From 2004 through 2007, the development of the U.S. liquid biofuel and biobased chemical industries expanded significantly as these industries increasingly used enzymes, micro-organisms, and renewable resources in the production of fuels and chemicals. The large increase in sales of U.S.-produced liquid biofuels and bio-based chemicals showcased the adoption of industrial biotechnology. A significant piece of the increase was accounted for by the ethanol and biodiesel industries, which were supported by government tax incentives, mandatory use regulations, or both. Sales of liquid biofuels and bio-based chemicals remain small in comparison to conventional chemicals and liquid fuels.
Innovation is key to the future competitiveness and productivity of U.S. firms and all innovation indicators increased during the 2004–07 period, including R&D expenditures, patent and trademark activity, strategic alliances, and government grants. However, operating income as a share of total net sales of bio-based products was relatively flat during the period, largely due to the substantial increase in agricultural feedstock prices. Accounting for more than 50 percent of production costs for liquid biofuels, feedstocks along with the inability to attract sufficient investment are some of the most significant challenges to the successful development and adoption of industrial biotechnology.
The difficulty in attracting R&D and investment capital comes from the risk inherent in new technology, including the uncertainty of whether such technologies can be fully developed and adopted. Other major roadblocks identified by liquid fuel and chemical producers as affecting the adoption of industrial biotechnology include production costs and limits of technology.
Industrial biotechnology can potentially benefit the U.S. economy by permitting the substitution of liquid biofuels for conventional liquid fuels, potentially reducing crude petroleum imports, and stimulating the development of rural economies due to increased agricultural feedstock consumption. Industrial biotechnology can improve production efficiencies and may also provide a range of environmental benefits, including sustainable production, reduced greenhouse gas (GHG) emissions and less waste generation.
The United States was not alone in its industrial biotechnology growth during this time as industrial biotechnology activities in many foreign countries also increased from 2004 through 2007. Like the United States, foreign governments use tax incentives, mandatory use regulations, and R&D funding to support their industrial biotechnology industries with the notable examples of Brazil, China and the EU.