36 – 3. TRENDS IN INDUSTRY AND PRODUCTS
FUTURE PROSPECTS FOR INDUSTRIAL BIOTECHNOLOGY – © OECD 2011
This chapter looks at recent developments in the liquid biofuels industry
and some of the international policy issues involved. A significant
development in 2010 was the US volume mandates which also specified the
required reductions of greenhouse gas (GHG) emissions for the different
categories of these fuels to 2022. In addition, bioplastics production has
increased sufficiently to treat them separately from other bio-based
chemicals. In future there may be a blurring of the boundaries between bio-
based chemicals and biopolymers, as indicated by the production of bio-
based ethylene to produce polyethylene.
Biofuels
To some extent, biofuels have taken over the industrial biotechnology
agenda in recent years. The year 2005 has been regarded as the tipping point
for biofuels, when the demand created by drivers such as energy security put
biofuels, and arguably industrial biotechnology more generally, high on the
policy agenda. As noted by Industrial Biotechnology – News (2009),
“Assuming an average biorefinery size of 40 million gallons per year, the
USDA estimates that meeting the RFS2 advanced biofuels goals will mean
the building of 527 biorefineries, at a cost of USD 168 billion”. Between
2005 and 2008 the construction of corn ethanol plants in the United States
exploded. One of the desired effects was a revitalisation of rural America; to
some extent this seems to have happened (Wyse, 2008).
It was not long before controversies arose, such as the debates on
sustainability (Goldemberg et al., 2008) and food vs. fuel (Zhang et al.,
2010; Mueller et al., 2011). Land use is an absolutely central issue in both of
these debates (Heinen and Johnson, 2008). Policy and investment interest
started to shift to biofuels other than corn-derived ethanol. Soaring oil prices
help to maintain interest in biofuels at a high level, and indeed there is
evidence that the food price spikes of 2007-08 had more to do with oil prices
than with biofuels (Harvey and Pilgrim, 2011).
US policy measures, if successful, will drive the large-scale develop-
ment of biofuels. In particular the Energy Independence and Security Act
(EISA) (2007) and the Farm Bill (2008), which between them set volume
mandates, created tax incentives, and provided funding for demonstration
plants, will pave the way for very large investments in research and infra-
structure and create further rural regeneration while working towards the
aim of energy security. In fact, governments can and have intervened at
many different points in the value chain for biofuels. Figure 3.1, for
example, demonstrates the different points at which subsidies (direct and
indirect) can be applied.