Growing Global Bioenergy Markets

June 21, 2017 |

By Gerard J. Ostheimer & Douglas L. Faulkner

Special to The Digest

The world really, really wants to have a thriving Global Bioeconomy. It just doesn’t know it, yet.

Two years ago, essentially all the governments of the world agreed that they wanted a sustainable, low carbon future. These ideas were encapsulated in two landmark agreements: The United Nations Sustainable Development Goals and the more widely known Paris Agreement on combatting climate change. The 17 Sustainable Development Goals (SDGs) (link), make explicit a combination of Economic, Environmental and Social aspirations that are shared by the Digest readership such as increased use of renewable energy and chemicals; decent jobs; technological innovation; and, natural resource conservation.

Big emitters like China, India and the EU have all expressed their commitment to the Paris Agreement. In addition, several U.S. governors, mayors and CEOs have since stepped forward to claim the mantle of U.S. climate leadership. Jerry Brown was particularly loquacious on this point with his Chinese hosts during the recent Clean Energy Ministerial in Beijing. Despite this professed enthusiasm, there is a general lack of understanding of how to de-carbonize the chemicals and transportation sectors, and specifically, how the bio-economy can contribute.

Growing Acceptance of Biofuels

Support for the global bio-economy comes from an unexpected place – international technical agencies. Recently, the International Energy Agency International Renewable Energy Agency (IRENA), IEA Bioenergy and the UN Food and Agriculture Organization (FAO) drafted a joint paper that supports bioenergy’s role in Sustainable Development (link), and especially food and feed production. In stark contrast to the perceived wisdom of bioenergy’s critics, the global bodies responsible for Energy Security and Food Security see numerous advantages to the use of sustainable bioenergy for heat, electricity, chemicals and fuels, including

  • Improving the agriculture sector for sustainable food and feed production in developing countries;
  • Revitalizing the forestry sector in developed countries; and
  • Helping countries meet their SDG and climate change mitigation targets.

These agencies specifically encourage re-framing old debates about food vs fuel into food plus fuel: “The attitude towards biomass production for food, bioenergy and other purposes should evolve from single end-use orientation to integrated production systems that ensure high resource use efficiency and reward sustainable production and use.” Unfortunately, policymakers in the U.S. and EU are either unaware or choosing to ignore this emerging international technical consensus as well as the historic roots for promoting a global bioenergy partnership in the George W. Bush Administration. Today’s proponents of the global bio-economy would do well to educate policymakers and bioenergy’s critics on this historical perspective and the emerging agreement among international organizations.

Market Dynamics

Where are the growth opportunities for the promised global bio-economy? On the fuel side, first-generation fuel use has limited potential for growth in the U.S. and Europe and uptake of advanced biofuels and renewable chemicals is slower to take off than expected with lower oil prices and surging natural gas production. In BRICS countries, there is appetite and some progress, but again the low price of oil undermines the growth rate of the sector. We see developing countries in Africa and Asia as the geographies with the greatest potential for rapid uptake of bio-based fuels and chemicals.

First, countries like Kenya and the Philippines have land, water and an under-performing agricultural sector. Consequently, opportunities exist to sustainably intensify biomass supply chains. Second, these countries spend enormous amounts of their national treasure proportionally to import fossil fuels, which prevents investments in things that they need like schools and infrastructure. As such, it has been argued for at least a decade that these countries would benefit from substituting domestically produced biofuels for imported fossil fuels. Third, a robust domestic biofuel sector can be a source of demand for agricultural products that can lead to investment and modernization of the agricultural and forestry sectors in developing countries – – a virtuous circle of growth.

These new national bio-economies aren’t going to grow on their own. Technology, investment, and – most of all – knowledge will be needed to grow the global agro-energy sector. At the moment, Indian companies like Praj and ISGEC have a booming business in bringing bioenergy to developing countries. With increasing biofuel and renewable chemical demand opportunities will emerge for American, Brazilian and European firms to license their technology, build new plants and provide their services.

Realizing the Potential

As we will explore in future columns, the issue in our minds is not whether a vibrant global bioeconomy will benefit developed and developing countries, but how to speed up the change and spread the benefits. We want to explore what lessons from earlier bio-economies to reject and which to adapt. We will dig into the barriers to growth and examine the efficacy of government policies in these new settings. We believe there are no “one-size fits all” solutions, but there are some common elements, like building partnerships between rural communities/interests and the industrial users and focusing on economic, environmental and social sustainability. Biofuels ventures are sprouting around the world, with new approaches, new coalitions, new politics and new technologies – – they should be encouraged and supported.

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Category: Thought Leadership

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