Lithuanian Bioeconomy Development Feasibility Study · The Study was carried out according to the March 24, 2017, Lithuanian Bioeconomy Deve-lopmeng Feasibility Study public procurement

Lithuanian Bioeconomy

Development Feasibility Study

Akademija, Kauno r. 2017

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The Study was carried out according to the March 24, 2017, Lithuanian Bioeconomy Deve-

lopmeng Feasibility Study public procurement agreement No. 8-49 between the Ministry of

Economy of the Republic of Lithuania and Aleksandras Stulginskis University.

Authors

Prof. dr. Vlada Vitunskienė, chief researcher (Aleksandras Stulginskis University)

Prof. dr. Vilija Aleknevičienė (Aleksandras Stulginskis University)

Prof. dr. Astrida Miceikienė (Aleksandras Stulginskis University)

Prof. dr. Jonas Čaplikas (Aleksandras Stulginskis University)

Prof. habil. dr. Vaclovas Miškinis (Lithuanian Energy Institute)

Prof. dr. Irina Pilvere (Latvia University of Agriculture)

Assoc. prof. dr. Daiva Makutėnienė (Aleksandras Stulginskis University)

Dr. Vida Dabkienė (Lithuanian Institute of Agrarian Economics)

Dr. Vidas Lekavičius (Lithuanian Energy Institute)

Knut Øistad (Norwegian Institute of Bioeconomy Research)

Neringa Ramanauskė (Aleksandras Stulginskis University)

Virginija Kargytė (Aleksandras Stulginskis University)

Darius Jazepčikas (Aleksandras Stulginskis University)

Evaldas Serva (Aleksandras Stulginskis University)

Aurelija Markelytė (Aleksandras Stulginskis University)

Consultants Øyvind Halvorsen (Innovation Norway)

Rita Bogužaitė (Innovation Norway)

Dr. Irena Vitkauskienė (JSC „Plastiksė“)

Mindaugas Šilininkas (JSC „Euromediena“)

Acknowledgment

We kindly thank the members of Study supervision panel from the Ministry of Economy, Ministry of

Health, Ministry of Education and Science, Ministry of Social Security and Labour, Ministry of Agri-

culture, Ministry of Environment, Ministry of Energy, Office of the Government, Lithuanian Biotech-

nology Association, Association of Lithuanian municipalities, the staff of the Ministry of Economics

and the consultants – Øyvind Halvorsen, Rita Bogužaitė, Irena Vitkauskienė and Mindaugas Šilininkas

– for their help and support.

© Aleksandras Stulginskis University, 2017

ISBN 978-609-449-126-9

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Contents

Introduction ..............................................................................................................................................7

1. Analysis of the definition of bioeconomy .........................................................................................10

2. Analysis of the condition of Lithuanian bioeconomy and potential directions of its development ..13

2.1. Economic activities attributable to bioeconomy ..........................................................................13

2.2. Analysis of key statistical indicators of Lithuaninan bioeconomy in 2005–2016 .......................18

Current general economic profile of Lithuanian bioeconomy..............................................18

Trends of the development of Lithuanian bioeconomy in 2005–2016 .................................20

Analysis of business environment factors that have or will have an impact on the

development of bioeconomy in Lithuania ............................................................................37

Forecasts for the development of Lithuanian bioeconomy till 2030 ....................................50

Identification of Lithuanian economic activities attributable to bioeconomy that have

the greatest potential .............................................................................................................54

3. Analysis of the impact of legal environment on the development of bioeconomy in Lithuania .......64

3.1. Legal regulation of bioeconomy in Lithuania ..............................................................................64

3.2. Evaluation of Expedience of the Lithuanian Bioeconomy strategy .............................................69

3.3. Feasibility analysis of efficient cooperation between Lithuanian business, science and state

authorities in bioeconomy ............................................................................................................74

4. Analysis of Economic Environment Impact on the Development of Bioeconomy in Lithuania ......83

4.1. Impact of Tax and Business Environment on the Development of Bioeconomy in Lithuania ....83

4.2. Research and experimental development potential in Lithuanian bioeconomy ...........................92

5. Analysis of the bioeconomy sector of European Union countries ..................................................101

5.1. Analysis of strategic documents of the EU and OECD related to bioeconomy development ...101

5.2. Review of bioeconomy development of the European Union countries ....................................106

5.3. Good practice of the EU Member States in the development of bioeconomy and

opportunities of its adaptation in Lithuania ...............................................................................115

6. Analysis of the Norwegian bioeconomy sector ...............................................................................130

6.1. Development of Norwegian bioeconomy ..................................................................................130

6.2. Strategic Norwegian documents related to the development of bioeconomy ............................145

6.3. Norway’s practice in the development of bioeconomy ..............................................................146

7. Analysis of Lithuanian and Norwegian business cooperation opportunities in the bioeconomy ...152

7.1. Investment and success stories of Norwegian companies in Lithuania .....................................152

7.2. Analysis of areas of cooperation of Lithuanian and Norwegian business and the need

therefor .......................................................................................................................................156

7.3. Potential measures to promote cooperation between the Lithuanian and Norwegian

business ......................................................................................................................................162

8. Conclusions and Recommendations on the development of bioeconomy and innovation in

Lithuania .........................................................................................................................................169

Annexes

Summary

http://ukmin.lrv.lt/uploads/ukmin/documents/files/Inovaciijos/bioekonomikos%20studija/Lithuanian_Bioeconomy_Study_Annexes_EN.pdf

http://ukmin.lrv.lt/uploads/ukmin/documents/files/Inovaciijos/bioekonomikos%20studija/Lithuanian%20Bioeconomy%20Development%20Study%20Summary_EN.pdf

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Table list

Table 1. Definition of bioeconomy in legal acts and other documents .............................................................. 10

Table 2. Basic scope of economic activities in the bioeconomy ........................................................................ 15

Table 3. Scope of economic activities in the bioenergy ..................................................................................... 16

Table 4. Main economic indicators of Lithuanian bioeconomy ......................................................................... 19

Table 5. Bioenergy indicators by resources in 2016 .......................................................................................... 20

Table 6. Transformation input in Lthuanian Bioenergy (thousand TOE) .......................................................... 31

Table 7. Final consumption of bioenergy resources in Lthuania (thousand TOE) ............................................. 32

Table 8. Changes in components of Lithuania’s business conditions index in the international........................ 44

Table 9. Legal acts of the Republic of Lithuania, structural elements and actions related to bioeconomy ....... 65

Table 10. Tax Incentives Relevant for Bioeconomic Enterprises ......................................................................... 84

Table 11. Provisions of strategic documents of the EU and OECD on the development of bioeconomy ........ 101

Table 12. Bioeconomy sectors involved in each good practice region ............................................................... 124

Table 13. Potential incentives for promoting cooperation between the Lithuanian and Norwegian business

in the bioeconomy area ...................................................................................................................... 167

Table 14. Goals, Objectives and Measures of Bioeconomy Development and Innovation Promotion ............... 176

Figures list

Figure 1. Gross value added in bioeconomy sectors in Lithuania ...................................................................... 21

Figure 2. Share of bioeconomy sectors in Lithuanian GDP (in percentage) ...................................................... 22

Figure 3. Labour productivity and its growth in bioeconomy sectors ................................................................ 22

Figure 4. Turnover in bioeconomy sectors in Lithuania (in percentage) ............................................................ 24

Figure 5. Export in bioeconomy sectors in Lithuania (in percentage)................................................................ 25

Figure 6. Employment in bioeconomy sectors in Lithuania (in percentage) ...................................................... 26

Figure 7. Gross earnings and its its growth in bioeconomy sectors in Lithuania ............................................... 27

Figure 8. Growth of bioenergy resource production in Lithuania (2005=100) .................................................. 30

Figure 9. Production of primary energy by resource in Lithuania ..................................................................... 31

Figure 10. Enterprise performance of Lithuanian biotechnology sector ............................................................... 34

Figure 11. Biotechnology R&D statistical indicators in the business sector ......................................................... 35

Figure 12. Significance of factors of the political environment (in points)........................................................... 38

Figure 13. Significance of factors of economic environment (in points) .............................................................. 39

Figure 14. Significance of social environment factors (in points) ........................................................................ 40

Figure 15. Significance of technologic environment factors (in points) ............................................................... 41

Figure 16. Significance of factors of natural environment (in points) .................................................................. 42

Figure 17. Significance of legal environment factors (in points) .......................................................................... 43

Figure 18. Population projections in Lithuania ..................................................................................................... 45

Figure 19. Projections of the working age population in Lithuania ...................................................................... 46

Figure 20. Projections of the world’s population and production and consumption of agriculture, fisheries

and food products and .......................................................................................................................... 47

Figure 21. Structure of the sales of Lithuanian manufacturing industry products by markets .............................. 48

Figure 22. Greenhouse gas emissions by Lithuanian bioeconomy sectors ........................................................... 49

Figure 23. Projections of bioeconomy gross value added in Lithuania ................................................................. 51

Figure 24. Projection of bioeconomy share of GDP in Lithuania ......................................................................... 52

Figure 25. Projections employment in bioeconomy in Lithuania ......................................................................... 53

Figure 26. Projections of bioeconomy products export in Lithuania .................................................................... 54

Figure 27. Trends of firm performance indicators according to bio-business expectation in short, medium

and log run ........................................................................................................................................... 59

Figure 28. Assessment of need for the Lithuanian bioeconomy strategy through a survey of business, science

and government representatives ........................................................................................................... 73

Figure 29. Methods and importance of efficient cooperation of business and government in bioeconomy ......... 75

Figure 30. Methods and importance of efficient cooperation of business and science in bioeconomy ................. 76

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Figure 31. Methods and importance of efficient cooperation of government and research institutions in

bioeconomy .......................................................................................................................................... 77

Figure 32. Framework scheme of institutional cooperation of Lithuanian government, business, research

institutions and the civil society in bioeconomy .................................................................................. 79

Figure 33. Principal scheme of the coordination of institutional cooperation of Lithuanian government,

business, research institutions and the public in bioeconomy .............................................................. 81

Figure 34. Regarding the leadership of government institutions in the coordination of the bioeconomy

policy in Lithuania ............................................................................................................................... 82

Figure 35. Public expenditure on Lithuanian bioeconomy sectors according to financing Fund .......................... 87

Figure 36. Public expenditures of national and the EU support for agriculture in Lithuania ................................ 90

Figure 37. Trend of direct support subsidies and agriculturas output in Lithuania ............................................... 90

Figure 38. R&D researchers in Lithuanian higher education and government sectors ......................................... 93

Figure 39. R&D personnel in bioeconomy business enterprise sector in Lithuania .............................................. 93

Figure 40. Number of doctoral students by field of science attributable to bioeconomy in Lithuania .................. 94

Figure 41. R&D expenditure in higher education and government sectors by field of science ............................ 95

Figure 42. Research project by bioeconomy sectors considering project estimates .............................................. 96

Figure 43. Research projects by bioeconomy themes considering project estimates ............................................ 96

Figure 44. Number of bioeconomy research projects by field of biotechnology in Lithuania .............................. 97

Figure 45. R&D expenditure in business sector in Lituanian bioeconomy ........................................................... 98

Figure 46. Bioeconomy turnover in the EU countries ......................................................................................... 107

Figure 47. Share of bioeconomy gross value added in the GDP in the EU countries ......................................... 110

Figure 48. Gross value added in biomass production and fully bio-based manufacturing subsectors in

the EU countries ................................................................................................................................. 111

Figure 49. Change in the gross value added in the bioeconomy subsectors between 2010 and 2014 in

the EU countries (±percent) ............................................................................................................... 112

Figure 50. Employment in bioeconomy subsectors of the EU countries ............................................................ 113

Figure 51. The share of persons employed in bioeconomy sectors of all the persons employed in the EU

countries ............................................................................................................................................. 114

Figure 52. Biorefining pyramid........................................................................................................................... 118

Figure 53. Organisational structure of a bio-cluster ............................................................................................ 126

Figure 54. Gross value added in Norwegian bioeconomy sectors (at current prices) ......................................... 130

Figure 55. Change in the gross value added in Norwegian bioeconomy sectors ................................................ 131

Figure 56. Employment in Norwegian bioeconomy sectors ............................................................................... 131

Figure 57. Change in the number of people employed in Norwegian bioeconomy sectors ................................ 132

Figure 58. Exports in Norwegian bioeconomy sectors in ................................................................................... 133

Figure 59. Change of export in the Norwegian bioeconomy sector .................................................................... 133

Figure 60. Agricultural, forest land and inland waters in Norway, 2016 ............................................................ 134

Figure 61. Total growing stock volume and gross annual increment in Norway ................................................ 135

Figure 62. Fish resources in Norway .................................................................................................................. 136

Figure 63. Biomass production potential in Norwegian agriculture ................................................................... 137

Figure 64. R&D personnel in Norwegian business by bioeconomy subsectors .................................................. 142

Figure 65. R&D expenditures in Norwegian business by bioeconomy subsectors ............................................. 142

Figure 66. MTEP R&D expenditure of Norwegian businesses on biotechnology by bioeconomy subsectors ... 143

Figure 67. Norway direct investment in bioeconomy sectors in Lithunia ........................................................... 152

Figure 68. Number of Norway-controlled enterprises in Lithuania at the end of the year .................................. 153

Figure 69. Average score of the importance of cooperation between the Lithuanian and Norwegian business

by areas: food sector........................................................................................................................... 157


by areas: forest biomass-based sector ................................................................................................ 158


by areas: bio-based chemicals and pharmaceuticals manufacturing .................................................. 159


by areas: manufacture of bio-based textiles, apparel and leather ....................................................... 159


by areas: biowaste treatment .............................................................................................................. 160


by areas: all bioeconomy sectors ........................................................................................................ 161

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Acronyms

CAP – Common Agricultural Policy

CAS – Closed Aquaculture Systems

CF – Cohesion Fund

CFFT – Center of Food and Fermentation Technologies (Estonia)

CN – Combined Nomenclature (European Classification of Goods)

CPA – European Classification of Products by Activity

DH – District Heating (Lithuanian)

EAFRD – European Agricultural Fund for Rural Development

EAGF – European Agricultural Guarantee Fund

EAGGF – European Agricultural Guidance and Guarantee Fund

EEA – European Economic Area

EESC – European Economic and Social Committee

EFF – European fisheries Fund

EFSI – European Fund for Strategic Investments

EIP – European Innovation Partnership

EMFF – European Maritime and Fisheries Fund

ERDF – European Regional Development Fund

EU – European Union

FAO – Food and Agriculture Organisation of the United Nations

FDI – Foreign Direct Investment

FIFG – Financial Instrument for Fisheries Guidance

GDP – Gross Domestic Product

GHG – Greenhouse Gas

GVA – Gross Value Added

H2020 – European Union Research and Innovation programme “Horizon 2020“

ICT – Information and Communications Technology

ITC – International Trade Center

KETs – Key Enabling Technologies

LITBIOMA – Lithuanian Biomass Energy Association

LQ – Location Quotient

NACE – European Classification of Economic Activities

OECD – Organisation for Economic Co-operation and Development

PGPK – Classification of Products and Services

PRODCOM – European System of production statistics for mining and manufacturing

R&D – Research and experimental development

R&D&I – Research, Experimental Development and Innovation

RDP – Rural Development Programme for Lithuania

RDPs – Rural Development Programmes

RWMC – Regional Waste Management Center

SPD – Single Programming Document (SPD)

TOE – tonnes of oil equivalent

UN – United Nations

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Introduction

Long-term forecasts show that, without radical political changes, the current trends in

world economic growth and development will have a major impact on the natural resources and

the ecosystem1. The population of Europe and the world is constantly growing, and so does its

need for food, more and more natural resources are exhausted, the environmental impact and

the related climate change challenges are increasing2. It is therefore essential to move to a new

way of economic growth that is compatible with environmental protection and sustainable use

of limited natural resources, while ensuring a much higher standard of living reducing poverty.

The development and application of innovative biotechnology methods and processes in the

agriculture, health, chemistry and energy sectors has recently been seen as one of the solutions

to accelerate sustainable growth and development3. By focusing more on scientific research and

innovation, new products from biomass and new services needed for the development of the

bioeconomy would be created, helping to reduce climate change, waste and create new jobs4.

The first steps towards bioeconomy in the European Union (EU) were made in 2002,

when the Life Science and Biotechnology Strategy was adopted, devoted to the development

and application of life sciences and biotechnology5. In 2009, the Renewable Energy Directive

of the EU set the renewable energy targets to be met by 2020. One of them was that 20 percent

of the EU’s final energy consumption should be generated from renewable energy resources,

in order to reduce the carbon dioxide emissions6. The bioeconomy strategy Innovating for Sus-

tainable Growth: A Bioeconomy for Europe was adopted in 20127. The Bioeconomy Strategy

and its Action Plan have become the foundation for a more innovative, more resource-efficient

and more competitive society that combines food security, sustainable use of renewable resour-

ces for industrial purposes and environmental protection. The European Commission has set a

long-term target for creating a competitive, resource-efficient and low-carbon economy by

2050. It is expected that bioeconomy will be an important element of the low-carbon economy8.

Under the Paris Agreement (2016), the EU has committed itself that by 2030, its GHG e-

missions would be reduced by at least 40 percent, compared to the level of the 19909.

1 OECD Work on Green Growth. 2015. Green Growth and Global Relations Division. 2 European Commission. 2017. The Bioeconomy Strategy. Research & Innovation: Bioeconomy. 3 Nordic Council of Ministers. 2016. Bioeconomy strategies and policines in the Baltic Sea Region countries. The Baltic Sea

Regional Bioeconomy Council Working Paper no.1. 4 Rönnlund I., Pursula, T. et all. 2014. Creating value from bioresources: Innovation in Nordic Bioeconomy. Nordic Innova-

tion Report 2014:01. Oslo: Nordic Innovation Publication. 5 European Commission. 2002. Life Sciences and Biotechnology—A Strategy for Europe, COM(2002) 27. 6 European Council. 2009. Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the pro-

motion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and

2003/30/EC. 7 European Commission. 2012. Innovating for Sustainable Growth: A Bioeconomy for Europe. Communication from the

commission to the european parliament, the council, the european economic and social committee and the committee of the

regions. 8 Scarlat, N., Dallemand, J.F. et all. 2015. The role of biomass and bioenergy in a future bioeconomy: Policies and facts //

Environmental Development Volume 15. 9 Council of the European Union. 2016. Council Decision (EU) 2016/1841 of 5 October 2016 on the conclusion, on behalf of

the European Union, of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change.

8

According to the OECD, by 2055 the bioeconomy will be the key principle of develop-

ment of the European economy. This means that the focus will be on production of renewable

bioresources in agriculture, forestry and aquaculture, and biomass will become the main source

of industrial raw materials10.

The purpose of this Study is to evaluate the state and the potential of bioeconomy in

Lithuania, to take into account the best practices of the EU Member States and Norway and to

present the conclusions and recommendations for the development of bioeconomy in Lithuania

and the innovation encouraging measures in this sector, to identify the areas of bioeconomy

where the business cooperation between Lithuania and Norway has the greatest potential and

to establish the measures for promotion of bilateral cooperation.

To achieve this, the following tasks have been fulfilled:

1. To analyse the use of the definition of “bioeconomy” in the legislation and guidance

documents of the EU institutions, the Organisation for Economic Cooperation and

Development (OECD), the EU Member States and Norway and to assess whether the

description of the bioeconomy sector provided in Section 1.6 of the Technical

Specification used in the European Commission communication “Innovating for

Sustainable Growth: A Bioeconomy for Europe” is suitable for defining the

bioeconomy sector in the Lithuanian legislation;

2. To analyse the state of bioeconomy in Lithuania and the possible directions of its

development;

3. To analyse the impact of the Lithuanian legal environment on the development of

bioeconomy in Lithuania;

4. To analyse the impact of the Lithuanian economic environment on the development

of bioeconomy in Lithuania;

5. To prepare a questionnaire on business environment assessment and business

development forecasts and to interview at least 5 businesses operating in each

economic activity attributable to the bioeconomy, at least 10 public and private

science and study institutions which activities are related to bioeconomy;

6. To carry our an analysis of the EU bioeconomy sector;

7. To carry our an analysis of the Norwegian bioeconomy sector;

8. To analyse the possibilities of Lithuanian and Norwegian business cooperation in the

field of bioeconomy and to propose measures for promotion of bilateral cooperation;

9. To provide recommendations on the development of bioeconomy in Lithuania and

innovation encouraging measures in this sector by forming a plan of the proposed

measures.

Various research methods were used for the Study: general scientific abstraction,

induction and deduction, analysis and synthesis, content analysis, statistical data analysis,

econometric time series analysis, general equilibrium modelling, questionnaires, interviews,

case studies and others. The research methods are more widely presented in the subsections of

the Study where the results of the research are described. The surveys of business entities and

associations, government and academic institutions are described in Annexes 3–8.

The data for empirical research was collected from publicly available statistical

databases such as Eurostat, Lithuanian Official Statistics Portal, Norway Statbank, joint

statistics of the Organisation for Economic Cooperation and Development (OECD) and the

10 SINTEF. 2015. Towards a bioeconomic future.

9

Food and Agriculture Organisation of the United Nations (FAO) “OECD-FAO Agricultural

Outlook 2016–2025”, International Trade Center (ITC) statistics and statistics of the Lithuanian

authorities. The Study also included the Lithuanian Official Statistics Portal data provided upon

special requests of the authors of the Study (e.g. data from bioeconomic enterprises, i.e.

enterprises involved in bioeconomic activities, selected for aggregated research, etc.) as well as

various studies, study reports and other data. The data sources and data limitations used in

figures and tables, are indicated below the latter, and the data and documents as well as other

sources of literature provided in the text, are listed in the footnotes at the bottom of the page.

Data limitations. The statistics on national accounts, employment, business, science and

technology according to the NACE2 economic activities is not suitable for the macroeconomic

indicator analysis of development, R&D and innovation of partially bio-based manufacturing

(textile, clothing, leather, chemical products, pharmaceuticals, rubber and plastic products,

furniture), bioenergy and biowaste processing sectors. The production of bioenergy resources

is integrated into several economic activities: solid biofuels (firewood, chips and pellets) – in

forestry and logging as well as the production of wood and its products; bioethanol and

biodiesel – in manufacturing of chemical products; biogas production – in gas production and

waste management. According to economic activities such as manufacture of textile, clothing,

leather, chemical products, pharmaceuticals, rubber and plastic products, furniture, general

statistics are provided, irrespective of the origin of the raw materials used in the production, i.e.

whether they are wholly or partially derived from mterials of biological origin or wholly of

fossil resources.

Another limitation is the difference in the time series of cumulative statistics according

to the indicators in question. As a result, the beginning and the end of the empirical research

period are not strictly defined due to the high diversity of the indicators in question. The Study

used the latest statistical data from the above-mentioned statistical databases extracted in May

– July 2017.

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1. Analysis of the definition of bioeconomy

Table 1 presents the results of the analysis of the definition of bioeconomy in documents

of EU institutions, the Organisation for Economic Cooperation and Development (OECD), EU

member states and Norwegian legal acts and guidance documents.

Table 1. Definition of bioeconomy in legal acts and other documents

Documents Bioeconomy definition

Innovating for Sustainable Growth:

A Bioeconomy for Europe. Euro-

pean Commission, 2012

The bioeconomy encompasses the production of renewable biological

resources and the conversion of these resources and waste streams into

value added products, such as food, feed, bio-based products and bioe-

nergy. The bioeconomy includes the sectors of agriculture, forestry,

fisheries, food and pulp and paper production, as well as parts of che-

mical, biotechnological and energy industries. Bio-based products are

products that are wholly or partly derived from materials of biological

origin, excluding materials embedded in geological formations and/or

fossilised. The bioeconomy relies on life sciences, agronomy, ecology,

food science and social sciences, biotechnology, nanotechnology, in-

formation and communication technologies (ICT), and engineering.

Bioeconomy ERA-NET Actions,

European Research Area Networks

of the 6th and 7th Framework Prog-

rammes. Cologne Paper. En Route

to the Knowledge-Based Bio-Eco-

nomy. European Commission, 2007

The bioeconomy encompasses the production of renewable biological

resources and their conversion into food, feed, bio-based products and

bioenergy. It includes agriculture, forestry, fisheries, food and pulp and

paper production, as well as part of chemical, biotechnological, and e-

nergy industries.

A Bioeconomy for Europe. Euro-

pean Commission, 2010

Bioeconomy is production paradigms that rely on biological processes

and, as with natural ecosystems, use natural inputs, expend minimum

amounts of energy and do not produce waste as all materials discarded

by one process are inputs for another process and are re-used in the

ecosystem.

A strategy for a bio-based eco-

nomy. Green New Deal Series vo-

lume 9, European Parliament, 2012

A sustainable bio-economy is based on biomass, is not dependent upon

fossil resources and can be seen as a part of a broader green economy.

A sustainable bio-economy is first and foremost built on the principle

of resource efficiency.

The Application of Biotechnology

to Industrial Sustainability – A Pri-

mer. OECD, 2001

The bio-based economy uses renewable (agricultural, forestry and ma-

rine) and eco-efficient processes (including bioprocesses) to produce

sustainable bioproducts, jobs and income.

Industrial Biotechnology and Cli-

mate Change. Opportunities and

Challenges. OECD, 2011

In a bio-based economy, society is no longer wholly dependent on

fossil fuels and industrial raw materials.

International Futures Project The

Bioeconomy to 2030: Designing a

Policy Agenda, Maine Findings and

Policy Conclusions. OECD, 2009

Bioeconomy is transforming life science knowledge into new, sustai-

nable, eco-efficient and competitive products.

Kjente ressurser – uante mulighe-

ter: Regjeringens bioøkonomistra-

tegi. Nærings-og fiskerideparte-

mentet, 2016.

Bioeconomy includes sustainable, efficient and profitable production,

extraction and use of renewable, biological resources into food, feed,

ingredients, health products, energy, materials, chemicals, paper, texti-

les and numerous other products. The use of potential technologies,

such as biotechnology, nanotechnology and ICTs in addition to con-

ventional disciplines, such as chemistry, is seen as vital to the develop-

ment of modern bio-economics.

11

Baltic Sea Region. Icelandic Presi-

dency of the Nordic Council of Mi-

nisters, 2014

The bioeconomy refers to economic activities based on optimal utiliza-

tion of maritime and terrestrial biological resources.

Towards a Belgian and Regional

Strategy for the Economy. Bio.be

policy document, June 2013

The so-called bio-based economy is the conversion of renewable

feedstock (biomass and organic waste) into bio-based products. Bio-

based economy is an economy where the basic building blocks for in-

dustry and the raw materials for energy are derived from plant-based

(i.e. renewable) sources, often processed using “industrial biotechno-

logy”.

Denmark as growth hub for a sus-

tainable bioeconomy. Statement by

the National Bioeconomy Panel,

September 2014

Bioeconomy is an economy in which the basic building blocks used for

production of energy, chemicals and materials originate from re-

newable biological resources, including plants and animal waste. Pro-

ducts encompass, for instance, foodstuffs and foodstuff ingredients, a-

nimal feed and feed ingredients, others bio-based products (biomass-

based chemicals, biomaterials, etc.) and bioenergy.

National Bioeconomy profile. Fin-

land. European Commission, 2014

The bioeconomy refers to an economy that relies on renewable natural

resources to produce food, energy, products and services.

National Bioeconomy Policy Stra-

tegy: Renewable resources and bio-

technological processes as a basis

for food, industry and energy. Fede-

ral Minister of Food and Agricul-

ture of Germany, 2014

Bioeconomy is the knowledge-based production and use of biological

resources to provide products, processes and services in all economic

sectors within the frame of a sustainable economic system.

National Bioeconomy profile: Italy.

European Commission, 2014

No official definition has yet been adopted. However, the Bioenergy

Sector Plan defines the bio-economy as follows: ‘[t]he bio-economy i-

dentifies new trends involving relocation and reorganisation of pro-

duction and processing, in relation to the natural resources of an area.

National Bioeconomy profile: The

Netherlands. European Co-

mmission, 2014

The bio-based economy is used to describe that part of the economy

that is active in producing bio-based materials and products and bioe-

nergy. The bio-based economy is ‘an economy in which plastics, trans-

port fuels, electricity, heat and all kinds of everyday products are made

from vegetable raw materials (instead of fossil resources’).

Swedish Research and Innovation

Strategy for Bio-based Economy

Report. FORMAS (Swedish Re-

search Council for Environment,

Agricultural Sciences and Spatial

Planning), March 2012

Bioeconomy is related to the sustainable production of biomass to e-

nable increased use within a number of different sectors of society. The

objective is to reduce climate effects and the use of fossil based raw

materials.

Bioeconomy facts and figures 2015,

driving economic growth and pro-

ductivity (United Kingdom).

BBSRC, 2015

The bioeconomy encompasses the wide range of activities that use

bioscience based research and processes to produce products and out-

puts such as food, fuel and bio-chemicals – creating jobs, economic

growth and increasing productivity.

Comparative analysis of the definition of bioeconomy in the EU, OECD and the EU mem-

ber state documents allowed determining that bioeconomy is a part of economics associated

with the following:

sustainable production of bioresources and their processing into value added products;

land and water (plants, animals and micro-organisms) and bio-based products;

types of economic activities (in other words – economic sectors) related to the manu-

facture, processing or recycling and use of such as plants, animals, micro-organisms

and their products;

12

the use of advanced technologies, such as biotechnology, nanotechnology, information

and communication technologies, in addition to traditional technologies. Advanced

technologies are seen as the main prerequisite for modern bioeconomy development,

while knowledge-based bioeconomy may be an essential part of a viable and sustai-

nable economic system.

Thus the definition of bioeconomy according to the Communication from the European

Commission “Innovation for Sustainable Growth: A Bioeconomy for Europe” presented in sub-

paragraph 1.6 of the Technical specification for the preparation of this Study (see line 1 in

Table 1) reflects the essence and the content of bioeconomy, covering all the specified material

elements of bioeconomy. According to this Communication, the bioeconomy encompasses the

production of renewable biological resources and the conversion of these resources and waste

streams into value added products, such as food, feed, bio-based products and bioenergy. This

description of bioeconomy is clear, easily understandable and suitable for defining the bioeco-

nomy in Lithuanian legislation. It should be added that this definition of bioeconomy has re-

cently been often quoted in various EU bioeconomy studies.

13

2. Analysis of the condition of Lithuanian bioeconomy and potential

directions of its development

2.1. Economic activities attributable to bioeconomy

Various political documents, researches and statistical reviews analyse different compo-

sition of bioeconomy by economic activities and sectors. For example, the Strategy for Sustai-

nable Bioeconomy approved by the European Commission11 attributes agriculture, forestry,

fisheries, manufacture of food, wood and paper, as well as the industries of chemicals, energy

and technology to the bioeconomy sector. The National Bioeconomy Profiles published by the

European Commission (by the EU states)12 provide the classification of bioeconomy sectors by

a threefold composition of types of economic activities:

biomass production sectors – agriculture, forestry and fisheries;

fully (100 percent) bio-based manufacturing sectors, processing biomass to higher

added value products, which include manufacture of food, beverages and tobacco;

manufacture of wood, cork and their products, except for furniture; manufacture of

paper and its products and manufacture of leather and related products;

partly (less than 100 percent) bio-based manufacturing sectors, where biomass is

used as a part of materials. This includes manufacture of textile and apparel, chemi-

cals, pharmaceuticals, rubber and plastics, furniture and other bio-based manufactu-

ring.

Manufacture of biogas, biotechnology-based sewerage and biowaste management are

also characterised as partly bio-based economic activities. In turn, NACE REV. 2 categorises

the production of biofuels as manufacture of chemicals (NACE REV. 2 codes C2014 and

C2059), the production of solid biofuels – as logging (NACE REV. 2 code A0220) and manu-

facture of wood products (NACE REV. 2 codes C1610 and C1629). Construction using wood

and its products as construction materials can also be attributed to the partly bio-based sector

of economy.

The OECD Bioeconomy Strategy 203013 defines three main sectors according to the

criterion of the used biotechnology: agricultural, health and industrial sectors. The Innovation

in Nordic Bioeconomy Study14 refers to a number of national economy areas comprising

bioeconomy. Agriculture, fisheries, aquaculture and forestry are attributed to the core bioeco-

nomy area generating feedstock. Various manufacturing areas cover the processing of

feedstock, including the industries of food, wood, bioenergy, chemicals, plastics, textile and

pharmaceuticals. Bioeconomy covers the sector using biotechnology, the construction industry,

household and industrial sewerage and waste treatment. Bioeconomy is also associated with the

service sector covering recreation and tourism that cannot be dissociated from nature. Only six

sectors, which completely fall under the bioeconomy area on the basis of feedstock production

11 European Commission. 2012. Innovating for Sustainable Growth: A Bioeconomy for Europe. Communication from the

commission to the european parliament, the council, the european economic and social committee and the committee of the

regions. 12 European Commission. 2014. National bioeconomy profile. Policy Structure of the Bioeconomy Institutional system (Uni-

ted Kingdom, Latvia, Ireland, Netherlands, etc.). 13 OECD. 2009. The Bioeconomy to 2030: Designing a Policy Agenda. OECD Publishing. Paris. 14 Rönnlund, I., Pursula, T., Bröckl, M., Hakala, L., Luoma, P., Aho, M., ... & Pallesen, B. E. 2014. Creating value from bio-

resources: Innovation in Nordic Bioeconomy. Nordic Innova-tion. Oslo.

14

and processing, were included in the assessment of the Nordic bioeconomy development: agri-

culture, fisheries and aquaculture, logging, food industry, forestry and bioenergy. The signifi-

cance of bioeconomy sectors has been determined to be very different among the Nordic co-

untries. For example, in Finland and Sweden, forestry-based industries are highly developed,

Denmark can be characterised by the importance of its agricultural sector and food processing,

while Iceland and Norway are known for fisheries. Different areas of manufacture of renewable

energy sources have been developed in Norway and Sweden. In addition to wind energy, ma-

nufacture of agro-biomass is well developed in Demark, and manufacture of forest biomass –

in Finland and Sweden.

The Bioeconomy Study drafted by the international economic research company

“Capital Economics”15 classifies components of direct bioeconomy into five groups of econo-

mic activities (agriculture and fisheries, forestry and logging, food processing, industrial bio-

technology, bioenergy, and water supply). It also analyses two-fold impacts: “upstream” im-

pacts, i.e. the benefit received by those areas of economic activities in the “value chain” from

which bioeconomic enterprises and farms purchase feedstock and services (for example, energy,

equipment, feed industry and others) and “downstream” impacts, i.e. the benefits received by

economic activities, using bioeconomy products (such as food trade and catering, medicine,

etc.).

The examined material revealed that the attribution of certain economic activities or

economic sectors to bioeconomy may be based on different concepts. Their practical applica-

tion may depend on different goals, factors or criteria. The scope of bioeconomy composition

is not finite – it changes with time, because bioeconomic activities are developing. It has been

emphasised that new technologies creates possibilities to replace products made of fossil re-

sources with fully or partly bio-based products16, or to use biomass as “the energy carrier” in

new sectors of economy in the future17.

The summary of analysis of the concept and composition of bioeconomy allows stating

that different scope of bioeconomy may be applied in Lithuania, depending on the examined

context and goals. The recommended base list of areas of economic activities attributable to

bioeconomy is presented in Table 2, while an extended detailed list by NACE REV. 2 four-digit

code is available in Annex No 1.

However, as previously mentioned, the attribution of economic activities to bioeconomy

is not finite. Certain products of party bio-based manufacture that are fully or partly derived

from materials of biological origin are not clearly described in statistical databases, because as

per the bioeconomy report18:

1) new products are continuously being created, and can therefore not yet be found in

official databases; and/or

2) these products are traditionally derived from fossil raw materials, thus the available

databases do not specify the origin (bio-based or fossil-based (such as polyethylene,

polyethylene terephthalate, polypropylene, etc.)) of the raw materials used to produce

them; or

15 Chambers, G., Dreisin, A. and Pragnell, M. 2015. The British bioeconomy: An assessment of the impact of the bioeco-

nomy on the United Kingdom economy. Capital Economics. 11 June. 16 Innovation in Nordic Bioeconomy: creating value from bioresources. Nordic innovation report, May 2014. 17 Vesterinen, P., Alakangas, E., Veijonen, K., & Junginger, M. 2010. Prospects of bioenergy in new industrial sectors–D2. 3.

Solutions for Biomass Fuel Market Barriers and Raw Material Availability EUBIONET-3. VTR. 18 European Commission. 2017. JRC Science for Policy Report: Bioeconomy Report 2016. EUR 28468 EN.

15

3) when a product is made of a partly bio-based material (for example, certain poly-

mers), this distinction is not made in the database either.

It has also been observed that certain studies attempted to collect data on this sector, but

solely the amount of biomass used in the production of bio-materials was assessed. On the other

hand, the reliability of the received data was still limited, thus the detailed list of activities

attributable to bioeconomy by NACE REV. 2 four-digit codes is not finite either.

Table 2. Basic scope of economic activities in the bioeconomy

NACE

Rev. 2

codes

Corresponding NACE Rev. 2 labels Abbreviated NACE Rev. 2 labels used in

this Study

Biomass production

A01 Crop and animal production, hunting and related ser-

vice activities

Agriculture

A02 Forestry and logging Forestry and logging

A03 Fishing and aquaculture Fishing and aquaculture

Fully (100%) bio-based manufacturing

C10 Manufacture of food products Manufacture of food

C11 Manufacture of beverages Manufacture of beverages

C12 Manufacture of tobacco products Manufacture of tobacco

C16 Manufacture of wood and of products of wood and

cork, except furniture; manufacture

of articles of straw and plaiting materials

Manufacture of wood products

C17 Manufacture of paper and paper products Manufacture of paper

Partly (< 100%) bio-based manufacturing

C13 Manufacture of textiles Manufacture of bio-based textiles

C14 Manufacture of wearing apparel Manufacture of bio-based wearing appa-

rel

C15 Manufacture of leather and related products Manufacture of leather products

C20 Manufacture of chemicals and chemical products Manufacture of bio-based chemicals

C21 Manufacture of basic pharmaceutical products and

pharmaceutical preparations

Manufacture of bio-based pharmaceuti-

cals

C22 Manufacture of rubber and plastic products Manufacture of bio-based plastics

C2365 Manufacture of fibre cement Manufacture of fibre cement

C31 Manufacture of furniture Manufacture of bio-based furniture

C32 Other manufacturing Other bio-based manufacturing

Partly (< 100%) bio-based others activities

D3521 Manufacture of gas Manufacture of biogas

E38 Waste collection, treatment and disposal activities; ma-

terials recovery

Biowaste treatment

Bioenergy is not distinguished into a separate type of economic activities in NACE

REV. 2. manufacture of bioenergy products falls within certain areas of logging, wood products

and chemicals, gas production and waste management, as per Table No 3. the Bio-Based In-

dustries Consortium (BIC) annual report distinguishes two areas of bioenergy, namely, biofuels

(bioethanol and biodiesel) and bioenergy (biogas and solid biomass) for the production of heat

and electricity19.

19 Bio-based Industries Consortium (BIC). 2017. Annual Report 2016, January

16

Table 3. Scope of economic activities in the bioenergy

NACE

Rev. 2

codes

Corresponding NACE Rev. 2 labels Broduct descriptions in PGPK or PRODCOM

A0220 Logging Firewood and charcoal produced in the forest

C1610 Sawmilling and planing of wood Wood in chips or particle

C1629 Manufacture of other products of wood;

manufacture of articles of cork, straw

and plaiting materials

Briquettes, pellets and other biofuels from wood,

logging waste and straw

C2014 Manufacture of other organic basic chemi-

cals

Undenatured and denatured ethyl alcohol, wood

charcoal whether or not agglomerated

C2059 Manufacture of other chemical products

n.e.c.

Biofuels (diesel substitute)

D3521 Manufacture of gas Production of gas from by-products of agriculture

or from waste

E3821 Treatment and disposal of non-hazardous

waste (in order to obtain biogas)

Treatment and disposal services of non-hazardous

waste in order to obtain biogas

Biotechnology sector

According to the latest OECD definition, biotechnology is defined as “the application

of science and technology to living organisms as well as parts, products and models thereof,

to alter living or non-living materials for the production of knowledge, goods and services”20.

Main biotechnology activities include21:

research and experimental development on biotechnology (R&D), which covers

1) the development of biotechnology techniques and processes or the creation of pro-

ducts and 2) knowledge received in the performance of R&D. The Frascati Ma-

nual22 distinguishes four biotechnology R&D fields, i.e. environmental biotechno-

logy, industrial biotechnology, medical biotechnology and agricultural biotechno-

logy;

manufacture, such as 1) the use of biotechnology techniques to manufacture biopro-

ducts and 2) the use of biotechnology processes in manufacture, including envi-

ronmental protection goals.

The main areas of application of biotechnology in the EU economy can be classified

into three large groups23: in healthcare and pharmaceutical applications, biotechnology has led

to the discovery and development of advanced medicines, therapies, diagnostics and vaccines;

in agriculture, aquaculture and veterinary, biotechnology has improved animal feed, produced

vaccines for livestock, improved diagnostics of diseases and plant selection, created genetically

modifie organisms; and in industrial processes and manufacturing, biotechnology has promo-

ted the use of enzymes in the production of detergents, pulp and paper, textiles, biomass, bio-

fuels and other bio-materials, and instead of traditional chemical synthesis, it has led to higher

efficiency of industrial processes and decreased energy and water consumption, which in turn

led to the reduction of toxic waste.

20 OECD glossary http://stats.oecd.org/glossary/detail.asp?ID=219. 21 OECD. 2005. A framework for biotechnology statistics. 22 OECD. 2015. Frascati Manual 2015: Guidelines for Collecting and Reporting Data on Research and Experimental Deve-

lopment, The Measurement of Scientific, Technological and Innovation Activities, 23 Biotechnology’s contribution to the EU economy. European Commission > Growth > Sectors > Biotechnology

17

The list-based definition of biotechnology techniques and process

DNA/RNA: Genomics, pharmacogenomics, gene probes, genetic engineering, DNA/RNA sequencing/ synthe-

sis/amplification, gene expression profiling, and use of antisense technology.

Proteins and other molecules: Sequencing/synthesis/engineering of proteins and peptides (including large mo-

lecule hormones); improved delivery methods for large molecule drugs; proteomics, protein isolation and puri-

fication, signaling, identification of cell receptors.

Cell and tissue culture and engineering: Cell/tissue culture, tissue engineering (including tissue scaffolds and

biomedical engineering), cellular fusion, vaccine/immune stimulants, embryo manipulation.

Process biotechnology techniques: Fermentation using bioreactors, bioprocessing, bioleaching, biopulping,

biobleaching, biodesulphurisation, bioremediation, biofiltration and phytoremediation.

Gene and RNA vectors: Gene therapy, viral vectors.

Bioinformatics: Construction of databases on genomes, protein sequences; modelling complex biological pro-

cesses, including systems biology.

Nanobiotechnology: Applies the tools and processes of nano/microfabrication to build devices for studying

biosystems and applications in drug delivery, diagnostics, etc.

Sources: A framework for biotechnology statistics. OECD, 2005

Because biotechnology is a process rather than a product or an industry, it cannot be

easily identified on the basis existing classification of economic activities or products24. Accor-

ding to the provided OECD definition of biotechnology, R&D, production and service activities

creating or applying biotechnology techniques and processes are attributable to the biotechno-

logy sector. According to the presented explanation of the concept of biotechnology and its

activities, the following types of economic activities according to NACE REV. 2 are attribu-

table to the biotechnology sector:

manufacturing activities (for example, C10-C23), when biotechnology techniques or

processes are applied in manufacture;

agriculture (A01), which applies biotechnology techniques;

aquaculture (A032), which applies biotechnology techniques;

other activities, which apply biotechnology techniques or processes (for example,

sewerage (C37));

research and experimental development on biotechnology (M7211);

hospital activities (Q8610), which apply biotechnology techniques;

veterinary activities (M75), which apply biotechnology techniques, and others.

According to the definition presented in Section 1, bioeconomy is understood as a pro-

duction activity, i.e. manufacture of biomass and the transformation thereof and biowaste into

value added products. As a result, only a part of biotechnology activities, i.e. manufacturing

activities only, are attributable to bioeconomy. Such activities of bioeconomy as R&D and ser-

vices (medicine and veterinary) are not attributable to bioeconomy.

24 OECD. 2002. Frascati Manual 2002. Proposed Standard Practice for Surveys on Research and Experimental Development.

18

2.2. Analysis of key statistical indicators of Lithuaninan bioeconomy

in 2005–2016

Current general economic profile of Lithuanian bioeconomy

The analysis of Lithuanian bioeconomy statistical indicators (gross value added, emp-

loyment, labour productivity, turnover, exports, earnings and the number of economic entities

in operation, including farms) was conducted according to the three first groups of activities

attributable to bioeconomy indicated in Table 2, i.e. biomass production, fully bio-based

manufacturing sectors and partly bio-based manufacturing sectors, and types of economic acti-

vities attributable thereto, which have also been referred to as subsectors in the Study. Other

partially bio-based activities (NACE REV. 2 codes D352 and E3821) were not included in the

analysis because of the lack of data based whereon the bio-proportion therein could be deter-

mined.

Actual statistical data were used for the analysis of indicators of gross value added

(GVA), employment, turnover, exports, earnings and the number of economic entities in opera-

tion of biomass production and fully bio-based manufacturing sectors. Statistical data of the

bio-based manufacturing sector were recalculated according to the proportion of bioproducts

fully or partly made of bio-materials. The statistics on the sale of industrial products according

to the PRODCOM list was used to determine this proportion in partly bio-based manufacturing.

Its share in sales was determined on the basis thereof. Also, indicators of GVA, turnover and

the number of employees were determined on the basis of this proportion in economic activities

attributable to bioeconomy according to the following NACE REV. 2 codes: C13-C15, C20-C22

and C31-C32 (see group “partly bio-based manufacturing” in Table 2). To measure the bio-

proportion by each of the said economic activities, equivalent products according to PRODCOM

8-digit codes were analysed:

1) Statistical classification of economic activities (NACE REV. 2) by 2 or 4-digit codes;

2) Classification of Products and Services (PGPK) by codes;

3) Combined Nomenclature (CN) by 4 or 6-digit codes.

Tables of linking codes of products and economic activities of Statistics Lithuania were

used to identify equivalent codes of goods in NACE REV. 2, PRODCOM, PGPK and CN ver-

sions.

Table 4 illustrates the latest statistical data of the Lithuanian bioeconomy, and data from

2005 is available in Annex No. 2. Almost EUR 4680.8 million in GVA was created in Lithua-

nian bioeconomy (in 2014), while its contribution to the country’s GDP accounted for 12.8

percent. Bioeconomy turnover (EUR 11562.0 million in 2015) accounted for a sixth of the total

turnover of non-financial companies. Exports of biomass and its products totalled EUR 9890.5

million (in 2016), which accounted for 43.7 percent of the total value of exports of Lithuanian

goods. 234.4 thousand people were employed in bioeconomy, accounting for more than a sixth

(17.6 percent) of persons employed in Lithuanian economy.

Almost EUR 1251.6 million (in 2014) of value added was created in the biomass pro-

duction sector, which accounted for 3.4 percent of the country’s GDP. The majority was created

in agriculture, where GVA was EUR 1019.7 million. Agricultural products accounted for the

major share (95.7 percent, or EUR 1310.8 million in 2016) of exports of the biomass production

sector. 105.2 thousand people were employed in agriculture (in 2015), accounting for 87.6

19

percent of all the people employed in the sector. Many family farms (171.1 thousand in 20125),

also enterprises and other agricultural companies (1143 – in the beginning of 201726) were en-

gaged in farming. Forestry, logging, fisheries and aquaculture companies employed a very

small share of people (about 1 percent).

Table 4. Main economic indicators of Lithuanian bioeconomy

NACE activities

GVA in mil-

lions EUR

(2014)

Turnover in

millions EUR

(2015)

Thousands of

employees

(2015)

Number of

economic en-

tities in ope-

ration (2016)

Biomass production

Agriculture 1019.7 2664.1 105.2 123.8**( thou.)

Forestry and logging 201.6 400.2 13.7 1018

Fishing and aquaculture 30.3 71.5 1.9 190

TOTAL 1251.6 3135.7 120.8 125**( thou.)

% of all economic activities 3.4* 4.1 9.1 -

Fully bio-based manufacturing

Mnufacture of food, beverages and tobacco 1480.8 4575.8 43.0 988

Manufacture of wood products 455.3 1081.5 21.5 1263

Manufacture of paper 177.8 412.5 4.8 107

TOTAL 2113.9 6069.8 69.3 2350


Partly bio-based manufacturing

Manufacture of bio-based textiles and apparel, leather 369.2 815.2 21.1 n.d.

Manufacture of bio-based chemicals 51.0 200.5 0.7 n.d.

Manufacture of bio-based pharmaceuticals 133.6 215.4 0.2 n.d.

Manufacture of bio-based plastics n.d. n.d. n.d. n.d.

Manufacture of bio-based furniture and other products 761.5 1125.3 22.3 n.d.

TOTAL 1315.3 2356.5 44.3 n.d.


TOTAL

TOTAL bioeconomy 4680.8 11562.0 234.4 n.d.


* percentage of GDP, ** including family farms (2013)

Data source: authors elaboration on information on Eurostat (National accounts aggregates by industry and GDP and main

components) and Lithuanian Official Statistics Portal (Turnover of non-financial business activities; Economic entities in

operation and Farm structure survey in 2013)

In 2014, EUR 2113.9 million in GVA was created in fully bio-based manufacturing

sector, accounting for 5.8 percent of Lithuania’s GDP. Turnover of companies operating in the

sector (EUR 6069.8 million in 2015) accounted for 7.9 percent of the total turnover, while

exports of goods (EUR 4355.5 million) accounted for almost a fifth of the total value of Lithu-

anian exports of goods. 2.35 thousand companies operated in the sector (in the beginning of

2017), employing 69.3 thousand people. The major share of GVA of the sector was created in

manufacture of food, beverages and tobacco products (70 percent). The share of the latter in-

dustries have also accounted for the major share of the bioeconomy turnover, exports and emp-

loyment of the sector.

GVA created in partly bio-based manufacturing sector (EUR 1315.3 million in 2014)

accounted for 3.6 percent of the country’s GDP, and its turnover (EUR 2356.5 million in 2015)

made up 3.1 percent of the total turnover. Exports of bioproducts accounted for almost a fifth

25 Statistics Lithuania. 2015. Results of the Farm Structure Survey 2013 in Lithuania. 26 Lithuanian Official Statistics Portal: Economic entities in operation statistics.

20

(18.1 percent) of the value of exports of Lithuanian goods. More than a half of GVA (57.9

percent in 2014) was created in manufacture of wood and bio-based furniture, and slightly more

than a fourth (28.1 percent) – in bio-based manufacture of textiles, apparel and leather. Exports

of goods of both subsectors accounted for almost a fourth of exports value of each subsector.

Both subsectors employed almost 98 percent of employees of the sector.

The significance of bioenergy increased in Lithuania having decommissioned the Ignalina

Power Plant in 2009. The contribution of bioenergy to the production of primary energy in

Lithuania lately accounted for about 73 percent27, of which firewood and wood waste for fuel

accounted for 64 percent, biodiesel made up about 5 percent, biogas – almost 2 percent, and the

remaining types of biofuel – less than one percent each. The current scopes of the production

of biofuel, total consumption, final use and exports in in-kind units of measure are presented in

Table 5. The production of solid biofuels is mainly targeted at the domestic market, exporting

slightly more than a tenth of the output. Firewood and chips are consumed in the domestic

market, while wood and straw pellets are exported28. Export of biodiesel and agricultural waste

for bioenergy accounts for the major share of their production (79 and 86 percent in 2016,

respectively). About a half of produced bioethanol is exported, while biogas is consumed in the

domestic market.

Table 5. Bioenergy indicators by resources in 2016

Bioenergy resources Production* Gross con-

sumption

Final con-

sumption Exports

Firewood and wood waste (thou. cubic metres) 6054,5 6130,0 3158,4 691,3

Charcoal (thou. tonnes) 0,5 1,3 1,3 5,9

Agriculture waste (thou. tonnes) 40,3 14,1 8,3 27,4

Renewable municipal waste (thou. tonnes) 99,4 98,4 6,2 -

Bioethanol (thou. tonnes) 14,1 9,9 9,9 6,8

Biodiesel (thous. tonnes) 103,1 56,7 56,7 81,8

Biogas (mill. cubic metres)** 67 67 17,2 -

* including recovered products and interproduct transfers; ** including landfill biogas, sludge biogas and other biogas

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (Fuel commodities balances)

Trends of the development of Lithuanian bioeconomy in 2005–2016

Gross value added trends

The food sector creates more than a half (54 percent in 2014) of GVA in bioeconomy

(which covers agriculture, fisheries and manufacture of food), and forest biomass-based sector

(which includes forestry and logging, manufacture of wood, paper products and furniture)

creates slightly more than a third (34.1 percent) of GVA. When it comes to individual sub-

sectors, food industry (together with manufacture of beverages and tobacco products), agricul-

ture and bio-based furniture production creates the major share of GVA in bioeconomy, while

manufacture of medicines, pharmaceutical products and chemicals – the smallest share, as per

Figure 1.

27 Authors elaboration on information in Lithuanian Official Statistics Portal Energy commodities balances sheets for energy

production in tonnes of oil equivalent (TOE). 28 Interview of LITBIOMA representative

21

The comparison of the structure of GVA at the beginning and at the end of the period

allowed determining that the shares of agriculture, manufacture of bio-based textiles, apparel

and leather, and the wood industry decreased significantly in the past decade (from 29.1 to 21.8

percent, from 17.7 to 7.9 percent and from 11.7 to 9.7 percent, respectively). Shares of food

industry together with manufacture of beverages and tobacco products, manufacture of bio-

based furniture, paper industry and manufacture of bio-based pharmaceutical products increa-

sed significantly (from 26.8 to 31.6 percent, from 11.6 to 16.2 percent, from 2.2 to 3.8 percent

and from 0.4 to 2.5 percent, respectively). Shares of forestry, bio-based chemicals industry and

fisheries in GVA of bioeconomy changed slightly.

Figure 1. Gross value added in bioeconomy sectors in Lithuania

Data source: authors elaboration on information in annex 2 table 3

Indicators of GVA of Lithuanian bioeconomy during the analysed period are presented

in Table 3 of Annex 2. The nominal value of bioeconomy was determined to have grown by 70

percent over the decade (2005 – 2014), from EUR 2746.7 to EUR 4680.8 million, while its

share in Lithuania’s GDP changed slightly, accounting for an average of about 12 percent. The

contribution of the biomass production sector to GDP decreased, but that of the bio-based

manufacturing experienced growth.

The share of bioeconomy subsectors in the country’s GDP and its change over the past

decade is illustrated in Figure 2. The contribution of subsectors of agriculture and manufacture

of bio-based textiles, apparel and leather decreased significantly, and the share of wood industry

also dropped. Shares of food industry and manufacture of bio-based furniture increased signi-

ficantly. The share of the sub-sector of bio-based manufacture of pharmaceutical products in

GDP also grew by almost 7 times from 0.05 to 0.37 percent, while the scope of its GVA incre-

ased by two and a half times. Since this is a very small sector of bioeconomy, its rapid growth

has not had any significant impact on the growth of the country’s economy, including

bioeconomy.

Manufacture of food,

beverages and tobacco;

31.6%

Agriculture; 21.8%Manufacture of bio-based furniture

and other products; 16.2%

Manufacture of wood

products; 9.7%

Manufacture of bio-based

textiles, wearing apparel and

leather; 7.9%

Forestry and logging;

4.3%

Manufacture of paper;

3.8%


pharmaceuticals; 2.9%

Manufacture of bio-

based chemicals;

1.1%

Fishing and

aquaculture; 0.6%

Percentage in 2014

22

Figure 2. Share of bioeconomy sectors in Lithuanian GDP (in percentage)

Data source: Authors elaboration on information in annex 2 table 3

Trends of labour productivity

In bioeconomy, labour productivity (value added created by one employee per year, in

thousand EUR) is lower than average productivity in the overall economy of Lithuania, as per

Figure 3. In 2014, the average labour productivity in bioeconomy was almost EUR 20 thousand

per employee, which was by a fifth lower than the average labour productivity in Lithuania.

This gap decreased significantly over the decade (for more information, see Table 4 of Annex

2).

Figure 3. Labour productivity and its growth in bioeconomy sectors

Data source: Authors elaboration on information in annex 2 table 4

0.08%

0.14%

0.37%

0.49%

0.55%

1.01%

1.24%

2.08%

2.79%

4.05%

0% 1% 2% 3% 4% 5%

Fishing and aquaculture

Manufacture of bio-based chemicals

Manufacture of bio-based pharmaceuticals

Manufacture of paper

Forestry and logging

Manufacture of bio-based textiles, apparel and leather


Manufacture of bio-based furniture and other

Agriculture

Manufacture of food, beverages and tobacco

Share in GDP (%)

2014

2005

10

15

18

20

20

25

25

33

37

39

80

336

0 100 200 300 400

Agriculture


Manufacture of bio-based textiles,

wearing apparel and leather

Average: Bioeconomy


Average: all NACE activities


Manufacture of food, beverages

and tobacco

Manufacture of bio-based furniture

and other products



chemicals


pharmaceuticals

GVA per persons employed (EUR thou.), 2014

0

100

200

300

400

500

600

700

800

900

1000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Index 2005=100

Agriculture






Manufacture of bio-based textiles, wearing apparel and

leatherManufacture of bio-based chemicals

Manufacture of bio-based pharmaceuticals

Manufacture of bio-based furniture and other products

Average: Bioeconomy

Average: all NACE activities

23

Labour productivity in manufacture of pharmaceutical products and the production of

chemicals is very high in Lithuanian bioeconomy. Here labour productivity is from a few dozen

to several times higher compared to the average labour productivity of the entire country. The

lowest labour productivity levels have been observed in agriculture (which is by a half lower

than the average of the country) employing almost a half of workforce of bioeconomy (44.9

percent in 2015, see Figure 7). Thus such labour productivity in agriculture significantly affects

the average labour productivity level in bioeconomy. Low levels of labour productivity have

also been observed in forestry and logging, manufacture of textiles, apparel and leather, as well

as in wood industry.

Such differences in labour productivity mainly come as a result of differences in inten-

sity of technology use. According to the classification of manufacturing industries prepared by

OECD based on technological intensity, manufacture of pharmaceutical products is attributable

to high-technology industry29 and is a knowledge intensive business industry30, manufacture of

chemicals is attributable to medium-high technology industry, and manufacture of rubber and

plastics – to medium-low technology industry. All other manufacturing industries of bioeco-

nomy (manufacture of food, beverages and tobacco products, textiles, apparel, leather, wood

and paper products, as well as furniture) are attributable to low technology industry. In terms

of technological intensity, primary production of biomass (agriculture, forestry and fisheries)

also is a low technology industry of bioeconomy. On the other hand, the gap in labour producti-

vity between bioeconomy and the entire economy as well as among sectors of bioeconomy has

also decreased due to innovative technological solutions in low technology industry, also in

aquaculture, agriculture and logging.

Over the decade, the average labour productivity in bioeconomy increased by more than

that of the national Lithuanian economy (2.6 and 1.9 times, respectively), especially in manu-

facture of bio-based pharmaceutical products (almost by 16 times) and the fisheries and aqua-

culture sector (by 7.6 times) as per Figure 3. Also, labour productivity in such bioeconomy

subsectors as manufacture of furniture, chemicals, food and beverages, paper and agriculture

increased more rapidly than the economy of the country. It grew somewhat slower in wood

industry, manufacture of textiles, apparel and leather.

Turnover trends

As per Figure 4, in 2015, more than two thirds (63.2 percent) of turnover in bioeconomy

was generated in the food sector, and slightly more than a fourth (26.1 percent) – in the forest

biomass-based sector, where turnover of manufacture of bio-based textiles, apparel and leather

as well as bio-based chemicals and pharmaceuticals is a mere 7.1 and 3.6 percent, respectively.

The comparison of indicators of structure of bioeconomy turnover in the beginning and

end of the period being analysed allowed determining that the share of manufacture of bio-

based textiles, apparel and leather products decreased significantly during the period from 2005

till 2015 (by 7 percentage points), while the share of bio-based furniture industry turnover incre-

ased by 2.8 percentage points. The share of the remaining bio-economy subsectors in the overall

bioeconomy turnover changed only slightly.

29 Eurostat indicators on High-tech industry and Knowledge – intensive services. Annex 3 – High-tech aggregation by NACE

Rev.2. 30 Eurostat indicators on High-tech industry and Knowledge – intensive services. Annex 8 – Knowledge Intensive Activi-ties

by NACE Rev. 2.

