A fuel too far? Technology, innovation, and transition in failed biofuel development in Norway

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Energy Research & Social Science

j o u r n a l h o m e p a g e :w w w . e l s e v i e r . c o m / l o c a t e / e r s s

Original research article

A fuel too far? Technology, innovation, and transition in failed biofuel development in Norway

Arne Martin Fevolden (Ph.D.) (Senior Researcher)

^∗

, Antje Klitkou (Ph.D.) (Research Professor)

NordicInstituteforStudiesinInnovation,ResearchandEducation,P.O.Box2815Tøyen,NO-0608Oslo,Norway

a r t i c l e i n f o

Articlehistory:

Received7January2016

Receivedinrevisedform20October2016 Accepted21October2016

Availableonlinexxx

Keywords:

Advancedbiofuels

Technologicalinnovationsystem Biofuelindustry

Environmentalpolicy Functionalanalysis

Motorsofsustainableinnovation

a b s t r a c t

Thisarticleexploreswhetherold,incumbentindustriescanpreventnew,greenindustriesfromemerging bystudyingtheriseandfalloftheNorwegianadvancedbiofuelsector.Itinvestigatesthreecompeting explanationsthathavebeenproposedtoaccountforwhyNorwayfailedtodevelopavibrantindustry withinthisﬁeld:(i)thepetroleumindustryacquiredallavailableriskcapital,(ii)thepetroleumindus- trycapturedallrelevanttechnologicalexpertiseand(iii)thegovernmentfailedtoprovideadequate incentivesandsupportmeasures.Thearticleappliesaqualitativeevent-historyanalysistochartthe developmentofthemostimportantNorwegianadvancedbiofuelcompanies–Borregaard(bioethanol), Cambi(biogas),Weyland(bioethanol)andXynergo(biodiesel)–andusestheirsuccessandeventualfail- ureasakeyindicatoroftheconditionoftheemergingtechnologicalinnovationsystemwithinthisﬁeld.

Thearticleﬁndsthattheadvancedbiofuelcompanieswerehamperedmostlybyinconsistentandunpre- dictablegovernmentincentives,andconcludesthatthethirdexplanationbestaccountsforNorway’s limitedsuccessinadvancedbiofuels.

1. Introduction

Norwayneeds,inthecomingyears,totransformitseconomy.

TheNorwegianeconomyiscurrentlyriggedtowardsexploitingthe largepetroleumreservesthatthecountryhasbeneaththeNorth Sea,anditsprivatesectorisdominatedbyﬁrmsthatareinvolved inexploration,extractionandreﬁnementofoilandgasresources.

Nevertheless,thepetroleumsectorwillnotbeabletosustainthe samelevelofeconomicactivityinthefuturesincetheNorwegian oilandgassuppliesaredecliningandtheuseoffossilfuelsmust bereducedtomeetinternationalemissionreductiontargets.Many commentatorshavesuggestedthatNorwaycouldsolvethisprob- lemifitmanagedtoconvinceitscompaniestoswitchfocusfrom fossilresourcestorenewableenergy.However,Norwayhassofar struggledtodevelopviablegreenindustries[1],eveninareaswhere naturalresourcesshouldhaveprovidedthecountrywithacom- parativeadvantage–suchasadvancedbiofuelsandoffshorewind power.Thishasledsomecommentatorstosuggestthatthesuccess whichNorwayenjoysinthepetroleumindustryhassomehowpre- venteditfromdevelopingnewgreenindustries.Thisarticleaimsto

∗Correspondingauthor.

E-mailaddresses:[email protected](A.M.Fevolden),[email protected] (A.Klitkou).

contributetothisdebateaboutwhetherold,incumbentindustries canpreventnew,greenindustries fromemerging, byexplaining whyNorwayfailedtodevelopavibrantadvancedbiofuelindustry.

Three competing explanations have been proposed – by researchers,investorsandpolicymakers–toaccountforNorway’s lacklustreperformanceinadvancedbiofuels[2–4].Theﬁrstexpla- nationclaims thattheoilsectoris soresource demandingthat theresimplyisnoavailableriskcapitaltofundpromisingadvanced biofuelprojectsinNorway.Thesecondexplanationmaintainsthat Norwayhasaknowledgebasethatissoentrenchedinhydrocarbon extractionthatthecountrysimplylackstherelevanttechnological expertisetosuccessfully exploitadvancedbiofuelopportunities.

AndthethirdexplanationstatesthattheNorwegiangovernment hasfailedtoprovideadequateincentivesandsupportmeasures tostimulatethedevelopmentandproductionofadvancedbiofuel.

Thisarticleexploreswhich,ifany,oftheseexplanationsaretrue.

Thisarticleinvestigatesthevalidityofthethreeexplanations byexploringtheformation oftechnologicalinnovationsystems (TIS) for the production of three types of advanced biofuels:

advancedbioethanol,biodieselandbiogas.Itappliesthetechno- logical innovationsystemapproach [5,6]in combinationwitha qualitativeevent-historyanalysis[7,8]totrackthedevelopment ofthemainNorwegiancompaniesworkingintheseﬁelds–Bor- regaard(bioethanol),Cambi(biogas),Weyland(bioethanol),and Xynergo(biodiesel).Thesecompanies’endeavourscompriseprac-

http://dx.doi.org/10.1016/j.erss.2016.10.010

4.0/).

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ticallyallofNorway’scommercialactivityinadvancedbiofuels,and theythereforeserveasagoodstartingpointforunravellingthe widertechnologicalinnovationsystemwithintheseﬁelds,which includeabroadrangeofactors,institutions,andtechnologies.

ThearticleappliestheTIS perspective totestthevalidity of specificexplanationsrather thanto explaingeneralpatterns of technologicaldevelopment,diffusionanddeployment.Thearticle adoptsthis approach becauseit aimstocontributetoanongo- ingdebate about thelacklustre performance of the Norwegian advanced biofuels industry, rather than to provide a complete descriptionofallNorwegianactivityinadvancedbiofuels.Thearti- clefollowstheTISperspectiveandassumesthat(seven)processes exist–referredtoas‘functions’intheTISperspective[7]–that couldhavecontributedtoasuccessfuldevelopmentoftheNorwe- gianadvancedbiofuelsindustry.However,thearticlealsoassumes thatsomeweaknesseswerepresentintheNorwegianadvanced biofuelsindustry–alackofriskcapital,alackofexpertiseorinsuf- ficientgovernmentsupport–thatpreventthisfromhappeningand thattheseweaknessescanbeidentifiedasfailuresinoneormore oftheinteractingsystemfunctions.

Theanalysiscarriedoutinthisarticlefindsconsiderablesup- portforthethirdexplanation(policyfailure)butonlysomesupport forthefirst(lackofriskcapital)andthesecondexplanation(lack ofrelevant knowledge).Although therewere examplesof Nor- wegiancompanies struggling toraise capital and develop new technologies,theanalysisrevealsthattheNorwegiancompanies weregenerallyabletodeveloptheirownprocessingtechnologies andraisesufficientfundstodemonstratethem.Theanalysisfinds, ontheotherhand,thattheNorwegiangovernmentfailedtoestab- lishareliableandpredictablepolicyregimeandthatthisfailureput severalbiofuelcompaniesoutofbusinessandscaredoffinvestors.

AlthoughthefocusofthisarticleisontheNorwegianadvanced biofuelindustry,theaimofthearticleistocontributetoawider debateaboutwhetherold,incumbentindustriescanpreventnew, greenindustriesfromemerging[9,10].Thisdebateisnot solely relevanttoNorway,but alsoforother countrieswhich aretry- ingtoestablishgreen industriesuponanindustrial basethat is heavilyinvestedin afossilenergy regime,which isthecase for manyEuropeancountries[11].Theexistingliteraturepointsout thatold,incumbentindustriescanhavebothapositiveandaneg- ativeinﬂuenceonnew,greenindustries.Theycanpreventnew, greenindustriesfromemergingthroughcompetitionandpolitical lobbying[12,13]ortheycanfacilitatethegrowthofnew,green industriesbyprovidingaccesstotechnology,marketsandcapi- tal[14](seealsodiscussionin[15].WithintheTISliteraturethis dilemmahasrecentlybeendescribedasoneof‘externallinks’and

‘structuralcoupling,’whereanemergingindustryisaffectedbyor ispartofdevelopmentprocessesinanothertechnologicalinnova- tionsystem[16].Nevertheless,onlylimitedempiricalworkhasso farbeenconductedonthistopic,andthisarticleaimsathelpingto ﬁllthisresearchgap.

