 2000, and as energy saving measures are capital incentive investments, little was done in that direction. The increase in fossil fuel prices proved that this

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” was a short-sighted policy. Space heating represented 68% of total household consumption in 2009 compared to 74% in 1990 (Figure 4). Part of these improvements occurred in the area of space heating due to better thermal performance of buildings encouraged by mandatory efficiency standards for new buildings, and a larger penetration of high efficiency boilers (e.g. condensing boilers). The share of electricity for lighting and appliances increased from 10% to 15% in 2009 compared to 1990. Water heating remains stable at 12% in 2009 (Figure 3). All EU countries have developed thermal regulations for new dwellings, some of them as far as the seventies. These standards require a theoretical maximum heating unit consumption for new buildings. However, the magnitude of this impact varies with the countries, depending on the number of standards upgrades, their severity and the number of new dwellings (i.e. the share of recent building in to total stock).

Around half of countries with an energy efficiency improvement above 1%/year The improvement in energy efficiency is higher or close to 2 %/year for 5 new member countries: Poland, Romania, Bulgaria, Latvia and Slovenia. For 12 other countries this improvement is above 1%/year (1.2%/year for the EU average). In three countries (Luxembourg, Spain and Portugal), no energy efficiency gains could be measured with the indicators used. These results should be obviously considered carefully because the energy efficiency gains are dependent on the time period and in many countries the economic crisis has deteriorated energy efficiency.

Figure 18: Energy efficiency progress by country (2000-2010)

Space heating represented 68% of total household consumption in 2009 compared to 74% in 1990 (Figure 4). Part of these improvements occurred in the area of space heating due to better thermal performance of buildings encouraged by mandatory efficiency standards for new buildings, and a larger penetration of high efficiency boilers (e.g. condensing boilers). The share of electricity for lighting and appliances increased from 10% to 15% in 2009 compared to 1990. Water heating remains stable at 12% in 2009 (Figure 3). All EU countries have developed thermal regulations for new dwellings, some of them as far as the seventies. These standards require a theoretical maximum heating unit consumption for new buildings. However, the magnitude of

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” this impact varies with the countries, depending on the number of standards upgrades, their severity and the number of new dwellings (i.e. the share of recent building in to total stock). Figure 19: Variation of the consumption per dwelling (1990 -2009)

Source : http://www.eea.europa.eu/data -and -maps/indicators/energy -efficiency -and -energy - consumption-5/assessment

4.4.2 Energy efficiency Greece The energy renovation of existing buildings in an important tool for the reduction of energy consumption in the building sector. This applies particularly in Northern Greece, with its cold and prolonged heating season, where a series of studies was carried out since 1994 to approach the problem and develop viable solutions. An Overview of Energy Efficiency Audits in Greece Energy efficiency audits for buildings were introduced in Greece on the 9 th January of 2011. Following an audit, an Energy Efficiency Certificate is being issued to be used in cases or a sale or rent or lease of somebody’s property. Energy audits, three years after their introduction, have already become a useful tool for policy makers in Greece. Based on the energy efficiency features of the building, there are nine categories (‘A’ is the more energy efficient and ‘G’ is the least energy efficient). The picture of Greece’s building stock in 2014 can be described as follows: • Over 509.000 energy efficiency certificates have been issued in the period 2011 – 2014. • The issued certificates are referring overwhelmingly (79%) to buildings that were constructed in the period 1950-2009. • The issued certificate, to the greater extent (65.5%) referred to buildings and apartments aimed for housing purposes.

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• Buildings constructed before 1980 (prior to the ‘Buildings Thermal Insulation Regulation’) are rated overwhelmingly with a ‘G’. • Buildings constructed during the 1981-2010 period, when the ‘Buildings Thermal Insulation Regulation’ was in effect, the ratings are improved to ‘C’ and ‘D’. • For the buildings constructed during 2011-2014, the ratings are mainly ‘B’ and ‘C’. This was to an extent unexpected: those buildings should rank ‘B’ or better. It is assumed that the buildings scoring less than ‘B’ had obtained a building permit prior to 1981 and their construction was completed between 2011.

