Evaluating the macroeconomic impacts of bio-based applications in the EU

In 2012, the European Commission (EC) launched the Bioeconomy Strategy and Action Plan with the objective of establishing a resource efficient and competitive society that reconciles food security with the sustainable use of renewable resources. This report contributes to the plan by evaluating the macroeconomic impacts of bio-based applications in the EU. Such effects can only be evaluated with a computable general equilibrium model such as MAGNET. Four bio-based applications are considered, namely biofuel (second generation), biochemicals, bioelectricity, and biogas (synthetic natural gas). This is done assuming that 1 EJ lignocellulose biomass is converted into fuel, chemicals, electricity and gas and that the final product replaces an equal amount of conventional (e.g. fossil energy) product (on energy basis). The results show that given the assumed efficiency of conversion technology, costs of conversion, biomass price and oil price, the production of second generation biofuel and biochemicals are the only competitive sectors compare to their conventional counterparts in the year 2030 for the EU. In the case of the fuel sectors, it represents a net GDP effect of 5.1 billion US$ while biochemicals generates 6 billion US$. A substantial part of this impact can be explained by the increase in wages, since the production of biomass is relatively labour intensive. The resulting increase in wages is transmitted to other sectors in the economy and increases production and consumption. Another important contributor is the lower oil and fuel price as a result of the substitution of oil based fuel production by bio-based fuel production, which in turn benefits the entire economy.