Green Premium Prices along the value chain of biobased products

Bio-plastics are usually more expensive than their conventional counterparts, and companies face supply chain challenges when they switch from one raw material solution to another. Nevertheless, the bio-based plastics market continues to grow. GreenPremium plays an important part in this.

In its paper “GreenPremium along the value chain of bio-based products” Nova-Institute is, for the first time, putting forward a clear definition of GreenPremium:

GreenPremium price is the additional price a market actor is willing to pay for the additional emotional performance and/or strategic performance of the intermediate or end product the buyer expects to get when choosing the bio-based alternative compared to the price for the conventional counterpart with the same technical performance.

The results of the surveys and analyses of 35 cases of bio-based chemicals, polymers and plastics clearly demonstrate that GreenPremium prices do indeed exist and are paid in the value chains of different bio- based chemicals, polymers and plastics–especially for new bio-based value-added chains and on the European market. In line with the definition of GreenPremium, the motivation for paying additional prices is the bio-based product’s expected increased emotional and strategic performance.

In the absence of any policy incentives, GreenPremium prices are very important for the market introduction of bio-based products, and many new bio-based polymers and plastics would not even exist if there were no customers willing to pay GreenPremium prices.

The range of reported GreenPremium prices in the various branches and applications analyzed ranges from a 10% to a 300% premium over the conventional petrochemical product with the same technical performance. Most of the GreenPremium prices found lie within a range of 10-20% for bio-based intermediates, polymers and compounds, followed by the 20-40% range. Higher GreenPremium prices could only be obtained in specific cases.

For the end consumer the range of GreenPremium prices for bio-based products goes from 0% (car, cosmetics, bottle) to 25% (wall plug, toy) with, in the middle, a 10% GreenPremium for organic food with bio-based packaging.

The empirical data shows that in all cases the GreenPremium price levels (in percentage) decrease along the supply chain towards the end consumer, sometimes with an intermediate peak. The two main reasons are: the material costs share of the total product price decreases along the value chain; and the highest GreenPremium price is paid predominately for the intermediates. Without this enhanced and confirmed willingness to pay GreenPremium prices for intermediates, many new bio-based value-chains would not have been implemented at all.

The paper is available at www.bio-based.eu/markets

Source: nova-Institut GmbH, press release, 2014-05-06.

 

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