New bio-based financing could be an example of the flexibility the EU needs

Written by Miroslav Poche on 20 September 2017 in Opinion
Opinion

The BBI’s financing model must be rectified so that companies are more willing to contribute, writes Miroslav Poche.

Miroslav Poche | Photo credit: European Parliament audiovisual


The European biotech sector’s economic prospects are undoubtedly promising, but challenges still prevail over the present benefits. The potential of the bio economy is enormous. 

It could, to cite just a few examples, reduce dependency on both domestic and imported fossil fuels, achieve zero waste - the ultimate goal of the circular economy - create jobs, growth, and support local economies in less developed regions. 

At the same time, there is no single cure to heal the pain of today’s world. Only a change in the way we think, towards a holistic perception of the environment, can save the planet for future generations.

It is clear that the sustainable bio-based economy in the European Union needs to be pushed the right direction. So far, overseas competitors are noticeably ahead, namely the US.

Why are we less competitive? Shall we once again repeat the favourite cliché about the European brain drain to America? I don’t think so. Europe does not lack the brains, the inventive approaches, the ideas or the business minds.

What Europe has been missing is a coordinated approach that would bring together all the necessary stakeholders in the field - researchers, SMEs and large industries. The more frequent the interconnection, the more effective the results.

Here we come to the issue of cost and risk sharing. Developing new technologies is often high risk. The wrong investment can be fatal for many brilliant companies. No pain, no gain, they say, but every pain must be well-calculated, particularly by SMEs. As a result, the market cannot always guarantee the best gain for society, and research is hit first. That is also why the Bio-Based Industries Joint Undertaking (BBI) was created in 2014. 

The joint technological initiative between the EU and the Bio-based Industry consortium (BIC) with an ambitious goal - to mobilise all relevant stakeholders and contribute to the advancement of Europe as a major research, demonstration, and deployment competitor in the bio-based products and biofuels marketplace.

The BBI’s budget is as ambitious as its goals. The 10-year period work plan should be covered by €3.7bn of both financial and so called ‘in-kind’ contributions. 

Whereas the EU contributes solely financially (the EU contribution can amount to €975m), industry matches this with €2.73bn which is divided into two types of cost obligations. Industry has to contribute financially to both the project-related (operational) and administrative costs, but most of the industry’s costs have an in-kind form.

My present parliamentary report is focused on the €182.5m financial contribution that was supposed to be paid by the industry (BIC) to so-called operational costs.

This is the part of the budget that finances specific calls for project proposals, yet industry has failed to pay up. Why? According to the present regulation, the private sector is expected to transfer financial contributions for operational costs directly to the BBI JU budget. This mechanism has, however, proven to be commercially unviable for many companies.

A company’s contribution to the common budget does not entitle the company to take part in a project that is being financed from such a contribution.

There exists a real threat that through this mechanism, a company could be contributing to its main competitor and allowing them to win a tender instead. Too much is at stake and I believe that this situation needs to be rectified.

The newly proposed legal modification allows the companies to contribute to the budget at project level, offering a possibility to deliver financial contributions by making direct payments to other beneficiaries in the consortium in which the companies take part.

When drafting my report, I tried to explore all the possible impacts of such a proposal on different stakeholders.

As a result, I fully endorse the proposal and I find it to be the right example of the flexibility the EU so badly needs. Some critics may say that we give too much power to the private sector but I disagree.

We need to set up viable conditions for industry because its economic survival is key for research and is vital for the effective spending of public money. If we want to reach our common goals, we must be able to learn from our mistakes.

Finally, the BBI Joint Undertaking has yet another task to manage. Its challenge is not only to boost the bio-economy but also make sure that all stakeholders live up their commitments.

All stakeholders will be focused on the financial behaviour of the industry and here I hope for a dramatic improvement.

 

About the author

Miroslav Poche (S&D, CZ) is Parliament’s rapporteur on bio-based industries joint undertaking: financial contributions

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