Economics of forest bioeconomy: new results

Abstract

We examine the emerging forest bioeconomy as an integrated multi-product industrial ecosystem, where the traditional pulp mills allocate the use of side streams to independent biochemical companies manufacturing bioproducts in the vicinity of the pulp mills. Biochemical companies benefit from the proximity by receiving wood-based side streams at lower costs and pulp mills from having a new source of revenue from selling side streams. We focus on the economic interaction between the pulp mill and the biochemical company, and study the impacts on the use of wood and profits under perfect and imperfect competition. We demonstrate that the new industrial ecosystem uses more wood than traditional pulp mills, but, depending on the side stream, it may promote cascading use of wood-based side streams.