24

Figure 4. Turnover in bioeconomy sectors in Lithuania (in percentage)


Turnover indicators by sectors and subsectors of bioeconomy during the analysed period

are presented in Table 5 of Annex No 2. The following trends were identified in 2005–2015:

bioeconomy turnover increased by 75 percent, i.e. from EUR 6606.9 to EUR 11562.0

million. Its share in the overall turnover of non-financial companies remained almost

the same, i.e. decreased from 15.7 to 15 percent;

in the biomass production sector, turnover increased by 77.4 percent, i.e. from EUR

1767.5 to 3135.7 million. It should be noted that the turnover of forestry and logging

companies increased by 2.4 times during the same period, while turnover of fishery

and aquaculture companies grew by 20 percent only;

turnover of the fully bio-based manufacturing sector companies increased by 79.3

percent, i.e. from EUR 3385.7 to EUR 6069.8 million. Turnover of companies pro-

ducing paper and its products increased the most (3.2 times), and turnover of compa-

nies engaged in the manufacture of wood and its products increased the least (52

percent);

turnover of the partly bio-based manufacturing sector increased by more than 62

percent, i.e. from EUR 1453.8 to nearly EUR 2356.5 million. Turnover of companies

producing bio-chemicals and pharmaceutical products increased the most, by 5.4 and

6.8 times, respectively, while turnover of wood and bio-based furniture production

grew by nearly two and a half times.

Trends of exports

Figure 5 illustrates the structure of exports of bioeconomy goods (i.e. biomass and

bioproducts). In 2016, products of the food sector accounted for almost a half (44.7 percent) of

the value of these exports, while exports of agriculture and food products alone – for 41.8 per-

cent. Exports of goods of forest biomass-based sector accounted for slightly more than a fourth

of bioeconomy exports (26.4 percent). The share of exports of the subsector of manufacture of

bio-based textiles, apparel and leather products was 12 percent. Moreover, it should be noted



39.6%

Agriculture; 23.0%


furniture and other products;

9.6%

Manufacture of wood

products; 9.4%


textiles, wearing apparel and

leather; 7.1%


3.6%


3.5%



Manufacture of bio-

based chemicals; 1.7%

Fishing and

aquaculture; 0.6%

Turnover, 2015

25

that in 2005–2016, it dropped by a half, especially the share of bio-materials-based apparel,

which decreased from 15.2 percent in the beginning of the period to 6 percent at the end of the

period. The share of exports of the subsector of manufacture of bio-based pharmaceutical pro-

ducts in the value of bio-economy exports increased 3.4 times during the analysed period (from

2.2 percent in 2005 to 7.4 percent – in 2016). The share of exports of beverages also experienced

significant increase (from 0.5 to 2.7 percent) during that same period.

Figure 5. Export in bioeconomy sectors in Lithuania (in percentage)


Bioeconomy export indicators by economic activities are presented in Table 6 of Annex

No 2 during the analysed period. The analysis of exports in 2005–2016 revealed the following

trends:

the value of exports of bioeconomy goods increased by 2.6 times, i.e. from EUR

3874.9 to nearly EUR 9890.5 million. Its share in the overall exports of goods incre-

ased by more than 4.2 percentage points, i.e. from 39.8 to 44.1 percent;

the value of exports of the biomass production sector in 2016 was EUR 1445.1

million and increased by almost 4.4 times during the analysed period. The share of

this sector in the country’s exports of goods nearly doubled (from 3.5 to 6.4 percent).

The value of exports of agricultural products increased almost 4.7 times, and that of

exports of fisheries or aquaculture – almost 4.4 times. The value of exports of forestry

and logging products increased 2.4 times;

the value of exports of the fully bio-based manufacturing sector almost tripled during

the analysed period, i.e. it grew from EUR 1473.3 to EUR 4355.5 million. The value

of exports of beverages, except for mineral water, water and other bio-ingredients –

free beverages increased the most (16 times);

exports of goods of the partly bio-based manufacturing sector more than doubled,

i.e. from EUR 2072.7 to EUR 4089.9 million, with exports of bio-based pharmaceu-

tical products as well as chemicals having increased the most, by 10 and 5.5 times,

respectively, and exports of furniture made of wood or containing wood – 3.1 times.

Manufacture of food;

27.2%

Agriculture; 14.8%


furniture; 11.9%

Manufacture of

wood products;

10.6%




wearing apparel; 7.6%

Manufacture of

tobacco; 4.4%


3.7%

Manufacture of

beverages; 3.3%

Manufacture of bio-

based textiles; 2.6%

Manufacture of bio-

based chemicals; 2.5%

Manufacture of leather

products; 1.4%

Forestry and

logging; 1.4%

Other bio-based

manufacturing;

0.2%

Fishing and

aquaculture; 0.1%

Export: 2016

26

Employment trends

As per Figure 6, almost two thirds (64.1 percent) of persons having worked in bioeco-

nomy were employed in the food sector. Slightly more than a fourth (26.5 percent) of them

worked in the bio-based forestry sector, less than a tenth (9 percent) – in manufacture of bio-

based textile, apparel and leather products and a very small share (0.4 percent) – in subsectors

of manufacture of bio-based chemicals and pharmaceutical products, where chemicals, phar-

maceutical products are fully or partly derived from bio-materials. Having compared the

structure of employment in bioeconomy at the beginning and the end of the analysed period, it

was determined that the share of persons employed in the food sector decreased the most over

the decade (2.7 percentage points). Also the share of persons employed in manufacture of bio-

based textile, apparel and leather products decreased (by 1.5 percent points). The proportion of

persons employed in the remaining sectors increased: 4.1 percentage points – in the forestry

bio-based sector and 0.1 percentage points – in manufacture of bio-based chemicals and phar-

maceutical products.

Figure 6. Employment in bioeconomy sectors in Lithuania (in percentage)


Annex No 2 presents indicators of employment in bioeconomy during the analysed pe-

riod by sectors and subsectors. The following trends in the change of employment were obser-

ved in 2005–2015:

the number of persons employed in bioeconomy decreased by a third, or 117.4

thousand (from 351.8 to 234.4 thousand), of which the reduction of as many as 71.3

thousand was in agriculture. Employment in the economy of the country decreased

by 6.1 percent during the same period, leading to significantly decreased contribution

of the bioeconomy into the Lithuanian labour market – the share of persons employed

in bioeconomy decreased from 24.8 to 17.6 percent;

the greatest decline was observed in the number of persons employed in the biomass

production sector – 39 percent, i.e. from 199.7 to 120.7 thousand. The number of

people working in fisheries and aquaculture decreased by more than a half. A large

Agriculture; 44.9%



18.4%

Manufacture of bio-

based furniture and other

products; 9.5%

Manufacture of wood

products; 9.2%

Manufacture of bio-based textiles,

wearing apparel and leather; 9.0%


5.8%

Manufacture of

paper; 2.0%

Fishing and aquaculture;

0.8%

Manufacture of bio-

based chemicals;

0.3%

Manufacture of bio-

based pharmaceuticals;

0.1%

Employment, 2015

27

share (40.4 percent) of employees left the agriculture sector and more than a fourth

(26.7 percent) – the forestry and logging sector;

the number of people working in the fully bio-based manufacturing sector decreased

by 17.7 thousand, or a fifth, i.e. from 87 thousand to 69.3 thousand. The number of

people employed in manufacture of wood and its products decreased the most (by

26.9 percent) followed by manufacture of food (with decrease of 20.2 percent). The

number of persons employed in manufacture of paper and its products increased by

more than a fourth (29.7 percent), but the number of employees in this sector is very

low – 4.8 thousand (in 2015).

employment in the partly bio-based manufacturing sector decreased by almost a

third, i.e. from 65.1 to 44.3 thousand. The manufacture of bio-based pharmaceutical

products faced the greatest decrease in the number of employees – by almost three

fourths. Employment in manufacture of bio-based textile, apparel and leather products

decreased by 42.9 percent and bio-based furniture – by 16.9 percent. Solely the in-

dustry of bio-chemicals faced employment growth of 28.7 percent.

Trends of gross earnings (monthly)

Average indicators of monthly gross earnings by subsectors of bioeconomy and their

comparison with the average earnings in the economy of the country are presented in Table 9

of Annex No 2. Figure 7 illustrates its expression in EUR in 2016 and growth rates since 2007.

The indicators for the period from 2007 till 2016 are illustrated in the figure, because the sta-

tistics of earnings of previous years is presented according to the older NACE REV. 1.1, thus

the data cannot be compared.

Figure 7. Gross earnings and its its growth in bioeconomy sectors in Lithuania

* the data points represent both the bio-based and the non-bio-based manufacturing combined due to the lack of data availibi-

lity needed for separate indicators

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (Average earnings (monthly)in whole

economy including individual enterprises)

608

639

686

722

731

760

774

774

1 288

1 378

0 500 1000 1500

Manufacture of textiles,

wearing apparel and leather*


Agriculture

Manufacture of furniture*

Manufacture of wood, paper

and printing


beverages and tobacco

Average in all NACE

activities


Manufacture of chemicals*

Manufacture of

pharmaceuticals*

Gross earnings (monthly, EUR)

180

134

172

146

157

90

100

110

120

130

140

150

160

170

180

190

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Index (2007=100)

Average in all NACE activities

Agriculture




Manufacture of textiles, wearing apparel and leather*

Manufacture of wood, paper and printing


Manufacture of pharmaceuticals*


28

The average gross monthly earnings in almost all sectors of bioeconomy are below the

average of the national economy, except for manufacture of chemicals, pharmaceutical pro-

ducts, fisheries and aquaculture (Figure 7 and Table 9 of Annex No 2). The lowest earnings

were observed in manufacture of apparel, leather and its products, where they accounted for a

mere 72 percent (in 2016) of the average of the economy of the country. Low earnings level

was also observed in forestry and logging, and agriculture, with 82.6 and 88.6 percent of the

average of the country’s economy, respectively. As previously mentioned, the highest monthly

earnings were in manufacture of chemicals, pharmaceutical products – here the average gross

monthly earnings significantly exceeded the national economy’s average, by 78 and 66 percent,

respectively.

Such differences in earnings (just like differences in labour productivity) were mainly

determined by different employee qualifications. As previously mentioned, manufacture of

pharmaceutical products is knowledge-intensive and attributable to high technology industry,

while manufacture of chemicals – to medium-high technology industry. Other examined types

of bioeconomy manufacturing are attributable to low technology industry. It should be noted

that from the perspective of sustainable development, another advantage which bioeconomy

brings to the society is a relatively high number of jobs created for labour force with less qua-

lified professions, thus reducing social exclusion and poverty. Thus subsectors of agriculture,

forestry and fisheries as well as low technology manufacturing should not be treated as less

significant based on labour productivity and value added criteria alone.

As per Figure 7, the average gross monthly earnings increased the most in agriculture

(80 percent), wood and paper industries, and fisheries (by 72 percent each) in 2007–2016. A

somewhat lower increase thereof was observed in manufacture of textiles, apparel and leather

products (66 percent) followed by manufacture of chemicals and pharmaceutical products (65

percent). The average gross monthly earnings increased the most in forestry and logging (34

percent) and chemistry (46 percent) sectors. It should be noted that the average monthly gross

earnings in the national economy increased by 48 percent during the same period.

Trends of the number of economic entities in operation

Table 8 of Annex No 2 lists indicators of companies operating in bioeconomy (along

with family farms) by economic activities throughout the entire analysed period. It should be

noted that determining the total number of companies operating in bioeconomy is impossible

for two reasons. On one hand, there are many farms engaged in self-farming in agriculture.

There is one number thereof registered in the Register of Farmers’ Farms31, and a different

number – in the Register of Agricultural and Rural Business32, yet another number thereof is

indicated in statistics of agricultural censuses and research of the structure of farms33. The latter

data have been used in the analysis, thus the current data reflect the situation in 2013. On the

other hand, there are no data based thereon companies that produce products from that are fully

31 According to the Farmers' Farm Register of the Republic of Lithuania, there were 122.5 thousand farms as of January 1,

2016, based on data supplied by the Agricultural Information and Rural Business Centre; it is unclear, however, how many

of them are in operation. 32 As of January 1, 2016, there were 184.5 thousand agricultural holdings, according to Agricultural Information and Rural

Business Centre data. On the other hand, in 2016, nearly 134.6 thousand agricultural holdings declared crops (National

Paying Agency under the Ministry of Agriculture 2016 direct payments for agricultural lands and crop areas data). The di-

fference between the aforementioned data points is too large to be explained by the number of farms keeping animals but

without declared crops. 33 According to Farm Structure Survey, in 2013, there were 171.1 thousand family farms over 1 ha. It should be noted that the

preliminary results of the 2016 Farm Structure Survey will be published in October, 2017.

29

or partly of biological origin could be identified. Thus the total number of companies (economic

entities) operating in bioeconomy was not determined in this Study. Data in the said table are

presented solely by separate economic activities attributable to bioeconomy. The following

trends were observed in 2005–2016:

there were about 173 thousand companies and farms operating in the biomass pro-

duction sector in 2013, of which 172 thousand (99.4 percent) were economic entities

engaged in agricultural activities, i.e. family farms, agricultural companies and other

corporate farms. In 2005–2013, the total number of farms decreased by almost a third

in Lithuanian agriculture (32.1 percent), but the number of agricultural enterprises

and other agricultural companies increased by 48.2 percent to 1143. The number of

companies operating in forestry and fisheries grew by 31.5 and 25 percent, respecti-

vely;

the number of companies operating in the fully bio-based manufacturing sector

decreased by more than a sixth (16.3 percent), i.e. from 2.8 to 2.4 thousand. The

greatest reduction was observed in enterprises engaged in manufacture of wood and

its products (18.9 percent);

An increase of 12.7 percent, from 2.2 to 2.5 thousand companies, was observed in

the partly bio-based manufacturing sector. It should be noted that this is the total

number of companies operating in the sector, which does not distinguish the number

of companies producing products from raw materials that are wholly or partly of

biological origin. During the said period, the number of companies engaged in ma-

nufacture of furniture and chemicals increased (by 59.1 and 11.5 percent, respecti-

vely), but the number of enterprises operating in textiles, apparel and leather products

and manufacture of pharmaceutical products decreased by 22.8 and 6.3 percent, res-

pectively.

Bioenergy trends

More significant development of bioenergy started in Lithuania in the beginning of this

century only, after the use of biomass in the production of electricity and district heating inten-

sified. Figure 8 shows the extent of increase of production scope in 2005–2016 and the re-

newable municipal waste used for fuel in 2013–2016. As previously mentioned, the production

of gas intensified during this period the most, i.e. more than seventeen times, production of

biofuels of both types increased almost 15 times and the amount of agricultural waste for fuel

– more than 6 times, however, the production of biodiesel and bioethanol has decreased since

2015.

In terms of the average annual growth, the production of biogas (by an average of 21.4

percent per year) and agricultural waste for fuel (by an average of 17.1 percent per year) inten-

sified over the past mid-term period (2010–2016). The production of wood for firewood and

fuel slowly increased during the same period (by an average of 2.9 percent per year). Scope of

renewable municipal waste as a source of bioenergy have increased by almost 24 percent per

year since 2013. End energy users (such as companies engaged in industrial, construction, ag-

ricultural and other economic activities, and households) received more than a half of wood

waste for firewood and fuel, and biodiesel, 70 percent of bioethanol and about a fourth of bio-

gas.

30

Figure 8. Growth of bioenergy resource production in Lithuania (2005=100)

* including landfill biogas, sludge biogas and other biogas

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (Fuel commodities balances)

Since 2015 the shrinking of the biofuels sector has also been affected by the changed

EU biofuel production policy. In order to reduce adverse effect of production of conventional

biofuels on the balance of food products and greenhouse gases (GHG) emissions, proposals

were made to limit the production of conventional (i.e. first generation) biofuels from rape and

cereal grains according to Directive (EU) 2015/1513 of the European Parliament and of the

Council of 9 September 2015 (partly amending Directive 98/70/EC relating to the quality of

petrol and diesel fuels and amending Directive 2009/28/EC on the promotion of the use of

energy from renewable sources), replacing a part of them with advanced (i.e. second genera-

tion) biofuels made of agricultural and wood waste and algae that do not need soil.

As previously mentioned, the biogas sector has rapidly developed in Lithuania in recent

years. In 2014–2016, the production of biogas from agricultural waste increased by an average

of 49 percent per year, and from sewage sludge – by 28 percent per year. Even though a few

years ago, biogas production potential was mainly associated with sewage sludge and animal

manure in Lithuania, now biogas is also made of crop production waste (produced by UAB

Kurana), waste from food and beverage industry, such as lees (produced by UAB Vilniaus

Degtinė), carcass waste (produced by UAB Agaras) and milk processing waste (produced by

AB Rokiškio Sūris). According to statistics, the use of biodegradable landfill waste in biogas

production has slowly increased; the production of biogas from this waste increased by an ave-

rage of 5.9 percent per year in 2013–2016.

Data in Figure 9 illustrates the contribution of in the production of primary energy in

Lithuania over the past decade. In 2010, the production of primary energy decreased almost

three times in 2010 as a result of the decommissioning of the Ignalina Nuclear Power Plant.

Scopes of the production of bioenergy have started to gradually increase since 2011. Since

2010, firewood and wood waste for fuel have become the main source of primary energy. The

use of solid biofuels in Lithuania is called “the national success story”34. On the other hand,

import of energy recourses has remained important for Lithuania. It was 14.3 toe, while export

totalled 8.8 mln. toe in 2015. Import of crude oils and export of oil products account for the

major share of foreign energy sources; 134.7 thousand toe of solid state bioenergy sources and

55 thousand toe of biogas and liquid biofuels were imported in 2015. That same year, export of

34 Kaimo vietovių apsirūpinimo šilumine energija galimybių studija. Asociacija “Slėnis Nemunas” 2011.

141

620

189

1473

1473

1718

0200400600800

100012001400160018002000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Index (2005 =100)

Firewood and wood waste (thou. cubic metres)Agriculture waste (thou. tonnes)Municipal waste (renewable) (thou. tonnes)Bioethanol (thou. tonnes)Biodiesel (thou. tonnes)Biogas* (mill. cubic metres)

31

solid state bioenergy sources totalled 146 thousand toe and export of biogas and liquid biofuels

was 99.7 thousand toe.

Figure 9. Production of primary energy by resource in Lithuania

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (Energy balances)

Bioenergy resources are transformed to other types of energy in Lithuania (heat, e-

lectricity, fuels) or are used as end-use energy products as per Table 6. Growth trends were

observed in the use of for transforming energy in 2005–2015: consumption of bio-gas increased

14.6 times; scopes of the transformation of biomass to heat and electricity increased 3.9 times.

The production of energy from municipal waste, a part whereof is materials of biological origin,

was started only in 2013.

Table 6. Transformation input in Lthuanian Bioenergy (thousand TOE)

Biofuels (fi-

rewood, wood

waste and agricul-

ture waste)

Biogas Bioethanol Municipal waste

(renewable) Total

2005 151,4 1,1 0,0 - 152,5

2006 175,2 1,0 3,7 - 179,9

2007 182,1 1,1 7,0 - 190,2

2008 214,7 1,6 7,4 - 223,7

2009 250,6 2,6 0,0 - 253,2

2010 252,1 5,5 - - 257,6

2011 236,8 8,0 - - 244,8

2012 312,3 8,5 - - 320,8

2013 356,0 11,3 - 11 378,3

2014 449,2 14,5 - 11,4 475,1

2015 584,1 16,1 - 15,7 615,9


Regardless of the rapihd increase of use of bioenergy for transforming it into other sour-

ces of energy, there also are certain limitations. For example, heat demand, which is determined

by such factors as decreasing number of consumers, climate conditions and the implementation

of measures for increasing efficiency of energy use, etc., limits the use of biomass in the pro-

duction of district heat. The limitations are also closely related to the use of biomass in the

production of electricity, even though the total production of heat and electricity (cogenera-

tion) allows achieving good results from both economic and resource efficiency perspective,

3 1432 665

2 992 2 974 3 230

406 458 444 463 498 472

846

902884 937

1003

1003 984 993 1042 1117 1206

13

1834 71

113

114 95 122 137 137 139

0

1000

2000

3000

4000

5000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

thou. TNEBiogas and liquid biofuels (bioethanol and biodiesel)

Firewood, wood waste and agriculture waste

Other kinds of fuel and energy

32

but limited demand for heat energy is faced.

Table 7 illustrates data on final consumption of bioenergy in recent years. Trends of

decreasing final consumption of biofuel can be observed – the consumption of solid biofuel

(firewood, wood and agricultural waste) has decreased by more than a tenth since 2006, but the

consumption of other sources of bioenergy increased significantly (9.4 times of biogas, 16 times

– of bioethanol and 20.7 times – of biodiesel).

Table 7. Final consumption of bioenergy resources in Lthuania (thousand TOE)

Biofuels (firewood,

wood waste and ag-

riculture waste)

Charcoal Biogas Bioethanol Biodiesel

2005 693,9 0,5 0,8 0,6 2,8

2006 702,3 0,6 1 1,7 14,00

2007 680,0 0,8 1,3 4,8 42,1

2008 694,6 1,5 1,4 8 45,7

2009 689,7 0,9 2,1 14 37,8

2010 687,2 1,2 4,5 10,4 34,8

2011 678,0 1,0 3,1 9,5 35,4

2012 690,8 0,7 3,1 8,7 51,8

2013 670,4 0,9 4,3 6,7 52,00

2014 635,5 1,1 6,5 5,5 57,6

2015 620,3 1,5 7,5 9,6 57,9


These trends are associated not only with warmer winters of recent years, but also with

several other factors: increased energy efficiency (both due to the installation of more efficient

heating and food production technologies and reduction of heat demand in buildings); spread

of more convenient energy use forms; reduction of the number of residents living in rural areas

(it should be noted that the majority of solid biofuels is used in households of rural areas in

particular); the consumption of biofuels is mostly dependent on the amount of biofuels added

in transport fuel, which is governed by legal acts (which has been quite stable in recent years).

Even though biomass-based power plants or boiler houses require much higher invest-

ments than respective fossil fuel-fired facilities, the price difference between biomass and na-

tural gas or fuel oil makes this type of energy appealing to business. The district heating system

of Kaunas, when the creation of possibilities for private investors to take part in the heat pro-

duction market alone gave the first impetus for the development of biofuel in this system, il-

lustrates this very well. Thus in certain cases, the creation of favourite conditions and refusal

of excess regulation alone rather than special support or incentives is enough for the develop-

ment of bioenergy (and bioeconomy in general).

Another important factor was the EU support allocated for investments in the production

of bioenergy and support for energy produced from renewable energy sources in 2007–2013.

More than EUR 87.5 million was allocated for bioenergy under the measures VP3-3.4-ŪM-02-

K “The Use of Renewable Energy Sources in Energy Production” and VP3-3.4-ŪM-06-V “The

Use of Renewable Energy Sources in Energy Production-2”, namely, for modernizing boiler

houses supplying heat to heating systems and replacing the fuel used with biomass, also for

modernizing combined heat and power plants supplying heat to heating systems and replacing

the fuel used with biomass; for building new renewable energy sources-fired boiler houses and

connecting to heating systems (the heating system also includes heat consumption system); for

33

building new efficient combined heat and power plants using renewable energy sources, except

for landfill gas (biogas, which forms naturally through self-decomposition of organic materials

contained in waste) and connecting to the heating systems. It is also very important that the

technologic industry already developed in the country, which allows efficiently renovating the

existing technology and installing new bioenergy technology, has a highly positive impact on

the development of biomass energy.

Prospects of final consumption of bioenergy (in household first of all) will be determi-

ned by a set of factors consisting of technology development trends, general demographic

trends, consumer preferences (with the improving level of livelihood, trends to choose “more

convenient” heating methods have been observed, thus the traditional firewood heating has

been gradually replaced by such modern biomass technology as fully automated pellet-fired

boilers also competing with even more comfortable natural gas boilers and heat pumps) state

policy measures not only fur the use of bioenergy resources directly, but also for restrictions or

taxation of fossil fuel.

Biotechnology sector trends

According to the definition of OECD (see subsection 2.1), biotechnology is the appli-

cation of research and technology to acquire knowledge, to produce goods and to provide ser-

vices. R&D and production are attributable to core biotechnology economic activities. The a-

nalysis of trends of the development of the biotechnology sector, the production part whereof

is attributable to bioeconomy, in Lithuania in 2005–2015 was conducted according to the sta-

tistics of business structure indicators:

1) aggregate statistical data of 29 companies operating in the biotechnology sector of

Lithuania35;

2) data on biotechnology in R&D business sector by NACE REV. 2 activity type “Bio-

technology Research and Development” (code M7211).

Trends of activities of companies operating in the biotechnology sector

Trends of development of business in the Lithuanian biotechnology sector are examined

in this Study according to aggregate statistical data of 29 biotechnology companies included in

the research (Figure 10) in 2005–2015. The total turnover of these companies was EUR 448.9

million in 2015, which accounted for 0.64 percent of all turnover of non-financial companies

in Lithuania. The annual business structure indicators illustrated in the Figure show a rapid

development of this sector in the past decade. The following was the average annual growth in

2010–2015:

turnover increased by an average of 23 percent per year. The value added at factor

cost increased even faster – 33.1 percent per year;

the number of employees grew 7.8 percent per year;

labour productivity increased by 23.5 percent per year.

35 The list of 32 biotechnology companies used in the study is based on the list of the largest biotech companies in Lithuania

compiled by UAB Creditinfo Lietuva (https://infogram.com/320a33cd-085b-497f-89e9-4c689b2096ee), upon checking

whether or biotechnology methods and practices are applied in these firms, and also on the list supploed by the Lithuanian

Biotechnology Association. The data on 29 out of the 32 companies were included in the 2015 annual structural business

statistics.

34

Figure 10. Enterprise performance of Lithuanian biotechnology sector

* value added at factor cost; ** the labour productivity is calculated as the ratio of the value added at factor cost and the

number of persons employed.

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (Business structure and finance data

aggregated from 29 companies in the biotechnology sector)

Research and experimental development on biotechnology in the business sector

As previously mentioned in subsector 2.1, research and experimental development

(R&D) is one of the core biotechnology activities according to the definition of OECD. Figure

11 illustrates statistical indicators of biotechnology R&D activities of the business sector only,

because there are no respective data in higher education and governmental sectors. Data pre-

sented in the Figure show that biotechnology R&D has been rapidly developing in business

sector in Lithuania, which creates conditions for the development of bio-innovation and the

implementation thereof in the industrial production (of pharmaceutical products and bio-che-

micals) and healthcare. According to the data of the Lithuanian Biotechnology Association,

medical biotechnology is rapidly developing in Lithuania at this time, and very fast develop-

ment of industrial biotechnology may also be expected in the future. According to the Associa-

tion, so far agricultural biotechnology is in its initial development stage, because there still are

no strong industrial companies in these fields. According to the statistics of OECD36, medical

biotechnology R&D developed by business is also most developed in the majority of OECD

countries. It should also be added that according to this statistics, Lithuania ranks 42 in terms of

the percentage share of registered biotechnology patents (0.06 percent in 2010–2013) in the

world; the share of the entire EU (28) accounted for 28.1 percent.

36 OECD. 2016. Key Biotechnology Indicators ://www.oecd.org/sti/inno/keybiotechnologyindicators.htm

1012 13 13 14 14

16

19 20

25

29

0

5

10

15

20

25

30

35

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Number of enterprises

53 66103

134 136174

206229

340380

490

14 21 24 28 47 51 5582 97

123

212

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Turnover (EUR mill.)

Value added at factor cost* (EUR mill.)

838937

1157 11451053

11221198

1308

14661538

1634

0

200

400

600

800

1000

1200

1400

1600

1800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Number of employees

17.322.1 20.9 24.1

44.6 45.2 45.6

63.0 65.8

80.1

129.8

0

20

40

60

80

100

120

140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Labour productivity** (value added per employee,

EUR thou.)

35

Figure 11. Biotechnology R&D statistical indicators in the business sector

* value added at factor cost; ** the labour productivity is calculated as the ratio of the value added at factor cost and the full-

time equivalent employees.

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (Business structure and finance data

by Biotechnology R&D (NACE Rev. 2 codes M7211)

The analysis of the statistics of the Lithuanian biotechnology R&D in the business sector

(Figure 11) allowed determining that business activity in biotechnology R&D has significantly

increased – this sector has been among the growth leaders in the last decade (2005–2015):

A number of business enterprises involved in biotechnology R&D activities increa-

sed significantly, from 3 to 25, while their share in the total number of companies

engaged in R&D activities increased from 2.9 to 4.9 percent;

Turnover of business enterprises in biotechnology R&D activities increased signifi-

cantly – by as many as 32.6 times to 16.9 million (in 2015), while its share in the

overall R&D turnover increased from 3.3 to 32 percent; moreover the value added

created by these activities increased 56 times;

The number of employees working in biotechnology R&D increased 7.3 times, i.e.

to 241 (in 2015), which accounted for 16.7 percent of all R&D employees in the

business sector. It should be noted that labour productivity of R&D employees incre-

ased nine times and has become almost a third higher compared to the average in all

R&D activities of the business sector.

Industrial biological processes are recognised in the European Commission’s “European

Industrial Renovation” policy as one of the major most advanced technology areas and one of

3 34

5

1011 11

8

12

20

25

0

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Number of enterprises

33 36 4251

70

108

141 141

181

209

241

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Number of employees

0.5 0.6 0.6 0.7 0.91.6

2.5

4.9

7.4 6.8

17.0

0.1 0.3 0.4 0.4 0.6 0.81.4

3.34.8 4.6

8.3

0

5

10

15

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Turnover (EUR mill.)

Value added at factor cost* (EUR mill.)

5.1

10.7 11.18.2

9.9 10.6

15.4

29.832.7

28.1

46.4

0

10

20

30

40

50

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Labour productivity** (value added per full-time

equivalent employee, EUR thou.)

36

six priority areas for promoting investment in innovation and new technology37. As per sub-

section 4.1, funding under “Horizon 2020” programme was allocated for promoting new bio-

innovation in 2014–2020 programming period. The programme plans for the support for bio-

manufacturing (a total of one billion euros for all countries).

Biological waste treatment condition

According to statistical data, in 2014 in Lithuania38:

10 million tonnes of waste were generated in agriculture, with straw and manure ac-

counting for the major share thereof (38 and 39 percent, respectively) and slurry (17

percent). More than three fourths of this waste was managed using it in production,

a mere 1 percent was handed over to waste managers and the remaining part was

managed by other means (disposing thereof in farms or transferring to other users)

or remained untreated (about 4 percent);

wood waste amounted to 44 thousand tonnes. Most wood waste in Lithuania are used

as solid biofuel, i.e. as a raw material for burning;

mixed municipal waste – 187 thousand tonnes. Municipal biodegradable waste ac-

counts for 46 percent of the entire amount of municipal waste, where green waste

makes up more than 6 percent, paper and cardboard, including packaging waste, –

about 6 percent, textile waste – about 7 percent and food waste – about 14 percent39;

food waste totalled 18 thousand tonnes. In recent years, more than 90 percent of food

waste was treated in production, transferring about 5 percent thereof to waste mana-

gers and treating the remaining part by other means.

Even though the country has one of the most modern biological waste treatment infrast-

ructure in the EU40, Lithuania is among the EU states, where most primitive waste treatment

method – landfilling – dominates41. Since this is the cheapest waste treatment method, waste is

treated disregarding the sequence of waste prevention and treatment priorities, while sorted

collection, processing or reuse of biodegradable waste is not economically appealing42. In the

context of other EU states, Lithuania is still at the end of the list in terms of the progress made

implementing requirements of the EU waste directives, especially those related to municipal

waste treatment43.

In order to reduce methane emissions, which intensify climate change, terminating dis-

posal of biodegradable waste in landfills without any undue delay is very important. Anaerobic

digestion plants, which combine energy recovery and the processing of materials, are an

attractive waste treatment method in this case44. One tonne of biodegradable waste treated by

37 European Commission. 2014. For a European Industrial Renaissance. Communication from the Commission to the Euro-

pean Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions for a Euro-

pean industrial renaissance /COM/2014/014 final/. 38 Lithuanian Official Statistics Portal: Waste generation and management in agriculture, forestry and fisheries 39 Aplinkos apsaugos agentūra. 2017. Mišrių komunalinių atliekų sudėties tyrimai ir biologiškai skaidžių atliekų vertinimas. 40 Komunalinių atliekų tvarkymas Lietuvoje. 2015. https://www.slideshare.net/LRATCA/komunalini-atliek-tvarkymas-lietu-

voje-2015-metais. 41 ESTEP. 2014. ES paramos atliekų tvarkymui Lietuvoje efektyvumo vertinimas ir 2014–2020 metų finansavimo prioritetų

nustatymas. Galutinė ataskaita. 42 LR Vyriausybės 2014 m. balandžio 16 d. nutarimas Nr. 366 ,,Dėl Lietuvos Respublikos vyriausybės 2002 m. balandžio 12

d. nutarimo Nr. 519 „Dėl valstybinio strateginio atliekų tvarkymo plano patvirtinimo“ pakeitimo. 43 ESTEP. 2014. ES paramos atliekų tvarkymui Lietuvoje efektyvumo vertinimas ir 2014–2020 metų finansavimo prioritetų

nustatymas. Galutinė ataskaita. 44 European Commission. 2017. The role of waste-to-energy in the circular economy.Communication from The Commission

to the European Parliament, The Council, The European Economic And Social Committee And The Committee Of The

Regions Brussels, 26.1.2017 COM(2017) 34 final

37

way of aerobic digestion, recovering therefrom biogas and fertilisers, the amount of non-emit-

ted greenhouse gasses may reach 2 tonnes of CO2 equivalent45. According to the Landfill Di-

rective,46 the aim is to ensure separate collection of bio-degradable waste, which should lead to

increased amount of biogas generated from waste, which can be used in cogeneration, injected

in the gas network, used as vehicle fuel or for the production of fertilisers by way of anaerobic

digestion.

In case of choosing to produce energy from waste, the use of the most effective methods

thereof must be ensured, thus contributing to the implementation of the EU climate and energy

goals. Calculations have been made that where efficient methods and additional measures are

implemented properly, 29 percent more energy could be recovered from the same amount of

waste, i.e. 872 PJ per year, which illustrates the extent of the potential for increasing energy

recovery efficiency47. Processes for energy recovery from waste may have a certain value in

the transition to circular economy, but the EU waste treatment hierarchy should be followed

when choosing them, without interfering with efforts to avoid waste generation, reuse and re-

cycle the greatest possible amounts thereof.

Bio-degradable waste treatment infrastructure was created in the country’s municipali-

ties and regional waste treatment centres (RATC): in 2015, total bio-degradable waste treatment

capacities were 588.5 thousand tonnes, of which 384 thousand tonnes were from mechanical-

biological treatment and 204.5 thousand tonnes – from green waste composting sites; 438.5

thousand tonnes thereof may be processed and 150 thousand tonnes – prepared for use (energy

production)48. It should be noted that even though economic entities show interest in investing

their own funds in the equipment necessary for the use of biodegradable waste in the production

of biogas and other necessary equipment without using the EU support, the fact that there is no

efficient biodegradable waste sorting collection system created so far stops the investments49.

Analysis of business environment factors that have or will have an impact on

the development of bioeconomy in Lithuania

Analysis of business environment factors by way of survey of business entities opera-

ting in the bioeconomy sector

The assessment of the impact of factors of the external environment (political, econo-

mic, social, technological, natural and legal) on business operating in bioeconomy was con-

ducted by way of a survey of business entities, using the PESTEL method used to monitor

macro-environmental factors. The survey is described in Annex 3.

45 Bernstad A., la Cour Jansen J. 2012. Review of comparative LCAs of food waste management systems – Current status and

potential improvements, Volume 32, Issue 12. 46 Article 6, paragraph (a) of the Council Directive 1999/31/EC of 26 April 1999 OL L 182, 1999 7 16. 47 European Commission. 2017. The role of waste-to-energy in the circular economy. Communication from The Commission

to the European Parliament, The Council, The European Economic And Social Committee And The Committee Of The

Regions Brussels, 26.1.2017 COM(2017) 34 final 48 Komunalinių atliekų tvarkymas Lietuvoje. 2015. https://www.slideshare.net/LRATCA/komunalini-atliek-tvarkymas-lietu-

voje-2015-metais. 49 ESTEP. 2014. ES paramos atliekų tvarkymui Lietuvoje efektyvumo vertinimas ir 2014–2020 metų finansavimo prioritetų

nustatymas. Galutinė ataskaita.

38

The impact of factors of the external environment on the development of Lithuanian

bioeconomy is assessed based on the opportunities created thereby and the posed threats to

business. A five-point scale is used in the assessment, with 1 point being a very small opportu-

nity or threat and 5 – a significant opportunity or threat. Factors that do not or will not have any

importance to business receive 0 points.

In both cases, external environment business factors are assessed in two periods:

according to their manifestation in the previous period – 2012–2016; and

their potential manifestation in the nearest future – 2017–2021.

Comparison of results of both periods illustrates the direction of changes and reflects

potential opportunities created by the external environment or posed potential threats to busi-

ness. A description of the assessment results of the external environment factors of bioeconomy

separately by PESTEL analysis factor groups is presented below.

Results of the assessment of favourability of factors of the political environment

7 generalised factors covering the levels of geo-policy, national policy and regional

(municipal) policy were distinguished for the assessment of the political environment. Fi-

gure 12 presents a summarised assessment of the favourability of the political environment on

the development of bioeconomy business.

Figure 12. Significance of factors of the political environment (in points)

Note: 1 point – very slight opportunity or threat, 5 points – very high opportunity or threat, 0 points – insignificant

It should be noted that respondents did not note any particular opportunities or threats

for the development of bioeconomy in the political environment. Summarised scores of all

factors as opportunities were below 2.5 points and as threats – 2.0 points out of 5 both in the

1.9

1.6

1.5

1.5

0.8

0.5

0.1

0.5

0.7

0.3

0.8

1.9

1.7

1.4

5 4 3 2 1 0 1 2 3 4 5

EU, national and municipal support for business

Lithuania’s appeal to foreign investment

Deployment of NATO military units in Lithuania

Investment environment in Lithuania

Change of government in Lithuania

Changes in the geopolitical arena

Extremism and terrorism

Political factors in 2017-2021m.

Threats Opportunities

2.4

1.6

1.4

1.4

0.9

0.3

0.1

0.3

0.6

0.8

0.2

1.4

1.8

1.0

5 4 3 2 1 0 1 2 3 4 5

EU, national and municipal support for business

Lithuania’s appeal to foreign investment

Investment environment in Lithuania

Deployment of NATO military units in Lithuania

Change of government in Lithuania

Changes in the geopolitical arena

Extremism and terrorism

Political factors in 2012-2016


39

previous and the upcoming period. Representatives of bioeconomy business believe that the

implementation of decisions of the EU and the national government and municipalities on

support for bioeconomy sectors provided the most opportunities for the development of their

business in 2012-2016. The average score of this opportunity was 2.4 points, and it may be

associated with intense financial, educational and information support for certain sectors of

bioeconomy at all levels of public government in 2014–2020 programme period. Of course,

this opportunity received a lower score in 2017–2021 period (giving an average of 1.9 points

therefor), and this trend observed by the respondents may be associated with a shortage of funds

at the end of the programme period and planned fund reduction in the future programme period

of 2021–2028.

In the political environment, respondents saw a greater threat in geopolitical changes

(weighted average in the previous period was 1.8 points and future period – 1.7 points). Such

opinion of the respondents can be associated with possible changes in business conditions due

to economic sanctions imposed on Russia, development in Ukraine and the United Kingdom,

and increased political instability in the EU.

The bioeconomy business representatives were slightly worried about the change of go-

vernment in Lithuania. The average score of this factor as a threat increased from 1.4 points in

the previous period to 1.9 points in the future period. In the summarised opinion of the respon-

dents, other political environment factors, including the investment environment and Lithua-

nia’s appeal to foreign investment, did not and will not have much significance.

Results of the assessment of the favourability of factors of the economic environment

11 generalised factors were distinguished for the assessment of the economic envi-

ronment; Figure 13 presents the scoring thereof. Bioeconomy business representatives usually

face economic environment factors, and their average scores are more indicative than those of

political factors. Economic factors are assessed more like threats rather than opportunities. Not

a single economic environment factor, which would be more indicative as an opportunity rather

than threat, was observed in 2012–2016 and the nearest future.

Figure 13. Significance of factors of economic environment (in points)

0.7

0.3

0.9

0.3

0.1

0.3

0.1

0.2

0.2

0.1

0.0

1.3

1.5

1.7

2.0

2.1

2.2

2.3

2.7

2.7

2.9

3.2

5 4 3 2 1 0 1 2 3 4 5

*Shift of the global economic power centres to rapidly…

Change in the EUR / USD exchange rate

Internal market demand trends

Slow or negative EU market growth

Inflation

Unsustainable economic (GDP) growth

Economic shadow in Lithuania

Labour market disparities

Increasing price of other sources of production

Increasing price of labour force

Tax burden

Economic factors in 2017–2021


40

Note: 1 point – very slight opportunity or threat, 5 points – very high opportunity or threat, 0 points – insignificant; * Shift of

the global economic power centres to rapidly growing regions

Results of the assessment of the favourability of social environment factors

5 generalised factors were distinguished for the assessment of the social environment;

Figure 14 presents their scoring. Bioeconomy business representatives distinguished factors

related to the country’s demographic issues as the greatest threats in social environment. These

factors, just like threats in 2012–2016, received an average score of 3.0 and 2.6 points. These

are among the highest average scores of threats not only among social but also among business

environment factors of other groups. Respondents believe that the manifestation of the impact

of demographic factors as threats to bioeconomy business will increase significantly in 2017–

2021. For example, the average score of population emigration from Lithuania in 2017–2021

was 0.5 point greater than in 2012–2020.

Figure 14. Significance of social environment factors (in points)


0.6

0.4

0.8

0.3

0.3

0.1

0.2

0.2

0.2

0.2

0.1

1.1

1.2

1.4

1.8

1.8

1.9

2.1

2.3

2.3

2.4

2.7

5 4 3 2 1 0 1 2 3 4 5

*Shift of the global economic power centres to rapidly…

Change in the EUR / USD exchange rate

Internal market demand trends

Slow or negative EU market growth

Unsustainable economic (GDP) growth

Inflation

Economic shadow in Lithuania

Increasing price of other sources of production

Increasing price of labour force

Labour market disparities

Tax burden

Economic factors in 2012–2016


1.1

1.0

0.8

0.1

0.0

1.2

1.2

1.7

3.2

3.5

5 4 3 2 1 0 1 2 3 4 5

Trends of change of consumer needs and behaviour

Trends of vocational training and post-secondary and higher

education system

Trends of change of income of residents of Lithuania

Aging population

Population emigration from Lithuania

Social factors in 2017–2021


0.8

0.9

0.7

0.2

0.1

1.0

1.0

1.5

2.6

3.0

5 4 3 2 1 0 1 2 3 4 5

Trends of change of consumer needs and behaviour

Trends of vocational training and post-secondary and higher

education system

Trends of change of income of residents of Lithuania

Aging population

Population emigration from Lithuania

Social factors in 2012–2016


41

Scores of other social factors are not indicative. They reflect not only threats, but op-

portunities as well. Even though education, especially vocational training and higher educa-

tion-related issues, have lately been emphasised, representatives of bioeconomy business

emphasised neither any significant opportunities nor threats not only in the past 2012–2016

peri-od, but also in the future period of 2017–2021. Average scores of this factor did not exceed

the limits of 1 point.

Results of the assessment of the favourability of technologic environment factors

7 generalised factors were distinguished to assess technologic environment; Figure 15

presents their scoring. The scores that bioeconomy business representatives gave for technolo-

gic environment factors were quite polarising. Some of them raised increasingly growing thre-

ats and others – increasingly improving opportunities.

The greatest threat having strongly manifested in the past 2012–2016 period, which will

be even more important in the future 2017–2021 period, is obsolete production equipment and

technologies. Another rapidly growing threat is insufficient security of information/ cyber se-

curity. Information technologies are integrated in all sectors of bioeconomy, and the assurance

of their security in the context of cyber-attacks of different nature has become increasingly

relevant. The average score of this threat in the future 2017–2021 period is 0.5 structural point

greater than of the previous period.

Figure 15. Significance of technologic environment factors (in points)

Note: 1 point – very slight opportunity or threat, 5 points – very high opportunity or threat, 0 points – insignificant;

*Dissemination and availability of technologies and other innovations

3.1

2.7

2.3

2.2

2.2

0.4

0.2

0.1

0.2

0.4

0.3

0.6

2.1

2.9

5 4 3 2 1 0 1 2 3 4 5

State of biotechnology science in Lithuania

*Dissemination and availability of technologies and other…

Support for innovation

Training of biotechnology specialists in Lithuania

Fast change of technologies

Informational / cyber security level

Obsolete production equipment and technologies

Technological factors in 2017–2021


2.7

2.2

2.0

1.9

1.8

0.3

0.2

0.1

0.3

0.5

0.3

0.5

1.6

2.4

5 4 3 2 1 0 1 2 3 4 5

State of biotechnology science in Lithuania

*Dissemination and availability of technologies and other…

Support for innovation

Training of biotechnology specialists in Lithuania

Fast change of technologies

Informational / cyber security level

Obsolete production equipment and technologies

Technological factors in 2012–2016


42

Other factors of technologic environment are assessed as consistently increasing oppor-

tunities of average importance. Opportunities arising from the improving condition of biotech-

nology science and dissemination of technologic, technical and other innovations, which have

been opening up increasingly wider, received the highest scores. Their respective average sco-

res in the past 2012–2016 period were 2.7 and 2.2 points, and will be 3.1 and 2.7 points in the

future 2017–2021 period. These increasingly opening up opportunities may be important in

reducing or eliminating the threat of obsolete equipment and technologies.

Results of the assessment of the favourability of natural environment

8 generalised factors were distinguished to assess natural environment; Figure 15 presents

their scoring. Bioeconomy is closely and directly related to natural environment and ecological

requirements related to its quality, thus representatives of this sector saw both opportunities and

threats in the natural – ecologic environment.

Figure 16. Significance of factors of natural environment (in points)


Bioeconomy business representatives saw threats for climate change, limited natural

resources, energy and other environmental taxes, which now are slight but will increase in the

future period. The average score of all these factors as threats varied from 1.1 to 2.0 points in

the past 2012–2016 period, and it increased by 0.2 – 0.4 point in the future 2017–2021 period.

2.1

2.0

1.1

1.0

0.5

0.5

0.5

0.3

0.2

0.3

1.3

1.4

2.0

2.0

2.1

2.2

5 4 3 2 1 0 1 2 3 4 5

Support for sustainable use of resources

EU Energy Efficiency Policy

Requirements for waste management and disposal

Requirements for emissions reduction

Other environment-related taxes

Energy taxes

Limited natural resources

Climate changes

Natural environmental factors in 2017–2021


1.8

1.8

0.9

0.8

0.5

0.5

0.4

0.3

0.1

0.2

1.1

1.1

0.5

0.6

1.7

2.0

5 4 3 2 1 0 1 2 3 4 5

Support for sustainable use of resources

EU Energy Efficiency Policy

Requirements for waste management and disposal

Requirements for emissions reduction

Other environment-related taxes

Energy taxes

Limited natural resources

Climate changes

Natural environmental factors in 2012–2016


43

More significant opportunities (average score – 1.8 points) were observed in the EU

Energy Efficiency Policy and for support allocated for sustainable use of resources. These

opportunities remain slightly more important in the future 2017–2021 period.

Results of the assessment of the favourability of legal environment factors

7 generalised factors were distinguished to assess legal environment; Figure 17 presents

their scoring. As usual, more threats than opportunities were distinguished in legal environment,

which is determined by the regulatory nature of these factors. Administrative burden and bri-

bery and corruption were treated as threats of medium significance (2.4 and 2.3 points, respecti-

vely in the past 2012–2016 period). Bioeconomy business representatives did not see any signs

of these threats being at least somewhat reduced in the future 2017–2021 period.

The respondents assessed other legal environment factors as slight opportunities or thre-

ats (with average scores of the previous 2012–2016 period ranging from 0.7 to 1.5), and did not

have any expectations as to essential change of the legal environment.

Figure 17. Significance of legal environment factors (in points)


Summary of the assessment of the favourability of external bioeconomy business envi-

ronment according to the results of the survey of business representatives of this area:

external bioeconomy business environment is assessed as changing slowly and mo-

derately; no significant favourable opportunities just like no significant threats were

observed therein;

1.1

1.5

0.9

1.0

1.0

0.1

0.2

0.9

1.1

1.4

1.6

1.6

2.3

2.6

5 4 3 2 1 0 1 2 3 4 5

Protection of intellectual property

System for the protection of fair competition

Legal regulation of business

Clarity of legislation and long-term impact

Regulation of employment relations and salary

Bribery and corruption

Administrative burden

Legal factors in 2017–2021


1.1

1.3

1.0

0.7

1.0

0.1

0.2

0.9

0.9

1.4

1.4

1.5

2.3

2.4

5 4 3 2 1 0 1 2 3 4 5

Protection of intellectual property

System for the protection of fair competition

Regulation of employment relations and salary

Legal regulation of business

Clarity of legislation and long-term impact

Bribery and corruption

Administrative burden

Legal factors in 2012–2016


44

there were more threats of slight and moderate significance than opportunities of such

significance observed in the external bioeconomy business environment. The main

emphasis was placed on more significant threats appearing in economic, social and

legal environment. Greater opportunities were observed in technologic environment

only (especially in biotechnology science and dissemination of innovation) and mea-

sures of support for business and sustainable use of resources;

bioeconomy business representatives focus more on the insights of threats rather than

opportunities. This could mean that entrepreneurs operating in bioeconomy and

managers and specialists whom they hire lack entrepreneurial characteristics, leading

to defensive rather than offensive business strategies used in this field more

frequently, which may mean slow growth rates of the sector;

in pursuit of a more rapid bioeconomy development, government institutions must

focus on the promotion of the expression of entrepreneurship and improvement of

favourability of economic and legal environment partnering with research, organisa-

tions representing business entities and non-governmental organisations.

International assessment of business environment factors in Lithuania

International ratings of the World Bank’s research “Doing Business” reflect the favou-

rability of environmental factors to business in Lithuania (including in bioeconomy). Accor-

ding to the latest research50 data, Lithuania ranks 21st among 190 countries and 10th among

the EU member states. Compared to 2016, the business conditions index fell by one point.

Table 8 presents Lithuanian rating positions by different business conditions. Over the decade

(from 2007 to 2017), the greatest breakthrough was achieved in the area of contractual obli-

gations, where Lithuania rose by as many as 26 positions, and its rating increased by 19 posi-

tions during the period under consideration in terms of the conditions for starting a business.

The worst results in the country were observed in the assessment of bankruptcy cases, where

Lithuania dropped from 33rd to 66th place, and assessment of international trade, where Lithua-

nia’s rating fell 15 places down.

Table 8. Changes in components of Lithuania’s business conditions index in the international

“Doing business” rating

Indicator set 2007 2016 2017 Change (±): 2017 com-

pared to 2007

Starting a business 48 8 29 19

Dealing with construction permits 23 18 16 7

Labour market regulation 119 x x x

Getting electricity x 54 55 x

Registering property 3 2 2 1

Getting credit 33 28 32 1

Protecting minority investors 60 47 51 9

Paying taxes 40 49 27 13

Enforcing contracts 32 3 6 26

Trading across borders 4 19 19 -15

Resolving insolvency 30 70 66 -33

Data source: Authors elaboration on information in „Doing Business“ reports for 2007 and 2017

50 World Bank. 2017. Doing Business 2017: Equal Opportunity for All. Washington, DC: World Bank, also using data from

reports for 2008 and 2016.

45

In the area of property registration, Lithuania ended up in the second place among all

the assessed countries in 2017, and it rose from the 32nd place in 2007 to the 6th place in terms

of the performance of contracts. Lithuania is among the most advanced countries that have the

top quality real estate administration system, because the procedure of property registration and

transfer from one company to another is relatively simple, fast and cheap in Lithuania. Also,

Lithuania experienced a major breakthrough in the tax payment area, where it rose from the

49th to the 27th place (2016). Lithuania ranked higher in the areas of construction permits (rising

from the 23rd to the 16th place) and start of business (from the 48th to the 29th place). Lithuania’s

position also improved in the area of protection of minor investors. The assessment of progress

that countries made according to ten indicators, Lithuania was declared to have implemented

five constructive reforms in three areas: start of business, connection to electricity networks (2

reforms) and protection of minor investors (2 reforms). The fundamental reform in the area of

starting a business was made in the registration of a new company with the Register of Legal

Entities.

Statistical data-based analysis of environmental factors

Trends in Lithuanian population

Having assessed business environment by way of survey, representatives of bioeco-

nomy business emphasised factors related to the country’s demographic problems as the grea-

test threats, including emigration of the population from Lithuania and the aging of the popula-

tion. Figure 18 presents graphs drawn up according to OECD and FAO population pro-

jections51, which show long-term trends of declining population in Lithuania. According to

forecasts, Lithuania will have 2.38 million residents in 2050, which means that the population

of the country will decrease by a fourth compared to 2015. This will lead to shrunken demand

in the domestic market and suspended growth of Lithuanian bioeconomy, especially of manu-

facturers, whose produce is mainly targeted at consumers of the country (the analysis of the

dynamics of sales structure in the past decade is presented below).

Figure 18. Population projections in Lithuania

Data source: authors elaboration on information in United Nations World Population Prospects, the 2015 Revision: Total

Population – Both Sexes

Trends of declining population of working age in Lithuania presented in Figure 19 are

even less favourable for the development of bioeconomy. According to forecasts, there will be

1.1 million working age residents 15-64 years of age in Lithuania in 2050, however, given the

51 OECD-FAO Agricultural Outlook 2016–2025. 04 July 2016.

2.12

2.38

2.64

2,0

2,2

2,4

2,6

2,8

3,0

201

5

201

7

201

9

202

1

202

3

202

5

202

7

202

9

203

1

203

3

203

5

203

7

203

9

204

1

204

3

204

5

204

7

204

9

Total population projections (million)

Low variant Medium variant High variant

73.7

82.5

91.7

70

80

90

100

110

201

5

201

7

201

9

202

1

202

3

202

5

202

7

202

9

203

1

203

3

203

5

203

7

203

9

204

1

204

3

204

5

204

7

204

9

Lithuanian population decline index

2015=100Low variant Medium variant High variant

46

fact that people usually are employed in the country after they complete secondary education,

the number of working age residents (20-64 years) will be 1 million. Compared to 2015, it will

decrease by almost a half, which is a twice greater decrease compared to the previously men-

tioned decline of Lithuania’s population. Thus the issue of the lack of employees will further

increase and pose threat to the development of the bioeconomy business.

Figure 19. Projections of the working age population in Lithuania

Data source: authors elaboration on information in EUROSTAT (Population projections 2015 at national level)

Trends of production and demand of agriculture and food products

The Food and Agriculture Organisation of the United Nations (FAO) forecasts that in

order to meet food and biofuel demand, agriculture will have to produce almost 50 percent more

food, feed and raw materials for biofuel in 2050 compared to the scope of production in 201252.

Forecasts for the production and consumption of agriculture, fisheries and food products made

by OECD and FAO and population projections presented in Figure 20 show certain trends.

1. Manufacture of agricultural, fisheries and food products will increase over the decade

(2015–2025). According to forecasts, the production of wheat will increase by 9 percent, maize

– by 15 percent, other oilseeds – by 13 percent and vegetable oils – by as many as 23 percent.

The forecasted scope of production of livestock farming products is even greater: pork pro-

duction should increase by more than 11 percent, beef and veal – by about 15 percent, poultry

– by 16 percent and lamb – by 22 percent; the scope of production of dairy products should

increase by a fifth. In 2025, fish catch will stay at almost the same level as in 2015, however,

the scope of aquaculture production will increase by a third.

2. Consumption of most products per capita will increase in the world. Consumption of

beef and veal will increase by about 4 percent, poultry – by 5 percent, fish – by 7 percent, lamb

and vegetable oil – by 10 percent, fresh dairy products – by 13 percent; in 2025, consumption

of wheat and pork will stay at the same level as in 2015.

3. The world’s population will rapidly increase, and will reach 9.7 billion in 2050. Com-

pared to 2015, the population will increase by almost a third in 2050. Increasing consumption

of agriculture, fisheries and food products as well as growing population will further increase

the demand for agriculture, aquaculture and food products and the need for increasing scopes

of production.

52 FAO. 2017. The future of food and agriculture – Trends and challenges. Rome.

0,9

1,1

1,3

1,5

1,7

1,9

201

5

201

7

201

9

202

1

202

3

202

5

202

7

202

9

203

1

203

3

203

5

203

7

203

9

204

1

204

3

204

5

204

7

204

9

Working-age population (million)

Aged 15-64 Aged 20-64

5550

70

90

110

201

5

201

7

201

9

202

1

202

3

202

5

202

7

202

9

203

1

203

3

203

5

203

7

203

9

204

1

204

3

204

5

204

7

204

9

Working-age population change index

(2015 = 100)

Aged 15-64 Aged 20-64

47

Figure 20. Projections of the world’s population and production and consumption of agriculture, fisheries

and food products and

Data source: authors elaboration on information in OECD-FAO Agricultural Outlook 2016–2025. 04 July 2016 and United

Nations World Population Prospects, the 2015 Revision: Total Population – Both Sexes

Thus, the continuously increasing demand for food products in the world can be stated

to encourage the development of agriculture, aquaculture and manufacturing food production

in Lithuania.

Trends of the structure of bioeconomy markets

As previously mentioned, the decline in Lithuania’s population leads to decreasing fu-

ture demand in the domestic market. This will stop the growth of bioeconomy’s manufacturing

production subsectors, the share of sales in the domestic market of which will remain high. The

analysis of the structure of manufacturing industry sales in the domestic and foreign markets

by aggregate data of economic activities was conducted using the statistics of sales of industrial

products according to 8-digit PRODCOM commodity code and their economic activity types –

according to NACE rev. 2 two-digit industry codes. Graphs on the product sales structure pre-

sented in Figure 21 revealed the following trends:

Sales of three product groups – food, beverages and paper – in the domestic market

account for a greater share of sales, 56.2, 87 and 52,3 percent, respectively (2015).

However, in recent years, the share of the domestic market of food and beverages has

gradually decreased, with manufacturers increasingly shifting to export markets. So-

lely the share of the sales of paper and its products in the internal market has increa-

sed.

Export of bio-based chemicals, medicines and pharmaceuticals accounts for the ma-

jor share of sales – 81 and 94 percent, respectively. Moreover, the share of export of

medicines and pharmaceuticals doubled over the past six years, while scopes of

export increased a few times. This is the key factor of rapid growth of this sector of

bioeconomy.

95

105

115

125

135

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Production index (2015 = 100)

Wheat MaizeOther oilseeds Vegetable oilsBeef and veal PigmeatPoultry meat Sheepmeat

95

100

105

110

115

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Consumption per capita index (2015 = 100)

Wheat Vegetable oils

Beef and veal Pigmeat

Poultry meat Sheepmeat

Fresh dairy products Fish

8710

9725

10801

6000

8000

10000

12000

20

15

20

17

20

19

20

21

20

23

20

25

20

27

20

29

20

31

20

33

20

35

20

37

20

39

20

41

20

43

20

45

20

47

20

49

Projections of the world’s population (million)


119

132

147

90

110

130

150

20

15

20

17

20

19

20

21

20

23

20

25

20

27

20

29

20

31

20

33

20

35

20

37

20

39

20

41

20

43

20

45

20

47

20

49

World's population growth index 2015=100


48

Figure 21. Structure of the sales of Lithuanian manufacturing industry products by markets

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (Commodities sold)

Proportion of export of wood, its products and furniture increased in recent years; in

2015, the export of furniture accounted for 70 percent, while the export of wood and

its products – for almost two thirds of sales.

Textile, apparel and leather products have mainly been sold in foreign markets (about

three quarters in recent years). However, the share of export has gradually decreased

over the past decade.

The share of export of products wholly or partly derived from material of biological

origin in sales was determined to be greater in the partly bio-based manufacturing

production sector compared to that of other products, which shows that bio-based

products are more marketable than those made of fossil resources.

