The biobased economy or \u201cbioeconomy\u201d has the potential to create new companies, new jobs and even entirely new industries. In a bioeconomy, renewable biobased materials such as crop residues and dedicated energy crops replace petroleum as a primary source of industrial and energy raw materials.<\/p>\n
A growing bioeconomy will create new opportunities for entrepreneurship, technological innovation and rural revitalization. \u00a0 A bioeconomy can also offer major environmental benefits, as fuels and chemicals made from renewable raw materials replace petroleum-based products.\u00a0 Recent years have seen several milestone achievements toward a biobased economy, including the initial commercialization of \u201ccellulosic\u201d (from plant fibrous materials) and other advanced biofuels and the introduction of new biobased or \u201cgreen\u201d chemicals which are produced from sugars rather than petroleum.<\/p>\n
Despite its potential benefits and some very real achievements, the biobased economy has overall progressed more slowly than many had hoped.\u00a0 There are several reasons for this slow progress. \u00a0 Technological challenges involved in converting biomass (plant material) to sugars and energy have sometimes proven more difficult than expected.\u00a0 The logistics involved in economically transporting large volumes of biomass have proven challenging.\u00a0 Many planned large-scale cellulosic ethanol projects did not materialize or were not successful.\u00a0 Although a handful of cellulosic ethanol facilities are operational in the U.S., most recent industry activity has been in the lower-volume but higher-margin biobased chemicals sector.\u00a0 The recent low price of petroleum has compounded the challenges for biobased industry, and has reduced the sense of public urgency to develop energy alternatives.\u00a0 Additionally and significantly, U.S. policy toward biobased industry has often been erratic and unpredictable.\u00a0 The combination of these factors has discouraged investors, further slowing the progress of the biobased industry.<\/p>\n
If the biobased economy is to achieve its full potential, then the focus must be on \u201cderisking\u201d the bioeconomy industry so that investors will once more see the industry as a source of promising new investment.\u00a0 In order to \u201cderisk\u201d the bioeconomy, policymakers must use limited public resources where they can have the greatest impact and must identify those roles which the public sector can fill more efficiently than the private sector. \u00a0 This article explores several approaches for derisking the bioeconomy and accelerating its growth.<\/p>\n
\u201cDerisking\u201d the Bioeconomy
\n\u201cDerisking\u201d the bioeconomy requires, among other things, a systematic effort by policymakers to identify unnecessary or unproductive risks or disincentives which discourage investment in biobased economy ventures, and then determining what, if anything the public sector can and should do to minimize these risks.\u00a0 Some risks, such as the risk that a particular business will succeed, that its business model is viable, that its technology is commercially competitive or that its management team is capable, are inherently roles for the private sector, and are factors that private investors expect to consider in evaluating an investment in any industry.\u00a0 However, there are many other types of risks which public entities can play a useful and efficient role in mitigating.<\/p>\n
A comprehensive strategy to \u201cderisk\u201d the bioeconomy could, at minimum, include the following:<\/p>\n
1. Reducing Unproductive Regulatory Impediments.\u00a0 Any derisking effort should include an effort to identify existing regulations which create unproductive uncertainty or disincentives for investing in biobased industries.<\/p>\n
One example of such an item would be the current exclusion of intermediate biomass \u201cpre-processing\u201d facilities (also known as \u201cbiomass depots\u201d) from the current Renewable Fuels Standard (RFS) standard.\u00a0 Biomass depots could compact and stabilize biomass, making it easier and less expensive to transport.\u00a0 They could fill an important logistical role in the biobased economy.\u00a0 Biomass depots can also offer an important, comparatively low risk investment opportunity for rural entrepreneurs and rural communities to capture some of the added value from biomass products. \u00a0 Expanding RFS credits to include biomass depots could open a source of new investment and produce new efficiencies for biomass production.<\/p>\n
No doubt there are other unproductive regulatory constraints. \u00a0 An aggressive \u201cderisking\u201d project would seek to compile a list of laws, regulations and legal ambiguities which unnecessarily, and in some cases unintentionally, inhibit growth of the biobased economy.\u00a0 This would be followed by a determination of which legal and regulatory obstacles are most significant, which can be resolved within existing legislation, and which require new legislation to fix.<\/p>\n
2. Aggressive and On-Going Informational Outreach.\u00a0 It should be a priority for policymakers to aggressively solicit input \u2013 both on problems and potential solutions \u2013 from those individuals who are most likely to become a part of new biobased industry ventures. \u00a0 These individuals include bioenergy and biobased chemical executives, operators of key investment funds, transportation and supply chain companies, potential customers and farmers and members of farm cooperatives.<\/p>\n
