# Presentation: 434806

## THE FUTURE FOR BIOPRODUCTS

**EVERYTHING OLD IS NEW AGAIN – AND THEN SOME**

## PRESENTED TO THE  USDA GLOBAL CONFERENCE ON AGRICULTURE

**Biofuels: Research and Economics**
**August 20 -22, 2007**
**Crowne Plaza Hotel**
**Minneapolis, Minnesota**

## Dr. Roger ConwayDirectorUSDA/Office of Energy Policy and New Uses

## BIOBASED INDUSTRIAL PRODUCTS ARE BACK 

- Biobased industrial products were common in the first two decades of the last century
- The emerging petroleum industry and petrochemical industry provided more product innovation at lower cost
- Three factors have converged to shape the re-emergence of biobased industrial products

- Petroleum and natural gas based energy and products have become more expensive and supplies less dependable
- Growing concerns with global climate change have caused more attention to environmental sustainability and carbon cycle management
- Biological sciences are now much more adept at creating new products

## U.S. PUBLIC POLICY HAS PLAYED AN IMPORTANT ROLE

- Biomass Research and Development Act
- Funding research, development, and demonstration projects
- Energy Title of 2002 Farm Bill
- BioPreferred preferred procurement
- Renewable energy and energy efficiency grants and loan guarantees
- Energy Policy Act of 2005
- Renewable fuels requirement, 7.5 billion gallons
- Tax credits for ethanol (51cents per gallon) and biodiesel ($1.00 per gallon)

## PROPOSED U.S. PUBLIC SECTOR INVESTMENTS 

- Bush Administration’s farm bill proposals include $1.6 billion in new funding for renewable energy research, development, and production.
- Including $2.1 billion in guaranteed loans for cellulosic projects,
- $500 million for bioenergy and bioproducts research, and
- $500 million for renewable energy systems and energy efficiency grants
- Department of Energy will invest up to $385 million over four years to support cellulosic ethanol development

## CURRENT U.S. BIOFUELS PRODUCTION

- Ethanol  production capacity of 7  billion gallons in April, 2007, from  118 plants, many of them farmer owned
- Biodiesel production capacity of 864 million gallons in January, 2007, from  105 plants, many of them farmer owned
- Increased emphasis on developing biomass sources that do not compete with food or feed

## U.S. WIND ENERGY DEVELOPMENT

- 29% annual growth rate over 2000 to 2005
- 9,149 megawatts installed at end of 2005
- Industry expects to install 3,000 megawatts in 2007
- U.S. wind energy potential is estimated to be 10,777 billion kilowatt hours
- U.S. production tax credit of 1.9 cents per kwhr in place

## U.S. PHOTOVOLTAIC ENERGY

- 1996 peak kilowatts produced – 13,016
- 2005 peak kilowatts produced – 424,807
- Federal tax credit of 30% of expenditures for solar technologies (through 2008)
- Various state level incentives also apply
- Technological breakthroughs in efficiency of solar energy development are creating new interest in solar energy

## U.S. POLICY SUPPORTS BIOREFINERY DEVELOPMENT

- Bioproducts, and feedstocks for bioproducts, are part of the same refining process for biofuels, increasing cost effectiveness of both
- An extensive array of chemical building blocks and final chemicals can be produced from biobased feedstocks
- Biobased chemicals can often be produced more cheaply and more quickly with greater environmental sustainability than can chemicals from petroleum or natural gas

## TOP VALUE ADDED CHEMICALS FROM BIOMASS

- U.S. Department of Energy has identified twelve biobased chemicals as building blocks for a wide range of final products
- End use products include familiar products such as: composite panels, hydraulic fluids, solvents, coatings, clothing plastic films and containers, adhesives, wood substitutes, cleaning agents, carpeting, personal care products, and pharmaceuticals

## GLOBAL CHEMICAL INDUSTRY GROWTH

- Industry grows  by 3 – 6% per year
- Biobased share projected to rise from 2% now to 22% of industry by 2025
- Global chemistry industry will grow to over $2 trillion by 2025
- Biobased share to exceed $500 million per year
- Corn will be primary feedstock for next 10 years with cellulosic sources becoming dominant within 20 years

## PROJECTED GLOBAL MARKETS OF BIOBASED CHEMICALS 

- Commodity chemicals:
- 2005 -- $0.9 billion; by 2025 -- $50-86 billion
- Specialty chemicals:
- 2005 -- $5 billion;     by 2025 -- $300-340 billion
- Fine chemicals:
- 2005 -- $15 billion;    by 2025 -- $88–98 billion
- Polymers:
- 2005 -- $0.3 billion;   by 2025 -- $45-90 billion

##  A BIOBASED PROCUREMENT PREFERENCE PROGRAM

- Focus of presentation will now shift to a preferred procurement program for biobased products affecting all Federal agencies and their contractors
- Two states have enacted legislation modeled after the Federal program
- A number of countries are also reviewing the U.S. program as a guide

## FEDERAL BIOBASED PRODUCTS PREFERRED PROCUREMENT PROGRAM

- Provides that Federal agencies must give purchasing preference to biobased products designated by this program
- Authority for the program included in the Farm Security and Rural Investment Act (FSRIA) of 2002
- Section 9002 provides for both preferred procurement and labeling programs

