Renewable Matter # 1 / Next Europe

Employment, Research and Innovation for Sustainable Growth

A 79 Billion Euro Policy Package for Horizon 2020

by Lucia Gardossi

Europe: innovation for sustainable and inclusive growth

In times of financial straits, substantial demographic changes and increasing global competition, innovation is Europe’s best tool to successfully deal with such issues. This is why innovation was given centre stage in the strategy “Europe 2020” to promote job creation, productivity and social cohesion throughout Europe. 

The EU outlined strategies to generate smart (through the development of innovation and knowledge), sustainable (adopting sustainable economic practices offering a more efficient and competitive approach to resource management), and inclusive (aiming at creating jobs and social and territorial cohesion) growth. This ambitious development vision is put in place through a series of targets to be reached by 2020, that is: increasing 20-64 year olds employment rate to 75%, investing 3% of EU’s GDP in R&D; reduction of carbon emissions by 20% (and by 30% if the conditions are right); increasing energy from renewable sources by 20% and energy efficiency by just as much; reducing the rates of early school leaving below 10% and increasing third level education to 40%; reducing to 20 million the number of people at risk of poverty.

It goes without saying that the achievement of such ambitious targets is strictly connected to consistent policies to fund technological research and innovation.

The funding programme integrated in “Horizon 2020” provides the adequate financial support for implementing such policies and is divided into three pillars or priorities: “Excellent Science”, “Industrial Leadership” and “Societal Challenges”. The new programme will be active from 1st January 2014 until 31st December 2020 with a 79 billion euro budget. 

First Pillar. “Excellent Science” (24.4 billion euro) promotes frontier research, future and emerging technologies. Such activities must aim at developing long-term expertise, strongly focusing on next-generation science, infrastructures and researchers. Research activities to be carried out must be chosen according to scientific needs and opportunities without pre-arranged researching priorities (following a bottom up approach). This is why research is funded according to the excellent science principle.

Second Pillar. Horizon 2020 (17 billion euro) must promote the strengthening of Europe’s industrial leadership through a complete range of tools supporting the whole research-innovation cycle according to themes and priorities established by companies. Technological innovation will benefit from key enabling technologies picked out as crucial tool to promote industrial development: information and communication technology, nanotechnology, advanced materials, biotechnology, advanced manufacturing and transformation and space.

Third Pillar. “Societal Challenges” (about 30 billion euro) aims at implementing research, technological development, demonstration and innovation promoting the achievement of priority targets such as wellbeing, nutrition, energy, the environment, transport, resource use and social changes.

As highlighted by the EU, the main problem of the Union and its member states is probably to have a much more strategic approach to innovation. It is necessary to find an approach where innovation is key for all these policies and to adopt a medium and long-term approach. Every aspect of adopted policies (tools, actions and funds) must be devised bearing in mind its contribution to innovation. National/regional and European policies must be aligned and reinforce each other. And last but not least, highest authorities must define a strategic agenda and regularly follow up the progress made in order to intervene in case of delays.

 

What kind of Innovation for Europe’s Bioeconomy and Bioindustry?

Europe has a unique intellectual and industrial resource potential as well as a cultural environment suitable for the development of new production and economic models able to combine efficiency and sustainability. To this end, Horizon 2020 outlines a path for the development of Europe’s bioeconomy that must really reflect people’s needs while respecting and enhancing territorial and environmental specificities. Regions with a strong rural inclination, as well as coastal areas, can find in the development of their own bioeconomy model a tool to contrast depopulation and unemployment. Little Europe, compared to other continents, has an extensive coastline. Taking into account islands as well, the total coastline amounts to a staggering 100,000 km, equating to two and a half times the circumference of Earth. About 200 million Europeans live near coastal areas and in many cases their livelihood is based on marine ecosystem resources.

While respecting the landscape, “integrated biorefinery” is an industrial system based on technologies capable of developing renewable and sustainable biobased products as well as hybrid products and biofuels. This complex integrated system is based on a cascade approach in line with the principles of the circular economy where all the components of biomass are exploited and transformed so that high added-value products can contribute to the economic sustainability of the whole production cycle. At the end of the cycle, residual products can go back to the soil as nutrients for agricultural activities to prevent soil depletion. It is obvious that raw materials supply plays a crucial role in such a strategy and must be in line with in situ resources without compromising the social and ecological balance.

Extending the range of biomass typologies to use in second and third-generation biorefineries, including those coming from silviculture, organic waste and industrial by-products, will make possible avoiding conflicts between food and fuel crops while supporting economic development that respects both rural and coastal areas in the EU. So, technological innovation must focus on biomass that does not compete with food production and it must examine the sustainability of connected systems of soil exploitation. In particular, scientific research is expected to increase the value of an expanding range of renewable resources, organic waste and by-products thanks to new and efficient processes from a resource point of view, including the transformation of urban organic waste and their use in agriculture.