Officials of the U.S. Department of Energy and USDA have recently co-sponsored several \u201clistening sessions\u201d at industry events where they solicited input from attendees in what were essentially public brainstorming sessions. \u00a0 This was a worthwhile start, and in addition to these listening sessions, it would be helpful for public policymakers to actively interview private sector officials \u2013 and prospective investors \u2013 to obtain as many ideas as possible about strategies to encourage new investments.\u00a0 In order for these outreach efforts to have their greatest impact, it is equally important that policymakers establish an institutional mechanism to evaluate and act upon input received.<\/p>\n
3. Identify areas where an increased governmental role can produce a significant return on investment.\u00a0 There are areas where an increased governmental role could produce a dramatic return on investment in terms of sparking new private sector investment growth in biobased industries. \u00a0 Identifying these areas, and intensifying governmental activity in these areas, could accelerate the bioeconomy.\u00a0 Below are some possible such areas:<\/p>\n
(a) Basic Scientific Research \u2013 There is perhaps no other area of the bioeconomy where increased public spending can spur new private sector activity as in basic scientific research.\u00a0 Basic scientific research is particularly justified in cases where the overall benefits to society from research are likely to far exceed the costs, but where the results of this research are likely to benefit society as a whole rather than the investor which funded the research.\u00a0 As a consequence, the private sector is unlikely to fund such research.<\/p>\n
Basic scientific research is often necessary to increase the overall level of scientific knowledge to a point where private investment in developing specific products makes business sense.\u00a0 Without this initial basic research, the costs and time to develop resulting products would be impractical and the investments in such products would be highly speculative and risky.\u00a0 However, once basic technical questions are resolved, follow-on investment by the private sector to create commercial applications of the research is likely to occur at vastly accelerated levels.<\/p>\n
Several areas exist in the biobased economy where well-targeted investment in basic scientific research could produce a dramatic return in terms of subsequent private investment and entrepreneurship.\u00a0 Examples of such areas include biomass cultivation practices, biomass harvesting and post-harvest handling methods. \u00a0 In each of these cases, improvements in current practices are critical to the overall logistical efficiency of the industry, but the benefits will probably be spread broadly across the economy and no single investor is likely to capture a return on investment.\u00a0 As such they are natural areas for public sector research.<\/p>\n
Another possible high-priority area for public research may involve technologies for converting biomass to more usable sugars or other more usable form, which are the main raw materials which are used to produce biomass energy and chemicals.\u00a0 Efficient, low-cost conversion of biomass to sugars or bio-oils has been a major factor limiting the development of the bioeconomy.\u00a0 While there has been public sector research in this area (as well as significant private research), a more extensive public research effort in prior years might have yielded much more progress toward a biobased economy than has actually occurred.<\/p>\n
The economic payoff from basic research advances in biomass logistics and conversion technologies could be enormous. The availability of a predictable and stable supply of low-cost biomass-based sugars and oils, available for conversion into new chemical, energy and industrial products, would almost certainly encourage much larger scale investment in new businesses ready to manufacture and market these \u201cdownstream\u201d sectors, creating new jobs all along the supply chain.<\/p>\n
It should be noted that the private sector has also invested in technologies for biomass conversion biomass to sugars and oils, which raises legitimate policy questions \u2013 as a general rule, it seems undesirable for the public sector to compete with private sector research. \u00a0 However, much of the private sector research was due to a lack of adequate public sector research to resolve basic technology issues. \u00a0 The slow progress of many private ventures, and their increasing difficulty in raising new capital, are direct consequences of the limited public effort in basic scientific research.\u00a0 It is quite possible that several companies which are actively involved in developing biomass technologies for converting biomass to sugars and oils, rather than being displaced by government research, could become primary beneficiaries of new scientific research which allows them to improve the efficiency of their conversion processes and expand the markets for their biomass-derived products.<\/p>\n
(b) Facilitating Scale-Up. Scaling up a technology \u2013 taking a technology from small-scale laboratory or pilot-scale production to large-scale commercial production \u2013 is a major challenge.\u00a0 Entrepreneurial companies typically must demonstrate that their technologies work at larger scale in order to obtain investment, industry partners or commitments from customers.\u00a0 However, the costs of establishing a scale-up demonstration facility in the chemical or energy sectors are often prohibitive \u2013 few companies are able to build a large-scale facility to test a process or product which may not work.<\/p>\n
