Canada’s Untapped Potential in the Industrial Bioeconomy
- The global industrial bioeconomy is set to reach at least $2 trillion a year by 2030 to 2040, and Canada has the resources to capture 10% of that value.
- The main commercialization challenges in Canada are the subsidization of fossil fuels, a lack of government procurement policy for bioproducts, and limited public awareness around Canada’s bioeconomic potential.
- The world is turning towards a low carbon economy and Canada should follow the money which is abandoning hydrocarbons, and reward low carbon emitting products and materials before we fall competitively behind the EU and the US.
Finance Minister Chrystia Freeland should end the tax subsidies to the oil and gas sector and implement stronger low carbon regulations across the economy. We cannot meet the Paris Agreement target of 1.5 degrees Celsius without the industrial bioeconomy, including renewable fuels and biomaterials.
How do you define the industrial bioeconomy and how would you characterize that economy today?
The industrial bioeconomy comprises renewable fuels such as ethanol, renewable diesel, and biojet, renewable energy for heat and electricity, and bio-based chemicals for the production of a host of bioproducts and materials. We use ethanol in all our gasoline, bioenergy for the generation of heat and electricity in certain remote communities, and, the most exciting, we are starting to be able to use biochemicals for an array of biobased products and materials such as paint, plastics, industrial cleaners, and personal care products. Essentially, the industrial bioeconomy is anything you can imagine consuming which is derived from a barrel of oil (hydrocarbons) coming instead from biomass (carbohydrates).
As far as the current state of Canada is concerned, I should begin with the good news. There has been a federal ethanol and renewable fuels mandate since 2010, which means all gasoline that Canadians buy, with the possible exception of Atlantic Canada, contains 10% ethanol. Of course, the government is coming out with a clean fuel standard—which is a couple of years behind schedule—but it should come into effect in 2022. So, Canada is moving down a path towards low carbon transportation fuel, however, we are still delivering way below our potential.
“Unfortunately, very few Canadians and politicians know anything about the industrial bioeconomy.”
We have huge resources in Canada that we are not adding much value to, including tens of thousands of acres of agricultural land, usable municipal solid waste and 9% of the world’s forests. I think, in fact, not adding value has been one of Canada’s cultural legacies: we tend to export raw materials without adding value to them. We can either develop the industrial bioeconomy, or sit on the sidelines and import bio-based products and materials from other countries.
Unfortunately, very few Canadians and politicians know anything about the industrial bioeconomy—and that is in part the fault of our industry for not communicating effectively. But what we can say for sure is that the future is not to be found in the oil and gas sector, even for Alberta. That is not where the environmental, social and governance (ESG) money is going. We are not going to discover the future by looking in the rear-view oil and gas mirror.
How large is the global industrial bioeconomy and what resources does Canada have available to help us lead in this industry?
The global industrial bioeconomy is set to reach $2 trillion a year by the 2030 to 2040 period. Imagine if Canada could capture 10% of that? That would be a $200 billion industry in Canada. I do not think that is anywhere beyond the realm of possibility—it is quite possible.
“The global industrial bioeconomy is set to reach $2 trillion a year by the 2030 to 2040 period.”
Canada’s forestry resources are much larger than most countries, so we have a significant opportunity there. We already have a lot of infrastructure in forestry, but that is at risk of being lost as that industry suffers from trade disputes. But Canada can take pulp and paper mills, and the pulp can be turned into biomaterials for bioplastics. There is plenty of opportunity to use the existing infrastructure and turn it towards bioproducts rather than just generating pulp, paper and lumber.
I do not want to leave out, however, the opportunity in municipal solid waste. There is a huge amount of activity happening there in Europe. We have a Canadian company, Enerkem, which has built a facility for this waste in Edmonton and is building a facility in Rotterdam.
Canada should not pick which areas of the bioeconomy are going to be successful, but rather, it should incent low carbon technologies and penalize the opposite. In particular, we should stop subsidizing oil and gas.
