Abstract

Growth of a biobased economy can strengthen the nation's economic security by increasing domestic manufacturing and exports of affordable consumer products, improving the U.S. balance of trade. It can also enhance the country's energy security by reducing dependence on foreign oil and flattening sharp rises and falls in the price of energy. And it could improve the nation's health and environment through cleaner burning fuels and more efficient manufacturing that reduce emissions of a variety of pollutants, including greenhouse gases. 2
The biobased economy is a vital component of a broader “bioeconomy” that represents the innovation and commercial activity of the whole biotechnology industry. In September 2011, President Barack Obama announced that “the Administration will develop a National Bioeconomy Blueprint detailing steps to harness biological research innovations to address national challenges in health, food, energy, and the environment. Biological research underpins the foundation of a significant portion of our economy. By better leveraging our national investments in biological research and development the Administration will grow the jobs of the future and improve the lives of all Americans.” 3 This blueprint is expected to serve as an umbrella for long-term, stable policies to support the emergence of biotechnology companies commercializing the solutions to national challenges.
In developing the value chains of a biobased economy, industrial biotechnology must compete with mature technologies and entrenched infrastructure of fossil fuels. The challenges of reaching sufficient scale to compete are well documented, but not insurmountable. 4 A combined approach of renewing existing policies for a length of time that enables long-term business planning, extending them to the full range of manufacturing and production associated with the biobased economy, and adopting new policies to recognize the continued evolution of industrial biotechnology promises timely results.
Addressing the Challenges
The grand challenge of building the biobased economy can be viewed as a series of discrete smaller challenges. The first challenge is to continue biotech research and development in parallel with commercialization of products. Federal programs have provided solid funding to industrial biotechnology research, leading to important innovations. That support has ushered many technologies to the cusp of large-scale commercialization. But even as commercialization accelerates, continued innovation and process improvements will be needed to enhance the economic viability of projects and expand the industrial biotech product portfolio. Continued public-private research collaborations will be needed to keep the U.S. competitive. Specific areas in need of ongoing research include synthetic biology, marine biotechnology, biocatalysis (enzymes), feedstock improvement and processing, and development of new chemicals and products.
The second challenge is to renew the flow of capital to finance construction of first-of-a-kind commercial biorefineries. Advanced biofuels, renewable chemicals, and technologies for processing cellulosic biomass have emerged from the laboratory and are ready for commercial deployment. But commercial lenders are reluctant to provide financing because these technologies have not been proven at scale. With the downturn in the economy, venture capital investment has also diminished significantly. Many industrial biotech innovators may be trapped in the “valley of death” because of this difficult financing climate. Commercial lenders and partners are looking for federal policies that reduce the risk of investing in new technologies.
The third challenge is to establish next-generation feedstock supply chains. Producing commercial volumes of biofuels and renewable chemicals will require a robust and diverse feedstock supply with an emphasis on high-yielding, sustainable biomass sources such as purpose-grown energy crops (PGECs), including algae. A robust infrastructure for the production, collection, and processing of next-generation feedstocks – such as cellulosic crop residues, dedicated energy crops, and algae biomass – must be built practically from scratch. A pathway to widespread adoption of purpose-grown energy crops is needed, including enduring programs to assist farmers in establishing such crops; equipment and infrastructure for collecting, storing and delivering the biomass; and processing technology and infrastructure.
A fourth challenge is to train a new workforce for the bioeconomy. Advanced biofuel production under the federal Renewable Fuel Standard (RFS) will likely create more than 800,000 direct jobs in the United States by 2030. 5 Hundreds of biofuel biorefineries located throughout the country already help meet RFS requirements, including over 50 existing and planned cellulosic biofuel development projects. Renewable chemicals projects are anticipated to lead to tens of thousands of additional high quality jobs over the next decade. 6 Biorefineries are expected to be built in rural areas, creating demand for significant manpower in research and development, construction, sales, management, feedstock growth, harvesting, transportation, engineering, and distribution. Workforce training in all of these areas will be critical. In particular, the evolving workforce will create a rapidly growing need for chemical engineers trained to work with biological systems – skills that are already in short supply even at this early stage of deployment.
A fifth challenge is to ensure a neutral regulatory atmosphere. Current environmental regulations are geared toward clean-up of end-of-pipe pollution. Such standards do not reflect the unique properties of industrial biotechnology to prevent pollution through cleaner, more efficient manufacturing processes. Revised regulatory approaches are needed to encourage the adoption of biotech processes. For example, many proposed federal and state-based carbon regulations fail to account adequately for greenhouse gas emissions savings that can be generated by industrial biotechnology. Combustion of biofuels and other biogenic energy sources recycles CO2 emissions through sustainably sourced renewable biomass feedstocks. Other uses of biogenic carbon, such as biochemicals and bioplastics, may even sequester CO2, reducing atmospheric greenhouse gas concentrations. Life-cycle based methodologies should start from the premise that all renewable biomass receive full credit for recycling of carbon.
