Bioeconomy Under the Radar

WASHINGTON (DTN) -- The bioeconomy is taking up a growing space in rural America, but chemicals and plastics made of crop feedstocks are largely flying under the radar.

Whether it is spoons, Coke bottles or carpets made out of corn, livestock enzymes for pharmaceuticals, or John Deere tractors using soy oil for plastic, supporters of a growing bioeconomy are trying to highlight that renewable chemicals is a more than $252 billion market that could grow to more than $440 billion by 2020.

Those figures, from a 2016 report by BIO, were touted at Commodity Classic last week in San Antonio, Texas, as the prospects and barriers of a growing bioeconomy were explained to farmers who largely grow some of the feedstocks used in these renewable products. BIO is the world's largest trade association representing biotechnology companies, academic institutions, state biotechnology centers and related organizations across the United States and in more than 30 other nations, according to the organization's website.

Jim Greenwood, president and CEO of BIO, testified before a House Agriculture Subcommittee on Thursday about some of the economic impact and potential of the bioeconomy and the role of energy programs in the farm bill.

"As we look at it, there is potential for advanced bioproducts to affect rural America as profoundly as ethanol has over the last 20 years," said John Bode, president and CEO of the Corn Refiners Association.

Other bioproducts won't have the volume of demand as ethanol, but still have a profound impact because of capital investment and jobs that come from developing those processing facilities. Bode pointed to the example of a $100 million investment to add a fermentation unit to a wet mill.

"It certainly does increase the demand and also holds great potential for both demand and impact on communities and jobs, and also on the perception of corn and production agriculture," Bode said.

Such development is an avenue to reducing carbon in the environment. That is an advantage we have going out and competing with petrochemicals and petroleum-based plastics, Bode said. There is growing market demand as companies push for ways to lower their carbon footprint.

"There are now restaurant chains that are priding themselves on the fact that all of the utensils -- the plastic utensils, packaging, everything they use -- is bio-based," Bode said. "The waste from those restaurants goes into corn-based trash bags and all of the waste goes into composting. None of it goes to landfills."

Joe Hrdlicka, executive director of the Iowa Biotechnology Organization, echoed some of Bode's perspective on the market for bioproducts. "Consumers want sustainable, renewable products, and to me that is going to be the main driver for these products," Hrdlicka said.

REGULATORY ROADBLOCKS

That's the promise. The killer for the bioeconomy can be regulatory roadblocks, Bode said. One such roadblock is EPA's push to regulate greenhouse gases. The agency, under the Obama administration, pushed to treat all carbon dioxide emissions the same. Bode said leading scientists said EPA sought to treat biogenic carbon dioxide -- carbon released when a crop is processed -- as the same as carbon released from fossil fuels even though the biogenic carbon has a one-year lifecycle while the fossil-fuel carbon had been sequestered for millions of years.

"It disregards the fact that there is a fundamental difference, and the natural lifecycle of plant growth is part of our environment," Bode said.

EPA had determined it was simpler for regulatory purposes to regulate everything. Bode said that has become a major barrier to further development of the bioeconomy. EPA's rules require permits that add a couple of years to the timeline for any project for a bioproduct. "It also adds substantial risk for litigation," Bode said.

Stringing out the timeline, adding substantial costs and the prospects of litigation all combine to become a major barrier to the development of these kind of projects, Bode said.

Leaders from the Corn Refiners Association, National Corn Growers Association and American Soybean Association and others are scheduled to meet with EPA Administrator Scott Pruitt early next week to talk about some of the regulatory issues surrounding agriculture and the carbon calculation issues are likely to come up.

Bode said he is hopeful the regulatory issues can be knocked down. He added that talk of a new farm bill lends opportunity for some federal support for funds to help build out research for advanced bioproducts and promotion programs.

DRIVING INCENTIVES

For a still-nascent industry, there often has to be policy leadership to stimulate new production, Hrdlicka said. He pointed to the Iowa Legislature last year creating the Renewable Biochemical Initiative, which is essentially a tax-credit program for new biochemical products. It could generate a 5-cent-per-pound refundable tax credit for a new company for up to $1 million, and an already established firm can get up to $500,000. The tax credit is capped at a maximum of $10 million annually, but Hrdlicka hopes there is such demand that the legislature would eventually have to expand the tax credit.

Iowa has more than 50 various bioprocessing facilities. The tax credit gives companies an opportunity to work with startups to co-locate at another processing operation. "This makes sense in Iowa from an economic perspective," Hrdlicka said.

FOCUS ON SUSTAINABILITY

The feedstocks for bioproducts lead to other questions of sustainability as well. That's where groups such as Field to Market are helping companies examining the tradeoffs.

The Bioplastics Feedstocks Alliance joined Field to Market last year because companies want to understand the impacts of using corn-based products for plastic bottles and other items. The companies want to ensure they don't get pushback down the road if agriculture is a target for nutrient runoff, etc.

"These are risks that companies are going to evaluate within the emerging bioeconomy," said Rod Snyder, executive director of Field to Market.

Executives at food companies are actually having conversations about topics such as nutrient management, buffer strips and cover crops. "They want to make sure their products are not having an adverse effect on the environment and that they can engage with farmers upstream and help to advance better practices," Snyder said.

Snyder expects that, in the coming years, companies are going to want more transparency about crop sourcing for products in the U.S., so they can talk to consumers and shareholders about agricultural sustainability.

"I think you can do this in a responsible way and show companies and consumers that farmers are sustainable in the United States, and we are getting better and better every year," Snyder said.

A PREMIUM QUESTION

While looking to jumpstart industries using agricultural feedstocks, questions remain over whether farmers will reap benefits from higher prices. There are some small premiums being paid out to farmers for being part of a sustainable-sourcing program. These farmers get paid a small premium for reporting environmental impacts of their operations, but such programs by companies are few for now.

"I think the supply chain is still sorting out the value for many of these conversations," Snyder said. "Are consumers willing to pay more for a product that is a domestically produced, more bio-based product? We are still getting that conversation sorted out with the Field to Market membership."

The other side of the conversation, however, is that a new level of transparency is just going to be part of doing business in the coming years. Companies will simply want more information about how they are sourcing their raw materials but are not planning to pay more for such information.

"We need to develop this market and let it mature and sort out," Bode said. "If we don't meet a certain level of sustainability, we are risking disqualification of the development of this promising area. But I'm very confident this will be met."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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