Effects of climate change

The impact of climate change on the bioeconomy business will continue increasing due

to the past developments and current greenhouse gas (GHG) emissions. Lithuania has underta-

ken under the United Nations Framework Convention on Climate Change and the Kyoto Pro-

tocol to reduce GHG emissions by 20 percent in 2013–2020 compared to 1990. According to

34.7

40.3

44.7

48.8

45.7

41.5

41.8

42.7

40.8

41.1

37.9

65.3

59.7

55.3

51.2

54.3

58.5

58.2

57.3

59.2

58.9

62.1

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Food products

In domestic market In abroad market

91.5

91.4

90.6

88.5

88.3

84.0

79.6

79.0

75.0

74.8

78.0

8.5

8.6

9.4

11.5

11.7

16.0

20.4

21.0

25.0

25.2

22.0

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Beverages


14.9

14.2

15.2

25.1

25.2

23.7

23.2

24.9

23.5

24.0

24.1

85.1

85.8

84.8

74.9

74.8

76.3

76.8

75.1

76.5

76.0

75.9

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bio-based textiles, apparel and leather


34.7

40.3

44.7

48.8

45.7

41.5

41.8

42.7

40.8

41.1

37.9

65.3

59.7

55.3

51.2

54.3

58.5

58.2

57.3

59.2

58.9

62.1

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Wood and wood productsIn domestic market In abroad market

52.4

50.0

49.0

51.3

46.1

43.6

41.7

50.0

50.5

50.5

52.3

47.6

50.0

51.0

48.7

53.9

56.4

58

.3

50.0

49.5

49.5

47.7

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Paper and paper products


38.6

41.9

41.6

44.7

41.8

38.6

34.2

34.8

34.6

33.5

32.4

61.4

58.1

58.4

55

.3

58.2

61.4

65.8

65.2

65.4

66.5

67.6

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bio-based furniture


27.2

35.0 47.8

35.1

22.7

25.3

20.7

28.7

22.0

24.2

25.4

72.8

65.0 52.2

64.9

77.3

74.7

79.3

71.3

78.0

75.8

74.6

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bio-based chemicals


51.8

57.5

51.1

59.3

35.4

17.4

27.9

24.9

14.8

9.4

5.7

48.2

42.5

48.9

40.7

64.6

82.6

72.1

75.1

85.2

90.6

94.3

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bio-based pharmaceuticals


49

the Paris Agreement on Climate Change (12 December 2015), in 2015, Lithuania along with

other EU member states set the goal to reduce GHG emissions in the economy by at least 40

percent by 2030 compared to 199053.

According to the data of the national greenhouse gas inventory report, GHG emissions

decreased in Lithuania by more than a half compared to 1990, i.e. from 48 to 20 million t of

CO2 equivalent. The highest GHG emissions in Lithuania were in the energy sector, where they

accounted for 55 percent (11.1 mln. t of CO2 equivalent) of the total greenhouse gas emissions;

GHG emissions in agriculture totalled 23 percent (4.6 mln. t of CO2 equivalent), 17 percent –

in the industrial and industrial product use sectors (3.4 mln. t of CO2 equivalent) and 5 percent

– in the waste sector (1 mln. t of CO2 equivalent) in 2015.

The analysis made by sectors and types of economic activities attributed to bioeconomy

(Figure 22) revealed that more than a half of GHG emissions (51 percent) were in the biomass

production sector, 4 percent – in the wholly bio-based manufacturing production sector and 45

percent – in partly bio-based manufacturing production sector (without eliminating the pro-

duction from fossil feedstock) in 2014. In terms of the assessment by separate types of econo-

mic activity, agriculture emits the most GHG – 50.4 percent (in 2014); emissions in the chemi-

cals industry account for 30.1 percent (with main pollutants being producers of chemical ferti-

lisers) and 14.5 percent – in the waste sector.

Figure 22. Greenhouse gas emissions by Lithuanian bioeconomy sectors

* the data points represent both the bio-based and the non-bio-based manufacturing combined due to the lack of data availibi-

lity needed for separate indicators

Data source: authors elaboration on information in Eurostat (Air emissions accounts by NACE Rev. 2 activity)

According to the National Greenhouse Gas Inventory Report, the main sources of GHG

emissions in the energy sector were the combustion of fuels for energy production and leakage

of volatile pollutants. In order to adapt to climate change, the plan is to install various engine-

ering network solutions and switch to alternative less polluting energy source, including bio-

fuels. The decline in GHG emissions in the waste sector is associated with declining population

53 Environmental Protection Agency. 2017. Lithuania’s National Inventory Report 2017: Greenhouse Gas Emissions 1990-

2015.

Biomass

production

sectors; 4028; 51%

Partly bio-based

manufacturing

sectors; 3577; 45%

Fully bio-based

manufacturing

sectors; 330; 4%

CO2 equivalent (thou. ttonnes; %)

3844 3881 3886 3846 3881 3860 3998

4850

1914 17883134 2916 2174 2388

1474

1434 1395

1304 12771205 1151

0

2 000

4 000

6 000

8 000

10 000

12 000

2008 2009 2010 2011 2012 2013 2014

CO2 equivalent

(thou. tonnes)



Manufacture of textiles, apparel and leather*

Manufacture of furniture and other manufacture*




Waste collection, treatment


Agriculture

50

and changing waste management system. Main measures aimed at the reduction of GHG e-

missions are related to the aim to avoid waste generation, also to the application of waste pre-

vention measures, while inevitable waste must be prepared for reuse, recycling or other use54.

The reduction of GHG emissions in agriculture is associated with the reduction of the

number of animals, especially livestock, and improving manure management. However, the

intensity of GHG emissions in Lithuania’s agricultural sector remains much higher than the EU

average. Main reasons leading to recent increase of GHG emissions in the crop production

sector are more intensive soil fertilization using chemical fertilisers and decreasing areas of

meadows, pastures and perennial grasses as well as their proportion in the used agricultural

land. Intensively cultivated fields under traditional agricultural conditions are potential sources

of GHG (organic material is intensively mineralised and biogenic elements are removed with

the yield); these processes are offset by fertilization with organic fertilisers or plant residues,

which are obtained in abundance from perennial grasses55.

Forecasts for the development of Lithuanian bioeconomy till 2030

Almost all long-term economic forecasts should be treated as certain projections, which

help seek goals of the formation of analytical or political measures, rather than attempts to

predict the future. The implementation of these projections is very much dependent on the con-

sistency of the development of the indicator being examined, because such sudden changes as

economic crises or the establishment of a major factory capable of increasing the value added

created in certain branch of economy a few times in ten years are very hard to predict.

Three methods were used to prepare Lithuanian bioeconomy development projects:

econometric time series analysis, general equilibrium modelling and analysis of its results, and

survey of economic entities operating in bioeconomy reflecting bioeconomy business expecta-

tions.

In the examination of historical data on GVA, the number of employees and export data,

the correspondence of their historical distribution to the regression equation was checked. The

equation which has the least deviations compared to historical data and satisfies logical criteria

was used as the basis for one of projections.

Another basis for projections is results of EnEkonLT general economic equilibrium mo-

del. Although this model is not aimed at forecasting, it gives a rather good opportunity for

analysing inter-sectorial relationships and providing the realistic representation of the develop-

ment of the national economy. This Study uses the results from the Social and Macroeconomic

Impact Assessment of Energy Development Scenarios Proposed by the National Energy Stra-

tegy of the Republic of Lithuania as a basis; they are aimed at the IntegracijosAb scenario,

which has most of baseline energy development scenario attributes56. In order to adapt the E-

nEkonLT model for bioeconomy development projections, certain modifications thereof have

54 Ibidem 55 Žemės ūkio, maisto ūkio ir žuvininkystės sričių išorės ir vidaus rizikos veiksniai, grėsmės ir krizės bei jų galimas povei-

kis. Mokslinio tyrimo ir taikomosios veiklos projekto (sutartis Nr. MT-15-38) 2016 metų baigiamoji ataskaita. 56 Lekavičius, V. ir kt. (2015). Nacionalinės energetikos strategijos siūlomų energetikos raidos scenarijų socialinio ir makroe-

konominio poveikio Lietuvos Respublikoje vertinimas. Lietuvos energetikos institutas, Kaunas.

51

been made. Since the classification of economic activities used by EnEkonLT is more aggrega-

ted than the available statistical data on bioenergy development, coefficients reflecting the con-

tent of bioeconomy in economic activities modelled by EnEkonLT were set first of all accor-

ding to the analysis results of the development of Lithuanian bioeconomy (Annex No 2). Since

EnEkonLT operates real values only, recalculation system has been prepared using the GDP

deflator. Historical data on GDP deflator values were used till 2016, its values according to the

economic development scenario prepared by the Ministry of Finance of the Republic of Lithu-

ania will be used in 2016–202057, while in later periods, the GDP deflator will be equated to

the last value forecasted by the Ministry of Finance of 1.6. The same GDP deflator values are

also used to recalculate GDP projections in prices of the current year in the PRIMES model.

In order to ensure that projections reflect bioeconomy business expectations, a survey

of economic entities was conducted (see question 7 of the survey questionnaire available in

Annex No 3). Since economic entities engaged in different activities took part in the survey,

averages according to the classification of bioeconomy sectors (biomass production, fully and

party bio-based manufacturing) were calculated before calculating the summarised bioeconomy

indicators. In forecasts of the GVA created by bioeconomy, its growth is associated with busi-

ness expectations for the growth of turnover, while their growth averages till 2020, 2025 and

2030 determined by way of survey were used to forecast the number of employees and export

volumes. Indicators of the remaining interim years were obtained by way of linear interpolation.

Figure 23 illustrates GVA projections in bioeconomy till 2030 according to the methods

used and their overall average.

Figure 23. Projections of bioeconomy gross value added in Lithuania

Data source: Authors elaboration

Projections of GVA of bioeconomy prepared in application of all methods are similar

and amount to EUR 7.8 – EUR 9.1 billion in 2030, which is 68–95 percent more than in 2014.

It should be noted that the applied assumptions on the GDP deflator value affect the forecasts

of GVA in nominal expression in EnEkonLT model – the higher the value thereof, the higher

will be the value of forecasted value added created in bioeconomy.

Figure 24 presents two alternatives of bioeconomy contribution to the country’s GDP

development till 2030, which were prepared using the average data of projections of GVA of

57 LR finansų ministerija. 2017. Lietuvos ūkio 2017–2020 metų perspektyvos. Kovas.

0

1

2

3

4

5

6

7

8

9

10

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

EUR billionObservedTime seriesEnEkonLT (recalculated to nominal values)According to bio-business expectations (related to the sales)Average projection

52

bioeconomy according to three methods (represented by the solid green curve in Figure 23) and

twofold GDP projections of the country according to EnEkonLT model, and the latest data of

PRIMES model projections58, which are often used to prepare studies ordered by the European

Commission.

Figure 24. Projection of bioeconomy share of GDP in Lithuania


The difference in some GDP projections of bioeconomy GVA is determined by the fact

that a very slow growth of Lithuanian economy after 2020 is forecasted according to the PRI-

MES model, which is a mere 0.7 percent of the annual growth of the actual GDP compared to

3.3 percent according to the EnEkonLT model (of GDP value in nominal expression, which

corresponds to the growth of 2.5 and 5 percent). Compared to the GDP projections according

to the PRIMES model, a larger share of bioeconomy in GDP (14.3 percent in 2030) was deter-

mined compared to GDP projection according to EnEkonLT model (10.9 percent that same

year), as per Figure 24, which means that in the second case, the remaining part of economy

will increase faster than the bioeconomy sector.

It should be noted that with service economy prevailing in Lithuania just like in other

developed countries, the contribution of services to GDP has been continuously increasing and

that of production decreasing. The share of the service sector (including trade) in GDP increased

from 56.6 to 64.1 percent in 2005–2016, but remained slightly lower than throughout the EU

(65.9 percent in 2016). The share of production (excluding construction) in GDP decreased

from 26.9 to 22.8 percent in the same period, but remained higher than throughout the EU (18.6

percent in 2016)59. According to the analysis of GVA of bioeconomy, its share in GDP fell

slightly in the past decade (see Table 3 of Annex No 2).

Projections of employment in bioeconomy have been known by much greater dispersion

as per Figure 25. Two projections according to the EnEkonLT model are presented in this case,

which were prepared considering the fact that a slightly different consideration of employment

than that presented in employment statistics of Statistics Lithuania was used in the model. Thus

the EnEkonLT model plans for a lower employment level than the officially published level of

58 Europen Commission. 2016. EU Reference Scenario 2016: energy, transport and GHG emissions Trends to 2050. Europen

Commission, July 59 The share attributed to the services sector was calculated according to EVRK2 G-U; the share of manufacturing – according

to A and B-E economic activity classifier.

0

2

4

6

8

10

12

14

16

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

Percent of GDP

Observed

According to EnEkonLT GDP projection

According to PRIMES GDP projection

53

employment in agriculture in the baseline period considering the fact that the majority of per-

sons employed in agriculture work part-time60. Data of the baseline period in the EnEkonLT

adjusted projection are adjusted to meet the official statistics, while further development thereof

is proportionately reflected in the modelling of trends.

Figure 25. Projections employment in bioeconomy in Lithuania


Projections of persons employed in bioeconomy have some contradictions. On one

hand, the projection based on business expectations having participated in the survey shows a

certain increase in the number of employees to 305 thousand. The survey of business entities

revealed the expectations of growing development of bioeconomy business and respectively

increasing number of employees in companies (see Figure 27), while business representatives

having taken part in the survey on economy identified emigration and aging population of

Lithuania as the biggest threats to business. In their opinion, the threat of these factors posed to

the bioeconomy business will increase (see Figure 14).

On the other hand, projections based on other methods (i.e. dynamic modelling of ge-

neral equilibrium and econometric time series analysis) forecast a consistent decrease of the

number of people working in bioeconomy. According to the projections, the number of people

working in bioeconomy may be 153–209 thousand in 2030 compared to 234.4 thousand in

2015. These projections are first of all associated with the general demographic projections in

Lithuania, i.e. significant decrease of working-age population during the same period61 and

increasing labour productivity in bioeconomy (see Figure 3).

Figure 26 presents the projections of bioeconomy products export. The projection of

exports prepared on the basis of bioeconomy business expectations (see Figure 27) is more

conservative than the results of the linear regression and EnEkonLT model. In presence of a

longer forecasting period, business representatives having taken part in the survey tended to

assess the growth of exports associated with greater uncertainly more conservatively than the

growth of sales in the domestic market. All projections show a consistent growth of exports of

60 Statistics Lithuanian. 2015. Results of the Farm Structure Survey 2013 in Lithuania. Vilnius. 61 According to the Eurostat population forecast, the working population (20-64 years of age) in Lithuania will decrease by

26.7 percent or by 27 percent in the 15-64 age group. According to the Eurostat population forecast, the working population

(20-64 years of age) in Lithuania will decrease by 26.7 percent over the years 2016-2030, while the general population decline

forecast stands at 16.5 percent. It should be noted that the population forecast encompasses both the natural population dy-

namic and emigration and immigration.

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Survey

54

the bioeconomy sector till 2030: it will grow to EUR 13.9 billion according to business expecta-

tions, and to EUR 18.1 and 21.1 billion according to EnEkonLT model and linear regression

results compared to the export value of EUR 9.9 billion in 2016.

Figure 26. Projections of bioeconomy products export in Lithuania


Projections of macro-economic indicators drawn up in this survey in three different

methods show that the growth of the Lithuanian bioeconomy is likely in the long term:

the GVA may increase to EUR 7.8 – 9.1 billion by 2030, which is 68–95 percent

more than in 2014 (EUR 4.7 billion);

the contribution of bioeconomy to Lithuanian GDP in the future may depend on the

expected growth rates of the national economy (including types of economic activi-

ties that are not attributable to bioeconomy, especially the service sector. According

to forecasts, the share of bioeconomy value added in Lithuanian GDP may be 10.9–

14.3 percent in 2030 compared to 12.8 percent in 2014;

projections of employment in bioeconomy have some contradictions, i.e. according

to expectations of the bioeconomy business, the number of employees may increase

to 30 thousand in 2030, while according to projections drafted according to the dy-

namic general equilibrium modelling and econometric time series analysis, it may

decrease to 153–209 thousand compared to 234.4 thousand in 2015;

forecasts of the development of exports of the bioeconomy sector have shown a con-

sistent growth of exports from EUR 13.9 to 21.1 billion in 2030 compared to EUR

9.9 billion in 2016.

Identification of Lithuanian economic activities attributable to bioeconomy that

have the greatest potential

The assessment of the potential of the Lithuanian bioeconomy subsectors perceived as

an opportunity or a degree of capacity is based on the following main criteria:

the current level of bioeconomy subsectors and growth trends under the current mar-

ket conditions. Indicators as the turnover and its growth, labour productivity level

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Linear regression

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According to bio-business expectations (related to the sales)

55

and its growth, and growth of exports and the number of employees are used in the

assessment (Table 2 in Annex No 2 presents aggregate results);

trends of growth of bioeconomy sectors based on business expectations till 2030.

Indicators of activities of companies engaged in bioeconomy business and farms

having taken part in the survey, such as sales in domestic and foreign markets,

tangible investments, the number of employees and expenditure on R&D, aggre-

gated by sectors of bioeconomy were used (data are presented in Figure 27);

global forecasts for the food sector (agriculture, fisheries and food products) and bio-

fuel production (data are presented in Table 2 of Annex No 2) and other trends;

policy priorities and provisions laid down in subsectors 3.1 and 5.1.

Potential of bioeconomy subsectors under the current market conditions

Manufacture of food, beverages and tobacco is a large fully bio-based manufacturing

sector of medium productivity level growing at an average rate. This is the largest bioeconomy

sub-sector in Lithuania with the average level of growth of turnover, labour productivity and

exports, the largest share in turnover (5.6 percent) and GDP (3.5 percent). Biotechnology tech-

niques and processes are used in certain industries of food production. Turnover: EUR 4575.8 mill. (2015)

Average annual turnover growth: +5.6% (2010-2015)

Average annual export growth: +6.4% (2010-2016)

Average labour productivity growth: +5% (2010-2014)

Average annual employee growth: +0.5% (2010-2015)

Export share in sales of products: 44% (2016)

Agriculture is a large biomass production sector of very low productivity growing at an

average rate. This is the second largest subsector of Lithuanian bioeconomy with an average

growth of turnover and labour productivity but low export growth. Agriculture is the second

largest subsector in terms of the share in GDP (3.1 percent). Lithuania has about 450 thousand

ha (about 14 percent) of abandoned agricultural land. Slow global growth of the production of

agricultural products compared to much more rapid growth of demand of food products and

increasing competition due to the increasing demand of biomass for food, feed production,

bioenergy and industrial purposes has been forecasted. Turnover: EUR 2664.1 mill. (2015)



Average annual labour productivity growth: +8.9% (2010-2014)


Export share in sales of products: n.d. (2016)

Manufacture of furniture is a medium-sized rapidly growing partly bio-based manu-

facturing subsector of medium-high productivity level. This is the third largest subsector of Lithu-

anian bioeconomy with a rapidly growing turnover and labour productivity, gradually increa-

sing share of export and appeal to foreign investors. It can be distinguished for an average

increase of the number of employees, and takes up a small part in turnover (1.5 percent) and

GDP (1.4 percent). Turnover: EUR 112.3 mill. (2015)





56


Manufacture of wood and its products is a medium-sized fully bio-based manufacturing

sub-sector of low productivity. This is the fourth largest subsector of Lithuanian bioeconomy

with an average growth of turnover, but rapid increase of labour productivity and exports, and

a gradually increasing share of exports, which is appealing to foreign investors. It accounts for

a small share in turnover and GDP (1.4 percent in each). Turnover: EUR 1081.5 mill. (2015)


Average annual export growth: +11% (2010-2016)


Average annual employee growth: -1.8% (2010-2015)


Bio-based manufacture of textile, apparel and leather products is a medium-sized,

slowly growing party bio-based manufacturing sector of low productivity. This is the fifth

largest subsector of Lithuanian bioeconomy, which is essentially targeted at the foreign market.

It accounts for a small share in turnover and GDP (1.1 percent in each). It can be characterised

by a slow growth of turnover and export, low labour productivity, gradually increasing share of

exports; it remains appealing to foreign investors due to the advantage provided by its relatively

low cost of labour force, which has been decreasing with the growing cost of labour in Lithua-

nia. Turnover: EUR 815.2 mill. (2015)




Average annual employee growth: -5% (2010-2015)


Manufacture of paper and paper products is a small fully bio-based subsector growing

at an average rate, with medium-high productivity. This is the sixth largest subsector of Lithu-

anian bioeconomy, which is essentially targeted at the domestic market. It can be characterised

by an average increase of turnover and productivity. More than a half of produce of the sub-

sector is used in the domestic market. It accounts for a very small share in turnover and GDP

(0.5 percent in each). Turnover: EUR 412.5 mill. (2015)






Forestry and logging is a small low-productivity biomass production sector growing at

an average rate. This is the seventh largest subsector of Lithuanian bioeconomy, which can be

distinguished for low labour productivity and its decreasing rate over the past mid-term period.

It accounts for a very small share in turnover and GDP (0.5 percent in each). Forest biomass

(firewood and wood waste) in the Lithuanian bioenergy is the main resource the majority of

which is burnt. Turnover: EUR 400.2 mill. (2015)


Average annual export growth: -2.1% (2010-2016)

Average annual labour productivity growth: -4.5% (2010-2014)


57


Manufacture of bio-based pharmaceuticals is a very small, very rapidly developing,

highly productive, knowledge-intensive partly bio-based manufacturing subsector. This is the

eighth largest subsector of Lithuanian bioeconomy distinguished for its high labour producti-

vity and a very rapid increase of exports. It is the Lithuanian bioeconomy subsector which is

targeted at the foreign market the most. This is a high technology area using industrial biotech-

nology and creating high value added. On the other hand, this subsector accounts for a very

small share in turnover (0.3 percent) and GDP (0.4 percent), thus its rapid development will

have no significant impact on the development of Lithuanian bioeconomy. Turnover: EUR 217.4 mill. (2015)






Manufacture of bio-based chemicals is a very small high productivity level party bio-

based subsector experiencing negative growth. This is the ninth subsector of Lithuanian

bioeconomy in terms of size, and it accounts for a very small share in turnover (0.2 percent)

and GDP (0.3 percent). This is a medium-high technology bioeconomy subsector using indust-

rial biotechnology and creating high value added. It has been known for decreasing turnover

and export in the last mid-term period as well as static labour productivity, which came as a

result of decreased production of bio-diesel and bioethanol since 2014 for the changed EU bio-

fuel production policy. However, the production and sales of enzymes has increased very ra-

pidly. Turnover: EUR 200.4 mill. (2015)

Average annual turnover growth: -4% (2010-2015)

Average annual export growth: -2.5% (2010-2016)




Fishing and aquaculture is a very small biomass production subsector with an average

growth rate and average productivity. This is the smallest subsector of Lithuanian bioeconomy.

It accounts for a minor share in turnover and GDP (a mere 0.1 percent in each). This is the

subsector of Lithuanian bioeconomy, which has lately been distinguished for its very rapid

increase of labour productivity and average growth of turnover and export. There is no com-

mercial fishing is inland waters. Almost 90 percent of aquaculture production is raised in open

aquaculture systems – ponds, pools and canals –, and the remaining small share – in closed

aquaculture systems (CAS). Turnover: EUR 71.5 mill. (2015)






The share of bioenergy sector in the primary energy production of Lithuania has lately

accounted for almost three fourths, 64 percent of which is wood waste designated for firewood

58

and fuel, about 5 percent – for biodiesel, almost 2 percent – for biogas and less than a percent

– for the remaining types of biofuel. Production of biodiesel and bioethanol has been decreasing

since 2014 due to the changed EU biofuels production policy, but the production of biogas from

agricultural waste and sewage sludge has rapidly decreased, and the use of biodegradable

landfill waste in the production of biogas has experienced a slow growth.

Biotechnology sector is a very small very rapidly growing knowledge and R&D inten-

sive sector with high productivity. According to the analysis of aggregated statistical data of

companies included in the survey, the development of this sector has been very rapid in the past

decade. Moreover, active involvement of business in biotechnology R&D has increased signi-

ficantly over this period and has become one of the growth leaders in the past decade. The

number of business companies involved in biotechnology R&D activities has increased 8 times.

Turnover of these companies increased 32.6 times, while its share in the overall business R&D

turnover grew to 32 percent. The number of biotechnology R&D employees increased 7.3 ti-

mes. It should be noted that labour productivity of biotechnology R&D employees increased

nine times and is higher by almost a third compared to the average in the overall business sector

R&D activities, which shows that the potential for the development and implementation of new

bio-innovations has increased.

Trends of development of bioeconomy business based on business expectations

Data presented in Figure 27 aggregated by sectors of bioeconomy and types of activities

reveal the trends of the development of bioeconomy based on business expectations till 2030.

The data were collected by way of a quantitative survey of business entities answering question

seven of the questionnaire (description of the survey is available in Annex 3 to the Study). The

respondents were asked to make strategic assessments of the change of performance indicators

of the company in the short, medium and long term (till 2020, 2025 and 2030, respectively)

compared to the current situation according to performance results of 2016. The survey results

showed likely trends of growth of sectors of bioeconomy.

The greatest growth potential according to all performance indicators of companies

included in the forecast was determined in the bio-based subsector of chemicals and pharma-

ceuticals till 2030. The likely increase of tangible investments, sales, the number of employees

and expenditure in R&D in this subsector is a few times greater than in other subsectors of

bioeconomy. Moreover, the fastest growth in productivity of the sector is also associated with

much higher expectations for investments in R&D and attraction of qualified employees. It

should be noted that the trends determined on the basis of statistical data show the greatest

growth potential in the pharmaceuticals industry.

Much lower expectations for business growth till 2030 were found in other analysed

manufacturing bioeconomy subsectors. Compared to the subsector of the manufacture of che-

micals and pharmaceuticals, expectations for the growth of tangible investments in the food

sector and manufacture of textiles, apparel and leather are up to 3 times lower, investment in

R&D – up to 4 times lower and the number of employees – up to 2 times lower. In terms of

those same indicators, the lowest business growth expectations were observed in the forest bio-

mass-based sector, i.e. forestry, production of wood, furniture and paper. Very low expectations

for the growth of tangible investments and the number of employees have been observed in

these sectors.

59

Figure 27. Trends of firm performance indicators according to bio-business expectation in short, medium

and log run

Source: data of the survey of business enterprises (n=102)

Companies engaged in biowaste management were also included in the survey. Accor-

ding to all corporate indicators included in the forecast, growth expectations in the waste sector

are much lower than in the chemicals and pharmaceuticals subsector; they also fall behind those

in subsectors of manufacture of textiles, apparel and leather products. Solely the expectations

for the growth in the demand for skilled employees in the biowaste management business are

greater than in the manufacture of textiles, apparel and leather products.

The trends of growth of bioeconomy sectors determined on the basis of business

expectations can be said to reflect the said trends identified on the basis of statistical data. In

both cases, the fastest growth potential was determined in bio-based pharmaceuticals industry.

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60

The greatest potential for the development of sectors of bioeconomy

Food sector

The food sector is the largest share of Lithuanian bioeconomy, just like in the majority

of other EU member states. Food industry (including manufacture of beverages) and agriculture

are the largest subsectors of Lithuanian bioeconomy, which can be characterised by average

growth rate over the past mid-term period. Fishing and aquaculture is a very small part of the

food sector, also developing at an average rate.

The strategic principle of bioeconomy of the priority of supply with food ensures the

priority of the food sector in bioeconomy. The priority of agriculture and fisheries is also de-

termined by the principle of combination of the supply with food with sustainable use of re-

newable energy sources for industrial (including energy) purposes and assurance of envi-

ronmental protection.

The development of the Lithuanian food sector has also been encouraged by rapidly

increasing food demand in the world as a result of rapid growth of population and their purcha-

sing power. As previously mentioned, food demand has been forecasted to increase by about

50 percent by 2050, and the total demand for food and feed – to 70 percent. The following are

the forecasts of FAO and OECD for the growth of production of agricultural and food products

till 2025 compared to 2015: wheat – 9.4 percent, corn – 15 percent, oilseed crops – 23.3 percent,

raw milk – 20 percent, fresh dairy products – 24.6 percent, butter – 19.1 percent, cheese – 15

percent, whole milk powder – 24.9 percent, sheep meat – 21.6 percent, poultry – 16.2 percent,

beef – 14.7 percent and pork – 11.3 percent.

Two opportunities increase the potential of the production of biomass in agriculture,

namely, suitable abandoned agricultural land should be included in production, and agricultural

production should be sustainably intensified in order to increase the productivity of agriculture.

On the other hand, the increasing problem of soil degradation, especially in territories of pro-

ductive land, must be solved (see subsection 2.2.3). The forecasted62 rapid increase of demand

for fish and other aquatic products in the world increased the potential of the development of

aquaculture in Lithuania; aquaculture will help meet this demand, because by 2025, fish catch

will decrease, while the production of aquaculture products will increase by 34.2 percent com-

pared to 2015. Moreover, controlling the quality of fish resources in open water has become

increasingly difficult. The development of aquaculture in Lithuania is associated with the incre-

ase of quantities of valuable species of fish in ponds and the farming of fish in closed systems,

which has been rapidly developed in the world and is much simpler compared to pond aquacul-

ture.

Forest bio-based sector

The forest bio-based sector (forestry and logging, production of wood, paper and furni-

ture) is the second largest sector of Lithuanian bioeconomy. In the utilization of forests, wood

resources are used first of all. The priority of the forestry subsector is determined by the prin-

ciple of combining the supply with food with sustainable use of renewable energy sources for

industrial (including energy) purposes and the assurance of environmental protection.

The total volume of wood has constantly increased in Lithuania. About 80 percent of all

biomass are found in forests. In 2016, the forest area covered 2186.7 thousand ha and accounted

for 33.5 percent of the territory of the country. Since 2003 this area has increased by 141.5

thousand ha. Farmed forests make up 71.4 percent. The use of forest biomass is limited by

62 FAO. 2016.The State of World Fisheries and Aquaculture 2016. Contributing to food security and nutrition for all. Rome.

61

environmental goals prohibiting or limiting economic activities: preserved forests make up 12

percent, special purpose forests – 12.2 percent and protective forests – 15.2 percent of the forest

area. Since the need for wood biomass has increased, the forest area has a potential for expan-

sion by afforestation of abandoned agricultural land and other land unsuitable for agriculture.

Forests perform many ecosystem functions: they help protect the soil, form a part of the

water cycle, regulate climate and are important in the implementation of the EU climate goals

first of all by accumulating coal. Since forests are habitats of many species, they also protect

biodiversity. Non-wood products, such as food, cork, gum and oil, are also derived from forests.

Forests are also a source of various services (such as hunting, tourism and others), which incre-

ases the significance of forestry in the Lithuanian bioeconomy.

The majority of wood resources in Lithuania are used traditionally, i.e. in manufacture

of wood, its products and furniture, also as biofuel in energy. Bio-based manufacture of furni-

ture is the third medium-sized subsector of bioeconomy characterised by a rapid growth of

turnover and labour productivity, gradually increasing the share of exports and appeal to foreign

investors. Manufacture of wood and its products is the fourth largest subsector of bioeconomy,

which is of medium size but low productivity. The contribution of wood waste for firewood

and fuel to the production of primary energy of Lithuania accounted for almost two thirds in

recent years, however, low value added chips intended for the domestic market with a low

growth potential have been produced for the most part.

In order to increase the contribution of forest bio-based sector to Lithuanian bioeconomy

and enhance its competitiveness, promoting sustainable use of forest biomass (including

logging and wood industry biowaste) and producing higher value added industrial products,

bio-chemicals (including second and third generation biofuels) and bioplastics, bio-based

textile products, etc. is necessary.

Bioenergy sector

The potential of the development of the bioenergy sector has been increased by the EU

provision that bioenergy will remain the main renewable energy source in the pursuit of climate

and energy goals of 2020–2030. Bioenergy is a very flexible low carbon dioxide content and

renewable energy form, because it can be used in the production of electricity and heat and in

transport. Bioenergy provides significant benefit in the areas of energy security, growth and

creation of jobs, especially in rural areas, technologic innovation, environmental and climate

protection. On the other hand, despite its many positive aspects, the risk of sustainability asso-

ciated with its production and use raises concern. The European Commission has done a comp-

rehensive analytical work on issues of availability of biomass, carbon dioxide efficiency and

competitiveness for biomass resources63. In order to reduce adverse effect of the production of

traditional biofuels on the balance of food products and greenhouse gas emissions, the proposal

has been made to limit the production of first generation biofuels from rape and cereal grain,

replacing a part of them with advanced biofuels made of agricultural and wood waste, and algae.

Due to its attractive price sufficient amount of local resources and low GHG emissions,

bioenergy resources should remain the principal fuel in Lithuanian district heating systems.

This has a potential for increase, even though it is limited. More than 64 percent of heat was

produced in the Lithuanian DH sector in 2016, when in 2014 natural gas was the principal fuel

in the heat production structure of district heating.

63 10 Newsletter Bioeconomy Stakeholders Panel. Brussels, June 2016.

62

The changed EU biofuel production policy led to decreased production of biodiesel and

bioethanol in Lithuania since 2015. In order to reduce adverse impact of the production of first

generation biofuels (made of rape and cereal) on the balance of food products and greenhouse

gas emissions, the transition to the production of advanced second generation biofuels from

agricultural and wood waste, and algae is necessary.

The potential of the production of biogas from agricultural and food industry waste and

biodegradable municipal waste has been poorly exploited in Lithuania, even though lately the

production of biogas from agricultural waste and sewage sludge has increased. Poor use of

agricultural and food industry waste, biodegradable municipal and food waste in the production

of biogas increases the potential of biogas production from such waste.

In the future the development of bioenergy will continue to be dependent not only on

such objective actions as mutual competition of energy technologies, but also legislative requi-

rements reflecting political will and the planned scopes of support. For example, the adoption

of a strategic provision for achieving a rapid increase of the share of energy derived from re-

newable energy sources in the total final energy consumption and acting in observance

therewith; this would affect not only heat production from biomass, which has already been

developed sufficiently well, but would also speed up changes in the transport sector. On the

other hand, requirements related to GHG emissions or development of renewable sources affect

not only the bioenergy, but also other types of renewable sources, – solar or wind energy.

Sector of manufacture of bio-based chemicals and bio-based pharmaceutical products

Currently, the contribution of manufacture of bio-based chemicals and bio-based phar-

maceutical products using bio resources and biotechnology into the Lithuanian bioeconomy is

poor. It creates almost 4 percent of the GVA of bioeconomy, while its contribution to the co-

untry’s GDP is a mere half percent. However, the projections of the development of bioeco-

nomy business based on business expectations till 2030 show the greatest potential of growth

of this subsector. Here the likely increase of tangible investments, sales, the number of emp-

loyees and R&D expenditure is a few times greater than in other sectors of bioeconomy. More-

over, most rapid increase of productivity of this subsector is associated with much greater

expectations for attracting investments in R&D and qualified employees. It should be noted that

rapid growth trends since 2010 determined by way of a statistical analysis also show the greatest

growth potential in the pharmaceuticals industry.

The rapidly growing biotechnology sector is one of the main driving forces of this po-

tential of manufacture of pharmaceutical products and chemicals. The biotechnology sector ra-

pidly developing in Lithuania covers the areas of research and applied activities, health diag-

nostics, production of pharmaceutical preparations, biochemical and food industry.

According to the European Commission’s policy on industrial revival, biotechnology as

one of the main most advanced areas of technology, and bioproducts derived in application

thereof are two of six priority axes for promoting investment in innovation and new technology.

Biotechnology is one of the most promising new pollution prevention, resource preservation

and cost reduction methods. OECD analysed the cases of application of industrial biotechnology

in sectors of manufacture of chemicals and plastics, food processing, textiles, pulp and paper,

and the energy sector. Research has shown that biotechnology may reduce not only cost, but

also adverse environmental effects. In certain cases, costs of capital and operations decreased

by 10-50 percent, while consumption of energy and water decreased by 10 – 80 percent, and

63

the use of petrochemical solvents – by 90 percent, or was eliminated altogether. Industrial bio-

technology allowed creating new products, the properties, price and environmental efficiency

whereof cannot be achieved using usual chemical processes or fossil raw materials64. Thus its

application in various sectors of bioeconomy could become the cornerstone driving force of the

development of Lithuanian bioeconomy – it would increase productivity, reduce adverse envi-

ronmental effects and allow for a more sustainable use of renewable energy sources, especially

in light of the fact that Lithuania has sufficient resources necessary for the development of the

biotechnology sector – a sufficient number of highly qualified specialists-biotechnologies is

trained in Lithuania each year, also producing large amounts of biomass65.

The transition of PET production companies operating in Lithuania to the production of

bioplastics from renewable raw materials (bioPET) could be another driving force of increasing

potential of bio-based chemicals industry. These companies produce about 550 thousand tonnes

of primary PET plastics, which accounts for almost 20 percent of the entire amount in the EU.

Access to local biomass resources at a stable and acceptable price must be ensured in Lithuania

for the production of bioplastics to stay competitive with countries that have more favourable

conditions for business development, for example, Asia, which plans to produce more than

45 percent of all bioplastics in the world in 2021. According to forecasts of key industrial areas

of Lithuania of Euromonitor International66, the chemicals industry will remain one of the most

promising areas of production in 2017–2025, while the production of plastics will remain the

largest chemical industry in Lithuania. The increasing popularity of plastic packaging and plas-

tic components in main industries, such as food industry, cars, furniture or transport, will have

a positive effect on the production of plastics, while demand should increase in both local and

export markets.

64 Primer, S. A. 2001. The application of biotechnology to industrial sustainability–a primer. OECD. 65 Interview of representatives of business associations 66 http://blog.euromonitor.com/2017/01/kurios-lietuvos-pramones-ir-paslaugu-sritys-bus-svarbiausios-2025-metais.html

64

3. Analysis of the impact of legal environment on the development of

bioeconomy in Lithuania

3.1. Legal regulation of bioeconomy in Lithuania

In order to determine the impact of the legal environment on the development of

bioe-conomy in Lithuania, 20 legal acts of the Republic of Lithuania controlling and regulating

the area of bioeconomy were analysed, also conducting their content analysis. The content a-

naly-sis was performed in application of the principle of the formation of a matrix, when types

of economic activities attributable to bioeconomy were identified according to the legal acts,

in-cluding: agriculture, forestry, fisheries, food production, manufacture of wood, pulp and pa-

per products, also bio-based manufacture of textiles, apparel and leather products, chemicals

and pharmaceuticals, manufacture of furniture, waste management and recycling, areas of bio-

technology and energy. These are vertical matrix elements. Bioeconomy-related structural

el-ements, such as strategic goals and tasks, priority measures and directions, the action plan,

innovations, factors and opportunities presented in documents were systemised horizontally.

Detailed results of the analysis of the content of legal acts are available in Annex 8, while the

document context matrix by types of economic activities and structural content elements is

presented in Table 9.

The document analysis revealed that legal acts of the Republic of Lithuania focus the

most on forestry and energy associated with the use of as solid fuel. The following is planned

in the forestry industry:

to assure sustainable development of competitive forestry activities;

to increase forest coverage in Lithuania, increasing the productivity of forests and

afforesting unused lands or lands that are not suitable for agriculture;

to assure rational use of forest resources and to supply industry of the country with

raw materials;

to use forests of state importance to the extent this is necessary for local wood in-

dustry and to pursue that the export of unprocessed raw materials was fully replaced

with export of processed raw materials and products creating higher value added and

jobs in Lithuania.

Forestry industry is closely related to energy industry, because legal acts plan for ex-

panding the extent of the use of logging waste in biofuel production.

The production of biofuels in the energy industry is closely related to both forestry and agricul-

ture. Legal acts of the Republic of Lithuania provide for the following:

expanding the use of biofuels in energy and transport, allowing reducing the use of

fossil fuels, air pollution directly related thereto and greenhouse gas emissions;

promoting sustainable production and use of biofuels of 2nd and 3rd generation;

limiting the amount of greenhouse gas emissions and promoting the use of biogas

and other forms of energy produced from waste. Gas, biomass, biogas, biowaste

containing energy value and peat are the main energy sources, which may be used

to produce heat and supply it to consumers;

65

Table 9. Legal acts of the Republic of Lithuania, structural elements and actions related to bioeconomy

No. Legal acts

Structural elements of the content of Lithuanian legal acts by areas of economic activities attributable to bioeconomy

Strategic goals

and tasks

Priority measures

and directions Action plan Innovation

Bioeconomy

factors Opportunities

1.

Law on Agriculture, Food Industry and Rural Development of the Republic

of Lithuania. 01-07-2008, No 81-3174. Consolidated version, 01 01 2017

Vilnius

Forestry

Agriculture

Manufacture of

food products

Forestry

Agriculture

Manufacture of

food products

2. Law on Forests of the Republic of Lithuania. 25 04 2001. No. 35-1161. Con-

solidated version, 27 04 2017. Vilnius Forestry

3.

National Progress Strategy “Lithuania’s Progress Strategy Lithuania 2030”

approved by Resolution No XI-2015 of the Seimas of the Republic of Lithu-

ania of 15 May 2012

Biotechnology

Agriculture

Forestry

Fisheries

Biotechnology

Agriculture

Forestry

Fisheries

Biotechnology

Agriculture

Forestry

Fisheries

4.

Resolution of the Seimas of the Republic of Lithuania “On the Approval of

the National Strategy for Climate Change Management Policy” No XI-2375

of 6 November 2012, Vilnius

Forestry

Energy

Waste treatment

Forestry

Energy

Waste manage-

ment

Forestry

Energy

Waste treatment

5.


the Lithuanian Innovation Development Programme 2014-2020” No. 1281

of 18 December 2013, Vilnius

Biotechnology

6.


the Programme on the Implementation of the Priority Areas of Research and

Experimental (Socio-cultural) Development and Innovation (Smart Specia-

lization)” No 411 of 30 April 2014, Vilnius

Biotechnology;

Manufacture of

chemicals; Ma-

nufacture of food

products; Energy;

Waste treatment

Biotechnology;

Manufacture of

chemicals; Ma-

nufacture of food

products; Energy;

Waste treatment

Biotechnology;

Manufacture of

chemicals; Ma-

nufacture of food

products; Energy;

Waste treatment

7.

Resolution of the Government of the Republic of Lithuania “On the Lithua-

nian Convergence Programme for 2011 and the National Reforms Agenda”

No 491 of 27 April 2011, Vilnius

Biotechnology;

Manufacture of

chemicals; Agri-

culture; Energy;

Use of waste

Biotechnology;

Manufacture of

chemicals; Agri-

culture; Energy

Use of waste

Biotechnology;

Manufacture of

chemicals; Agri-

culture; Energy;

Use of waste

8.

Resolution of the Government of the Republic of Lithuania “On the Appro-

val of the National Progress Programme 2014–2020” No 1482 of 28 Novem-

ber 2012, Vilnius

Energy Energy Energy

9.


val of the Programme for the Development of State Studies, Research and

Experimental (Socio-cultural) Development 2013–2020” No 1494 of 5 De-

cember 2012, Vilnius

Sustainable deve-

lopment

Sustainable deve-

lopment

10.

Resolution of the Government of the Republic of Lithuania “On the Ap-

proval and Implementation of the National Sustainable Development Strat-

egy” No 1160 of 11 September 2003, Vilnius.

Energy

Waste treatment

Energy

Waste treatment

Energy

Waste treatment

66

11.


proval of the National Forestry Development Programme 2012–2020” No

569 of 23 May 2012, Vilnius

Forestry

12.


proval of the National Waste Management Plan 2014–2020” No 519 of 13

April 2002, Vilnius

Waste treatment

Manufacture of

food products

Waste treatment

Manufacture of

food products

13.


proval of the Programme for Promoting Investment and Industrial Develop-

ment 2014–2020” No. 986 of 17 September 2014, Vilnius

Energy

Biotechnology

Waste processing

Energy

Biotechnology

Waste processing

Energy

Biotechnology

Waste processing

14.

Resolution of the Seimas of the Republic of Lithuania “On the Programme

of Government of the Republic of Lithuania” No. XIII-82 of 13 December

2016, Vilnius

Manufacture of wood; Energy;

Agriculture;

Manufacture of food products;

Circular economy;

Waste treatment

15.

Order of the Ministry of Education and Science of the Republic of Lithuania

and Ministry of Economy of the Republic of Lithuania “On the Approval of

Priority Action Plans for the Direction “Health Technologies and Biotechno-

logy” of Research, Experimental (Socio-cultural) Development and Innova-

tion (Smart Specialization)” No V-422/4-293 of 30 April 2015,Vilnius

Biotechnology

Manufacture of

chemicals

Biotechnology

Manufacture of

chemicals

16. Law on Heat Sector of the Republic of Lithuania No IX-1565 of 20 May

2003, Vilnius

Energy

Use of waste

Energy

Use of waste

17.


proval of the National Heat Sector Development Programme 2015–2021”

No. 284 of 18 March 2015, Vilnius

Energy

Use of waste

Energy

Use of waste

Energy

Use of waste

18. Programme for the Development of Renewable Energy Sources in District

Heating Systems of Lithuania, June 2010, Vilnius

Energy

Use of waste

Energy

Use of waste

19. Law on Fisheries of the Republic of Lithuania No VIII-1756 of 27 June 2000,

Vilnius Fisheries

20.


val of the Implementation Plan of the Programme of the Government of the

Republic of Lithuania”, No 167 of 13 March 2017, Vilnius

Circular eco-

nomy

Waste treatment

21. Law on Energy from Renewable Sources of the Republic of Lithuania. 12

May 2011, No XI-1375, Vilnius.

Energy

Use of waste

Energy

Use of waste

22.

Order of the Ministry of Economy of the Republic of Lithuania “On Gui-

dance for Public Authorities on Public Procurement of Innovation appro-

val“, No 4-938 of 29 December 2014, Vilnius

All bioeconomy

sectors

23. Decree No 709 of the Government of the Republic of Lithuania of 1 July

2015 on the Approval of the Procedures for Pre-commercial Procurement

All bioeconomy

sectors

24.

Resolution of the Government of the Republic of Lithuania “On the Natio-

nal Green Procurement implementation programme approval”, No 804 of 8

August 2007, Vilnius

All bioeconomy

sectors

67

substantiating the expedience of the development of biofuel cogeneration not only

with financial goals of companies, but also with environmental protection, because

its use in replacement of fossil fuel is the most efficient CO2 pollution mitigation

measure;

promoting the use of biologic fuel and production of electricity and heat in combined

heat and power plants by giving economic incentives therefor, and setting pollution

norms for facilities using biofuels;

giving priority to renewable energy sources, applying biofuel tax exemptions, com-

pensatory tariffs for the purchase of electricity and heat and allowances for balancing

electricity.

Agriculture and food industries receive less attention, while fragmented attention is de-

voted to the industries of fisheries, wood, pulp and paper, and chemical products.

Agricultural industry is closely related to food production. Legal acts of the Republic of

Lithuania provide for the following:

creating conditions for competitive and efficient agriculture and food sectors, deve-

lopment of export, thus increasing revenues from agriculture and alternative activi-

ties, and ensuring improving standard of living of rural residents;

supporting sustainable and balanced farming and the development of fully fledged

food production considering environmental, health requirements and the improve-

ment of quality of life in rural areas;

aiming to preserve soil fertility, promoting the implementation of sustainable agri-

cultural practice by implementing advanced agricultural systems;

complying with strict policy of giving up (prohibiting) the use of genetically modi-

fied organisms in Lithuania;

taking active and ambitious measures to reduce food waste, help municipalities ar-

range food waste collection system and install measures allowing reducing the ge-

neration of food waste.

The Law on Fisheries of the Republic of Lithuania provides for ensuring fishing con-

serving fish stocks, their preservation and restoration considering ecological conditions, inte-

rests of fishermen, fish breeders, processors and consumers.

The wood, pulp and paper industry focuses on investment in the modernization of the

Lithuanian wood industry.

Lately legal acts of the Republic of Lithuania have considerably focused on waste

management, use and processing. The concept of circular economy has been used fragmentedly

(see documents 14 and 20 in Annex 8). The concept of circular economy in these documents is

associated solely with biomass energy, food waste and its composting. However, it is much

broader and convers the use of technologies of smaller waste and wasteless production, the use

of biowaste and recycling to new products, the optimization of the food chain, step-by-step use

of biomass, etc. (for more information, see the analysis of the EU and OECD strategic docu-

ments related to the development of bioeconomy).

According to NACE2, biotechnology is not characterised as a type of economic activity.

In the examined documents, biotechnology is closely related to research and innovation as well

as the application thereof in those industries, which use , process and produce bioproducts. The

examined documents emphasise that:

68

the lack of resources will function as a catalyst for a breakthrough of science-based

radical technological innovations, including biotechnology innovations;

high-impact technologies, which include biotechnology, are to be considered an im-

portant source of innovation;

one of the planned priority action areas is the implementation of joint medicine and

biotechnology research programmes;

unique competitive advantages in the areas of biotechnology and bio-pharmacy of

the industry of the country, which the neighbouring countries do not have, should

be used in the promotion of the development of this business area; a cooperation and

synergy between biotechnology, bio-pharmacy and bioinformatics companies is

possible;

investments in the modern Lithuanian medicine and biotechnology industry should

be promoted.

Lithuanian legal acts mainly focus on strategic goals and tasks of bioeconomy-related

areas or sectors of economic activities, priority areas and measures (Table 9). Action plans,

innovations, factors and opportunities receive less attention. It should be noted that the strategy,

goals, tasks, priority areas and measures are formulated in different examined legal acts accord-

ing to all types of bioeconomic activities, except for the wood industry. A significant share of

information overlaps or is repeated in different legal acts. The Law on Renewable Energy

Sources of the LR provides an institutional framework – regulating and controlling authorities

or renewable energy sectors.

Lithuanian legal acts provide for targeted values by certain indicators of the scope of

and bioproducts in different periods:

biofuels should account for at least 10 percent of fuels used in transport by 2020

(document 18 in Annex 8);

to promote efficient development of the production of biofuel and to achieve that 15

percent of fuel used in transport was replaced with biofuel in 2020 (document 10 in

Annex 8);

to commit to achieving that renewable energy used in all types of transport accounted

for 10 percent of final energy consumption in the transport sector in 2020 (document

18 in Annex 8);

the strategy includes a task to increase the share of biofuel in the mixture with solid

fuel to 20 percent by 2020 (document 4 in Annex 8);

the plan is to install 240 MW biofuel cogeneration power plants in 2020, excluding

municipal waste incineration plants (document 18 in Annex 8);

biofuel consumption will increase, and reasonable local potential in Lithuania may

be up to 1.8 mln. toe by 2020 (document 17 in Annex 8);

the aim is to increase the forested areas in Lithuania by 3 percent by 2020, to expand

areas of other natural multi-annual vegetation, to reduce uneven territorial distribu-

tion of forests, with a particular focus on increasing forest areas in least forested re-

gions (document 10 in Annex 8);

the main type of fuel in the production of district heating should be biofuel; heat

produced thereof should account for about 60 percent in 2017 and 70 percent – in

2021 (document 17 in Annex 8);

69

the plan is to increase the share of biologic fuel by 60 percent in 2020 compared to

the total energy consumption (document 8 in Annex 8);

the share of districtly supplied heat made of municipal waste should reach 7 percent

in 2021, while the production of heat of biogas should approach 4 percent (document

17 in Annex 8);

to ensure that landfilled municipal biodegradable waste generated in 2000 accounted

for no more than 35 percent by 2020; at least 65 percent of municipal waste shall be

recycled, reused or used otherwise (for example for energy recovery) by 2020

(document 12 in Annex 8).

In summary, the development of bioeconomy in Lithuania can be stated to be mainly

regulated and promoted via certain sectoral policies to this day, including policies of agricul-

ture, forestry, fisheries, energy, environment (including waste management), development of

research, innovation and biotechnology, etc. On the other hand, document analysis revealed the

existing relations between sectoral policies, such as forestry and energy, agriculture and food

industry, agriculture and energy, forestry and wood industry, etc. Cross-sectoral relations in

bioeconomy will inevitably strengthen in the future for the need to reduce the amount of waste

and switch to circular economy. Institutional framework and coordinating policy is important

for ensuring these relations.

3.2. Evaluation of Expedience of the Lithuanian Bioeconomy strategy

The expedience of the Lithuanian bioeconomy strategy is based on:

The experience of the EU and advanced European countries in addressing the strate-

gic bioeconomy development questions;

The strategic bioeconomy development experience of countries of the Baltic Sea re-

gion;

Lithuanian experience of regulating bioeconomy with different sectoral politics and

a growing need for consistent bioeconomy policy, based on inter-sectoral comple-

mentarity and interaction;

The opinion expressed by representatives of business, government and scientific in-

stitutions that the bioeconomy strategy is important for Lithuania.

Justification of the expedience of the Lithuanian bioeconomy strategy from the point of

view of the EU and advanced European countries, following an analysis of the objec-

tives and substantiation of bioeconomy strategies

The European Commission communication “Innovating for Sustainable Growth: A

Bioeconomy for Europe” underlines that Europe is facing unprecedented, unsustainable use of

its natural resources, significant and probably irreversible climate change and continuing loss

of its biodiversity which is posing a threat to the living systems. The need for a bioeconomy

strategy is based on the fact that „In order to cope with an increasing global population, rapid

depletion of many resources, increasing environmental pressures and climate change, Europe

70

needs to radically change its approach to production, consumption, processing, storage, re-

cycling and disposal of biological resources“. By nature, the bioeconomy encompasses many

sectors and therefore offers an unique opportunity to achieve sustainable economic growth and

to fully address interdependent societal challenges such as food security, lack of natural resour-

ces, dependence on fossil resources and climate change. In cross-sectoral policies, complex task

interconnections can lead to disagreements, for example, on alternative uses of biomass. In

other sectors, the rising demand for biological resources may interfere with food security, as

well as raise environmental concerns. Priority is given to the consistency of the political fra-

mework and it is emphasised that only a strategic and comprehensive approach covering a wide

range of policy areas is appropriate for multi-dimensional issues. The importance of better co-

mmunication with the public is also emphasised.

The bioeconomy strategy will contribute to the development of low GHG production

systems, together with the implementation of the EU commitment under the 2016 Paris Agree-

ment to reduce the GHG emissions in all sectors of the economy by at least 40 percent, compa-

red to the level of the 1990, by 2030.

The Finnish Bioeconomy Strategy emphasises that the decline in natural resources, the

loss of biodiversity and the climate change challenges are determining the need to develop a

bioeconomy based on renewable natural resources. The objectives of the Finish bioeconomy

strategy are the competitive environment of the bioeconomy, the creation of new businesses, a

strong base of bioeconomy competencies and the availability and sustainability of biomass.

The Flemish Bioeconomy Strategy is based on the needs of society, business and poli-

ticians. First of all, bioeconomy is necessary because of the societal challenges (climate change

due to the use of fossil resources, the importance of food security for the growing population).

In the future energy system based on renewable resources, biomass will be required for heating

and other areas such as aviation and shipping. The starting point is the use of primary biomass

and biowaste, ensuring the food and feed security and the raw material demand for the industry

and the energy system. The EU Bioeconomy Strategy and its Action Plan provided the basis

for the vision and strategy of the Flemish Government. The Action Plan is based on three pillars:

the development of new technologies and processes, the strengthening of markets and compe-

titiveness of the bioeconomy sectors and the promotion of closer inter-sectoral cooperation a-

mong all stakeholders.

The German National Strategy for Bioeconomy Policy identifies the following key stra-

tegic objectives: security of supply, increasing competitiveness, environmental protection and

structural change. Bioeconomy is treated as the opportunity of the 21st century. Climate change,

rising population, depleted fossil fuel resources and growing demand for raw materials are chal-

lenges opening up new economic development opportunities. In order to take advantage of these

opportunities, it is important that a structural shift is made from fossil fuel-based economy to a

biomass-based economy, new life and technological science knowledge, new products and pro-

cesses are created. The value created in bioeconomy depends on the sustainable and efficient

use of biomass based on non-waste production and a tiered approach. Close cooperation among

all stakeholders – politicians, business people, scientists and the public – is important in the

development of the bioeconomy. Regional and decentralised initiatives make it possible to plan

the use of biomass for localised scale.

The Italian Bioeconomy Strategy indicates the need for the definition of a common fra-

mework for various defined and emerging policy areas, technologies and market demands, so

that it were possible to share the challenges and the experiences at global, European, national

71

and regional levels. Agriculture, food, marine, forestry and bio-based industries have two addi-

tional and horizontal components. One is based on renewable raw materials and the other on

the reuse and recycling of biowaste. In both cases, it is important to develop the bioeconomy

taking into account the local resources and equipment, the interconnection and integration of

related industries and public and private interests.

The main objective of the Spanish Bioeconomy Strategy is to create a bioeconomy as an

essential part of the country’s economical activity characterised by technological innovations,

based on closer public-private cooperation and interaction between the Spanish and the inter-

national science and technology systems.

The Norway’s Bioeconomy Strategy will strive to become the most innovative country

of bioeconomy. It is emphasised that a full shift to bioeconomy will require significant changes

in the use of resources. The strategy emphasises new needs for R&D and innovation, declares

the intention to support large-scale interdisciplinary research in the field of bioeconomy, prio-

ritise projects involving partners from various scientific fields and sectors and encourages the

development of sustainable bioeconomy-driven industry. The Government of Norway will seek

to promote the creation of greater value and employment, the reduction of the GHG emissions

and more sustainable and efficient use of renewable. The strategy emphasises the new needs

for state-funded scientific research and an innovation system and its users. A goal is declared

to support large-scale interdisciplinary research, to prioritise projects involving partners from

various scientific fields and sectors and sustainable, bioeconomy-oriented industrial develop-

ment is promoted.

In summary, it is possible to state that expedience of a bioeconomy strategy in Lithuania

is justified by the following needs:

The transition from the fossil resource-based economy to a more innovative, more

resource-efficient, less polluting and more competitive economy based on biore-

sources;

Strengthening the basis for biomass availability and sustainability, ensuring food

security, sustainable use of renewable resources for industrial purposes, envi-

ronmental protection coherence;

Increasing the added value of bioeconomy through the application of tiered biomass

and biowaste recycling approach in various sectors of bioeconomy;

The reuse and recycling of biowaste in various bioeconomy sectors, transitioning

to a circular economy;

The improvement of the knowledge basis of life, biotechnology and other sciences

and creation of new innovations in order to increase the productivity of the bioeco-

nomy, to ensure the sustainable use of renewable resources and to protect the envi-

ronment;

The increasing of the consistency and integration of sectoral bioeconomic policies

and their synergy with other policy areas;

Enhancing the public dialogue by combining public and private interests by in-

volving all bioeconomy stakeholders (government, business, science and society)

into cooperation;

The implementation of the EU Bioeconomy Strategy and Action Plan.

Justification of the expedience of the Lithuanian bioeconomy strategy following an anal-

ysis of strategic bioeconomy development experience of countries of the Baltic Sea region

72

An analysis of bioeconomy strategies and policies in the Baltic Sea region countries67

shows bioeconomy accelerated the sustainable growth and development of the Baltic Sea re-

gion. Some countries in the Baltic Sea region have already developed a holistic bioeconomy

policy and prepared their strategies (Germany, Finland and Norway), some are preparing the

policy right now (Latvia) or are planning to prepare (Estonia). In addition to its bioeconomy

strategy, Germany has also prepared a “National Research Strategy – Bioeconomy 2030”

(2011) and Sweden – a Research and Innovation Strategy for a Bio-based Economy (2012). In

2013, Denmark established a National Bioeconomy Advisory Council, but so far does not have

a bioeconomy strategy. The need for strategic development of the joint Baltic Sea region and

the EU Member States is linked to the value added of cooperation in fisheries and aquaculture,

increasing the knowledge of sustainable forest management, involvement of the business com-

munity, sustainable development of bioeconomy in the Baltic Sea region and its contribution

to the development of the European bioeconomy through the best practices of the Baltic Sea

region. This justifies the need for development of strategically oriented bioeconomy in Lithua-

nia.

Justification of the expedience of the Lithuanian bioeconomy strategy following the

analysis of legal regulation in the field of bioeconomy in Lithuania

In the previous section it was concluded that to date the bioeconomy development in

Lithuania has been regulated and promoted through certain sectoral politics – agriculture,

forestry, fisheries, energy, environment (including waste management), scientific research,

innovation and biotechnology development, etc. It was established that interfaces exist only

between certain sectoral policies – forestry and energy, agriculture and food industry, forestry

and wood industry and so on. Moreover, the analysis of Lithuanian legal acts revealed that

certain documents contain different, i.e. uncoordinated developmental targets for the same sec-

tors. On the other hand, most of the targets are planned for 2020 or the years that follow. In the

future, the cross-sectoral links and interactions in the Lithuanian bioeconomy will increase for

a number of reasons:

The need for bio-materials is increasing not only in the traditional fields of manufac-

turing (food, feed, wood, furniture, paper, textiles, clothing and leather) and bioenergy,

but the use of bio-materials will also increase in chemical, pharmaceutical and plastic

manufacturing industries, construction or the like. This may lead to disagreements

on alternative uses of biomass;

To increase the value added of bioeconomy, it will be necessary to apply a tiered

biomass recycling principle, i.e. to increase the production of higher value added

biological products consuming less raw biomass materials. This may lead to disa-

greements on alternative uses of biomass;

During the transition to circular economy, biomass and biowaste will be reused and

recycled in various sectors of the economy. Then, the waste from the biomass pro-

duction or processing waste from one sector will become bio-raw material in another

sector;

67 Nordic Council of Ministers. 2016. State of Play. Bioeconomy strategies and policies in the Baltic Sea Region countries.