Thearticleisalsorelated toand furtherbuildsuponseveral recentcontributionsinEnergyResearch&SocialSciencethathave discussedthedevelopmentand deploymentof biofuels[17,18], anditaddressesseveralofthequestionsthatEnergyResearch&

SocialScienceaimstoanswer,suchas“whatarethemosteffective strategiesfor catalysingprivatesectorinvestmentininnovative low-orno-GHGemissionstechnologies”and“whataresomeof theendogenousandexogenouscausesoffailedenergyinnovation”

[19].

Thearticleisorganisedasfollows:Section2presentstheana- lyticalframeworkadoptedinthisstudy,whileSection3presents themethods;Section4providessometechnologicalbackground information;Section5presentstheeventhistoryanalysis,while Section6discussesthemainresultsofthisanalysis.

2. Analyticalframework

Thetheoreticalstartingpointforthisarticleisthetechnologi- calinnovationsystem(TIS)approach,whichwasintroducedinthe 1990sbyCarlssonandStànkiewicz[5,6].Sinceitsinception,the TISapproachhasundergoneaseriesofdevelopmentsandhasbeen appliedinanumberofempiricalstudies[20–23].Andinrecent years,it hasbeenadaptedspeciﬁcallytostudythedynamicsof emergingtechnologiesandhasbeenusedextensivelytoanalyse renewableenergysystems[20,24,7,25–27].Itisitssuitabilityfor analysingemergingtechnologiesandrenewableenergysystems– whichisthereasonthattheTISapproachisappliedinthisarticle.

ThecurrentTISapproachissummarizedbyHekkertetal.[7]

asanapproachthat‘focusesonthemostimportantprocessesthat needtotakeplaceintheinnovationsystemstoleadsuccessfullyto technologydevelopmentanddiffusion.’Theseprocessesor‘functions’aredeﬁnedbyHekkertandNegro[24]as:(i)Entrepreneurial activities,(ii)Knowledgedevelopment(learning),(iii)Knowledge diffusionthroughnetworks,(iv)Guidanceofthesearch,(v)Market formation,(vi)Resourcemobilisation,and(vii)Creationoflegit- imacy/counteract resistancetochange.These functionsinteract witheachother,andgeneratepositiveandnegativefeedbackloops, througha combinationof strongor weaksystemfunctionsand strongorweakinteractionsoffunctions[26].Theseinteractions againdeterminewhetheraTIScontributestothesuccessfuldevel- opmentanddiffusionofatechnology.

Althoughall functionshave a partto play in thesuccessful developmentanddiffusionofatechnology, somefunctionsand interactionsbetweenfunctionscanplayamoreprominentrole.

ThisideaisexpressedthroughSuurs’sconceptof‘motorsofinnovation’[26].Suursdescribesthe‘motorsofinnovation’asfrequently occurringforms ofcumulativecausationorfeedbackloopsgen- erated by a speciﬁc set of interacting system functions. Suurs distinguishes betweenfour different types of motors: the ‘Sci- enceandtechnologypushmotor’,the‘Entrepreneurialmotor’,the

‘Systembuilding motor’ and the ‘Market motor’. Eachof these motorshighlightsa speciﬁcformoffeedbackloop thatleadsto thesuccessfuldevelopmentanddiffusionofatechnologybydraw- ingextensivelyona subsetofinteractingsystemfunctions.For instance,thescienceandtechnologypushmotordrawsextensively onknowledgedevelopment(ii),knowledgediffusionthroughnetworks(iii),guidanceofthesearch(iv)andresourcemobilisation (vi).Thismotormightstartwithexpectationsofapositiveresearch outcome(iv),whichleadstopublicR&D(vi),whichleadstotech- nologicaldevelopmentanddiffusion(ii&iii),whichagainleadto greaterexpectationsofpositiveresearchoutcomes(iv)andmore publicandprivatefundingforR&D(andsoon).

Ourtheoreticalconjecturesarederivedfromtheideaofmotors, butweapproachtheconceptfromadifferentangle.Ratherthan thinkingthattherearesomeinteractingsystemfunctionswhich serveasthemaindriversofthedevelopmentanddiffusionofa technology,weenvision thattherearesomeinteractingsystem functionswhichserveasthemainimpedimentstothedevelop- mentanddiffusionofatechnology.Weenvisionthatsomepartsof theTISmightcontainweaknessesthataresosubstantialandfar- reachingthatthesystemasawholegrindstoahalt–creating,if youwill,a‘motorfailure.’Intheexampleabovewiththescience andtechnologypushmotor,wecouldenvisionapositivefeedback loopbetweenpositiveresearchoutcomes(iv)publicR&D(vi)and technologicaldevelopmentanddiffusion(iiandiii).Nevertheless, wemightalsoenvisionthatthispositivefeedbackloopcollapses– afterafewiterations–becauseofanacutelackofprivatecapital(vi) tofunddemonstrationplantsandcommercializethetechnology.

Inthisarticle,weusetheTISapproachtotestthevalidityofthe claimsthatthelacklustreperformanceoftheNorwegianadvanced

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Table1

FailuresandSystemFunctions.

FailureI:lackofriskcapital FailureII:lackofexpertise FailureIII:lackofgovernmentsupport

1.Entrepreneurialactivities X

2.Knowledgedevelopmentandlearningprocesses X

3.Knowledgediffusionthroughnetworks X

4.Guidanceofthesearch X

5.Marketformation X

6.Resourcemobilisation X X X

7.Thecreationoflegitimacyandcounteractingresistancetochange X

biofuelsindustryisduetoalackofriskcapital,alackofexpertise orinsufﬁcientgovernmentsupport.Totest thevalidityofthese explanations,wedevelopthreetypesoffailuresthatcorrespond toeachofthesethreeexplanations–acapitalshortagefailure,an absenceofexpertisefailureandapolicyinsufﬁciencyfailure.We assume,asinSuurs’sconceptofmotorsofinnovation[26],that somefunctionsandinteractionsbetweenfunctionsplay amore prominentroleinthesefailures,andweassignasetofdominant interactingsystemfunctionstoeachofthesethreefailures,based onthetypeofprocessesthattheyindicateashavinghampered thedevelopmentoftheNorwegianadvancedbiofuelindustry(see Table1).

Weinvestigatetheﬁrstexplanation–thattherewasnotenough availableriskcapitaltofundpromisingadvancedbiofuelprojectsin Norway–byexaminingwhetherthereexisteda‘capitalshortage’

failurethatwasdominatedbythefunctions‘resourcemobilisation’

and‘entrepreneurialactivities’.Resourcemobilisationisa func- tionthatreferstotheavailabilityoffinancial,humanandnatural resourceswithinaTIS.Entrepreneurialactivities,ontheotherhand, isafunctionthatreferstothepresenceofprojectsaimedatturn- ingtheseresourcesintoan“emergingtechnologyina practical and/orcommercialenvironment”[26].Concerningthisfailure,itis theavailabilityoffinancialcapitalandtheabilityofentrepreneurs toproduceviablebusinesscasesforadvancedbiofuelsthatarethe mostimportantfactors.Weassumethatthisfailureispresentifthe advancedbiofuelsindustrydevelopssuccessfullyuntilanacutelack offinancialcapitalandentrepreneurialactivitybringsthesystem toahalt.

Weinvestigatethesecondexplanation– thatNorwaylacked relevanttechnologicalexpertisetosuccessfullyexploitadvanced biofuel opportunities – by examining whether an ‘absence of expertise’ failure existed that wasdominated by the functions

‘knowledge development,’ ‘knowledge diffusion’ and ‘resource mobilisation’.Knowledge development isa functionthat refers tolearningprocessesrelatedtoatechnology,occurringthrough activities such as basic research and development, laboratory experimentsandadoptiontrials.Knowledgediffusion,ontheother hand,is afunction thatrefers tonetwork activitieswherehet- erogeneousagentsexchangeknowledge,suchasconferencesand workshops.Finally,‘resourcemobilisation’isthesamefunctionas inthecapital shortagefailure,butthefocusinthis failureison humancapitalratherthanﬁnancialcapital.Concerningthisfailure, itistheavailabilityofcomprehensiveandaccessibleexpertiseand thehumanresourcesnecessarytoexploitthisknowledgethatare essential,andweassumethatthisfailureispresentiftheadvanced biofuelsindustrydevelopssuccessfullyuntilanacutelackofexper- tiseonadvancedbiofuelsbringsthesystemtoastandstill.

