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5—
Making the Transition to Biobased Products

By the end of the next century, many current petroleum-derived products could be replaced by less expensive and better-performing products based on renewable materials grown in America's forests and agricultural fields. The committee believes that movement to a biobased production system is a sensible approach for achieving economic and environmental sustainability. Biobased products have the potential for being more environmentally friendly because they are produced by less polluting processes than in the petrochemicals industry. Some rural areas may be well positioned to support regional processing facilities dependent on locally grown biobased crops. As a renewable energy source, biomass does not contribute to carbon dioxide in the atmosphere in contrast to fossil fuels. An investment in biobased industries could prepare the nation for a long-term disruption in supplies of imported oil and help to diversify feedstock sources that support the nation's industrial base. These potential benefits of biobased products could justify future public policies that encourage a transition to renewable raw materials for the production of organic chemicals, fuels, and materials.

Despite the potential benefits from biobased products, certain impediments could hamper a transition to biobased production. The carbon-based industries of today are well established and profitable and largely rely on low-priced fossil feedstocks. Introduction of innovative processing technologies has contributed to large returns on investment in petrochemical industries. These energy and chemical companies are ver-



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Page 103 5— Making the Transition to Biobased Products By the end of the next century, many current petroleum-derived products could be replaced by less expensive and better-performing products based on renewable materials grown in America's forests and agricultural fields. The committee believes that movement to a biobased production system is a sensible approach for achieving economic and environmental sustainability. Biobased products have the potential for being more environmentally friendly because they are produced by less polluting processes than in the petrochemicals industry. Some rural areas may be well positioned to support regional processing facilities dependent on locally grown biobased crops. As a renewable energy source, biomass does not contribute to carbon dioxide in the atmosphere in contrast to fossil fuels. An investment in biobased industries could prepare the nation for a long-term disruption in supplies of imported oil and help to diversify feedstock sources that support the nation's industrial base. These potential benefits of biobased products could justify future public policies that encourage a transition to renewable raw materials for the production of organic chemicals, fuels, and materials. Despite the potential benefits from biobased products, certain impediments could hamper a transition to biobased production. The carbon-based industries of today are well established and profitable and largely rely on low-priced fossil feedstocks. Introduction of innovative processing technologies has contributed to large returns on investment in petrochemical industries. These energy and chemical companies are ver-

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Page 104 tically integrated to coal, oil, and natural gas and have economic ties to the extraction of these fossil resources. Yet industries constantly transform themselves. For example, witness the Dow/Cargill joint venture to commercialize polylactic acid polymers (biomaterials) derived from corn starch. This venture represents the beginning of an important transformation in feedstocks and processing technologies for the chemical industry. In most cases, however, there is a lack of industrial experience in large-scale processing of complex plant materials. Volatility in petroleum prices continues to be a barrier to the development of these materials. If the government chooses to accelerate development of a biobased industry, well-established petroleum firms may need some incentive to invest in riskier precommercialization stages of development of biobased products. There may be a compelling national interest to make a transition to a biobased industry. For example, policymakers may want to accelerate use of renewable biomass to mitigate impacts on the U.S. economy from a long-term disruption in world oil supplies or perhaps to reduce impacts on the environment created by possible global warming. However, the degree of public-sector involvement to encourage the growth of a biobased products industry will be a public policy decision. Federal support of research could be a way to make biobased products more competitive. This report makes some recommendations to facilitate research and development (R&D) and commercialization of biobased industrial products. A Vision for the Future The committee has described circumstances that it believes will accelerate the introduction of more sustainable approaches to the production of industrial chemicals, liquid fuels, and materials. In this vision a much larger competitively priced biobased products industry will eventually replace much of the petrochemicals industry. The committee proposes intermediate (2020) and long-term (end of century) targets for a future biobased industry. These are summarized below and in Table 5-1: • by the year 2020, provide at least 25 percent of 1994 levels of organic carbon-based industrial feedstock chemicals and 10 percent of liquid fuels from a biobased products industry; • eventually satisfy over 90 percent of U.S. organic chemical consumption and up to 50 percent of liquid fuel needs with biobased products; and • form the basis for U.S. leadership of the global transition to biobased products with accompanying environmental benefits. Tables 5-2, 5-3, and 5-4 outline the current status of biobased products