Here is another excellent opportunity for public involvement.\u00a0 The public sector, possibly including national federal laboratories, can ease an important bottleneck, by establishing facilities which can be rented for scale-up, demonstration and early-stage commercialization.\u00a0 Such a program could be supported, significantly if not entirely, by industry users. \u00a0 It would be much easier to rent a pre-existing facility for scale-up or demonstration testing, or even initial commercial manufacturing, than to build a new facility for each new candidate product.<\/p>\n
In fact, the public sector already does fulfill this role to some extent. \u00a0 Some federal laboratories, such as the Idaho National Laboratory, are capable of performing certain scale-up testing.\u00a0 An aggressive biobased economy program would, though, significantly increase the capacity of public laboratories to facilitate industrial scale-up of technology.\u00a0 Eventually, as the industry expands and the volume of scale-up activity increases, private companies might arise which can profitably assume part or all of this role. Until then, this is an area where a greater public role is likely to produce a major return on investment.<\/p>\n
A related opportunity might be the establishment of \u201cvirtual scale-up teams\u201d which can be made available to companies looking to scale up their technology.\u00a0 This concept has an analog in the private sector:\u00a0 some private sector business accelerators have established \u201cvirtual management teams\u201d which they make available to their member companies.\u00a0 Rather than asking each of their companies to incur the expense and difficulty of putting together complete management teams with limited resources, these accelerators use their resources and connections to recruit highly experienced management teams which can be made available as needed to all of the accelerator\u2019s companies.\u00a0 These virtual management teams allow the member companies to focus on their core skill sets while providing them the other management pieces necessary to grow a successful business.<\/p>\n
Just as private sector accelerators offer \u201cvirtual management teams,\u201d federal laboratories could establish \u201cvirtual scale-up teams\u201d consisting of researchers from the federal national laboratories and perhaps their academic partners which could be made available and customized to fit the needs of individual companies seeking to scale up their technologies.\u00a0 These virtual scale-up research teams could supplement a company\u2019s own research capabilities and allow the company to use its limited resources to build up the company\u2019s core skill sets. \u00a0 Equally importantly, the availability of \u201cvirtual scale-up teams\u201d could permit companies to avoid the cost of building up a scale-up team which may only be needed temporarily during one phase of the company\u2019s growth.\u00a0 As an added benefit, the \u201cvirtual scale-up team\u201d would undoubtedly build up a great body of knowledge and expertise over time.\u00a0 While some of this knowledge would be proprietary and specific to individual companies, much of this knowledge would be of general application and could be made available to all participating bioeconomy companies, thereby avoiding the time, cost and risk of failure if each company had to individually develop this knowledge on its own.<\/p>\n
The U.S Department of Energy national laboratories are planning the establishment of an \u201cAgile BioFoundry\u201d which would develop and make available scalable, open-source technology for bioproducts companies.\u00a0 As a component or perhaps a complement to the BioFoundry concept, it may be worthwhile considering virtual scale-up teams.\u00a0 As an added benefit, it may be possible to establish \u201cvirtual scale-up teams\u201d without major new public expenditures \u2013 rather, it may be possible to accomplish a great deal by simply repurposing existing resources.<\/p>\n
4. Carbon credits.\u00a0 Biomass-based ventures can provide important environmental benefits to society, but the U.S. marketplace seldom rewards these benefits.\u00a0 As an example, cellulosic ethanol reduces greenhouse gas emissions by over 80% compared to gasoline, but the only national market reward for such services is a limited allotment for cellulosic ethanol credits in the Renewable Fuel Standard.\u00a0 Biobased chemicals provide comparable environmental benefits compared with petroleum-based chemicals, but do not receive any market reward for providing these benefits.<\/p>\n
In the absence of a carbon pricing system, the environmental costs of fossil fuels are absorbed by society as a whole rather than by the manufacturers and purchasers of fossil-fuel derived products. \u00a0 The absence of carbon pricing effectively creates an enormous subsidy for producers of fossil fuels, who are able to avoid the costs of the greenhouse gas emissions their products generate.<\/p>\n
Several options for creating market incentives for carbon reduction exist, including a \u201ccarbon tax\u201d and a \u201ccap-and-trade\u201d system.\u00a0 In fact the three U.S. west coast states along with several Canadian provinces have enacted or actively considered such systems.\u00a0 Canadian Prime Minister Justin Trudeau announced in October 2016 a new plan which would require each Canadian province or territory to either establish a price on carbon pollution or adopt a cap-and-trade system by 2018.\u00a0 The proposed price on carbon pollution under this plan would start at $10 per metric ton in 2018 and increase to $50 per metric ton by 2022, with provinces and territories which elect a cap-and-trade system expected to achieve emissions reductions comparable to those which elect a carbon pricing system.\u00a0 Revenues generated from such carbon pricing or cap-and-trade systems would remain within the provinces or territories which generated them.<\/p>\n