Working Paper No. 1 – The Baltic Sea Regional Bioeconomy Council. Paper drafted by Thomas Winther, Innogate ApS,

for Nordic Council of Ministers, February.

73

The development and implementation of new innovations (technologies and bioproducts)

in the bioeconomy will require the promotion of R&D by increasing multidiscipli-

nary and cross-sectoral research in this area and by fostering business and science

collaboration involving partners from various scientific fields and sectors.

As a result, on the one hand, the development of Lithuanian bioeconomy requires a

consistent cross-sectoral complimentarity-based approach in various policy areas and

strengthening of their interactions. As highlighted in the European Commission communication

“Innovating for Sustainable Growth: A Bioeconomy for Europe”, such multidimensional issues

can only be addressed by a strategic and complrehensive approach covering a wide range of

policy areas. On the other hand, bioeconomy encompasses many interconnected sectors, which

means that the stakeholders at all levels are participating in bioeconomy for a variety of pur-

poses. For both of these reasons, there will be a need for closer interaction between the stake-

holders (business, science, politics and society) and policy coordination at both public and

private interest levels, as food security will have to be prioritised and combined with sustainable

use of renewable resources for industrial purposes and energy as well as environmental protec-

tion. An important institutional framework and a coordinating policy are important to ensure

this interaction. As the experience of the EU and other European countries shows, these issues

should also be addressed politically in Lithuania, ensuring a strategically oriented development

of the bioeconomy and the inter-institutional interaction of all stakeholders in tackling the stra-

tegic bioeconomy development issues, i.e. creating the Lithuanian bioeconomy strategy and

establishing the National Bioeconomy Council.

Justification of the expedience of the Lithuanian bioeconomy strategy based on the as-

sessment of business entities, government and scientific institutions

Representatives of business enterprises, farms, business associations, government and

scientific institutions were interviewed on the question of expedience of developing a Lithuanian

bioeconomy strategy (see Annexes 3–5). Their attitudes towards the importance of the Lithu-

anian bioeconomy strategy are presented in Figure 28. The respondents were asked to rate the

importance of developing this strategy (from 1 – very little importance to 5 – very important).

Respondents from scientific institutions and business associations rated it as very important

(equally, 4.8 points on average), government authorities – as important (an average of 4.1

points). Business representatives rated the importance of the bioeconomy strategy for Lithuania

at an average of 3.7 points, as moderately important and important.

Figure 28. Assessment of need for the Lithuanian bioeconomy strategy through a survey of business,

science and government representatives

Source: data of the survey of business entities (N = 102) business associations (N = 14), government authorities (N = 8) and

research institutions (N = 11)

3.9

3.7

3.6

3.7

4.1

1

4.8

Business entities (fully bio-based transformation)

Business entities (partly bio-based transformation)

Business entities (biomass production)

Business entities

Government authorities

Business associations

Research institutions

Average scores when 1 point is low importance and 5 points – very importante

74

Business enterprises and farmers were asked to express their opinion on the need for

such strategy and to assess its importance in scoring: 0 – not important, i.e. there is no need for

it, or from 1 – very little importance to 5 – very important. The average score was 3.7, i.e. the

Lithuanian bioeconomy strategy was important for the the business representatives who par-

ticipated in the survey. The differences in the average values according to the bioeconomy

sectors that the respondents represented (as indicated in Figure 27) were minor. The importance

of developing the strategy was rated an average of 3.9 by the representatives of partially bio-

based enterprises and the lowest score (an average of 3.6) by the representatives of enterprises

and farms engaged in biomass production. Only less than 5 percent of the respondents did not

see the need for such a strategy.

3.3. Feasibility analysis of efficient cooperation between Lithuanian business,

science and state authorities in bioeconomy

In order to identify opportunities of efficient cooperation of Lithuanian science, busi-

ness entities and state authorities on the development of bioeconomy, a survey of business asso-

ciations, governmental and science authorities was conducted in June 2017. Questionnaires

were posted online. 23 business associations, 11 state authorities and 13 science institutions

were invited to take part in the survey by phone. Questionnaires were completed by 14, 8 and

11 representatives, respectively (Annexes 4-6). Questions about directions and methods of po-

tential cooperation between business and government, business and science, science and gover-

nment, and their significance were asked. The latter was assessed in application of a five-point

scale with 1 point being of very little importance and 5 – very important.

Figure 29 presents the results of the assessment of potential areas and methods of effi-

cient cooperation of business and government by way of surveying business associations and

government authorities (average mutual scores). Representatives of business associations con-

sider the strengthening of appeal of investment environment (4.1 out of 5), improvement of

accessibility of the EU funding to business (4.1 points), training of skilled labour force, espe-

cially highly qualified specialists (4.1 points), creating favourable conditions for investments

of business companies in R&D (4 points) and attracting foreign investments (3.9 points) to be

the most important areas of efficient cooperation of business and government.

Results of the survey of government representatives show that the government finds mu-

tual cooperation with business in the creation of attractive investment environment to be im-

portant just like the business does. Both parties gave the same score for the importance of such

cooperation – an average of 4.1 points. Business representatives viewed mutual cooperation in

pursuit of facilitating the accessibility of the EU funds to business (average score of 3.5 points),

training of highly qualified specialists (3.6 points) or creating more favourable conditions for

investments of business companies in R&D (3.4 points) less important than representatives of

business associations. They consider expert activities (4.0 points) and improvement of

knowledge and dissemination of technology (4.0 points) more important for efficient mutual

cooperation, while business representatives view both these areas of cooperation as less signifi-

cant (giving 3.4 points for each of them).

75

Opinions of business and government representatives differed the most in respect of mu-

tual cooperation ensuring the security of information. Business representatives assessed co-

mmon efforts in increasing information security to be of average importance (3.4 points), while

business representatives considered them to be least important (2.5 points). Also, according to

business representatives, the holding of business contact fairs was not very efficient means of

mutual cooperation (with average score being 2.6 points). Business representatives viewed such

form of cooperation to be of average importance (3.2 points).

Figure 29. Methods and importance of efficient cooperation of business and government in bioeconomy

Source: data of the survey of business associations (N = 14) and government authorities (N = 8)

3.4

3.5

3.9

4.0

4.1

4.1

3.3

4.0

4.1

3.0

3.1

3.2

3.3

3.4

3.5

3.6

3.7

4.0

3.4

3.4

3.4

3.4

3.4

3.5

3.4

4.1

3.5

3.3

3.8

3.6

3.0

3.3

2.6

3.0

2.5

3.3

3.1

3.6

3.4

3.0

4.0

4.0

5 4 3 2 1 0 1 2 3 4 5

Implementation of national research programmes and

other high-level R&D projects

Programmes for promoting cooperation between science

and business

Attracting foreign investments

Creating favourable conditions for investments of

business enterprises in R&D

Creating an attractive investment environment

Facilitating availability of EU funds to business

Attracting the missing highly-qualified specialists to

Lithuania

Training of skilled labour force

Training of highly-qualified specialists

Creating favourable conditions for establishing innovation

centres and technology platforms

Creating favourable conditions for cooperation of science,

education and business sectors

Holding business contact fairs

Search for potential business partners

Ensuring information security

Creating favourable conditions for the formation of

clusters

Search for new markets

Initiation of business-related R&D

Making public procurement procedures more transparent

Holding trainings, seminars and conferences

Improvement of dissemination of knowledge and

technology

Expert activities

Inv

estm

ents

Lab

ou

r fo

rce

Org

aniz

atio

nK

now

led

ge

Average scores when 1 point is low importance and 5 points – very important

Representatives of government

Representatives of business associations

76

Figure 30 illustrates the results of the assessment of potential areas and methods of effi-

cient cooperation of business and science by way of survey of business associations and science

institutions (average mutual scores). Science representatives were determined to consider po-

tential methods of mutual cooperation more important than business representatives. Science

representatives assessed all of them as important and very important, while business represen-

tatives distinguished only some of them as very important, and considered others as non-im-

portant, i.e. inefficient.

Figure 30. Methods and importance of efficient cooperation of business and science in bioeconomy

Source: data of the survey of business associations (N = 14) and science institutions (N = 11)

Science representatives engaged in bioeconomy-related research consider the develop-

ment of common science and business projects and innovative products for business (average

scores of 4.5 points for each of them), holding of joint trainings and seminars (4.2 points) and

implementation of innovation in business (4.1 points) to be the most important methods of co-

operation with business. They also considered cooperation with business accruing intellectual

capital in science-intensive business sectors (4.2 points) to be important, while business repre-

sentatives considered the latter method of cooperation to be less important. Opinion of science

and business representatives differed the most in respect of cooperation in the development of

innovation (both innovative technologies and new products). Business representatives viewed

3.3

3.5

3.5

3.6

4.0

4.0

3.3

4.2

2.9

2.9

3.1

2.9

3.8

4.1

4.5

3.5

4.5

4.1

4.5

4.2

3.8

3.6

3.7

3.5

3.7

4.2

5 4 3 2 1 0 1 2 3 4 5

Business involvement in EU research programmes

Development of innovative technologies

Initiating R&D in the private sector

Creation of innovative productss

Implementation of innovation in business

Creation of common science and business projects

Concentration of intellectual potential in science-intensive

business sectors

Concentration of intellectual potential in science-intensive

business sectors

Establishment of business enterprises/ divisions in science

and technology parks

Creation and development of business and science

technology platforms

Development of common science and business

infrastructure

Other dissemination of knowledge and technologies

Preparation of training programmes, trainings, seminars and

conferences

R&

DQ

ual

ific

atio

nO

rgan

izat

ion

Kn

ow

led

ge

Average scores when 1 point is low importance and 5 points – very important

Science representatives

77

such cooperation as being of more than average importance (3.5 points), while business repre-

sentatives considered this to be the most important area of mutual cooperation (average score

of 4 points).

Representatives of business associations consider the training of specialists of top quali-

fication (4.2 points) to be the most efficient area of cooperation with science. Mutual coopera-

tion in the implementation of innovation and creation of common science and business projects

(4.0 points each) are also important for them. Business representatives are least interested in

the cooperation in establishing companies or their divisions in science and technology parks,

setting up business and science technology platforms, and cooperation in the dissemination of

knowledge or technology (2.9 points each).

Figure 31 illustrates the results of potential areas and methods of efficient cooperation

of government and science by way of survey of government and science institutions (average

mutual scores).

Figure 31. Methods and importance of efficient cooperation of government and research institutions in

bioeconomy

Source: data of survey of research (N = 11) and government (N = 8) institutions

3.7

4.1

4.5

4.5

3.6

3.7

4.0

4.4

4.7

3.5

4.3

4.6

3.8

4.2

3.4

3.5

3.8

3.8

3.9

4.0

4.4

3.9

3.6

3.4

3.6

2.9

3.3

4.0

5 4 3 2 1 0 1 2 3 4 5

Initiation and implementation of R&D relevant for business

Initiation of programmes for promoting cooperation

between science and business

Training highly-qualified scientists and researchers

Attracting the missing highly-qualified scientists to

Lithuania

Creation and implementation of bioeconomy development

monitoring system

Expert assessment of consequences and problems of the

development of bioeconomy

Expert activities

Creation and implementation of research programmes

ordered by central and regional government

Creation and implementation of national science

programmes and other high level R&D projects

Creation of favourable conditions for innovation centres

and technology platforms

Creation of favourable conditions for the cooperation of

science, educational and business sectors

Ensuring information security

Holding trainings, seminars and conferences

Improvement of dissemination of knowledge and

technology

R&

D i

n t

he

busi

nes

s se

cto

rQ

ual

ific

atio

nS

cien

tifi

c se

rvic

es

Sci

enti

fic

rese

arch

Org

aniz

atio

nK

now

led

ge

Average scores when 1 point is low importance and 5 points – very

importantGovernment representatives

Science representatives

78

Scientists engaged in bioeconomy-related research see the greatest opportunities of e-

fficient cooperation with government institutions in the area of creation and implementation of

scientific research programmes and projects, i.e. the national research programmes and high

level R&D projects (average score of 4.7 points) and research programmes ordered by the go-

vernment (4.5 points). Government representatives also consider cooperation in the area of or-

dered scientific research to be important (3.9 points), but they view mutual cooperation in the

creation and implementation of national research programmes and high level R&D projects as

much less important (average score of 3.6 points). Government representatives also view the

promotion of cooperation between science and business via the initiation of special programmes

to be less important.

Representatives of research and government institutions also have inadequate opinion

of the cooperation in training highly-qualified scientists and researchers or making joint efforts

to attract them to Lithuania. Representatives of research institutions view this as a very impor-

tant area of joint actions (4.5 points), while in the opinion of government representatives this is

much less important (3.8 points)

When it comes to the dissemination of knowledge and technology, science and gover-

nment representatives have the same opinion about joint efforts in the aim to improve this pro-

cess. Both sides consider cooperation in holding trainings, seminars and conferences to be less

important.

Unlike scientists, government representatives see a greater need for cooperation with

research institutions in the area of services provided by scientists in serving the process of mo-

nitoring and assessment of the bioeconomy sector. On the other hand, both average scores are

not that different. Opinions of science and government representatives differed the most in res-

pect of mutual cooperation in the area of ensuring information security. Scientists gave the

score of 4.6 for joint efforts in enhancing information security, while government representati-

ves scored it giving a mere 2.9 points.

Scheme of institutional cooperation and coordination of activities

Bioeconomy as an integrated multi-sectoral part of national economy covers a number

of business, research, government institutions and the civil society (in other words – non-gover-

nmental sector) that have not only general, but also specific interests in the area of bioeconomy.

Having analysed Norwegian experience in the preparation of the national bioeconomy strategy,

four parties interested in cooperation were distinguished as illustrated in Figure 32.

1. Business enterprises and their associations that belong to the bioeconomy sector.

Activities directly relating to bioeconomy usually comprise the main profile of these enterpri-

ses. Even though the majority of enterprises operate in the same or similar markets, they have

many common interests, especially regarding the increase of favourability of remote and im-

mediate business environment. The majority of these enterprises express their common interests

via business associations representing them. Organisations of business entities are united in

umbrella organisations in certain very broad sectors of bioeconomy (such as agriculture). For

example, the Chamber of Agriculture of the Republic of Lithuania as an umbrella organisation

brings together 70 agricultural and similar business associations.

2. Research and educational institutions, whose mission is related to the development of

bioeconomy education, dissemination of new knowledge and training of specialists. Such ins-

titutions include universities, colleges, vocational training centres and research institutes and

79

Figure 32. Framework scheme of institutional cooperation of Lithuanian government, business, research institutions and the civil society in bioeconomy

The scheme was compiled according to the interests of cooperation of the surveyed business associations, research and government institutions in bioeconomy

Central government institutions:

Seimas

Office of the Government

Ministry of Economy

Ministry of Agriculture

Ministry of Energy

Ministry of Environment

Ministry of Health

Ministry of Education and Science

Ministry of Finance

Ministry of Transport

Ministry of Foreign Affairs

Ministry of the Interior

Aleksandras Stulginskis University Vil-

nius Gediminas Technical University

Kaunas University of Technology

Vilnius University

University of Health Sciences

Klaipėda University

Lithuanian Energy Institute

Lithuanian Research Centre for Agri-

culture and Forestry

...

Agriculture



Manufacture of food products

Manufacture of beverages

Manufacture of textile, apparel and

leather products

Manufacture of wood and furniture

Manufacture of paper and its products

Manufacture of chemicals

Manufacture of pharmaceuticals

Bioenergy

Biotechnology

Waste management

...

Government institutions Research and educational institu-

tions Associations of business entities

Information and Support Centre of

Non-Governmental Organisations

Professional associations, fellowships

Local action groups

....

INSTITUTIONAL BIOECONOMY FRAMEWORK

Municipal authorities

Association of Lithuanian munici-

palities

Non-governmental organisations

80

centres. The Study reveals that research and educational institutions have a mutual need for

cooperation. On one hand, they are interested in the development of research and education in

bioeconomy-related research and educational areas depending on needs of business entities,

and on the other hand, they want to cooperate with other institutional groups operating in the

field of bioeconomy in the improvement of research and educational infrastructure and assu-

rance of the quality of research and education. Research and educational institutions can repre-

sent their interests directly or via associations established by them.

3. Public government institutions responsible for the development of bioeconomy and

its effective integration in the economic development of the country and its regions. According

to the principles of public management, public authorities must consult business entities, re-

search and educational institutions and non-governmental organisations of the respective sector,

involve them in projects in preparation and consideration of documents important for the sector

and cooperate by other means ensuring transparency.

4. Non-governmental organisations, which are in one or another way related to the

bioeconomy sector and interested in interinstitutional cooperation. This non-governmental

sector is broad and includes various associations related to the knowledge, use and fostering of

natural resources (associations of hunters, fishermen, ornithologists, etc.), also non-political

green movements and trade unions operating in the bioeconomy sector, local action groups and,

finally, consumer institutions.

Figure 32 illustrates the framework of cooperation interests of Lithuanian government,

research, business and public institutions in bioeconomy drawn up according to the results of

the survey of government, research and business associations. This is not a finite list of institu-

tions comprising the framework; it may be constantly supplemented or otherwise adjusted.

Central public government and self-government institutions responsible for the develop-

ment of bioeconomy and partnerships with business entities and non-government sector can be

distinguished. The Ministry of Environment, Ministry of Energy, Ministry of Economy and

Ministry of Agriculture can be distinguished among central government institutions, because

they are directly responsible for the development of bioeconomy areas and sustainable use of

natural resources. Other ministries and public government institutions must also be interested

in cooperation according to bioeconomy development-related tasks attributed thereto. Munici-

palities, which express common interests, including in the field of bioeconomy, and represent

them via the Association of Lithuanian Municipalities are the main regional government insti-

tutions.

Figure 32 reveals that the cooperation in the fields of bioeconomy covers many institu-

tions of different nature. The circle of subject matters of cooperation and coordinated interests

may also be very wide. Assessing from the perspective of public management, efficient equal

partnership-based coordination of cooperation is necessary in such a case.

According to experience of Norway and other European countries, a proposal has been

made to form the National Bioeconomy Council on the basis of an equitable four-party

partnership in order to ensure institutional cooperation of Lithuanian research, business, gover-

nment and non-governmental sector in bioeconomy. Figure 33 illustrates the principal scheme

thereof.

81

Figure 33. Principal scheme of the coordination of institutional cooperation of Lithuanian government,

business, research institutions and the public in bioeconomy

The National Bioeconomy Council must consist of representatives of all the institutional

groups distinguished in Figures 32 and 33. In the coordination of mutual actions and agree-

ments, it must solve key bioeconomy development problems, seek for a rapid and at the same

time sustainable development of this part of economy. National Bioeconomy Council activities

are governed by its regulations. Key operating principles must include equality of the parties,

regularity of activities and a consensus in decision-making.

Principles of formation of National Bioeconomy Council:

National Bioeconomy Council must cover all 4 groups of bioeconomy institutions in

equal shares;

In pursuit of National Bioeconomy Council work efficiency, its rational size should

not exceed 24–28 members;

Each bioeconomy institution group must delegate 6-7 members to National Bioeco-

nomy Council. Business associations, research and educational institutions and non-

governmental organisations delegate members to National Bioeconomy Council by

their own agreement. The Government of the Republic of Lithuania delegates mem-

bers of the central public government at its own discretion. The Association of

Lithuanian Municipalities delegates at least one member by a decision of its board.

Regarding the government institution coordinating the Lithuanian bioeconomy policy

Government and research institutions as well as business associations were surveyed

regarding the leadership of government institutions in the coordination of the bioeconomy po-

licy in Lithuania during their surveys conducted in June 2017 (for more information thereon,

please refer to Annexes 4-6). Figure 34 presents the survey results.

82

Figure 34. Regarding the leadership of government institutions in the coordination of the bioeconomy

policy in Lithuania

Source: data of survey of government and research institutions and business associations (number of answers N = 69)

As per Figure 34, the Ministry of Economy received more than two thirds of votes, the

Ministry of Agriculture – slightly more than a fifth of votes and the Ministry of Environment –

one sixth of votes. The Ministry of Economy is believed to have the least narrow sectoral

interest, thus it would be most suitable for the role of the coordinator of the bioeconomy policy

as cross-sectoral policy68.

68 Interview of representatives of government institutions and business associations.

Minister of

Economy; 26;

37%

Minister of

Agriculture;

15; 21%

Minister of

Environment; 11;

15%

Office of the

Government; 8; 11%

Minister of

Education and

Science; 5; 7%

Minister of Energy;

4; 6%

Others; 2; 3%

83

4. Analysis of Economic Environment Impact on the Development of

Bioeconomy in Lithuania

4.1. Impact of Tax and Business Environment on the Development of Bioeco-

nomy in Lithuania

An analysis of the impact of business environment factors on the development of

bioeconomy through a survey of businesses revealed that tax burden is seen as the factor of the

external economic environment that is the most threatening to the business. On the contrary, in

the EU, national and municipal support is seen as a factor in the political environment that has

already provided and will be able to provide the greatest potential for business development in

the future (for more information about the assessment of benefits of these and other external

environmental factors to the development of the bioeconomy businesses, see Section 2.2.3).

This section analyzes the issues of tax incentives and public support for bioeconomy businesses.

The analysis of their impact on the development of bioeconomy is limited by the lack of syste-

mised data on both the taxes paid by the legal entities and natural persons involved in the

bioeconomic businesses and the support provided for them.

Tax System

Bioeconomy businesses in Lithuania are subject to the general tax system, therefore the

impact on the development of bioeconomy can only be considered in the context of overall

impact of taxation on business development in Lithuania. The tax-to-GDP ratio in Lithuania is

one of the lowest in the EU, with indirect taxes prevailing. In Lithuania, the tax environment

remains one of the most restrictive areas for the creation or development of business69, and the

effectiveness of the country’s tax system, given the global competitiveness ratings, is conside-

red one of the worst. As the Global Competitiveness Report 2016–201770 shows, Lithuania,

according to the total tax rate, is only No. 90, according to the impact of taxes on investment

incentives – No. 68, according to the impact of taxation environment on the incentives for joi-

ning the labour market – No. 121 out of 140 countries. The general tax rate in Lithuania also

remains higher than the EU averages. According to the OECD data71, a one percent reduction

in the general tax rate would be likely to increase the investment potential by up to five percent.

High labour taxation in Lithuania is one of the major shortcomings of the tax system.

Tax rates are similar to those in Sweden and higher than in the United Kingdom and other old

EU countries, which limits the ability of the employers to pay competitive wages and increases

the shadow economy. Given that the wages in Lithuania are 4 – 5 lower than in Western Europe,

the current level labour taxation has a significant impact on potential employees in deciding

whether to participate in the labour market.

The smart tax administration system72 is likely to reduce the administrative burden on

the taxpayers, to increase the taxpayer income accounting, tax collection and operational effi-

ciency of the tax administration by introducing smart electronic services and transferring the

collection, processing, management and provision of data of the taxpayer transactions to the

digital space.

69 Invest in Lithuania. 2016. Investment Environment: Priorities and Necessary Changes Invest Lithuania, March 70 The Global Competitiveness Report 2016-2017. http://reports.weforum.org/global-competitiveness-index/ 71 OECD Tax Statistics: http://www.oecd-ilibrary.org/taxation/data/oecd-tax-statistics_tax-data-en 72 VMI: apie i.MA Shttps://imas.vmi.lt/isaf/

http://reports.weforum.org/global-competitiveness-index/

84

Table 10. Tax Incentives Relevant for Bioeconomic Enterprises

Incentive

Taxes

Corporate / Personal Income

Tax Excise Taxes Environmental Pollution Tax Land Tax Real Estate Tax

Tax Re-

duction

1) Corporate tax relief (re-

duction of taxable profit) for le-

gal entities performing invest-

ment projects (A, C, D, E);

2) Corporate tax relief allowing

the legal entities to increase the

allowable deductions (A, C, D,

E) for the research and experi-

mental development work costs.

The taxable value of

agricultural land other

than abandoned land is

its average market va-

lue or value as estab-

lished by an individual

land evaluation mul-

tiplied by a factor of

0.35 (A01).

Exemption 1) The income of farmers and

other persons engaged in agri-

cultural activities, other than

VAT payers, is income tax-free

(A01);

2) Direct payments to maintain

income levels are tax-free (A01).

The following are exempt from excise tax:

1) Ethyl alcohol that is a component of phar-

maceutical products, veterinary medi-cines

(C21.10; C21.20);

2) Ethyl alcohol used for the purposes of per-

sonal and public healthcare, veterinary phar-

macy, veterinary practice or for imple-men-

tation of functions of state pharma-ceutical,

food and veterinary control autho-rities

(C21.10; C21.20);

3) Ethyl alcohol used for production of cer-

tain food products and non-alcoholic be-ve-

rages (C10; C11);

4) Dehydrated ethyl alcohol intended for

production of biocombustibles and/ or their

components and/ or biofuel in accordance

with the procedure established by the Law

on Renewable Energy of the Republic of

Lithuania (D35.21);

5) Electricity produced from renewable e-

nergy sources (D35.21).

The following are exempted from the environmental

polution tax:

1) Natural or legal persons implementing envi-

ronmental measures that reduce the emission of into

the environment from stationary pollution sources

by at least 5% from the established maximum al-

lowable emission standard (A, C, D, E);

2) Natural and legal persons contaminating from

vehicles equipped with operating exhaust gas neut-

ralization systems (A, C, D, E);


vehicles used for agricultural activities, if their

income from such activities constitutes more than

50% of all income (A01);

4) Natural persons who are self-employed and use

private vehicles in their activities (A, C, D, E);


vehicles that use biofuels complying with established

standards and that have submitted the documents

confirming the use of biofuels (A, C, D, E);

6) Natural and legal persons who have submitted the

documents confirming the consumption of biofuels

for the amount of pollutant emissions generated by

the use of biofuels established in the permit for integ-

rated pollution prevention and control of the pollu-

tions permit (A, C, D, E);

7) Natural and legal persons who, either themselves

of through third parties, export taxable products or

products in taxable packaging from the territory of

Land acquired for the

establishment of a far-

mer’s farm is exem-

pted from land tax for

three tax periods from

the acquisition of the

property rights. Such

type of relief, inclu-

ding the one applied

before the entry into

force of this law, can

be applied to the same

person only once (A01).

The following are

exempted from

the real estate tax:

1) real estate (or

part thereof), used

by a natural or le-

gal person for

income from agri-

cultural activities

(A01);

2) real estate of

the enterprises in

the free economic

zones (A, C, D, E).

85

the Republic of Lithuania are exempted from the en-

vironmental pollution tax for the production or pac-

kaging waste for such amount of taxable products or

packaging that has been exported from the territory

of the Republic of Lithuania during the tax period (A,

C, D, E);

8) manufacturers and importers are exempted from

the environmental pollution tax on products and/ or

packaging waste for the quantity of products and/ or

packaging that is proportional to the part of the use

and/ or recycling of product and/ or packaging waste

established by the Government (A, C, D, E);

9) manufacturers and importers who, within a tax pe-

riod, are supplying to the domestic market of the Re-

public of Lithuania no more than 0,5 t of packaging

and are keeping records of packaging and packaging

waste (A, C, D, E).

Reduced Ta-

riff

1) Reduced 5% corporate tax

rate for legal entities engaged in

agricultural activities (when the

income from agricultural active-

ties represents 50% or more of

all income) (A01);

2) Reduced 5% corporate tax

rate for self-employed natural

persons engaged in manufactu-

ring-trading activities, including

natural persons engaged in agri-

cultural activities, VAT payers

(A, C, D, E).

1) Reduced excise tax is applicable to e-

nergy products from materials of biological

origin or with their additives (rate reduced

by portion proportionate to the percentage of

biological impurities in the mixture of bio-

fuels and fuels) (A, C, D, E);

2) Gas oils intended for use by subjects ma-

nufacturing agricultural products in agricul-

tural activities, including aquaculture or in-

farm inland fishing activities, are subject to

a reduced excise tax of EUR 21 per 1000 lit-

res of product, not exceeding the quantities

of gas oils established by the Government

for the period of one year (A01).

Note: the letters are indicating the economic activities according to the NACE2 coding, which are subject to tax incentives.

Source:1) Republic of Lithuania Law on Excise Duties. https://www.e-tar.lt/portal/lt/legalAct/TAR.B9E1D301256F/RfqOvvkwHl

2) Republic of Lithuania law on income tax of individuals. https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/TAIS.210886?jfwid=zm7w3r9oa

3) Republic of Lithuania law on pollution tax. https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/TAIS.286378?jfwid=fhhu5mgyp

4) Republic of Lithuania law on immovable property tax. https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/TAIS.409446?jfwid=rivwzvpvg

5) Republic of Lithuania law on corporate income tax. https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/TAIS.273770?jfwid=ck9gyaymo

6) Republic of Lithuania law amending the law on land tax. https://www.e-tar.lt/portal/lt/legalAct/TAR.59681865CD01/dSFaMPluoL

86

Tax Incentives Relevant to Entities Operating in the Bioeconomy

Bioeconomy businesses in Lithuania are subject to the general tax system. They are paying

direct taxes (corporate, profit and environment) and state social and health insurance contributions,

indirect taxes (excise taxes, value added taxes, etc.). Table 10 represents the tax incentives promoting

the development of bioeconomic businesses.

The greatest influence on the development of the bioeconomy is the reduction of the corporate

income tax for companies engaged in investment projects and participating in R&D activities, as well

as special tax incentives for agricultural enterprises and farmers – exemption from real estate tax,

reduction of excise task for gas oils for agricultural activities, exemption from environmental pollu-

tion taxes. Having assessed the current Lithuanian tax system, the main tax system measures that

have a positive impact on the development of bioeconomy in Lithuania have been identified73:

Special exemptions for small and medium-sized agricultural business entities (exemption

of farmers non VAT-payers from personal income tax, reduced personal income tax for

farmers VAT-payers, reduced corporate tax for legal entities engaged in business agricul-

tural activities, exemption of agricultural business entities from real estate tax, reduction

of excise tax on gas oils for agricultural activities, exemption from environmental pollution

taxes) reduce the tax burden which leads to increased viability of the farms;

Incentives for investment in research and experimental development (allowing the enterp-

rises three times deductible expenses for R&D activities, as well as for purchasing of R&D

in the designated foreign countries; it is permitted to write off the cost of acquisition of

fixed assets used in R&D activities in a shorter period of time – two years; it is permitted

to deduct three times the expenses for R&D activities, as well as for purchasing of R&D in

the designated foreign countries);

Incentives for investments in technological renewal (profit tax relief allowing up to 50 per-

cent reduction of taxable profit for enterprises investing in essential technological renewal).

Although tax incentives for R&D have been in place for quite some time, a large proportion

of investors are not aware of such tax reliefs74. In order to encourage bioeconomic businesses inves-

ting in technological renewal and commercialization of inventions, it is necessary to provide more

information about them. Due to lack of information, businesses often have questions about practical

feasibility of tax incentives, including the scope of the incentives, the expected benefits and the ma-

nagement of potential risks. Also the need to simplify as much as possible the administrative, project

documentation preparation burden, as well as project selection criteria and requirements for appli-

cants is emphasised, so that more businesses would decide to make use of the R&D and investment

project tax incentives75.

The new deduction provision that came into force under the Law on Forests of the Republic

of Lithuania on January 1, 2015 and according to which all forest managers, (natural and legal per-

sons) must calculate and pay mandatory 5 percent deductions to the state budget from the income

received for the sale of raw wood prepared in their forests and for the sale of uncut forest can have a

negative impact on the development of bioeconomy. State forest managers (legal entities) must cal-

culate and pay mandatory 10 percent deductions to the state budget from the income received for the

73 Miceikienė A., Čiulevičienė V. Ūkininkų ir kitų žemės ūkio veikla užsiimančių gyventojų apmokestinimo sistemos tobulinimas

2016 m. Galutinė ataskaita. Akademija, 2016. 74 Interview of representatives of business associations. 75 Interview of representatives of business associations; Verslininkų nevilioja moksliniai tyrimai ir eksperimentinė plėtra. Lietuvos

rizikos ir privataus kapitalo asociacija: Naujienos 2016-04-11.

87

sale of raw wood prepared by them in the forest under their control and for the sale of uncut forest

under their control. This tax increases the tax burden on forest managers.

The changes included in the Tax and Social System Improvement Project announced by the

Government of the Republic of Lithuania in June, 2017 would have an impact on the development of

bioeconomy.

A significant positive impact should occur in the following taxation areas:

Commercialization of inventions – a 5 percent profit tax rate is planned instead of the cur-

rent 15 percent;

Investment in technological renewal – a 100 percent profit tax exemption is planned,

instead of the current 50 percent;

Foreign investment – application of SODRA contribution “ceiling” of 120 average salaries

per year, in order to attract these investments;

For self-employed persons starting their activity for the first time – a one year income tax

“vacation” for starting a small business and a one year SODRA contribution “vacation”.

Public Support

The analysis of public support for the development of the bioeconomy sector was based on

non-systemic data, mostly collected from reports on the implementation of various support programs,

in individual cases, from the programs and other documents. The analysis provided allows us to form

a certain picture on the extent of support in individual program periods according to the sources of

support identified in Figure 35. In all of the program periods indicated in the Figure, most of the

public support for was allocated for agriculture and rural development (including support for forestry

under the EU rural development regulation). Part of the state aid for agriculture was dedicated to co-

financing support for forestry measures. Public support under the EU Common Agricultural Policy

and Fisheries Funds is described according to the bioeconomy sub-sectors below.

Figure 35. Public expenditure on Lithuanian bioeconomy sectors according to financing Fund

Data source: Authors elaboration on information in finansines ataskaitas apie EŽŪOG, EŽŪGF ir EŽŪFKP, BPD ir kt. ataskaitas

In 2004–2006, the European Regional Development Fund (ERDF) funded the SPD measures

related to bioeconomy: “Ensuring of energy supply stability, accessibility and increased efficiency”

262 256

457

41

252

230

75

90

79

43

93

40

6

10

9

41

0

100

200

300

400

500

600

700

800

900

1000

2004–2006 2007–2013 2014–2020

EUR millions on average per annum

European Regional Development Fund

EFF / FIFG /EMFFfor fisheries

Cohesion Fund

EFSI (Junker's Plan)

State aid for agriculture

EAGF Guidance Section / EAFRD

EAGF Guarantee Section / EAGGF

88

and “Improvement of environmental quality and prevention of environmental damage”. These mea-

sures received EUR 123 million in aid, which represented 9.3 percent of the total fund. The first

measure was aimed at ensuring the stability of energy supply, including the stability of availability

of supply of bio-energy to household and corporate customers, as well as increasing energy effi-

ciency, providing the basis for a more stable development of the Lithuanian economy. The second

measure was aimed at reducing the water, air and soil pollution and to ensure that the negative effects

of farming and other activities on the environment were avoided while maintaining the sustainable

use of natural resources. A total of EUR 123 million of public support was allocated to these measu-

res.

In 2007–2013, cohesion funds (CF) financed support for such priorities related to bioeconomy

as environment and sustainable development, renovation and development of water supply and was-

tewater management systems, creation of a modern waste management system, improvement of air

quality, energy production and consumption efficiency and increasing of consumption of renewable

energy resources. A total of EUR 654 million or 29 percent of CF funds was allocated to these mea-

sures.

To promote the development of Lithuanian bioeconomy in 2014–2020, various financial inst-

ruments can be used. The most important sources of public support are the European Agricultural

Guarantee Fund (EAGF), European Structural and Investment funds, European Fund for Strategic

Investments (EFSI) (or Juncker Plan), the EU Research and Innovation Programme Horizon 2020

and state aid funds. Support for bioeconomy sectors from these sources can reach over EUR 6.1

billion (excluding the Horizon 2020 funds) or an average of EUR 877 million per year, as shown in

Figure 35. Of these, around EUR 3196 million from the EAGF, EUR 1613 million from the EAFRD,

EUR 553 million through state aid for agriculture, EUR 281 million from the CF and EUR 63 million

from the European Maritime and Fisheries Fund (EMFF) (2 percent). According to the Juncker Plan,

renewable energy, waste and water management sectors are expected to be allocated EUR 430 million

by 2023, which could be used to develop the bioeconomy sectors. Support for bio-innovations is

funded through the Horizon 2020 programme.

Support for Bio-innovations

In the current program period for 2014–2020, new bio-innovations are funded under the Ho-

rizon 2020 programme, which provides for support for bio-based manufacturing, with a total of EUR

1 billion (27 percent) for all countries76. According the program, by the end of 2016, Lithuania had

received about EUR 10 million for R&D&I related projects77. In addition to that, public support for

the promotion of biotechnology innovations was financed also under the national Lithuanian Indust-

rial Biotechnology Development Program. Since 2007, the program was financed by the Lithuanian

state budget funds for two periods, i.e. in 2007–2010 and in 2011–201378. Both programs were aimed

at promoting the development of new biotechnology methods and processes and biological products

for the chemical, plastics and pharmaceutical industries, agriculture and health. The support of EUR

76 European Commission. 2013. Public-private partnerships in Horizon 2020: a powerful tool to deliver on innovation and growth in

Europe. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Co-

mmittee and the Committee of the Regions. Brussels, 10.7.2013 COM(2013) 494 final 77 MOSTA, 2017. Smart Specialization Progress: First Report. 78 The Program for the Development of Industrial Biotechnology in Lithuania for 2007–2010 approved by the Resolution No. 1050

of the Government of the Republic of Lithuania on October 24, 2006 and the Program for the Development of Industrial Biotech-

nology in Lithuania for 2011–2013 approved by the Order No. 4-118 of the minister of Economy of the Republic of Lithuania on

March 3, 2011.

89

23.2 million was foreseen for the implementation of these programs (EUR 8.7 million for the first

one and EUR 14.5 million for the second).

Until 2020, the support for the development and commercialization of innovative technolo-

gies, products, processes and methods is provided through the realisation of the Smart Specialisation

programme for implementation of the priority areas of research and development and innovation

(R&D&I)79. According to the two priority areas of this program directly linked to the bioeconomy

sectors – Health Technology and Biotechnology and Agro-Innovation and Food Technology, an es-

timated EUR 130 million is planned to be allocated.

Support for Fisheries

At the initial stage (2004–2006), public support was aimed at creating a market-oriented, mo-

dern, competitive and balanced fisheries system meeting the EU health and safety requirements. In-

vestment support was primarily aimed at eliminating negative social consequences of the restructu-

ring of the fisheries sector. In the subsequent programming periods (2007–2013 and 2014–2020), the

support was provided for the promotion of sustainable and competitive fishing and aquaculture with

a view to ensure long-term economic, environmental and social sustainability, fish stock preservation

and restoration. During the 2004–2006 and 2007–2013 program periods, respectively, EUR 17.5 mil-

lion and EUR 71,3 million (or on average EUR 5.8 million and EUR 10.1 million were allocated

(Figure 36). It accounted for 39,1 percent and 53 percent, respectively, of GVA by the fisheries (or

respectively, 0.028 percent and 0.033 percent of the national GDP) during the same periods. Accor-

ding to this proportion, it can be said that public support had a significant contribution to the deve-

lopment of Lithuanian fisheries. In 2014–2020, EUR 63 million have been planned to be allocated.

Support for Agriculture

Agriculture is the most supported area of bioeconomy. It accumulates a large amount of public

support, not only through the abovementioned tax incentives, but also through subsidies. On the other

hand, in comparison with other sectors of bioeconomy, it is characterised by higher risks of the pro-

duction and market which leads to high instability in the farming income. The First Pillar of the

Common Agricultural Policy aims at stabilising the farming income and implementing various mar-

ket organisation measures, as a counterbalance to the increased market risks. The measures of the

Rural Development Programme are aimed at strengthening the agricultural competitiveness, encou-

raging farms to provide agro-environmental services for preserving and improving the agro-eco-

systems, and reducing the impact of agriculture on global warming. Data on public expenditure on

support for Lithuanian agriculture and rural development is presented in Figure 35, according to the

sources of financing, i.e. national aid, otherwise known as state aid80, and the financing funds of the

First and the Second Pillars of the Common Agricultural Policy (CAP)81.

The subsidies for the Lithuanian agriculture and rural development under the national aid and

EU CAP measures have increased significantly since the beginning of Lithuania’s membership in the

EU, as seen in Figure 36. Between 2004 and 2014, all public expenditure on supporting agriculture

and rural development increased by 2.8 times. According to preliminary data, it fell by 35 percent in

2015. In 2004–2015, EUR 6.5 billion were allocated to support the Lithuanian agriculture and rural

79 Program for the Implementation of Priority Research and Experimental (Social, Cultural) Development and Innovation (Smart

Specialization) Directions and their Priorities. Approved by the Resolution No. 411 of the Government of the Republic of Lithua-

nia on April 30, 2014. 80 According to the scope of Article 107 of the TFEU (Treaty on the Functioning of the European Union). 81 Until 2004-2006 – the up by Regulation No 25 of 1962 on the European Agricultural Guidance and Guarantee Fund (EAGGF)

and, from 2007, – the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development

(EAFRD)).

90

areas, most of them (more than EUR 5.5 billion) came from the EU CAP funds and almost EUR 1

billion – from the national budget. Over the entire period, the subsidies from the EU funds for the

Lithuanian agriculture and rural areas increased 3.4 times (from EUR 179.9 million in 2004 to EUR

616.5 million in 2014), while the share of the EU support increased from 70 to 86 percent.

Figure 36. Public expenditures of national and the EU support for agriculture in Lithuania

Data source: authors elaboration on information in the European Commission financial statements for EAFRD, EAGF, EAGGF and state aid and Eurostat (Economic accounts for agriculture)

In assessing the intensity of Lithuanian agricultural and rural development subsidies under the

CAP and national aid measures, the percentage of these subsidies of GDP has increased from an

average of 0.5 percent in 2001–2003 to an average of 1.9 percent in 2004–2006. In the subsequent

period, the level of support intensity remained almost unchanged and accounted for 1.98 percent in

2014. It is more than 4 times higher than across the EU (0.45 percent on average).

According to the data of Economic Accounts for Agriculture82, in the period of 2004–2013,

the majority of direct support subsidies (86 percent) were allocated to the crop production sector. As

seen in Fig. 37, during this period, the subsidies for crop production increased 13.9 times, dropped

significantly for livestock farming from 2007 onwards.

Figure 37. Trend of direct support subsidies and agriculturas output in Lithuania

Data source: Authors elaboration on information in Eurostat (Economic accounts for agriculture – indices: volume, price, values)

Such disproportion of support had an impact on the changes in the structure of agriculture:

crop production increased several times more than livestock production (see Figure). According to

82 Eurostat data: Economic accounts for agriculture – values at current prices (aact_eaa01)

148291 346

168 174 218 268 280 330 357 384 41432

4249

261 249250

254 248250 254 232

38

76

75

7772 120 88

8075 86

92 93 103

11

0,5

1,4

2,0 1,9 1,9

1,6

2,0 2,12,0 2,0 2,0 2,0

1,2

0,0

0,5

1,0

1,5

2,0

2,5

0

200

400

600

800

1000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EUR millions State aid for agriculture expenditures

EAGGF Guidance section / EAFRD expenditures

EAGGF Guarantee Section / EAGF expenditures

% of total expenditures of GDP

100

754

895979

882

1022 996921

11181195

1386 13611413

1225

100194

337

489

94 98 49 58 581 1

102177 177

0

200

400

600

800

1000

1200

1400

1600

Index 2003 =100

Crop: Subsidies on products

Livestock: Subsidies on products

100 108120

100

127141

150

127

147

183 176191

212

191

100111

119 126115 116

107 111 111 111 111121 122 122

0

50

100

150

200

250

Index 2003 =100

Crop: Output

Livestock: Output

91

the agricultural statistics, during this period the dairy cows experienced a significant decrease in herds

(29.5 and 28.6 percent, respectively), only the bird flock and sheep herds increased (21 percent and

4.9 times, respectively). The share of cereal crops in the utilised agricultural land has increased (from

34.1 to 43.6 percent), but the share of the green areas, i.e. meadows, pastures and perennial grasslands

has decreased (from 44.8 to 38.6 percent). The intensification of crop production (especially fertili-

zation with chemical fertilisers) and the turning up of grasslands and pastures did not just increase

the GHG emissions (see Section 2.2.4), but augmented the ecological threat to the environment and

the human health. It has been established that the imbalance in the structure of agricultural crops

caused the threats of deterioration of soil structure and other soil degradation processes, the decline

of soil biological resistance, the nutrient leaching and pollution of groundwater and surface water and

the loss of biodiversity. The ecological risk in Lithuania is increasing, especially in those territories

where the soils of very good and good economic value (42.1–52.0 yield points) are predominant83.

It was determined that the investment support under the EU RDP farm modernization measu-

res encouraged the investments and had a positive impact on the process of modernization and the

growth of labour productivity in the Lithuanian farms that received the support84. However, this im-

pact was not significant at the agricultural level of the country as a result of the relatively low cove-

rage of the supported farms: less than 0.3 percent of the country’s farms were supported under the

Investments in Agriculture Holdings measure (RDP 2004–2006) and about 6 percent were supported

under the Modernization of Agricultural Holdings measure (RDP 2007–2013). Investment support

for farm restructuring and modernization is particularly important for semi-subsistence farms, which

make up almost two-thirds of the Lithuanian farms. Under the special Support for Semi-subsistence

Farms (RDP 2004–2006) and Semi-subsistence Farming (RDP 2007–2013) mesures, 5821 semi-sub-

sistence farms were supported during both periods. An analysis of the share of subsidies for invest-

ments in general farm investments85 showed that since the launch of the EU rural development prog-

rams in Lithuania, the contribution of these investments to increasing the farm investment opportu-

nities is the largest in small farms. A more detailed analysis of the economic size classes of farms has

shown that the larger the farms were, the lower was the significance of the investment support, i.e.

the need for support for investments was much higher in the small and medium-sized farms than in

the large ones. In the long run, the investment behaviour of large farms is more influenced by their

ability to compete successfully in the market in order to earn enough money for investment and survi-

val of the farm in a competitive environment, rather than public support subsidies. It is likely that

after 2020, the EU support for agriculture will be significantly reduced. Therefore, in order to achieve

sustainable development support, the future agricultural support schemes should be changed.

Support for Forestry

In 2004–2006, support under the SPD Forestry measure was promoted for developing the

economic, ecological and social functions of forests, improving the infrastructure of privately-held

forests, increasing their productivity, improving the quality of the environment and biodiversity.

Under the RDP 2007–2013 measures for Lithuania, support was allocated for forestry modernization,

83 Žemės ūkio, maisto ūkio ir žuvininkystės sričių išorės ir vidaus rizikos veiksniai, grėsmės ir krizės bei jų galimas poveikis. Moksli-

nio tyrimo ir taikomosios veiklos projekto (sutartis Nr. MT-15-38) 2016 metų baigiamoji ataskaita. Akademija, 2016. 84 ESTEP. 2008. Galutinė Ūkio ministerijos 2004 – 2006 m. programavimo laikotarpiu administruotos ES struktūrinės paramos pa-

naudojimo vertinimo ataskaita; BGI Consulting, 2016. Lietuvos kaimo plėtros 2007–2013 metų programos galutinis (ex-post) ver-

tinimas. Galutinė ataskaita. 85 Vitusnskienė V.; Jazepčikas D. 2016. Investicinės ir tiesioginės paramos priemonių reikšmingumas ūkių investicijoms Lietuvoje.

Apskaitos ir finansų mokslas ir studijos: problemos ir perspektyvos, Nr. 1 (10), p. 200–214.

92

innovative technologies, improvement of forest infrastructure, promotion of forest environmental ser-

vices and increasing of forest area, afforestation of abandoned agricultural and other land areas. Du-

ring the RDP 2014–2020 program period, support is aimed at promoting the use of renewable energy

sources such as logging waste for the purposes of bioeconomy. During the SPD implementation pe-

riod, almost EUR 5,5 million were paid, and during the implementation period of RDP 2007–2013

for Lithuania – almost EUR 204 million in support, representing respectively 1,9 and 20,3 percent of

GVA by forestry (or respectively, 0.09 and 0.09 percent of the national GDP) during the same periods.

The Lithuanian Rural Development Program for 2014–2020 allocated almost EUR 131.5 million.

These funds are one of the most important sources of funding for the National Forestry Sector Deve-

lopment Program for 2012–2020 other sources include other EU financial support funds, Lithuanian

budget and other resources.

4.2. Research and experimental development potential in Lithuanian bioeconomy

Lithuanian research and experimental development (hereinafter – R&D) potential in bioeco-

nomy was assessed using data of Statistics Lithuania, the education management information system,

survey of universities and research institutions and MOSTA’s insights about the condition of science

and education in Lithuania.

R&D personnel are divided into researchers with a scientific degree, researchers without a

scientific degree, technicians and equivalent staff, and other R&D personnel. R&D researchers, just

like other R&D personnel, can work part-time. In order to determine the number of R&D personnel

working full-time, they are recalculated as a full-time equivalent employees. According to the data

of Statistics Lithuania, 10.5 thousand full-time equivalent employees were engaged in R&D activities

in Lithuania in 2015, of which 2.6 thousand (or 25 percent) worked in the business sector. Researchers

account for more than three quarters of R&D personnel. Here researchers who do not hold a degree

in science dominate (accounting for 54 percent). Only 11.4 percent of R&D researchers working in

the business sector had a degree in science. Thus the number of highly qualified R&D researchers is

relatively low in business.

Figure 38 presents the data on R&D researchers (in full-time equivalent) in higher education

and government sectors by all field of science and field of agricultural sciences and biomedical (na-

tural) sciences that are 100 percent attributable to bioeconomy. There were only 13.3 percent, or 838

R&D researchers (in full-time equivalent) working in the latter fields of science (in 2015). A very

small part of them were engaged in agricultural sciences (4.1 percent, or 260 relative researchers). A

certain share of researchers (in full-time equivalent) conducting research in the field of bioeconomy

were engaged in technology and physical sciences, which cover such fields of science as bioche-

mistry, biophysics and environmental engineering, and thus the number of researchers researchers in

the fields of science attributable to bioeconomy can account for about 15–18 percent. The total

number of researchers (in full-time equivalent) decreased in the country by 9.3 percent in 2015 com-

pared to 2005, while in the area of agriculture and other biomedicine sciences it decreased by 25.9

and 0.3 percent, respectively.

93

Figure 38. R&D researchers in Lithuanian higher education and government sectors

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (R&D personnel)

In 2008–2015, number of R&D personnel (in full-time equivalent) increased from 229 to 316,

or by 38 percent, in bioeconomy business sector, and at the end of the period accounted for 12 percent

of the total number in the entire business sector. A number of R&D personnel (in full-time equivalent)

by separate bioeconomic activities presented in Figure 39 shows that most of them were employed in

the production of chemicals (160 in 2015), where their number increased. Much fewer R&D per-

sonnel (in full-time equivalent) worked in the production of furniture (45), food, beverages and to-

bacco (42), and pharmaceuticals (34). A few relative R&D employees were engaged in such bioeco-

nomic activities as manufacture of textiles, apparel and leather products (18), paper (9) and wood (21

in 2014 and only 2 – in 2015). There were the least R&D personnel (in full-time equivalent) working

in agriculture, forestry and fisheries, and here these employees worked only in certain years of the

period under examination, for example, 6 – in 2015. Low number of R&D personnel (in full-time

equivalent) in these bioeconomic activities may first of all be explained by a relatively low domina-

tion of small enterprises, which normally are rarely engaged in R&D.

Figure 39. R&D personnel in bioeconomy business enterprise sector in Lithuania

* the data points represent both the bio-based and the non-bio-based manufacturing combined due to the lack of data availibility nee-

ded for separate indicators

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (R&D personnel)

The Lithuanian R&D potential in bioeconomy is also illustrated by the number of doctoral

students. Bioeconomy doctoral students accounted for 16-18 percent of the total number of doctoral

1346 1385 1300 1353 1380 1330 1324 1039 1156 1108 1033

1270 1330 1208 1280 1431 1611 1635 1670 1602 1503 1392

1296 1335 1453 1465 1383 1386 1399 1384 1300 1356 1284

1264 1278 1298 1299 1306 1348 1323 1325 1342 13371232

351 338 381 343 334 330 270 274 274 276260

1394 1437 1522 1525 1549 1352 1070 1014 1120 10611078

814 826 953 973 1009 785587

551 555 534500

580 611 569 552 540 567483

463 565 527578

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R&D researchers (in full-time equivalent))

Humanities sciences Social sciences

Technological sciences Physical sciences

Agricultural sciences Biomedical sciences

Medical sciences Other biomedical (natural) sciences

0

50

100

150

200

Agriculture,

forestry and

fishing

Manufacture of

food, beverages

and tobacco

Manufacture of

textiles, apparel

and leather*

Manufacture of

wood products

Manufacture of

paper

Manufacture of

chemicals*

Manufacture of

pharmaceuticals*

Manufacture of

furniture and

other

manufacture*

R&D personnel (in full-time equivalent)

2008 2009 2010 2011 2012 2013 2014 2015

94

students in the study years 2013/2014–2016/2017. The number of doctoral students also allows indi-

rectly determining the share of researchers working in the field of bioeconomy. Data presented in

Figure 40 show that the majority of doctoral students study biomedicine and agricultural sciences

(with 42 and 25 percent, respectively, studying in 2016/2017).

22 percent of all bioeconomy doctoral students studied physical sciences, which include bio-

chemistry and biophysics, and 11 percent studied technological sciences, which cover environmental

engineering. The number of bioeconomy doctoral students changed slightly in the past four study

years (increased by about 16 percent), but the total number of doctoral students increased by a mere

2 percent.

Figure 40. Number of doctoral students by field of science attributable to bioeconomy in Lithuania

Data source: authors elaboration on information in Education management information system

The development of scientific potential and commercialization of the created products de-

pends on R&D funding. In 2015, total Lithuania’s R&D expenditure accounted for 1.04 percent of

GDP. The ratio of R&D expenditure to GDP in higher education and government sectors was 0.76

percent, and in the business sector it was 0.28 percent. State budget funds accounted for the main

share of R&D expenditure, i.e. 35.6 percent, in terms of the sources of financing, foreign funds – 34.6

percent, funds of business enterprises – 28 percent and funds of higher education and non-profit

institutions accounted for 1.8 percent. R&D financing from the funds of the government increased by

10.6 percent per year, but business financing decreased by 12 percent. Business enterprises allocated

only about EUR 74 million for R&D activities in 201686.

In terms of business expenditure on R&D, Lithuania is one of the most lagging EU states – it

ranks 25th in terms of the share of such expenditure in GDP and per capita. In 2015, business expen-

diture on R&D accounted for 0.28 percent of GDP in Lithuania, while the EU’s average was 1.3

percent and in the leading countries (Sweden and Australia) it accounted for more than 2 percent. In

that same year, business expenditure on R&D was EUR 35.6 per capita compared to the EU average

of EUR 37687.

86 Statistics Lithuania. 2016. Research and Development Activities in Lithuania in 2015. Vilnius. 87 Data source – Eurostat business enterprise R&D expenditure (BERD) by economic activity (NACE Rev. 2) data

123 118 123 123

193 207 215 212

84 93 101 11032 33

43 56

0

100

200

300

400

500

600

2013-2014 2014-2015 2015-2016 2016-2017

Number of doctoral students by field of science

T 000 Technological Sciences

P 000 Physical Sciences

B 000 Biomedical sciences

A 000 Agricultural SciencesBiology;

117; 23%

Ecology and

Environment

al; 82; 16%

Biochemistry;

74; 15%Environmental

Engineering; 56; 11%

Agronomy;

49; 10%

Biophysics;

36; 7%

Forest

science; 29;

6%

Veterinary

medicine; 24;

5%

Zootechnics;

21; 4%

Pharmacy;

12; 3%Zoology; 1;

0%

95

In 2017, Lithuania ranked only 16th out of 28 countries on the European Innovation Score-

board. The assessment of the global competitiveness according to the innovation and business intel-

ligence sub-index revealed that Lithuania ranked 43rd in 2016, and stepped 6 positions down compared

to 201588.

In 2011, R&D expenditure in the research and governmental sectors increased and totalled

more than EUR 280 million in 2015 (Figure 41). The R&D expenditure increased the fastest in bio-

medical sciences, accounting for 30 percent of the overall expenditure in this field in 2015, while

expenditure on other biomedicine sciences totalled 17 percent. More than a third of R&D expenditure

in the period under examination was intended for fundamental research and slightly less than 2/3 –

for applied research and experimental development.

Figure 41. R&D expenditure in higher education and government sectors by field of science

Data source: authors elaboration on information in Lithuanian Official Statistics Portal (R&D expenditure)

Six universities are engaged in scientific research in the field of bioeconomy (namely, Alek-

sandras Stulginskis University, Kaunas University of Technology, Klaipėda University, Lithuanian

University of Health Sciences, Vytautas Magnus University and Vilnius University) and 9 research

institutes (Nature Research Centre, Centre for Physical and Technological Sciences, Centre for Inno-

vative Medicine, Lithuanian Research Centre for Agriculture and Forestry, Lithuanian Energy Insti-

tute, Biomedical Engineering Institute, Life Sciences Centre, Institute of Animal Science and Food

Institute). By way of a questionnaire survey (see Annex 7), having assessed 236 research projects

being implemented by the universities and research institutes in 2014 – 2017, it was found that almost

a quarter of funds was allocated for agriculture, about a fifth of funds – for biowaste recycling and

manufacture of food products, and one sixth – for fisheries and aquaculture. Manufacture of bio-

based pharmaceuticals, forestry and logging, bioenergy, bio-based construction, manufacture of bio-

based chemicals as well as for water treatment and sewerage accounted for about 5 to 7 percent of

the total funding (Figure 42).

88 Valstybės investicijos į mokslinius tyrimus ir eksperimentinę plėtrą siekiant inovacijų augimo. Valstybinio audito ataskaita. Vals-

tybės kontrolė. 2017 m. balandžio 10 d. Nr. Nr. VA-P-50-1-7.

14,1 16,7 19,7 23,7 19,4 20,5 23,1 26,0 29,5 27,8 25,520,8 21,1 26,9 30,0 32,5 25,8

36,0 38,9 38,7 40,2 36,130,8 32,542,8

48,937,4 36,8

48,9 43,4 50,4 50,4 59,020,2 24,4

29,232,8

28,626,6

42,6 43,350,3 54,7 56,9

9,110,7

12,8

16,0

13,510,2

12,0 18,415,6 18,6 19,7

30,032,0

34,9

45,2

37,535,1

46,048,0

63,368,7

85,8

17,917,8

17,1

23,7

22,020,6

25,122,8

33,132,8

37,5

12,014,2

17,8

21,5

15,514,5

20,925,3

30,236,0

48,3

0

100

200

300

400

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R&D expenditure (million. Eur)

Humanities sciences Social sciences

Technological sciences Physical sciences

Agricultural sciences Biomedical sciences

Medical sciences Other biomedical (natural) sciences

96

Figure 42. Research project by bioeconomy sectors considering project estimates

Source: data of questionnaire survey of research institutions (n=219)

The survey of the universities and research institutes determined that in the implementation

of bioeconomy R&D projects, the involvement of these institutions in later R&D stages is minor

(Figure 43). The majority of research project results are associated with the concept of application of

knowledge (about 87 percent), much fewer research results (about 50 percent) – with new (funda-

mental) knowledge and only a very small share (about 18 percent) – with the creation, testing and

checking of a layout, development and demonstration of a trial version of a prototype and the pro-

duction and assessment of a trial batch. It should be noted that results achieved at the time of imple-

mentation of certain scientific research are associated with several types of R&D stage results.

Figure 43. Research projects by bioeconomy themes considering project estimates


Agriculture; 3558;

24.2%

Waste treatment ;

1892; 12.9%

Manufacture of

food; 1843; 12.6%Fishing and aquaculture;

1642; 11.2%


pharmaceuticals; 1061; 7.2%

Forestry and logging; 1005; 6.8%

Bioenergy; 987; 6.7%

Bio-based construction; 949;

6.5%

Manufacture of bio-based chemicals;

821; 5.6%

Water treatment and sewerage;

704; 4.8%


plastics; 112; 0.8%

Manufacture of wood

products; 86; 0.6%

; 25; 0.2%

Value in mill. EUR; %

106

196

16

4

0

2

1

1

11

10

R01 – New knowledge (acquisition of fundamental

knowledge)

R02 – Concept of knowledge application

R03 – Proof of concept feasibility (approval)

R04 – Model development and testing

R05 – Testing model by simulating real conditions

R06 – Prototype (pilot version) development

R07 – Prototype (pilot version) demonstration

R08 – Pilot production (final testing)

R09 – New product evaluation (new

product test examples evaluated by user/customer)

Other

97

Figure 44 illustrates data on the distribution of research projects by themes, considering pro-

ject estimate values. More than a half of research project funds is allocated for research of sustainable

agro-biological resources and safe food, 17 percent – for new production processes, materials and

technologies, and 10 and 8 percent, respectively, – for energy and fuel production from biomass or

waste and waste management, as well as for molecular technology for bio-pharmacy.