This will also help to overcome ethical conflicts created by the introduction of first generation biofuels by countries (China, USA, Brazil) that have promoted technologies exploiting agricultural produce that can be used for food production.

Biotechnologies, identified as crucial enabling technologies, can foster innovation and increase resource use efficiency to produce “more with less”. The aim is twofold: on the one hand to allow European companies (in the chemical, health, mining, energy, cellulose and paper, wood and fibre material, textile, starch and food product business) to devise new products and methods able to satisfy both industrial and social needs, preferably using competitive environmentally-friendly production methods; and on the other hand to exploit the potential of biotechnologies in identifying, monitoring, preventing and eliminating pollution.

Estimates conclude that a shift to biological raw materials and biological processing methods could save up to 2.5 billion tons of CO2 equivalent per year by 2030, increasing markets for biobased raw materials and new consumer products. The Horizon 2020 Programme details the strategies to adopt in order to take advantage of this potential that must be based on the development of relevant (bio)technology know-how and focused mainly on three essential elements: a) substitution of current transformation processes based on fossil fuels with processes based on biotechnologies efficient both at resource and energy level; b) creation of reliable, sustainable and adequate biomass, by-products and waste flow supply chains and a vast network of biorefineries across Europe; c) stimulating the development of markets for biobased products and processes, taking into account related risks and advantages.

Since biotechnology innovation is expected to open up new markets, it is crucial to have European and international standards and certification to determine biological content, features and biodegradability of products. It is necessary to further develop products’ lifecycle analysis methods and strategies in order to keep them in line with scientific and industrial progress.

Horizon 2020 focus on aquatic biological resources deserves special attention. Over 90% of marine biodiversity is yet to be explored and offers a huge potential for the discovery of new species and applications in the field of marine biotechnology that should generate a 10% annual growth in this sector.

One of the main characteristics of aquatic biological resources is that they are renewable and their sustainable exploitation is based on deep knowledge and high qualitative productivity of aquatic ecosystems. The global objective is to manage aquatic biological resources in order to maximise by-products, economic and social advantages offered by oceans, seas and Europe’s internal waters. To this end, Horizon 2020 intends to support further exploration and exploitation of the vast opportunities offered by marine biodiversity and aquatic biomass to create new, innovative and sustainable processes, products and services on markets with potential application in industries such the chemical and materials sectors, fishing and aquaculture, pharmaceutical, cosmetics and energy companies.

 

Local Needs Drive European Innovation

The geography of innovation is still very heterogeneous; some regions are very competitive on the global technological front while others are trying to catch up with them by adopting and adapting innovative solutions to their specific situation (technological gap). Public support must adapt its strategies and its interventions in order to take into account such diversity. In order to achieve Europe 2020 intelligent growth target, the full innovative potential of EU regions must be mobilized. Innovation is crucial for all regions: for advanced regions in order to maintain their advantage and for the ones lagging behind to catch up. R&D and innovation results vary enormously within the EU as shown by the regional innovation performance index.

There are also considerable differences in achieving the target of investing 3% of GDP in R&D. Within the EU, only 27 regions, approximately one out of ten, has achieved this target. Compared with previous European programmes for research funding, Horizon 2020 is part of a concerted strategy including several funding sources of the European Commission (i.e.: for agriculture, regional and industrial development). Its top priority is to align EC, national and regional policies. This is why for the first time, EC priorities also involve members states, their regions and micro-geographic areas which share priorities and specificity. It is then crucial to establish how well prepared the infrastructures devoted to scientific research and training are to take on board these strategic changes.

In order to promote policy alignment within the EU, a Smart Specialization Strategy has been developed with the aim of preventing intervention fragmentation and applying the efforts in innovation promotion at peripheral and regional level. Regional policies are a key tool in transforming EU innovation priorities into effective practical actions. Such actions include the creation of favourable conditions for innovation, education and research in order to promote strong investment in R&D and know-how, as well as initiatives supporting higher added-values activities.

Regions have a central role to play because they are the main state partner for universities, other education and research institutes and SMEs, key actors within the innovation process and thus crucial elements of the Europe 2020 strategy.

The new planning cycle of Cohesion Policy 2014-2020 (regional structural funds of at least 100 billion euros) establishes that all regions of member states must draw up a document outlining, starting from their available resources and abilities, their smart specialisation strategy identifying competitive advantages and technological specializations more in line with their innovation potential specifying private and public investment needed to support their strategy, particularly in the field of research, technological development and innovation. 

Thus, the EU intends to discourage the trend of allocating public funds evenly to different productive sectors without taking into due consideration their strategic position and their development prospects in the global panorama. It also intends to develop innovation strategies of companies and regional productive sectors devoted to international value chains. National and regional governments should develop smart specialisation strategies to maximise the impact of regional policies combined with EU policies. Smart specialisation strategies can stimulate private investment and become a key element for the development of a multilevel governance of integrated innovation policies.