We investigate the third explanation – that the Norwegian governmenthasfailedtoprovideadequateincentives and sup- portmeasurestostimulate thedevelopmentandproduction of advancedbiofuel–byexaminingwhethera‘policyinsufﬁciency’

failureexistedthatwasdominatedbythefunctions‘guidanceofthe search,’‘marketformation,’‘thecreationoflegitimacyandcounteractingresistancetochange’and‘resourcemobilisation.’Guidance ofthesearchis afunction thatreferstoprocesses offormulat-

ingexpectationsandvisionsrelatedtoatechnologyandincludes activitiessuchasformulatingR&Dpriorities,conductingforesight studiesandsettingpolicytargetsthatareoftencarriedoutincon- junctionby‘governments,technologyproducers,technologyusers andNGOs’[26].Marketformation,ontheotherhand,isafunction thatreferstosupportmeasuresthatenableemergingtechnologies tocompetewithincumbenttechnologiesinanopenmarket,suchas financialsupportmeasures,minimalconsumptionquotasortaxes ontheuseofincumbenttechnologies.Thecreationoflegitimacy andcounteractingresistancetochangeisafunctionthatrefersto activitiesthatcreateacceptanceandsupportforanemergingtech- nology,suchaslobbyingactivitiesandadvisoryactivitiesthathelp tocounteractresistancetochange[28,29].And,finally,‘resource mobilisation’isthesamefunctionasintheprevioustwofailures, butthefocusinthisfailureisonpublicfundingforRD&D(research, developmentanddemonstration)ratherthanfinancialorhuman capital.Concerningthisfailure,itistheexistenceofclearpublic prioritiesaccompaniedbytargetedpublicincentiveschemesthat arethemostimportantfactors,andweassumethatthisfailure ispresentiftheadvancedbiofuelsindustrydevelopssuccessfully untilmisguidedpoliciesorinadequateincentiveschemesbrings thesystemtoahalt.

Althoughweassignaspeciﬁcsetofdominantsystemfunctions toeachofthethreefailures,thisdoesnotimplythatthisstudyis basedonanassumptionthatthesefunctionsoperateisolatedand alone.Rather,weassumethatsystemfunctionsnotassignedtoa particularfailurecanbothmitigateandexasperatethosefailures throughpositiveornegativefeedbackloops.Inessence,weassign asetofdominantsystemfunctionstoeachofthethreefailures toguidetheempiricalanalysistowardscrucialprocessesthat– inconjunctionwithotherprocesses(functions)–couldhaveled tothelacklustreperformanceoftheNorwegianadvancedbiofuels industry.

Whatwehavedevisedcouldtosomeextentbedescribedas a ‘failure framework’ much like that described by Weber and Rohracher[30]andWoolthuisetal.[31].Our‘absenceofexpertise’failure,forinstance,bearsagreatdealofresemblancetowhat theseauthorscall‘capabilitiesfailure.’Nevertheless,whileWeber andRohracher[30]andWoolthuisetal.[31]aimedtointroduce afailureframeworkthatcouldhelpguidepolicymoregenerally, ourfailureframeworkhasbeendevelopedtodealspeciﬁcallywith explainingthelacklustreperformanceoftheNorwegianadvanced biofuelindustry.

3. Methodology

Thearticlecarriesoutastudyoffourcompanies–Cambi,Norske Skog/Xynergo,WeylandandBorregaard–developingthreetypes of advanced biofuels – advanced bioethanol,biodiesel and biogas. These companies were chosen because theyare the main Norwegianbusinessplayersinadvancedbiofuelsandaccountfor practicallyallofNorway’scommercialactivitywithinthisﬁeld.

Theirsuccessorfailurecanthereforebeseenasakeyindicatorof theconditionoftheemergingTISforadvancedbiofuelsinNorway.

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Table2

Operationalizationofsystemfunctions,adaptedfromHekkert&Negro[24].

Eventcategory Entrepreneurial

activities

Projectstarted

Contractorsprovideturn-keytechnology Projectstopped

Lackofcontractors Knowledge

development

Desktopstudies Assessmentstudies Feasibilitystudies Reports R&Dprojects Patents Knowledge

diffusion through networks

Conferences Workshops Platforms Guidanceofthe

search

Positiveexpectationsofrenewableenergies Positiveregulationsonrenewableenergies Negativeexpectationsonrenewableenergies Negativeregulationsonrenewableenergies Market

formation

CO2taxes Feed-inrates

Environmentalstandards Greenlabels

Expressedlackoffeed-inrates

Expressedlackofenvironmentalstandards Expressedlackofgreenlabels

Resource mobilisation

Subsidies Investments

Expressedlackofsubsidies Expressedlackofinvestments Creationof

legiti- macy/counteract resistanceto change

Lobbybyagentstoimprovetechnical, institutionalandﬁnancialconditionsfor particulartechnology

Expressedlackoflobbybyagents

Lobbyforothertechnologythatcompeteswith particulartechnology

Resistancetochangebyneighbours(NIMBY attitude)

This article studies these companies by making use of

‘event-historyanalysis.’Event-history analysisis a methodthat conceptualizesdevelopmentandchangeprocessesassequences ofevents,andinthewordsofHekkertetal.[7],‘encompassescon- tinuousanddiscontinuouscausation,criticalincidents,contextual effectsand effects offormativepatterns.’Event-historyanalysis wasdevelopedbyVandeVenandPoole[8]asamethodforidentify- ingdevelopmentpatternsinqualitativedataandhasbeenapplied successfullyinTISstudiesbyanumberofresearchers(i.e.,[24,7,26].

Thismethodhasprovenusefulbothforidentifyingpatternsoftech- nologicaldevelopmentanddiffusionin innovationsystems and forassessingpolicyinitiativesaimedatinﬂuencingtherateand directionoftechnologicalchange.

Tocarryouttheeventhistoryanalysis,adatabasewascreated thatlistedallrelevanteventsforthefouradvancedbiofuelcom- paniesspecificallyandotherrelevanteventswithintheNorwegian advancedbiofuelsfieldmoregenerally.Thisdatawasgenerated througha review of Norwegian reports, technical news, news- paper articles, research projects and publications, patent data, andnationalpolicyandlegaldocumentsthatwerepublishedin theperiodfromwhentheNorwegianadvancedbiofuelindustry emergedin1998upuntil 2015.Theresult wasa databasethat includedinformationabout:theyearortimeperiodwhentheevent tookplace,thecompanyinvolved(ifrelevant),thedatasource,the relatedfunctionintheTIS,theeventcategory(foreverysystem functionasetofeventcategorieswasdefined,seeTable2)anda descriptionofthepositiveornegativeimpactthattheeventhadon thedevelopmentoftheNorwegianTISforadvancedbiofuels.

The events themselves were identiﬁed and categorized by followingstandardproceduresforevent-historyanalysis.Inevent-

historyanalysis,itisusualtodistinguishbetweensimpleincidents andevents:whileanincidentismoreorlessanempiricalobserva- tion,aneventisa“conceptualconstructinamodelthatexplains thepatternsofincidents”[8](p.319).Thisimpliesthatsomeinci- dentswerecategorisedasthesameevent,whileotherincidents werecategorisedasmultipleevents.Aftertheincidentswerecate- gorizedintoevents,theeventswerefurthercategorizedaccording tothefunctionsofthetechnologicalinnovationsystemandasso- ciatedeventcategories.Theresultofthisexercisewasarichand structureddatasetthatlaidthefoundationforthedetailednarra- tiveoftheNorwegianadvancedbiofuelindustrythatispresented andanalysedinSections5and6.