As for the United States, while many economists of different political ideologies have called for a carbon tax to allow the market to more accurately reflect products\u2019 true costs to society, the enactment of any such national carbon tax or cap-and-trade system seems unlikely in the current political environment.\u00a0 In the absence of a true carbon tax, the establishment of a carbon credit system might be more politically palatable and could create market incentives which encourage carbon reduction technology.\u00a0 Such credits might dramatically encourage investment in innovative carbon capture technologies. \u00a0 As a general principle, any legislation which would incorporate the environmental costs of products into their market price will create a dramatic incentive to produce environmentally favorable products as well as to invest in new ventures which generate them.<\/p>\n
5. Create Incentives for the \u201cTraditional\u201d Chemical Industry.\u00a0 \u00a0 The \u201ctraditional\u201d organic chemical industry could be a major source of financing and strategic partnerships for biobased chemical companies.\u00a0 That is how many other sectors of the biotechnology industry evolved: \u00a0 the pharmaceutical industry has been a major investor and partner with medical biotechnology companies, and the agribusiness industry has played a comparable role with regard to agricultural biotechnology start-ups.<\/p>\n
However, at least to this point, the traditional organic chemical industry has been largely absent from the biobased chemical sector. \u00a0 The reluctance of the chemical industry to invest in biobased chemical companies reflects several factors, including lack of confidence in reliable supplies of biobased raw materials, the current low price of petroleum, as well as a traditional reliance on petroleum-based raw materials. \u00a0 Furthermore, there have been few incentives for traditional chemical companies to focus on biobased raw materials as a business opportunity.<\/p>\n
There are at least a few obvious strategies which could increase incentives for the traditional chemical industry to invest in biobased companies. \u00a0 First, the RFS, which at present applies only to biofuels, could be expanded to also apply to biobased chemicals. \u00a0 When the RFS was enacted, the major public and industry focus was on biofuels. \u00a0 In recent years, however, industry\u2019s focus has turned to biobased chemicals. \u00a0 Inclusion of biobased chemicals in the RFS program could create an important incentive to invest in biobased chemicals.<\/p>\n
In addition, the federal Toxic Substances Control Act (TSCA) could be amended so that it does not impose additional regulatory requirements on biobased chemicals which do not apply to petroleum-based chemicals. \u00a0 TSCA, which regulates production of most industrial chemicals imposes pre-manufacture notification requirements on many biobased chemicals which in some cases do not apply to a similar product derived from petroleum. \u00a0 Eliminating disparate regulatory treatment of substantially similar products could help the development of the biobased chemical sector.<\/p>\n
Any derisking program should include input from the traditional chemical industry to determine what other public policy actions could increase their participation in the biobased chemical industry.<\/p>\n
6.\u00a0 Adopt Biobased Product Standards. There is little standardization in biomass-based industries.\u00a0 Biomass can have widely varying properties with respect to such characteristics as heating (BTU) value, moisture content and ash content, depending upon the type of feedstock material as well as cultivation practices and location.\u00a0 Even within a single class of feedstock, seasonal variations and different cultivation practices can cause variability from one shipment to the next.\u00a0 The industry lacks generally accepted standards which would allow biomass users to immediately understand the physical or chemical properties of a particular shipment of biomass. This lack of standardization imposes an additional cost and uncertainty upon biomass processors, as there is no commonly understood \u201clanguage\u201d to communicate the properties of a particular biomass product.<\/p>\n
Development of appropriate industry standards can help to make biomass transactions within the industry more efficient and predictable. Development of such biomass standards need not be a governmental activity. \u00a0 Indeed, non-governmental entities have developed commercial standards in many industries.\u00a0 What is important is that for the biomass industry to maximize its commercial efficiency, the development and adoption of recognized and accepted industry standards is critical.<\/p>\n
7. \u00a0 Increase Participation of Rural Communities.\u00a0 The bioeconomy is often called a virtually unprecedented opportunity for rural communities.\u00a0 Rural communities possess at least two key building blocks of the bioeconomy: land and biomass. Nonetheless, participation of rural communities as owners and investors in new biobased industries has to date been relatively limited. \u00a0 The opportunities for rural communities in the bioeconomy will not be fully realized unless farmers and other members of rural communities become owners and investors in new bioeconomy-related ventures, and not merely suppliers of raw materials.<\/p>\n