If all buildings in Greece had been constructed according to the ΚΕΝΑΚ (Building Energy Efficiency Regulation) standards, then the average proportion of energy –saving would be: 66.03% for single houses, 56.06% for apartment blocks, 44.44% for stores, 47.14% for schools, and 36.92% for hospitals. These figures reveal the tremendous potential that exists in the county’s building stock for energy efficiency.

The climatic and energy features of a representative sample of buildings The building sector in Northern Greece absorbs 31% of the final energy demand ranking second after the transport sector, as opposed to the country’s energy balance where the industrial sector consumes more than the building sector. This deviation can partly be attributed to the climatic conditions. The climate in Northern Greece is partly Mediterranean and partly continental, influenced by the harsh Balkan winter. Figure 20: Diffusion of solar water heaters in EU

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Main features of the existing building stock In Greece, the majority of the buildings are only insufficiently or not at all thermally insulated. This results in an average annual specific consumption, for space heating only, of 130-180 kWh/m 2, instead of the 80-110 kWh/m 2 that would be necessary if the buildings had been properly insulated, in accordance to the existing legislation. Compared to the regulations prevailing in other European countries, like Germany where values of 70 kWh/m2 are the standard since the mid-1990s, this is a disappointing performance. One of the main issues in Greece is that of cooling and air-conditioning in the summer, leading to significant problems as the occurring peak-load demand increased by more than 55% over the last 10 years. The energy policy in Greece (between 2000 – 2010) focused on the search of a cheap energy form (lignite that is in abundance in Greece), instead of focusing on the effort to reduce energy consumption combined with the provision of cheaper energy. From a long-term economic perspective, this is a narrow minded policy as it inevitable leads to higher operating costs of the building stock by trying to avoid the initial investment needed to reduce energy consumption. The building stock in Greece can be divided into 3 main categories, according to the date of construction 1. Buildings dating from the end of the 19 th century until 1940. Two major sub-groups here: there are rather few in numbers, large buildings with an important monumental architectural value, usually housing public services and authorities, museums etc, where the option for intervention on the buildings’ shells are rather limited. These buildings have been renovated over the years. Contemporary heating systems have been installed and in some cases also air conditioning systems. Then, there are the residential and mixed- use buildings, met mainly in the smaller cities, the villages and the rural areas. They are significant in number but small in size. These are the buildings where space heating is covered mainly by means of wood-fired stoves, which results in low energy consumption and respectively poor prevailing comfort conditions. It is very difficult to obtain detailed data on the energy consumption and the condition of those buildings, which are to a large extent, progressively replaced by new constructions. 2. The second and most important group consists of buildings which were constructed after the Second World War up until the late 1970s, and they represent the major part of urban buildings. Most of them are 3-7 storeyed mixed-use buildings, housing shops or enterprises on the ground floor and residences on the other floors. The change of land usage in the cities which occurred in the 1990s led to the gradual change of use of those buildings, which in the city centers house almost exclusively shops and enterprises or public services. Those still housing residences have not been substantially renovated, leading to a steady decline in the living conditions and also their market value. Their energy performance is poor. They need on average 167.9 kWh/m 2 annually to ensure satisfactory comfort conditions.

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3. The third group of buildings, consisting of those constructed after 1980, when thermal insulation became mandatory, present a fairly good energy behavior, as represented by the average annual value of 100.4 kWh/m 2. The lowest values of 50-60 kWh/m2 per annum were monitored in well insulated buildings in the city of Thessaloniki.

Space heating is responsible for approximately 80% of the total consumption in the pre-war buildings and in those built before 1980, whilst it accounts for 70% in the modern insulated ones.

4.4.3 Energy efficiency in Bulgaria An in-depth survey of the Bulgarian building stock, construction practices, market prices for materials and equipment, existing legislation and support measures. The survey defines and evaluates new reference buildings (current practice for the following building types: • Detached single family house (SFH) • Multi-family house (MFH) • Office Buildings