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Page 105 TABLE 5-1 Targets for a National Biobased Industry   Biobased Production Levels (Percent Derived From Biobased Feedstocks) Biobased Product Current Level Future Target: Intermediate (2020) Future Target: Ultimate (2090) Liquid fuelsa 1–2% 10% Up to 50% Organic chemicalsb 10% 25% 90+% Materialsc 90% 95% 99% a Large-scale production of biobased ethanol is a long-term possibility; this projection assumes advanced technologies are in place for processing lignocellulosic materials. b Biobased organic chemicals represent an important market for the biobased industry. Examples include oxygenated chemicals such as butanol or butyl butyrate that can be processed into other intermediate and specialty chemicals traditionally dependent on fossil fuel feedstocks. c Biobased materials includes a wide range of materials extracted directly from plants. Some examples include traditional forest products such as lumber, as well as novel biopolymers such as bioplastics. Many new products in this market will be high-value materials that cannot be produced from petroleum feedstocks. and some potential actions that could be put into place to meet these targets. These are intermediate and ultimate targets that are based on estimates of available feedstocks and assume technological advances are in place to improve the suitability of raw materials and conversion processes. While these targets are difficult, they are attainable goals for the following reasons: (1) productivity will almost certainly continue to increase, so more plant material will be produced from less land, (2) food/ feed ingredients such as protein will be coproduced with some of the herbaceous energy crops (like alfalfa), and (3) use of agricultural wastes as raw materials for biobased products will reduce competition for resources. It is likely that biobased products will penetrate higher-value chemical markets first. As the technology improves and costs decline, eventually higher-volume, lower-value fuel markets would be penetrated. Demand for biobased materials will continue to grow. Ultimately, the outcomes will be determined by the rate of investment by the private sector. In the long term, large-scale production of biobased ethanol may supply up to 50 percent of liquid fuel needs in the United States. Once the technology to produce ethanol and other oxygenated chemicals from lignocellulosics becomes economical, the demand for biobased organic chemicals and liquid fuels could increase, creating competition for land and other resources. Coproduction of human food and animal feed prod-

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Page 106 TABLE 5-2 Steps to Achieve Targets of a National Biobased Industry: Biobased Liquid Fuels—Production Milestones   Current Future: Intermediate (2020) Future: Ultimate (2090) Sources Corn starch; plant oils and animal fats; wood. Replace starch and oils with lignocellulosics from wastes and traditional plants and trees (e.g., corn stover, switchgrass, hybrid poplar). Genetically modified plants and Replace stach and oils provide optimum feedstocks for biorefineries. Products Ethanol used in making 10% oxygenated fuels; fatty acid methyl esters comprise 10% of biodiesel; wood for stoves and furnaces. Ethanol produced at $0.58 per gallon; animal feed coproducts. Very inexpensive ethanol (less than $0.50 per gallon); animal feed coproducts; many other coproducts. Processes Corn wet-milling enzymes; traditional microbes with known processes; transesterification. Low-cost pretreatment; transgenic microorganisms use C-5 and C-6 sugars. Combination of physical, chemical, and biological processing in biorefineries minimizes costs. Status of research and development Clean Air Act mandates oxygenated fuels; fuel ethanol subsidies; low level of R&D investment by public sector. Support by government and industry makes lignocellulosics competitive. Most R&D supported by biobasedindustry and conducted in academia, government, and industry partnerships; negligible investment by public sector.

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Page 107 TABLE 5-3 Steps to Achieve Targets of a National Biobased Industry: Biobased Organic Chemicals—Production Milestones   Current Future: Intermediate (2020) Future: Ultimate (2090) Sources Starch in grains; oils and fats. Lignocellulosics in wastes and traditional plants and trees; waste sugars. Genetically modified plants and trees provide optimum sources for biobased products. Products Glycerol, ethanol, sorbitol, acetic acid, citric acid, succinic acid, amino acids, poly(hydroxybutyrate), polylactate; detergent enzymes; water-soluble polymers. Ethanol as feedstock for ethylene; other major oxygenated chemicals; some specialty chemicals such as chiral compounds. Most specialty, intermediate, and commodity chemicals. Processes Corn wet milling; enzymes; traditional microorganisms; thermal and chemical processes. Low-cost pretreatment of lignocellulosics; transgenic microorganisms; some direct extraction of plant chemicals. Biorefineries incorporate low-cost, large-scale thermal, chemical, and biological technologies for biomass conversion; multiple chemicals as coproducts of fuel ethanol refining. Status of research and development Modest support for R&D by public sector (e.g., USDOE, USDA, NSF, NIH); a few initiatives undertaken by industry. Research by government and industry provides many new possibilities for exploitation by venture capital; some development assistance by government Support of R&D by public sector and industry; R&D conducted by partnerships among academia, government, and industry. ABBREVIATIONS: USDOE, U.S. Department of Energy; USDA, U.S. Department of Agriculture; NSF, National Science Foundation; NIH, National Institutes of Health.