Figure 44. Number of bioeconomy research projects by field of biotechnology in Lithuania


The following was determined in R&D field89:

low focus of research and educational institutions on prototypes, products suitable for the

market, spin-offs;

research and educational institutions have insufficient experience and motivation to create

patented, licensed or otherwise commercialised products suitable for the market;

management of R&D projects implemented in research and educational institutions must

be enhanced in order to turn research results into products;

there is an obvious lack of start-ups and spin-offs;

the Lithuanian science system is fragmented, thus poor culture of cooperation exists not

only among scientists and entrepreneurs, but also among researchers from different insti-

tutions;

cross-institutional and cross-border coordination of innovation activities in Lithuania re-

mains inefficient.

It was also emphasised that the current R&D management system remains focused on the

process rather than partnership-based programme management. Companies implementing technolo-

gic innovation have cooperated with research and educational institutions increasingly less90. Open

access research centres have attracted business as planned. Research and technology parks are mostly

engaged in the lease of premises, even though they also were assigned other functions, such as the

transfer of technologies and commercialization of scientific research results. It is not clear which

share of companies established therein are engaged in innovation activities. In the performance of

valley programmes, the main focus was placed on the renovation of infrastructure. It was created as

89 MOSTA. 2016. Review of the state of Lithuanian research and education. Vilnius 90 Ibidem

Sustainable agro-

biological resources

and safer food; 5781; 61%

New production

processes, materials

and technologies ; 1541; 16%

Production of energy and fuel

of biomass or waste, waste

management ; 877; 9%

Molecular technology for

bio-pharmacy; 847; 9%

Innovative creation,

improvement and recycling of

bio-materials ; 339; 4%

Functional food; 63; 1%

Value million EUR; percent

98

means to ensure cooperation between business and science, develop innovation and attract private

investments from Lithuania and abroad. Ambitious valley programme goals and target indicators

were set, but neither valley associations nor the Ministry of Education and Science presented any

information thereon. The use of equipment of laboratories operating under an open-access principle

by businesses is limited. In the implementation of orders of economic entities of the country, only

31 percent of works were conducted in open access centres91.

Compared to the total business sector R&D expenditure, expenditure on bioeconomic activi-

ties totalled EUR 11.2 million, or 10.8 percent, in 2015. In 2008–2015, this share decreased by

1.6 percentage point. Data presented in Figure 43 allowed determining that: the greatest expenditure on R&D was in the chemical industry. It almost doubled in eight

years and accounted for more than two fifths of all business spending on R&D in bioeconomic

activities, or almost 5 percent of all business expenditure on R&D in 2015;

expenditure on R&D of pharmacy and food companies ranks second and third. In 2015, it

accounted for a fifth of all business expenditure on R&D in bioeconomic activities, or

2 percent of all business R&D expenditure, each. Business expenditure on R&D in the phar-

macy industry changed slightly in eight years, but significantly increased in 2014; it nearly

doubled in food, beverages and tobacco industry;

lately, R&D expenditure of furniture production companies has increased. In 2013, it accoun-

ted for 35 percent of the total R&D business expenditure in all sectors of bioeconomy, while

in 2015 it amounted to almost a tenth;

R&D expenditure of the business sector on manufacture of textiles, apparel and leather, agri-

culture, wood and paper is minor.

Figure 45. R&D expenditure in business sector in Lituanian bioeconomy



Data source: authors elaboration on information in Lithuanian Official Statistics Portal (R&D expenditure)

Business admits that innovations are a very risky area, and failures are frequent here, thus not

all business representatives are willing to take the risk. Another problem is the lack of control and the

sharing of managerial skills: there is a shortage of specialists, who could help find the missing profe-

ssionals of different areas, who could work with the company from the initial stage of the creation of

91 Valstybės investicijos į mokslinius tyrimus ir eksperimentinę plėtrą siekiant inovacijų augimo. Valstybinio audito ataskaita. Vals-

tybės kontrolė. 2017 m. balandžio 10 d. Nr. Nr. VA-P-50-1-7

0

2

4

6

8

10

12

Agriculture,

forestry and

fishing

Manufacture of

food, beverages

and tobacco

Manufacture of

textiles, apparel

and leather*

Manufacture of

wood products

Manufacture of

paper

Manufacture of

chemicals*

Manufacture of

pharmaceuticals*

Manufacture of

furniture and other

manufacture*

R&D expenditure (million EUR)

2008 2009 2010 2011 2012 2013 2014 2015

99

innovation till its practical adaptation, ensure a smooth project implementation and familiarise with

opportunities to receive additional financial support92. Businesses in the country often confine them-

selves to providing financial assistance at the product development stage only, without rendering

assistance for the introduction of a new product into the market, where the risk of a failure is signifi-

cant93. On one hand, it was determined that as many as 75 percent of new products in the market fail,

on the other hand, the introduction of a product into the market is an expensive procedure94. The

process of commercialization of industrial biotechnology products is long for regulatory constraints,

poor consumer awareness of the products, the advantages and functions whereof are not sufficiently

clear. Moreover, currently there is no approved definition and common understanding of the term

“bioproduct”95.

It has been emphasised that so far Lithuania does not have the culture of accounting for funds

for research – in the absence of incentives, only a small part of companies declare research96. Since

there is no clear understanding of what R&D investments are and which used funds can be attributed

thereto due to the lack of information, corporate accounting often does not reflect the actual invest-

ments in innovation97. Another reason of non-declaration of business expenditure on R&D is insuffi-

cient system efforts of the country in this field. In order to take advantage of the incentive, companies

incur additional costs, the payoff whereof is economically sound only when a significant profit is

received. Moreover, the use of R&D incentive is associated with the risk of recalculation of additional

payables and interest for the companies due to discrepancies in their accounting98.

The analysis revealed the condition and trends of research and development and the potential

of innovation in bioeconomy:

− There were 13.3 percent of relative R&D researchers working in the fields of research

directly attributable to bioeconomy in 2015. Considering the fact that bioeconomy-related

research in biochemistry, biophysics and environmental engineering has also been con-

ducted, the proportion of researchers may be 2–5 percentage points greater;

− Manufacture of chemicals had the most R&D employees in business during the period

under examination. Increase in the number of R&D employees was observed in this busi-

ness. A fewer R&D employees were employed in manufacture of food products, beverages

and tobacco. A much lower but similar number of R&D employees was observed in ma-

nufacture of textiles, apparel and leather products, pharmaceuticals and furniture. “Infilt-

ration” in agriculture, forestry and fisheries or manufacture of paper and its products is

very poor and fragmented;

− The number of doctoral bioeconomy students accounted for an average of 16–18 percent

of the total number of doctoral students in the past four study years, and increased more

rapidly than the number of doctoral students of other areas unrelated to bioeconomy. More

than a third of R&D expenditure in Lithuania is designated for fundamental research, and

slightly less than 2/3 – for applied research and experimental development. The business-

funded share of research significantly decreased in 2016 compared to 2015;

92 Balčiūnas A. 2017. Su kuo valgomos inovacijos Lietuvoje? Delfi, kovo 6 d; interview of representatives of business associations 93 Interview of representatives of business associations. 94 Kaip sėkmingai įvesti į rinką naują produktą? Verslo žinios, 2015-04-08 95 The bioeconomy enabled: a roadmap to a thriving industrial biotechnology sector in Europe. Funded by the European Union. 96 Jakubavičius A. 2017. Verslo investicijų į MTEP didinimas: misija (ne)įmanoma. Delfi, kovo 6 d. 97 Balčiūnas A. 2017. Su kuo valgomos inovacijos Lietuvoje? Delfi, 2017 m. kovo 6 d; interview of representatives of business asso-

ciations 98 Jakubavičius A. 2017. Verslo investicijų į MTEP didinimas: misija (ne)įmanoma. Delfi, kovo 6 d.

100

− Lithuania has a scientific potential for the development of bioeconomic activities, however

the involvement of business in joint research is insufficient, and thus the country is among

the last ones in the ranking of the European Innovation Scoreboard. The Lithuanian re-

search system is fragmented, thus the culture of cooperation not only among researchers

and entrepreneurs, but also among scientists of different institutions is poor. Cross-insti-

tutional and cross-border coordination of innovation activities remains inefficient in

Lithuania. Business-oriented actions and measures under “Horizon 2020” and the Baltic

Sea Region Programme are planned separately. Coordination of different sources of fi-

nancing and funds and coordination and monitoring of the system level remain the main

innovation system management problems. Activities of open access centres do not attract

business as planned; research and technology parks are usually engaged in the lease of

premises, while business makes little use of equipment of laboratories of valleys operating

under the open access principle;

− Even though Lithuania has a scientific potential for developing bioeconomic activities,

business is insufficiently involved in joint research. Its involvement could be increased

through projects funded by the Research Council of Lithuania. Considering the fact that

research and experimental development is allocated 2/3 of expenditure in Lithuania, the

commercialization of research products is too slow. Business can make very limited in-

vestments in research and experimental development, because enterprises are relatively

small. In order to speed up the introduction of new products into the market, business

involvement could also be increased through the implementation of European innovation

partnership projects;

− In order to increase the competitiveness level of Lithuania’s bioeconomy, ensuring high

scientific competence and promoting innovation in the segment of bioeconomic activities

creating a higher value added is important. Considering the bioeconomy value chain,

Lithuania should focus the available potential of researchers and doctoral students and the

conducted research projects on innovative bio-based pharmaceuticals and chemicals,

manufacture of food and feed. Focus should also be placed on manufacture of products at

the bottom of the “bioeconomy value pyramid”, because here bioproducts and waste

unsuitable for recycling may be used. It is important to ensure the longest possible

“lifecycle” of biomass and products made thereof, i.e. assuring that it led towards circular

economy.

101

5. Analysis of the bioeconomy sector of European Union countries

5.1. Analysis of strategic documents of the EU and OECD related to bioeconomy de-

velopment

The examined strategic EU documents present bioeconomy strategies and action plans as well

as bioeconomy sector-related strategies and action plans. The main EU bioeconomy strategic docu-

ment is Communication from the Commission “Innovating for Sustainable Growth: A Bioeconomy

for Europe” (2012). The plan is to review this strategy in 2017. Bioeconomy strategy is also partially

laid down in the European Parliament’s document “A strategy for a bio-based economy” (2012). The

regional EU bioeconomy strategy is laid down in the Communication from the Commission “Con-

cerning the European Union Strategy for the Baltic Sea Region” (2009). Other documents lay down

strategies and action plans closely related to the bioeconomy sector: circular economy action plan,

European Innovation Partnership on Biomaterials, rebirth of the industry via the use of biomass, the

strategy for smart bioeconomy specialisation and strategic directions of R&D programme “Horizon

2020”. The examined strategic OECD documents emphasise the role of biotechnology in bioeco-

nomy. Table 11 presents the EU and OECD strategic documents, bioeconomy and related strategies

set as a result of the analysis of their content, action plans and their substantiation.

Table 11. Provisions of strategic documents of the EU and OECD on the development of bioeconomy

Documents Bioeconomy strategic provisions, action plans and their substantiation

Communication from the Co-

mmission to the European

Parliament, the Council, the

European Economic and So-

cial Committee and the Co-

mmittee of the Regions “Inno-

vating for Sustainable

Growth: A Bioeconomy for

Europe”. Brussels, 14.2.2012,

COM/2012/060 final

The Bioeconomy Strategy and its Action Plan aim to pave the way to a more innova-

tive, resource efficient and competitive society that reconciles food security with the

sustainable use of renewable resources for industrial purposes while ensuring envi-

ronmental protection. They will form research and innovation agendas in bioeco-

nomy sectors and contribute to a more coherent policy environment, better interrela-

tions between national, EU and global bioeconomy policies and a more engaged pub-

lic dialogue. The bioeconomy's cross-cutting nature offers a unique opportunity to

comprehensively address inter-connected societal challenges such as food security,

natural resource scarcity, fossil resource dependence and climate change, while

achieving sustainable economic growth. The Europe 2020 Strategy calls for a bioeco-

nomy as a key element for smart and green growth in Europe.

European Parliament. A stra-

tegy for a bio-based economy.

Green New Deal Series vo-

lume 9, 2012

The strategy for a bio-based economy states that future bio-based economy should

focus on higher value applications – i.e. chemicals and materials – rather than on

bioenergy as an application of biomass, because these do not require such big volu-

mes of biomass as feedstock. The EU is in need of creating such a level playing field

between the different uses of biomass to be able to steer biomass demand away from

the most inefficient way to use biomass: for energy purposes. The success or failure

of a sustainable bio-based economy goes hand in hand with the sustainable pro-

duction of biomass. The application of biomass that is located at the bottom of the

value pyramid is bioenergy. The total volume of biomass needed for energy pro-

duction is so huge that the sustainability of biomass production cannot be guaranteed.






mmittee of the Regions “Con-

cerning the European Union

Strategy for the Baltic Sea Re-

gion. Action Plan”. Brussels,

The European Union Strategy for the Baltic Sea Region is a key instrument in pro-

moting territorial cohesion with land and maritime dimensions. The strategy aims at

ensuring that policies contributed to a competitive, cohesive and sustainable devel-

opment of the region at all levels (local, regional, national and the EU). In that sense,

such a strategy serves well the objectives of territorial cohesion: reducing territorial

disparities, ensuring equivalent living conditions, building on the territories, recog-

nising diversity as an asset, acknowledging the potential of the regions, allowing for

a fair access to infrastructures and services, strengthening polycentricity, building

good links between urban and rural areas, promoting good governance with equal

102

10.6.2009, COM (2009) 248

final

participation and sharing of common resources, resting on the ecosystem-based man-

agement and planning of maritime space.

European Commission. Co-

mmission Staff Working

Document. European Union

Strategy for the Baltic Sea Re-

gion. Action Plan. Brussels,

20.3.2017 SWD(2017) 118 fi-

nal

The bioeconomy offers an integrated approach to incorporate economic / prosperity,

social and environmental (on land and in the sea) aspects of sustainability in agricul-

ture, forestry, fisheries and aquaculture – and more than that: it also offers an ap-

proach for enhancing sustainability, entrepreneurship, competitiveness and growth –

in cities and rural regions alike – by building on circular thinking; and an approach

that aims to enable a transition from a fossil-based to a sustainable bio-based society.

In other words a sustainable bioeconomy is linked to all parts of the green and blue

economy. The bioeconomy offers opportunities for paving the way for strengthening

the international competitiveness of the European economy as well as for a lower

emission and more resource efficient economy that combines food production with

the sustainable use of renewable resources for industrial and energy purposes and

environmental protection. The conversion to a bio-based economy means a transition

from an economy that is based, to a large extent, on fossil fuels, to a more resource-

efficient economy based to a higher extent on renewable raw materials that are pro-

duced through the sustainable use of ecosystem services from land and water. The

Baltic Sea region is making progress towards realising a number of opportunities

embedded in the bioeconomy. For example, good farming practices (innovative tech-

nologies for animal feeding and housing; processing; storage; improved water quality

and quantity; and handling of fodder, fertiliser and handling of manure – including

with a view to energy production); good marine practices (macroalgae harvesting and

cultivation, mussel cultivation, reed harvesting, large-scale microalgae cultivation,

and sustainable fish aquaculture); good practices on waste water management; good

health practices (on boosting the engagement of smaller biotechnology companies

and commercialisation of clinical inventions); good circular economy practices (such

as through industrial symbiosis) and more generally, many good practices on tech-

nology chains and business innovation. The development of blue bioeconomy in the

Baltic Sea region should be promoted. The main targets of the development: im-

proved recycling of nutrients in agriculture; added value through cooperation within

Baltic fisheries and aquaculture; synergies from cooperation between the Rural De-

velopment Programmes; involvement of the business community, increase

knowledge on sustainable forest management; increased coordination and synergy in

the Baltic Sea region among public sector and NGO cooperation initiatives, projects

and stakeholders dealing with bioeconomy; realizing the bioeconomy in the Baltic

Sea region: development of a sustainable bioeconomy in the Baltic Sea region; con-

tributions to the development of the European Bioeconomy.






mmittee of the Regions “Clo-

sing the Loop – An EU Ac-

tion Plan for the Circular Eco-

nomy”. Brussels, 2.12.2015,

COM (2015) 614 final

The transition to a more circular economy, where the value of products, materials

and resources is maintained in the economy for as long as possible, and the generation

of waste is minimised, is an essential contribution to the EU's efforts to develop a

sustainable, low carbon, resource efficient and competitive economy. Such transition

is the opportunity to transform our economy and generate new and sustainable com-

petitive advantages for Europe.

The Commission will propose a revised EU regulation on fertilisers, so as to facilitate

recognition of organic and waste-based fertilisers in the single market and thus

support the role of bio-nutrients in the circular economy.

In order to support the achievement of the Sustainable Development Goal target on

food waste and to maximise the contribution of actors in the food supply chain, the

Commission will develop a common EU methodology to measure food waste and

define relevant indicators. It will create a platform involving Member States and sta-

keholders in order to support the achievement of the SDG targets on food waste

through the sharing of best practice and the evaluation of progress made over time;

take measures to clarify EU legislation relating to waste, food and feed and facilitate

food donation and the use of former foodstuff and by-products from the food chain

in feed production without compromising food and feed safety; examine ways to

improve the use of date marking by actors in the food chain and its understanding by

consumers, in particular the „best before“ label.

Commission will promote efficient use of bio-based resources through a series of

measures including guidance and dissemination of best practices on the cascading

use of biomass and support for innovation in the bioeconomy. The revised legislative

103

proposals on waste contains a target for recycling wood packaging and a provision

to ensure the separate collection of biowaste.






mmittee of the Regions “Ma-

king Raw Materials Available

for Europe's Future Well-

Being. Proposal for a Euro-

pean Innovation Partnership

on Raw Materials”. Brussels,

5.3.2012, COM (2012) 82 fi-

nal.

This EIP will contribute to the mid- and long-term security of sustainable supply of

raw materials (including critical raw materials, industrial minerals and wood-based

materials) that are required to meet the fundamental needs of a modern resource ef-

ficient society. It is an essential contribution to the competitiveness of European in-

dustries, to increased resource efficiency in the EU, and to the development of new

European-based recycling activities. The EIP has an overall target of reducing Eu-

rope's import dependency on raw materials that are critical to Europe's industries.

This will be achieved by providing Europe with enough flexibility and alternatives

in the supply of important raw materials, whilst taking into account the importance

of mitigating negative environmental impacts of some materials during their life cy-

cle, thus making Europe the world leader in the capabilities related to exploration,

extraction, processing, recycling and substitution by 2020. As part of its Strategic

Implementation Plan (SIP), the EIP will be expected to set out impact targets to meas-

ure its success, for example in terms of major reductions in import dependency of

some of the most critical raw materials.

Opinion of the European Eco-

nomic and Social Committee

on the „Communication from

the Commission to the Euro-

pean Parliament, the Council,

the European Economic and

Social Committee and the Co-

mmittee of the Regions — For

an European Industrial Re-

naissance“ COM(2014) 14 fi-

nal

Among EESC recommendations: the goal of greening European industries to be ac-

companied by a strong drive towards more new technology and knowledge-based,

higher value-added, competitive industrial and service sectors; all players, including

employees and employers, to be involved in creating a favourable, predictable envi-

ronment for industry, with initiatives based in regions; every reasonable measure to

be taken to reduce European energy prices. The EESC supports the Commission's

intentions on raw materials diplomacy and its plans to eliminate price distortions on

inputs for industry. Exploration and exploitation of raw materials within the EU

should be stepped up and relevant regulation should be harmonised. As for legislative

initiatives on resource efficiency and waste, they should be designed carefully in or-

der to deliver optimal results while avoiding unnecessary cost burdens (in the short

term) for companies. Policy neutrality in access to biomass is needed for efficient

application of the cascade principle in the use of biomass.

Bioeconomy development in

the EU regions. Mapping of

the EU Member States’ / re-

gions’ Research and Innova-

tion plans & Strategies for

Smart Specialisation (RIS3)

on Bioeconomy. Framework

Contract 2014.CE.16.BAT

Lot 2. Final Report. 28.2.2017

By 2030, applications of biotechnology could account for 2.7 percent of the GDP.

Well before 2030, biotechnology will be used in the development of all new pharma-

ceuticals and most new varieties of large market crops such as wheat, soy beans,

potatoes and cotton. Bioeconomy will create winners and losers, often within the

same sector. The full benefits of the emerging bioeconomy will not develop without

purposeful goal-oriented policy. This will require leadership, primarily by gover-

nments but also by leading firms, to establish clear goals for the application of bio-

technology to primary production, industry and health; to put in place the structural

conditions required to achieve success such as obtaining regional and international

agreements, and to develop mechanisms to ensure that policy can flexibly adapt to

new opportunities. Many regions in Europe have a low level of bioeconomy maturity,

i.e. cannot fully exploit the potential of bioeconomy on their own. Further develop-

ment of bioeconomy-related R&I activities of the EU regions and Member States

would require, at least: a common definition/classification of bioeconomy, for

bioeconomy-related economic and research activities and for bioeconomy maturity

in the EU regions that allows for monitoring and benchmarking bioeconomy deploy-

ment and support knowledge transfer; a coordinated support from the EU level to

cities and regions in strategic planning and communication within a streamlined and

integrated EU strategy and policy framework for bioeconomy. Also the knowledge

exchange between Member States and regions should be supported/encouraged; stra-

tegic planning and leadership to coordinate, align and combine efforts on R&I, ac-

cording to the different bioeconomy profiles and maturity levels; a more specialised

support on the development of value chains according to different bioeconomy pro-

files and maturity levels; support in engaging traditional sectors (e.g. agriculture,

trade, food, fisheries etc.) and, in particular, SMEs, in conversion processes towards

the bioeconomy; support on developing transdisciplinary and specific bioeconomy

competences and skills, both for research and academia and in businesses; better ac-

cess to finance for small scale demo activities and pilot plants until new value chains

and new technologies reach a sufficient TRL level to be market ready; more synergies

and better coordination in funding and investments.

104

Horizon 2020. The Fra-

mework Programme for Re-

search and Innovation, Brus-

sels, COM(2011)

Under Horizon 2020, the EU identified seven priority challenges where targeted in-

vestment in research and innovation can have a real impact. One of these is Societal

Challenge, addressing a wide range of the key EU policy priorities: 1) the call “Inno-

vative, sustainable and inclusive Bioeconomy” (ISIB) runs in 2014 with a budget of

44.5 million. Known throughout the former research funding programme (FP7) as

Knowledge-based Bioeconomy (KBBE), the call is now more generally designated

as Bioeconomy; 2) the calls "Sustainable Food Security" (138 M€ in 2014) and "Blue

Growth" (100 M€ in 2014) contribute to cover other important areas of Bioeconomy.

Altogether, the budget for the three calls will serve to further implement Bioeconomy

in Europe where at least five countries (Finland, Germany, Ireland, Sweden and

Norway) already have approved strategies at governmental level.

Industrial Biotechnology and

Climate Change. Opportuni-

ties and Challenges. OECD,

2011

This paper explores the potential role of industrial biotechnology in the bio-based

economy and examines emerging trends, the impact of innovation, the convergence

of technologies, and goes on to identify the challenges involved. It concludes with a

need for an integrated and strategic approach to allow industrial biotechnology to

fulfil its potential in the struggle with climate change. Industrial biotechnology has

suffered a lack of investment at all levels, and there is a serious mismatch between

future expectations of this industry and this low level of investment. Policy interven-

tion is seen to be required across three broad criteria – social/environmental, indust-

rial performance and economical. To make all this happen, not only national but also

international policy is necessary in a rapidly globalising world.

OECD International Futures

Programme “The Bioeco-

nomy to 2030: Designing a

Policy Agenda. Main Fin-

dings and Policy Conclu-

sions”. OECD, 2009

The role of biotechnology could play in addressing what are considered the most

serious challenges to world economies and societies over the next decades. These

challenges include providing food, water, energy, healthcare and other resources and

services to the world that will see its population increase by a third in the face of

mounting environmental stresses over the next 20 years. Bioeconomy may have a

major impact in many of these areas to ensure long term economic and environmental

sustainability. The following are the main policy conclusions: 1) to prepare the foun-

dation for long-term development of bioeconomy (to encourage the application of

biotechnology in agriculture, to support long-term follow-up research into health

outcomes and to reward environmentally sustainable technologies in industry); 2) to

reverse the neglect of agriculture and industrial biotechnologies; 3) to prepare for a

costly but beneficial revolution in healthcare; 4) to turn the potentially disruptive

power of biotechnology to economic advantage (several biotechnologies that promise

productivity improvements, better health or environmental sustainability could dis-

rupt current business models and economic structures); 5) to reduce barriers to bio-

technology innovation (high research costs, regulatory barriers and market concent-

ration can prevent new entrants, hindering biotechnological innovation, especially

for small market applications); 6) to promote the integration of biotechnology re-

search across commercial applications (coordinating policies across government mi-

nistries has always been a challenge); 7) to create an ongoing dialogue among gover-

nments, citizens and firms.

The Application of Biotech-

nology to Industrial Sustaina-

bility – A Primer. OECD,

2001.

Developing a sustainable economy more extensively based on renewable carbon and

eco-efficient bioprocesses (a bio-based economy) is one of the key strategic challen-

ges for the 21st century. At present, the global economy depends to a large extent on

energy, chemicals and materials derived from fossil carbon sources, mainly petro-

leum. Petroleum provides us with fuels for transportation and heating. It also yields

synthetic chemicals for producing plastics, paints, dyes, adhesives and a wide range

of other useful industrial and consumer products. These developments have contri-

buted to strong economic growth and employment and have literally transformed our

global society. Improved understanding of biodiversity, ecology, biology and bio-

technology is making it possible both sustainably to increase biomass productivity in

forestry and agriculture as well as to utilise biomass and waste organic materials in a

highly efficient and sustainable manner. Without such advances in science and tech-

nology, the transition to a bio-based economy would result in rapid depletion of re-

newable resources and environmental degradation. Thus, advances in science and

technology are making it possible to have an economy where industrial development

and job creation are not in opposition to environmental protection and quality of life.

Getting there will be a major challenge, requiring effective tools to assess technology,

processes and products for sustainability as well as policies that encourage sustai-

nable production and consumption.

http://ec.europa.eu/programmes/horizon2020/node/113

http://ec.europa.eu/programmes/horizon2020/node/113

http://ec.europa.eu/geninfo/query/action?query_source=RESEARCHPP&language=en&text=#queryText=Innovative%2C+sustainable+and+inclusive+Bioeconomy&tab=restricted&summary=summary

http://ec.europa.eu/geninfo/query/action?query_source=RESEARCHPP&language=en&text=#queryText=Innovative%2C+sustainable+and+inclusive+Bioeconomy&tab=restricted&summary=summary

http://ec.europa.eu/geninfo/query/action?query_source=RESEARCHPP&language=en&text=#queryText=Sustainable+Food+Security&tab=restricted&summary=summary

http://ec.europa.eu/geninfo/query/action?query_source=RESEARCHPP&language=en&text=#queryText=blue+growth&tab=restricted&summary=summary

http://ec.europa.eu/geninfo/query/action?query_source=RESEARCHPP&language=en&text=#queryText=blue+growth&tab=restricted&summary=summary

105

Having examined the EU and OECD strategic documents related to the development of

bioeconomy (Table 11) and conducted the analysis of their content, the main directions of expansion

of bioeconomy at the EU and international level were identified.

Having summarised the analysis of the content of the EU strategic documents, the following

was determined:

− bioeconomy strategy shall be focused on three areas: investment in research, innovation

and skills; strengthening policy interaction and participation of stakeholders; increasing

markets and competitiveness in bioeconomy sectors;

− many European regions have a low level of bioeconomy maturity, thus cannot fully exploit

their bioeconomy potential themselves. In pursuit of its better exploitation, maturity of

economic and research activities must be assessed in the EU regions, monitoring and com-

paring the development of bioeconomy and supporting knowledge transfer; provide better

specialised support for the development of value chains according to different bioeconomy

profiles and maturity levels; seek for a greater bioeconomic synergy at the EU level;

− advances in bioeconomy research and implementation of innovation would create condi-

tions for Europe to improve the management of biological resources, open up new and

more diverse markets of food and biotechnology products. European Innovation

Partnership would also serve this purpose allowing reducing Europe’s dependence on im-

ported raw materials which are very important for European industry;

− bioeconomy shall be developed to align the supply with food, sustainable use of renewable

resources for industrial purposes and ensurance of environmental protection. In order to

ensure this coherence, transition to circular economy the circle whereof retains the value

of products, materials and resources for as long as possible also generating the least

possible amount of waste is very important;

− special focus should be placed on the development of biotechnologies, because they will

become the basis for the development of all bioeconomy sectors. To develop more com-

petitive industrial and service sectors based on the latest technology, knowledge and

higher value added. To apply cascading principle of the use of biomass. Bioeconomy will

create winners and losers, often in the same sector, thus creating the greatest possible value

added will be impossible without a targeted, goal-oriented policy. Future bioeconomy

should be focused on the creation of a higher value rather than the use of biomass in the

production of bioenergy, i.e. manufacture of chemicals and materials, because it does not

require such large volumes of biomass as raw materials;

− bioeconomy shall be developed in the Baltic Sea region in order to ensure that policy of

all levels (local, regional, national and the EU) contributed to the development of a com-

petitive, stable and sustainable region. In the performance of the regional policy, good

governance with uniform participation and resource sharing, using ecosystems-based ma-

nagement and planning maritime spaces, should be promoted; “Horizon 2020” programme

“Blue Growth” is also aimed at the implementation of these goals; sustainable develop-

ment – economic, social and environmental, is the greatest challenge of the Baltic Sea

region.

Summary of the analysis of the content of OECD strategic documents revealed that main

attention was devoted to efficient measures that allow assessing the sustainability of technologies,

processes and products as well as the policy promoting sustainable production and consumption. Not

only national but also international policy is necessary to this end, emphasizing therein the necessary

106

research and technology advances, because without the advances, renewable resources would rapidly

die out, and the environment would degrade. Thus biotechnology receives exclusive attention.

The analysis of the strategic documents of the EU and OECD related to the development of

bioeconomy implies the following main recommendations for bioeconomy development in Lithuania:

− main attention should be devoted to the use of biotechnologies targeted at manufacture of

products of higher value (chemicals and materials) rather than the bioenergy, and the

creation and development of biotechnologies for smaller waste and processing of this

waste;

− cascading principle in the use of biomass should be applied;

− Lithuanian science and business should be encouraged to take over the knowledge,

experience and commercialised products from the EU member states that have a high level

of bioeconomy maturity;

− a common policy of the development of bioeconomy of the Baltic Sea Region and the EU

Member States should be formed.

5.2. Review of bioeconomy development of the European Union countries

Bioeconomy turnover

According to the data of the bioeconomy report of the European Commission’s Joint Research

Centre for 201699, in 2014, bioeconomy turnover of the EU-28 states totalled about EUR 2.2 trillion,

with 18.6 million people employed in the sector. Bioeconomy accounts for an important share of the

entire EU economy (about 9 percent). It was determined that about three fourths of persons employed

in the EU bioeconomy worked in the manufacture of food, beverages and tobacco generating about

two thirds of bioeconomy turnover. The industry of food, beverages and tobacco generated more than

a half of bioeconomy turnover, while agriculture accounted for 17 percent (0.38 trillion EUR). In

terms of sectors, the contribution of the biomass production sector in bioeconomy turnover accounted

for 20 percent, meanwhile its contribution into the overall employment of bioeconomy was 55 percent;

respective contribution of fully bio-based manufacturing industry comprised 67 and 35 percent and

of partially bio-based production – 13 and 9 percent.

Data of the above-mentioned report show that during the period from 2004 to 2014 the number

of persons employed in the EU bioeconomy decreased by 2.2 million (or 10.5 percent), while bioeco-

nomy turnover increased by EUR 140 billion (or 7 percent). It should be noted that the greatest re-

duction in the number of employees was in agriculture (by 1.2 million) due to its constant restructu-

rization, also, in manufacture of wood and furniture made of wood (by 390 thousand), bio-based

textile and clothes (300 thousand) and food, beverages and tobacco (by 200 thousand). It should be

noted that the growth of the EU bioeconomy turnover was mainly determined by the development of

food production (the turnover increased by EUR 98 billion), and slightly less – by changes in agri-

culture, where the turnover increased by EUR 26 billion, also in the production of chemical substances,

medicines, plastics and rubber based solely or partially on raw materials of biological origin.

99 European Commission. 2017. JRC Science for Policy Report: Bioeconomy Report 2016. EUR 28468 EN.

107

Figure 46 illustrates bioeconomy turnover in the EU countries in relative and absolute units.

In terms of bioeconomy turnover per person, Ireland, Finland and Denmark were leaders in 2014

(with about EUR 8800). Belgium, the Netherlands, Sweden and Austria had a somewhat lower

bioeconomy turnover (of EUR 6200 – EUR 6900). Among the five countries generating most bioeco-

nomy turnover, results of three countries, namely, France, Germany and Italy, were higher (EUR

4800 – EUR 5100 per person) than the EU-28 average (which is EUR 4400 per person), while two

countries, namely, Spain and the United Kingdom, had results lower than the EU-28 average (EUR

4100 and EUR 3300 per person, respectively). In Lithuania, bioeconomy turnover per person was

EUR 3800, which is lower than the EU-28 average.

Figure 46. Bioeconomy turnover in the EU countries

Source: authors elaboration on information in JRC Science for Policy Report: Bioeconomy Report 2016. European Co-

mmission. 2017.

Data of turnover in absolute terms for 2014 presented in that same Bioeconomy Report show

that five countries generate almost two thirds (or EUR 1.4 billion in 2014) of bioeconomy turnover

in the EU: Germany (18.3 percent of the total EU bioeconomy turnover), France (15.1 percent), Italy

(13.2 percent), the United Kingdom (9.5 percent) and Spain (8.6 percent). Another one tenth is gene-

rated by Poland (5.1 percent) and the Netherlands (5 percent), while the remaining one fourth – by

all other EU member states the contribution of each of which into the overall EU turnover ranged

from 0.01 percent (Malta) to 3.5 percent (Belgium). Also, turnover data by bioeconomic activities in

the EU countries revealed that:

France, Germany, Italy, the United Kingdom and Spain are the largest manufacturers of

food, beverages, tobacco products and agricultural produce. In 2014, the total turnover of

their food sector accounted for more than two thirds of the entire turnover of this sector in

the EU. Also, these five countries generated about two thirds of manufacture of bio-based

chemicals, pharmaceuticals, plastic and rubber sectors of the EU;

The largest manufacturers of textiles, wearing apparel, leather and related products in the

EU are Germany, France, Italy and Spain. Their total turnover in 2014 accounted for

74 percent of the total turnover of manufacture of textiles, wearing apparel, leather of the

EU-28 member states;

Spain, the United Kingdom and Italy are the largest manufacturers of fishing and aquacul-

ture products in the EU. Their contribution into the total turnover of the EU fisheries sector

accounted for 68 percent in 2014;

More than a half of manufacture of the EU wood and its products as well as of furniture

made solely or partly of wood is concentrated in Germany, Italy, France and the United

9.59.0 8.8

6.9 6.7 6.5 6.2

5.1 5.0 4.8 4.4 4.1 3.8 3.7 3.3 3.3 3.2 3.0 3.0

2.82.7 2.5 2.5 2.4 2.3

1.8 1.8

0.7

0

50

100

150

200

250

300

350

400

450

0

2

4

6

8

10

Irel

and

Fin

land

Den

mar

k

Bel

giu

m

Net

her

lands

Sw

eden

Aust

ria

Fra

nce

Ger

man

y

Ital

y

Est

onia

Spai

n

Lit

huan

ia

Port

ugal

Unit

ed K

ingd

om

Lat

via

Slo

ven

ia

Pola

nd

Luxem

bo

urg

Cze

ch R

epubli

c

Cy

pru

s

Gre

ece

Hun

gar

y

Cro

atia

Slo

vak

ia

Ro

man

ia

Bu

lgar

ia

Mal

ta

in 2014thousand EUR per person employed billion EUR

108

Kingdom. In terms of turnover, these four countries generated 54 percent of turnover of

this sector in the EU in 2014;

Sweden was also determined to have generated 16 percent of the total turnover of the fo-

restry and logging sector of the EU-28 in 2014. That same year, turnover of paper industry

of Finland accounted for 10.6 percent of the total turnover of this industry in the EU-28,

while Belgium generated about 9 percent of the total bioelectricity manufacture turnover

of the EU-28 countries.

Different model of bioeconomy100 with different specialisation and contribution to national

economy is typical of the EU member states due to very diverse natural resources and different his-

torically formed orientation of the country’s economy. The previously mentioned EU bioeconomy

report revealed the specialisation of bioeconomy of certain EU countries. The analysis of bioeconomy

turnover of 2014 allowed determining that:

the bioeconomy of Malta has been concentrated in two areas: agriculture generated

42 percent of the country’s bioeconomy turnover and aquaculture – 32 percent;

bioeconomy of Sweden, Finland, Latvia and Lithuania is significantly focused on the fo-

restry sector, the turnover of which accounted for more than a tenth of national bioeconomy

turnover of these countries (compared to the EU average of 2 percent);

Italy and Portugal generated about a sixth of the total bioeconomy turnover in manufacture

of textiles and wearing apparel (17 and 15 percent, respectively) (compared to the EU ave-

rage of 5 percent);

Estonia and Latvia stand out in terms of manufacture of wood and furniture made solely or

partly of wood – the turnover of this sector accounted for about a third and more (38 and

33 percent, respectively) of their national bioeconomy turnover (compared to the EU ave-

rage of 8 percent);

paper production of Finland and Sweden accounted for 9 and 22 percent of the national

bioeconomy turnover, respectively, compared to the EU average of 8 percent;

Ireland and Denmark generated about a sixth of bioeconomy turnover in sectors of manu-

facture of bio-based chemicals (excluding biofuels), pharmaceuticals, plastic and rubber

(with the EU average being 6 percent).

Furthermore, having examined the contribution of separate sectors of bioeconomy or bio-

based manufacturing industries to GDP and employment of separate EU countries according to the

data of national Eurostat accounts on the GVA and persons employed under NACE 2 activities, areas

of bioeconomy where countries specialise compared to the overall EU bioeconomy were identified.

The main limitation of this analysis is the fact that there are no data on GVA created using solely or

partly bio-based raw materials by partly bio-based manufacturing types. The same limitation also

applies due to the lack of information on persons employed in this sector. Thus when analysing both

of these indicators, the focus will be placed on the sectors of biomass production and fully bio-based

manufacturing, which, as previously mentioned, account for the majority of turnover (87 percent) in

the EU bio-economy and for more than 90 percent of the employed. The analysis presented below

reveals a sufficiently clear view of peculiarities of bioeconomy specialisation of the EU countries.


109

Contribution of sectors of bioeconomy to GDP

The specialisation (or concentration) of bioeconomy of a particular EU country can be deter-

mined using a relative indicator – location quotient (LQ). In this Study, LQ is calculated based on

two variables, namely, GVA and employment. In the first case, LQ is calculated as a ratio between

the share of GVA of the bioeconomy sector (or bioeconomy activity) in a certain EU country and a

respective share throughout the EU. LQ shows how specialised (concentrated) a country is in a certain

bioeconomy sector (or a separate economic activity) compared to the entire EU. In the second case,

LQ is calculated as a ratio between the share of persons employed in bioeconomy sector (or a separate

economic activity) in the total number of employees in a separate EU country and the respective share

throughout the EU. This indicator illustrates the concentration of the country’s labour market in a

certain bioeconomy sector or in a separate economic activity compared to the entire EU.

According to absolute and relative units of GVA presented in Figures 47, 48 and Table 15 in

Annex 9, it was determined that the majority of the EU countries are engaged in concentrated bio-

mass and/or fully bio-based manufacturing. In 2014, the share of both sectors in GDP was greater

(ranging from 4 to 10.1 percent) than the EU average (3.9 percent) in nineteen countries (out of the

26 analysed countries, Malta and Luxembourg were not included in the analysis due to the lack of

data). Meanwhile, the contribution of both sectors to GDP of the United Kingdom, Germany,

Denmark, Belgium, Cyprus and Sweden (from 2.4 to 3.6 percent) was lower than the EU average,

while in France it corresponded to the EU average, despite the fact that France and Germany are the

largest manufacturers of agricultural and food products in the EU, while the United Kingdom ranks

fifth.

Biomass production sector

Romania and Bulgaria are the EU countries specialised in biomass production the most. The

share of GVA in GDP created in this sector in both countries (4.7 and 4.6 percent, respectively) is

more than three times greater than the EU-28 average (1.4 percent). Hungary and Slovakia are two

other countries highly specialised in biomass production, where the contribution of this sector to GDP

(having reached 4 percent) was by almost 2.8 times greater than the EU-28 average. The significance

of the biomass sector to the national economy in other five countries, including Lithuania (also Cro-

atia, Greece, Estonia and Latvia), is more than twice greater than in the EU. These countries, except

for Latvia and Estonia, have concentrated biomass production in agriculture the most out of all the

EU counties. Its contribution to GDP in Romania (4.3 percent), Bulgaria (4.1 percent) and Hungary

(3.8 percent) was more than 3 times greater than throughout the EU (1.2 percent), and in Slovakia

(3 percent), Greece (2.9 percent), Lithuania (2.8 percent) and Croatia (2.7 percent) it was greater by

almost two and a half times.

Latvia, Finland, Estonia, Sweden and Slovakia are countries most concentrated in forest and

logging out of all the EU countries. In 2014, the share of this subsector in GDP in Latvia and Finland

(1.7 percent in each) was ten times greater than throughout the EU (0.16 percent), in Estonia

(1.2 percent) it was greater by seven and a half times, while in Sweden and Slovakia (0.9 percent in

each) – by more than five times. Lithuania is also specialised in forestry and logging – here the share

of the created GVA in GDP (0.6 percent) is more than three times greater than the EU-28 average.

Greece and Croatia are most specialised in fishing and aquaculture, where the share of this

biomass production sector in GDP was respectively by 8.3 and 6.3 times greater than the EU-28

average. The specialisation of fishing and aquaculture is also important in Portugal, Cyprus and Es-

tonia, where its contribution into GDP is more than 3 time greater than throughout the EU.

110

Figure 47. Share of bioeconomy gross value added in the GDP in the EU countries

* the data points represent both the bio-based and the non-bio-based manufacturing combined due to the lack of data availibility needed

for separate indicators; ** excluding the share of partly bio-based sector due to the lack of Ireland’s data on GDP in chemistry (C20)

and Sweden’s data on GDP in chemistry (C20) and medicines and pharmaceuticals industry (C21) . Source: authors calculations based

on Eurostat data: National accounts aggregates by industry (up to NACE A*64) and GDP and main components (output, expenditure

and income)

Source: authors elaboration on information in Eurostat (National accounts aggregates by industry (up to NACE A*64))

Fully bio-based manufacturing sector

Lithuania, Romania and Latvia are the EU countries specialised in bio-based manufacturing

sector the most. Here, the share of this sector in GDP (5.8, 5.4 and 5.1 percent, respectively) is more

than twice greater than the EU-28 average (2.4 percent). On the other hand, the contribution of bio-

based manufacturing sector to GDP in Lithuania and Latvia is close to the contribution of the biomass

production sector (see Figure 2 and Table 1 of Annex 1).

Food industry together with the manufacture of beverages and tobacco products is best deve-

loped part of the fully bio-based manufacturing sector in the EU countries, except for Estonia, the

larger share of GDP whereof consists of manufacture of wood and its products (2.2 percent), and

Latvia, where the contribution of both sectors (food and wood) in GDP is nearly the same. Moreover,

in the majority of countries, food industry creates the highest value added compared to biomass pro-

duction sectors, as illustrated in Figure 3. Lithuania, Ireland and Romania are the EU countries that

specialise in the production of food, beverages and tobacco products the most. Here the share of this

sector in GDP (4.0, 4.5 and 4.5, respectively) is 2 – 2.5 times greater than in the EU.

0.6

0.7

1.4

0.6

1.8

1.2

1.4

1.5

1.2

1.9

1.7

2.1

2.0

2.3

2.5

2.4

1.3

3.3

4.0

2.6

4.0

3.1

3.5

4.6

3.1

3.4

4.7

1.8

2.0

1.6

2.4

1.7

2.4

2.4

2.4

2.8

2.1

2.4

2.5

3.1

3.1

2.9

3.3

4.7

3.2

2.5

4.1

2.9

4.4

4.2

3.6

5.1

5.8

5.4

2.5

4.3

5.0

4.7

0.9

3.5

2.4

3.2

4.0

2.8

6.3

4.1

3.1

4.5

2.5

1.5

4.4

3.9

3.7

2.8

3.1

4.1

1.9

6.6

4.2

0 2 4 6 8 10 12 14 16

United KingdomGermanyDenmarkBelgium

CyprusSweden**

EU (28 countries)FranceAustria

ItalyNetherlands

SloveniaPortugal

SpainCzech Republic

FinlandIreland**

GreeceHungary

PolandSlovakiaEstoniaCroatia

BulgariaLatvia

LithuaniaRomania

persent of GDP, 2014

Biomass production


Partly bio-based manufacturing*

1.5

1.4

1.3

1.9

1.5

1.0

1.8

2.1

1.6

1.5

2.1

1.3

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2.0

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2.0

2.9

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2.0

3.5

3.0

2.5

4.0

4.6

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1.1

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1.6

0,3

1.2

1.4

0.8

1.8

1.6

1.5

1.4

2.0

1.8

0.7

1.1

2.9

3.8

2.3

3.0

1.8

2.7

4.1

1.3

2.8

4.3

0 2 4 6 8 10 12

United KingdomGermanyDenmarkBelgium

CyprusSweden

EU (28 countries)FranceAustria

ItalyNetherlands

SloveniaPortugal

SpainCzech Republic

FinlandIrelandGreece

HungaryPoland

SlovakiaEstoniaCroatia

BulgariaLatvia

LithuaniaRomania

persent of GDP, 2014

C10-C12 - Manufacture of food, beverages and tobacco

A01 - Agriculture

A02 - Forestry and logging

C16 - Manufacture of wood

C17 - Manufacture of papers

A03 - Fishing and aquaculture

111

Figure 48. Gross value added in biomass production and fully bio-based manufacturing subsectors in the EU co-

untries

Source: authors elaboration on information in Eurostat (National accounts aggregates by industry (up to NACE A*64))

Latvia and Estonia are most specialised in manufacture of wood and its products in the EU.

The share of this industry in GDP is almost ten times greater than the EU average in Latvia and almost

9 times greater – in Estonia. Lithuania and Slovakia are the other two countries specializing in the

production of wood and its products, with the contribution of this sector in GDP being 4-5 times

greater than the EU-28 average.

Finland is most specialised in manufacture of paper and its products among all the EU countries;

its share in GDP (1.4 percent) is more than four times greater than that of the EU (0.3 percent). Swe-

den ranks second, while Poland and Austria are third and fourth in terms of the contribution of the

paper industry to GDP.

Growth in bioeconomy sectors

Figure 49 presents data on the change in GVA in 2010-2014 calculated according to the chai-

ned volume index (in 2010 = 100) illustrating which EU countries and which bioeconomy subsectors

increased or decreased in the last period of average duration. Forestry and logging grew the fastest

throughout the EU (by an average of 3.1 percent per year); paper industry and fishing increased slowly

(by 1 percent per year) with agriculture and food, beverages and tobacco sectors (0.4 percent and

0.3 percent per year, respectively) experiencing a very slow growth. Meanwhile, wood industry

(excluding furniture production) decreased by 8.3 percent, however, these bioeconomy subsectors

experienced a very rapid or rapid growth in certain EU countries:

Fishing grew very rapidly in Slovakia, Romania and Cyprus – by 25 percent in the first

two countries, and 14 percent – in Bulgaria per year. The fishing sector also grew rapidly

in Lithuania (by an average of 8.5 percent per year), Hungary, Austria, Spain and Greece

(more than 5 percent per year);

Slovakia can also be distinguished for a very rapid growth of the agricultural sector (by an

average of 20 percent per year). A rapid growth in agriculture was also observed in Estonia,

Latvia and Hungary (by 9.2, 8 and 6 percent per year, respectively), while agriculture in

Lithuania and the United Kingdom increased by more than 4 percent per year;

0

20 000

40 000

60 000

80 000

100 000

Fra

nce

Ger

man

y

Ital

y

Spai

n

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Net

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Aust

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m

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Est

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Cy

pru

s

At current prices (mill. EUR), 2014Manufacture of food, beverages and tobacco

Agriculture



Manufacture of wood

Manufacture of papers

112

Figure 49. Change in the gross value added in the bioeconomy subsectors between 2010 and 2014 in the EU co-

untries (±percent)

Source: authors elaboration on information in Eurostat (National accounts aggregates by industry (up to NACE A*64), Based on

Chain linked volumes index (2010 = 100))

The forestry and logging subsector experienced most rapid growth in Greece, the United

Kingdom, Estonia and Romania (by an average of 11-14 percent per year), it also rapidly

grew in Finland, Germany, Denmark, Slovakia and Lithuania (by an average of 5-9 percent

per year). Moreover, the industry of wood and its products increased most rapidly in Esto-

nia, Slovakia and Lithuania – by 14.1, 8.3 and 7.1 percent per year;

Poland and Bulgaria are the countries with the fastest growing sector of food, beverages

and tobacco (by an average of 7 percent per year, each). In Lithuania and Belgium it incre-

ased by an average of 4 percent, while in the Netherlands – by almost 3 percent per year.

-26.1

-23.9

-23.2

-16.5

-12.3

-11.2

-0.7

-0.5

0.2

1.7

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3.1

4.2

5.1

8.2

8.8

12.6

14.1

14.3

16.9

17.6

23.9

31.9

36.7

80.8

-100 -50 0 50 100

Croatia

Germany

Cyprus

Belgium

Sweden

Finland

Portugal

Italy

Poland

EU (28 countries)

Bulgaria

Greece

Netherlands

Spain

France

Austria

Slovenia

Denmark

Czech Republic

Romania

United Kingdom

Lithuania

Hungary

Latvia

Estonia

Slovakia

A01 - Agriculture

-25.5

-10.4

-8.9

-6.6

-2.9

-1.9

1.4

2.9

3.5

3.5

8.2

8.3

9.7

11.6

12.4

15.6

21.1

22.6

23.3

25.1

32.1

34.8

44.1

47.5

55.0

57.2

-50 0 50 100

Cyprus

Latvia

Bulgaria

Hungary

Netherlands

Austria

Italy

Croatia

Belgium

Czech Republic

Sweden

Spain

France

Portugal

EU (28 countries)

Poland

Finland

Slovenia

Germany

Denmark

Slovakia

Lithuania

Romania

Estonia

United Kingdom

Greece

A02 - Forestry and logging

-31.1

-27.6

-26.6

-25.1

-21.0

-15.8

-15.5

-15.1

-9.7

-6.9

-1.6

0.6

2.1

4.0

11.1

13.6

13.9

20.0

22.0

22.6

23.1

33.8

56.7

90.0

-100 0 100

Netherlands

Latvia

Estonia

Italy

Sweden

Finland

Denmark

Croatia

Slovenia

Portugal

Belgium

Czech Republic

France

EU (28 countries)

Poland

United Kingdom

Germany

Greece

Spain

Austria

Hungary

Lithuania

Bulgaria

Cyprus

A03 - Fishing and aquaculture

-26.5

-18.3

-15.0

-13.4

-12.2

-11.0

-4.9

-4.7

-4.1

-3.4

-3.4

-2.2

-1.7

-1.5

-0.2

1.2

2.0

3.4

4.1

6.4

6.7

11.5

16.1

16.6

27.9

27.9

-50 0 50 100

Cyprus

Spain

Finland

Sweden

Hungary

Denmark

Slovakia

Croatia

Czech Republic

Greece

Austria

Romania

Latvia

Germany

Estonia

EU (28 countries)

Slovenia

France

Italy

United Kingdom

Portugal

Netherlands

Lithuania

Belgium

Bulgaria

Poland

C10-C12 – Manufacture of food,

beverages and tobacco

-70.4

-57.8

-24.7

-23.1

-22.0

-20.6

-17.4

-13.9

-13.2

-9.5

-9.2

-8.8

-8.3

-7.6

-4.6

-3.7

-2.3

-2.3

5.7

7.7

9.5

12.8

21.2

28.2

33.1

56.4

-100 -50 0 50 100

Greece

Cyprus

Spain

Czech Republic

Italy

Romania

Belgium

Hungary

Sweden

United Kingdom

Germany

Finland

EU (28 countries)

Netherlands

Portugal

Croatia

Denmark

Slovenia

Austria

France

Poland

Latvia

Bulgaria

Lithuania

Slovakia

Estonia

C16 – Manufacture of wood

-39.5

-27.5

-22.0

-15.9

-14.7

-12.4

-6.5

-5.8

-3.9

-3.1

-3.0

-3.0

-1.1

0.0

2.0

2.8

4.5

4.9

5.6

7.0

7.2

12.2

24.7

26.3

27.5

52.8

-60 -40 -20 0 20 40 60

Romania

Greece

Cyprus

Denmark

Hungary

Spain

Estonia

Netherlands

Czech Republic

Sweden

Bulgaria

United Kingdom

Portugal

Croatia

Finland

Slovenia

EU (28 countries)

Latvia

France

Italy

Slovakia

Germany

Poland

Austria

Belgium

Lithuania

C17 - Manufacture of papers

113

The growth of food, beverages and tobacco sectors was negative in as many as fifteen EU

countries (out of the analysed 26 countries);

Lithuania was the leader in terms of the growth of the paper industry (by an average of

13.2 percent per year), which was twice greater than the growth rate of this sector in Bel-

gium, Austria and Poland, which ranked second-fourth in terms of this indicator, and

Austria and Poland, which reached the average annual growth of 6-7 percent.

Thus Lithuania is among the leaders in terms of bioeconomy growth in all subsectors of bio-

mass production and fully bio-based manufacturing – it ranks first in terms of growth of the paper

industry, third – in terms of growth of fishery, fourth – in terms of growth of agriculture, food, beve-

rage, tobacco and wood (except for the production of furniture) sectors and fifth – in terms of the

growth of forestry and logging subsector.

Employment in bioeconomy sectors

As previously mentioned, 18.6 million people were employed in bioeconomy of the EU, and

more than 90 percent of them worked in biomass production and fully bio-based manufacturing. Due

to the previously-mentioned lack of data, comparative analysis of employment in the EU bioeconomy

was conducted by activities of these two sectors, as illustrated in Figures 50-51. Due to the lack of

data, Malta and Luxembourg were not included into the analysis. Most jobs were concentrated in the

biomass production sector in more than half of the EU countries, including Lithuania, compared to

every other fully or partly bio-based manufacturing sector, and in biomass production of Romania,

Bulgaria, Greece, Poland and Portugal, job concentration was greater than in both sectors together.

Moreover, most persons engaged in bioeconomy were brought together in agriculture in the majority

of the EU countries, except for Germany, the United Kingdom, Belgium, Estonia and Cyprus, where

most of them work in manufacture of food, beverage and tobacco products, as illustrated in Figure 50.

Figure 50. Employment in bioeconomy subsectors of the EU countries

Source: authors elaboration on information in Eurostat: National accounts employment data by industry (up to NACE A*64)

According to relative values of employment in bioeconomy sectors illustrated in Figure 6 and

Table 16 of Annex 9, namely, the share of all the persons employed in the country and LQ in 2014,

the following peculiarities of bioeconomy labour market in the EU countries were observed:

workforce concentration in agriculture was the greatest in Romania and Bulgaria compared

to the entire EU. In both countries, the proportion of persons employed in agriculture a-

mong persons employed in the economy is a few times greater than in the EU, i.e. the share

0

500

1 000

1 500

2 000

2 500

3 000

Ro

man

ia

Pola

nd

Ger

man

y

Ital

y

Fra

nce

Spai

n

Unit

ed K

ingd

om

Bu

lgar

ia

Port

ugal

Gre

ece

Hun

gar

y

Cze

ch R

epubli

c

Net

her

lands

Aust

ria

Cro

atia

Sw

eden

Lit

huan

ia

Fin

land

Bel

giu

m

Irel

and

Slo

vak

ia

Den

mar

k

Lat

via

Slo

ven

ia

Est

onia

Cy

pru

s

Thousand persons employed, 2014Agriculture


Manufacture of wood

Manufacture of papers



114

of persons employed in Romanian agriculture was by 6.2 times greater, and in Bulgaria it

was by 4.1 times greater than the share of persons employed in the EU agriculture. The

share of workplaces concentrated in agriculture in Greece, Poland and Portugal was more

than twice greater than the average in the EU, Lithuania and Croatia – by three fourths, and

in Slovakia – by two thirds;

in Latvia, eight times greater workforce is concentrated in the forestry and logging labour

market compared to the entire EU (0.24 percent); it is 4.5 times greater in Slovakia, Estonia

and Lithuania, and 3-4 times greater in Finland, Croatia, Sweden and Slovenia. Moreover,

the highest workforce concentration in Latvia, Estonia and Lithuania is in the production

of wood and its products. The share of persons working in wood industry in Latvia and

Estonia is 5 times greater than the EU average and in Lithuania it is greater by more than

3 times;

Figure 51. The share of persons employed in bioeconomy sectors of all the persons employed in the EU countries

* the data points represent both the bio-based and the non-bio-based manufacturing combined due to the lack of data availibility needed

for separate indicators ; ** excluding the share of partly bio-based sector due to the lack of Sweden’s data on persons employed in

chemistry (C20) and medicines and pharmaceuticals industry (C21)

Source: authors elaboration on information in Eurostat: National accounts employment data by industry (up to NACE A*64)

Cyprus is characterised by a very high workforce concentration in fisheries, where the share

of persons employed (0.38 percent of all the persons employed in the country) is as many

1.4

1.3

2.2

1.5

2.3

2.5

2.7

3.7

3.3

4.1

3.2

4.4

4.4

4.9

4.1

5.6

3.7

6.7

8.3

7.4

10.8

9.5

9.2

12.2

11.5

19.4

29.3

1.7

2.6

1.8

2.8

2.4

2.2

2.8

2.7

3.4

2.9

4.0

3.1

3.2

2.9

3.8

2.8

5.5

3.7

3.2

5.9

3.3

5.0

5.5

3.3

4.7

4.1

3.2

2.3

3.4

3.3

4.0

2.9

3.0

5.3

5.6

3.2

6.3

3.7

3.0

4.1

1.8

3.7

5.7

4.8

6.1

3.9

7.0

5.5

6.0

2.5

6.1

7.4

7.4

0 5 10 15 20 25 30 35 40

United Kingdom

Belgium

Netherlands

Germany

Sweden**

Denmark

France

Italy

Slovakia

Spain

Czech Republic

Austria

Finland

EU (28 countries)

Cyprus

Ireland

Estonia

Hungary

Slovenia

Latvia

Portugal

Croatia

Lithuania

Greece

Poland

Bulgaria

Romania

percent of Total in all NACE activities, 2014

Biomass production


Partly bio-based manufacturing*

1.3

1.2

2.2

1.4

1.4

2.2

1.7

2.6

3.4

2.1

3.7

2.8

3.8

3.4

4.6

2.6

5.3

2.6

6.3

7.5

5.3

10.1

8.2

8.0

11.6

10.9

18.8

28.7

1.3

2.1

1.5

2.2

1.2

1.8

1.9

2.4

1.8

1.9

2.3

2.4

1.9

1.5

2.1

3.1

2.4

2.7

2.8

1.7

3.1

2.3

3.9

3.4

2.7

3.3

3.2

2.1

0 5 10 15 20 25 30 35 40

United Kingdom

Belgium

Netherlands

Germany

Sweden

Denmark

Norway

France

Italy

Slovakia

Spain

Czech Republic

Austria

Finland

EU (28 countries)

Cyprus

Ireland

Estonia

Hungary

Slovenia

Latvia

Portugal

Croatia

Lithuania

Greece

Poland

Bulgaria

Romania

percent of Total in all NACE activities, 2014

A01 - AgricultureC10-C12 - Manufacture of food, beverages and tobaccoA02 - Forestry and loggingC16 - Manufacture of woodC17 - Manufacture of papersA03 - Fishing and aquaculture

115

as 17 times greater than the EU average (0.08 percent). Also, a very high workforce con-

centration is in fisheries of Greece, Croatia and Portugal, where the share of employed

persons is 4-6 times greater than the EU average;

Finland and Sweden can be characterised by the highest workforce concentration in manu-

facture of paper and its products. The share of persons working in this sector in Finland is

greater by 2.9 times and in Sweden – by 2 times compared to the entire EU.

Meanwhile, changes in concentration of workforce in manufacture of food, beverages and

tobacco have not been that great among the EU countries as those determined in the agriculture,

logging, fisheries and wood manufacturing. The share of this industry in the labour market of separate

EU countries ranges from 1.2 to 3.9 percent and in the entire EU – about 2 percent (in 2014), while

the concentration of workforce therein is the highest in Croatia and Lithuania, where it is higher than

the EU average by 1.8 and 1.6 percent, respectively.