Detached single family houses and multi-family blocks of flats represent almost 90% of the residential building stock in Bulgaria and around 97% of the net floor area in the residential sector. Office buildings represent around 27% of the non-residential building stock and almost 39% of the non-residential floor area. Altogether, these three buildings types account for around 89% of the Bulgarian building stock and around 85% of the total net floor area of the Bulgarian building stock 138 . Housing Sector in Bulgaria Household are the third largest consumer of energy in Bulgaria, with a practically constant level of consumption of around 2.1 – 2.2 Mtoe (Million Tons of Oil Equivalent) per annum. The ‘Buildings’ sector share has also remained constant, at approximately 25 – 26% of total final energy consumption in Bulgaria. The energy consumption in the housing category increased from o.553 toe/unit in 2007 to 0.567 toe / unit in 2009, with electricity consumption rising particularly fast. The main factors for this increased consumption are: the bigger size of the new housing units, the increased use of energy for space heating and lighting, the penetration of the air- conditioners and the increased use of electrical appliances and electronic equipment. Issues that are yet unresolved in domestic residences are the extensive use of inefficient wood and coal- burning stoves and the limited access of households to the gas supply. The housing sector’s energy efficiency problem is growing: on the one hand the price of fossil fuels places a heavy burden on household budgets, while on the other hand heating accounts for approximately 70%

138 Building Performance Institute Europe (BPIE), Implementing Nearly Zero Energy Buildings (nZEB) in Bulgaria – Towards a definition and roadmap.

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” of domestic energy consumption 139 . The priority of the National Program to renovate residential buildings in Bulgaria 2006-2020 is multi-occupancy buildings. The estimated average energy savings that would result when the energy efficiency measures are implemented would be 25-35 kWh/m 2 of floor space per annum. The anticipated effect of the package of measures is around 35.5% savings on the pre-renovation costs, taking into account the requirements for maintaining the standard domestic microclimate paremeters. About half of the total building stock in Bulgaria was built over the past 40 years, and only a 3.9% date from before 1919. The condition of these buildings is poor and constantly deteriorating, primarily due to inadequate maintenance by the owners. It worth to note that there are over 17,000 public buildings in Bulgaria, which emphasizes the importance of implementing measures to reduce their energy consumption.

Assessment of Energy Efficiency Action Plans and Policies in EU Member States 2013 The following comparative table is based on country reports published within the Energy Efficiency Watch project and assesses both ambion and quality of EU Member States΄ energy efficiency acon plans and policy implementation 140 .

Table7: Overarching Energy Efficiency Governance Framework Comprehensiveness of policy package policy packages GREECE BULGARIA Long -- -term EE No long -- -term targets Bulgaria has adopted the target of halving its target(s) and mentioned; primary energy intensity (compared to 2005) strategy Reference to EU targets by 2020; for 2020 A national energy efficiency strategy has been adopted; Regional energy councils assist in the preparation and implementation of regional/ municipal programmes Involvement of Municipalities, ESCOs Municipalities participate in the national non-governmental and a research institute renovation programme; and market actors, are part of the Energy traders and industry are obligated and sub-national strategy parties; Public private partnerships are authorities planned to be promoted Energy agencies Energy agencies are not Energy agencies exist at national and climate mentioned and regional/local level protection agencies EE mechanisms for A green fund has been Energy efficiency funds are available; overall established; Overall coordination is provided coordination and Financing is also by the state; Industry, owners of

139 Ecofys 2013, National Plan for Increasing the Number of near Zero-Energy Buildings in Bulgaria. 140 www.energy---efficiency---watch.org

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” financing available through other public buildings and energy traders programmes are obligated to save energy Favourable Framework conditions Supportive framework conditions have been framework have been adopted; set up; Co-financing and a guarantee fund are conditions for Details of energy Available energy performance contracts services have been regulated and a standard contract will be published Horizontal Support for R&D; Voluntary agreements may be concluded with measures Voluntary agreements industry between the public and private sector for energy saving in commercial buildings planned Monitoring, Top -- -down method The savings are estimated based on both top - reporting and used for quantification down and bottom-up methods verification of most savings; Attempt to take account of impact of economic recession Public Sector Comprehensiveness of policy package policy packages GREECE BULGARIA Public sector strategy No strategy for the public Central and local governments are sector outlined; required to prepare energy Promotion of integrated efficiency improvement plans; energy planning of Regional energy councils provide municipalities assistance for the preparation of regional/ municipal programmes and their implementation Role model, Information campaigns; Regional councils for energy transparency, Demonstration of energy efficiency have been established by and demonstration efficient buildings; the public sector; Standards for Promotion of energy electricity consumption per efficiency in schools employee in the public sector are developed Public procurement Establishment of an office to Minimum energy efficiency criteria coordinate and implement are to be included in public tenders; public procurement; Guidelines have been developed Requirements have been set for some appliances