4. Technologicalbackground

Production techniques for conventional biofuels have been developedanddeployedoverthelastthirtyyears,withdifferent countriesfocusingondifferenttypesoffuelandutilisingdifferent kindsoffeedstock.BioethanolhasmainlybeenproducedintheU.S.

(basedoncorn)andinBrazil(basedonsugarcane),whilebiodiesel hasmainlybeenproducedinEuropeandintheU.S.(typicallybased onrapeseed,soyabeanandpalmoil).However,researchers,gov- ernmentsandNGOshaveraisedconcernsaboutthesustainability ofconventionalbiofuels.Theyhavepointedoutthatproductionof conventionalbiofuelsofferslimitedgreenhousegas(GHG)reduc- tionbeneﬁts,cancontributetohigherfoodpricesbycompeting withfoodcropsandhasbeenlinkedtoaccelerateddeforestation, decliningbiodiversityandwatershortagesinregionswithscarce waterresources(see,forinstance,[32],p.6).Inthelightofthese concerns, a newgeneration ofbiofuels (advanced biofuels) has emergedthatdrawsupon morerecentscientiﬁcbreakthroughs, utilizesnon-foodfeedstockandislessdemandingwithregardto theuseoflandandwaterresources.Therearepresentlymanytypes ofso-called‘advancedbiofuels’beingproducedandnewtypesare underdevelopment,butthisarticle willfocusonthree types− bioethanol,biodieselandbiogas.

Althoughadvancedbioethanol,biodieselandbiogascanbepro- duced froma variety of feedstock,Norwegian companies have mainlyproduced(orhaveattemptedtoproduce)bioethanoland biodieselfromlignocellulosicbiomass(suchasleaves,treebark, straw,bagasseorwoodchips)andbiogasfrombiosolids¹(treated sewage)andbiowaste(foodwasteandslaughterhouseresidues).

Norwegiancompaniesuseavarietyofprocessestoproducethese biofuels, which can be classiﬁed into three main categories: a thermo-chemical (biomass-to-liquid) approach, a bio-chemical approachandanaerobicdigestion(Fig.1).

Thethermo-chemicalandbio-chemicalapproachesareusedto producebioethanolandbiodiesel.Thethermo-chemicalapproach involvesheatingthebiomasswithorwithoutoxygen.Whenthe biomassisheatedintheabsenceofoxygen,theprocessiscalled pyrolysisandresultsinpyrolysicoils(bio-oils)thatcanbeupgraded by catalysis to high-value phenols and/or biofuels. When the biomassisheated withoxygentheprocessis calledgasiﬁcation andresultsinasyntheticgas(syngas)thatcanbeconvertedinto syntheticbiodieselorbio-ethanolbyacatalyticprocess(e.g.the Fischer-Tropschprocess)[33].

1Biosolidsisatermusedbythewastewaterindustrytodesignatethesolid“left- overs”aftermunicipalandindustrialsewagehasundergonetreatmenttoremove diseasecausingpathogensandvolatileorganicmatter.Thistreatmentprocessis usuallycarriedoutinanoxygen-enrichedenvironmentatawastewatertreatment planttank,wherebacteriaandothermicroorganismsdigesttheorganicmatter(aer- obicdigestion).Thebiosolidsconsistprimarilyoftheremainsofthemicroorganisms thathavecleanedthesewageandcanbeprocessedfurthertocreatebiogasand fertilizer.

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Pre-treatment/

Inial processing stage

Feedstock

Main processing stage

Upgrading

Types of Fuels

Biosolids & Biowaste

Thermo Hydrolysis

Anaerobic digeson:

Conversion with microorganisms and heat

Water scrubbing or pressure swing adsorpon

Biomethane

Anaerobic digeson path

Hydrolysis Conversion with enzymes, heat and

diluted acids or concentrated acids Lignocellulose

Fermentaon

Biohydrogen, Bio-DME, DMF, HTU Diesel, Fischer-Tropsch diesel (FTD)

Disllaon Catalyc

upgrading to high-value phenols and

biofuels

Pretreatment and separaon Thermo-chemical path Bio-chemical path

Bioethanol, Mixed Alcohols Pyrolysis

Fischer Tropsch synthesis

Biomass treatment Gasiﬁcaon Gas cleaning Gas condioning

Reﬁning, upgrading

and upgrading of

biofuels

Fig.1.Technologicalapproachesfortheproductionofsecondgenerationbiofuels.

Table3

DevelopmentofTISfunctionsovertime,2001–2014(N=203).

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total

Creationoflegitimacy/counteractresistancetochange 0 0 0 0 0 1 1 8 1 3 6 3 0 0 23

Entrepreneurialactivities 1 0 0 0 0 5 2 6 5 8 4 0 1 0 32

Guidanceofthesearch 2 0 1 0 1 1 0 4 2 0 2 0 2 3 18

Knowledgedevelopment 2 0 0 1 3 1 1 10 13 21 1 3 5 3 64

Knowledgediffusionthroughnetworks 1 0 0 0 0 2 0 2 4 7 2 1 0 2 21

Marketformation 0 0 0 0 0 1 2 3 4 1 1 0 0 0 12

Resourcemobilisation 2 0 1 0 0 1 1 1 10 8 1 4 3 1 33

Total 8 1 2 0 4 12 7 34 39 48 17 11 11 9 203

Thebio-chemicalapproach,ontheotherhand,istechniquethat turnslignocellulosicbiomassintoethanolinafour-stageprocess [34]. In theﬁrst stageof theprocess, thepre-treatment, cellu- lose,hemicelluloseandligninareseparated,usuallybymeansof steamheating,steamexplosionorenzymaticpre-treatment(see [34];Table3).Inthesecondstage,thehydrolysis,thecelluloseand hemicellulosearehydrolysedintosugarmoleculesbytheuseof enzymes,concentratedacidsordilutedacidsandheat.Inthethird stage,thefermentation,thesugarmoleculesagainarefermentedto producebioethanol.Finally,inthefourthstage,theupgrading,the bioethanolisdistilled.Thebio-chemicalapproachisoftenapplied byintegrated bioreﬁnery that separatesbiomass resourcesinto theirchemicalbuildingblocksandconvertsthemintobiofuelsand othervaluablechemicalcompounds[35,36],p.2233).

Anaerobicdigestion isused toproduce biogasfrombiosolids and biowaste. The anaerobic digestion process normally com- prises several stages. An optionalﬁrst stage (pre-treatment) is oftenincluded where thebiosolidsor biowasteundergoa pre- treatmentto destroy and dissolve cell structuresand naturally occurringcellpolymers(aformofprotein)intoaneasilydigestible feed.In thesecondstage(mainprocessing stage),thebiosolids andbiowasteundergoananaerobicdigestionprocessinanoxy- genfree/depletedenvironmentwherebiogasisextractedfromthe biomassbymicroorganisms[37].Sincetheresultingbiogasusually consistsofonly45–85%methane,athirdupgradingstageisoften requiredbeforethebiogascanbeusedasvehiclefuel.Throughpro- cessessuchaswaterscrubbingorpressureswingadsorption[38], themethanecontentcanbeincreasedtoimprovethepowerden- sityofthefuelandhydrogensulphideandvolatilesiloxanescan

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beremovedtopreventdamagestovehicles’engines.Theresultis bio-methane−whichusuallyconsistsofatleast97%puremethane andischemically“identical”tonaturalgas.

5. Event-historyanalysis

Inourevent-historyanalysis,we dividetheevolution ofthe Norwegianadvancedbiofuelsindustryintofourunevenlyspaced periods:1998–2005,2006–2007,2008–2011and2012–2014.This categorizationfollowspreviouswork,suchas[26],individingthe eventhistorythematicallyratherthansymmetricallyandgrouping togethereventsbasedonwhethertheysharecommoncharacter- isticsratherthansomearbitrarytimeinterval.We identifyfour themesthatcharacterizethefourdifferentperiods.Theﬁrstperiod canbecharacterizedasaperiodof‘sporadicactivities,’sincethe activitythat tookplaceinthebiofuelindustry wasmostly lim- itedtoirregularexperimentation.Thesecondperiod,ontheother hand,canbedescribed asa period of‘commitmentand confu- sion,’since both the companies and the government began to explore,inasomewhatdisorderlymanner,howbiofuelscouldbe producedsustainably and economically.Thethird period, however,canbecharacterizedasaperiodof‘industryformation,’since companiesbegan to investheavilyin biofuels and thegovern- mentstartedtointroducepoliciestosupportthesedevelopments.