5.3. Good practice of the EU Member States in the development of bioeconomy and

opportunities of its adaptation in Lithuania

Good practice of the EU Member States in the development of bioeconomy was analysed and

summarised in three levels: 1) at the national strategic level of the EU Member States; 2) at the state

governance level of the EU Member States; 3) at bioeconomic cluster level of the EU Member States

and 4) at the level of good practice examples of research and the created products of the EU Member

States. Good practice of Ireland, Belgium, Denmark, Estonia, Spain, Italy, Latvia, the Netherlands,

France, Finland, Sweden and Germany was analysed and summarised. The opportunities for adapting

good practice in Lithuania have been provided for considering the situation in the Lithuanian bioeconomy

sector and the maturity stage.

Analysis of good practice of bioeconomy strategies of the EU Member States

5 out of 12 examined the EU countries have prepared bioeconomy strategies: Belgium and

Germany (2013), Finland (2014), Spain and Italy (2016). In addition to the bioeconomy strategy,

Germany has also prepared the “National Research Strategy Bioeconomy 2030” (2011). The Nether-

lands has developed the Bio-based Economy Strategy (2012) and Sweden – the Bio-based Economy

Research and Innovation Strategy (2012). Denmark set up the National Bioeconomy Advisory Coun-

cil in 2013, however, so far it does not have any bioeconomy strategy. Ireland, Estonia and France

plan to prepare a bioeconomy strategy, while the Ministry of Agriculture of the Republic of Latvia is

currently finishing up the drafting of such strategy in Latvia in cooperation with the University of

Agriculture of Latvia. The Ministry addressed the Nordic Council of Ministers’ Office for coopera-

tion in establishing the main bioeconomy strategic directions and activities and conveying best prac-

tice examples.

Having examined bioeconomy strategies of the EU countries, their structure was determined.

Usually, the strategy is started with the substantiation of its need (bioeconomy as an opportunity, a

global and regional context of its development and bioeconomy challenges). The next step is SWOT

or a different analysis, which allows identifying strengths and weaknesses, threats and opportunities

of the bioeconomy sector of the country preparing the strategy. All this allows forming the vision and

116

goals of bioeconomy, the pursuit of which shall be based on certain universally accepted principles.

Policy, R&D, education and training, biomass value chain, markets and competitiveness are the main

components of the strategy. Partnership at the EU and regional level is also presented in certain strat-

egies as a separate component. The action plan is formed and measures are provided for via the main

components of the strategy. Certain bioeconomy strategies are completed with the implementation of

the strategy, monitoring and impact assessment, also indicating specific measurement indicators, and

others – with an action plan. Italian bioeconomy strategy also contains the legal framework and stake-

holders.

Bioeconomy in Flanders101 states that research institutions, the business world, ports, civil

society and consumers are the key stakeholders and players in the transition to bioeconomy. The

government has a framework-creating and facilitating role. To create this framework and achieve the

vision, five strategic objectives have been formulated: 1) the development of a coherent Flemish po-

licy that supports and facilitates sustainable bioeconomy; 2) putting Flanders at the top for education

and training and research and innovation in future-oriented bioeconomy clusters; 3) biomass is to be

optimally and sustainably produced and used across the entire value chain; 4) strengthening of mar-

kets and competitiveness of bioeconomy sectors in Flanders; 5) Flanders is to be a key partner within

European and international joint ventures.

The German National Policy Strategy on Bioeconomy102 is based on these guiding principles:

food security takes priority over the production of raw materials for industry and energy internatio-

nally; paths of use with a higher value-adding potential must be given preference in the remainder of

the work on structuring the bioeconomy’s framework conditions; where possible and purposeful,

cascading use and coupled use of biomass should be applied; the aim to secure and strengthen the

competitiveness of bioeconomy in Germany and the areas of growth potential on the international

markets should always be kept in sight; having well-trained and well-informed specialist personnel

is imperative for the competitiveness of bioeconomy; the opportunities and framework conditions for

using key technologies and for effecting their transfer into commercial use need to be improved;

bioeconomy needs to satisfy increasingly challenging requirements from society in terms of the way

in which goods are produced (this applies to the protection of the environment, the climate, nature

and animals, also to the compliance with standards of social responsibility); the use of sustainability

standards in the producer countries, especially in those with weak government leadership and weak

institutions, must be expanded and appropriate efforts must be made to check compliance with them.

Close cooperation between all those involved, from the political, economic, scientific and envi-

ronmental spheres and from the society at large is needed in the development of bioeconomy.

The vision and quantitative targets of the Finnish Bioeconomy Strategy103 will be implemen-

ted by means of four strategic goals: 1) a competitive operating environment for the bioeconomy: a

competitive operating environment will be created for bioeconomy growth; 2) new business from

bioeconomy will be generated in bioeconomy: by means of risk financing; bold experiments and the

crossing of sectoral boundaries; increasing equity financing and innovation inputs in bioeconomy;

funding piloting and demonstration projects of new bioeconomy solutions; developing bioeconomy

cooperation platforms across sectoral boundaries; 3) a strong bioeconomy competence base: the

bioeconomy competence base will be upgraded by developing education, training and research; 4) ac-

cessibility and sustainability of biomass: availability of biomass, well-functioning raw material mar-

kets and sustainability of use of biomass will be secured.

101 Bioeconomy in Flanders. The vision and strategy of the Government of Flanders for a sustainable and competitive bioeconomy in 2030. 102 National Policy Strategy on Bioeconomy. Renewable resources and biotechnological processes as a basis for food, industry and energy. 103 The Finnish Bioeconomy Strategy. 2014.

117

The Spanish Bioeconomy Strategy 2030 Horizon104 to be developed is designed to encourage

economic activity and improve the competitiveness and sustainability of productive sectors linked to

the use of biologically-based resources, promoting the generation of know-how and its use in deve-

loping and applying derived technologies, via collaboration within the science and technology system

and Spanish public and private bodies. The competitive development of new industrial sectors and

new professional skills is also foreseen.

Bioeconomy strategy in Italy105 is related to the vision based on these priorities: 1) to move

“from sectors to systems“; 2) to create “value from local biodiversity and circularity”; 3) to move

from “economy to sustainable economy”;4) to move “from concept to reality”; 5) to promote “bioeco-

nomy in the Mediterranean area”. Ensuring a strong coordination among ministries, other public ad-

ministration and national technological clusters involved in the bioeconomy domain, in order to de-

fine a proper and coherent legislative framework and to minimise duplication and fragmentation is

important. A permanent working group on bioeconomy composed of representatives of such organi-

sation will be established with the aim of: collecting and sharing data and information; guaranteeing

policy coordination among public authorities with particular attention to the implementation of Eu-

ropean policies on waste prevention and minimization, in order to encourage full exploitation of the

resources and circularity; monitoring the implementation of the bioeconomy strategy; proposing new

measures and action to improve the bioeconomy system, also evaluating the social and environmental

impact of subsidies on non-renewable resources; implementing and coordinating international initia-

tives to boost bioeconomy in the Mediterranean basin.

The Copenhagen Declaration for a Bioeconomy in Action106 (March 2012) found that a level

playing field must be created for different uses of biomass, such as food, feed, bio-based products

and bio-energy, by reviewing incentives and regulatory frameworks as a prerequisite for increasing

the value generated from biomass and for stimulating the value chains. It has also been agreed that

there is a need for new ways of highly committed partnering between all stakeholders: citizens, con-

sumers, academia, industry, primary producers and policy makers. The conflict between food and

non-food production from arable land could be overcome by using agricultural crop and forestry re-

sidues and bio-degradable waste as well as selecting feedstock such as algae and other under-exploited

resources from aquatic and marine environments, and by using existing and new knowledge and tech-

nologies to increase biomass yield.

Some suggestions from Danish Bioeconomy Panel107 could be useful for Lithuania:

biomass should be treated as a limited resource. Given the trend of global climate change,

growing population and greater prosperity, the pressure on natural resources is set to inten-

sify in coming years. At the same time, transition towards a bio-based economy will incre-

ase demand for biomass, so the use of biomass must be carefully thought through. Priority

must be given to food production, resource efficiency and mitigation of environmental

stress. The feasibility of increasing the production and accessibility of biomass should also

be closely examined;

it is important to acknowledge that new value chains in bioeconomy will rarely come about

in a single leap, but will typically appear step by step. To this effect, focusing on the deve-

lopment of bioeconomy in the short and medium term without losing sight of more long-

term development potentials could be beneficial;

104 The Spanish Bioeconomy Strategy 2030 Horizon. 105 Bioeconomy in Italy. A unique opportunity to reconnect Economy, Society and the Environment. Consultation draft. 106 The Copenhagen Declaration for a Bioeconomy in Action. March 2012. 107 Denmark as growth hub for a sustainable bioeconomy. Statement by the National Bioeconomy Panel. September 2014.

118

bioeconomy must develop a more resource-efficient and sustainable society. In this con-

text, the concept of sustainability should be understood in climatic, environmental, social

and economic terms;

sustainability requirements should be identical for a given type of biomass, and the effort

to address bioeconomic sustainability should be prioritised. When introducing sustainabi-

lity criteria, identical requirements should apply to a given type of biomass regardless of

its end use. The requirements should, to the extent possible, be drawn up internationally or

within the EU. It must be ensured that all stakeholders can have their voice heard in the

preparation of sustainability standards;

framework conditions should stimulate the development of new bioeconomic value chains.

This implies, among other requirements, that framework conditions must be predictable,

stimulate the development of new markets, ensure job creation and mitigate the climate

and environmental burden.

The production of biofuels is seen as a part of a bio refining complex108. The principle of bio-

refining is to extract products and materials in cascading sequence of value from an organic feedstock.

This means that from the feedstock several products are produced by different levels of refinement,

yielding smaller and smaller volumes at higher orders of refinement. Several authors also refer to this

principle as “biomass cascading”, i.e. the maximum extraction of value from a given biomass by

cascaded use of different quantities and qualities of products and materials that biomass can yield

through fractioning and bio-refining. The extraction, refinement and sale of higher sequence products,

for instance pharmaceutical ingredients, can thus help finance the extraction and production of lower

sequence products, such as bulk chemicals or energy and heat from the feed-stock.

The “biorefining pyramid” (Figure 52) shows the relationship between the volume and value

of different products extracted from biomass in a biorefinery.

Figure 52. Biorefining pyramid

Source: Danish Transport Authority. Sustainable Fuels for Aviation. An Analysis of Danish Achievements and Opportunities. 2013.

Swedish Research and Innovation Strategy for a Bio-based Economy109 defines the needs for

the following research and development:

− the replacement of fossil-based raw materials with bio-based raw materials;

108 Danish Transport Authority. Sustainable Fuels for Aviation. An Analysis of Danish Achievements and Opportunities. 2013. 109 Swedish Research and Innovation Strategy for a Bio-based Economy. 2012.

Energy and heat

Bulk chemicals, building materials and

fuels

Food and feed

Bioplastics and polymers

Pharmaceutical and

cosmetics ingredients Vo

lum

eV

alu

e Cascading

119

− smarter products and smarter use of raw materials;

− change in consumption habits and attitudes e.g. increased product lifetimes; increased

recycling, more efficient transport, distribution and storage, new services; consumer be-

haviour;

− prioritisation and choice of measures e.g. environmental and socio-economic consequen-

ces, conflict of objectives, governing policies.

Research and development must be complemented by innovation-fostering initiatives and

measures that specifically address bioeconomy challenges. The nature and extent of these challenges

necessitates widespread collaboration among actors and sectors that work together to deal with comp-

lex issues and demands for solutions that the challenges raise. It includes:

stimulating cross-industry collaboration in research and development in order to develop

and implement solutions that contribute to a growing bio-based economy.

stimulating the growth of strong research and innovation environments that contribute the

relevant knowledge and create preconditions for innovation within the area.

accelerating development, verification and commercialisation of new bio-based solutions

and provision of continued support for the demonstration of products, systems and servi-

ces other than fuels and energy technology solutions;

offering support to small and medium-sized enterprises for the commercialisation of new

technologies.

France110 has foreseen these bioeconomy goals: 1) to guarantee food security and sustainable

living standards for current and future generations by conserving natural resources and ecosystemic

functions of habitats; 2) to be efficient, resilient, circular and productive over the long term; 3) to

focus on the general public and to be rooted in local regions, contributing to the development of

economic value and jobs; 4) to offer innovative solutions that are effective, affordable and capable of

addressing the diversity of human needs.

The UK Bioenergy strategy111 points out that there are risks and uncertainties associated with

bioenergy: whether it genuinely contributes to carbon reductions; the availability and price of suffi-

cient sustainably-sourced biomass; the relationship between bioenergy and other uses of land, such

as food production, and other uses of biomass, such as for construction materials; the environmental

impacts on air quality, biodiversity and water resources. UK Bioenergy principles (approach to bio-

energy in the UK) are the following: 1) policies that support bioenergy should deliver genuine carbon

reductions that help meet UK carbon emissions objectives to 2050 and beyond; 2) support for bioen-

ergy should make a cost effective contribution to UK carbon emission objectives in the context of

overall energy goals; 3) support for bioenergy should aim to maximise the overall benefits and mini-

mise costs (quantifiable and non-quantifiable) across the economy; 4) UK bioenergy demand is likely

to significantly hinder the achievement of other objectives, such as maintaining food security, halting

bio-diversity loss, achieving wider environmental outcomes or global development and poverty re-

duction. The development of bioenergy sector is related to the use of waste, biomass boilers and

biomethane, use of biofuel in the road construction and other sectors. Biomass is available in many

forms and from many different sources, including:

conventional forestry management, such as thinning, felling and coppicing of sustainably

managed forests, parklands and trees from other green spaces;

110 A Bioeconomy Strategy for France. 111 UK Bioenergy strategy. 2012.

120

agricultural crops, including wheat, maize, sugar, rapeseed or oil palm, and crops grown

primarily for use in energy generation (‘energy crops’), such as short rotation coppice

(SRC) or miscanthus grass which can be grown on land unsuitable for food crops;

biodegradable waste and residues, including residues from the wood processing (e.g.

sawmill residues, parts of trees unsuitable for the wood industry), agricultural residues

(straw, husks), sewage sludge, animal manure, waste wood from construction, and food

waste;

algae. Both microalgae and macroalgae can be grown in either fresh or saline water for use

as a feedstock for bioenergy. This is not yet viable at commercial scales, but could in the

future be an important source of both liquid biofuels and solid biomass.

In summary of good practice of bioeconomy strategies of the EU Member States, the following

opportunities for its adaptation in Lithuania can be foreseen:

the drafting of the Lithuanian bioeconomy strategy and action plan in consultations with

the Nordic Council of Ministers and institutions responsible for the bioeconomy sector of

the EU Member States (with Belgium being one of them). The Ministry of Economy could

be responsible for the drafting of the Lithuanian bioeconomy strategy and the action plan

in cooperation with other ministries (usually strategies are prepared by the Ministry of

Economy, Food Sector, or Agriculture);

the following are the key components of bioeconomy strategies of the EU countries: sub-

stantiation of the need for the strategy; SWOT analysis of the bioeconomy sector; vision,

goals and principles of bioeconomy; key components of the strategy indicating the action

plan and measures (policy; R&D, training and education; biomass value chain; markets

and competitiveness); implementation, monitoring of the strategy and impact assessment;

the Lithuanian bioeconomy strategy should provide for measures to promote the creation

of biotechnologies aimed at the most efficient use of biomass as a scarce resource, or their

takeover from more biotechnologically mature member states; the greatest focus should be

placed on biotechnologies aimed at the manufacture of products (chemicals and materials)

of a higher value rather than at the use of biomass for the production of bioenergy;

Lithuanian bioeconomy strategy should be focused on wasteless production and biowaste

processing technologies that meet the needs of all stakeholders;

a conflict between food and non-food production from arable land should be resolved using

agricultural crop and forestry residues, growing non-food biomass in abandoned agricul-

tural land, selecting new feedstock and additives for fuel, such as algae, and other under-

exploited resources from aquatic and marine environments; bioeconomy demand shall not

interfere with the pursuit of goals, such as the supply with food, preservation of biodiver-

sity, poverty reduction, etc.

Analysis of good practice of state governance of the EU Member States

The bioeconomy policy strategy in Germany112 was developed jointly by the Federal Ministry

for Food and Agriculture (BMEL), which also coordinates the implementation efforts together with

the Federal Ministry of Education and Research (BMBF), the Federal Ministry of Economics and

112 Nordic Council of Ministers. 2016. State of Play. Bioeconomy strategies and policies in the Baltic Sea Region countries. Working Paper no. 1 – The

Baltic Sea Regional Bioeconomy Council.

121

Energy (BMWi), the Federal Ministry for Economic Cooperation and Development (BMZ), the Fe-

deral Ministry for the Environment, Nature Conservation and Nuclear Safety (BMUB), the Federal

Ministry of the Interior (BMI) and the Foreign Office (AA). The German Bioeconomy Council plays

an important role as an independent advisory body to the German Federal Government. The 17 mem-

bers of the Council have expertise covering a broad thematic and stakeholder spectrum of bioeco-

nomy. The Council mainly seeks to promote the dialogue with the public and to advise on innovation

policy and related implementation issues. Furthermore, the Council considers bioeconomy develop-

ment in a global context and presents its insights to the Federal Government. The German Bioeco-

nomy Council convenes regularly to prepare position statements and to discuss policy issues. It orga-

nises events on relevant issues, and promotes the future vision of bioeconomy to broader society. The

activities of the council are oriented both towards long-term objectives as well as current policy requi-

rements.

The Finnish Bioeconomy Strategy113 is implemented in cooperation between ministries that

cooperated to conceive the Strategy. The Ministry of Employment and the Economy leads coordina-

tion. The organisations in the administrative branches of the ministries are extensively involved in

the implementation. For example a number of funding organisations contribute towards realising the

strategy, including: Tekes (the Finnish Funding Agency for Innovation) and SITRA (the Finnish

Innovation Fund). A bioeconomy panel has been established to support the implementation and

further development for the Strategy. The panel is chaired jointly by the Ministry of Employment and

the Economy and the Ministry of Environment and Agriculture. The panel has 40 members from

industry associations, RDI, government and governmental agencies and NGOs. The first meeting was

held on 19 January 2016. In going forward the panel will meet two-three times a year and thematic

working groups will be established to address various specific aspects of bioeconomy.

In Flanders,114 the Bioeconomy Strategy was developed by the Flemish interdepartmental

Working Group in consultation with the Advisory Council on Environmental and Nature Protection

Policy of the Flemish government and Strategic Advisory Council for Agriculture and Fisheries.

To start drafting the Spanish Bioeconomy Strategy, the Ministry of the Economy and Com-

petitiveness, the Ministry of Agriculture, Food and the Environment and115 a working group chaired

by the Secretary of State for Research, Development and Innovation were brought together. A moni-

toring group for the Spanish Bioeconomy Strategy was formed at the initiative of the Interministerial

Council for Scientific, Technological and Innovation Policy. A Spanish Bioeconomy Strategy Mana-

gement Committee, whose objective will be to foster the implementation of measures, was created.

In 2013, the Danish Government established the National Bioeconomy Panel116 with the aim

to support cooperation among ministries, government agencies and the society. The Panel is hosted

and chaired by the Danish AgriFish Agency under the Danish Ministry of Environment and Food.

The panel is composed of 25 representatives of companies, researchers, NGOs and authorities. The

panel met for the first time in December of 2013, and convenes approximately three times a year. In

2014, the National Bioeconomy Panel presented “Denmark as growth hub for a sustainable bioeco-

nomy”. Being a “statement” rather than a “strategy” the paper provides a number of recommendations

to the Danish Government for promoting bioeconomy, including: the establishment of an advanced,

integrated, industrial-scale biorefinery; review if incentive structures support the development of new

113 Sustainable Growth from Bioeconomy. The Finnish Bioeconomy Strategy. 2014. 114 Bioeconomy in Flanders. The vision and strategy of the Government of Flanders for a sustainable and competitive bioeconomy in 2030. 115 The Spanish Bioeconomy Strategy 2030 Horizon. 116 Nordic Council of Ministers. 2016. State of Play. Bioeconomy strategies and policies in the Baltic Sea Region countries. Working Paper no. 1 – The

Baltic Sea Regional Bioeconomy Council.

122

industrial bioeconomic value chains, or if e.g. support for technological development is needed; en-

courage more partnerships with the participation of public authorities, private sector actors and

knowledge centres; ensure close cooperation between relevant ministries in relation to bioeconomic

development; utilizing public procurement of sustainable bioeconomic products as a driver for deve-

lopment, including by seeking knowledge and ideas from industry organisations, knowledge centres

and NGOs.

In Sweden,117 the Ministry for Enterprise & Innovation has prepared a long-term national fo-

rest program to be launched 2017. The Action includes a number of efforts to develop the forestry-

based bio-economy, including on: sustainable use of forest; processing and innovation; experience

and recreation; and Sweden in the world (know-how and export). The Swedish Energy Agency also

supports the development of bioeconomy. Biofuel is particularly important for bioeconomy in Swe-

den, 90percent of it coming from Swedish forestry. The Swedish Energy Agency support, for

example, R&D in biofuel system development (availability, resource cost reductions, yield increases

and more) as well as a number of sustainability efforts related to biofuels and bioliquids. The Swedish

forest industries are focusing more and more on the forest’s contribution to bioeconomy. They have

increased the total research budget allocated to “bio-economy research”. There are also several and

increasing “public-private partnerships” concerning bioeconomy. One example is the project

“Processum” which supports “research and development in the areas of biotechnology, energy tech-

nology, organic chemistry and raw materials with a focus on sustainability”. As obvious from the

above, the governance of many government supported bioeconomy development efforts is divided

among many institutions and organisations in Sweden.

Bioeconomy is a new political topic in Estonia,118 and so far a bioeconomy advisory

body/panel has not been established. Inter-ministerial coordination efforts are mainly being facilitated

by the Council of Agriculture and Rural Development, the Council of Fisheries and the Council of

Forestry. Currently, the “Estonian Bioeconomy Strategy until 2030” is being negotiated between the

following ministries: the Ministry of Rural Affairs (with responsibility for rural life, agriculture,

fisheries, food processing industry, food safety and agricultural sciences); the Ministry of Envi-

ronment (with responsibility for forest resources, fish stocks, waste management, climate policies,

eco-system services and environmentally sound procurements); the Ministry of Economic Affairs and

Communications (with responsibility for biotechnology, bioenergy and bioeconomy-related elements

of industrial policies); the Ministry of Education and Research (with responsibility for knowledge-

based strategic support and education policy related to various bioeconomy fields); the Ministry of

Social Affairs (with responsibility for eating habits, healthy eating and health, and chemical safety/

biochemistry); and the Ministry of Finance (with responsibility for administration and budget).

Analysing the EU member-states’ good experience in governance, defining bioeconomy

support measures is important.

In Flanders,119 the policy must strengthen the knowledge network in the sectors of bioeco-

nomy and ensure better cooperation and coordination between the policy areas of research and inno-

vation, economy, agriculture and fishing, environment, nature, energy, spatial planning, education

and training, work and social economy and supporting taxation. To bring about bioeconomy, multi-

disciplinary research and innovation have to be supported across the entire value chain. Cooperation

and knowledge transfer between all parties in the value chain will be encouraged. Research and

upgrade to stimulate the closure of circuits and a maximum focus on waste and residual streams must

117 Ibidem 118 Ibidem 119 Bioeconomy in Flanders. The vision and strategy of the Government of Flanders for a sustainable and competitive bioeconomy in 2030.

123

be further promoted and supported. Research into techniques and crops that optimise the yield of

biomass economically, ecologically and socially as well as market development will be supported by

the government, by playing a pioneer role by means of public procurement.

The most commonly mentioned support measures for the development of bioeconomy120 are

tax incentives on the production and consumption; soft measures encouraging consumers to buy (and

pay more for) sustainable bio‐based product substitutes; tax reliefs on private RTD, research vouchers

etc. Soft enablers may include various efforts to link better private companies with knowledge and

research centres by means of technology transfer centres, open innovation networks, business incu-

bators etc. Governmental organisations – local, national and international – may develop bioeconomy

markets in a number of ways: regulations and taxation can encourage producers and consumers to

substitute fossil based products and services to bio-based alternatives; bioeconomy public procure-

ment schemes may be effective both in terms of creating new immediate markets, as well as by en-

couraging private sector RTD activities leading to a higher future supply of bioeconomy products and

services; public awareness campaigns that encourage end‐users to substitute consumption towards

more sustainable alternatives, even if economic costs are higher.

In Italy, Bioeconomy strategy121 is foreseen to connect physical and digital systems, complex

analyses of big data and real-time settings through the use of smart machines inter-connected and

connected to the Internet, and provides for intense financial support to enterprises through hyper-

depreciation and super-depreciation scheme, tax credit for research and development and innovation

expenditure, tax reliefs on investments in venture capital, start-ups and innovative SMEs.

In summary, the EU Member States can be stated to solve issues of the drafting, implementa-

tion and monitoring of the bioeconomy strategy and strategies of the related sectors. The formation

of ministries, working groups or councils under the integrated and strategic approach remains the

main principle. Working groups are delegated the drafting function, while councils are delegated the

function of monitoring the strategy and the action plan as well as the advisory function.

The majority of support measures for the development of bioeconomy are typical in other

economic activities, including of Lithuania. Nevertheless, such incentives as encouraging consumers

to buy (and pay more for) for sustainable bio-based products as substitutes for traditional products,

the creation and funding of public procurement programme and large data arrays are noteworthy.

Analysis of good practice of bioeconomy clusters of the EU Member States

Table 2 lists sectors of bioeconomy included in good regional cluster practice. In many cases,

the research and development sector is the main sector driven by industrial needs and funded from

budgets at the national and regional level122.

The good practice of primary biomass sector clusters were found in Finland, Lower Bavaria

(Germany) and the Netherlands. Central Finland is also considered to be an example of good practice

in other sectors of bioeconomy, such as pulp, paper and energy. North Rhine-Westphalia, Manchester,

Toulouse and Ghent are examples of good practice in the chemicals and polymers industry, with

Ghent also being an example in the energy industry. Manchester is very strong in research. However,

so far there is a lack of good practice examples in construction, textile and apparel sectors.

120 A Bioeconomy for the Baltic Sea Region – impact, engaging the private sector and financing cooperation. Workshop Paper, Berlin, 18‐19 September

2014. 121 Bioeconomy in Italy. A unique opportunity to reconnect Economy, Society and the Environment. Consultation draft. 122 Good Practices in Selected Bioeconomy Sector Clusters: a Comparative Analysis. Project acronym BERST. Project full title „BioEconomy Regional

Strategy Toolkit“. Grant Agreement No: 613671. 2015.

124

Table 12. Bioeconomy sectors involved in each good practice region

Bioeconomy

sectors

Central

Finland

(FI)

Lower

Bavaria

(DE)

Biobased

Delta

(NL)

Westland

(NL)

North

Rhine

Westfalia

(DE)

Manches-

ter (UK)

Ghent

(BE)

Toulouse

(FR)

Primary Biomass ˅ ˅ ˅ ˅

Food and feed ˅ ˅

Construction ˅ ˅

Chemicals and

polymers ˅ ˅ ˅ ˅ ˅ ˅

Pulp and paper ˅

Textiles and

clothing ˅

Energy ˅ ˅ ˅ ˅

R&D services ˅ ˅ ˅ ˅ ˅ ˅

Source: Good Practices in Selected Bioeconomy Sector Clusters; a Comparative Analysis. Project "BioEconomy Regional Strategy Toolkit " report.

Grant agreement no: 613671. 2015.

Regional good practice cluster examples in Belgium, Finland, France, Germany, the Nether-

lands and the United Kingdom are analysed in order to:

understand how various essential elements are interrelated and function in different stages

of development;

identify the experience and plan for cluster development perspectives;

make recommendations to other regions and clusters, which they shall have to consider

in order to create, develop and successfully expand different bioeconomy sectors.

Ghent Bio-Energy Valley123 was founded at the initiative of Wim Soetaert in 2005 as a Public

Private Partnership between Ghent University, the City of Ghent, the Port of Ghent, the Development

Agency East-Flanders and a number of industrial companies related to the Ghent region, active in the

fields of generation, distribution, storage and use of bio-energy. The driving force for the estab-

lishment of GBEV was mainly of a political nature. By joining forces, companies were hoping to

obtain as the largest possible production quota for biofuels from the Belgian government. In addition,

the partnership was intended to tackle common problems related to production, feedstock or infrast-

ructure. Finally, GBEV also provided a platform for informing the general public on these new pro-

ducts and technologies in a concerted way. In 2013, the cluster acknowledged that despite the fact

that it was initiated with bioenergy activities, a new range of activities were subsequently introduced;

the name was changed to “Ghent Bio-Economy Valley” to reflect this.

North Rhine Westfalia cluster124 was founded with the aim to initiate research and develop-

ment projects in the field of industrial biotechnology. The cluster has 80 members, encompassing

large industrial partners, small and medium-sized enterprises, which account for 40 per cent of their

membership and bring diversity of technologies and products to the cluster, and universities. Its ope-

ration and future development is based on closing gaps between science and technology: the cluster

brings together academic and industrial members who are active in research, development, production

and commercialization. The cluster solves the questions related to markets, innovative (economic and

ecological) materials, cost-efficient production processes and simplified downstream workflows, as

well as helps its members to manage the process of innovation.

123 Ibidem. 124 Ibidem.

125

The region of Straubing in Lower Bavaria, Germany125, is relatively rural with the proportion

of people employed in agriculture and forestry significantly higher than the national average. In addi-

tion to being agriculture and forestry-rich, the region has direct inland waterway access via a major

port on the Danube to Eastern and Western Europe. The port specialises in biomass handling and

freight. The Eastern Danube countries hold large biomass potential which makes the region an ideal

source for biomass or intermediate imports. A priority economic sector for Bavaria is life-sciences

and the Straubing-based cluster “Renewable Raw Materials”, which was initiated in 2009 as a politi-

cally rather than industry-led top-down initiative. The cluster comprises four sub-sectors, namely,

primary biomass, energy, chemicals and R&D services in biomass. The state of development is he-

terogeneous. Primary biomass is at mature stage and is analysed in this report as Good Practice.

Energy is at drive to maturity stage. R&D services and chemicals & polymers are both at initial stage.

The other sectors are analysed in the individual Case Study report which is a part of D3.2: A repre-

sentative set of case studies. Despite the fact that the majority of the circa 100 members are from the

private sector, engagement of the private sector is considered to be relatively weak. This is due to the

origin of the cluster being top-down and politically-led.

The area of Central Finland (Keski Suomi)126 has a population of 270 thousand inhabitants

and covers nearly 20 thousand km2. The region is characterised by strong presence of the paper and

pulp sector, which is based on equally strong primary supply and has also a very well developed

bioenergy sector. Also, the region has the most developed and extensive bioenergy R&D – including

education and training activities – in Finland. The three bioeconomy sectors of primary biomass, pulp

& paper and energy are considered Good Practices from which other clusters or regions can draw

lessons and get recommendations on how to establish, develop and successfully operate similar clus-

ter activities.

Toulouse White Biotechnology cluster in France127 is a pre-industrial demonstrator that

supports the development of innovative biological tools (enzymes, microorganisms, microbial con-

sortia) thus opening new avenues for the production of chemical molecules, biopolymers, biomate-

rials and biofuels based on the use of renewable carbon. Most of the participating companies are

SMEs. There are three key aims: 1) to promote white biotechnology (white, or industrial, biotechno-

logy is the application of biotransformation and fermentation for manufacturing chemicals, materials,

energy on an industrial scale through the use of biomass as a renewable raw material). The challenge

lies in developing an innovative bio-economy that makes use of renewable carbon without competing

with food requirements; 2) to be a catalyst for scientific innovation (promotes scientific and techno-

logical innovation by funding pre-competitive projects carried out in the very early stages of deve-

lopment); 3) to strengthen links between research and industry.

The Biobased Delta cluster in south-west Netherlands128 started operating in 2012. It was

formed by the merger of two clusters in Zeeland and Brabant regions which have strong mature ag-

ricultural sectors that provide major contributions to local and national economy. The primary bio-

mass sector is considered to be in a mature stage. However, new economic activities in the non-food

and non-feed sectors are developing. These sectors are at the initial stage. Though these sectors are

relatively small, they have good growth potential, driven by factors such as rising oil prices, climate

change and the political drive to reduce dependency on energy imports. The main economic activity

which Biobased Delta aims to increase is the refinement and conversion of biomass (either locally

125 Ibidem 126 Ibidem 127 Ibidem 128 Ibidem

126

sourced or imported) to chemicals. These include fuels, bulk, platform and specialty chemicals, and

polymers. Biobased Delta is a leading European cluster in its field, in large part due to the presence

of strong chemical industry and primary sectors. One of the examples is to find ways to valorise the

one million tonnes of pulp that remains annually after production of beet sugar.

Netherlands-Westland cluster129 was initiated by the Municipality of Westland in 2013. The

main driver was the presence of a large area (approximately 3000 ha) of greenhouses in the area with

vegetables, flowers and plants and the concept to gain value from residues such as stems, leaves and

class 3 products. The Westland area is very well known for its horticulture. Its location on the coast

leads to a favourable climate conditions year-round, including relatively high light density which is

beneficial for horticulture. In addition, the region lies between a few big Dutch cities and has good

water, road and airplane connections for transport. The Westland is a prosperous and innovative area,

due to the fast-growing developments in the field of agribusiness. In the greenhouse cluster there is

an extensive cooperation between supplying companies, production, trade and knowledge institutes.

United Kingdom-Manchester cluster130 is a research based organisation funded by industrial

actors with focus on the industrial development of northwest England. So far they have funded mostly

doctoral level research on pharmaceuticals but there is a recent re-focus to advanced chemical appli-

cations including bioenergy and biomass. Albeit these activities are relatively new and advanced, they

already form an important part of the activities among certain partners of the cluster.

The organisational structure of a bio-cluster is presented in the Figure 53.

Figure 53. Organisational structure of a bio-cluster

Source: Good Practices in Selected Bioeconomy Sector Clusters; a Comparative Analysis. Project "Bioeconomy Regional Strategy

Toolkit" report. Grant agreement no: 613671. 2015.

Estonian Centre of Food and Fermentation Technologies (CFFT)131 is an R&D company that

focuses on improving quality, functionality and stability of food as well as developing and introdu-

cing new innovative food and fermentation technologies. CFFT has an extensive cooperation with

research institutions and more than 40 industrial enterprises from different countries.

In summary of the good practice of bioeconomy clusters of the EU Member States, the fol-

lowing opportunity for its adaptation in Lithuania may be planned for:

129 Ibidem 130 Ibidem 131 Bioeconomy development in EU regions. Mapping of EU Member States’ / regions’ Research and Innovation plans & Strategies for Smart Spe-

cialisation (RIS3) on Bioeconomy. Final Report. February 2017. Framework Contract: 2014.CE.16.BAT Lot 2.

Active bioeconomy entrepreneurs

Supply of biomass

Bioeconomy R&D InstitutesPolicy makers willing to

support the bioeconomy

Competitive

bioeconomy productsConsumers

127

creation of clusters at the national level is expedient only when there is a very strong scien-

tific potential and many business enterprises prepared to commercialise products; support

for their creation should be associated with the implementation of strategic bioeconomy

goals;

creation of clusters should first of all be initiated “from the bottom”, and only in the absence

of the initiative to create them “from the top”;

in presence of a weak scientific potential, to search for membership opportunities in clus-

ters created in the EU Member States, or to acquire patents of the necessary biotechnolo-

gies.

Analysis of good practice of research and the created products of the EU Member States

In Estonia a unique probiotic Lactobacillus fermentum ME-3 could be an example of success,

since it is the only one in the world to have two sets of patented properties: 1) antimicrobial properties

(direct and adverse effects on harmful bacteria). ME-3 bacteria reduce the risk of gastrointestinal tract

infections, especially those of salmonellosis and shigellosis by attacking and neutralising various

harmful bacteria in the gastrointestinal tract; 2) antioxidant properties (indirect beneficial effects pro-

moting human health)132.

Ireland’s company “Biomass Heating Solutions” developed a number of poultry litter com-

bustors using fluidised bed combustion technology. The burning of the litter creates energy to provide

a sustainable source of heat for the poultry housing on farm. Another example of good practice is the

production of high quality biodiesel from recovered vegetable oil and tallow feed-stocks. Thus bio-

diesel from the plant at New Ross is available at forecourts around Ireland as a blend with mineral

diesel133.

The Irish Bioeconomy Association was established in 2016 as a vehicle to bring together re-

levant stakeholders with an interest in establishing a National Bioeconomy Hub at Lisheen. The hub

will be the location of choice for both indigenous and FDI companies to establish businesses in the

bioeconomy sector. All the relevant infrastructure is in place in Lisheen for the establishment of a

number of businesses, and the Association is represented in the third and fourth level sectors by

Limerick Institute of Technology, University College Dublin and Trinity College Dublin. Current

members from the private industrial sector include Bord Na Móna (principal interest in Biomass),

Glanbia and co-operative Mushroom Producers who lodged a planning application for the const-

ruction of a compost production facility in phase 1 of the project,leading on to an integrated

mushroom, packing and R&D facility in future phases of the project134.

In Finland wood-based pharmaceuticals GrowDex® was developed. It is a wood nanocellu-

lose hydrogel product developed by UPM-Kymmene Corporation for the needs of the pharmaceutical

industry. GrowDex® can be used to replace animal testing and enable the development of cell-based

drugs, tests and models that can be used in the future to better treat serious diseases. UPM Biofuels

has developed a process to transform wood-based residues from pulp production into an advanced

biofuel that can be used in any diesel engine without modification. The product, UPM BioVerno, is

a commercial-scale renewable diesel that reduces greenhouse gas emissions as well as tailpipe

emissions significantly compared to conventional fossil diesel. Production of renewable diesel does

132 National Bioeconomy Profile. Estonia. European Commission. 2014. 133 National Bioeconomy Profile. Ireland. European Commission. 2014. 134 Irish Bioeconomy Developments: http://www.agriforvalor.eu/article/Irish-Bioeconomy-Developments-62

128

not generate additional demand for forest harvest areas or compete with food production as processing

residues are used as feedstock135.

The municipality of Ii in Finland is committed to reaching zero waste and becoming a non-

carbon economy, utilising only local and renewable resources for energy, transportation, and pro-

duction. Public buildings are either equipped with ground-sourced heat, solar panels, or connected to

the district heating network with bioenergy as primary energy source. Currently the electricity is ge-

nerated by wind turbines, small- and large-scale hydropower and solar energy – Ii produces 9 times

more green energy than uses. Ii has launched a system where biowaste is collected and fed into a

digestion plant for biogas production. Ii created its own certificate given to producers for using local

employees, services, feedstock and energy, while surplus food is sold/ donated to the poor to minimise

waste streams, and the remainder of waste is recycled136.

In Denmark, “Arla” has successfully converted whey from being a by-product from cheese

production into a valuable ingredient in products such as protein powder. Previously, whey was sold

as animal feed, but is now mainly sold for human consumption in the areas of medical, infant and

sports nutrition due to its high content of proteins. As a result of strong market demand for whey-

based products, Arla is now importing about 50percent of raw material for whey protein, because the

company needs more raw material than its own main production facilities can deliver137.

BioValue SPIR (Denmark) is a strategic platform for innovation and research on value-added

products from biomass, used to develop new solutions to upgrade plant material into high-value in-

dustry products. The platform’s projects address the entire value chain – from sustainable biomass

production to improved separation and conversion techniques. The platform co-funds a number of

projects to help small- and medium-sized enterprises in bringing innovations and products within

biorefinery to the market138.

In Sweden, Seafarm is a research project between 4 universities aiming to grow, cultivate and

use macroalgae for the production of food, feed, bioenergy and other bio-based materials focusing on

creating a circular bioproduction. Holistic approach supports a goal to develop a sustainable system

for the use of seaweeds as a renewable resource, avoiding the need for fertilisers and irrigation, not

competing for arable land. In addition, seaweeds are fast-growing and their farming counteracts loss

of oxygen in the ocean139.

In Belgium, “Tomato Masters” integrates aquaculture with horticulture. Fishing water is later

used for growing tomatoes, getting higher yields and saving water. Belgium company “MilliBETER”

uses fish food wastes for bioconversion into larvae by the black soldier fly. Rapidly developing larvae

are dried and used as feed for fish. This is one example of a circular economy140.

In Austria, “Land&Forst” wood waste and straw ashes are used for the production of compost,

the renovation of forest and other roads, and for fertilizing forests 141.

In Germany, the company “Kaffeeform” manufactures coffee cups and saucers that consist of

used coffee grounds. Up to 40percent of the product is made from recycled coffee grounds. Plant

fibres, cellulose and a resin made of biopolymers are additionally used for the production of cups.

The company “Vegavita” uses blue sweet lupine seeds for the production of ice-cream. They are rich

135 Nordic Bioeconomy. 25 Cases for Sustainable Change. Nordic Council of Ministers, 2017. 136 Ibidem 137 Ibidem 138 Ibidem 139 Ibidem 140 Tomato Masters and Aqua4C. Combining horticultural production and fish breeding in Belgium: https://ec.europa.eu/eip/agriculture/en/event/eip-

agri-workshop-opportunities-agriculture-and 141 Development of innovative processes for wood ash upcycling in Austria: https://ec.europa.eu/eip/agriculture/en/event/eip-agri-workshop-opportu-

nities-agriculture-and

129

in proteins, which have a bitter taste due to their high alkaloid content, are lactose and gluten-free,

and suitable for those who suffer from allergies. As nitrogen fixers they are great fertilisers for Ger-

man soil142.

In summary of good practice of research and the created products of the EU countries, the

following opportunities for its adaptation in Lithuania may be planned for:

improvement of food quality, its functionality and stability as well as the creation and

presentation of new advanced food and fermentation technologies; creation of probiotics

(Estonian experience);

the use of waste as biomass, for example, poultry litter combusters (Ireland’s experience);

collection of biodegradable waste and production of biogas; production of cellulose of

wood waste and its conversion to modern biofuel (Finland’s experience); production of

coffee cups of used coffee grounds (Germany’s experience);

integration of bioeconomy sectors, for example, production of compost, growing and pac-

kaging of mushrooms (Ireland’s experience), growing fish and tomatoes (Belgium’s

experience),

the use of biomass for the production of high value added products, for example, wood-

based pharmaceuticals (Finland’s experience), processing of plant materials to high value

added products (Denmark’s experience);

the use of biomass for the production of high value added products;

the replacement of one type of biomass with another one, for example, replacing sea fish

oil with rapeseed oil feeding rainbow trout (Finland’s experience); processing of whey

into a powder and its use for human food, in medicine, for infant and sport nutrition due

to its high protein content (Denmark’s experience);

search for alternative forms of biomass, for example, growing micro and macro algae and

the use of their oil for the production of food, feed and bioenergy (Sweden’s experience);

the use of lupine seeds in the production of ice cream (Germany’s experience);

development of circular economies, for example, conversion of fish waste into fly larvae

used as fish feed (Belgium’s experience); the use of wood waste and straw ash in the

production of compost, renovation and construction of forest roads and fertilization of

forests (Austria’s experience).

This is just a few examples of good bioeconomy practice, which could be a stimulus for Lithu-

anian companies to produce higher value products of that same biomass, process biodegradable waste,

integrate sectors of bioeconomy, search for alternative biomass forms, replace one type of biomass

with another and develop wasteless production moving towards circular economy.

142 BioSTEP. Bioeconomy in Everyday Life.

130

6. Analysis of the Norwegian bioeconomy sector

6.1. Development of Norwegian bioeconomy

Norway aims to be a frontrunner in the emerging bioeconomy. While the petroleum industry

has been important to Norwegian economy development over the last few decades, Norway has

always been strong in traditional bio-based industries such as fisheries, forestry and agriculture. With

an abundance of high quality raw materials and a skilled workforce, Norway is presently de-veloping

a leading position in advanced biorefining, particularly related to advanced processing of marine co-

products and lignocellulose 143.

Gross value added

Value creation in the bioeconomy depends not only on production technology and market

conditions for final products and inputs, but also on how much and which parts of the value chain are

created in Norway. Value chains in the Norwegian bioeconomy currently involve processing and

supplier industries to varying degrees. The bioeconomy comprising biomass production sectors, fully

bio-based transformation sectors and partly bio-based transformation sectors account for 5.1 percent

of gross domestic product in Norway (EUR 16963 million in 2016). Value added in biomass pro-

duction sectors totalled EUR 7416 million being the largest contributor to the Norway’s bioeconomy,

providing 2.2 percent of Norway’s gross domestic product (GDP) in 2016. The GVA of fishing and

aquaculture sector was by far the largest contributor to the Norway’s economy and resulting

1.6 percent of GDP in the same year. Manufacture of food, beverages and tobacco production is the

second component of the Norwegian bioeconomy with over 1.5 percent of GDP (in 2016). Partly bio-

based transformation sectors contributed the smallest share of GVA in the bioeconomy sectors, which

accounted for 1 percent of Norway’s GDP in the same year (Figure 54).

Figure 54. Gross value added in Norwegian bioeconomy sectors (at current prices)

* the data points represent both the bio-based and the non-bio-based manufacturing combined due to the lack of data availi-

bility needed for separate indicators. No data are available on subsectors of the manufacture of chemicals and manufacture of basic

pharmaceuticals

Data source: authors elaboration on information in Norway Statbank (Production account and income generation, by in-

dustry)

143 Invest in Norway (2017). Bioeconomy. Norwegian Government webpage for innovation and development of Norwegian enterpri-

ses and industry.

7416

6085

3463

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

(Million euro, 2016)

Partly bio-based

manufacturing sectors

Fully bio-based


Biomass production

sectors

5303

4899

2113

1538

960849

603362

337

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

(Million euro, 2016)



Furniture and other manufacture*


Manufacture of chemicals etc*

Manufacture of rubber and plastics

Agriculture and forestry



131

The GVA in 2016, as compared to 2010, significantly increased in manufacture of rubber and

plastics, manufacture of textiles, and wearing apparel, and fishing and aquaculture, by 29.2 percent,

23.8 percent, 21.5 percent, by 7.1 and percent, respectively. More modest increase of GVA was found

in manufacture of food and beverages (5.1 percent) and in manufacture of wood products (3.6 percent).

As well the increase in GVA was estimated in agriculture and forestry, with a growth of 0.8 percent.

By contraries, manufacture of paper and saw the biggest decline of 31.1 percent over the considered

period. Followed by manufacture of furniture, with a fall of 15.5 percent, and then manufacture of

furniture and other manufacturing, with 11.9 percent. (Figure 55).

Figure 55. Change in the gross value added in Norwegian bioeconomy sectors


bility needed for separate indicators. No data are available on subsectors of the manufacture of chemicals and manufacture of basic

pharmaceuticals

Data source: authors elaboration on information in Norway Statbank (Production account and income generation, by in-

dustry)

Employment

Bioeconomy in Norway employed around 1361.4 thousand of people in 2016 and, compared

to 2010, the number increased by 9.1 percent (Figure 66).

Figure 56. Employment in Norwegian bioeconomy sectors


bility needed for separate indicators

Data source: authors elaboration on information in Eurostat (Employment – LFS series (lfsa_egan; lfsa_egan22d))

-31%

-28%

-15%

1%

4%

5%

21%

24%

29%

-50% -30% -10% 10% 30% 50%


Manufacture of chemicals etc*

Furniture and other manufacture*

Agriculture and forestry





Manufacture of rubber and plastics*

Change in volume between 2010 and 2016 (±percent)

55.0

56.9

24.5

0

20

40

60

80

100

120

140

(thousand persons employed, 2016)

Partly bio-based

manufacturingsectors

Fully bio-based


Biomass production

sectors

40.4

37.4

13.5

10.18.65.84.24.1

0

20

40

60

80

100

120

140

(thousand persons employed)

Manufacture of wearing apparel*

Manufacture of textiles*










Agriculture


132

The agricultural sector and the manufacture of food products are the largest employment

sectors, altogether providing 5.7 percent of the total in all NACE activities employment in Norway.

The fully bio-based transformation sectors (manufacture of food products, beverages, wood products

and paper) provide 4.2 percent of the total employment in the Norway’s bioeconomy and the biomass

production sectors (agriculture, forestry as well as fishing and aquaculture) provide another 4.0 per-

cent, while the manufacture of partly bio-based products employs 1.8 percent of the workforce in the

Norway’s bioeconomy.

Comparing the number of employed people in 2016 to 2010, it decreased by 13.5 percent, 8.2

percent, and 19.4 percent in biomass production sector, fully bio-based transformation sector and

partly bio-based production sector, respectively. In absolute numbers, the number of persons emp-

loyed in bioeconomy of Norway increased by 113.7 thousand people in 2016 compared to 2010. The

major increase in the number of people employed occurred in forestry and logging (+0.6 thousand

people), in fishing and aquaculture (+1.2 thousand people), in manufacture of basic pharmaceuticals

(+0.2 thousand people) and manufacture of beverages (+0.1 thousand people). Though major re-

ductions in the number of people employed occurred in manufacture of paper (-3.7 thousand people),

manufacture of textiles (-0.9 thousand people) and manufacture of rubber and plastics agriculture

(-1.6 thousand people), in relative terms it decreased by 63 percent, 31 percent and 30 percent, res-

pectively (Figure 57).

Figure 57. Change in the number of people employed in Norwegian bioeconomy sectors



Data source: authors elaboration on information in Eurostat (Employment – LFS series (lfsa_egan; lfsa_egan22d))

Exports

The total value of Norwegian export of goods was EUR 80.9 billion in 2016. The largest share

of exports in 2016 consisted of crude petroleum and natural gas, the value whereof totalled EUR 37.5

billion and accounted for 46 percent of total exported goods. The export of bioeconomy sectors ac-

counted for 22.4 percent of the total export of goods. The largest export share of goods from bioeco-

nomy sectors consisted of biomass production sectors (agriculture, forestry and fishing and aquacul-

ture), the exports whereof amounted to EUR 6165.9 million and comprised 7.62 percent of the total

goods exported. Partly bio-based sectors rank second in terms of export value of bioeconomy pro-

ducts, with their exports amounting to EUR 6112.7 million (7.56 percent of the total Norwegian

export of goods). Exports of the biomass production sectors comprise 34 percent of total exports of

bioeconomy sectors. The main exported goods of bioeconomy sector were fishing and aquaculture,

-63

-31

-30

-28

-22

-15

-10

-8

-1

2

8

10

17

-80 -60 -40 -20 0 20 40





Agriculture









Percentage change between 2010 and 2016 (±percent)

133

manufacture of food products and manufacture of chemicals, representing 32.7 percent, 25.5 percent

and 20.4 percent of total exports of bioeconomy sectors, respectively (Figure 58).

Figure 58. Exports in Norwegian bioeconomy sectors in



Data source: authors elaboration on information in Norway Statbank (Imports and exports of goods, by product groups (CPA))

During the period of 2010–2016 the value of exports of most of the bioeconomy sub-sectors

under consideration, with the exception of tobacco, paper and chemical products, increased, as shown

in Figure 14. The export value of forestry and logging products increased by more than four times,

while the export value of fish and aquaculture products and beverages doubled.

Figure 59. Change of export in the Norwegian bioeconomy sector


bility needed for separate indicators; ** change between 2009 and 2016

Data source: authors elaboration on information in Norway Statbank (Imports and exports of goods, by product groups

(CPA))

In conclusion, we have found that fully bio-based transformation sectors and partly bio-based

transformation sectors account for a small share of gross domestic product in Norway. Fishing and

aquaculture sectors dominate in the GVA of the bioeconomy sectors. The fastest growing sectors

during the period of 2010–2016 were manufacture of rubber and plastics, manufacture of textiles and

6166

5836

6113

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

(million EUR, 2016)

Partly bio-based

manufacturing sectors*

Fully bio-based


Biomass production

sectors

5 915

4 618

3 695

1 463

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

(million EUR, 2016)

Manufacture of tobacco products


Agriculture













-54

-24

-11

-5

21

28

35

35

39

51

51

76

108

116

325

-100 0 100 200 300 400

Manufacture of tobacco products**









Agriculture






Percentage change between 2010 and 2016 (±percent)

134

wearing apparel, and fishing and aquaculture, whilst manufacture of paper as well as manufacture of

furniture shrank the most.

Employment in bioeconomy sectors increased significantly over the period under considera-

tion. The biggest share of the employed worked in the fully bio-based transformation sectors and the

biomass production sectors.

The export of bioeconomy sectors accounted for more than 1/5 of the total export of goods.

The largest share of the export consisted of biomass production sectors (agriculture, forestry and

fishing, and aquaculture). The main exported goods of bioeconomy sector were fishing and aquacul-

ture, manufacture of food products and manufacture of chemicals. The value of exports of most of

the bioeconomy sectors under consideration, with the exception of tobacco, paper and furniture pro-

ducts, increased. The export value of forestry and logging products as well as fish and aquaculture

products and beverages increased the most.

Biomass resources and bioeconomy sectors bearing the biggest potential

The full transition to bioeconomy will require a massive shift in the use of resources. In terms

of biomass, there are production limitations in natural Norwegian ecosystems, but modern agriculture

and aquaculture have demonstrated that the production volumes can be multiplied through techno-

logy, and with advanced biotechnology and market as well as commercialisation of know-how, the

value creation can be multiplied even further. What can be counted as resources and how valuable

they are depends on technological and market developments and conditions144.

Bioresources of Norway are characterised by the diversity of land- and marine-based biomass

in the country, in particular from forestry, agriculture, seaweed, fisheries and aquaculture. Available

studies reveal that the biggest share of the biomass available is used for the low value products of the

bioeconomy sectors, namely energy, electricity and heat.

In Norway, the total potential area of land and inland waters for biomass production made up

15215 thousand ha and occupied 39.5 percent of the territory of the country in 2016 (Figure 60). In

the last five years, the area has changed insignificantly – it has increased by only as much as 46

thousand ha. Nearly four fifths of this area was occupied by forests, about 13 percent – by inland

water and 7 percent – by agricultural land.

Figure 60. Agricultural, forest land and inland waters in Norway, 2016

Data source: authors elaboration on information in Norway Statbank (land use and coverage)

144 Centre for Rural Research (2017). BioSmart: Managing the transition to a smart bioeconomy (2015-2018). Version available at

http://biosmart.no/en/om-biosmart.

12093

20091113

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

Forest land Inland

waters

Agricultural

land

1 000 ha

31%

5%3%

0%

5%

10%

15%

20%

25%

30%

35%

Forest land Inland

waters

Agricultural

land

% of Total

135

Forest biomass

In 2016, Forestland area in Norway totalled 12093 thousand ha and occupied 31.4 percent of

the territory of the country as indicated in Figure 61. Although the forest area has undergone little

change over the last five years – it has increased by 0.2 percent or by 26 thousand ha (its share in the

country's overall territory is only 0.1 percentage points) –, the potential of forest biomass (stem, root

and branches) has increased. As shown in Figure 6, according to the National Forest Inventory, the

annual increment increased from 24.6 million tons m³ in 2010 to 26.1 million m³ in 2015, i.e. by 6.2

percent. In 2015, the total growing stock volume was 941.7 million m³. It has increased by 11.8 per-

cent over the last five years (i.e. by 99.2 million m³). The growing stock per capita increased from

173 to 186 m³ over the same period.

Figure 61. Total growing stock volume and gross annual increment in Norway

Data source: authors elaboration on information in Norway Statbank (National Forest Inventory)

The annual utilisation has been relatively stable – around 11 million m3 145. Forest biomass

represents a big terrestrial biomass potential in Norway. Current utilisation is less than 40 percent of

the annual increment. The growing stock in Norwegian forests has nearly increased by three-fold

since 1925. The potential for expansion and increased use of this potential is dependent of the market

situation and the ability to overcome the structural, environmental and other constraints.

Large forest biomass resources can be utilised for bioenergy: 14 TWh is equivalent to 7 mil-

lion m3 of timber ~ equivalent to 70 percent of today's harvest146.

The recently published Norwegian bioeconomy strategy147 and the report from the Norwegian

government’s expert committee for green competitiveness148 highlight the massive surplus of bio-

mass in Norwegian forests and the low level of utilisation of forest resources as a major biological

potential for further development of bioeconomy.

The Strategy for Forest and Wood Sector in Norway, Skog22149, estimates the potential for

the forest sector. This report was prepared as a joint effort among representatives from the private

sector, public authorities and research institutions. The strategy report estimates the potential for

increased biomass from Norwegian forest available for industrial use to be 15.8 million m3 in 2045.

This is a 35 percent increase from the level of 2010 (11.9 mill. m3). solid wood product sector, buil-

ding sector and biofuels are forecasted to be potential promising markets for the increased production

of biomass. The strategy also highlights new products made of wood as a promising development

achievable in a more distant timeframe.

145 Bardalen, A. 2016. Jordbrukets bidrag til bioøkonomien. NIBIO rapport. Vol 2. Nr 77. 146 Astrup, R. 2009. Forest Biomass Resources in Norway: report. Norwegian Forest and Landscape Institute. 147 Nærings- og fiskeridepartementet. 2016. Kjente ressurser – uante muligheter: Regjeringens bioøkonomistrategi. 148 Expert Committee For Green Competitiveness. 2016. Green Competitiveness: Executive summary of Report from the Norwegian

Government’s Expert Committee for Green Competitiveness. 149 Olufson, G. 2015. Skog22: Nasjonal strategi for skog- og trenæringen.

842

24,6

878

24,9

894

25,3

912

25,6

929

25,9

942

26,1

0

200

400

600

800

1000

Total growing stock (mill. m³) Annual increment (mill. m³)

2010 2011 2012 2013 2014 2015

136

Recent developments have, however, resulted in major changes in the Norwegian forest

sector. As per statistics used in this document, the pulp and paper industry has decreased significantly

in recent years. Following this development, forest production had to find other markets. Export of

roundwood has increased substantially and has now reached approx. 40 percent of the production.

Sweden is the prime market for export of roundwood from Norway. A significant share of the value

added is created outside Norway for an important part of the wood processing. The potential for forest

resources in Norwegian bioeconomy rely on the possibility to change this development. The

ownership structure, topographic conditions and distance to markets are other factors affecting the

competitiveness of the sector. For energy from forest biomass, low price level of competing energy

sources in Norway is a major factor.

Fisheries

The area of inland water (2009 thousand ha) is six times less than forest area and covers more

than 5 percent of territory of the country. However, due to the development of marine fisheries and

aquaculture systems, the fisheries sector creates the largest share of GVA in bioeconomy (see Figure

54). In addition, during the latter medium term, it is one of the fastest growing Norwegian bioeco-

nomy sectors. Here the average annual GVA growth during 2010–2015 was 6.8 percent, while the

overall result of agriculture and forestry for the same period grew by 0.3 percent per annum.

When assessing the potential of fishery biomass according to the data of catch of fish and fish

stocks presented in Figure 62, a considerable decrease in the weight of fish (by 23.7 percent) from

2679 thousand t in 2010 to almost 2044 thousand t in 2016 can be observed. Moreover, the data on

fish stocks by species in the North-East Arctic and the Barents Sea indicates a decline in stocks of

fish other than Blue whiting. A certain counterweight to this decline is found in the increase of fish

stocks in aquaculture systems. During the period of 2010-2016 fish stocks increased here by almost

a tenth, i.e. from 375.3 to 407.1 million.

Figure 62. Fish resources in Norway

* caught and released fish and slaughtered fish; ** Stocks of fish at the end of the year

Data source: authors elaboration on information in Norway Statbank (Aquaculture and Fisheries)

Annual processing of marine by-products and sidestreams from fisheries, aquaculture and fish

processing industry is approx. 870000 tonnes of biomass. Approximately 75 percent of this biomass

is utilised. Microalgae is annually harvested and processed in a quantity of 170 thousand tonnes (mea-

sured in wet weight).

0

500

1000

1500

2000

2500

3000

Catch fish (1000 t) Stocks of fish (mill.

pieces)

2010 2011 2012 2013 2014 2015 2016

0

2 000

4 000

6 000

8 000

10 000

Herring

(Norwegian

spring

spawning)

Blue

whiting

Capelin

(Barent

Sea)

Cod

(Northeast

Arctic)

Haddock

(Northeast

Arctic)

Saithe

(Northeast

Arctic)

Total stock biomass (1000 t.)

2010 2011 2012 2013 2014 2015

137

According to the scenario for the value creation from the marine sector150 the value added to

be achieved in 2050 is 500 billion NOK. Aquaculture is highlighted as a sector with particularly

promising potential. Aquaculture and fisheries are export oriented sectors. Thus, the Study considers

global markets not to be a limitation to the estimated potential.