## SECTION 9002 OF FSRIA SETS OUT FEDERAL AGENCY REQUIREMENTS

- The Act defines biobased products as commercial or industrial products that are composed, in whole or in significant part, of biological products or renewable **domestic** agricultural materials (including plant, animal, and marine materials) or forestry materials

## DOMESTIC CONTENT

- Is interpreted to mean content from any country with which the United States has a preferential trade agreement
- Countries that are signatories to NAFTA and CAFTA, for example, will have their qualifying biobased products treated the same as U.S. domestic products
- Label program requires minor statute change in biobased definition

## WHY DID CONGRESS CREATE THIS PROGRAM?

- To spur demand growth for new biobased products/jump start a new industry
- To grow domestic demand for agricultural commodities
- To encourage development of processing and manufacturing in rural communities
- To capture environmental benefits
- To enhance the Nation’s energy security

## WHAT DOES THE PROGRAM REQUIRE?

- All Federal agencies must give preference to biobased products that have been designated by the program, unless:
- The products are not reasonably available
- The products fail to meet performance standards for the application intended
- The products are available only at an unreasonable price

## DESIGNATING ITEMS FOR PREFERRED PROCUREMENT

- Items are generic groupings of products
- Items are designated by rule making
- Once designated, all ‘qualifying’ products within a designated item are eligible for preferred procurement
- Federal agencies have up to one year to implement procurement preference

## WHAT IS A ‘QUALIFYING’ BIOBASED PRODUCT?

- It is consistent with definition in statute
- Biobased content is known
- Environmental and health effects of product use are available
- Product performance, as tested against industry recognized standards, is known
- Designation is based on providing reliable and relevant information to Federal agency

## EXCLUSIONS FROM THE PROGRAM

- The following product groups are excluded from the program by statute:
- Food and feed
- Motor vehicle fuels
- Electricity

## AGENCIES’  SPECIFICATIONS MUST COMPLY

- Within one year after final guidelines issued, (January 11, 2005)  agency specifications require use of biobased products
- Agencies must create procurement program
- A biobased products preference program
- An agency promotion program
- An annual review and monitoring of effectiveness of agency’s program
- Within one year after designation, agencies’ must give procurement preference to items
- Applies to Federal agency contractors, as well

## TO USE THE PROGRAM A MANUFACTURER CAN:

- Claim coverage under the program for all products for which items (generic groupings of products) have been designated by rule making
- Certify that a product’s biobased content is consistent with statutory definition
- Certify biobased content meets minimum requirement, using ASTM standard test
- Certify that a product will perform in the use to which it will be put

## BIODEGRADABILITY REQUIRED

- To be designated for preferred procurement, items of single use bioplastic products must meet appropriate ASTM standard for biodegradability
- Some examples are:
- Cutlery
- Garbage bags
- Food containers

## FEDERAL AGENCIES MAY ASK FOR PRODUCT INFORMATION

-  Federal agencies may ask the manufacturer for the following information:
- Biobased content information using ASTM test
- Environmental and health effects of product use using BEES analysis or ASTM standard
- Product’s life cycle cost using same standards
- Results of product performance testing against industry recognized performance standards

## ITEMS IN PROCESS OF BEING DESIGNATED

- Hand cleaners and sanitizers
- Adhesives and mastic removers
- Sorbents
- Graffiti and grease removers
- Glass cleaners
- Dust suppressants
- Carpet and upholstery cleaners
- Bathroom and spa cleaners
- Floor strippers
- Laundry products

## EXAMPLES OF ITEMS PROPOSED FOR DESIGNATION

- Metal working fluids
- Composite panels
- Biodegradable containers
- Hydraulic fluid for stationary use
- Hydraulic fluid for mobile uses
- Durable plastic films
- Biobased carpet
- Biodegradable cutlery
- Greases
- De-icers
- Clothing products

## BIOBASED PRODUCTS MARKET PLACE

**170** Items (generic groupings of products) identified so far
**2,119** companies identified that produce or market **11,758** biobased products
- For the first four rounds of designation, **36** items are designated that include **2,438** individual biobased products

## DESIGNATING PRODUCT ITEMS 

- Must be done by rule making process
- Proposed rule
- Public comment period
- Final rule
- USDA must consider information on
- Product availability
- Economic and technological feasibility of use, including life cycle costs

## DESIGNATING PRODUCT ITEMS

- USDA must also provide information to Federal agencies concerning:
- Relative price
- Performance
- Environmental and public health benefits
- And, where appropriate, recommend a level of biobased content in the procured product

## VOLUNTARY LABELING PROGRAM

- Qualifying biobased products may gain use of **U.S.D.A. CERTIFIED BIOBASED PRODUCT** label and logo
- Authority to use label granted for limited number of years with re-authorization
- Proposed rule to establish labeling program  in formal clearance in USDA
- We anticipate opening the labeling program to biobased products from mature markets, as well as from new and emerging markets
- Label available to all qualifying biobased products

## USDA’S MODEL PROCUREMENT PROGRAM

- Under leadership of Departmental Administration
- In coordination with the Office of Federal Procurement Policy of OMB
- This program will be available to all Federal agencies
- Its purpose is to train agencies, educate, and promote use of biobased products

## CONCLUSIONS

- There is private and public sector interest in developing the biobased economy
- This effort is underwritten by a supportive public policy foundation
- Biofuels and bioproducts are expected to fill growing roles in the U.S. economy
- The BioPreferred Program is an innovative effort to spur bioproduct market development