Stimulating Investment To Grow the Biobased Economy

By Brent Erickson, Executive Vice-President, Biotechnology Innovation Organization

Over the past decade, federal policies such as the Renewable Fuel Standard (RFS), the USDA Biobased Markets Program, the Navy’s Green Fleet initiative, the Second Generation Biofuel Tax Credit, and others have created momentum for industrial biotech innovations, including biofuels, renewable chemicals and synthetic biology. While policy uncertainty can slow progress, as we’ve seen, opportunities still exist for these new technologies. The challenge our industry faces right now is to continue building investment in the biobased economy. That can be accomplished with both policy and non-policy activities.

BIO continues to provide the largest forum for creating the partnerships across the entire value chain. The BIO World Congress on Industrial Biotechnology was created in part to bring together leaders in different fields who would not normally converse. The theme of the event is “linking agriculture, chemistry and biotechnology to create new value chains” and indeed it has helped produce many partnerships and collaborations and market growth. Conferences like the World Congress and the recent ABLC meeting are a key part of a larger picture.

On the policy front a new coordinated federal effort to establish a biobased economy vision and national policy framework could help our industry accelerate momentum. The policies that we need include a level playing field in the tax arena for all biotech innovation; proper implementation and continued funding of USDA’s biorefinery programs; and stability and clarity about how the RFS will work in the future.

The RFS did indeed drive billions of dollars in investment for research, development and commercialization of advanced biofuels. There are many success stories for companies building first of a kind biorefineries – POET’s Project Liberty; Abengoa’s Hugoton biorefinery; DuPont’s biorefinery in Nevada, Iowa; GranBio’s and Raizen’s biorefineries in Brazil; Chemtex in Italy. These first-of-a-kind plants show that the technology is reaching a commercial stage where it can be scaled economically. EPA’s two-year delay in issuing the 2014, 2015 and 2016 RFS rules undercut investment in advanced biofuel commercialization; but the rapid development of the technology created new opportunities.

There are additional successes in renewable chemicals that can trace their roots to the research and development initiated for advanced biofuels, many that are already economically competitive. Multiple companies are now producing commercial quantities of succinic acid. DuPont and ADM recently announced a partnership to produce furan dicarboxylic acid (FDCA) from fructose; the derivatives of FDCA are vinyl and other plastics. Green Biologics recently began the renovation of the Central Minnesota Renewables ethanol plant to produce n-Butanol and acetone from sugar. Avantium, Gevo and Virent are working with The Coca-Cola Company to produce PlantBottles – aiming at 100 percent renewable plastic. Calysta recently announced a new venture with Cargill to grow a microbe-based fish food using methane as a feedstock. These are just a few of the many examples of the renewable chemical technologies currently driving continued growth in the biobased economy.

According to an analysis by McKinsey & Co., biobased chemicals are expected to capture a growing share in the global chemicals market. Worldwide, fully 9 percent of all chemicals produced today are biobased, including biofuels. Chemical industry revenues in 2012 were more than $2.8 trillion; the biobased share of that revenue is equal to more than $250 billion. From now through 2020, renewable chemicals are expected to grow at twice the rate of the overall chemical market, comprising 11 to 13 percent of total chemical industry revenues (which are expected to top $3.45 trillion).

The U.S. Biomass Research & Development Initiative (BRDI) estimates that U.S. biobased production (including biofuels) generates $50 million in economic activity today, with the potential to reach $250 billion annually down the road. A quarter million Americans are already employed in the industry; that number could grow to more than 1 million jobs. These estimates back BRDI’s effort to expand the bioeconomy. BRDI recently released a Federal Activities Report on the Bioeconomy, detailing how federal agencies are partnering with industry to support the bioeconomy. The BRDI board is working with all agencies to develop a Bioeconomy Vision and roadmap that will coordinate federal efforts. Such an effort can help our industry build momentum in creating the value chains and deploying the investments necessary for the bioeconomy. BIO’s World Congress on Industrial Biotechnology continues to provide an unparalleled industry forum for partnering between agriculture with chemistry and biotechnology to create new value chains.

Stable and robust federal policy can help our industry continue to make good on the research and development first unleashed by the RFS. The renewable chemical sector – after being left out of policy for too many years – was recognized in the 2014 Farm Bill, with renewable chemical biorefineries becoming eligible for the Section 9003 loan guarantee program. Those loan guarantees are crucial to ensuring that debt equity or asset financing is a viable option for building biorefineries in rural communities. Without them, banks simply can’t secure sufficient capital to lend to these projects.

However, renewable chemicals have yet to be recognized in the federal tax code. Two pieces of current legislation could remedy that. Sen. Debbie Stabenow in the Senate and Rep. Pascrell have put forward a proposal to provide a production tax credit for the sector. And renewable chemicals – as well as biofuels – would be eligible for Sen. Chris Coons’ Master Limited Partnership Act. Renewable chemicals are a promising area for U.S. economic growth, and they need a level playing field in policy. And finally, we need to ensure that Congress and federal agencies do not inadvertently create instability for our industry by creating barriers in TSCA reform legislation, or revision of the coordinated framework for regulating biotechnology, or in overly long approval times for RFS pathways.

2016 will be a crucial year in shaping the policies that reinvigorate growth in the biobased economy. Companies continue to innovate and find new applications for the biotechnology, creating new investment opportunities. The right policy atmosphere can help them quicken the pace of commercialization. In addition, BIO continues to support the industry by providing a world-class forum for developing partnerships across the value chain. We recently upgraded our patented computerized business partnering system to help companies find technology and partners. So we look forward to seeing you at the 2016 BIO World Congress on Industrial Biotechnology in San Diego next month to take part in furthering the vision of the biobased economy.