Finally,thefourthperiodcanbedescribedasaperiodof‘retraction andreorientation,’sincemostcompaniesterminatedtheirlarge- scaleadvancedbiofuelactivitiesandproducedbiofuelmostlyasa by-ornicheproduct.

Inoureventhistoryanalysis,wemakeuseofatotalof203events thatcanbedivided acrosstheseven TISfunctions(see Table3 below).Weusetheseeventsandassociatedfunctionstocreatea narrativethataccountforhowdifferentaspectsofthetechnolog- icalinnovationsystemshapedthedevelopmentoftheNorwegian advancedbiofuelindustry.Duetothesheernumberofarticles(inci- dents)thattheanalysisdrawsupon,wewillonlyoccasionallyrefer toindividualarticlesinthenarrative,butweprovideacomplete listofallthesourcesasSupplementarymaterialtothisarticle.

Althoughthefocusofthisarticleisonadvancedbiofuels,the eventhistoryanalysisoccasionallydiscussesrelatedactivities,such astheproductionof ﬁrstgenerationbiofuels andwood pellets.

Theserelatedactivitieswerepartofthefourcase-studycompanies’

productportfolio,and eventsthat affectedthese related activi- tiesalsoaffectedhowthesecompaniesoperatedintheadvanced biofuelsmarket.In this sense,theeventhistory analysiscovers someeventsthat–strictlyspeaking–belongtoothertechnologi- calinnovationsystems,whentheseeventsaffectthetechnological innovationsystemforadvancedbiofuels.

5.1. Firstperiod:sporadicactivity(1998–2005)

Intheﬁrstperiod–whichlastedfromthelate1990sto2005 –therewereonlysporadicactivitiesinvolvingadvancedbiofuels.

Commercialinvolvementwithbioenergywasmostlylimitedtothe productionofﬁrewoodorpelletsforstationaryuseinhouseholds, andtheNorwegiangovernmentlacked,formostoftheperiod,a clearlyformulatedbiofuelpolicy.Nevertheless,thereweresome importantactivitiesandeventsthattookplaceinthisperiodthat laidthefoundationforthelaterevolutionofanadvancedbiofuel industryinNorway.

Amongthemost importantevents wastheentrance of two new companies in the Norwegian advanced biofuels industry.

Theﬁrst company wasWeyland, which wasfounded, in 2001, bytworesearchersfromtheBergenUniversityCollege.Thetwo researchershaddevelopeda newtechnologyfortheproduction ofbioethanolusingstrongacidhydrolysis,and theyestablished

Weylandtocommercialisethetechnology.Theirtechnologymade useof a process of recovery and recycling of the acidused in thehydrolysisprocessthatenabledthemtoproducebioethanol fromforestresidualsmuchmoreeconomically.Theothercompany thatenteredtheindustrywasCambi.Cambiswitched,duringthe 1990s,fromproducingwoodpelletstoextractingbiogasthrough anaerobicdigestion.Itdeveloped apre-treatmentprocess–the

‘thermalhydrolysisprocess’–thatenabledittoincreasetheyield ofbiogas,inclosecollaborationwithresearchersfromtheNor- wegianUniversity ofScienceandTechnology(NTNU)andother Europeanresearchorganisations.ImportantmilestonesinCambi’s developmentincludedanagreementin1998withthelargestUK wastewatertreatmentcompany,ThamesWaterPLC,fortheuseof itstechnologyinthetreatmentofsewageandfoodwasteanda contractin2001todesignandbuildafacilityforthetreatmentof foodwasteinLillehammer,Norway.

AnotherimportanteventwasthatNorskeSkog–aNorwegian- based, global producer of newsprint and magazine paper – preparedtoentertheadvancedbiofuelindustry.Intheearly2000s, NorskeSkogwasinacriticaleconomicsituation,andaconsultancy suggestedthatitcouldimproveitsfinancialsituationbymakinguse ofitsforestresidualstoproducesyntheticbiodiesel(consultancy report,KanEnergi).However,NorskeSkogfoundthatitwasdiffi- culttoraisecapitalanddevelopareliabletechnologyforproducing biodiesel.Itthereforebegantosearchforpartnerswhocouldhelp developthetechnologyandfindinvestorswhowouldbewillingto investinanewadvancedbiofuelventure.

The only company (of the four considered in this study) whichhadcontinuousproductionofadvancedbiofuelsthroughout thisperiod, wasthechemical company,Borregaard[39].Borre- gaardproduced, throughout this period,about 20million litres ofbioethanolannually.Theproductionofbioethanolwasnever- thelessnotBorregaard’sprimaryactivity,norwasthebioethanol necessarilyusedasvehiclefuel.Itsprimaryactivitywastheextrac- tionofvaluablechemicalsfromwoodyresources,andbioethanol wasmoreofaby-productthatitproduced,largely,fromresidues fromitscommercialreﬁneryoperations.

Intermsofgovernmentpolicy,advancedbiofuelswas,inthis period,aneglectedarea.Publicfundingforadvancedbiofuelswas notprioritizedinNorwegianenergyRD&Dprogrammes,suchas Renergi.Although,thepublicindustrialdevelopmentorganisation, InnovationNorway,establishedabioenergyprogrammein2003 andtheGovernmentDeclarationbythenewCentre-LeftGovern- ment[40],intheautumnof2005,speltoutaclearcommitment tofosterthedevelopmentofbioenergy–noneoftheseinitiatives focused directlyonadvanced biofuels. Instead, theseinitiatives weredirected atfosteringtheproduction and useof bioenergy andbiofuelsingeneral.Nevertheless,therepresentativesfromthe industrialassociationswerekeentopointouttheseshortcomings, astheydidin oneinstance,bycriticisinga studyofsustainable transportationthatEconAnalysecarriedoutfor theMinistryof Transportforneglectingtodiscussadvancedbiofuels.

5.2. Secondperiod:commitmentandconfusion(2006–2007)

Thesecondperiodwascharacterisedbyagrowingcommitment bycompaniesandthegovernmenttotheproductionofbiofuels, butalsoanincreasingconfusionastohowthisproductioncouldbe carriedoutbothsustainablyandeconomically.

During this period, both Cambi and Weyland became more ambitiousandexpandedtheiroperations.In2006,Cambibeganthe developmentandconstructionofabiowasteandbiosolidstreat- mentfacilityinthemunicipalityofVerdal.Thefacilitytreatedfood wasteandsewagefor41municipalitiesinthegeographicalregion ofTrøndelagandHelgelandandwasatthetimethelargestfacility ofitskindinNorway.Nevertheless,neitherthisfacilitynorCambi’s

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existingfacilityatLillehammermadeuseinthisperiodofthebio- gastoproducebiofuels(biomethane);instead,theyusedthebiogas toproduceelectricity.Inaddition,theVerdalfacilityexperienced efﬁciencylossesduetodifﬁcultieswithsortingoutnon-biological wastefromthefeedstock,and theLillehammerfacilityreceived complaintsfromlocalresidentsarisingfromproblemsoflimiting unwantedodours–botheventsthatledtomuchnegativepublicity.

Weylandalsoembarkedonanewcommercialventure,commenc- ing,in2007–2008,withthedevelopmentandconstructionofan ambitiouspilotplanttotestitstechnology,withﬁnancialbacking fromtheResearchCouncilofNorway.

AnotherimportanteventinthisperiodwasthatNorskeSkog begantorealizeitsambitionsofproducingbiodieselbyforming apartnershipwithNorwegianinvestorsandcompaniesandfor- eigntechnologyproviders.NorskeSkogagreedin2006withHydro (nowStatoil)tocollaborateonafeasibilitystudythatwouldinves- tigatethepossibilitiesforbiodieselproductioninNorway.Norske SkogalsoexploredpossibilitiesforcooperationwiththeGerman technologyprovider, Choren. Choren had been involved in the developmentofanadvancedBtL(biomass-to-liquid)processbased ongasiﬁcationofwoodybiomassandanFTsynthesisintosynthetic dieselandcouldserveasacapabletechnologyproviderforNorske Skog[41],p.6850).Nevertheless,attheendof2007,Hydro(now NorskHydro)decidedtoestablishitsownadvancedbiofuelfacil- ityinDenmarkbasedonstrawasfeedstock,andwithdrewfrom thecooperationwithNorske Skog,partly becauseitconsidered thecostsoftheprojectbeingtoohigh.Ontheotherhand,Norske Skogreceivedsomeencouragement,whenitlearnedthatsomeof thebusesintheNorwegiancapital,Oslowouldstartrunningon biodiesel.

