Blog Posts Natalia Kuosmanen Agriculture, Economy, Food, Forestry, Statistic

A recent report by the Joint Research Centre (JRC) of the European Commission challenges the established view of the Finnish bioeconomy. According to the report, the Finnish bioeconomy is much more than just forestry and forest industry: agriculture, food industry, wholesale and retail trade, and accommodation and food services are also large contributors to the Finnish bioeconomy.

The forest sector dominates the Finnish bioeconomy according to the official bioeconomy statistics by the Natural Resources Institute Finland (Luke) and Statistics Finland. However, the conventional bioeconomy statistics underestimate the contribution of the food sector. This is because the conventional approach to measure the bioeconomy relies heavily on a subjective classification of industries: fully bio-based, partially bio-based, and non-bio-based industries.

Primary production sectors agriculture, forestry and fishery are usually considered as 100% bio-based, whereas manufacturing industries such as pulp and paper, furniture, textile, and food industries are often included partially to the bioeconomy sector, since only portions of these industries are considered to be bio-based (consider, e.g., metal screws of a wooden table). Other industries that do not fit to this classification are considered as non-bio-based, and are excluded from the bioeconomy statistics. This approach has at least three major shortcomings.

Other industries that do not fit to this classification are considered as non-bio-based, and are excluded from the bioeconomy statistics

First, classifying the primary production sectors as fully bio-based is contradictory because these sectors also use non-bio-based inputs such as oil in their production processes. Since non-bio-based inputs are taken into account in the manufacturing industries, it would be logical to apply the same principle to the primary production.

Second, expert assessment of the extent that manufacturing industries are bio-based can involve subjective biases and blind spots. Further, different experts give different answers. To illustrate this point, the bio-based share of the Finnish chemical industry in 2015 was 36 % according to the official bioeconomy statistics of Finland, but only 20 % according to JRC. In terms of the value added of the bio-based chemical industry, such a difference in the bio-based shares implies uncertainty that amounts to several hundreds of millions euro.

Third, thus far the official bioeconomy statistics completely ignore the wholesale and retail trade and service industries such as hotels and restaurants, which are integral parts of the supply chain of food. It is contradictory that industrial scale manufacturing of pizza counts as the bioeconomy, but if a local pizzeria (or a retail market) prepares a pizza from the same ingredients using the same recipe, it is excluded.

It is contradictory that industrial scale manufacturing of pizza counts as the bioeconomy, but if a local pizzeria prepares a pizza from the same ingredients using the same recipe, it is excluded

Due to these problems, the official bioeconomy statistics tend to ignore some relevant industries and exaggerate others. There is a considerable risk that misleading statistics cause bias in the political decision making.

To address these problems, a group of researchers from Aalto University, Luke, and JRC has collaboratively developed a more objective method for measuring the bioeconomy. The method uses the input-output tables of the national accounts to objectively track the material flows of bio-based inputs from the primary production to manufacturing industries and further to service industries. The input-output tables are also complemented with the detailed measures of the bio-based content of thousands of final products. Therefore, the proposed method takes into account both the bio-based inputs used during the production process and the bio-based content of the final output. Imports of bio-based raw materials are also taken into account in the analysis.

The importance of more reliable measurement of the bioeconomy for policy-making has been recognized by the European Commission in its recent review of European Bioeconomy Strategy (European Commission 2017). In Finland, the development of the bioeconomy statistics is a joint responsibility of Luke and Statistics Finland. The key advantage of this new method is that it utilizes the standardized data of national accounts, which allows for international comparison and aggregation, for example at the EU level. Thanks to the innovations of Luke and Aalto University in the development of the method, Finland would be in an excellent position to become the world leader in the bioeconomy statistics. Or should we wait until Sweden adopts the new method?

Leave a Reply

Your email address will not be published. Required fields are marked *