Agriculture

Agricultural land, like forestland area, is relatively stable in Norway and occupies only 2.9

percent of the territory of the country (Figure 60). In the last five years, the area used for agriculture

has increased by only 1.5 percent (or by 16 thousand ha), i.e. up to 111.3 million ha in 2016. As a

result, the growth of biomass potential is mainly ensured by intensifying agricultural production.

As shown in Figure 63, the yield of agricultural crops has increased over the latter medium

term. In 2016, compared to 2011, the yield of fruits and berries increased by more than one third (on

average by 6.1 percent a year), production of biomass for raw feed and silage increased by more than

a quarter (on average, by 4.8percent a year ), the yields of vegetables and potatoes increased by more

than a fifth (by 4.3 and 4.2 percent per year, respectively), and the growth of grain and hay production

was slightly slower (by 3.3percent and 2.6percent per year, respectively).

The livestock production potential has grown due to both the increase in the herd and flock

(Figure 18) and the improved productivity of livestock. In 2016, compared to 2011, the largest incre-

ase was observed in the bird flock – by 9 percent (up to 69.9 million). Sheep flock increased by 8.5

percent (up to 1129.4 thousand). The number of pigs and cattle, except for cows, increased by 2.4

percent (up to 1696.8 and 560.6 thousand, respectively), and the goat flock increased by more than

one percent (up to 34.5 thousand).

Figure 63. Biomass production potential in Norwegian agriculture

Data source: authors elaboration on information in Norway Statbank (Agricultural area and livestock)

Organic waste (by-products and side streams) from the meat and poultry industry provides

approx. 220 thousand tonnes of biomass annually. These resources are utilised for various products

150 Det Kongelige Norske Vitenskapers Selskap DKNVS and Norges Tekniske Vitenskapsakademi NTVAV (2012).

Verdiskaping basert på productive hav I 2050.

0 500 1 000 1 500 2 000

Dairy goats

Cows

Other cattle

Winter feed

sheep

Pigs

Thousand head (animals)

2016

2015

2014

2013

2012

2011

2010

0 20 40 60 80 100

Poultry

Million head (poultry)2016201520142013201220112010

0 1 000 2 000 3 000 4 000

Fruit and berries

Vegetables

Potato

Total crops for green fodder

and silage

Grain

Hay

Yield (1000 tonnes)

2016

2015

2014

2013

2012

2011

2010

138

within medicine, renewable energy and a number of other products. Side streams from other agricul-

ture products are also available in large quantities, but limited data on volumes are available. No exact

information exists on the volumes of wet organic waste categorised by source or end-use. Norwegian

government is working on a white paper on waste and circular economy. We may expect a more

structured policy guidance in this field in the future.

Challenges related to biomass resources

Under the Nordic Carbon-Neutral Scenario (CNS), Nordic primary energy supply is expected

to decrease by 25 percent in 2050 compared to 2013 (excluding net electricity export). Energy supply

from fossil fuels and nuclear will decrease, while supply from bioenergy, wind and hydropower as

well as net electricity exports will increase. The CNS requires a dramatic change in the composition

of primary energy supply, coupled with aggressive energy efficiency policies that substantially re-

duce demand151.

Bioenergy is expected to surpass oil as the largest energy carrier, with the total demand for

biomass and waste increasing from almost 1100 Petajoules (PJ) in 2013 to over 1600 PJ in 2050,

corresponding to a share increase from 18 percent to 35 percent. At present, oil is the dominant energy

in Norway, but its declining use in transport is the single most important source of emissions reduction

in the CNS, accounting for almost 40 percent of total reductions alone. Primary supply for power and

heat also undergoes a significant transformation152.

The CNS shows the anticipated 50 percent increase in the use of biofuel in transport, which

will be supplied by a fourfold increase in net biofuel imports. Aiming for a greater domestic pro-

duction to cover the entire demand for bioenergy would imply diverting biomass away from higher

value uses in industry or producing biofuel from less economic domestic feedstocks. Increased re-

search, development, demonstration and deployment (RDD&D) efforts on the supply of low-cost

biomass feedstocks and integrated process concepts to produce advanced biofuels could make them

more cost- competitive153. On the other hand, if biomass continues to be transformed into higher-

value products (e.g. within the pulp and paper industry), 16 percent of the total Nordic biomass de-

mand across all sectors will need to be met by imports in 2050. Thus sustainable and politically ac-

ceptable sourcing of those resources will be crucial.

Moreover, the physical availability of biomass resources is not the only and even not the main

limiting factor for the development of the bioeconomy sector in Norway. Limitations and challenges

are to be found at the cost level, policy level and societal changes at large. Identification of these

limitations is a part of ongoing research projects in Norway, including the BioSmart154 project.

Biomass resources for bioenergy use

In terms of biomass resources for bioenergy use in Norway, there still is a significant potential

available for increasing bioenergy contribution to energy supply. Forest resources represent the major

potential for increased bioenergy production. The potential increase varies in different studies accor-

ding to assumptions. Ergseng et al. (2012)155 estimated the potentially increased biomass supply at

151 OECD International Energy Agency. 2016. Nordic Energy Technology Perspectives: Cities, flexibility and pathways to carbon-

neutrality. 152 Ibidem 153 Ibidem 154 Centre for Rural Research. 2017. BioSmart: Managing the transition to a smart bioeconomy (2015-2018). Version available at

http://biosmart.no/en/om-biosmart. 155 Bergseng, E, Eid, T, Rørstad, P.K and Trømborg, E 2012. Bioenergiressurser i skog – kartlegging av økonomisk potensial.

Rapport nr 32-3012. NVE

139

the harvesting level to be 20-25 PJ where harvesting residuals represented the major share. Agricul-

tural land can also be used for energy crops, but limited availability of agricultural land limits the

potential (agricultural land covers 3.2percent of the total land area). If all biomass resources where

used for energy production, the theoretical potential would be around 180-210 PJ (50-55 TWh)156.

The potential for biogas production in Norway is estimated to be around 8 PJ (NOU 2012:9)157.

However, the abundance and relatively low energy prices (i.e. fossil fuels and hydro energy),

in connection with the need for high investment costs, did not favour bioenergy production. However,

there are several limitations related to topography, accessibility and economics. Biomass resources

and the full range of technologies available for heat or electricity generation can provide good oppor-

tunities for increased bioenergy production. In Norway there is a deficit of mobilization of biomass

resources and insufficient industrial integration of bioenergy with other forest-based sectors158.

Challenges for increased use of forest biomass for bioenergy include the following159:

1. Market for bioenergy. Norwegian energy prices have historically been very low. With the

current energy prices, utilizing forest biomass for bioenergy is still profitable, and as the

district heating is not very developed in Norway, the largest energy product from forest

has been firewood to this day.

2. Environmental considerations. Today 15-20 percent of forested area is under a certain

type of environmental protection, therefore not all biomass can be utilised. Increased bio-

mass utilization will lead to a decrease in some environmental values.160. For that reason,

continuous development of management practices and planning in order to minimise ad-

verse environmental effects will be necessary.

3. Type and quality of forest recourses. Harvest residues can be utilised for bioenergy. Es-

timated amount of harvest residues – 1.6 million tonnes; not all of them can be utilised

leading to a reduction of 40 -70 percent; residues are generally found in places where

timber harvest already is economic.

Other issues of bioeconomy are the implications of agricultural land use changes on terrestrial

biodiversity and GHG emissions, influence the energy footprint of bioeconomic developments, envi-

ronmental sustainability of the foresighted bioeconomic development scenarios as well as the effi-

ciency in bioeconomy itself.

In conclusion, we have found that Norwegian bioeconomy is developing across sectors. Fo-

rest, agriculture, fisheries and aquaculture sectors are main sources of biomass in the Norwegian

bioeconomy. The potential for increased production differs across sectors based on the biological

resource base, economic conditions and environmental challenges.

Norway is rich in forest resources. Forestry has an obvious potential based on biological re-

source base, but previous mentioned structural, economic and environmental challenges have to be

tackled. Additional forest biomass may be mobilised in Norway by more intensive management of

currently exploited forests. The world’s largest wooden building is currently in Bergen city in the

western Norway. That is a potential for Norway and Lithuania. This is due to a deliberate policy

combining wood technology development, knowledge of architects and construction specialists of

156 Trømborg, E. 2015. Bioenergy Task 40 – Country report 2013 for Norway. Norwegian University of Life Sciences. 157 NOU 2012:9. Energiutredningen – verdiskaping, forsyningssikkerhet og miljø. 158 Scarlata, N., Dallemand, J.-F. Et all. 2011. An overview of the biomass resource potential of Norway for bioenergy use // Re-

newable and Sustainable Energy Reviews. Volume 15, Issue 7. 159 Astrup, R. 2009. Forest Biomass Resources in Norway. Norwegian Forest and Landscape Institute. 160 Vennesland, B. Hobbelstad, K. Bolkesjø, T. Baardsen, S. Lileng, J. Rolstad, J. 2006. Skogressursene i Norge 2006. Muligheter og

aktuelle strategier for økt avvirkning i Norge. Viten fra Skog og Landskap

140

wood as a building material. This could easily end up in a limited result, if it was not for the fact that

the future demand for climate change mitigation efforts will also most likely be driven by urban area

developments and the construction sector in Europe and elsewhere. Building sector is a significant

contributor to non-ETS161. Emissions in Europe – approx 40 percent (much less in Norway). Given

the current development in the negotiations on the EU compliance with their commitment to the Paris

Agreement, we should soon expect much stricter demands for mitigation results. Thus wooden

structures in urban areas provide a huge potential for Norway and Lithuania.

Agriculture has proven a substantial development in Norway. Further expansion is possible

through technical development, agronomic practices and utilization of crops with higher yield poten-

tial. The extent of the expansion is limited by natural conditions and environmental constraints. Ag-

riculture and food processing is by far the most important bioeconomy sector in Europe as a whole,

as well as in Lithuania and Norway (if marine value chains are included as well)162. Market for ag-

riproducts, known and unknown, has a potential for significant expansion. Focus should be on effecti-

veness of agricultural production, including precision agriculture. Norway has a modest agriculture

sector, but a significant development in precision agriculture, digitalization, automatization and e-

ffective value chains, whichshould be utilised. Another major asset is the food safety situation. Food

safety standards of Norwegian agriculture are among the world leading. Norwegian breed of livestock

is a world’s commodity due to the safety standards, and it has been growing.

Fisheries and aquaculture – including processing industry –already are the front-running

bioeconomy sectors in Norway. The utilization of fisheries resources are basically in balance with

the resource base. Data on the potential for bioeceonomy based on marine value chains are limited.

There is, however, a huge potential in the marine sector in Norway. Fisheries and aquaculture, inclu-

ding the processing industry, are already highly developed, while aquaculture is expected to grow

substantially. Utilization of other marine resources has a potential (i.e. plankton and seaweed)163. New

products are under development, but will still lag behind the value and potential of aquaculture and

fisheries in the medium term. Marine biomass, nonetheless, will continue to be one of the sectors with

the highest potential in Norway. In order to assess availability and distribution of biomass resources

in Norway from forestry, agriculture and the marine environment in terms of annual availability,

fluctuations and use as well as to provide qualitative and quantitative estimates for the future under

scenario conditions defining the types of bioeconomy-relevant resources likely to be in demand in

2030, the Research Council of Norway launched a 40 Million kroner research project under the Prog-

ram BIONÆR (2012-2021)164.

The sector-based overview briefly explains the potential viewed from the supply perspective.

The development is expected to generate new products, new markets and opportunities of supply of

resources and products that currently are limited in volume and value, but have a significant potential.

Currently, forecasting these new products and processes is difficult, but a number of examples are

provided in Chapter 6.3 hereof.

161 ETS sectors – industrial and power sectors, covered by the EU emissions trading system (ETS), while the other sectors of the

economy are the so-called non-ETS sectors. 162 European Commission. 2017. JRC Science for Policy Report: Bioeconomy Report 2016. EUR 28468 EN. 163 Falk Andersson, Janne (NORUT), Forbord, Magnar (Norsk senter for bygdeforskning) and Vennesland, Birger (NIBIO): Mapping

the bioeconomy. Biological Resources and Production in Forestry, Agriculture, Fisheries and Aquaculture Across Norway. NO-

RUT report 16/2016 164 Centre for Rural Research. 2017. BioSmart: Managing the transition to a smart bioeconomy (2015-2018). Version available at

http://biosmart.no/en/om-biosmart.

141

R&D potential

In the Norwegian Government Long-Term Plan for research and higher education 2015 –

2024165 the thematic priorities are clustered around areas, most of which directly or indirectly cover

R&D related to bioeconomy sectors: sea; climate; environment and green energy; renewal of the

public sector and better and more efficient welfare, health and care services; enabling technologies;

innovative and adaptable businesses; and world-leading experts166.

Although research and innovation is becoming increasingly international, the national dimen-

sion remains the key when activities and resources in this field are measured. For example, around

90 percent of R&D in Norway is still funded by national sources. All the R&D funding sources fall

into four categories167:

Funds from private enterprises. Most go to R&D in own enterprises.

Funding from ministries’ budgets. Mostly institutional grants, for example, general univer-

sity funds and funds distributed through the Research Council of Norway, but there are

also funds for programmes and projects of ministries and other state institutions. A smaller

portion comes from counties, municipalities, state banks, etc.

other sources such asown revenues at universities and research institutes; private founda-

tions and gifts, loans, funds from NGOs and SkatteFUNN. SkatteFUNN is in principle

public funding, but according to international guidelines168 any tax incentive schemes are

classified as own funding of the relevant sector. This is because the tax incentives are very

different, and in many countries there are period-related discrepancies between actual R&D

activity and the associated tax benefits.

Foreign sources: funds from foreign enterprises and institutions, funds, the EU, Nordic and

other international organisations. Foreign sources cover both public and private funding,

but are often classified as private funds when total financing is divided into two main cate-

gories, namely, public and private.

Total expenditure on R&D in Norway amounted to almost 6.7 billion EUR in 2015169. That

same year, R&D expenditure in the Norwegian business enterprise sector amounted to 3.66 billion

EUR and accounted for more than a half of Norway’s total R&D expenditure. During the period of

2011 – 2015, R&D expenditure in the business enterprise sector grew by a third, i.e. by more than

918.7 million EUR.

Figure 64 illustrates the R&D personnel in Norwegian enterprises by bioeconomy sectors.

The biggest share of R&D personnel work in food industry enterprises. In 2015, 1597 persons were

employed in R&D activities in these enterprises, which made up 5.1 percent of all R&D staff emp-

loyed in business enterprises. That same year, 919 R&D personnel worked in the chemical industry,

which accounted for 3 percent of the total R&D personnel in all business enterprises, and 851 (or 2.7

percent) – in the fisheries sector. The remaining sectors employed several times less R&D employees

than the previously-mentioned sectors, as shown in the Figure below. Since 2010, the number of R&D

personnel has been increasing in all sectors of bioeconomy, with the exception of the pharmaceutical

industry, furniture and textiles as well as clothing production enterprises. Over the same period, the

165 Norwegian Ministry of Education and Research. 2014. Long-term plan for research and higher education 2015–2024. Meld. St. 7

(2014–2015) Report to the Storting (white paper). 166 The Research Council of Norway. 2015. Report on Science & Technology indicators for Norway 2015. 167 The Research Council of Norway (2015). Report on Science & Technology indicators for Norway 2015. 168 OECD. 2015. Frascati Manual 2015: Guidelines for Collecting and Reporting Data on Research 169 EUROSTAT Total intramural R&D expenditure data (Last update: 30.11.16)

142

number of R&D personnel has increased the most in waste management enterprises (by 2.6 times),

fisheries (by 87.4 percent) and food industry enterprises (by 65.5 percent).

Figure 64. R&D personnel in Norwegian business by bioeconomy subsectors



Data source: authors elaboration on information in Norway Statbank (R&D in the business sector)

Figure 20 illustrates R&D expenditures in Norwegian business by bioeconomy sectors. Du-

ring the recent years, food, pharmaceutical industry and fishery enterprises have accounted for the

largest biggest share of the overall spending. Their shares in all expenditure on R&D amounted to

3.8, 3.4 and 2.6 percent, respectively, in 2015. During the period under review, R&D spending incre-

ased rapidly in the fisheries and food businesses (by an average of 13.5 percent and 10.9 percent,

respectively, per year). Slower growth was observed in the production of wood, textile and clothing

(an average of about 8 percent per year) as well as furniture production enterprises (5.6 percent).

Meanwhile, R&D spending fell in the industries of paper, rubber,plastics and chemicals (including

oil) by an average of 13.7, 9.7 and 3 percent, respectively, per year.

Figure 65. R&D expenditures in Norwegian business by bioeconomy subsectors



Data source: prepared according to the data of StatBank Norway (R&D in the business sector)

965 990 1017 997 10861597

916 863 853 918 925

919454 495 416 349650

851

199 154 201 197176

262

246

0

1000

2000

3000

4000

5000

6000

2010 2011 2012 2013 2014 2015

R&D personnel





Water supply, sewerage and waste*




Manufacture of basic chemicals (incl. pertoleum) etc*


70.5 74.5 87.3 80.5 87.9118.2

111.6 107.9118.2 114.1 113.0

105.9

43.6 37.739.7 40.8

62.6

82.161.5 92.5 52.4 49.140.9

36.9

0

50

100

150

200

250

300

350

400

450

2010 2011 2012 2013 2014 2015

Total funding (EUR million)




Manufacture of basic chemicals (incl. pertoleum) etc*







143

Biotechnology R&D expenditure of Norwegian businesses amounted to EUR 2909 million in

2015170, which made 5.1 percent of the overall expenditure of enterprises. It is noteworthy that en-

terprises spend the most of R&D expenditure on information and communication (47 percent) and on

other technologies, with the exception of nanotechnologies and new materials (42 percent). R&D

spending on biotechnology increased by 2 percent in 2010 – 2015, i.e. from 146.2 to 149.1 million

EUR, while all R&D expenditure on technologies increased by 34.9 percent. As shown in Figure 11,

the biggest share of R&D expenditure on biotechnology falls within the fisheries sector. Here it has

grown rapidly since 2013 – by an average of 20.6 percent per year; it increased slightly less in the

food and beverage industry (by 15.4 percent), in the pharmaceutical industry (by 7.3 percent) and in

the chemical industry (by an average of a mere 1.1 percent per year). In recent years, business R&D

expenditure on biotechnology has dropped sharply in waste management and paper industry (by

45.5 percent and 72 percent, respectively, in 2015 compared to 2010. R&D expenditure was low on

the development of biotechnology in manufacture of textiles and clothing as well as in the production

of paper and its products, and it was non-existent in the production of wood, furniture and plastics in

2013–2015 (Figure 66).

Figure 66. MTEP R&D expenditure of Norwegian businesses on biotechnology by bioeconomy subsectors



Data source: prepared according to the data of StatBank Norway (R&D in the business sector)

The results of the analysis of R&D costs and the number of employees in business enterprises

by bioeconomy sectors show that:

R&D potential is concentrated mainly in three sectors of bioeconomy: fisheries, pharma-

ceuticals and food processing;

R&D potential is the fastest growing in the fisheries business sector;

Most of R&D expenditure on biotechnology is spent in the fisheries sector, and it is rapidly

increasing.

170 Norway Statbank: Technology area of R&D in the business enterprise sector. Current cost, by detailed industry (SIC2007) (NOK

million) based on EUROSTAT Euro/ECU exchange rates – annual data (last update 01.06.17).

23.2 24.1 24.2 21.3 26.242.5

28.543.6

16.7 16.418.4

20.716.5

18.3

13.4 16.7

24.5

20.621.5

14.6

14.6 16.4

15.2

15.1

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015

Current cost (EUR million)




Manufacture of chemicals (incl. pertoleum) etc*




144

R&D infrastructure development and funding

Public schemes stimulate private sector investment in research and development in several

different ways. The threshold for investing is lowered through tax relief, such as the Skattefunn tax

deduction scheme. The public sector also creates schemes that directly stimulate research in trade and

industry, and that also contribute to cooperation with research institutions. This applies, for example,

to programmes under the Research Council of Norway and Horizon 2020171.

The Government has increased its investments in renewable industries through several grant

programs administrated by the Norwegian Research Council and Innovation Norway. In May 2015,

the Norwegian Research Council announced a total of NOK 900 million for research based innovation

for Norwegian industry172. Innovation, sustainability and a more environment friendly business sector

are the key themes of the call for proposals.

NIBIO, the Norwegian Institute of Bioeconomy Research, was established on 1 July 2015 as

a merger between the Norwegian Institute for Agricultural and Environmental Research (Bioforsk),

the Norwegian Agricultural Economics Research Institute and the Norwegian Forest and Landscape

Institute. The goal of the new Institute with its approximately 700 employees is to contribute to food

security, sustainable resource management, innovation and value creation through research and

knowledge production within food, forestry and other bio-based industries173.

An important step towards implementation of the new strategy was the establishing of a

Norwegian Biorefinery Laboratory (NorBioLab) as a part of Norway’s national strategy for research

infrastructure 2012–2017174. Also, NIBIO175, the Norwegian Institute of Bioeconomy Research, was

established on 1 July 2015 as a merger between the Norwegian Institute for Agricultural and Envi-

ronmental Research (Bioforsk), the Norwegian Agricultural Economics Research Institute and the

Norwegian Forest and Landscape Institute. It is Norway’s largest institute specifically dedicated to

bioeconomy research.

Bio-based knowledge centres

As bio-based value chains typically depend on a multidisciplinary approach, there are new

alliances emerging. Knowledge hubs with unique strengths are extending their capabilities into new

sectors. Heidner is a cluster in the southeast of Norway, leveraging a world-leading expertise in bre-

eding technologies. Originally developed for livestock and pig farming, this competence has created

an essential basis for Norway’s success in salmon aquaculture. The Heidner community maintains

close relations with the large University of Life Sciences (NMBU) at Ås, 50 km south of Oslo, which

represents a major academic centre and a cluster of key research institutes such as NOFIMA and

NIBIO (link).

For the marine sciences, there are main centres in the cities of Bergen and Ålesund on the

west coast of Norway as well as in Tromsø further north.

171 Norwegian Ministry of Education and Research. 2014. Long-term plan for research and higher education 2015–2024. Meld. St. 7

(2014–2015) Report to the Storting (white paper). 172 The Research Council of Norway. 2016. NOK 900 million available for research-based innovation for industry. Newsletter at

https://www.forskningsradet.no. 173 Norsk institutt for bioøkonomi (NIBIO) – www.nibio.no 174 National Research Council of Norway. 2016. Norway’s national strategy for research infrastructure 2012-2017. 175 Den Norske Regjeringen. 2015. Norsk institutt for bioøkonomi (NIBIO) opprettes 1. juli 2015. Regjeringen.no Nyhet at

https://www.regjeringen.no

145

• In Bergen, the Institute of Marine Research has a national responsibility in marine surveil-

lance and resource management, and Fiskeriforum Vest and the Seafood Innovation clus-

ters represent focal points for the seafood and aquaculture industry both in Bergen and

nationwide.

• Ålesund is also leveraging long-standing fishing traditions, and the Legasea industry clus-

ter has developed a leading expertise on marine ingredients such as oil and protein extracts.

• Tromsø is hosting the national marine biorepository, Marbank and the Tromsø University,

the northernmost University of the world. For more information, see also Biotech North.

In Trondheim, the polytechnic university of NTNU with close to 25 thousand students and

Northern Europe’s largest research institute, SINTEF and the Paper and Fiber Institute PFI, create a

major centre for process engineering and industrial biotechnology.

The processing industry is also strong in Grenland and adjacent regions in the southern part

of Norway, represented by industry clusters such as the Eide network176.

6.2. Strategic Norwegian documents related to the development of bioeconomy

The Norwegian Government seeks to enhance competitiveness in the industry and has an am-

bition of making Norway one of the most innovative countries in Europe. Therefore, the Government

has made a commitment to commercial research and innovation, and will use the long-term plan to

lay the foundation for a more knowledge-intensive business community with a robust ability to adapt

and create value177. Starting from the National Strategy for the Bioeconomy, aiming to prepare the

industry for the opportunities related to new value chains and markets based on sustainable manu-

facturing, authorities and research institutions of Norway have developed a range of strategic and

political documents and started several grand projects to explore possibilities, create the necessary

infrastructure and achieve the goals set in the strategic guidelines.

Norway has built an economy dependent on fossil, non-renewable resources through a

successful mining of North-sea oil. However, Norwegian policy makers see a national focus on

bioeconomy as a part of a green shift, which has been recognised as necessary178.

Norway has committed to reduce emissions of harmful greenhouse gases by 40 percent in

2030 relative to a 1990 baseline as a part of the Paris agreement. This is consistent with estimates of

what is required to achieve the two-degree target made by the UN panel on climate change, and

coincides with commitments made by the EU. Norway is negotiating an agreement with the EU that

will entail a joint commitment to meet these targets. The Government has also set a target for Norway

to become a low- emission country by 2050179.

In March 2015, the Norwegian government decided on the preparation of the National Bioeco-

nomic Strategy. The Research Council of Norway has played the key role in implementing the cross-

sectoral strategy that formed the basis for national investment in bioeconomy. Written reports from

Innovation Norway and the Norwegian Environment Agency were submitted. The Ministry of Trade,

176 Invest in Norway. 2017. Bioeconomy. Norwegian Government webpage for innovation and development of Norwegian enterpri-

ses and industry. 177 Norwegian Ministry of Education and Research. 2014. Long-term plan for research and higher education 2015–2024. Meld. St. 7

(2014–2015) Report to the Storting (white paper). 178 Hansen, L., and Bjørkhaug, H. 2017. Visions and Expectations for the Norwegian Bioeconomy // Sustainability 9, 341. 179 Norwegian Ministry of Finance. 2016. Long-term Perspectives on the Norwegian Economy 2017 – A Summary of Main Points.

Meld. St. 29 (2016-2017) Report to the Storting (white paper).

146

Industry and Fisheries coordinated this project in close cooperation with the Ministry of Agriculture.

They were assisted by Inter-ministerial working group with participation from 6 other Ministries and

the Advisory Group with national experts. The Strategy was completed on 11 November 2016.

The subsequent policy statements were developed by Norwegian Ministries:

The Ministry of Finance prepared the White Paper “Long-term Perspectives on the

Norwegian Economy 2017 – A Summary of Main Points” in 2017.

The Ministry of Trade, Industry and Fisheries presented a white paper on the place of the

seas and oceans in the country’s foreign and development policy – the White Paper “The

Place of the oceans in Norway’s Foreign and Development Policy” in 2017.

The Ministry of Agriculture and Food presented a white paper on the forest policy and

forest sector development180.

The Ministry of Agriculture and Food presented a white paper on agricultural policy in

2017181.

The Government of Norway presented a white paper on the climate policy in June 2017.

White Paper on waste policy and the circular economy to be presented to the Parliament

in 2017.

To implement the National Bioeconomy Strategy, the total of 16 new national Norwegian

research infrastructures are being established, which will lay the foundation for ground breaking

research, future value creation and attractive research and educational institutions. Along the process

of the infrastructure development, researchers of scientific and academic institutions are now carrying

out fundamental analytical work aimed at providing the background knowledge for further develop-

ment of related policies and policy instruments as well as promoting a higher level of sustainable

innovation in Norway.

Over the three-year period (2015–2018) of the BioSmart project182, researchers from the

NCRR, SINTEF, NIBIO, NTNU and Norut as well as a number of international research institutes

will be working with a total of eleven topics or so-called “work packages”. Furthermore, a series of

scientific studies will be carried out looking into issues such as biotechnological transitions, legal

rights, and the levels and scope at which wealth generation can be anticipated183.

6.3. Norway’s practice in the development of bioeconomy

Two important industries in the Norwegian bioeconomy are forestry and marine sectors.

Norway aims to be a frontrunner in the emerging bioeconomy. With an abundance of high quality

raw materials and a skilled workforce, Norway is presently developing a leading position in advanced

biorefining, particularly related to advanced processing of marine co-products and lignocellulose. The

180 Den Norske Regjeringen (2016). Meld St, 6 (2016-2017) Verdier i vekst: Konkurransedyktig skog- og trenæring. Det Kongelige

Landbruks- og Matdepartament. 181 Den Norske Regjeringen (2016). Meld. St. 11 (2016-2017) Endring og utvikling. En framtidsrettet jordbruksproduksjon. Det

Kongelige Landbruks- og Matdepartament. 182 Centre for Rural Research (2017). BioSmart: Managing the transition to a smart bioeconomy (2015-2018). Version available at

http://biosmart.no/en/om-biosmart. 183 SINTEFF (2015). Towards a bioeconomic future. Latest news at sintef.com

147

Government has already increased its investments in renewable industries through several grant prog-

rams administrated by the Norwegian Research Council and Innovation Norway. The Research Co-

uncil of Norway plays a key role in implementing the cross-sectorial strategy that forms the basis for

national investment in the bioeconomy184.

The key research of Norwegian University of Life Sciences is related to fisheries, forestry and

agriculture. In order to increase value creation in the Norwegian aquaculture, meat and dairy indust-

ries, Foods of Norway will target three key research areas: biomass, feed efficiency and product qu-

ality. Future animal feeds should be based on sustainable feed sources that do not compete directly

with human food, such as macroalgae, grass and trees. Norway has limited land area and limited

climatic conditions to grow feed grains and protein-rich crops such as peas and beans on a large scale,

but Norway is in a unique position with large amounts of renewable biological resources from forest,

i.e. converts these resources into feed using new technology. Seaweeds (macroalgae) are one of the

largest unexploited biomass resources and among the fastest-growing plants in the world. They grow

rapidly under cold water conditions and provide a large potential for value creation. By exploiting

seaweeds for animal feed, national food security can be increased. In Norway, timothy and meadow

fescues are the dominant cultivated grasses, and together with clover they are the main sources of

energy in diets for ruminants. Improving the digestibility of grass will have a large impact on resource

utilization, feed efficiency, and feed cost185. For example, the research has recently demonstrated that

salmon thrives on a feed with proteins derived from trees. How will small pigs react? Piglets are ready

to be fed diets with yeast derived from Norwegian tree biomass. Three different experimental diets

have been produced, with a yeast level replacing 10, 20 and 40 percent of the protein from the protein-

rich feed ingredients186.

Collaborating we are smarter: Biosmart (Managing the transition to a smart bioeconomy)

(2015–2018) is funded from the Research Council of Norway’s Program BIONÆR (2012–2021) that

calls for a “visionary framework” for the development of a sustainable bioeconomy in Norway.

Bioeconomic development is about more than a continuation of current directions in the farming,

forestry and fisheries sectors. Rather it is about a societal shift from an economy based on non-re-

newable resources to an economy based on resources that can be grown (forestry) or farmed (far-

ming, fisheries). To do this, Norway needs to develop technologies capable of transforming biomass

into the raw inputs for agriculture, industry and production (such as biomass to fuel, fish food, and so

on). To develop a “smart” (knowledge based and wisely managed) bioeconomy we need to think of

how these sectors can work together in the future. If we can achieve this, investments that help all

sectors involved in the bioeconomy integrate can be made, thus cutting waste, optimising the

knowledge sector of Norway and leading to a more sustainable economy. A key component in the

project will be a foresight analysis of 1500 Norwegian businesses to ascertain what the needs of

Norway's five key biosectors (farming, forestry, fisheries, bioscience, industry) are and where there

is a potential for integration187.

Some examples of research projects in Norway research institutions188:

184 Invest in Norway. 2017 Bioeconomy. Norwegian Government webpage for innovation and development of Norwegian enterprises

and industry. 185 Øverland, M. 2015. Biomass. Norwegian University of Life Sciences. Version available at: https://www.foodsofnorway.net/key-

research/biomass 186 Bjergene, L. R. 2017. Can piglets eat trees? Norwegian University of Life sciences. Version available at:

https://www.nmbu.no/en/news/node/30564 187 Industrial Biotech Network – Norway. 2017. Bioeconomy projects. Version available at: http://indbiotech.no/content/bioeco-

nomy-projects 188 Ibidem

148

NorZymeD. Enzyme development for Norwegian biomass – mining Norwegian biodiversity

for seizing opportunities in the bio-based economy. New enzymes are tested in Borregaards demo fa-

cilities for the BALI-process, a pre-process for cellulose;

BIOFEED. Novel salmon feed by integrated bioprocessing of non-food biomass. The use of

biomass from wood (spruce) in salmon feed will be examined together with the use of macroalgae.

Researchers will examine pre-processing techniques, enzymatic hydrolysis, screening of promising

microorganisms (mainly yeasts) and evaluate processing methods;

MarPol. The main goal of MARPOL is to develop innovative biomaterials by enzyme tech-

nology for modification and upgrading of polysaccharides from marine resources;

CYCLE. An interdisciplinary project with a bio-economic perspective, focusing on several

value chains from both agriculture and marine sectors. The main objective is to improve resource uti-

lization in the food chain in Norway by developing sustainable eco-friendly bio-processes and novel

technology, with research and innovation at its core;

PROMAC. Energy efficient processing of macro algae in blue-green value chains. The project

focuses on energy efficient processing and refining of macroalgae to food and feed, and includes a

logistic and economic analysis of the value chain, as well as a life-cycle analysis;

SusValueWaste. Sustainable path creation for innovative value chains for organic waste pro-

ducts (SusValueWaste) is led by NIFU. The project will address the potential for value creation and

improved sustainability in the valorisation of organic waste streams, residual feedstock and by-pro-

ducts – by analysing value chains inside and across different sectors of bioeconomy;

Food to Waste to Food (F2W2F). The project aims to demonstrate a closed cycle organic

waste treatment system using municipal organic waste to provide energy, water, fertiliser and carbon

dioxide for greenhouse agriculture. BioMim – Advancing biomass technology. BioMim is a four-year

research project funded by the Norwegian Research Council. Research and technology development

are critically needed to find cost-effective and sustainable solutions for the conversion of biomass.

Extensive exploitation of lignocellulosic biomass as a feedstock for a variety of products is the key to

develop a viable bio-economy. However, the natural resistance of lignocellulosic biomass to chemical

and biological deconstruction is a challenge that biorefineries have to overcome.

Some examples of good practice in Norway companies:

Trefokus. Sustainable building solutions. To increase the use of wood in construction. Coo-

perating with the local municipality to obtain support for using wood in public buildings. The Nardo

School project made use of wood, not only in the interiors but also in sheathing and even the load-

bearing structures189;

Borregaard. From petroleum-based to bio-based additives. The Exilva plant is a wood-based

performance-enhancer that replaces petroleum-based additives in adhesives, coatings, agricultural

chemicals, and cosmetics with bio-based materials – namely cellulose from wood, the most abundant

organic polymer on Earth. Exilva consists of a network of suspended microfibers known as microfib-

rillated cellulose that are extracted from wood and converted into a network of microfibrils. It is a so-

called multifunctional additive, which reinforces and stabilises various substances. Microfibrillated

cellulose was not available in commercial quantities until the opening of Borregaard’s Exilva plant

in 2016, with a production capacity of 1 thousand tonnes per year190;

189 Nordic Council of Ministers (2017). Nordic Bioeconomy: 25 Cases for Sustainable Change. 190 Nordic Council of Ministers (2017). Nordic Bioeconomy: 25 Cases for Sustainable Change.

149

Borregaard AS. Forest / agricultural waste conversion. Extensive investment in R&D to pro-

duce new and sustainable products from wood and agricultural waste has led to the value-added pro-

ducts of highly intensive knowledge activities. Considerable investments in R&D (e. g. Borregaard

3–4 percent of its turnover used for innovation and 9 percent of employees work in R&D) transform

a company from a traditional wood-processing to an advanced manufacturer of bio-based chemicals.

Approximately 90 percent of the incoming lignocellulosic biomass is converted to marketable pro-

ducts191. Also forest waste, straw and wood chips were used to produce biofuels and valuable green

chemicals;

Biomega. Turning tonnes of waste into new products. Biomega produces salmon oil, meal

and peptides for pet food and human consumption by sourcing more than 36 thousand tonnes of

former by-products such as heads, fins, bones, guts and tails. For a long time, non-edible parts of the

fish were dumped into the sea, causing detrimental effects to ocean health192;

Calanus AS. Break down (hydrolysis) of protein from marine plankton to improve feeding

stuff. Calanus finmarchicus, a part of zooplankton, is a potentially large resource of proteins if sus-

tainably harvested and processed in application of a gentle and environmental biorefinery technology.

Breaking down marine proteins leads to the new products (e.g. third generation omega 3, protein

hydrolysates) with better functional properties (e. g. high digestibility, heat stable, highly soluble,

excellent amino acid profile, low mineral content, GMO free, pleasant marine flavour). Thus the pro-

ducts serve as a nutrient source and an excellent flavour enhancer in premium pet food, treats, pet

supplements and pharmaceuticals, even in very low inclusions;

Norvegian Government. Publicly financed bioeconomy infrastructure. Publically financed

national centres and infrastructures for biotechnologies and bioeconomy (e. g. the Norwegian Centre

for Bioenergy Research, the Norwegian Biorefinery Laboratory NorBioLab, the National Facility for

Marine Bioprocessing NAMAB193, etc.) is publically available for commercial organisations within

the frame of research projects in collaboration with participating institutions. The sources of public

funding are the following: international, national and/or local authorities (e. g. Fisheries Directorate,

Ministry of Local Government and Modernisation, Research Council of Norway, Innovation Norway,

Technology Strategy Board, Executive Agency for Competitiveness and Innovation, etc.) by estab-

lishing programs and funds (e. g. the EU EP7, User-Led Innovation Arena (BIA), Eco-Innovation

Project, MABIT-programme, etc.), universities (e. g. Norwegian University of Life Sciences (UMB)),

institutes (e. g. NIBIO, SINTEF, etc.) or others;

Tromsø, Norway. Role of regional spill-over. Natural environment (e. g. cold waters of the

Norwegian Sea), infrastructure (e.g. fishing port, economic services, research centres, laboratories)

and social conditions (e. g. living conditions of modern city) provides with competitive conditions

for start-up companies to succeed. This gives companies an easy access to adjacent oceans as well as

access to available research infrastructure and competencies both for marine exploration, on-shore

research and product development (e. g. Science Park, Aquaculture Station, BioTep facility, hub for

global marketing of seafood, etc.). The academic environment (Norges arktiske universitet, College

of Fisheries) serves as a place for the sharing of knowledge and experience. Home to some of the

world’s most competent scientists within marine biotechnology is a reason for many start-ups within

the marine biotech sector194;

191 Lange, L. et all. 2015. Development of the Nordic Bioeconomy. NCM reporting: Test centers for green energy solutions o Biore-

fineries and business needs. TemaNord. T. 582. Denmark: Nordic Council of Ministers. P. 219. ISBN 978-92-893-4426-5. 192 Nordic Council of Ministers (2017). Nordic Bioeconomy: 25 Cases for Sustainable Change. 193 Lange, L. et all. (2015). Development of the Nordic Bioeconomy. NCM reporting: Test centres for green energy solutions o Bio-

refineries and business needs. TemaNord. T. 582. Denmark: Nordic Council of Ministers. Psl. 219. ISBN 978-92-893-4426-5. 194 Biotech North (2016). Success stories: Calanus. Version available at: https://www.biotechnorth.no/success-stories.

150

Hadeland / Norway; Jämtland. Local partnership for acceptance of innovation. Local biomass

bioenergy chain follows principles (e. g. bottom-up approach, multilevel governance; triple bottom

line criteria, multi-disciplinarity, participatory, etc.) for ensuring a prosperous and sustainable bioe-

nergy development in rural and remote communities. Triple bottom line principle examines econo-

mic, social and environmental outcomes of the development, thus all stakeholders, affected parties or

actors in the chain have to be included in broad partnership relations. Good example of such relations

is a ‘quintuple helix’ partnership, enabling the main groups (i.e. 1) local entrepreneurs; 2) local raw

materials suppliers; 3) local authority; 4) expertise and 5) civil society, customers and users) bringing

specific knowledge and other resources into the coalition in bioenergy production innovation. These

relations ensure that all parties (actors) benefit from joint activities and create acceptance in the co-

mmunity195;

Romerike Biogas plant at Esval Miljøpark KF, Norway. Food waste to biogas and biofertili-

ser as well as cooperation between public sector and industry. The Waste-to-Energy Agency’s

(EGE) biogas plant at Romerike processes food waste from the Oslo region. Waste is utilised to pro-

duce liquid biogas (LBG) and bio fertiliser at the innovatively designed plant. Liquid biogas fuel-

fired city busses and waste collection vehicles, and bio fertilisers are used for agricultural purposes.

This creates a closed loop, where waste resources are exploited in the best manner possible. The

capacity of the plant makes it possible to provide biofuel for 135 buses and biofertilisers to 100 ave-

rage size local farms. In 2012, EGE and its industrial partner Cambi won a National Innovation Award

for the design of the plant and cooperation between the public sector and industry196.

Hynor Lillestrøm AS, Norway. Landfill gas to green hydrogen as fuel. A hydrogen production

facility and a filling station for hydrogen cars were built in Lillestrøm. The company is both a hydro-

gen technology test centre and one of the most advanced refuelling stations in the world, located just

north of Oslo. Hydrogen is produced from landfill gas, hydro power and local solar power at the

station. The test center facilitates R&D projects of international importance, both on hydrogen pro-

duction, compression and second generation carbon capture technologies. Hynor Lillestrøm is the

result of a broad cooperation with companies, institutes and educational institutions. Collaboration

with ambitious local and regional authorities plays a crucial role for its success197.

Lindum AS and Esval Miljøpark KF, Norway. Food waste and sewage sludge from wastewa-

ter transformed into energy and fertilisers. The two waste treatment plants, where food waste and

sewage sludge from wastewater treatment plant are used to produce environmentally friendly fertili-

sers and generate energy. Both plants use the thermal hydrolysis method (CAMBI technology) to

improve and intensify the digestion process and thus obtain better final products. Lindum AS is also

implementing a pilot project Food2Waste2Food, which consists of using CO2 from food waste treat-

ment to support growth of new vegetables and fruits grown in special greenhouses, which are cha-

racterised by low carbon footprint. In this way another product of the waste treatment process is being

used, which is in line with the principles of the circular economy198.

Akershus EnergiPark, Norway. Energy supply and research. The company situated in Kjeller

is both a local energy supplier and a research unit. In order to produce district heating, the company

is using solar thermal collectors (in summer), wood chips, heat pumps, biogas and – as a backup

195 Bryden, J. et all. (2017). Triborn: Triple Bottom Line Outcomes for Bioenergy Development and Innovation. NordRegio Policy

Brief. T. 3. May. Psl. 12. ISSN2001-3876. 196 http://esval.no/om_esval/om_biogassanlegget_i_nes 197 http://hynor-lillestrom.no/ 198 Polish-Norwegian cooperation platform for climate and energy conservation http://www.razemdlaklimatu.eu/en/32-

wizyta-studyjna-w-norwegii

http://www.razemdlaklimatu.eu/en/32-wizyta-studyjna-w-norwegii

http://www.razemdlaklimatu.eu/en/32-wizyta-studyjna-w-norwegii

151

source – bio-oil produced from waste from slaughter houses and fish processing. The company is also

conducting research on the production and utilisation of hydrogen fuels 199.

In summary of good Norwegian practice in the area of research, the following opportunities

for its adaptation in Lithuania may be envisaged:

development of innovative biotechnologies and biomaterials in search for cost-effective and

sustainable solutions for the conversion of biomass, such as the creation of innovative bioma-

terials, extensive exploitation of lignocellulosic biomass as a raw material, and in other areas;

evaluation of the potential of the production of biomass and the need for biomass in all sectors

of bioeconomy; insights of integration of all bioeconomy-related sectors in the implementa-

tion of interdisciplinary projects;

improvement of the use of resources and innovative solutions in the creation and improvement

of sustainable bioprocess technologies in various biomass value chains and fields;

improvement of quality of animal feed and digestibility, creation of new feed from sources of

biomass, which do not directly compete with those used in food production (for example,

macro algae, grass and wood products) in order to increase the value added in the production

of aquaculture products, meat and dairy products.

In summary of good Norwegian practice in the business area, the following opportunities for

adapting it in Lithuania may be envisaged:

transition from petroleum-based to bio-based additives of cellulose from wood – most abun-

dant organic polymer on Earth – in the production of adhesives, coatings, agricultural chemi-

cals, cosmetics, etc.;

biorefinery of wood and agricultural by-products and waste into higher value added chemical

bio raw materials;

processing fishery and aquaculture by-products into food and feed;

biowaste treatment and processing into new products;

production of biogas from waste.

In summary of good Norwegian practice in business and local governance area, the following

opportunities for adapting it in Lithuania may be envisaged:

development of the local biomass bioenergy chain on the basis of local partnership based on

such principles as “bottom-up”, multi-level governance, triple bottom line, etc., when all sta-

keholders, affected parties or actors in the chain (suppliers of raw materials, energy producers,

suppliers, consumers, local municipalities and local communities) are involved in interaction;

creation of competitive conditions for start-ups to establish in aquaculture or other sectors of

bioeconomy, giving them an easy access to , research infrastructure, accumulated R&D com-

petencies, product development skills, etc.;

collection of municipal and household food waste, its processing into biogas in sludge treat-

ment facilities in the local sewage cleaning plant, use of the produced biogas in city transport

with local government subsidising the difference in biogas prices;

sustainable business solutions in order to increase the use of wood and other biomaterials in

the construction of public buildings in cooperation with local municipality.

199 Polish-Norwegian cooperation platform for climate and energy conservation http://www.razemdlaklimatu.eu/en/32-

wizyta-studyjna-w-norwegii

152

7. Analysis of Lithuanian and Norwegian business cooperation

opportunities in the bioeconomy

7.1. Investment and success stories of Norwegian companies in Lithuania

Norwegian direct investment in Lithuania constantly growing (by annual 4,7 percent on ave-

rage since 2011) and Norway FDI totaled EUR 919 million in 2016. The Norwegian FDI growth is

more rapid compared to growth rate of total FDI in Lithuania (by 3.4 percent) or compared to Swedish

FDI (by 1.9 percent) or Finnish FDI (by 2.9 percent). Norwegian FDI were fifth largest in Lithuania,

while six years ago (i.e. in 2010) they were only in top 10200. It should be noted that Lithuanian

foreign direct investment in Norway totaled EUR 1.6 million in 2016 and has been flat over the past

three years201.

Norwegian foreign direct investment in Lithuanian bioeconomy stood at EUR 84.6 million in

2016 and has increased by nearly four and a half times since 2005, i.e. by 12 percent annually, on

average (Figure 65). Norwegian direct investment in Lithuania has been rising at a much higher pace,

thus the share of bioeconomy sector investment has fallen remarkably from 17.2 to 9.2 percent over

the years 2005–2016

Norwegian companies invested mostly in the wood, wood products and furniture sector (fi-

gure 21). Investments in these sectors in 2016 reached the EUR 46.5 million level, i.e. 5 percent of

all Norwegian FDI in Lithuania. Norwegians has also invested in textile, wearing apparel and leather

EUR 26.3 million (i.e. 2.9 percent of all FDI), in food products and beverages and agriculture, forestry

and fishing almost EUR 6 million. There was no Norwegian FDI into aquaculture although there are

successful fish processing companies controlled by Norwegian capital in Lithuania. During recent

mid-term period most rapid increase of the Norwegian FDI were in wood manufacturing (on average

by 12.9 percent annually), in textile, wearing appareal and leather (by 7.1 percent), food products and

beverages (by 4.2 percent) manufacturing and agriculture, forestry and hunting (by 3.8 percent).

Figure 67. Norway direct investment in bioeconomy sectors in Lithunia



Source: authors elaboration on information in Lithuanian Official Statistics Portal (Foreign direct investment by economic activity)

200 Estimated according data of Lithuanian Official Statistics on foreign direct investments. 201 Lithuanian Official Statistics Portal: Lithuanian direct investment abroad at the end of the year.

16.026.5 24.0 29.2

20.1 19.2 17.8 20.6 24.5 28.0 32.139.95.0

5.7 6.311.6

14.8 17.3 19.5 17.7 16.421.2

22.826.2

6.64.0 3.9 5.8 5.1 4.5

4.53.8

6.4

3.3

3.4 5.5

2.74.2 4.9 6.2 5.4 2.7

5.35.4

6.1

0

20

40

60

80

100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

million EUR

Wood and wood productsTextiles, wearing apparel and leather*Furniture*Agriculture, forestry and fishingFood products and beverages

153

During last decade number of Norwegian capital controlled enterprises in Lithuania increase

by 73 to 244 in the beginning of 2015. That was 6.5 percent of all foreign capital enterprises in Lithu-

ania (by the way, significantly slower growth was of enterprises controlled by Swedish (52 percent)

or Finnish (28 percent) capital). Meanwhile in the beginning of 2015 there were only 20 Lithuanian

capital controlled enterprises in Norway202.

There were 30 Norwegian enterprises203 in Lithuanian bioeconomy in the beginning of 2015

(Figure 22), that is one eighth of all Norwegiant companies in Lithuania and almost 20 percent less

compared with record high 37 companies in 2008. Most of these companies (21 of them, i.e. 70

percent) are working in furniture manufacturing, about 20 percent are in the textile and wearing ap-

parel, two companies are in food products manufacturing, and one in wood and wood products. Since

2006 there is no Norwegian enterprise in the fisher setor in Lithuania.

Figure 68. Number of Norway-controlled enterprises in Lithuania at the end of the year



Source: authors elaboration on information in Lithuanian Official Statistics Portal (Annual structural business statistics)

Examples of successful business of joined Norwegian and Lithuanias ventures

Manufacture of wood and wood products

Oak and other hardwood parquet producer Bauwerk Boen UAB (until July 2017 – BOEN Lietuva) is located in Kietaviškės. It is

a well-functioning and constantly growing international company with over 20 years of experience in producing premium flooring

for home and gyms. The company produces more than four thousand different products, which are sold in 86 countries, on all

continents. Exports account for 97.5 percent of total production. The main export markets are Scandinavia, Germany, Austria,

Switzerland and the United Kingdom. The company sells its products through Boen's sales offices in Lithuania, Germany,

Norway, the United States and the United Kingdom. The company's capital is owned by investors from Norway and Switzerland.

Over the last five years, the company has grown by more than one and a half times, and currently employs 1228 people. For more

information see: http://boen.com/en/

Massive Wood Construction UAB, based in Šiauliai, is a Norwegian capital company that designs and builds wooden frame-

panel holiday houses. The company started its operation in 2005. The sole shareholder of the company is Norvegian company

Massive Wood Construction AS, which sells its products, while the Lithuanian company carries out design, production, const-

ruction, project management and other construction project development work. The company is certified in Norway. Since its

inception, the company has manufactured, built and fully equipped more than 200 homes. At present, an average of 50 holiday

homes per year are produced and built. Most of the houses are built in ski resorts, mountains, in central and southern parts of

Norway. Customers appreciate the exceptional home design, extra-fast construction process and high quality. The company has

an average of 110 employees, of which 60 are employed in Lithuania and 50 more in Norway. The company organises staff

202 Estimated according data of Lithuanian Official Statistics on business statistics. 203 Excluding rubber and plactics manufacturing enterprises, indicated in figure 22. Due to insufficient date it is hard to

estimate the level of biomaterials in the production.

14 17 20 19 15 11 10 12 10 13

43

3 68

8 7 7 98

7 67

87

75 4 5

61

4 3 44

3 33

44

4 3 3 32

1 21

1 1 1 1 122 2

0

10

20

30

40

50

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood and wood productsFurniture*Textiles, wearing apparel and leather*Rubber and plastic products*Food products and beveragesForestry and logging

154

training and qualification upgrading. Due to the growth of interest in products of the kind in Norway, the company is expecting

on average 40–50 percent growth of turnover in the next 2–3 years. For more information see: http://mwc.lt and http://nwc.no

Viking Industrier UAB is a Norwegian capital company, founded in 2006 in the remote region of Lithuania – Venta (in Mazeikiai

district). The company designs, manufactures and markets high quality wooden products and accessories for gardens. The com-

pany's customers are from Norway, Germany, the Netherlands, the United Kingdom, France, Denmark and other countries. They

evaluate the quality of products by 95 percent, design – 92 percent, innovations – 89 percent. The company employs 64 emp-

loyees. For more information see: http://www.vikingindustrier.com/

Baldeka UAB is a subsidiary of the Norwegian company Svenheim Møbelindustri AS, working in Alytus since 2002. The com-

pany produces office furniture and designs grocery stores. The company sells its products in the Norwegian, Swedish, Danish,

German markets. Over the past five years, the company’s staff has increased by almost 75 percent, and it currently employs 226

people. For more information see: http://www.baldeka.lt/

Hjellegjerde Baltija UAB is a Norwegian capital company, based in Panevėžys since 2007, that manufactures chairs and soft

furniture for home with natural leather. The administrative, marketing and product development functions are carried out in

Norway, production – in Lithuania. The produced furniture is exported to Norway. The company employs 108 employees. For

more information see: http://www.hjellegjerde.no/en/

Manufacture of textiles and wearing apparel

In 1998 the Norwegian capital company Devold has established a factory in Panevėžys. In 2015 it moved to Panevėžys Free

Economic Zone. The company Devold, operating since 1853, is one of the oldest knitted apparel manufacturers in Europe and

the oldest in Norway. The main activity of the company is the production and sales of clothing for outdoor sports and warm

industrial clothing. According to the sales data, the company is the leader in Norway, Sweden, Iceland. It has its subsidiaries in

14 countries worldwide. Norwegians have introduced innovative production technologies in Devold subdivision in Lithuania,

which allows more than 95 percent of manufactured products to be Exported. At present, over 90 percent of Devold Knitwear is

produced in Lithuania. The factory also performs the storage function – the company's warehouse, which has moved to Lithuania,

is supplying central European markets. The company allocates funds for co-operation with Lithuanian R&D institutions and

universities (in the year 2015 the company has provided support for scholarships of KTU students of textile engineering study

programmes, This educational institution also trains Devold employees), thus aiming at bringing science and business closer,

reducing youth unemployment. Over the past five years, the number of employees of the company has grown by one fifth and

currently it employs 303 people.

Scandye UAB, Established in 2003 in Telšiai, Northwest Lithuania, is a Scandinavian capital company (48 percent – Norwegian,

49 percent – the Danish capital), engaged in textile dyeing and finishing. Scandinavian companies form a large part of Scandye

UAB clients, as the company meets high quality and environmental standards. The company dyes and finishes woolen yarn,

knitwear materials and products from the Norwegian capital company Devold operating in Lithuania, and returns them to Devold

for further production. The company also performs dyeing of wool and polyester fabrics (washing, dyeing and finishing) and

dyeing of yarns to the Danish company Gabriel AS. Over the past five years, the number of employees of the company has grown

by one third and currently it employs 92 people. For more information see: http://www.scandye.lt/

Lithuania is attractive to Norwegian investors because of these factors204:

− Good geographical position – Norway is close to Lithuania, which has good transport

infrastructure to Eastern markets, including a possibility to export using Klaipeda sea port.

− Lithuanian enterpreneurs are exporting to Eastern markets, thus has constant linkes there.

− Lithuania is a part of European common market, thus free movement of products from

here to all the EU countries.

− High competence labour force in Lithuania is much more cheaper than in Norway, and

low labour costs are attractive to Norwegian business.

− There are a large number of Lithuanians working in Norway. They understand the pro-

cesses and technologies, Norwegian culture and language. Part of these workers are inte-

204 Karaliūnaitė U. 2015. Norvegijos ambasadorius apie tai, kodėl jo šalies verslininkai renkasi Lietuvą. Delfi, balandžio 23 d.; Inter-

view with Commercial Attache of Lithuanian Republic in the Norway Kingdom; Interviews with representatives of Norwegian

capital enterprises in Lithuania (UAB „Massive Wood Construction“, UAB ,,Bauwerk Boen“, UAB ,,Viking Industrier“, UAB

„Hjellegjerde Baltija“, UAB „Devold“, UAB ,,Scandye“, UAB ,,Mittet“, UAB ,,Nokvėja“, UAB „Noras LT“ ir kt.).

http://www.scandye.lt/

155

rested in going back to Lithuania to work for a lower wage but to live in their native co-

untry or near their families instead. These workers are highly attractive to Norwegian in-

vestors in Lithuania.

− Lithuania has a FDI-friendly business environment, and good general conditions for star-

ting the business.

− Norwegian investors feel welcomed in Lithuania, they are developing their investments in

a number of sectors.

− Socially responsible Norwegian enterprises are withdrawing their activities from the co-

untries with human slavery, everyday children exploitation, etc. Lithuania is one of the

countries strickly intolerant to these processes.

− Lithuania has developed open and business-oriented R&D infrastructure.

− There are good governmental relations between Norway and Lithuania.

Norwegian capital enterprises in Lithuania are very attractive employer for Lithuanian labour

force due to higher wages and better social security measures (e.g. holidays in summer, when

headquaters in Norway are on holliday, strickly follow the working day hours limits, no extra-hours,

flexible work schedule for worker with young children) 205.

Factor decreasing the attractiveness of Lithuania for Norwegian investors are206:

− Huge bureaucracy in public institutions, applications procedures not always clearly docu-

mented, long procedures of application checking, auditing, ect.;

− There are increasing costs of raw materials and labour force.

− Due to rapid migration out of Lithuania, there is a shortage of labour force in peripherial

regions. Regional policy is insufficient.

− Relatively high standards of environemental management (they getting close to Sciandi-

navian ones).

− Limited number and mobility of labour force able to speak any Scandinavian language.

Factor decreasing the attractiveness of Lithuania for Norwegian investors are207:

− huge bureaucracy in public institutions, applications procedures not always clearly docu-

mented, long procedures of application checking, auditing, ect.;

− there are increasing costs of raw materials and labour force.

− Due to rapid migration out of Lithuania, there is a shortage of labour force in peripherial

regions. Regional policy is insufficient.

− Relatively high standards of environemental management (they getting close to Sciandi-

navian ones).

− Limited number and mobility of labour force able to speak any Scandinavian language.

− High labour force tax system, which raises its price and labour cost respectively.

205 Interviews with representatives of Norwegian capital enterprises in Lithuania. 206 Karaliūnaitė U. 2015. Norvegijos ambasadorius apie tai, kodėl jo šalies verslininkai renkasi Lietuvą. Delfi, balandžio 23 d.; inter-

views with commercial attache at Embassy of Republic of Lithuania in Norway and representatives of Norwegian capital enterp-

rises in Lithuania 207 Karaliūnaitė U. 2015. Norvegijos ambasadorius apie tai, kodėl jo šalies verslininkai renkasi Lietuvą. Delfi, balandžio 23 d.; inter-

views with commercial attache at Embassy of Republic of Lithuania in Norway and representatives of Norwegian capital enterp-

rises in Lithuania

156

7.2. Analysis of areas of cooperation of Lithuanian and Norwegian business and the

need therefor

In April – June 2017, surveys of business enterprises and business associations were con-

ducted with the aim to identify areas of cooperation of Lithuanian and Norwegian business and the

need therefor (Annex 2 and 3). Questionnaires contained the same questions on areas of bioeconomy

where cooperation with Norwegian business entities is or would be important. Respondents were

asked to assess the significance of areas of possible cooperation listed in the questionnaire for their

business. The initial list of areas of bilateral cooperation of Lithuanian and Norwegian business was

drawn up having analysed descriptions of 83 Norwegian enterprises working in the area of bio-pro-

cessing and bioenergy on the origin of the biomass that they use, processing processes, products pro-

duced or R&D services provided208. They also were asked to enter other areas of potential cooperation

which they found to be important, which were not on the questionnaire. A six-point scale was used

in the assessment with 0 meaning not important, or from 1 point being of little importance to 5 points

being of high importance. The survey results (average of importance points) by sectors of bioeconomy

represented by companies and associations (food, forest biomass-based, biochemistry and production

of medicines and pharmaceuticals, textile, leather industry, sewing of apparel and waste management)

are presented in Figures 69-74.

Survey results of business enterprises and associations operating in the food sector

Results of the assessment of areas of cooperation of the Lithuanian and Norwegian business

and the need therefor according to the survey of respondents having represented the food sector are

presented in Figure 69. In this case, agricultural, fishery and food production companies and associa-

tions are attributed to the food sector. The averages of importance points of cooperation with the

Norwegian business are much higher according to the assessment of representatives of business asso-

ciations than those of representatives of business enterprises – the distribution of opinions of repre-

sentatives of associations ranged from 3 to 0.1 points, while those of business companies – from 2.2

to 0.8 points, which shows that the latter viewed the need for such cooperation to be of low or very

low importance to their business.

Meanwhile, representatives of business associations of the food sector consider the area of

processing technologies of biomass waste / by-products to be the main area of cooperation with the

Norwegian business, and treat cooperation to be of average importance (with the average importance

score being 3 points and standard deviation σ = 2).

The second area of cooperation assessed as somewhat less important (2.4 points, σ = 2.1)

would be the management of solid biodegradable waste.

Representatives of business associations referred to the recycling of combined packaging

waste, processing of animal by-products, biological wastewater treatment and implementation of

green innovations to be less important (with the average values ranging from 1.6 to 2.1). Other

possible areas of cooperation illustrated in the Figure were assessed to be of very low importance.

