Advancing the Biobased Economy: Renewable Chemical Biorefinery Commercialization, Progress, and Market Opportunities, 2016 and Beyond

A review of operating biorefineries displays a range of technology solutions undergoing commercial development – beyond just advanced biofuels – to produce commodity and specialty renewable chemicals. Industrial biotechnology companies are pursuing renewable chemicals and biobased materials because they can be commercialized at production manufacturing scale and at low volumes, as well as promise environmental benefits, stable costs and novel properties in comparison to fossil fuel-derived chemicals. Competition to produce platform renewable chemicals provides manufacturers assurance of a steadily available, high-quality supply of renewable chemicals for consumer product applications.

Analysts predict a rapid expansion of renewable chemical production in the near future based on planned capacity expansion or new construction. McKinsey & Co. estimates that there were $252 billion (€204 billion) in sales of biobased products in 2012, with biofuels and plant extracts comprising more than half. Sales of renewable chemicals represented 9 percent of the $2,820 billion (€2,281 billion) in worldwide chemical sales in 2012. By 2020, McKinsey expects biobased products to make up 11 percent of the $3,401 billion (€3,130 billion) global chemical market. Sales of biobased products would reach $375 – $441 billion (€345 – €406 billion) by 2020, with a compound annual growth rate of 8 percent over the preceding decade. Worldwide sales of chemicals are expected to grow at 4 percent annually, overall. While biofuels and plant extracts continue to comprise half of the projected sales of biobased products in 2020, McKinsey expects the highest growth rates in sales of new biopolymers and renewable chemicals, biocatalysts for industrial processes and biologic medicines, as well as biofuels.

Supportive polices will help grow the 21st century biobased economy. The Renewable Fuel Standard (RFS), for instance, not only helped stimulate innovation in biofuels, but also opened discussions and policy development in renewable chemicals and biobased products. The 2014 Farm Bill (The Agriculture Act of 2014) extended loan guarantee eligibility to renewable chemicals and biobased products producers, through Section 9003, the Biorefinery, Renewable Chemical, and Biobased Manufacturing Assistance Program.

Other policy drivers include draft legislation, introduced in both federal chambers, creating tax incentives for production of or investment in qualifying renewable chemicals. Spurred by the federal legislation, Iowa and Minnesota announced enactment of state-level production tax credits for renewable chemicals that will speed capital investment availability and commercialization. Additionally, draft legislation introduced in the 114th Congress – the Master Limited Partnerships Parity Act (MLP) – proposes to extend tax benefits currently available only to the oil and gas industry to renewable chemicals and biofuels producers. If enacted, the legislation will provide renewable chemical producers access to low-cost capital, will attract investors and will lower corporate stock tax liabilities.

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