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Public buildings Energy management systems Energy efficiency improvement are used; plans have to be prepared by Pilot projects on energy central and local government efficiency in buildings and authorities; Grants are provided for energy service contracting; the implementation of energy No targets mentioned efficiency measures in public buildings; 508 public and 3454 municipal buildings to be renovated until 2020 Adequacy of policy Different actors have been The policy mix for the public sector package considered; is well balanced Supply and demand side are partly addressed; The saving potentials are partly considered Residential Sector - Buildings Comprehensiveness of policy package policy packages GREECE BULGARIA Minimum Energy MEPS have been established; Minimum energy performance Performance No roadmap for tightening of standards are in place. Standards (MEPS) MEPS Other regulations The issuance of a buildings Energy efficiency requirements are permit is linked to the to be taken into account during requirement that 60% of the construction works/spatial needs for domestic hot water planning; is covered by solar thermal Individual metering of heat systems consumption in centrally heated multi---family buildings Economic incentives Financial support is available A direct subsidy of up to 20% of for energy saving measures in total costs is provided for the old buildings; Support is renovation of prefabricated panel granted for central solar buildings; thermal systems and the Financial support for energy audits replacement of old air-- of residential buildings in conditioners communal ownership; Grants for energy audits and efficiency measures in multi--- family residential buildings Financing instruments Low interest loans, reduced A loan followed by a grant funding VAT and grants are available of up to 20% of the amount of the for the installation of central loan is available for individual solar thermal systems households Energy performance Energy performance Energy performance certificates are

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European Territorial Cooperation Programme Greece-Bulgaria 2007-2013 “Smart Specialisation” certificates (EPCs) certificates are mandatory for mandatory for all new buildings no all buildings (>50m2) later than 6 years after that undergo a complete commissioning and for all existing renovation; Energy buildings with a useful floor area performance certificates are over 1000 m 2 also mandatory for existing buildings when they are sold or leased, and for all buildings of the public sector Energy advice and Not mentioned Energy agencies and energy audits auditors provide advice Information tools Several information and No precise information on education campaigns are information tools available mentioned; Not clear whether these address the buildings sector Demonstration Innovative systems in A demonstration project for the projects buildings are planned to be renovation of multi-family demonstrated on the basis of residential buildings was voluntary agreements; implemented Upgrading of four industrial buildings to nearly zero energy buildings Education and training Not mentioned Albeit not mentioned in the NEEAP, for education and training for energy stakeholders assessors and auditors is offered by six University centres Adequacy of policy Potentials are considered; Supply and demand are addressed; package Policy package is rather The policy mix is rather balanced balanced Residential Sector - Appliances Comprehensiveness of policy package Minimum Energy Ecodesign Directive Ecodesign Directive implemented Performance implemented Standards (MEPS) Economic incentives Not mentioned Soft loans for the purchase of energy efficient appliances are available Energy labels The labelling Directive has The EU energy labelling regulation been implemented has been implemented Information tools Smart meters are promoted; Not mentioned The Public Power Corporation is obliged to provide

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information on energy efficient appliances Education and training Not mentioned Not mentioned for retail staff and other supply chain actors Adequacy of policy The policy package is based on Supply and demand side are package the implementation of EU addressed; Many aspects of the requirements; Most aspects package could be strengthened of the policy package could be strengthened Industry and Tertiary Sector Comprehensiveness of policy package Standards for Ecodesign Directive Ecodesign Directive implemented equipment, production implemented process, products Energy savings and Not mentioned Individual energy savings targets action have been set for 297 industrial targets for individual systems with an annual companies consumption of 300MWh Obligations / According to the MURE Owners of industrial systems must commitments database voluntary conduct energy audits every three agreements in the industrial years sector are promoted. Companies wishing to participate will have to agree on action plans to reduce energy consumption Economic incentives Not mentioned A credit line facility provides financing for energy efficiency projects and advisory services. Grants are available for the implementation of energy saving technologies Tradable permits Only EU ETS Not mentioned Energy or CO2 taxation Excise duty for natural gas and The excise duties on natural gas for electricity above minimum business use are below the rate minimum rate. The excise duties for electricity use for business use are slightly above the minimum rate. Energy labelling EU energy labelling regulation Partly included in all MS due to EU energy labelling regulation, which

