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Over the past 10-15 years the bioeconomy has increased in importance and has been promoted as a possible contribution to address important societal challenges such as climate change, food security, and global health issues. It is argued that the development towards a circular bioeconomy can be characterised as a system change as it requires fundamental changes in both production and consumption systems (Coenen, Hansen, and Rekers 2015; Bugge, Hansen, and Klitkou 2016; Scordato, Bugge, and Fevolden 2017). However, even if governments in many countries have started to introduce policies addressing grand societal challenges, it remains unclear how policies can be implemented to achieve determined goals, and also how such policies can be understood in relation to existing policies (Kuhlmann and Rip 2014; OECD 2015; Schot and Steinmueller 2016). Still, we know very little about the extent to which policies are in fact giving sufficient importance to transformative failures (vis-à-vis market and structural failures). Also, to the extent that transformative failures are given attention in bioeconomy policies, we don't know whether this is consistent in the policy mix or only in terms of formulating visions.

Production of cellulosic ethanol (CE) has not yet reached the scale envisaged by the literature and industry. This study explores CE production in Europe to improve understanding of the motivations and barriers associated with this situation. To do this, we conduct a case study-based analysis of CE production plants across Europe from a global value chain (GVC) perspective. We find that most CE production plants in the EU focus largely on intellectual property and are therefore only at the pilot or demonstration scale. Crescentino, the largest CE production facility in Europe, is also more interested in technology licensing than producing ethanol. Demonstration-scale plants tend to have a larger variety of feedstocks, whereas forestry-based plants have more diversity of outputs. As scale increases, the diversity of feedstocks and outputs diminishes, and firms struggle with feedstock provisioning, global petroleum markets and higher financial risks. We argue that, to increase CE production, policies should consider value chains, promote the wider bio-economy of products and focus on economies of scope. Whereas the EU and its member states have ethanol quotas and blending targets, a more effective policy would be to seek to reduce the risks involved in financing capital projects, secure feedstock provisioning and support a diversity of end products.

The objective of this paper is to outline and discuss the key elements of an EU industrial development policy consistent with the Paris Agreement. We also assess the current EU Industrial Strategy proposal against these elements. The "well below 2 °C" target sets a clear limit for future global greenhouse gas emissions and thus strict boundaries for the development of future material demand, industrial processes and the sourcing of feedstock; industry must evolve to zero emissions or pay for expensive negative emissions elsewhere. An industrial policy for transformation to net-zero emissions must include attention to directed technological and economic structural change, the demand for emissions intensive products and services, energy and material efficiency, circular economy, electrification and other net-zero fuel switching, and carbon capture and use or storage (CCUS). It may also entail geographical relocation of key basic materials industries to regions endowed with renewable energy. In this paper we review recent trends in green industrial policy. We find that it has generally focused on promoting new green technologies (e.g., PVs, batteries, fuel cells and biorefineries) rather than on decarbonizing the emissions intensive basic materials industries, or strategies for handling the phase-out or repurposing of sunset industries (e.g., replacing fossil fuel feedstocks for chemicals). Based on knowledge about industry and potential mitigation options, and insights from economics, governance and innovation studies, we propose a framework for the purpose of developing and evaluating industrial policy for net-zero emissions. This framework recognizes the need for: directionality; innovation; creating lead markets for green materials and reshaping existing markets; building capacity for governance and change; coherence with the international climate policy regime; and finally the need for a just transition. We find the announced EU Industrial Strategy to be strong on most elements, but weak on transition governance approaches, the need for capacity building, and creating lead markets.