A related, butimportant event wasthat Borregaard became involvedintheproductionofconventionalbiofuels(orﬁrstgen- erationbiofuels).In2006,Borregaardtookpartinajointventure togetherwithHabiol,UnikornASandØstfoldkornAStoestablish the biofuel company, Uniol. Uniol, according to these companies’plans,wassupposedtobuildalargeproductionfacilityfor biodiesel,withanannualproductioncapacityof100millionlitres, basedonsoyaoil,rapeseedoilanddomesticslaughterhousewaste asfeedstock.ThisnewventurecameasanadditiontoBorregaard’s existingproductionofbioethanol,andnotasareplacement.

In terms of government policy, the Norwegian government showed an increased commitment in this period to foster the developmentanduseofbiofuels,butitwasunclearwhetherthe governmentfavouredthedevelopmentand useof conventional oradvanced biofuels. TheNorwegian governmentstated inthe WhitePaperonNorwegianClimatePolicy[42]ageneralambition fortargetedandcoordinatedpolicymeasuresforincreaseduseof bioenergy(upto14TWhby2020),whilealsoexpressingaspeciﬁc needforincreaseduseofadvancedbiofuels.Thegovernmentintro- ducedataxexemptionforbioethanol-basedfuelforvehicles,as longasthenewfuelwaslargelybasedonbioethanol.Inresponseto this,theoilcompany,Statoil,launchedanewgasolinetypeinMay 2006thatincluded85%bioethanol,knownasE85.However,this fueldidnotnecessarilyconsistofadvancedbioethanol,andStatoil admittedthatthefuelwasbasedoncornfromEuropeandsugar canefromBrazil.In 2007,theNorwegiangovernmentextended theseincentivesbyreducingtheVehicleImportDuty,onvehicles runningonethanolormixedfuel(E85cars)withof10,000NOK(ca.

1200Euro).Nevertheless,thispolicypromptedseveralNorwegian environmentalNGOstorequeststrongersustainabilitycriteriato beappliedtoimportedbiofuels.

5.3. Thirdperiod:industryformation(2008–2011)

Thethirdperiodwascharacterizedbyanewindustrialdynamic intheadvancedbiofuelsindustry.Norwegianpolicy-makersintro-

ducedawiderangeofpoliciestofurtherdevelopadvancedbiofuel processingtechnologiesandcreateamarketforadvancedbiofuels.

Theadvancedbiofuelcompaniesrespondedtothesepolicychanges byundertakingconsiderableinvestmentinpilotanddemonstra- tion plants in preparation for launching full-scale production.

Nevertheless, bythe end ofthis period,few biofuel companies hadactuallybegunfull-scalecommercialproductionofadvanced biofuels.

Inthethirdperiod,theNorwegiangovernmenttookonalead- ingroleandattemptedtobuildacomprehensivepolicyframework tosupporttheadvancedbiofuelindustry.It madeanimportant steptowardsbuildingthispolicyframework,whenitin2008man- agedtoconvince theNorwegian Parliament(Stortinget) tosign abipartisan‘AgreementonClimatePolicy’(“Klimaforliket”).This agreementsetabroadbutambitiousagendaforemissioncutsand developmentofrenewabletechnologiesandpreparedtheground formoretargetedstrategiesandpoliciesthatdealtspeciﬁcallywith biofuels.Thesestrategiesandpolicescanlooselybegroupedinto twocategories–‘push-based’policiesthatencouragedthedevel- opmentofadvancedbiofuelproductionprocessesand‘pull-based’

policiesthatencouragedtheuseofadvancedbiofuels.

Intermsofpush-basedpolicies,thegovernmentinstructedits subordinate agencies to putin place a broad range of mecha- nismsfor supportingresearch,developmentand demonstration activities. The Research Council of Norway responded to these instructions, in 2009,by signiﬁcantly increasingits fundingfor advanced biofuels projects in itsexisting programmes (suchas Renergi)andbyestablishinganewcentrededicatedtothedevel- opmentofbioenergy(CenBio),whichwouldcarryoutseveralR&D projectsonadvancedbiofuels.Inthesameyear,thegovernment alsoestablisheda newagencyundertheMinistryof Transport, TRANSNOVA,whichwasgiventhetaskofreducingCO₂emissions bythetransportsectorthroughsponsoringdemonstrationprojects onnewsustainablemodesoftransportation,whereadvancedbio- fuelswasoneofseveraltargetareas.In2010,InnovationNorway, launchedanewfundingschemeforenvironmentaltechnologies, whereasubstantialamountofmoneywassetasideforpilotand demonstrationfacilitiesdesignedtoproduceadvancedbiofuels.

Intermsof‘pull-based’policies,thegovernmentmadeuseof twotypesofpolicytobolsterdemandforbiofuels–taxexemptions onbiofuelsandminimumproportiontargetsonbiofuels.Minimum proportiontargetsonbiofuelwasapolicythatthegovernmentused tocompelfuelretailerstoblendbioethanolandbiodieselwiththe conventionalfuelthattheysold.Althoughthepolicyrequiredthat onlyacertainpercentageofthegasolineanddieselthattheretail- erssoldwasbio-based,mostretailersfoundthatitwaseasiertosell thebiofuelwhentheyblendedthebiofuelwithconventionalfuel inlowconcentrations,ratherthantosellthebiofuelseparatelyor inhigherconcentrations.Thegovernmentintroduceditsﬁrstmin- imumproportiontargetof2.5%in2009andincreasedthistarget to3.5%in2010.Althoughtheminimumproportionpolicyensured areliablemarketforbiofuels,thetargetwassetlowerandintro- ducedlaterthanthatwhichthepoliticaldiscoursehadledmany NGOsandindustrialactorstoexpect.Inaddition,theminimum proportionwasnotaccompaniedbyanysustainabilitycriteriathat couldhavefavouredadvancedbiofuelsoverconventionalbiofuels.

Theothertypeofpolicythatthegovernmentusedtobolster demandwastaxexemptionsonbiofuels.InNorway,vehiclefuel hasbeensubjecttotwoformsoftaxation–a‘CO₂tax’thatplaces adutyonclimategasemissionsanda‘road-usetax’thatpaysfor highwaymaintenanceandassociatedinfrastructure.Thetwotaxes havehistoricallybeenrelativelyhighandintheperiodunderinves- tigationaccountedfor45–55%ofthepumppriceofconventional fuels.Nevertheless,ofthesetwotaxes,theroad-usetaxwasbyfar thelargest–comprisingabout46%ofthepumppriceforgasoline andabout40%fordiesel,whiletheCO2taxaccountedforonlyabout

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9%ofthepumppriceforgasolineand6%fordiesel.²Withregards totheCO₂androad-usetax,thegovernmentcontinuedtoexempt bothbiodieselandbioethanolfromtheCO₂taxes(ataxexemp- tionfromwhichtheyhadbeneﬁttedsince1991),butitmadesome importantchangesintheroad-usetaxonbiodieselthatwouldhave importantramiﬁcationsforthebiofuelindustry.

Biodieselhad since1999 beenexemptfromroad-usetax in allconcentrations.Itwasthereforeinaveryfavourablesituation compared tobioethanol, which wasonlyexemptin concentra- tionsabove50%(seepreviousperiod).Sincemostretailerssold biofuelsblendedwithconventionalfuelinlowconcentrationand biodieselinlowerconcentrationshadamuchbettertaxproﬁlethan bioethanol.Biodieselwaspracticallytheonlybiofuelthatwassold inNorwayupuntil2010.