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does not cover all appliances though. Other sectors Several measures in the Several measures in the agricultural agricultural sector. sector. Adequacy of policy The supply and demand side Different actors are considered. package of energy efficiency markets Supply and demand side addressed. have been addressed Policy mix balanced. Transport Sector Comprehensiveness of po licy package Planning instruments Concrete measures to support Programs are not described in public transport and non- detail. Every mode is considered. motorized transport (e.g. urban mobility plans) have been set up. The integrated energy planning of municipalities also addresses mobility Regulatory Only public procurement Measures are not clearly described instruments mentioned Economic incentives Tax incentives are available. Loans and grants are available Mainly due to EU Information and advice Information campaigns and Training on fuel-efficient driving. trainings promote eco-driving R&D support Not mentioned Not mentioned Adequacy of policy Potentials considered. The adequacy of the policy is package The policy mix has a strong difficult to assess since some focus on road vehicles (e.g. no measures are not detailed. Lack of awareness campaign on regulatory instruments and public transport). information R&D.

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4.4.4 Two Good Practices from Greece and Bulgaria

4.4.4.1 Social housing for elderly people in Village Kudelin, Bulgaria

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Project: ROSH – Retrofitting of Social Housing Source: http://www.elih-med.eu/upload/moduli/pagine/public/doc/ROSH%20- %20bg_Kudelin.pdf

4.4.4.2 Energy retrofitting of 5 Students’ residence buildings in Democritus University of Thrace (DUTH) campus, Komotini, Greece. In Greece, 5 Students’ residence buildings have been selected for the large scale pilot experiment. The pilot buildings are located within the Democritus University of Thrace (DUTH) campus on the edge of the city of Komotini, the capital of the periphery (or region) of East Macedonia and Thrace, and of the peripheral unit of Rhodope.

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The 5 student buildings are public buildings, owned and managed by the University, accommodating 700 students in 630 flats (560 one-person and 70 two-person flats). The buildings follow in principle the model of low-income social housing buildings, as the students are selected each year on the basis of financial and social criteria. Those buildings were constructed in 1985-1988, range in size between ~1400m2 up to ~3600m2, and contain one or two person flats (depending on the building). Each flat has its separate bathroom and there are communal kitchens on each floor. The construction of the main building elements of all five buildings consists of:

• External walls: single layer of insulating brickwork (type: Poroton) without insulation; un- insulated concrete structural elements (columns, beams) • Floors: concrete floor slabs; un-insulated 1st floor concrete slabs above pilotis • Roofs: pitched timber roofs with ceramic tiles, on air void above flat concrete slabs (with insulation in ‘sandwich’ type construction) • Windows and doors: timber frame double glazed windows and doors; some aluminum entrance doors

The energy audit and analysis of the buildings has shown that currently, 4 student buildings can be classified as Energy Class E (between 706 and 772 kWh/m2-yr, primary energy) and one rated as Energy Class D (702 kWh/m2-yr).

Energy saving measures and estimated costs

(*) Note: In addition to the costs for the actual energy refurbishment, there are costs for parallel activities for the pilot project implementation, i.e. monitoring/metering equipment, campaigns, publication, events etc.

Energy saving target: it is expected for the Greek pilot experimentation to: - improve the pilot buildings by two grades of energy class (from Grade E to Grade C), except Building S1 (one grade improvement, from D to C); corresponding to a primary energy consumption reduction of 34 ~

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43%.

Innovative financial mechanisms used

Financial resources used for Energy refurbishment

Pilot student residence buildings

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External insulation of the facades

Completed external insulation on the facades

Project: Elih-Med. Source: http://www.elih-med.eu/Layout/elih- med/?page=/upload/moduli/pagine/public/greece_pilot.html&target=&tit=Pilot%20Actions

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