Enhanced competitiveness and increased employment through domestic production of biofuels

The full text is available in Swedish.

All renewable fuels, in large quantities, are needed to achieve a fossil-independent vehicle fleet. However, to fully benefit from a fossil-independent vehicle fleet, it is not enough for usage to increase – domestic production must also keep up. Beyond reducing climate impact, renewable fuels bring with them a range of positive societal effects that could help meet Sweden’s environmental goals and strengthen the social and economic sustainability of regions. Examples of these include improved air quality, reduced noise, increased employment, enhanced energy security, and strengthened competitiveness on a national level. This particularly applies to biofuels. However, the current focus on climate impact has resulted in the majority of the biofuels used in Sweden, or the raw materials used for biofuel production, being imported. This leads us to miss out on the positive societal effects.

In efforts to reduce greenhouse gas emissions and transition to a fossil-free transport sector, the demand for renewable fuels in the world is likely to increase significantly in the coming years. From a global perspective, Sweden is rich in natural resources suitable for biofuel production. We also have favorable conditions for renewable electricity production and a growing industry for battery manufacturing. Therefore, increased domestic production of biofuels, renewable electricity, and electric vehicle batteries is desirable. Reasons for this include better opportunities for traceability and control over environmental impact, and reduced dependence on imported raw materials and fuels, hereby strengthening Swedens crisis preparedness. Given our abundance of biobased natural resources, Sweden should therefore be a net exporter of biofuels and/or the raw materials from which biofuels are produced, but currently we are far from being that. Close to 90 percent of biofuel consumption in Sweden consists of biofuels that are imported or biofuels produced from imported raw materials. [1] At the same time, it should be emphasized that some of the biofuels produced in Sweden today are exported.

Production and use of renewable fuels enhance competitiveness

Using national resources such as raw materials, established industry and expertise to produce, utilise and scale up renewable fuels contribute to national growth in the form of development and employment [2]. The production and use of renewable fuels also have a connection to enhanced competitiveness, knowledge, and innovation – through links to innovative environments, research, and innovation – and thus have an impact on employment.

Domestic production of renewable fuels contributes to the expansion of existing socio-technical systems, the creation of new systems [3, 4], and as a consequence, stimulates employment and economic activity along the entire value chain from raw material to usage. For biofuels, there is a particularly strong connection to local resources. However, the positive socio-economic effects decrease if a significant portion of the raw materials for biofuel production is imported.

Table 1 presents a compilation of the effects on employment and stimulation of regional growth for different value chains of biofuel production [5]. The compilation is based on a literature review of a significant number of national and international studies focusing on Sweden and Europe. As can be seen in Table 1, the results of the compilation point to an indicative figure of generated full-time positions (Full Time Equivalents, FTE) per TWh of produced biofuel, which seems to vary somewhat between the reviewed biofuels. For biogas, Energigas Sverige has estimated the total employment effect to be approximately 1 job per GWh [6]. A regional study for biogas also shows estimates that align with the results in Table 1 [7].

Tabell 1. Indicative results regarding employment and regional net productions for fuel production. The table is a synthesis conducted by Mossberg et al. (2019) [5] based on several different studies [3, 4].

Based on Table 1, the stimulation of regional growth from domestic production of biofuels can be estimated at an indicative figure of approximately 1 million SEK per GWh of fuel. Although there is a wide range of data in Table 1, it can be concluded that biofuel production in Sweden is likely to yield socio-economic benefits and is likely to increase further if the raw materials are of Swedish origin.

For employment related to renewable electricity production, the picture is more complex. Currently, there are many different production technologies where some are associated with relatively high employment and others significantly lower (such as hydropower, for example). However, it can generally be stated that renewable energy technologies have the potential to create higher employment than fossil alternatives, including electricity production. Studies show that the effects are greater for bio-based value chains than other value chains for electricity production such as solar and wind power [8]. Worth noting is that in a situation of low unemployment, this job creation does not provide any particular socio-economic added value (aside from any regional policy aspects). In a situation of labor shortage, the effects can even be negative for the overall economy [9]. The national strategy for sustainable regional growth and attractiveness also highlights innovation and entrepreneurship, skills supply, and international cooperation as priority areas for regional development and employment [10].”

The use of locally available raw materials increases innovation capacity

In terms of strengthening regional/national innovation capacity, renewable fuels linked to regionally/nationally available raw materials, such as local biomass, should have an advantage. In the long term, fuel value chains that connect to existing industry and innovation areas can be advantageous as they provide the opportunity to scale up already established structures. However,  established industries are often passive when it comes to renewal and investing in radically new value chains, making the regional context and collaboration in the actor network especially important [11, 12]. The ability to innovate is also influenced by the number of industries and the concentration of workplaces. Metropolitan regions and larger regions generally have both higher industry diversification and lower workplace concentration [1].

Internationalization of companies is also important for renewal, which can be expressed as the proportion of employees in international/multinational companies [1]. Another important aspect of societal development is providing conditions for a vibrant rural economy, with opportunities for entrepreneurship, employment, housing, and welfare. Here, the opportunity for jobs in rural areas related to some part of the value chain for renewable fuels is a clear synergy. Such a connection often relates to the use of local raw materials and is therefore particularly prominent for bio-based value chains. For example, small-scale upgrading close to the the location of the raw material can have a positive effect on the number of jobs in rural areas. Furthermore, the utilization of by-products that were previously unused provides conditions for increased profitability throughout the value chain. The production of renewable fuels also increases diversity and provides more potential income sources for local businesses, strengthening their redundancy  [3]. Production of biofuels, especially through the utilization of by- and waste products from agriculture and forestry, thus strengthens the possibility for a competitive forestry and agricultural sector nationwide. Increased biofuel production on agricultural land in rural areas also has the advantage that production ensures that the land is cultivated and creates more jobs, compared to leaving land fallow. Previous studies have shown that domestic agricultural-based raw materials can contribute to between 4 and 10 TWh of biofuels per year without negative side effects regarding indirectly changed land use [13].

Continue reading the full report (in Swedish) in the PDF version. It includes a literature review that summarizes what is found in a selection of studies regarding the socio-economic benefits of renewable fuel production.