The lack to date of major rural investment in the biobased economy has several causes.\u00a0 A major factor is the high degree of risk involved in most potential investments:\u00a0 many ventures involve technology which is expensive and not yet ready for commercialization or which cannot yet be operated at a profit.\u00a0 Futhermore, the optimal business models for transforming biomass from farm to finished product have not yet been fully worked out. \u00a0 Other risks include the current low prices of fossil fuels, and the difficulty in raising adequate capital to support a biobased production facility.<\/p>\n
Some programs do exist which can help finance rural-owned bioeconomy facilities.\u00a0 Notably, USDA operates several loan guarantee programs aimed at financing biomass-based ventures or rural industries.\u00a0 However, these loan guarantee programs still require, among other things, finding a lender which is prepared to risk significant amount of capital on as yet often precommercial or not clearly profitable technology.<\/p>\n
Biomass investment opportunities which present comparatively lower risk and lower cost may eventually become available to rural communities.\u00a0 Among these are the biomass depot preprocessing facilities described above, as well as other biomass handling or conversion facilities which could be located close to farms.\u00a0 However, even these opportunities may not be fully practical until relevant technologies mature and there are reliable industry consumers available to utilize the partially processed biomass products.<\/p>\n
Given the major benefits which rural communities can play in the bioeconomy, and the equally important benefits which the bioeconomy can provide to rural communities, any \u201cderisking\u201d program should actively include rural communities as a key component of its activities. \u00a0 The outreach activities described above should include outreach to rural communities for new ideas on how farmers, rural entrepreneurs and rural communities can become full participants in the bioeconomy.<\/p>\n
Eliminating unproductive legal and regulatory constraints
\n\u201cDerisking\u201d the biobased economy should be a central focus for policymakers looking to accelerate the growth of new bioeconomy industries and technologies. \u00a0 Derisking the bioeconomy involves eliminating unproductive legal and regulatory constraints, increasing the public sector\u2019s role where it can have the greatest positive impact on the industry\u2019s growth, creating incentives which can most efficiently encourage private sector investment, and establishing an on-going outreach program to identify each of the above.<\/p>\n
The list of ideas for derisking the bioeconomy contained in this paper is not exclusive.\u00a0 It is this author\u2019s hope that this paper can help to serve as a basis for discussion, and more importantly for action, on how to expand the bioeconomy and accelerate its growth, and to more fully realize the economic, environmental and technological benefits which a biobased economy can provide.<\/p>\n
About the author
\nNeil A. Belson is a life sciences and technology attorney and has been a biomass products entrepreneur. He is Of Counsel at Potomac Law Group, a \u201cnew-model\u201d law firm based in Washington, D.C., where he is Chair of the Life Sciences practice and a co-founder of the firm\u2019s Technology Transactions practice.\u00a0 In addition, Mr. Belson founded and served as President of NewAgriculture, Inc., a Maryland company which produced proteins and co-products from plant biomass.\u00a0 Mr. Belson is currently a Manager of LeafPro Bioproducts, a North Carolina company which acquired the assets of NewAgriculture in 2015.\u00a0 Mr. Belson\u2019s career-long interest in the bioeconomy dates back to his service as a Peace Corps Volunteer in the Dominican Republic shortly after college, where he developed a rural energy farm project.\u00a0 Mr. Belson can be contacted at nbelson@potomaclaw.com or tel: 240-416-7239.<\/p>\n","protected":false},"excerpt":{"rendered":"
The biobased economy or \u201cbioeconomy\u201d has the potential to create new companies, new jobs and even entirely new industries. In a bioeconomy, renewable biobased materials such as crop residues and dedicated energy crops replace petroleum as a primary source of industrial and energy raw materials. A growing bioeconomy will create new opportunities for entrepreneurship, technological […]<\/p>\n","protected":false},"author":59,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","nova_meta_subtitle":"","footnotes":""},"categories":[5572],"tags":[5838],"supplier":[8400,11236],"class_list":["post-38445","post","type-post","status-publish","format-standard","hentry","category-bio-based","tag-bioeconomy","supplier-usda","supplier-u-s-department-of-energy"],"_links":{"self":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts\/38445","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/comments?post=38445"}],"version-history":[{"count":0,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts\/38445\/revisions"}],"wp:attachment":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/media?parent=38445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/categories?post=38445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/tags?post=38445"},{"taxonomy":"supplier","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/supplier?post=38445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}