The Biobased Economy: Measuring Growth and Impacts

February 28, 2017 |

ericksonBy Brent Erickson, executive vice president, Biotechnology Innovation Organization

Special to The Digest

BIO continues to be the champion of federal and state policies that help build the biobased economy. Biobased production encompasses a value chain from agriculture, through industrial biotechnology, to the manufacture of consumer goods. Biobased manufacturing generates measurable economic benefits, including new markets for agricultural producers, increased innovation in domestic manufacturing, and sustainable economic growth. Market studies indicate that the biobased economy and industrial biotechnology are poised for accelerated growth in the 21st century. To make our case to policymakers that state and federal action can unleash this growth, BIO is seeking to establish authoritative economic data and projections.

There are many valuable market studies estimating the economic impact of the biobased economy, the industrial biotechnology sector, and various other subsectors, such as biofuels, renewable chemicals, enzymes and biobased polymers. The “Biobased Economy and Sector Projections” figure below maps a selection of these analyses. While market watchers agree that the overall global industry and the various subsectors are poised for ongoing – even accelerated – growth during the first half of the 21st century, it is hard to get a comprehensive, authoritative accounting of the overall biobased economy. Each study may include or exclude different parts of the biobased production value chain.

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Current expectations for ongoing growth in industrial biotechnology and biobased manufacturing are built on the abundance and favorable costs of renewable feedstocks, the successful commercialization of pioneer products, and new investments in production capacity. Industrial biotechnology’s future potential is also bolstered by the intensifying pace of research and development in biotechnology, new developments in synthetic biology and gene editing, and recent experience in engineering commercial scale industrial biotech processes.

McKinsey & Company estimates that worldwide production of biobased products is projected to grow from approximately $203.3 billion in 2015 to $400 billion by 2020 and $487 billion by 2024. The United States is well-positioned to capture a large share of that projected growth, due to investments made in first-of-a-kind production capacity, innovative research and development, and employment and training of U.S. workers.

Investors have been bullish on the potential. Between 2010 and 2015, investors pumped $9.2 billion into the industrial biotechnology sector, primarily in renewable chemicals and biobased polymers. The majority of the funding – $5.3 billion (57 percent) – came via venture capital, according to Lux Research. Synthetic biology startups garnered the largest share of that venture capital in recent years.

Continued growth of the biobased economy will benefit the U.S. farm sector. The U.S. Department of Energy has determined that a cost-competitive supply of agricultural, forestry, waste, and algal biomass is within reach, sufficient to displace 30 percent of U.S. petroleum consumption. New crops support farm sector earnings, which USDA notes have been falling recently with lower commodity prices. Price advantaged feedstocks, in turn, support economic growth opportunity in the biobased product sector.

While market analyses indicate that the biobased economy is poised for ongoing growth, accurate measurement and projections strengthened by hard data will help BIO to demonstrate the value of policy support. The United States is well-positioned – with abundant biomass resources and innovative research and development in industrial biotechnology – to capture a favorable share of future biobased economy growth and employment. Effective state and federal policy is needed to unleash continued investment. As Congress begins work on the next Farm Bill, it should strengthen programs that have effectively supported development of new markets for agriculture and capital formation for rural communities. Congress should create a clear path forward for Farm Bill energy programs with mandatory funding, which will enable U.S. technology producers to unleash innovation and ensure rural communities share in economic growth.

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