208 Development of the Nordic Bioeconomy NCM reporting: Test centers for green energy solutions Biorefineries and business ne-

eds. Authors: L.Lange, B.Björnsdóttir, A.Brandt, K.Hildén, G. Óli Hreggviðsson, B. Jacobsen, A. Jessen, E. N. Karlsson, J.Lin-

dedam, M. Mäkelä, S. E.Smáradóttir, J.Vang and A.Wentzel. TemaNord, 2015 (See table 10).

157

Figure 69. Average score of the importance of cooperation between the Lithuanian and Norwegian business by

areas: food sector

Source: data of the survey of business enterprises (N = 54) and business associations (N = 7), food sector – as the main area of opera-

tions of respondents

Results of the survey of business enterprises and associations operating in the forest biomass-

based sector

Figure 70 illustrates the results of the assessment of areas of cooperation of the Lithuanian

and Norwegian business and the need therefor according to the survey of forestry and logging, wood,

furniture and paper industry business and business associations.

The survey results have shown that the Lithuanian business found wood biomass biorefinery

to be the most important area of cooperation with the Norwegian business. Representatives of busi-

ness associations assessed this area of cooperation as very important (average score of importance –

4.5 points, σ = 0.7), while representatives of business enterprises – as being of medium importance

(3 points, σ = 1.8).

Representatives of business associations assessed the implementation of green innovations as

second most important area of cooperation with the Norwegian business (3.5 points, σ = 0.7). Accor-

ding to the assessment of the surveyed representatives of business, these are the areas of lower than

medium importance (2.4 points, σ = 1.7).

The area of cooperation on processing technologies of biomass waste and other plant biomass

bio-refinery were assessed evenly by both parties in terms of its importance to business. Other

possible areas of cooperation illustrated in the Figure were assessed as of low or very low importance

(with average score ranging from 2 to 0.9 points).

Survey results of business enterprises and their associations operating in the manufacture

bio-based chemicals and pharmaceuticals

Figure 71 illustrates survey results of the assessment of areas of cooperation of the Lithuanian

and Norwegian business and the need thereof of business enterprises and their associations producing

0.1

0.6

1.0

1.1

1.1

1.3

1.6

1.6

2.0

2.0

2.1

2.4

3.0

0.8

1.3

1.1

1.3

2.2

1.3

1.2

1.4

0.9

1.2

1.0

0.8

1.8

5 4 3 2 1 0 1 2 3 4 5

Biorefinery of wood biomass: bioenergy

Biocatalysis: analytical and industrial applications, etc.

Pharmaceutical biotechnology

Biosynthesis: analytical and industrial applications, etc.

Production of bioplastic and biodegradable bioplastic

Biorefinery of biomass of aquatic organisms

Biorefinery of other plant biomass: bioenergy

Recycling combined packaging waste

Processing animal by-products

Biological wastewater treatment

Implementation of green innovation and projects in the field

Management of solid biodegradable waste

Biomass waste / by-products treatment technologies

Average scores when 1 point is low importance and 5 points - very important

Representatives of business enterprises Representatives of business associations

158

biochemistry products (including biofuels) and pharmaceuticals. Business associations were obser-

ved to have assessed all possible areas of cooperation as more important than representatives of bu-

siness enterprises, except for analytical and industrial application of biosynthesis and bio-catalysis,

production of bioplastics and biological wastewater treatment.


areas: forest biomass-based sector

Source: survey data of business enterprises (N = 24) and business associations (N = 2), forest biomass-based sector – as the main area

of operations of respondents

Representatives of associations of businesses producing biochemistry, biotechnologies, me-

dicines and pharmaceuticals consider implementing green innovation and projects in this field as a

very important area of cooperation of the Lithuanian and Norwegian business (average score of im-

portance – 5 points, σ = 0.0). Zero standard deviation shows that representatives of all four associa-

tions having participated in the survey had the same opinion on the importance of cooperation in this

area. Business representatives having taken part in the survey also assessed cooperation in the field

of green innovation as the area of possible cooperation of medium importance (3 points, σ = 2.3).

Another area that they also found to be important was analytical and industrial application of bio-

synthesis (3.1 points, σ = 2.4). Representatives of associations assessed the cooperation with Norwe-

gian business in the areas of wood and other plant biomass refinery as well as technologies of biomass

waste treatment to be of more than medium importance (average scores – from 3.3 to 3.8 points).

Associations can also be said to consider cooperation in another four areas to be of medium

importance (with average score being 2.8 points), namely, pharmaceutical biotechnologies, analytical

and industrial application of biosynthesis, solid biodegradable waste treatment and processing of bio-

mass of aquatic organisms.

1.0

1.0

1.0

1.0

1.0

1.5

1.5

2.0

2.5

2.5

2.5

3.5

4.5

1.0

0.9

1.7

1.5

1.3

1.2

1.8

2.0

2.4

2.1

1.6

2.4

3.0

5 4 3 2 1 0 1 2 3 4 5










Biomass waste treatment technologies






159


areas: bio-based chemicals and pharmaceuticals manufacturing

Source: survey data of business enterprises (N = 7) and business associations (N = 4), bio-based chemicals and pharmaceuticals ma-

nufacturing – as the main area of operations of respondents

Survey results of business enterprises and their associations operating in the manufacture

bio-based textiles, apparel and leather

Figure 72 illustrates the results of the assessment of areas of cooperation of the Lithuanian

and Norwegian business and the need therefor according to the survey of businesses and business

associations engaged in the manufacture of textiles, wearing apparel and leather. The survey revealed

that businesses engaged in manufacture of textiles, wearing apparel and leather products have almost

no interest in cooperation with the Norwegians (with the maximum average score being 2 points).


areas: manufacture of bio-based textiles, apparel and leather

Source: survey data of business enterprises (N = 10) and business associations (N = 1), manufacture of bio-based textiles, apparel and

leather – as the main area of operations of respondents

1.8

1.8

2.0

2.3

2.5

2.8

2.8

2.8

2.8

3.3

3.5

3.8

5.0

1.4

2.6

2.4

2.4

1.4

2.3

1.6

3.1

2.1

1.9

2.3

2.7

3.0

5 4 3 2 1 0 1 2 3 4 5
















0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

2.0

2.0

2.0

2.0

0.1

0.6

0.1

1.2

0.3

0.2

0.6

1.0

0.3

0.1

0.1

0.5

1.1

5 4 3 2 1 0 1 2 3 4 5
















160

Survey results of business enterprises and associations operating in biowaste treatment area

Figure 73 presents the results of the assessment of areas of cooperation of the Lithuanian and

Norwegian business according to the survey of biowaste management enterprises (business associa-

tions did not complete the questionnaire). The greatest cooperation potential is associated with bio-

mass waste treatment technologies (average importance score – 3.5 points, σ = 1.8), implementation

of green innovations and management of solid biodegradable waste (average score in both cases was

3.3 points, σ = 2.1). Cooperation in the area of processing of animal by-products was assessed as

being of medium importance (2.7 points, σ = 2.1).


areas: biowaste treatment

Source: survey data of business enterprises (N = 8), biowaste treatment – as the main area of operations of respondents

Figure 74 illustrates average scores of the assessment of the need for and areas of cooperation

between the Lithuanian and Norwegian business by all businesses and business associations having

participated in the survey. The survey revealed that main areas of the said cooperation include imp-

lementing green innovations, processing technologies of biomass waste, biodegradable solid waste

management and plant biomass biorefinery. Results of both surveys showed the same.

The following are the main insights with regard to the areas of cooperation between the Lithu-

anian and Norwegian business according to survey results of business entities and associations:

business associations see a greater need for cooperation than business enterprises by sepa-

rate areas of bioeconomy, because they show more interest therein and monitor internatio-

nal cooperation of enterprises209;

business associations see such areas as the implementation of green innovation and related

projects as well as wood biomass biorefinery for bioenergy purposes as a very important

cooperation with Norwegian business;

representatives of business enterprises usually see the need for cooperation in such areas

as processing technologies of biomass waste, implementation of green innovation and re-

lated projects and biomass waste and biodegradable solid waste management.

209 Interview of representatives of business associations

1.4

1.6

1.9

2.1

2.1

2.1

2.1

2.3

2.3

2.7

3.3

3.3

3.5

5 4 3 2 1 0 1 2 3 4 5















Representatives of business enterprises

161


areas: all bioeconomy sectors

Source: survey data of business entity (N = 103) and business associations (N = 14)

It should be noted that the processing of forestry and fisheries by-products and biorefinery of

waste and other biowaste (including food) are one of the most innovative areas of business develop-

ment in Norway according to the analysis of development and strategic provisions of Norwegian

bioeconomy and examples of good practice of business, which also corresponds to the main expecta-

tions of Lithuanian bioeconomy enterprises for the cooperation with the Norwegian business in the

areas of processing technologies of biomass waste, implementing green innovations and biodegra-

dable solid waste management identified by way of survey.

Moreover the analysis of the development of the Norwegian bioeconomy and examples of

good business practice revealed high achievements of Norwegian aquaculture in the areas of techno-

logical innovations, especially in salmon farming. It should be noted that a high development poten-

tial is forecasted for aquaculture. As previously mentioned, FAO has forecasted that a rapid increase

in demand for fish and other aquatic products will be met through aquaculture till 2025, because fish

catches will decrease by 0.06 percent per year, while aquacultures will grow by 3 percent per year210).

On the other hand, the question of whether the take-over of these technologies in Lithuania may

become a driving force of the development of aquaculture in Lithuania remains open. Direct Norwe-

gian investments in the fisheries sector in Lithuania were zero in the past ten years. Even though

according to studies, Norwegian entrepreneurs have shown interest in separate years, it also is zero

at this time.

It should finally be mentioned in the context of cooperation between the Lithuanian and

Norwegian bioeconomy business that it turned out in the course of the survey of business entities

(when a participation in the survey was aligned with more than 600 enterprises and farms by phone

(Annex 3)) that the majority of enterprises and farms have never taken any effort to find out about

Norwegian business enterprises and cooperation therewith, because they did not have any knowledge.

However, only a fifth of all those having completed the questionnaire did not show any interest in

cooperation with the Norwegian business. On the other hand, the respondents themselves did not

210 The State of World Fisheries and Aquaculture 2016. Contributing to food security and nutrition for all. FAO. Rome, 2016.

1.0

1.4

1.5

1.5

1.6

1.7

1.8

1.8

1.9

2.2

2.4

2.8

3.1

1.2

1.2

1.3

1.1

1.1

1.4

1.3

1.6

1.4

1.7

1.4

2.1

2.1

5 4 3 2 1 0 1 2 3 4 5
















162

additionally enter any areas of cooperation of interest to them in not a single questionnaire, which

illustrates the lack of information available about the Norwegian business and markets. Contact fairs

were observed211 to be an important assistance for entrepreneurs in companies that do not have time

or resources for the search, as short business meetings held at the time of the fairs allow deciding on

future cooperation.

7.3. Potential measures to promote cooperation between the Lithuanian and Norwegian bu-

siness

According to the analysis of bioeconomy of both countries as well as examples of Norwegian

good practice and success stories of the Norwegian business in Lithuania, possible “cross-sectoral”

cooperation elements still have not come to light due to significant differences in directions of bioeco-

nomy development in Lithuania and Norway.

Looking at the short-term prospects of cooperation between the Lithuanian and Norwegian

business, the main elements of promotion of cooperation, disregarding the development of future

structure of bioeconomy in both countries, should probably be based on the following areas of coo-

peration:

R&D and innovation (in particular the development of new innovations in the bioeco-

nomy);

transfer of biotechnology (especially of Norwegian know-how);

development of business competencies (professional advisory, training, business develop-

ment assistance services for enterprises);

improving investment climate;

investment;

dissemination of good practice (by way of business missions, business contact fairs, infor-

mation and contact networks);

cross-sectoral relationships and interactions (between the biomass-producing sector and the

sector transforming it into value-added products).

The following are some of the main support platforms for promoting cooperation between the

Lithuanian and Norwegian business:

Norwegian Financial Mechanism;

European Economic Area (EEA) financial mechanism;

the EU research and innovation programme “Horizon 2020”;

the EU fund investments.

Programmes of Norwegian and the EEA financial mechanisms could continue being plat-

forms for cooperation between the Lithuanian and Norwegian business in the area of bioeconomy.

Objectives of grants of both financial mechanisms are to reduce economic and social disparities in

Europe and to strengthen bilateral relations with beneficiary countries. Partnership between organi-

sations in donor countries and beneficiary countries has been widely encouraged, which has rendered

mutual benefits, facilitated exchange and enhanced cross-border interrelations. During the 2009 –

2014 financing period, Lithuania was allocated a total of EUR 35.5 million from the EEA and EUR

42.2 million – from the Norwegian financial mechanism212. In 2016, the EU, Iceland, Lichtenstein

211 Ministry of Economy of the Republic of Lithuania. 2017. Green Industry Innovation Programme. 212 Working together for a better Europe. Annual report 2016–2017. Publisher: Financial Mechanism Office Brussels on behalf of the

Foreign Ministries of Iceland, Liechtenstein and Norway.

163

and Norway signed an agreement on the implementation of the EEA financial mechanism and Norwe-

gian financial mechanism for the new 2014 – 2021 period. The plan is to invest EUR 2.8 billion in

15 EU countries in the implementation of these mechanisms in order to continue reducing economic

and social disparities in the EEA countries and enhancing cooperation between countries. Lithuania

was allocated EUR 117.6 million, of which EUR 56.2 million was support from the EEA financial

mechanism and EUR 61.4 million – funds from the Norwegian financial mechanism. Funds from the

financial mechanisms may also be allocated for such areas as innovation, research, improving edu-

cation and increasing competitiveness, environmental protection, energy, resolving climate change

problems and low-carbon dioxide technology economy, etc.213.

Green Industry Innovation Programme financing from funds of the Norwegian Financial Me-

chanism 2009-2014 is the closest to the bioeconomy business214. The Programme was aimed at incre-

asing competitiveness of environmentally friendly enterprises, involving the application of green so-

lutions in the current traditional manufacturing companies, in application of green innovation and

entrepreneurship. Support for projects was provided according to two schemes – Partnership and

Small Project schemes. Activities related to the creation of new environmental technologies, their

implementation or introduction into the market, significant improvement of the existing technologic

processes, their introduction into the market, acquisition and implementation of innovative envi-

ronmental technologies as well as acquisition and implementation of new innovative environmental

software, hardware and/ or production equipment were supported under the Partnership Scheme.215

The insert below presents successful examples of how projects supported from “Green Industry Inno-

vation Programme” funds encourages the cooperation between Lithuanian and Norwegian enterprises

in RDI area. Norwegian and the EEA financial mechanism programmes could promote the coopera-

tion of Lithuanian and Norwegian business and research institutions in various areas of bioeconomy.

Good practice examples in bioeconomy: promoting cooperation between the Lithuanian and Norwegian business via

the projects supported by the “Green Industry Innovation Programme”

In 2017, UAB Akvavita implemented the project “Green Innovation Development in the Creation of a Lightweight PET Bottle”

in cooperation with the Norwegian company “BergHolding AS”. Eco-friendly PET bottle was created for beverages made of 30

percent natural and 70 percent recycled materials. The new shape makes it easy to compress the bottles and to fully recycle them

into textiles, building materials, plastics, furniture, etc. These solutions will allow reducing the need for raw materials (saving 54–

72 t of plastic per year, or 16 percent of the total used quantity) and electricity consumption (with its bills decreasing by 40 percent),

decreasing costs of logistics by 10 percent and pollution tax – by 16 percent; also, the plan is to reduce the total carbon emissions

into the atmosphere by 70 percent. This is expected to increase the competitiveness of the company in the international market,

also the demand for and export of products.

The joint project of UAB “Birštono Mineraliniai Vandenys” and the Norwegian company “Berg Holding AS” “The Develop-

ment of the Technology of Paper Packaging in UAB “Birštono Mineraliniai Vandenys” was implemented together with researchers

by creating next generation technology for recyclable packaging. The created innovative paper packaging for mineral water allowed

reducing the use of plastic packaging materials. Moreover, the company created 5 new jobs in the manufacture of packaging of the

new type. These innovative solutions are expected to increase sales and export of the company.

Source: Green Industry Innovation Programme. Ministry of Economy of the Republic of Lithuania, 2017.

Activities related to the development of technologically new green products (produce or ma-

terials), their introduction into the market, also significant improvement of the existing products (pro-

duce or materials) in order to reduce their adverse effects on the environment and human health, and

their introduction into the market, were supported under the Small Project Scheme. The insert below

213 EEA and Norwegian support to Lithuania. 2014–2021 period. http://www.eeagrants.lt/2014_2021_laikotarpis 214 Green industry innovation. Programme description. http://www.eeagrants.lt/programos/aprasymas/programos-aprasymas/prog-

ram/3 215 Green industry innovation. Programme description. http://www.eeagrants.lt/programos/aprasymas/programos-aprasymas/prog-

ram/1

164

presents examples how projects supported from the funds of the “Green Industry Innovation Prog-

ramme” encouraged the takeover of advanced biotechnologies in Lithuanian companies. Project pro-

moters noted that project funding from the funds of the “Green Industry Innovation Programme” is

very attractive – more attractive than funding from the EU structural funds due to a low administrative

burden and fast receipt of funds.

Good practice examples in bioeconomy: green innovative solutions in traditional bioeconomy companies having imp-

lemented projects supported under the Green Industry Innovation Programme

Having implemented the project “Increasing Business Competitiveness of UAB Eurobagetas in 2017, UAB Eurobagetas acquired

innovative, currently most eco-friendly and modern technology for making donuts, used by only a few Western European produ-

cers. The project implemented by the company will allow increasing sales volume, create additional 50 new jobs, also will allow

reducing air pollution, the volume of production wastewater and waste as well as fat content in the product.

Source: Green Industry Innovation Programme. Ministry of Economy of the Republic of Lithuania, 2017.

The good practice of adoption of the Norwegian Cambi technology for recycling the sewage

sludge of UAB Vilniaus vandenys into biogas shows that the adoption of Norwegian know-how in

the Lithuanian companies can help to increase the biowaste recycling, thus ensuring the production

of renewable resources and better quality of the environment. The companies in Norway are using a

new biogas production technology in small and medium-sized reactors. The adoption of this innova-

tion can help to solve the problem of biowaste management in small Lithuanian towns and enterprises

(especially in food industry, agriculture and fishery). It should be noted that it is in line with the

business expectations for cooperation with Norwegian businesses in the field of biomass waste treat-

ment technologies, identified by the survey (see Section 7.2).

Good Practices in the Bioeconomy: the Adoption of Innovative Norwegian Cambi Technology in Lithuania

The consortium of German and Norwegian companies WTE Wassertechnik and Cambi have built sludge treatment facilities in the

largest Lithuanian wastewater treatment plant in Vilnius, one of the most advanced in Europe. The project was financed from the

Cohesion Fund and the budget of the Republic of Lithuania. Norwegian Cambi technology was introduced to convert sludge into

renewable energy and high-quality biofuel. The sludge is processed in modern thermohydrolysis facilities and closed sludge diges-

ters where the produced biogas is used for production of electricity and thermal energy, and the processed dried sludge as solid

biofuel or valuable fertiliser in agriculture. The largest Lithuanian Vilnius wastewater treatment plant is cleaning about 113 thousand

m3 of wastewater per day, resulting in approximately 200 tons of drained sewage sludge every day. The new sludge treatment

facilities in Vilnius will make it possible to solve the problem of urban sewage sludge treatment very effectively due to Cambi’s

technological advantage – high quantities of biogas and solid biofuels, low carbon footprint of drying and low energy consumption,

compact sludge treatment facilities and no unpleasant odour of the sludge.

Source: http://www.vv.lt/lt/apie/tinklo_pletra/vilniaus-dumblo-apdorojimo-irenginiai.php

Norway is a fully integrated partner and sponsor of the EU Research and Innovation Prog-

ramme “Horizon 2020” (H2020), just like of previous EU research support programmes. About 5.6

percent (EUR 4208 million) of H2020 funds will be allocated for bioeconomy and its cross-sectoral

solutions216. Small and medium-sized enterprises, which are the main source of jobs and innovation,

receive a particular attention under H2020. The measure of small and medium-sized enterprises is

targeted at highly innovative small and medium-sized enterprises willing to increase their growth

potential. One-time pay-outs for feasibility studies, subsidies or the main innovation project phase

(demonstration, prototype creation, checking, application, development, etc.) are offered under the

measure; commercialization phase is supported indirectly, granting an easier access to debt and equity

financial instruments. A small or medium-sized enterprise or a consortium established in the EU or


165

an associated country may take part in the measure217. H2020 research programmes and projects co-

uld encourage cooperation of the Lithuanian and Norwegian business and science institutions in va-

rious fields of bioeconomy.

The analysis of foreign direct investment revealed that the Norwegians have risen from the

tenth place to the fifth among foreign investors in Lithuania during the past six years. Statistics of

Norwegian investors controlled in Lithuania and, vice versa, – companies controlled by Lithuanian

investors shows that the interest of Norwegian entrepreneurs in investment development in Lithuania

is more than ten times greater than that of Lithuanian entrepreneurs in Norway (for more information,

see subsection 7.1). The survey of business entities of Lithuanian bioeconomy revealed that lack of

information and its limited availability mainly due to the language barrier was one of the main reasons

of poor interest of Lithuanians in the Norwegian business. These conclusions were also confirmed by

interviews of Lithuanian experts working with Norwegian companies in both countries, who also

highlighted such reasons as too weak business relations, differences in the business culture, high

Norwegian agriculture and food market protection, reservedness of Norwegian business community

in Lithuania having lasted for some time in the beginning, which manifested in their dominant mutual

business relations. The good practice of business contact fairs held under the Green Industry Innova-

tion Programme of the Norwegian Financial Mechanism described in the insert below illustrates how

such cooperation barriers may be eliminated.

The Bilateral Cooperation Fund (EUR 0.5 million), which is aimed at enhancing bilateral re-

lations of Lithuania and Norway in the area of green industry innovation, implementing or promoting

bilateral partnership of business enterprises, organisations, research and education institutions, and

developing cooperation, comprises a part of the funds of the “Green Industry Innovation Programme”.

Activities related to the organisation of business contact fairs, consultations for potential partnership

project promoters and project partners related to the submission of applications for support under the

programme, execution of the Lithuanian Business Acceleration Programme, etc., were financed from

this Fund218.

A possibility to learn from each other in business contact fairs supported from fuds of the mutual cooperation fund of

the Green Industry Innovation Programme

In order to promote the Lithuanian and Norwegian partnership in the green innovation area and increase environmentally-friendly

business competitiveness, four business contact fairs by separate areas were arranged in 2016-2017: waste management, biomass

energy, green ICT and energy efficient business. During the business contact fails, many questions and topics relevant for bilateral

cooperation were raised in a discussion. It was noted that one should not forget to be open, not to be afraid to change the way of

thinking, to be prepared to not only teach the partner but to also learn from him, and to take cultural differences and communication

into account in all cases in the cooperation. Representatives of Lithuanian and Norwegian business and science had about 200

individual business meetings in business contact fairs to establish relationships and discuss possible joint projects. This is a very

good way for Lithuanian entrepreneurs to assess Norway as an export market, find market needs and possibilities for cooperation.

Participants of a biomass energy business contact fair (in Oslo) had a possibility to observe the production of renewable energy

from forest waste and the production of liquid biofuel in one of the most modern and ecological Norwegian thermal power plants

“Statkraft” and get familiar with activities of the largest Norwegian bioenergy power plant “Hafslund Varme” and the Europe’s

largest “Haraldrud” optical waste sorting plant.

Wide business opportunities in Oslo for biomass energy representatives. lrytas.lt, 24-10-2016;

Norwegian business delegation found useful contacts for future projects in Lithuania. 15min., 17 May 2017

A possibility to bring Norway’s and Lithuania’s business culture closer together, to take over

innovative Norway’s project management and/ or business development means and methods is one

of the cornerstone methods of long-term cooperation of business of both parties. Moreover, there is

217 HORIZON 2020: Brief information about the programme. EU Framework Programme for Research and Innovation, Luxembourg,

2014. 218 Green Industry Innovation / Bilateral programme relations. http://www.norwaygrants.lt/programos/aprasymas/programos-dvisa-

liai-santykiai/program/3

166

a shortage of proactive people for developing mutual cooperation.219 The example of professional

assistance of highly-skilled Norwegian experts in the area of management of Lithuanian business

development described in the insert below is yet another efficient incentive promoting mutual coope-

ration.

Professional advisory, training, business development assistance services for Lithuanian companies

The Agency for Science, Innovation and Technology (MITA) arranged the selection of Lithuanian companies for taking part in

business acceleration programme to be held in September of 2017 in Norway. Professional advisory, training and business deve-

lopment services will be provided by highly skilled experts to young companies via the acceleration programme, which will allow

them to grow within the shortest possible period of time, using various advanced measures and methods. The Norwegian Innovation

Advisory Company “Proneo”, which is a member of NBIA, the global network of organisations providing incubation and business

consultations, will conduct the acceleration programme (in September of 2017 in Norway). Lithuanian companies will be able to

receive professional services in a single Norwegian accelerator, which has more than 10 years of experience in the business advisory

areas and has provided services to more than 500 start-ups from Scandinavia and other European countries. Each company will

have an individual mentor appointed for the entire acceleration programme period. During a visit to Norway, getting familiar with

local business companies will be possible. Costs of participation in the business acceleration programme shall be covered from the

bilateral cooperation fund of the Green Industry Innovation Programme.

We are inviting young business to take part in the Norwegian acceleration programme. MITA, 23 June 2017.

http://www.mita.lt/lt/naujienos/226-kvieciame-jauna-versla-dalyvauti-norvegijos-akceleravimo-programoje

Almost two thirds of foreign investors in Lithuania have indicated to be frequently facing

operational difficulties posed by a shortage of labour force, and they treat it to be one of the two areas

most challenging to investors, with the second one being challenges posed by regulation of labour

relations220. Norwegian companies consider qualified and relatively cheaper labour force to be one

of key advantages of Lithuania. Norwegian investors appreciate employees as loyal and well working;

however, in recent years, they have faced a shortage of skilled employees, which has become an

increasingly greater challenge to business and an obstacle to the development of investment, espe-

cially in regions with high emigration levels of working age population. Here an efficient regional

policy is missing221.

Good local partnership experience in the reduction of growing shortage of skilled employees

Norwegian capital company UAB Devold making knitted apparel moved its factory to the Free Economic Zone of Panevėžys in

2015. A part of this project was funded by the EU support European Regional Development Fund and the state budget of the LR.

The new factory was designed so that when investing into an additional modern equipment and workforce, production capacities

could be increased by more than a half. It has solved the issue of a shortage of skilled employees, which has become a real challenge,

by bringing 65 employees from Kupiškis very day, which leads to increased costs. Moreover, the company got actively involved in

the course for training tailors in Panevėžys labour exchange training centre participating in the improvement of the training prog-

ramme and admitting trainees. Also, currently it seeks to adjust public transport schedules in cooperation with Panevėžys munici-

pality in order to attract employees from the surrounding areas.

Business success in Lithuania encourage Norwegians to build a new plant. Invest in Lithuania. 30 October 2015

Interview of the Head of Foreign Investors’ Association of Panevėžys (F.I.B.A. Panevėžys).

Interview of the Project Manager of Panevėžys Free Economic Zone

Having summarised good practice of Lithuanian-Norwegian cooperation, the recommenda-

tion is to promote Lithuanian-Norwegian cooperation in the new programme period of the Norwegian

and the EEA financial mechanism programmes in the following areas:

Takeover of the Norwegian know-how in the bioeconomy area in the implementation of

bilateral business or business and science projects;

219 Interview of the Head of Foreign Investors’ Association of Panevėžys (F.I.B.A. Panevėžys). 220 Lithuanian investor confidence index (9), Q I, 2017. Investors’ Forum. 221 Interview of representatives of Norwegian companies.

167

Takeover of good Norwegian practice in the implementation of integration of bioeconomy

sectors allowing to use all waste, reduce costs, optimise the knowledge sector and create

innovative products and technologies (clusters, industrial symbiosis);

Takeover of good Norwegian practice creating favourable conditions for bioeconomy start-

ups to be established and taking over the experience of consultations of companies via the

acceleration programmes.

After summarizing the evaluation of the survey of business entities on the need for and areas

of cooperation between the Lithuanian and Norwegian bio-based businesses (see Section 7.2) and the

analysis of Norway’s good practice, the following areas of cooperation were identified:

Biomass waste treatment technologies;

Biomass waste and biodegradable solid waste management;

Municipal and household waste collection and recycling into biogas;

Wood and other vegetable biomass, biowaste recycling for production of bio-energy, es-

pecially biogas;

Aquaculture development in closed systems;

Green innovation project implementation in all subsectors of the bioeconomy.

The need for any cooperation in the future depends on many factors. Market opportunities and

conditions, business relations, development stage, investment needs, business opportunities and other

factors determine the selection of respective most favourable cooperation incentives. Bioeconomy

requires not only new and innovative technologies, but also new and innovative methods of coopera-

tion in countries and among countries and regions. Long-term projects have been emphasised to be

the most successful, because long-term cooperation creates efficient results222. Lithuanian and

Norwegian business cooperation may be encouraged by incentives (Table 13) managed via the above-

listed three financial mechanisms indicated in the Table, also by attracting other funds and initiatives.

Table 13. Potential incentives for promoting cooperation between the Lithuanian and Norwegian business in the

bioeconomy area

Areas Incentives

1. R&D and innovation (es-

pecially the creation of

innovation in the bioeco-

nomy)

1.1. Subsidies for business feasibility studies on possibilities for the crea-

tion of bilateral businesses and project implementation;

1.2. Subsidies for bilateral projects aimed at the creation and implementa-

tion of bioeconomy innovation

1.3. Support for commercialization phase of new products by indirect inst-

ruments of financial engineering

2. Transfer of biotechnolo-

gies

2.1. Support of investment projects

2.2. Support for implementation of Norwegian know-how in Lithuanian

companies (consultations to businesses on opportunities and condi-

tions of transfer of Norwegian technologic innovations; sponsorship

of training for the employees of the firm adopting technological

innovations)

3. Organisation 3.1. Holding business contact fairs

3.2. Organisation of campaigns for attracting Norwegian investors

4. Information 4.1. Support for creation of information cooperation networks

4.2. Support for good practice dissemination, news, etc.

5. Development of business

competences

5.1. Acceleration programmes – professional services of highly-skilled

experts (advisory; training; assistance in project development; mee-

tings with experienced entrepreneurs and/or enterprises)

5.2. Support of measures for bringing closer the business culture (e.g., e-

vents about the peculiarities of Norwegian business culture)

222 Norwegian business delegation found new contacts for future projects in Lithuania. 15min., 17 May 2017.

168

6. Improving investment cli-

mate

6.1. Support for creating and retaining jobs in Lithuanian regions

6.2. Adaptation of study, vocational training and labours exchange retrai-

ning programmes to the labour market needs

7. Financing and/or incentive platforms:

Norwegian Financial Mechanism

the EEA Financial Mechanism

the EU Research and Innovation Programme “Horizon 2020”

the EU structural funds

Lithuanian state budget funds

169

8. Conclusions and Recommendations on the development of

bioeconomy and innovation in Lithuania

The Lithuanian bioeconomy created nearly EUR 4.7 billion in GVA, which accounted for

12.8 percent of GDP (in 2014). Food industry (along with manufacture of beverages and tobacco)

and agriculture create the highest value added in bioeconomy, which are the largest Lithuanian bioe-

conomy sectors in terms of turnover. Manufacture of bio-based furniture creates about a sixth of the

Lithuanian bioeconomy GDP, manufacture of wood products – about a tenth, and manufacture of

bio-based textiles, wearing apparel and leather – slightly less than that. In terms of turnover, all the

three industries are medium-sized sectors. Meanwhile, small knowledge-intensive and industrial

biotechnology-based sectors of manufacture of pharmaceutical and chemical products do not have

any significant impact on the Lithuanian bioeconomy so far, despite the fact that the manufacture of

pharmaceutical products has experienced a very rapid development in recent years.

Since 2010, Lithuania has been among leaders of bioeconomy growth in EU in all biomass

production and fully bio-based manufacturing sectors – the first in terms of the growth of the paper

sector, the third – in terms of the growth of fisheries, the fourth – in terms of the growth of the agri-

cultural sector, manufacture of beverages and tobacco and manufacture of wood products (except for

the furniture production) and the fifth – in terms of the growth of forestry and logging subsector.

Almost two thirds of persons working in bioeconomy were employed in the food sector in

2015. Slightly more than a fourth of them worked in the bio-based forestry sector, less than a tenth –

in manufacture of bio-based textile, apparel and leather products, and a very small share (0.4 percent)

– in subsectors of manufacture of bio-based chemicals and pharmaceuticals. The share of persons

employed in the food sector and manufacture of bio-based textile, apparel and leather products decre-

ased over the decade (by 2.7 and 1.5 percentage points, respectively). The proportion of persons

employed in the remaining sectors increased: 4.1 percentage points – in the forestry bio-based sector

and 0.1 percentage points – in manufacture of bio-based chemicals and pharmaceutical products and

preparations.

Three methods were used to prepare Lithuanian bioeconomy development projections: eco-

nometric time series analysis, general equilibrium modelling and analysis bioeconomy business

expectations. The following trends of development of the Lithuanian bioeconomy are likely in the

long-term: the GVA, which was EUR 4.7 billion in 2014, may increase to EUR 7.8–9.1 billion in

2030, which would be a growth of 68–95 percent. Projections of persons employed in bioeconomy

have some contradictions. The projection based on bioeconomy business expectations shows a certain

increase in the number of employees to 305 thousand (in 2030), while projections prepared in appli-

cation of different methods forecast the reduction to 153–209 thousand compared to 234.4 thousand

in 2015; exports value may increase from EUR 9.9 billion in 2016 to EUR 13.9–21.1 billion in 2030.

In bioeconomy, labour productivity is lower than the average productivity in the Lithuanian

economy. This gap decreased significantly over the decade. Labour productivity in manufacture phar-

maceutical products and preparations and the production of chemicals is very high in Lithuanian

bioeconomy. Here labour productivity is from a few dozen to several times higher compared to the

average labour productivity of the entire country. The lowest labour productivity levels have been

observed in agriculture, which are half the country’s average. Low levels of labour productivity have

also been observed in forestry and logging, manufacture of textiles, apparel and leather, and wood

industry. Such differences in labour productivity mainly come as a result of differences in intensity

of technology use. As a matter of fact, manufacture of pharmaceutical products and preparations is

170

attributable to high-technology industry and is a knowledge intensive business industry, while manu-

facture of chemicals is attributable to medium-high-technology industry. All other manufacturing

industries of bioeconomy (manufacture of food, beverages and tobacco products, textiles, apparel,

leather, wood and paper products, and furniture) are attributable to low-technology industry. In terms

of technological intensity, primary production of biomass (agriculture, forestry and fisheries) also is

a low technology area of bioeconomy. On the other hand, the gap in labour productivity between

bioeconomy and the entire economy as well as among sectors of bioeconomy has also decreased due

to innovative technological solutions in low technology industry, also in aquaculture, agriculture and

logging.

The food sector is the largest share of Lithuanian bioeconomy, just like in the majority of

other EU states. Food industry and agriculture are the largest subsectors of Lithuanian bioeconomy,

which can be characterized by average growth rate over the past mid-term period. Fishing and aqua-

culture is a very small part of the food sector, also developing at an average rate. The strategic prin-

ciple of bioeconomy of the priority of food security ensures the priority of the food sector in bioeco-

nomy. The priority of agriculture and fisheries is also determined by the principle of combination of

food security with sustainable use of renewable energy sources for industrial (including energy) pur-

poses and assurance of environmental protection. The development of the Lithuanian food sector has

been encouraged by rapidly increasing food demand in the world as a result of a rapid growth of

population and their purchasing power. The potential of biomass production in agriculture has been

increased by the possibility of including suitable abandoned agricultural land in production and sus-

tainably intensifying agricultural production in order to increase the productivity of agriculture. The

forecasted rapid increase of demand for fish and other aquatic products in the world has increased the

potential of the development of aquaculture in Lithuania. The development of aquaculture in Lithua-

nia is associated with the increase of quantities of valuable species of fish in ponds and the aquaculture

cultivation in closed systems.

The forest bio-based sector (forestry and logging, production of wood, paper and furniture) is

the second largest sector of Lithuanian bioeconomy. The priority of the forestry sector is determined

by the strategic principle of combining food security with sustainable use of renewable energy sources

for industrial (including energy) purposes and the assurance of environmental protection. The total

volume of wood has constantly increased in Lithuania. Farmed forests make up 71.4 percent. The use

of forest biomass is limited by environmental goals prohibiting or limiting economic activities. The

forest area has a potential to expand by afforestation of abandoned agricultural land and other land

unsuitable for agriculture. Forests perform many ecosystem functions: they help protect the soil, form

a part of the water cycle and regulate climate; they are important in the implementation of EU climate

goals by accumulating coal, and protect biodiversity. Other products (such as food, cork or resin) are

derived from forests. Forests are also a source of various services, which increases the significance

of forestry in the Lithuanian bioeconomy. The majority of wood resources in Lithuania are used tra-

ditionally, i.e. in manufacture of wood, its products and furniture, also as biofuel in energy. In order

to increase the contribution of forest bio-based sector to Lithuanian bioeconomy and enhance its

competitiveness, promoting sustainable use of forest in the production of higher value added indust-

rial products is necessary.

The potential of the development of the bioenergy sector has been increased by the EU provi-

sion that bioenergy will remain the main renewable energy source in the pursuit of climate and energy

goals of 2020–2030. In order to reduce adverse effect of the production of traditional biofuels on the

balance of food products and greenhouse gas emissions, the production of first generation biofuels

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from rape and cereal grain should be replaced by the production of advanced second and third gene-

ration biofuels made of agricultural and wood waste, and algae. Due to their attractive price, sufficient

amount of local resources and low GHG emissions, bioenergy resources should remain the principal

fuel in Lithuanian district heating systems. This has a potential for increase, even though it is limited.

The potential of the production of biogas from agricultural and food industry waste and biodegradable

municipal waste has been poorly exploited in Lithuania, even though lately the production of biogas

from agricultural waste and sewage sludge has increased. Based on the experience of advanced Eu-

ropean countries, the use of biogas derived from biodegradable municipal (especially food) waste in

the city transport through public procurement procedures of biogas held by government of the city

helps resolve urban pollution problems and reduce GHG emissions.

Currently, the contribution of manufacture of bio-based chemicals and pharmaceutical pro-

ducts and preparations using advanced biotechnology processes and techniques to the Lithuanian

bioeconomy is poor due to due to its small scale. However, the projections of the development of

bioeconomy business based on business expectations till 2030 show the greatest potential of growth

of this sector. The most rapid increase of productivity of this subsector is associated with much greater

expectations for attracting investments in R&D and qualified employees.

The rapidly growing biotechnology sector is one of the main driver of the potential of manu-

facture of pharmaceutical products and chemicals. According to the European Commission’s policy

on industrial revival, biotechnology as one of the main most advanced areas of technology, and

bioproducts derived in application thereof are two of six priority axes for promoting investment in

innovation and new technology. Biotechnology is one of the most promising new pollution preven-

tion, resource preservation and cost reduction methods. Its application could also become the cor-

nerstone driver in other sectors of bioeconomy, it would increase productivity, reduce adverse envi-

ronmental effects and allow for a more sustainable use of renewable energy sources, especially in

light of the fact that Lithuania has sufficient resources necessary for the development of the biotech-

nology sector (such as a sufficient number of highly qualified and production of large amounts of

biomass).

The transition of plastics production companies operating in Lithuania to the production of

bioplastics could be another driver of increasing potential of bio-based chemicals industry. The in-

creasing popularity of plastic packaging and plastic components in main industries, such as food in-

dustry, cars, furniture or transport, will have a positive effect on the production of plastics, while

demand should increase in both local and export markets.

The expediency of the Lithuanian bioeconomy strategy is based on experience of regulation

of Lithuanian bioeconomy using different sectoral policies and the increasing need for consistent

cross-sectoral complementarity and interoperability-based policy; experience of EU and advanced

European countries in solving issues of the strategic development of bioeconomy; the need for stra-

tegic development of bioeconomy of the Baltic Sea Region, and the opinion of business, government

and educational institutions on the fact that the bioeconomy strategy is very important for Lithuania.

The development of bioeconomy in Lithuania is mainly regulated and encouraged through

sectoral policies: the policy of agriculture, forestry, fisheries, energy, environment (including waste

management), R&D, innovation and biotechnology development, etc. There are interconnections be-

tween individual cross-sectoral policies, for example, forestry and energy, agriculture and food in-

dustry, agriculture and energy or forestry and wood industry. These cross-sectoral relations will in-

evitably grow in the future for the need to reduce waste and move towards circular economy.

Bioeconomy cross-sectoral relations in Lithuanian legislation are linked solely through the

use of biomass and its waste in energy. Meanwhile, the content analysis of EU and OECD strategic

documents revealed that bioeconomy shall be developed to combine food security, sustainable use of

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renewable resources for industrial purposes and assurance of environmental protection. To ensure

this synergy, transition to circular economy, the circle of which would retain the value of products,

materials and resources for the longest possible period of time and result in generation of minimum

possible amounts of waste, is of particular importance. Those same limited bio-resources are used in

various subsectors of bioeconomy, while biowaste generated in one subsector becomes a source of

biomass for another subsector. Biomass cascading principle has become increasingly important. In

accordance with this principle, biomass must first of all be used in the production of products of the

highest value added. Thus, future bioeconomy must be focused on the use of biomass in the produc-

tion of pharmaceutical and cosmetics ingredients, bioplastics and polymers rather than on its use in

the production of energy. Cascading principle of the use of bioeconomy will lead to the formation of

winners and losers, often in the same sector, thus creating the highest possible value added will be

possible only having a targeted, goal-oriented policy. The analysis of bioeconomy strategies and pol-

icies in the Baltic Sea Region countries also revealed that Lithuania needs a bioeconomy strategy,

which would speed up the sustainable growth and development of the Baltic Sea Region.

5 out of 12 examined EU states have drafted bioeconomy strategies: Belgium and Germany

(2013), Finland (2014), Spain and Italy (2016). In addition to the bioeconomy strategy, Germany has

also drafted the National Research Strategy BioEconomy 2030” (2011). Sweden has a drafted Re-

search and Innovation Strategy for a Bio-based Economy (2012). Denmark set up the national

bioeconomy advisory council in 2013, however, it has no bioeconomy strategy so far. Ireland, Estonia

and France plan to draft a bioeconomy strategy, while the Ministry of Agriculture of the Republic of

Latvia is currently finishing up with the preparation of the Latvian strategy in cooperation with the

Latvian University of Agriculture.

Analysis of good practice of bioeconomy strategies of EU countries revealed that the Ministry

of Economy could be responsible for drafting the Lithuanian bioeconomy strategy and the action plan

in cooperation with other ministries (ministries of economy, food or agriculture usually draft such

strategies in EU countries). Main components of bioeconomy strategies of EU countries include the

substantiation of the need for the strategy, SWOT analysis of the bioeconomy sector; vision, goals

and principles of bioeconomy; main parts of the strategy indicating the action plan and measures (the

policy; R&D; training and education; biomass value chain; markets and competitiveness); the imple-

mentation, monitoring of the strategy and impact assessment.

The analysis of good practice of state governance in EU countries showed that EU countries

solve the issues of drafting a bioeconomy strategy, it’s implementation and monitoring somewhat

differently. However, work groups and councils are formed under the integration principle. Work

groups are delegated the function of drafting and councils – the function of monitoring the strategy

and the action plan as well as the advisory function. The majority of incentives for the development

of bioeconomy used in EU countries are those typically used in other economic activities, including

those of Lithuania. Nevertheless, such incentives as encouraging consumers to buy (and pay more

for) for sustainable bio-based products as substitutes for traditional products, the creation and funding

of public procurement programme, and big data systems are important.

The content analysis of strategic documents of the EU, OECD and Norway and of good

practice of EU countries and Norway allowed determining that bioeconomy or related strategies and

action plans are based on the following 4 principles: 1) to give the priority to food security; 2) to

combine food security with sustainable use of renewable resources for industrial purposes and assu-

rance of environmental protection; 3) to apply the cascading principle in the biomass value chain,

first of all using biomass in the production of the highest value added products. The Lithuanian

bioeconomy strategy and the action plan should be based on the said principles, integrating the sectors

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of bioeconomy and including all stakeholders in order to ensure sustainable growth of bioeconomy

via the biomass value chain.

When giving priority to food security, it is important for biomass to first of all be used in the

production of food rather than biofuels, thus shifting towards the 2nd and 3rd generation sustainable

production and use of biofuels is necessary. Additional biomass needed for biofuels may be created

by using abandoned agricultural land inappropriate for growing food product raw materials.

The analysis of research of EU countries and good practice of bioproducts created by their

companies revealed the following trends: 1) the use of waste as biomass; 2) integration of sectors of

bioeconomy; 3) the use of biomass in the production of high value added products; 4) replacement of

one type of biomass by another; 5) search for alternative forms of biomass; 6) development of circular

economy.

Both EU and Lithuanian legislation devote special attention to the reduction of biowaste,

especially of food. Lithuanian legislation provide for taking active and ambitious means to cut down

on food waste, help municipalities organize a food waste collection system and implement measures

allowing reducing the generation of food waste. EU legislation provides for the pursuit of the goal of

sustainable development of the reduction of food waste, extension of the use of food, facilitation of

food donation and increase of the use of no longer used food products and food chain by-products in

feed production. Emphasis is placed on educating the public about issues of reducing food waste.

EU and OECD strategic documents emphasize that the bioeconomy strategy shall be focused

on three areas: investment in R&D, innovation and skills; strengthening policy interaction and parti-

cipation of stakeholders; increase of markets and competitiveness in bioeconomy sector, with the

special focus being placed on the development of biotechnologies, because they will become the basis

for the development of a whole bioeconomy sector. The plan is to develop the innovative technology

and knowledge-based, more competitive industrial and service sectors of higher value added.

Particular attention on the creation and development of Lithuanian innovative technologies

and new products places in the “Programme for the Development of Lithuanian Innovation 2014–

2020”. It provides for the following main programme objectives: to promote investment in activities

creating high value added; to encourage the entry of new products into the market; to encourage cross-

sectoral cooperation in the creation of innovation and to develop high-impact innovation; to promote

the creation, development and internationalization of value networks; to encourage cooperation be-

tween business and science, transfer of knowledge and technology; to promote the development of

clusters and their integration in international value creation networks. These objectives are also im-

portant in the pursuit of promoting innovation in the bioeconomy sector. It is expedient to do this

through innovative (pre-commercial) and green public procurement: to increase the innovative capa-

city of companies through pre-commercial purchases (government orders for R&D) to address social

challenges, to increase the demand of the public sector for innovation, to motivate the business mar-

keting new bioproducts.

The EU countries have created strong bioeconomy clusters. The analysis of good practice of

clusters revealed that their creation at the national level is expedient only when there is a very strong

research potential and many business enterprises prepared to commercialize products. Support for

their establishment should be linked to the implementation of strategic bioeconomy goals. The crea-

tion of clusters should first of all be initiated “from the bottom”, and only in the absence of the initia-

tive they should be created “from the top”. In presence of a weak scientific potential, searching for

membership opportunities in clusters created in EU countries would be better.

It has been emphasized in Lithuania that merging into clusters is one of the opportunities to

occupy a greater share of export markets, because competing for a single company is rather complex.

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Promoting the culture of cooperation and the need for innovation by increasing popularity of the

benefit of the development of clusters in research and education institutions, also creating the space

for distribution of information on potential benefits of clusters, management peculiarities and busi-

ness cooperation, creation of value chain via the provided services of cluster facilitators, success sto-

ries, the media, seminars and conferences are important. The plan is to encourage the national clusters

to become a part of international value creation chains, especially in the Baltic Sea Region, encoura-

ging Lithuanian clusters to develop international partnership. Thus clusters in Lithuania receive a

special attention.

More than a third of R&D expenditure was allocated for fundamental research in Lithuania

during the examined period of time, and only slightly less than 2/3 – for applied research and devel-

opment. Nevertheless, low focus of projects of research and education institutions on prototypes and

products suitable for the market has been observed. Results of the survey of universities and research

institutes revealed that in the performance of R&D projects in the bioeconomy area, the involvement

of these institutions in subsequent R&D stages is very low. The majority of research project results

is associated with the knowledge application concept (about 87 percent), must fewer research results

(about 50 percent) – with new (fundamental) knowledge, and only a very small share (18 percent) –

with layout design, tests and check, creation of a prototype trial version and demonstration, as well

as the production and assessment of the trial batch. Lithuanian research and education institutions

have little experience and motivation in creating patented, licensed or other-wise commercialised

products suitable for the market, there is a shortage of start-ups and spinoffs.

The Lithuanian research system is fragmented, thus the culture of cooperation not only

between researchers and entrepreneurs, but also between scientists from different institutions is low.

Interinstitutional and international coordination of innovation activities remains inefficient in Lithu-

ania; the created infrastructure necessary to ensure research and business partnership also functions

ineffectively. Activities of open access centres do not attract business as planned; science and tech-

nology parks are mainly engaged in the rent of premises, and businesses take little advantage of

equipment of valley laboratories operating under the open access principle. In order to increase the

efficiency of activities of centres, parks and valleys, periodic control and assessment of their activity

results is necessary.

Business admits that innovations are a very risky area, and failures are frequent here, thus not

all business representatives are willing to take the risk. Another problem is the lack of control and the

sharing of managerial skills: there is a shortage of specialists, who could help find the missing pro-

fessionals of different areas, who could work with the company from the initial stage of the creation

of innovation till its practical adaptation, ensure a smooth project implementation and familiarize

with opportunities to receive additional financial support. Businesses in the country often confine

themselves to providing financial assistance at the product development stage only, without rendering

assistance for the introduction of a new product into the market, where the risk of a failure is signifi-

cant. On one hand, it was determined that as many as 75 percent of new products in the market fail.

On the other hand, the introduction of a product into the market is an expensive procedure. The pro-

cess of commercialization of industrial biotechnology products is long for regulatory constraints, poor

consumer awareness of the products, the advantages and functions whereof are not sufficiently clear.

Lithuania has a scientific potential for the development of bioeconomy activities. The number

of doctoral bioeconomy students accounted for an average of 16–18 percent of the total number of

doctoral students in the past four study years, and increased more rapidly than the number of doctoral

students of other areas unrelated to bioeconomy. The analysis of the Lithuanian research and deve-

lopment potential in the bioeconomy area revealed that the research area attributable directly to

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bioeconomy employed 15 percent of conditional R&D researchers in 2015. The highest number of

R&D employees in business was in the production of chemicals during the examined period of time.

An increase in the number of R&D employees has been observed in this business. Business inclusion

in R&D could be increased via projects funded under Horizon 2020, Interreg Baltic Sea region prog-

ramme and the Lithuanian Research Council. Business can make very limited investment in R&D,

because enterprises are relatively small. In such a case, acquiring the already created product is more

efficient than investing in its creation. Commercialization of research results may also be accelerated

via the implementation of European Innovation Partnership projects.

The following directions for promoting Lithuanian bioeconomy innovation are recommended:

1) promoting investment in high value added activities; 2) promoting the introduction of new products

into the market; 3) encouraging cross-sectoral cooperation in the creation of innovation and developing

high-impact innovation; 4) promoting the creation, development of value networks and their interna-

tionalization; 5) promoting the cooperation between business and science, knowledge and technology

sharing; encouraging the development of clusters and integration into international value creation

networks.

Financial and non-financial instruments for promoting innovation are first of all targeted at

the growth of biomass-based economy through a more rapid commercialization of new products:

different tax reliefs, constraints, financial support for the establishment of start-ups and spin-offs,

provision of consultation and acceleration services to small and medium-sized enterprises, organiza-

tion of innovative (pre-commercial) and green public procurement procedures and search for export

markets. Creating favourable legal, organizational and financial conditions necessary for the estab-

lishment and operation of biomass value chain-based knowledge centres and clusters, production and

demonstration of new bioproduct test batches, development of international partnership and increa-

sing the number of R&D jobs in the bioeconomy sector is important for promoting innovation. Infor-

mation and education of Lithuanian business sectors and the public on bioeconomy-related issues is

indirect but important instrument for promoting innovation.

Recommendations – action plan for promoting the development of Lithuanian bioeconomy

and innovation

The analysis of the content of strategic documents of the EU, OECD and Norway as well as

of good practice of the EU countries and Norway allowed determining that the strategy of bioeco-

nomy and the related strategies and action plans are based on the following 4 principles:

1) to give the priority to food security;

2) to combine food security with sustainable use of renewable resources for industrial purpo-

ses and assurance of environmental protection;

3) to apply the cascading principle in the biomass value chain, first of all using biomass in the

production of the highest value added products;

4) to maximise recycling and reuse and minimise waste.

The Lithuanian bioeconomy strategy and the action plan should be based on the afforementioned

principles, integrating the bioeconomy subsectors and involving all stakeholders in order to ensure

sustainable growth of bioeconomy via the biomass value chain. Considering these principles and

conclusions received having assessed the condition and the potential of Lithuanian bioeconomy as

well as good experience of the EU member states and Norway, recommendations were prepared for

promoting the development of Lithuanian bioeconomy and innovation in this sector by drafting an

action plan (Table 14).

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Table 14. Goals, Objectives and Measures of Bioeconomy Development and Innovation Promotion

Goals Objectives Measures*

1. To pursue sustainable

and strategically-orien-

ted development of

bioeconomy

1.1. To ensure inter-institutional inte-

raction of all stakeholders in

solving the problems of strategic


1.1.1. By January 1st, 2018 to form a National Bioeconomy Council with representatives from

governmental (central and municipal) institutions, business associations, research and

study institutions and non-governmental organisations

1.1.2. To prepare the regulations of the National Bioeconomy Council, describing the princip-

les of its formation, activities, and functions as well as the procedures of decision-ma-

king and empowerment

1.1.3. To establish a secretariat of the National Bioeconomy Council and organisational and

financial preconditions for its work

1.2. To ensure strategically-oriented


1.2.1. By February 1st, 2018 to establish a working group and assign it to prepare Lithuanian

Bioeconomy Strategy and the Action Plan, defining strategic positions of the bioeco-

nomy at the national and regional levels, the levels of the EU and the Baltic Sea region

1.2.2. To monitor the implementation of the Lithuanian Bioeconomy Strategy, assigning this

function to the National Bioeconomy Council

1.2.3. In accordance to the deadlines set, to carry out detailed assessments of the Bioeconomic

Strategy implementation and to adjust the strategy

1.3. To inform and educate the

Lithuanian business sector and

the society on bioeconomy is-

sues

1.3.1. To create and implement a system for publicising the National Bioeconomy Council’s

work and its results as well as for receiving a feedback

1.3.2. To create and implement a coherent system of bioeconomic statistical information

1.3.3. To publish the summary reports of the implementation of the Lithuanian Bioeconomy

Strategy and other results of the implementation of this Strategy

1.3.4. To create a specialised website for discussing the problems of strategic development of

the bioeconomy, to promote new biotechnologies, circular economy and other innova-

tions in the bioeconomy, to reveal and analyse food waste problems

1.3.5. To publish financial instruments for the development of the bioeconomy sector and the

creation and implementation of new innovations

1.3.6. Through modern means of communication to educate the society on sustainable use of

bioproducts, avoidance and reduction of food and other biowaste

2. To increase the effi-

ciency and sustainability

of biomass production

and recycling as well as

biowaste utilisation

2.1. To increase the volume of de-

manded biomass production by

using the resources suitable for

this production

2.1.1. To carry out the analysis of abandoned land areas, to evaluate the possibilities of using

them for biomass production taking into account soil quality, agro-ecological and other

peculiarities

2.1.2. To create favourable legal and economic preconditions for long-term and sustainable

production of biomass in abandoned land areas

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2.2. To increase the production and

use of bioenergy

2.2.1. To support financially an investment in bioenergy through the introduction of innovative

bioenergy technologies and use of local (forest waste, manure, straw, sewage sludge,

and etc.)

2.2.2. To support financially an investment in biofuel production by using new types of bio-

mass (algae and etc.)

2.2.3. To support financially an investment in heating systems in residential areas through the

development of local biomass energy supply chains on the basis of local partnerships

2.2.4. To establish mandatory conditions for the use of biofuels in urban public transport

2.3. To increase the efficiency of

biomass logistics

2.3.1. To develop a feasibility study on the assessment and development of a biomass logistics

system

2.3.2. To support financially the development of territorial bioenergy clusters in order to reduce

transport costs and transport GHG emissions

2.4. To develop R&D for creating

new innovations

2.4.1. Through tendering procedure to prepare and organise joint research programs for the

new knowledge and technologies on which the bioeconomy is based and to develop

bioproducts

2.4.2. To support financially the establishment and operations of a Bioeconomy Knowledge

Centre that is needed to manage the supply, demand and transfer of bioeconomy

knowledge to stakeholders

2.4.3. To increase the companies‘ innovative capacity of product development and preparation

for market through pre-commercial procurement (government orders for R&D) to

address social challenges

2.4.4. To support the production or demonstration of new test batches of bioproducts

2.5. To intensify the development

and implementation of prototy-

pes of innovative technologies

(especially biotechnology

methods and processes) and

bioproducts

2.5.1. To support financially the launch of bioeconomy start-ups and spin-offs, partially cove-

ring the development and operation costs

2.5.2. To promote the provision of advisory and acceleration services to small and medium-

sized companies, operating in the field of bioeconomy

2.5.3. To create favourable legal, organisational and financial conditions for the creation of

biomass-value-chain-based bioeconomic clusters, with a large number of innovation-

intensive companies and a strong scientific potential in the sector

2.5.4. To create favourable conditions to develop an international partnership for bioeconomy

clusters – to engage in the development and implementation of innovative biotechnology

and bioproducts

2.5.5. To provide special social or economic status to high-level biotech specialists, including

favourable tax and social contribution schemes.

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2.5.6. To encourage the creation and maintenance of R&D jobs in bioeconomic sector through

a favourable tax system

2.6. To increase the use of biomass

for producing higher value-

added products, to manage

biowaste more efficiently

2.6.1. To order investigations to assess the economic, social and environmental impact of

cascading use of biomass and to determine the priorities for cascading use of biomass

through tendering procedure

2.6.2. Sukurti ir įgyvendinti verslo subjektų, taikančių biomasės pakopinį naudojimą, skati-

nimo sistemą

2.6.3. To initiate a stakeholder platform based on the avoidance and reduction of biowaste

2.6.4. To create a system for promoting biowaste management, including legal, financial and

administrative measures

3. To increase the de-

mand of bioproducts and

to improve their con-

sumption

3.1. To improve the conditions for

selling bioproducts

3.1.1. To support financially the development of short supply chains for higher value-added

bioproducts and other innovative methods for direct sales

3.1.2. To establish and carry out a system for promoting the exports of higher value added

bioproducts

3.1.3. In accordance to the established procedure, partially to cover the costs of business orga-

nisations, that have been experienced when in mesmerizing ways promoting higher

value-added bioproducts, comparing to their substitutes and indicating the advantages

3.1.4. To determine the objectives for green procurement, prepare a plan for reaching these

objectives and approve a list of products for which environmental criteria are applicable

to public procurement

3.1.5. To promote innovation through public procurement by increasing the public sector de-

mand for innovation and motivating business to market new bioproducts

3.2. To reduce food waste

3.2.1. To regulate the food waste management system, collection of food waste, conditions of

its use for animal feeding, biogas production and other purposes

3.2.2. To review the conditions of food labelling in order to provide clearer, more comprehen-

sive information for consumers about the definitions of food consumption terms

3.2.3. To review the conditions governing food donation, including hygiene standards, requi-

rements for retail chains and etc.

*The measures presented in the Plan are primary and will need to be specified and supplemented, linked to the other EU and national programs in line with the approved

Bioeconomy Strategy and the Action Plan for its implementation.

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Study supervision panel

Prof. dr. Vlada Vitunskienė, Aleksandras Stulginskis University (chief researcher)

Prof. dr. Astrida Miceikienė, Aleksandras Stulginskis University (researcher)

Prof. dr. Vilija Aleknevičienė, Aleksandras Stulginskis University (researcher)

Virginija Kargytė, Aleksandras Stulginskis University (researcher)

Prof. habil. dr. Vaclovas Miškinis, Lithuanian Energy Institute (researcher)

Dr. Vidas Lekavičius, Lithuanian Energy Institute (researcher)

Evaldas Serva, Aleksandro Stulginskio universitetas (researcher)

Knut Øistad, Norwegian Institute of Bioeconomy Research (researcher)

Prof. dr. Irina Pilvere, Latvia University of Agriculture (researcher)

Editor:

JSC „Vertimo namai“