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Page 108 TABLE 5-4 Steps to Achieve Targets of a National Biobased Industry: Biobased Materials—Production Milestones   Current Future: Intermediate (2020) Future: Long-Term (2090) Sources Trees; fiber crops (e.g., cotton and kenaf); strawboard. Trees; new domesticated crops (e.g., milkweed); soy protein; waste paper. Transgenic plants and trees produce useful polymers. Products Lumber and related building materials; paper and apparel; Tencel fiber for apparel. Nonwoven fabrics; yarn; paper; composites. Polymers for plastics; packaging. Processes Sawmills; plywood, particle board manufacture; pulp and paper mills; rayon processing. Harvesting; fractionation; spinning. Biopolymers; fractionation of transgenic plants. Status of research and development Modest investment by public sector (e.g.,USDA, DOE) and industry (lumber/paper companies). Substantial public and industry support of research and development; venture capital funds development of promising processes. Support of R&D by government and industry; R&D conducted by partnerships among academia, government,and industry.

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Page 109 ucts such as protein with biobased liquid fuels, organic chemicals, and materials is expected to help prevent future conflicts between production of food and biobased products. Biobased organic chemicals currently constitute 10 percent of the total organic chemicals market. This market may represent the greatest opportunity for replacement of petrochemicals with renewable resources. If ethanol fermentation becomes competitive, enough lignocellulose materials are available to yield ethanol and other oxygenated chemicals (such as butanol or butyl butyrate) that can be further processed into other intermediate and specialty chemicals (Table 5-1). Table 5-3 shows predicted markets for several large-volume chemical and material products. Up to 100 million metric tons of crop residues could be converted into biobased organic chemicals. Other potential resources include production of low-risk crops on a portion of the 35 million acres of land set aside in the Conservation Reserve Program. If one-half of CRP land became available for the production of perennial grasses such as switchgrass, approximately 46 million tons of additional biomass (assuming yields of 2.5 tons per acre) could be available for conversion. The total biomass is sufficient to meet current demands for biobased industrial chemicals. The biobased materials industry constitutes a major portion of the biobased market. In 1992 wood and paper products accounted for 90 percent of the agricultural and forestry materials used in manufacturing (ERS, 1997b). New products using these traditional materials are under development. The demand for more biobased materials such as bioplastics and novel biopolymers is expected to grow for several reasons. These products are naturally diverse and biodegradable and, compared to biobased commodities (liquid fuels and organic chemicals), specialty chemicals and biopolymers are of higher value and require smaller acreages. In the long term, development of a strong biobased industry will depend on products that can compete in the marketplace without incentives. A sustained commitment will be required and efforts will need to be integrated among scientists, engineers, economists, raw material producers, processors, manufacturers, marketers, financiers, and business managers. The committee believes that replacement of fossil-based industrial products with renewable materials would be accelerated by public- and private-sector efforts to raise public awareness, focus investment in research and commercialization, and address new approaches to the innovation process. Investments to Achieve the Vision The goal of research, development, and commercialization (RD&C) activities for a biobased industry should be to convert renewable raw

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Page 110 materials by appropriate processing into valuable products that sell at prices exceeding the combined input costs. Reducing the costs of raw materials will continue to be important. With advances in plant molecular biology, cost reductions will occur by genetic engineering of the source plants to make them better suited for processing or direct use. Large cost reductions for biobased products, however, are more likely to occur through development of effective low-cost processing technologies. Such technologies will be physical, thermal, chemical, biological, informational, and combinations thereof. This section discusses RD&C priorities for raw materials, processing, and products, building on concepts and research needs detailed in earlier chapters. A theme throughout this report is that methods, techniques, and technologies developed for a biobased industry must be both effective and economical. Many technically feasible techniques for processing renewable materials have been developed in the laboratory but have little chance of commercial viability. Providing explicit mechanisms for cooperation between laboratory scientists and process engineers would help avoid this problem and help ensure adoption of effective and economical approaches. The goal of a biobased system is to be sustainable over time. Sustainability can be partially ensured by designing systems capable of processing a variety of raw materials. This will permit greater regional flexibility to make use of the biomass sources most suited to particular locations. Sustainability also will require careful accounting of all material and energy inputs and outputs into the production and processing system, and assurance that healthy soil—the ultimate production resource for biobased products—will be maintained. Economic and environmental sustainability should be the basis of efforts to improve the raw materials, processes, and products of biobased industries. Niche Products Niche products are comparatively smaller-scale products that include novel materials such as bioplastics, fatty acids, and other biopolymers. This market deserves special attention because these are high-value products that do not require large acreages of land. Performance is much more important than price, and product differentiation is high among manufacturers. Particularly important niche products are those yielding significant environmental benefits. ''Big bang" products, in contrast, are generally large-scale commodity materials for which selling price is the key feature and little or no product differentiation exists. Capitalization needs for commercial-scale operations are significantly lower for niche products in comparison to commodity materials.