What can the government do to help scale our industrial bioeconomy from small- and medium-sized enterprises to become a global leader?
The main commercialization challenges in Canada are the lack of favourable regulations for low carbon emitters, the lack of government bio-based procurement like they have in the US, and the lack of public awareness about the potential of the bioeconomy and the resources Canada has to deliver on that potential.
There are much better regulations in other jurisdictions. One example of a low carbon fuel standard that is driving fuel switching is California. There are various California-based oil refineries that are converting to biofuels and renewable diesel production because of low carbon fuel standards.
Another area for the government to focus on is procurement. The US Department of Agriculture (USDA) has something called the BioPreferred Program. If you go to their website, they have a catalog of at least 3,000 items that are USDA certified. Once you get a USDA independent certification sticker on your product, the US government has to purchase that product or show preferential treatment towards that product compared to those that are not bio-based. Imagine how much the US government, including the military, procures. This creates real market pull for the bioeconomy.
People rarely realize how few levers governments have at their disposal. They can tax—and of course we have the carbon tax, which I support. They can spend, but I do not necessarily want them spending more money on the bioeconomy. And they can regulate, which is the area toward which I would propose they direct their efforts. Finally, they can educate, and certainly we could do with more public education on the benefits of the industrial bioeconomy.
How are private industry investments having an impact on the bioeconomy globally?
If you ask me where the money is going, I would point to Frankfurt-based Deutsche Bank, the European Investment Bank, the United Kingdom’s National Employment Savings Trust, Sweden’s Riksbank, Munich Re, the world’s largest reinsurance company, Moody’s, and Queen Elizabeth II’s wealth manager—all of these are abandoning oil and gas.
The European Investment Bank will free up 1 trillion euro between now and 2030 for cleantech investment. The Guardian newspaper will no longer accept advertising money from fossil fuel companies—which is pretty incredible for a newspaper considering how much they are suffering from lack of advertising revenue. And then there is Moody’s which downgraded Alberta’s credit rating because of too high a reliance on fossil fuels. Further, France’s Total just wrote off $9.3 billion of their tar sands investment in Alberta.
“The bioeconomy is going to happen globally despite what the Canadian government does.”
The point is that industry, and particularly European industry, is seeing the writing on the wall—that the world is turning towards a low carbon economy. To take the advice of the former Governor of the Bank of Canada, Mark Carney, companies have to get on board with this or else they are going to fail. The bioeconomy is going to happen globally despite what the Canadian government does. For Canada, the choice is simply whether we want to be a part of this trend and start recognizing where the money is going.
What role is there for oil and gas companies in the transition towards a bioeconomy?
I think there is a big role. In particular, I feel that the employees of oil and gas companies could be extremely beneficial in terms of the talent that they can bring to the industrial bioeconomy. This economy is going to need people who are educated in chemistry, biological sciences, chemical engineering, data analytics and computer science. All of these skills exist within oil and gas, and the bioeconomy is going to need them and their experience.
“The employees of oil and gas companies could be extremely beneficial in terms of the talent that they can bring to the industrial bioeconomy.”
As far as companies themselves are concerned, one of the more progressive oil companies, Shell, is planning to invest up to $3 billion a year on its low carbon business. Imagine if Shell spends $15 billion over the next five years on its low carbon business. That has the potential to become really material.
“If I was a mom or dad living in Fort McMurray, Alberta, I would not expect my ten- year-old children to be working in the oil and gas sector when they reach their mid-20s.”
Another role for big oil companies is not to acquire small businesses, but rather to invest in start-ups, providing the funds for innovation and creativity. They can also provide management guidance by sitting on the boards of small, innovative companies. But I advise against acquisitions, because then the innovation will be squashed.
If I was a mom or dad living in Fort McMurray, Alberta, I would not expect my ten- year-old children to be working in the oil and gas sector when they reach their mid-20s. Canada needs to stop looking in the rear-view mirror. The future for those children is in the low carbon economy – including the industrial bioeconomy.