A sixth challenge is to reduce barriers to market access. Biofuels face several barriers to increased market adoption, including ethanol blending limits, regulations and standards that restrict eligible fuel molecules or production pathways, and inadequate biofuel distribution infrastructure. In the case of new “drop-in” biofuel molecules such as biobutanol and renewable hydrocarbons, there are multiple statutory and regulatory barriers to the introduction of these promising new fuels. For biobased products, existing programs to expand market adoption and consumer awareness have been very slow to take shape, hindering the growth of these technologies.
A seventh challenge for the industrial biotech sector is increasing public awareness and support for industrial biotech processes and products. Broad support has been established for advanced biofuels, but recent criticism of first-generation biofuels has undermined the confidence of policymakers, investors, and the broader public in biofuels generally. 7 Awareness of renewable chemicals among policymakers and the public significantly lags that of biofuels, complicating the case for policy support.
Helping Industry Overcome the Challenges
Over the past six years, Congress and the Bush and Obama administrations have enacted a broad set of federal policies that, if continued and expanded, can help the advanced biofuels and biobased products sectors overcome the above challenges. While there have been some notable successes, slow implementation and a lack of appropriate coordination has reduced the impact of these policies to date. For example, overly restrictive implementation has limited biorefinery loan guarantee programs; renewable energy tax incentives will likely expire before having a significant impact; and threatened cuts to farm bill energy programs have added to project uncertainty. Strong, sustained, and stable federal policy support is critical to overcoming the challenges facing the industrial biotech sector.
The National Bioeconomy Blueprint should advocate maintaining funding for biomass and biorefinery programs at the U.S. Departments of Agriculture (USDA) and Energy (DOE) and expanding eligibility to renewable chemicals and biobased products. In particular, continuation and robust funding of the Biomass Crop Assistance Program (BCAP), USDA and DOE Loan Guarantee Programs (LGP), and the DOE Biomass Research and Development Program would support continued progression of demonstration and pilot biorefinery projects to commercial scale.
Reauthorization of the Farm Bill (which occurs every five years) should ensure that USDA programs support the full range of biorefinery products. USDA has rightfully taken a leadership role in helping to commercialize advanced biofuels and biobased products through programs authorized under the Farm Bill's energy title (Title IX). These programs are just now realizing their full potential after protracted rulemaking, with rules for most of these programs only being finalized in the last quarter of 2010. Some programs, such as the USDA LGP, need new legislative authority to include renewable chemicals and biobased products. Other programs, though authorized to support these technologies, have focused almost entirely on fuels.
The National Bioeconomy Blueprint should support the Department of Defense's (DOD) interest in advanced biofuels. Transportation fuel security is a national security issue, not just for the American public, but also for America's military. The DOD has expressed a desire to help address fuel security by facilitating the commercialization of military-grade advanced biofuels.
Furthermore, the Blueprint must maintain the RFS, the federal government's foundational policy supporting the development of an advanced biofuels industry. It provides both market assurance and a price premium for high-performing advanced biofuels, resulting in a strong investment case for advanced biofuels. To stimulate necessary investment in advanced biofuel technologies, the market needs an unwavering message that the Environmental Protection Agency (EPA), under its Clean Air Act authority, will continue to set annual advanced biofuels volumes at the level mandated in the Energy Independence and Security Act of 2007.
The National Bioeconomy Blueprint should also incentivize innovation through the tax code. Tax policy can more effectively promote advanced biofuels commercialization by providing long-term opportunity and flexibility. An enduring package of advanced biofuels tax incentives that extends the cellulosic biofuel producer credit, supports commercialization of innovative renewable chemicals and biobased products, expands feedstock eligibility, and allows developers to elect either a producer credit or refundable investment tax credit should be pursued aggressively.
Proposal: The Biobased Economy Jobs and Development Act
The Biotechnology Industry Organization (BIO) has developed the following proposal to elevate awareness of the biobased economy and realize the outstanding job creation and economic development potential of industrial biotechnology and biorefinery commercialization.
Agriculture
Biomass Crop Assistance Program – Reauthorization and Enhancement
BCAP is the key program encouraging farmers and landowners to produce new purpose-grown energy crops. This proposal would reauthorize BCAP through December 2017 and enhance the program through multiple mechanisms: (1) ensuring funds are directed primarily to production of next-generation crops for biofuels and bioenergy; (2) establishing a dedicated funding mechanism for awarded contracts; (3) providing for eligibility of non-food crops; and (4) clarifying eligibility of certain other PGECs.
Federal Crop Insurance for Purpose Grown Energy Crops
While the USDA's Risk Management Agency (RMA) is currently studying the feasibility of developing crop insurance programs for certain biomass feedstocks, no formal federal crop insurance program is in place to support producers of new PGECs. This section directs the RMA to finalize its research and work with stakeholders to establish a formal crop insurance program that will cover PGECs.
Feedstock Sustainability Enhancement Grants
The continued development of domestic sources of energy, including biofuels and renewable chemicals, depends upon the sustainable availability of consistent, high yield, and good quality feedstocks. This section establishes a grant program through the USDA and DOE to fund demonstration projects that seek to enhance biofuel and bioenergy feedstock sustainability.