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Page 111 Niche products are typically developed by small businesses led by innovative entrepreneurs. Speed in commercialization is crucial, and support consequently must be available when needed and without excessive delays for new funding cycles. Once the process technology, favorable economics, and product characteristics are established, market penetration can begin comparatively rapidly. Innovative entrepreneurs play a pivotal role in spearheading many new commercial developments. Commodity Products For commodity products the goal of research and development is to reduce the costs of raw materials and processing because these have a major effect on product cost. The raw materials are heterogeneous, and more than one product is generally produced. In fact, over time the number of products produced from the same raw material tends to increase. Thus, there is no single product; each product is actually a co-product. Policymakers should focus on public research investments to encourage development of a biobased industry for coproduction of biomass-derived fuels, organic chemicals, and materials. There is potential that coproduction will increase opportunities to create higher-value products from commodity crops. Public Investments in Research and Development In the United States, massive public investment in research and development began during World War II and continues to be supported in specific areas. For many years, basic research was regarded primarily as a responsibility of the public sector, while development and commercialization were regarded primarily as responsibilities of the private sector. A large proportion of public funds for research and development were directed toward national security. The federal government assumed special responsibility for ensuring the commercialization of specific identifiable products. For example, the United States adopted this approach for national defense (e.g., high-performance jet aircraft) and for public health (e.g., the polio vaccine). The national interest may be well served by a similar approach for specific biobased products such as biobased ethanol (Lugar and Woolsey, 1999). Public investment in basic research continues to garner broad support with little controversy surrounding funds for basic research, including fundamental work on process engineering (essential to launch biobased industries). However, public support for development activities that private firms would undertake anyway is not justified (NRC, 1995), and even when private support is uncertain, the use of public funds for

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Page 112 development may still be uncertain. It may be less risky and more effective for the public sector to develop the technology to the point where the potential applications are attractive to companies that understand the market. However, a recent report by the U.S. Congress (1998) on national science policy concluded that the need for the government to focus on its critical role in funding basic research is creating a gap between federally funded basic research and industry-funded applied research and development. This gap often is referred to as the Valley of Death. The congressional committee that authored the report concluded that the private sector must recognize and take responsibility for the performance of research but that in some cases of national interest supplementary funds may be justified to provide federal assistance for commercialization of particular technologies. Because of the potential benefits from the expansion of biobased industries, the committee believes limited public involvement in the development of promising technologies is justified. Between basic research and final commercialization of a new product or a product that directly substitutes for a fossil-based product, the most difficult step is proving the concept at a sufficient scale to encourage full-scale production. This is a key step for attracting the necessary level of private-sector investment for commercialization of emerging technologies. An approach in addressing this concern is through public-private partnerships (Cohen, 1997). One formal mechanism for such partnerships is the Advanced Technology Program (ATP) of the National Institute of Standards and Technology. The ATP is a partnership between government and private industry to accelerate the development of high-risk technologies that promise significant commercial payoffs and widespread benefits for the economy. This committee envisions similar partnerships to facilitate and support biobased research and, in some key cases, government could make an important contribution to proof of concept. There is limited investment for proof of concept of biobased technologies by the public sector. The ATP helps bridge this gap for selected technologies, but its mission is much broader than biobased technologies. The Alternative Agricultural Research and Commercialization Corporation (AARCC) is a venture capital firm that makes investments in companies to help commercialize biobased industrial products (nonfood, non-feed) from agricultural and forestry materials and animal byproducts. In its first five years of operation the corporation invested $33 million in federal funds and leveraged $105 million in private funds in 70 projects in 33 states (http://www.usda.gov/aarc/aarcinfo.html). Subsidizing the development of private-sector products can be controversial. The committee envisions a government-industry partnership in which the government facilitates and supports research and, in key cases where industry will not risk responsibility, government may be a