Nevertheless,thissituationchangedattheendofthisperiod.In thefallof2009,thegovernmentdecidedtoremovetheexemption fromroad-usetaxthatbiodieselhadenjoyedhithertoandsubject ittoa50%road-usetaxfrom2010anda100%road-usetaxfrom 2011.Thegovernmentjustiﬁedthisdecisionpubliclybypointing outthatvehiclesrunningonbiofuelsalsocontributedtotheero- sionofroadsandshouldthereforebesubjecttothesameroad-use taxesasconventionalvehicles.Thegovernmentalsopointedout thatasbiofuelshadbecomemorepopular,thecostsofmaintaining thetaxexemptionhadincreasedandarguedthattherewereother climate-changepolicieswhichofferedmorevalueformoney[43].

Nevertheless,thisdecisionwascontroversialevenwithinthegov- ernment,andthetwosmallerpartnersofthe‘Centre-Leftcoalition’

government–theCentrePartyandtheSocialistLeftParty–fought tomaintainthetaxexemption.Nevertheless,thecoalition’slargest partner,theLabourParty,wasinaparticularlystrongpositionhav- ingachievedanotableelectionresultthatfallandforcedthrough theremovalofthetaxexemption.Besidesthat,biogaswasneither subjecttoCO2norroad-usetaxesinanyoftheperiodsinvestigated inthisarticle.³

2 Thepumppricesofgasolineanddieselvariedfromdaytodayinthisperiod,and thereweresmalladjustmentsinthetaxesonceortwicepr.year.Nevertheless,the relativecontributionoftheCO2taxandroad-usetaxtothepumppriceremained fairlystable.Thefollowingexampleillustrateshowthepercentagecontributionof theCO2taxandroad-usetaxwascalculatedusingdatafromNorskPetroleumsin- stitutt:In2009,theCO2taxongasolinewas0.84NOKandtheroad-usetaxwas 4.46NOK,inadditiona25%valueaddedtaxwasaddedtothepumpprice.Ifwe addthevalueaddedtaxtotheCO2androad-usetax,wegetaCO2taxon1.05NOK andaroad-usetaxon5.58NOK.Withanaveragepumppriceof12.02NOKin2009, theCO2taxongasolineaccountedfor9%ofthepumppriceandtheroad-usetax accountedfor46%–andincombinationthetwotaxesaccountedfor55%ofthe pumppriceforgasoline.Inthesameway,theCO2taxondieselwas0.57NOKand theroad-usetaxwas3.50NOK,inadditiona25%valueaddedtaxwasaddedtothe pumpprice.IfweaddthevalueaddedtaxtotheCO2androad-usetax,wegetaCO2

taxon0.71NOKandaroad-usetaxon4.38NOK.Withanaveragepumppriceof 10.98NOKin2009,theCO2taxondieselaccountedfor6%ofthepumppriceand theroad-usetaxaccountedfor40%–andincombinationthetwotaxesaccounted for46%ofthepumppriceofdiesel.

3 Anotherdemand-sidefactorthatitwouldhavebeenreasonabletoassume affectedinvestmentsinbiofuelsinNorwayistheoilandgasprices.Whenoilandgas pricesincreasedconsiderablyduringthe2000s,biofuelsshouldhavebecomemore competitivevis-à-visconventionalgasolineanddieselandthedemandforbiofuels shouldhaveincreasedsigniﬁcantly.Nevertheless,duringthistimeperiod,theNor- wegiangasolineanddieselpricesremainedfairlystable–fortwolessthanobvious reasons.First,theoilandgassectorinNorwaycomprisedaconsiderablepartofthe Norwegianeconomy.Whentheoilandgaspricesincreased,theNorwegiancur- rency–kroner–appreciatedagainstforeigncurrencies,suchastheUSdollar.Since fossilfuelsareboughtandsoldglobally,thisappreciationmadeitlessexpensivefor Norwegiangasstationstopurchasegasolineanddiesel,andtheycouldofferthese fueltypestotheirconsumersforamorereasonableprice.Inthisway,theNorwe- giancurrencyfunctionedasabufferthatreducedthevolatilityinthegasolineand dieselpricesinNorway.Second,Norwayintroducedanumberoffueltaxes,which comprisedalargeshareofthepumppriceofgasolineanddiesel(seepreviousend- note).Thesetaxesensuredthatevenaconsiderableincreaseinthepurchasingprice ofgasolineanddieselforthegasstations,resultinamodestpercentagewiseprice increasefortheconsumers(SeeStatisticsNorway).

Borregaard experienced, in this period, both successes and failures.Borregaardhad investedconsiderablefundsin Uniol,a Fredrikstad-basedcompanythatwastoproduceﬁrst-generation biodiesel.Uniolspent360millionNOK(45millioneuro)inthis periodontheconstructionofabiofuelplantandcommencedpro- ductionofbiodiesel inthesummerof2009.Nevertheless,three monthslater,Uniolcloseddownproduction,duetothewithdrawal ofthetaxexemptionfromroad-usetaxesonbiodiesel.Theexpla- nationgiven by representativesofUniol wasthat fuelretailers nolongerhadanyincentivetobuybiodiesel.Biodieselwasmore expensivethan importedbioethanoland whenneitherreceived anyexemptionfromroad-usetaxes,thefuelretailerswouldonly importcheapbioethanolbasedoncornandsugarcanestocover thegovernment’s3.5%minimumproportiontarget.Thiseventwas widelycoveredinthemedia,andenvironmentalNGOsandindustry associationsstronglycriticisedthegovernmentfortheinconsis- tencyandunpredictabilityoftheirenvironmentalpolicies.

Nevertheless,Borregaarddidmuchbetterwithitsbioethanol production.Inthisperiod,Borregaardengagedinawiderangeof governmentsponsoredresearch,developmentanddemonstration projects,receivinggrants fromENOVA, theEUFrameworkPro- gramme7andtheResearchCouncilofNorway’sBIA-programme to improve various aspects of its processes. Perhaps the most prominentoftheseprojectswasthedevelopmentoftheBALIpre- treatmentprocess,aprocessthatreducedlignininhibitionandthat resultedinimportantpatentsandapublicationintheprestigious journal,Science[44],p.17;[45].Borregaardalsobecame,inthis period,increasingly committedtosupplying bioethanol forfuel purposes,whenitreceivedacontractforsupplying1millionlitres ofbioethanolannuallytothepublictransportcompany,Ruter,to helprunitsbusﬂeetinOslo.

NorskeSkog’sventuresintoadvancedbiofuels didnotprove verysuccessful.In2008,NorskeSkogestablished,incollaboration with thetechnology provider Choren in Germany, a new sub- sidiarythataimedtoproducedieselfromwood-basedresources (BtL-diesel) – Xynergo.Since the technologywasstill not fully developed,Xynergostartedtocollaboratewithexpertsonthegasi- ﬁcationofwoodattheNorwegianresearchinstitute,Sintef,and receivedinthefollowingtwoyearssubstantialﬁnancialsupport forthesedevelopmentprojects,frombothpublicinstitutions,such asTRANSNOVAandtheResearchCouncilofNorway,butalsofrom privateinvestors,suchasitsownparentcompany,NorskeSkog, andtheoilcompany,Statoil.

Xynergoplannedtoestablishoneortwofull-scaleplantsfor theproductionofBtLinNorway.However,in2010,thecompany wasindireneedofnewinvestors,afterStatoilwithdrewfromthe jointventureandNorskeSkogannouncedthattheﬁnancialcri- sishad putsucha strainonthecompany thatit didnot want toremainthemajorityshareholderinXynergo.Itwasestimated thatafull-scalefacilitycouldbeoperationalby2015,providedit receivedinvestmentsof6–7billionNOK(ca.800millionEuro)[46].

However,inNovember2010,NorskeSkogdecidedtoshutdown Xynergobecauseit wasunabletoattract sufﬁcientinvestment.

NorskeSkog’sdecisioncamealongwithnewreportsfromaNor- wegianresearchinstitute(Vestlandsforsking)suggestingpotential healththreatsassociatedwiththeuseofbiodieselandannounce- mentsfromXynergo’stechnologyprovider, Choren,that it was strugglingtomakeitstechnologyworkandthatitfacedserious ﬁnancialproblems.Somemonthslater,inJuly2011,Chorenwent bankrupt.

