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Report: U.S. must act quickly to maintain edge in biorefining

By Erin Voegele | March 01, 2013

The Milken Institute has released a new report, noting that the U.S. could replace 20 percent of its petrochemical consumption with biobased products over the next decade, while creating jobs and capturing a larger share of the renewable chemical market. However, the institute stresses the importance of acting quickly, before the current technological and agricultural edge is lost to other nations.

In the report, titled “Unleashing the Power of the Bio-Economy,” the institute describes three significant barriers to the development of new biotechnology in the U.S, including financing, market uncertainties, and policy uncertainty and complexity.

“With our strong agricultural and manufacturing sectors, the United States can lead the bio-economy and create good-paying jobs,” said Joel Kurtzman, Milken Institute senior fellow. “It is essential we develop new financial and policy innovations to move this cutting-edge sector forward.”

One barrier identified by the report is bridging the readiness gap. According to the institute, the gestation period for new biobased chemicals is 5 to 10 years, longer than most investors can tolerate without revenues or profits. Venture capitalists have been unwilling to fund commercial-scale up, and traditional lenders are hesitant to take on technology risk or untested markets. According to the report, biochemicals face additional financing challenges because the most expensive research and development occurs at the start of the supply chain.

Regarding market uncertainties, the report notes that risk-aversion toward biobased projects has not been limited to banks, bond investors, or existing petrochemical companies. Rather, agrichemical companies have also abandoned projects. On example cited in the report is Archer Daniels Midland Co.’s decision to abandon a bioplastic joint venture with Metabolix. While ADM said fermentation technology performed well, it cited uncertainty around projected capital and production costs combined with the rate of market adoption, as reasons for ceasing its involvement with the project.

Policy uncertainty and complexity also poses a challenge to the biorefining industry. While the federal government has a long history of fostering new technologies and industries, the report notes that regulation of biobased chemicals is complex and sometimes more onerous than rules governing petrochemicals. For example, chemicals derived from biotechnology are regulated by the U.S. EPA, USDA, and the Food and Drug Administration. “A single biobased chemical can be subject to regulations at more than one agency, making compliance with the law complicated, uncertain and expensive,” said the institute in the report.

The publication also points to several recommendations that could help overcome these challenges. First, it recommends establishing concrete and consistent government policies. There is significant competition from other countries that have made investment in biobased chemicals a priority, and public funds are critical to reducing the risk for private investment, said the authors of the report.

Green banks are another recommendation made by the report. The system would be based on one already in place in Denmark, and would involve the sale of standardized, transparent bonds to finance loans for green initiatives. In addition, the institute calls for the expansion of “market pull” systems, such as the USDA’s BioPreferred program, to provide incentives for product purchases and allow for promotional labeling of products that use biochemicals. Finally, the report recommends taking advantage of existing infrastructure, such as retooling unprofitable ethanol plants to produce other products.

“By unleashing the power of the bioeconomy we can reduce our dependence on petrochemicals, protect the environment, and still produce the same great products. That will do more than just improve the economy, it will improve our lives,” said Kurtzman.

 

 

 

1 Responses

  1. Sara

    2013-03-21

    1

    Time to face the music armed with this great inofrmaiton.

  2.  

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