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Page 113 joint supporter at the proof-of-concept stage. These partnerships should emphasize those technologies that are essential to the development of new products and processes across several industries and in cases where the private sector will not risk sole responsibility. R&D efforts should be targeted to those programs and collaborations that can best perform the task. Moreover, these programs should receive periodic evaluation and include endpoint provisions. An important contribution could be made to the proof-of-concept stage through investment in one or more multifunctional demonstration facilities. Such facilities would house a wide range of flexible large-scale processing equipment and ample qualified support personnel. The facilities might be established by entrepreneurs, industry consortia, or the public sector, with the last possibility most likely. Several places and organizations already exist that could form the nucleus for public-sector-assisted facilities for developing biobased products. Examples include the USDOE Alternative Fuel User Facility in Golden, Colorado; the USDA Laboratory for Agricultural Utilization Research in Peoria, Illinois; and MBI International (formerly the Michigan Biotechnology Institute) in Lansing, Michigan. Regardless of where these facilities might be sited, at federal laboratories or elsewhere, they should be required to obtain a significant fraction of their funds for proof of concept from the private sector. This would maximize the likelihood that commercialization would eventually occur and should bring a degree of market discipline to the process. These facilities could also serve as repositories for the process modeling hardware, software, and databases required to appropriately model new systems or provide sites for analyzing process economics to help set research priorities. These facilities would increase their support of scale-up needs of external clients by providing outside organizations with easier access to facility equipment and technical expertise. Federal-State Cooperation Biobased industrial development across the United States often will be region or state specific because of differences in agricultural or forestry resources. Consequently, a diversity of approaches to the development of biobased industries is encouraged. Flexible mechanisms to encourage cooperation between federal and state governments would help achieve this goal. Incentives Government agencies (federal, state, or local) can use incentive programs as a mechanism to catalyze biobased industries because the adop-

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Page 115 Subsidies can distort market forces and have far-reaching effects. Production of biobased chemicals and fuel from lignocellulosics that is cost competitive with gasoline without subsidies is a primary goal of R&D for biobased products. The committee believes this to be an achievable goal given the necessary research investment. Should abatement of greenhouse gases become serious, government incentives to develop biobased fuels could be instituted. While the committee recognizes that subsidy decisions are political, not technical, we would argue that, in the long run, subsidies are not a desirable way to support biobased industries or petroleum-derived products. Providing a Supportive Infrastructure To hasten and ease the transition to a biobased economy, a variety of investments should be made in education, technical training, and development of databases. This section examines some of the changes in education, training, and information infrastructure that will be needed to support a biobased industry. Some federal agency might take responsibility for some of this activity or might fund a university consortium to collect and disseminate information on such components as training and curriculum development and biotechnology databases. Education of the Public The public as well as policymakers should be educated regarding the rationale and benefits of biobased production. Elected officials and industry leaders in particular must be educated to enable the paradigm shift required for a transition to a biobased economy. Early adoption of this view by private- and public-sector leaders would help generate the required funding support, hasten the transition, and thereby minimize possible dislocations. One possible way to educate decisionmakers, who develop policy, and the public, which pays for it, would be through an "Annual Conference on Biobased Products Technology." Such a conference could bring together companies, academia, government, and other stakeholders to identify targets and recognize landmark achievements. An important function of this annual meeting and its associated support organizations could be to set standards for biobased materials, perhaps by issuing a seal of authenticity for biobased products. Technical Training Today's curricula in chemical and process engineering are thoroughly

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Page 116 tied to petroleum processing. Curricula should be revised and then implemented that use examples from and illustrate large-scale processing of renewable materials, including unit operations. Increased curricular flexibility would allow chemical engineers to become better acquainted with the principles and terminology of the biological sciences that are essential to understanding renewable materials. Conversely, the principles and terminology of process engineering also need to be taught to biologists, biochemists, and microbiologists so that engineers and life scientists can better work together to develop the technical infrastructure for developing, manufacturing, and using biobased products. Improved communication of process engineers with plant breeders and molecular biologists would help tailor various raw materials to specific processing needs. Today innovations for industrial applications are not the focus of most plant breeders because industrial use of plant material is small relative to its use as food and feed. Corn breeders, for example, focus mainly on developing the higher-yield cultivars desired by farmers rather than on modifying corn for industrial applications. The pool of trained people is scant in certain vital areas, such as natural products chemistry and carbohydrate chemistry. Encouraging an expanded presence for these disciplines on university campuses and industry would speed the development of processes and products requiring such expertise. Information and Databases Readily accessible databases could help promote the development of biobased products. Some of the needed information resources are: • bibliography covering the literature of this field as background to guide future research; • lists of federal and state grants and funding sources for biobased product research; • data on ongoing demonstration and precommercialization projects; • lists of individuals and organizations in the public and private sectors who are active in developing these products and summaries of their facilities and expertise; • electronic "bulletin boards" for people working in the area; • statistics on the commercial penetration of biobased products and processes; and • lists of key organizations promoting the development of these products, such as the New Uses Council Board, the AARCC, and the ATP.

