Leveling That Old Playing Field: as biofuels rise, what about biobased chemicals?

September 12, 2013 |

BarrelWhy make incentivize a $3 fuel when you can make incentivize a $5 chemical? 

A number of biobased refiners would like to level the playing field in replacing the, er, entire barrel of oil.

It’s a football analogy, of course, the idea that leveling the playing field is important for players to have fair access to success. It’s not mentioned very much in downhill skiing, golf, or mountain climbing. Sometimes, the hill is an integral part of the challenge that makes an activity worthwhile.

But never mind about that — biobased chemical producers have been mentioning for some time that, ahem, there’s no Renewable Chemical Standard, no tax incentive, no RINs for them – and they help reduce carbon, too.

It becomes especially complex when we consider that many producers can make chemicals or fuels — even more, that the same molecules can be used for green chemistry as well as in transportation fuel. Ethanol comes to mind; isobutanol, too.

Meanwhile, chemical producers compete for the same feedstock, use a lot of the same processing technologies; some of them are producing chemicals now at small scale, fuels later at large scale.

So, there’s lots of reasons why a level playing field would make sense. So it’s good news for the bioeconomy that Rep. Bill Pascrell (D-N.J.) and Rep. Steve Stockman (R-Texas), Reps. Allyson Schwartz (D-Pa.), Linda Sanchez (D-Calif.) and Richard Neal (D-Mass.) introduced the Qualifying Renewable Chemical Production Tax Credit Act of 2013, which provides renewable chemical producers access to production tax credits currently available for other renewable energy producers.

As the sponsors’ noted, “while chemicals and other products represents less than 20 percent of the volume of each barrel of oil, they represent about half the value. And renewable chemicals and biobased products can already compete on cost with fossil fuels.”

Of course, more parsimonious protectors of the public purse might point out that, if a sector can already compete on cost, why do they need a tax incentive?

Part of that has to do with the global footprint of industry — after all, there’s ready biomass in Burundi, too — and there’s no guarantee that plants will be built in a given country, such as the US, unless the host country, state and community have assembled an attractive package for the future employer.
“By leveling the playing field for the biochemical sector, we are strengthening America’s role as the leader in developing this groundbreaking industry,” said Rep. Pascrell.  “Creating good jobs right here in America is the best way to bolster our economy, and this legislation does just that while reducing our reliance on foreign oil and ensuring a more sustainable future.”

It’s not the first time around for Pascrell. In the last Congress, with Reps. Brian Bilbray and Richard Neal he proposed a production tax credit to accelerate commercialization of the renewable chemicals and biobased products industry. A companion bill, S. 1267, was introduced in the Senate by Sen. Debbie Stabenow (D-MI).

Here’s the summary of the proposed benefits

Jobs

• Today, nearly 2,000 companies in the United States either manufacture or distribute  nearly 20,000 biobased products.

• The bio-based products industry creates a minimum of 100,000 jobs annually, according to an Iowa State CIRAS voluntary survey.

• Biorefineries that process sustainable biomass can produce 700,000 jobs and $88.5 billion in economic activity, primarily in rural areas where economic development is greatly needed, according to USDA projections.

• The biobased economy has the potential to generate upwards of $230 billion to the global economy by 2020, according to the World Economic Forum. The biobased economy includes a projected $89 billion for biomass production and $30 billion for biomass trading.

The Economy

• The global sustainable chemical industry will grow to $1 trillion dollars by 2020, according to the OECD; this creates a significant opportunity for job growth and export growth

• If U.S. companies can capture 19% of this new $1 trillion market, the U.S. will create about 237,000 direct U.S. jobs in the sustainable chemicals sector, while shifting the balance of trade in the chemical sector to a trade surplus.

Industry reaction

BIO President & CEO Jim Greenwood

“Creating a level playing field in tax policy will help U.S. industrial biotech companies innovate and develop new products. We’re already beginning to see renewable chemical companies put homegrown technologies to work to create high-quality rural jobs and spur economic growth. We thank Representatives Pascrell, Stockman, Sanchez, Schwartz and Neal for supporting innovation and helping U.S. companies compete in a rapidly growing renewable chemicals market.”

Hugh Welsh, President of DSM

“We are grateful for Congressman Pascrell’s continued leadership and vision on innovation, renewable chemicals and a US manufacturing renaissance as reflected in his sponsorship of the Qualifying Renewable Chemical Production Tax Credit legislation. This legislation will further support employment, economic growth and continue to encourage global companies like DSM to make additional investments in New Jersey and the entire United States.”

Brett Lund, Chief Licensing Officer of Gevo

“The Qualifying Renewable Chemical Production Tax Credit is a significant step toward encouraging the production and use of renewable chemicals. Many products such as Gevo’s renewable isobutanol can be used as a biochemical or a biofuel and it is important that both uses are equally supported. We applaud Representatives Stockman, Pascrell, Sanchez, Schwartz and Neal for their leadership in supporting legislation that will help stimulate the renewable chemicals industry in the United States.”

Mark Schweiker, Senior Vice President of Renmatix

“There is clear momentum for bioindustry to commercialize cost-competitive pathways to biochemicals. This bill will help leverage a variety of under-utilized, non-food biomass in America for conversion into renewable materials. Stimulating our nascent biochemical market will reinvigorate rural economies and create sustainable jobs.” Renmatix is a cellulosic sugar producer and signed a joint development agreement with international forester UPM to develop biochemicals.”

Bill Radany, President and CEO of Verdezyne

“We have always emphasized the aspects of our growing industry that make it so exciting – the positive impact we can have on the environment as well as our national economy. Legislation such as the Qualifying Renewable Chemical Production Tax Credit Act is a clear affirmation that Verdezyne, along with the many players in our space, are onto something significantly valuable to our country.”

Tjerk de Ruiter, CEO, LS9

“Few people realize that fossil fuels are used to produce many of the products used every day in the United States and around the world. Passage of the Qualifying Renewable Chemical Production Tax Credit Act would lead to much greater use of renewable chemicals in the manufacture of those products, reducing the negative economic and environmental impacts that come from relying on oil and gas. A production tax credit for renewable chemicals will benefit American businesses and consumers.”

Ross MacLachlan, CEO, Lignol Innovations

“The potential market for biochemicals from renewable sources is enormous and represents an opportunity to transform the supply chains for businesses world-wide and open new markets and applications for America’s forest and agricultural industries. What is most needed are policies that provide incentives for customers to become early adopters of renewable chemicals and renewable materials. Early adopters who can show market leadership and champion the introduction of new materials into their supply chains will serve as a catalyst to ignite an emerging business with immediate environmental and economic benefits on a major scale. This production tax credit would be a major step toward achieving these goals.”

Category: Top Stories

Thank you for visting the Digest.