Bioenergy and Ecosystem service value co-creation Brent Matthies University of Helsinki

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1 Bioenergy and Ecosystem service value co-creation Brent Matthies University of Helsinki

2 Some questions How are climate or biodiversity benefits of forest management valued? How is value transferred between economic actors? If preferences between actors differ, are there policy instruments to make value creation more efficient?

3 What is a service? Formerly viewed as a tertiary category in the Goods- Dominant Logic three sector model (Clark, 1940) Primary Extraction Secondary Industrial Manufacturing Tertiary Everything else (very heterogeneous) Shift away from value-in-exchange to value-in-use reinterpretation of the process of creating utility Goods Dominant Logic Service Dominant Logic (Beckman, 1957; Alderson, 1957; Vargo and Lusch, 2004)

4 Determining Value Beliefs: an internal feeling that something is true Values: measure of the worth or importance of something Utility: usefulness or perceived ability of something to satisfy needs or wants Attitudes: the way a person expresses or applies their beliefs and values Preferences (Bateman and Kerry, 1993) 4

5 Ecosystem Service Value Provisioning service: sawlogs, mushrooms, bioenergy Cultural service: recreation, spiritual connection Regulating service: climate regulation, biodiversity Supporting service: nutrient cycling, soil formation Value of these services is derived anthropogenically (van Oudenhoven et al., 2012)

6 Traditional Value Chains vs. Value Networks (Allee, 2001: Bhatia, 2014)

7 Actors and Value Co-creation in the Bioenergy context Forest owners Manage resource, entrepreneurship Harvesting contractors and transport Energy producers Policy makers and market informants: government, NGOs, scientists Energy customers Market segments urban vs. rural, young vs. old

8 Service Co-creation Preferences Preferences inform how the forest is managed, which determine the extent that biomass is used for producing energy Preferences are dependent on provisioners (i.e. forest owners) and customers (i.e. urban energy users) Value creation is dependent on offering a service that customers prefer Mismatches between actor preferences may require policy intervention to improve efficiency

9 Service Co-creation Trade-offs Management objectives lead to trade-offs between services Highly dependent on the service synergies Preferences inform provisioning levels and trade-off impacts

10 Forest Management Scenarios and Forest Owner Consultation Four scenarios: Business As Usual, Climate (carbon storage/albedo), Biodiversity, Bioenergy (short rotation) Looked at Trade-offs and synergies between: Economic returns and ecosystem service provision Between additional regulating ecosystem service provision Effect of framing climate and biodiversity problems using scientific (neutral) language versus non-scientific language during stakeholder consultation

11 Economic Return Trade-offs 1.0 Normalized 0 (min) to 1 (max) Economic returns do not include subsidies Normalized Additional Achievement of Provisioning Ecosystem Services Saw Logs Pulpwood Bioenergy Achievement of Economic Returns (Matthies et al., In Press)

12 Economic Return Trade-offs 1.0 Normalized 0 (min) to 1 (max) Economic returns do not include subsidies Normalized Additional Achievement of Regulating Ecosystem Services Biodiversity Index Value (BIV) Carbon Storage (CS) Avoided Radiative Forcing from Albedo Effect (RFA) Achievement of Economic Returns (Matthies et al., In Press)

13 Regulating Service Trade-offs 1.0 Normalized 0 (min) to 1 (max) Achievement in each indicator additional relative to BAU Normalized Additional Achievement of Climate Regulating Services Carbon Storage (CS) Avoided Radiative Forcing from the Albedo Effect (RFA) Normalized Additional Achievement of Biodiversity Index Value (BIV) (Matthies et al., In Press)

14 Nudging Actors to Inform Management Preferences Nudging preferences resulted in: Greater weight towards climate, bioenergy, and biodiversity management preferences away from BAU Lower marginal cost of ecosystem service provisioning Higher levels of ecosystem service provisioning Group Portfolio Weights by Scenario BAU Climate Bioenergy Biodiversity Nudge Neutral (Matthies et al., In Press)

15 More Bioenergy Value Network Actor Preferences Industry Concern about the availability and price of wood for pulp and paper production. (Kautto et al., 2012) Entrepreneurs SME bioenergy entrepreneurs focused on importance of obtained income, community relationship, and networking (Huttunen 2012) Future Customers Students critical towards the environmental aspects and sustainability of production, but differences between rural and urban students. (Halder 2014)

16 Service Co-creation Outcomes Understanding the preferences for service provision informs how value is co-created in the network For bioenergy this means understanding the value flows that are changed/created/destroyed by increased provisioning Does the intended climate-friendliness create value in the network? Where and why is this value created? If the created value is baseless/sub-optimal, then how should policies address this?

17 Service Co-creation Outcomes Preferences are not always based on value-inuse and not always monetized Value creation takes place within and outside of the traditional supply chain How do non-monetized services interact with and compete with bioenergy? What are the trade-offs and how do you address these?

18 Service Co-creation Outcomes Can preferences be shifted? Framing the message is key. Targeted messaging/framing public service announcements, commercial marketing What is ethical? Are you sending the right message to the right people?

19 Kiitoksia!

20 Alderson, W. (1957) Marketing Behaviour and Executive Action: A Functionalist Approach to Marketing Theory. Robert D. Irwin (eds). Homewood, USA. Allee, V. (2001) Understanding Value Networks. References Bateman, I. and Kerry, T.R. (1993) Valuation of the Environment, Methods and Techniques" in Turner, R. Kerry ed., Sustainable Environmental Economics and Management, Belhaven Press, London, UK. Beckman, T. N. (1957) The Value Added Concept as a Measurement of Output. Advanced Management 22, 6-9. Bhatia, A. (2012) Value Creation: Linking Information Technology and Value Creation. Brown Books, Dallas, USA. Matthies, B. D., Kalliokoski, T., Eyvindson, K., Honkela, N., Hukkinen, J. I., Kuusinen, N., Räisänen, P., and Valsta, L. (In Press) Nudging service providers and assessing service trade-offs to reduce the social inefficiencies of Payments for Ecosystem Services schemes. van Oudenhoven, A. P. E., Petza, K., Alkemade, R., Heina, L., and de Groot, R. S. (2012) Framework for systematic indicator selection to assess effects of land management on ecosystem services. Ecological Indicators 21, Peppard, J., and Rylander, A. (2012) From Value Chain to Value Network: Insights for Mobile Operators. European Management Journal 24, Ramirez, R. (1999) Value Co-production: Intellectual origins and implications for practice and research. Strategic Management Journal 20, Vargo, S. L., and Lusch, R. F. (2004) Evolving to a New Dominant Logic for Marketing. Journal of Marketing 68,