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Page 117 Research Priorities A national research agenda for a biobased industry should include biological and engineering research that supports the development of economically feasible raw materials, products, and processing technologies. The development of U.S. biobased industries will require a strong base in science and technology. Advances in agriculture have tended to stress production technologies without a parallel interest in technologies for processing and adding value to agricultural products. For many decades, education and research resources in the fields of chemistry and engineering have focused on petroleum-related opportunities. Research will be a prominent tool in achieving the committee's vision of making these alternative feedstocks more competitive. The government's research programs should be sensitive to major technical and economic roadblocks that impede the progress of biobased industrial products. Expansion of a biobased industry will require a broad base of knowledge from research in fundamental biological and engineering principles to development of practical technologies that support biobased industries. Where basic research is necessary, innovative ideas should be encouraged through a competitive grants program. For example, investigations of functional genomics are promising new areas of molecular biology and plant genetics that fit this category. In other cases, industrial partnerships with the public sector may be an appropriate mechanism to solve certain engineering problems (e.g., economic feasibility of lignocellulosic conversion processes). Biological Research A long-term commitment to fundamental biological research relevant to the needs of a biobased industry should be maintained. The committee identified three priorities in biological research supporting a biobased industry: • the genetics of plants and bacteria that lead to an understanding of genes that control plant pathways and cellular processes; • the physiology and biochemistry of plants and microorganisms directed toward improving bioconversion processes and modification of plant metabolism; and • protein engineering methods to allow the design of new bio-catalysts and novel plant polymers.

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Page 118 Easy Processing and Conversion Research using new molecular techniques combined with conventional plant breeding will make possible unprecedented modifications of plants to facilitate subsequent processing and conversion to desired products. For example, lignocellulosic fiber crops (including trees) may be developed having a lower lignin content—a change that will make the plants easier to hydrolyze to sugars and hence to ferment to ethanol and other products. Corn grain may be developed that yields modified starches having specific desired properties. Some products may also be encapsulated within plants, increasing the ease with which they are separated from the rest of the raw plant material. Plants also provide a natural source of polymers that may be used as is or from which monomers may be produced and used directly or reassembled into other polymers. Alter Content of Specific Components A variety of factors—economic considerations, processing convenience, market demand, and others—may require changes in the content of specific components of a raw material or the final product itself. Desired changes might include an increase or decrease in components, such as lignin, proteins, or oils, or the addition of new polymers. Plant breeders have already succeeded in changing plant oil composition to yield new oils having improved properties for specific uses. Such developments will require an unprecedented degree of research collaboration among process engineers, plant breeders, and molecular biologists. Processing Advances In order for biobased products to compete more effectively with petroleum-derived products, the cost of processing raw materials to biobased products must be significantly reduced. Engineering research should focus on developing and improving new and existing processing technologies and on integrating technologies that have the potential to significantly reduce costs. The committee recommends five key targets for engineering research: • equipment and methods to harvest (independent of weather conditions) and fractionate lignocellulosic biomass for subsequent conversion processes; • methods to increase the efficiency and reduce the costs of pretreating lignocellulosic biomass for subsequent conversions to fuel and chemicals, including reducing the costs of the cellulase enzymes (as well as other enzymes such as laccases);

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Page 119 • principles of and processing equipment for handling solid feed-stocks; • fermentation technologies to improve the rate of fermentation, yield, and concentration of biobased products; and • downstream technologies to further react, separate, and purify products in dilute aqueous streams. The research priorities for biobased processing are diverse and range from methods for raw material harvest to separation of final biobased products from aqueous media. The committee identified specific areas in processing technologies that should be prioritized in research for the delivery of biobased products to the marketplace. Certain advances could improve the economics of biobased production. Others could unlock the potential of vast new sources of raw materials, make possible whole new product types, or minimize waste production. Ultimately, developing biobased production systems will require modeling to provide an integrated view of sources, processes, and products in the evaluation of technical and economic feasibility. Separation and Fractionation Separating raw materials in or near the field might reduce costs and increase the efficiency of subsequent processing steps. Agricultural practice already incorporates in-field fractionation. Corn grain, for example, is separated from stalks and stripped from the ears in the field, and the stalks, cobs, and husks are usually left on the land. The development of lignocellulose conversion technology would make harvesting and transporting the stalks, cobs, and husks necessary. Appropriate harvesting equipment is already available. The harvesting of "wet" crops (e.g., alfalfa) containing industrial enzymes could be improved by equipment that dries the fibrous material and thereby avoids hauling excess water. Developers of biobased products should exploit such opportunities for in-field processing and fractionation to deliver raw materials having the greatest intrinsic value at the lowest possible cost. Almost all of the renewable carbon materials now available for biobased production are "heterogeneous," that is, made up of more than one component. These components generally will have different uses and different intrinsic values. A fundamental axiom of process engineering is that the components of a heterogeneous raw material become increasingly valuable as they are separated from one another. This applies as much to separating the components of crude oil as to separating copper from ore-bearing rock. Thus, one of the chief research priorities for biobased production is to identify effective and economical methods for