Weylandmanaged,inthisperiod,toconvinceprivatecompanies thattheyshouldinvestinthecompanyandpublicfundingagen- ciesthattheyshouldsupportthedevelopmentofitsstrongacid hydrolysistechnologies.Weylandmanagedtoattractinvestment fromawiderangeofcompanies,includingtheoilcompanyStatoil- Hydro,andreceivedfundingforseveralRD&Dprojectsfromamong

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others,InnovationNorway,theResearchCouncilofNorway’sRen- ergiprogrammeandtheNordicTop-level-initiative.Throughthe RD&Dprojects,Weylandcollaboratedwithreputablecompanies and institutions,suchas Sintef and Statoilin Norway, Inventia inSweden,VTTinFinland,DTUinDenmark,andMatis-Foodin Iceland. Nevertheless,despiteinvolvement inseveralsuccessful RD&Dprojectsandensuringpatentprotectionforkeyfeaturesofits technology,Weylandwasnotableraisethe300–400millionNOK requiredtobuildafull-scaleadvancedbioethanolfacility[46].

Cambiwaspossiblytheadvancedbiofuelcompanythatexpe- rienced thegreatest commercial success. In this period, Cambi embarkedonaninternationalexpansionandwoncontractstobuild biogasfacilitiesthroughouttheworld(includingtheU.S.A.,Chile, theMiddleEast,andtheBalticcountries).Atthesametime,italso enteredthebiofuelindustryinearnest.In2011,amongothers,it commencedconstructionofanewfacilityontheoutskirtsofthe Norwegiancapital,Oslo,whichwastosupply135busseswithbio- methaneproduced fromthecapital’sbiological waste.Although muchofCambi’ssuccesscouldbeattributedtoitsprize-winning technologiesanditswell-executedstrategies,itwasalsohelped byEU legislation, suchEU’s landfilldirective (CouncilDirective 1999/31/EC)whichforcedEuropeanmunicipalitiestofindtoalter- nativewaysofdealingwiththeirbiologicalwastethantodeposit itinlandfills.

5.4. Fourthperiod:retractionandreorientation(2012–2014)

The fourthperiod was a period of retractionand reorienta- tion.Mostofthecompaniesthathadtheambitionofproducing advanced biofuels either ceased production or refocused their attentiontowardsproducingnicheproducts,suchasbiochemicals andbiopharmaceuticals.

TheNorwegiangovernmentmaintained,formostofthisperiod, its existing biofuel policies, but mentioned that it considered withdrawingthetaxexemptiononbioethanolsoldinhighercon- centrations.Nevertheless,attheendof2013,therewasachange ofgovernment,fromagovernmentbasedona‘Centre-Leftcoali- tion’toaConservativeminoritygovernment.ThenewConservative minority government was more positive towards biofuels and graduallyintroducedpoliciesthat weremore favourabletothe advancedbiofuelindustry.Amongothers,theyintroducedasus- tainabilitycriterionthatprovidedincentivesforfuelretailerstosell advanced(secondgeneration)ratherthanconventional(ﬁrstgen- eration)biofuelsandsignalledthatitwouldincreasetheminimum proportiontargetsandreducetheroad-usetaxonbiodiesel.

Industrial activityintheNorwegianadvanced biofuelindus- trydeclinedinthisperiod.Borregaardmaintainedalowlevelof productionofadvancedbioethanolbasedonresiduesfromitspro- ductionof bio-basedchemicals.Nevertheless, itmade noeffort toexpand itsbiofuelproductionand itexpressednointerestin increasingitsNorwegianbiofuelproductioninthefuture.Atthe sametime,Weylandfounditselfunabletoraisesufﬁcientinvest- mentstobuildaproductionplantbasedonitstechnologies,and begantoconsidermovingtotheUSandfocusonbiochemicals ratherthanbiofuels.AndwithXynergogone,therewerenoother companiesthathaddevelopedorproducedadvancedbiodiesel.The onlyexceptionwasCambi,whichbeneﬁttedfromtighterregula- tiononorganicwastetreatmentandcontinuedtoexpanditsbiogas businessbothinNorwayandglobally.

Bytheend of2014,theadvanced biofuelindustryconsisted of some distributed biogas facilities and small-scale plants for bioethanolproductionthatproducedfuelmostlyforpublictrans- port.Nevertheless,somenewindustrialinitiativesbegantoemerge asaresponsetoamorefavourablepolicyenvironment.Oneofthese

initiatives,amongothers,involvedusingwood-baseresourcesto produceaviationfuel.

6. Discussionandconclusions

Basedonthisanalysis,wecannowdiscusswhichofthethree competing claims best account for Norway’s lacklustre perfor- manceinadvancedbiofuels–alackofriskcapital,alackofexpertise orinsufﬁcientorinadequategovernmentincentivesandsupport measures.

Based on the event history analysis, the article finds some supportforthefirstexplanation.Thefirstexplanationsuggested thatthepetroleumsectoracquiredtheavailableriskcapitalthat couldhavefunded promisingadvancedbiofuelprojects,andwe definedthisexplanation(inthetheorysection)asa‘capitalshortage’failure,dominatedbythefunctions‘resourcemobilisation’and

‘entrepreneurialactivities.’Particularlyintheﬁrsttwoperiodsand theinitialpartofPeriod3(1998–2009),theeventhistoryanalysis foundfeweventsrelatedtoalackofriskcapitalandmanyevents relatedtoentrepreneurialactivity.Notonlydidtheadvancedbio- fuelcompaniesmanagetoraisesufﬁcientcapitaltodevelopand demonstratetheirtechnologies,theyalsoreceivedaconsiderable amountoftheirfundsfrompetroleumcompanies,suchasStatoil andHydro(whichlatermergedtoformStatoilHydro(2007–2009) andthenStatoil).Inthissense,therewaslittleevidenceof‘capital shortage’failureinthisperiod,sinceboththefunctionsresource mobilisationandentrepreneurialactivitieswerestrongandinter- actedpositivelywiththerestoftheTIS.

Nevertheless,thissituationchangedinthelatterpartofPeriod 3,whenboth XynergoandWeylandwereunabletoobtainsuf- ﬁcient capital to commence full-scale production of advanced biofuels.However,XynergoandWeylandtriedatthattimetoraise capitalafterthegovernmenthadwithdrawnthetaxexemption onbiodiesel. Thisevent wasprobablyone of themain reasons whyinvestorswereunwillingtofundtheirproductionplants(in additiontotheproblemsXynergofaced, amongothers,withits technologyprovider,Choren).Inthissense,thelackofriskcap- italwasasmuchasymptomofachangingpolicyregimeasany real shortageof risk capital and illustrates how functionssuch as guidanceof search interacts withresource mobilizationand entrepreneurialactivity.

Thearticleﬁndsonlylimitedsupportforthesecondexplanation.

ThesecondexplanationsuggestedthatNorwaylackedtherelevant technologicalexpertisetoexploitadvancedbiofuelopportunities, andwedeﬁnedthisexplanationasan‘absenceofexpertise’failure, dominatedbythefunctions‘knowledgedevelopment,’‘knowledge diffusion’and ‘resourcemobilisation’.Theeventhistory analysis foundthattheNorwegiancompaniescarriedoutagreatdealof R&Dandexchangedknowledgeandexpertisewithothercompa- niesandresearchinstitutions,bothnationallyandinternationally.

MostoftheNorwegiancompanies–suchasBorregaard,Weyland and Cambi –also developedtheirown processing technologies andthesetechnologieswereconsideredtobeattheforefrontof internationaldevelopments.However,Xynergoprovedtobethe exception. It did notdevelop itsown advanced biodiesel technology and hadto licenceits BtL technologyfromthe German company,Choren.Inthissense,therewaslittleevidenceofabsence ofexpertisefailure,sinceboththefunctionsknowledgediffusion andresourcemobilisationwerestrongandinteractedpositively withtherestoftheTIS.

Thearticledoes,however,ﬁndsupportforthethirdexplanation.

ThethirdexplanationsuggestedthattheNorwegiangovernment hadfailedtoprovideadequateincentivesandsupportmeasures tostimulate developmentandproduction ofadvanced biofuels, andwedeﬁnedthisexplanationasa‘policyinsufﬁciency’failure,