 

Overcoming Fragmentation through Innovation Transversality

More and more frequently, innovation is seen as an open system where several actors interact and collaborate. Boundaries amongst scientific sectors, but also amongst traditional industries, are becoming more and more blurred and consequently transversality has an increasingly important role in creating high quality research and in accelerating the innovation process for emerging markets’ needs. This is particularly true for bioeconomy, a meta-sector including a vast range of know-how and several productive sectors.

For example, clusters – geographic concentration of businesses, oftentimes SMEs that interact with each other and with their customers and suppliers and share a pool of specialists – offer a favourable context for promoting competitiveness and orientating innovation towards the bioeconomy sectors (see also the article published in this issue of Renewable Matter “The European Path to Bioeconomy Passes through Clusters”).

According to Horizon 2020, it is crucial to promote both inter-sector cross-fertilization and mobility between the business world and academic research. This helps avoid know-how fragmentation, promote technology transfer and cross the so-called “death valley”, that is the gap between research and industrial innovation. Although European researchers are extremely prolific in terms of scientific publications, very often these results are not turned into innovations with an impact on the life of the people that fund them through taxation. For example, the analysis of half of the results (7,888) of the projects funded by the EC during the previous framework programme for research (FP7) shows that 16,709 pieces of research were published but there were only 629 intellectual property rights applications.

For this reason, the latest funding policies call for increasing focusing of resources on great interdisciplinary projects involving entire “systems” and “sectors” of knowledge and innovation. So, local scientific knowledge and excellence must be used to create synergies. In such a context, the role of regions is once again crucial. Their mission is to draw up policies locally relevant and able to integrate scientific resources and technological innovation at last.

With transversality in mind, even intervention aiming to promote industrial growth and innovation must not encourage a single production sector but rather strengthen the competitiveness of an entire value chain carried out through the integration of sectors with different levels of innovation. This will also benefit traditional low-tech sectors that are nonetheless strongly integrated into the surrounding area and become involved downstream in the meta-sector as suppliers of biomass and by-products to be enhanced. This is the only way in which creating new innovation and value chains in bioeconomy will lead to broad-spectrum solutions able to promote local sustainable and coherent development.

 

Public and Private Contribution to Innovation

In this historic moment, through Horizon 2020, the EU clearly sets out a strategy that promotes innovation by focusing resources on activities able to have a social impact and to act as a driving force for industrial innovation and economic development.

The reasons, besides the already mentioned economic crisis, are explained in the “Innovation Union” document offering a clear analysis of the European system’s limitations. Private sector R&D activities are increasingly transferred to emerging countries and many qualified researchers move to countries where they enjoy better terms and conditions. The EU invests in research and innovation 0.8% of GDP less that the US and 1.5% less than Japan’s. The number of innovative SMEs managing to become big companies is still too small. 

According to recent estimates, the target of investing 3% of the EU’s GDP in R&D by 2020 could create 3.7 million jobs while increasing its annual GDP by 800 billion euros by 2025. 

The same document highlights how urgent it is to remove obstacles that still hindrance entrepreneurs from bringing their “ideas to the market”: access to funds must be facilitated, especially for SMEs while cutting the costs of intellectual property rights. 

Consequently, public support to innovation must be adapted to these changes, integrating the commitment in favour of research and technology by promoting open collaboration amongst all concerned parties.

This support is justified since market forces are not always able to guarantee adequate long-term funding for investments. For example, private investments in biorefineries are still considered high risk since the concept of biorefinery is not fully established in the chemical and energy fields. Pilot infrastructures and plants, necessary to demonstrate the feasibility of innovative processes, require huge investments. Moreover, the time necessary for a product to reach the market is on average quite long, thus causing unacceptable financial exposure for SMEs. Hence, it is crucial to reduce financial risk through public co-funding of plants and infrastructures accessible to various actors and companies engaged in the innovative process.

In Europe, in order to promote sustainable growth, it is necessary to optimize public and private contribution since responsible research and innovation imply that the best solutions are achieved by the interaction of partners with different perspectives but with common interests. 

To this end, Horizon 2020 envisages the creation of public-public and public-private partnerships based on contracts between public and private investors but also institutionalized public-private partnerships such as joint technology initiatives.

In joint technology initiatives, public and private funds are used synergistically to overcome barriers stopping the transfer of results to the market. The Bio-based Industries Consortium is a good case in point. It groups together over 60 European members (public research institutions, businesses and SMEs) involved in biotechnology, agriculture, chemistry, forestry and food production. They all share an interest in developing and demonstrating the applicability of biobased technologies and transforming them into useful products for European citizens. This joint technology initiative funds R&D projects for a total of 3.8 billion euros, of which approximately one billion comes from the EU and the rest from consortium members. It is interesting to highlight that non-consortium parties can have access to funding.

The EU is confident that all these policies and measures for funding research and innovation will lead the European industry towards a “New Renaissance”.

 

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