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Page 120 separating and fractionating the major components of renewable raw materials (such as carbohydrates, oils, proteins, and lignin). Pretreatment and fractionation of lignocellulosic biomass together are an especially high priority. The development of effective and economical processes for lignocellulose fractionation can have great economic and social impacts because lignocellulosics—grasses, hays, trees, crop wastes, and the organic fraction of municipal solid waste—can be produced in sufficient volumes to generate biobased replacements for a significant portion of today's petroleum-derived fuels and chemicals. Yet such methods currently are relatively less developed than those for corn grain fractionation (or ''refining"). Some lignocellulose fractionation may eventually be accomplished where the raw material is produced (i.e., in the field). Biological Conversion of Raw Materials Enzymes In many cases, enzymes are the best way to process renewable raw materials into biobased products. Moreover, enzymes are themselves an important class of biobased products with industrial markets of hundreds of millions of dollars annually (see also Chapter 3). The ability to use specific enzymes as products and as the catalysts for making other products depends on several factors—enzyme separability, activity, and stability. Each factor merits increased RD&C attention so that the activity and stability of enzymes can be tailored to specific end uses and so that enzymes can be more easily separated from mixtures. Perhaps the most important class of enzymes required to develop a large biobased products industry is the cellulases. The research goals listed above for other enzymes are also appropriate for the cellulases. In addition, particular attention should be paid to means of reducing the costs of the cellulases in integrated processes for biobased products. Microbial Catalysts Microbial cells and plants produce enzymes in mixtures containing literally thousands of other components. Effective economical methods are required to better separate industrially useful enzymes from these complex mixtures. Furthermore, enzymes must be recovered as active catalysts, a significant processing challenge because enzymes are inherently only marginally stable. A further difficulty is that the phenolic compounds present in plant extracts often can inactivate enzymes. Genetic engineering of plants should be a viable approach to solving some of these technical problems.

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Page 121 Various approaches, involving science and process engineering, can increase or otherwise manipulate enzyme activity and stability. Research on these approaches deserves increased attention and support, especially work incorporating considerations of effectiveness and economic viability in industrial applications. Many approaches that are effective in a laboratory simply have no reasonable chance of ever being economically viable. In contrast, one particularly attractive approach deserving increased attention is engineering a "purification tag" to assist in the fractionation and purification of recombinant enzymes produced by plants and microbes. Natural and genetically engineered microbes can also act as "biocatalysts" to increase product concentrations, production rates, and yields (or selectivity). These three factors are critical for evaluating the performance of any catalyst. As for enzymes, research is needed to improve methods for separating microbes from mixtures and for tailoring their activity and stability to function in specific catalytic settings. While it is likely that nonbiological catalysts could also be important in generating biobased products, as they have for petroleum-derived products, very little research has examined this possibility. Of particular significance would be the development of nonbiological catalysts that function in aqueous media and are useful in converting oxygen-containing compounds. Fermentation The microbes used in the manufacture of biobased products are contained in production vessels referred to generically as fermentors or bioreactors. Today's fermentation bioreactors need to be improved so that they are capable of better heat and mass transfer for viscous fermentation broths (see also Chapter 4). Also required are new methods for monitoring biological processes in fermentors and real-time imaging. Better approaches could reduce fermentor volume and increase volumetric productivity, perhaps by integrating several processes in a single vessel. Finally, new concepts and applications would improve process control for fermentation systems, including improved methods for control of sterility, heat removal, improved selectivity and stability of fermenting organisms, recycling of enzymes, and fermenting organisms in very large fermenters (with capacities up to 3,000 cubic meters). Concentrating Dilute Aqueous Products Biobased products that result from reactions in water are present at low concentrations and mixed with other reaction products. Energy-efficient methods are needed to separate and concentrate the desired product. Such methods might include improved membrane-based techniques (such as ultrafiltration and electrodialysis), energy-efficient distillation,

