The Biobased Economy after Trump: the States May Lead the Way

November 27, 2016 |

ericksonBy Brent Erickson, executive vice president, Biotechnology Innovation Organization

Special to The Digest

Donald Trump’s election victory has Washington insiders closely watching the incoming administration’s cabinet selections and personnel appointments for clues to the direction that federal policy will take. And there will be more tea-leaf reading down the road as Democrats and Republicans in a closely divided Congress map out their policy priorities and strategies for the next two years. Trump and Congressional Republicans are expected to focus on comprehensive tax reform, infrastructure development, and repealing Obamacare. Some of those initiatives may touch the biobased economy but only at the margins. Renewable chemical and biofuel producer CEOs, who make business decisions with a longer time horizon, can gain more certainty by looking at state policies. In the absence of federal activity early in 2017, state initiatives will continue to provide some stable policy and to lead in creating the right business climate to support emerging technologies and businesses that create jobs.

The clues from the Trump administration on the federal Renewable Fuel Standard (RFS) are generally positive; the recent rule on the 2017 RVOs are also a positive sign. Trump articulated his support for biofuels on the campaign trail – for instance, telling the Iowa Renewable Fuels Association last January that the U.S. should increase ethanol mandates. And while the campaign published a fact sheet in September calling for elimination of the Renewable Identification Number (RIN) credit system, it withdrew the inconsistent statement within hours. The new administration should have no sympathy for Carl Icahn’s campaign to change the point of obligation for merchant refiners, because it would create new and unwelcome uncertainty about the future of the RFS. But the jury is still out on how Trump will handle this position by his longtime supporter Icahn.

The incoming Trump administration is expected to at least partially unravel the presidential directives and regulatory rules of the past eight years that aimed at reducing carbon emissions throughout our economy. But many businesses have already made large investments to adopt low carbon technologies, energy efficiency, and cleaner production processes. Sustainability is now a standard part of U.S. manufacturers’ business models and an integral feature of the biobased economy. Many states have adopted market-based policy portfolios that encourage carbon reduction in transportation fuels and energy. California’s Low Carbon Fuel Standard, established a decade ago, served as a model for Oregon’s. Eleven states in the Northeast are discussing similar region wide legislation. States can continue to lead in creating policies to support businesses that use renewable energy and renewable resources in manufacturing.

One of Donald Trump’s key campaign pledges is to redress trade imbalances in order to preserve U.S. manufacturing. Biobased production can revitalize U.S. manufacturing, generate jobs and economic growth and provide new markets for U.S. agriculture. But there is an imbalance that needs to be rectified. Countries such as China, Malaysia and Brazil have for years offered tax credits to attract construction of biorefineries. Technology researched and developed in the United States is being commercialized overseas because the United States does not offer a competitive tax credit to this industry. Iowa and Minnesota have recognized the need to compete for biobased manufacturing jobs and have been forward leaning in enacting tax credits for biorefineries and biobased products.

In 2015, Minnesota passed the Bioeconomy Production Incentive Program, which is enabling the commercial scale-up of advanced biofuel, renewable chemical, and biomass thermal production in Minnesota using the state’s agricultural and forestry resources. In 2016, BIO worked closely with IowaBIO and the Iowa Economic Development Authority in helping the State of Iowa develop and enact a new five-year production tax credit for renewable chemicals. Nebraska’s biorefining industry is promoting similar policies in that state; companies have recommended that the state legislature enact a renewable chemical tax credit identical to Iowa’s and create a Iowa-Nebraska hub for the biobased economy. More states can take the lead in setting tax policy to support a revival of U.S. manufacturing.

Donald Trump vowed during the campaign to renew economic growth in the United States. That will require innovative technologies and a highly educated workforce. Here again, states have been leading the way. Florida, North Carolina, Pennsylvania, Wisconsin, Ohio and numerous other states support research, development and education in the biosciences. Nationwide, 1.53 million Americans are employed in biobased product manufacturing, and the industry generates $127 billion in economic activity. The industry’s impact creates an additional 2.7 million employment opportunities. The states that support development of the biosciences are achieving the greatest benefits from the economic strength of the biobased manufacturing industry.

The incoming Trump administration should recognize that its federal agenda works hand-in-glove with the state level efforts to support emerging technologies and businesses and do what it can to help them. Companies that have been building the biobased economy and those starting up to commercialize innovative technology can look to the states for the stable, supportive policies that create the environment needed for them to succeed. States can continue to take the lead in adopting local policies that create the right economic environment for the biobased economy to grow while the new Trump administration gets it sea legs.

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Category: Thought Leadership

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