Farm Bill Energy Title Amendments for Renewable Chemicals
Many of the programs in the 2008 Farm Bill's Title IX renewable energy programs are not available to renewable chemicals and biobased products, despite their profound potential benefits. This section codifies the definition of renewable chemicals; modifies the section 9003 Biorefinery Assistance Program and 9007 Rural Energy for America Program to provide for eligibility of renewable chemicals projects; and expands the USDA BioPreferred program to increase program outreach and education.
Tax
Tax Credit for Production of Qualifying Renewable Chemicals
Renewable chemicals and biobased plastics represent an important technology platform for reducing reliance on petroleum, creating jobs, increasing energy security, and reducing greenhouse gas emissions. 8 By providing a renewable chemicals tax credit, Congress can help secure America's leadership in this important arena of green chemistry. This proposal provides a federal income tax credit for domestically produced renewable chemicals. Like current renewable electricity production credits, the credits would be general business credits available for a limited period per facility. Similar to the operation of IRC section 48C, the Treasury Department and USDA would review taxpayers' applications in a competitive process to ensure conformance with legislative intent. Per calendar year, each taxpayer would be entitled to claim as much as $25 million in renewable chemicals production tax credit associated with production of eligible renewable chemicals.
Advanced Biofuels Tax Reform
Current tax law on advanced biofuels does not provide an ordered pathway toward U.S. energy security. Congress must consider amendments to current tax incentives to focus on bringing commercial volumes of affordable advanced biofuels to market in the near term. Toward this end, this section implements several changes to the tax code: (1) extend the Cellulosic Biofuel Production Tax Credit through 2016 and add eligibility for algal biofuels; (2) allow advanced biofuel facility developers the option of electing to receive an investment tax credit; (3) provide for eligibility of biorefinery retrofit projects; (4) provide eligibility to federal Section 1603 Grants in Lieu of Tax Credits program; and (5) extend and expand eligibility for cellulosic biofuel property accelerated depreciation.
Defense
Strategic Biorefinery Initiative and Offtake Authority
Substantial energy security benefits would accrue to the DOD from the development of domestic sources of renewable biofuels and biobased products. As a major potential customer and a potential source of funding for biorefinery construction, the DOD is uniquely positioned to help accelerate deployment of these vital products. This section establishes and provides necessary funding for a DOD Strategic Biorefinery Deployment Program to finance construction of the first five commercial military advanced biofuel biorefineries. It directs the DOD to identify existing funding authority for such projects and to conduct a biorefinery “fly-off” to identify and fund construction of the most promising projects. In addition, this section provides DoD with the authority to enter into long-term (up to 15 years) off-take agreements for procurement of advanced biofuels for military use.
Energy
Repurpose and Retrofit Grant Program
Repurposing or retrofitting existing idled or underutilized US manufacturing facilities to integrate next-generation processes is one of the most time- and cost-effective ways to build out the advanced biofuels and renewable chemicals sector. This section establishes a federal matching grant program through the DOE to fund projects (up to 30 percent of eligible costs) to repurpose or retrofit existing idle or underutilized manufacturing facilities for the production of advanced biofuels and renewable chemicals.
Synthetic Biology for Enhanced Sustainability of Biofuels and Renewable Chemicals
The advancing field of synthetic biology has the potential to enhance greatly both the economic and environmental sustainability of fuels and chemicals manufacturing. 9 This section establishes a DOE Synthetic Biology Research and Development (R&D) Grants Program to fund research and development in industrial biotechnology for the enhanced sustainability of biofuels and renewable chemicals produced through synthetic biology technology. This program would support work on biological catalysts and processes that enable the cost-effective, sustainable production of advanced biofuels, renewable chemicals, and other technologies that reduce or minimize greenhouse gas emissions, including biological processes for removing CO2 from the atmosphere.
Industrial Bioprocess R&D Program
The use of industrial biotechnology for the production of renewable chemicals and biobased products is enabling dramatic improvements in industrial energy efficiency as well as a host of renewable alternatives to traditional petrochemical-based products. This section establishes an Industrial Bioprocess R&D program through the DOE Office of Energy Efficiency and Renewable Energy (EERE) and the Industrial Technologies Program (ITP) to fund projects in industrial biotechnology for renewable chemicals, biobased products, and renewable specialty chemicals.
Environment
EPA R&D Program for Renewable Chemicals
Renewable chemicals can be engineered to provide innovative solutions that save energy, are environmentally preferred, and are a direct substitute or “drop-in” replacement for petrochemicals. Presently, no strong standardized metrics exist to quantify the environmental benefits of these products. Standardized metrics would allow renewable chemical companies to demonstrate the substantial cost, environmental, and efficiency benefits of their products, further encouraging development. This section establishes a new R&D program funded by the EPA that would provide grants to conduct environmental assessments for renewable chemicals and industrial products produced with industrial biotechnology. This program would provide for the following: (1) assessments to generate quantitative data to demonstrate chemical safety and pollution prevention in industrial biotechnology processes; and (2) educational and awareness follow-up programs for US businesses for the purpose of providing education and data on the environmental and economic benefit of using green chemistry and biological processes in manufacturing.