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Page 122 ion exchange, molecular sieves, chromatography, biomimiary separation technology, supercritical fluid extraction, and other methods. Handling Solids There is a need for more engineering studies on biomass feedstocks relating to methods and equipment for collection, preprocessing, transport, and storage to minimize total costs delivered to the conversion process. Important scientific problems with significant applications will need to be addressed to improve handling techniques for renewable raw materials, which are usually solids. Solids are more difficult to process, store, and handle than liquids and gases and, consequently, lack similarly well-developed methods. Much work has been done over the past two decades to develop low-cost means of handling agricultural residues and hays. Many biological raw materials are fibrous and create special "bridging" problems, that is, they become intertwined and do not flow smoothly out of storage bins and tanks or along transfer lines. The relatively low-bulk density of some renewable materials also makes them more costly to handle and transport than comparable fossil feedstocks. Finally, difficulties in mixing can hinder the processing of biomass in slurries and can also result in high mass transfer costs. Reuse of Wastes The hundreds of millions of tons of organic industrial, agricultural, and municipal wastes generated annually in the United States are disposed of at increasing cost; in fact, these wastes represent a significant potential source of renewable raw materials for biobased products. Current practices in the production, processing, and use of fossil carbon create many environmental problems, including the wastes generated at all stages. Biobased production potentially should cause fewer problems than the petrochemicals industry since biological materials break down in the biosphere. For example, return of mineral-rich effluents from biological processing to the land could avoid waste disposal problems and help maintain long-term soil fertility. Research on wastes should be focused on full use of raw materials, improved biobased processing economics, and reduction of waste materials. Supporting related R&D and providing incentives to use waste materials would accomplish two important objectives. First, the volume and costs of waste disposal could drop, creating significant environmental benefits. Second, working out the science and technology to use waste materials for biobased products would further the transition to renewable

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Page 123 raw materials. It will be important to make a complete energy and environmental audit to demonstrate the potential benefits from reuse of wastes for production of biobased industrial products. Economic Feasibility The ultimate goal of all RD&C activities recommended here is to convert renewable raw materials derived from our fields and forests by effective low-cost processing into products that can compete directly with products derived from fossil raw materials. Focused research on agricultural production economics, processing system economics, and integration of food, feed, fuel, and chemical production systems is needed. Delivering Economic and Effective Biobased Products This report identifies numerous R&D priorities for raw materials, processing, and products for a biobased industry. A theme throughout is that the methods, techniques, and technologies developed must be both effective and economical. Identifying the conditions in which biobased products can be competitive will be important to the long-term viability of the industry. Economics research will help in identifying potential markets for biobased products and technological developments that can exploit these market opportunities. Studies of the major industrial product markets should be conducted that include statistical demand analyses, pricing studies, and patterns of import protection. Access to potential markets depends on the extent of the competition and the ability to accommodate changing demands associated with business cycles. The market and general equilibrium effects of the anticipated lignocellulose conversion technology also merit examination. Meeting the Demand for Food and Industrial Products Coproducing biobased industrial products with food and feed materials will increase the amount of land effectively available for biobased industrial products and should also improve overall system economics. Recommendations for process technology research to develop these coproduction systems were presented above. Important economic research questions about such coproduction systems might include, for example, the impacts of new protein feeds from biobased industrial products on existing feed markets, land use/availability impacts of coproduction, and overall trends in protein/calorie use/availability due to biobased products. Agricultural policies could encourage planting of mixed perennial

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Page 124 grass feedstocks on erosion-prone farmlands. However, economic research is needed to evaluate the potential competitiveness of processing crops derived from marginal croplands in the absence of government programs that increase the values of these lands. Modeling Production Systems Modeling will play a key role in developing the systems for producing biobased industrial products. Modeling provides a way to integrate technical processing with economic considerations in order to assess economic viability. It also helps identify the most costly areas of the overall system for improvement by future research. Software for process modeling already exists, but some of the databases, and perhaps unit processes, needed to apply the software to renewable feedstocks are lacking. In addition, the models require further refinement to include the crop production phase of the overall system, so that work on silviculture, and agriculture, and subsequent processing can be advanced together as an integrated whole. Environmental Research Evaluation of the environmental impacts of biobased industries should be a research priority. These evaluations should include environmental and energy audits of the entire product life cycle rather than a single manufacturing step or environmental emission. Development of a biobased industry may produce widespread environmental benefits, but these implications are not well understood. Production of agricultural and forest feedstocks can have positive, negative, or neutral consequences on wildlife, soil, air, and water quality, but these effects depend on many factors, such as previous use of land and crop management practices. In specific instances, biobased technologies are less polluting, and biobased products are biodegradable. To ensure that biobased products fulfill their promise of environmental sustainability, life-cycle assessments of biobased products should be a research priority. Conclusion Over the past century, industrial products derived from petroleum—plastics, fuels, lubricants, and building materials—gradually replaced similar products that were once derived from renewable biological materials. Now a transition back to biobased products is taking place, driven

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Page 125 by issues related to sustainability of natural resources, human health, environmental quality, economics, and national security. During the next century, the results of innovative collaborations between biological scientists and process engineers are likely to affect industrial development as much as past discoveries in the physical and chemical sciences. This report has identified key opportunities for biobased products and the research and policy priorities that could facilitate the transition. With a vigorous commitment from all parties, the United States will be well positioned to reap the benefits of a strong biobased industry.