The Bio-Based Economy: What’s Holding It Back?

Although pollution and climate change are ever increasing problems, breaking society’s addiction to fossil fuels is a daunting task. What are the main obstacles holding European biotechs back from building a more sustainable economy and how can we resolve them?

Modern society’s dependence on fossil fuels is unsustainable. Worldwide, emissions of greenhouse gases show no signs of decreasing, and petrochemical products such as plastics continue to be highly polluting. They will also become more and more expensive over the long run as they become scarce.

The circular economy is, in my view, imminent,” said Ullrich Stein, Project Manager at Berlin Partner, a company that helps technology companies find funding. “You have to have it because we don’t have infinite resources. The population is still growing. We need to come up with a ‘zero waste theory’ and therefore a circular economy is what we need.

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Policymakers in the EU are well aware of this challenge and have set ambitious sustainability targets for the EU to reach by 2030. These targets include reducing European greenhouse gas emissions by 40% of what they were in 1990, and increasing the amount of renewable energy consumption to 27% of the total.

A great way to meet these targets is to use bio-based sources of chemicals, food additives and fuel, such as algae or bacteria, instead of fossil fuels. Having an economy based on these sources — a bioeconomy — could mean that we generate less waste and use our resources more efficiently.

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In spite of their potential, bio-based industries are still the underdog. At the Bionnale conference in Berlin last month, I asked the experts what factors are stopping European bio-based companies from becoming established.

The tricky transition to industry

A bio-based economy is driven by innovations, but innovations have to leave the lab and enter the market to make a difference. According to Stein, Europe has a very strong academic presence in bio-based technology. Unfortunately, this doesn’t easily transfer over to industry.

The research is very well established. The industry is waiting for it but they only see a proof of concept and not a demonstration plant, for example,” Stein explained. “Research institutes don’t have a demonstration plant of 50,000 cubic meters of capacity … so why would [the industry] buy it? It becomes a ‘valley of death.’

An example of the complex nature of bio-based technology entering industry is a group led by Thomas Leya at the Fraunhofer Institute for Cell Therapy and Immunology, Germany. Leya’s group studies cold-loving algae found in the Arctic. The researchers believe that these organisms could be useful sources of enzymes that work at cold temperatures, such as those required in the food industry.

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In spite of the wide potential of algae as a bio-based source of products including food additives and cosmetics, Leya told me that the markets are generally conservative, with cosmetics being the easiest sector to break into.

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Thomas Leya group’s two-stage algal mass production process

[The cosmetics industry] is more accessible for innovative approaches as this market is very trend-driven and is continuously looking for new ingredients,” Leya explained. Of course, it also is a high-price market … It is easier to market small amounts of costly fine chemicals in the cosmetics sector than bulk chemicals at low prices in other sectors.

European policymakers could do more to push bio-based technology from academia into the industry. “Increased public funding mechanisms and support with public-private partnerships for the bioeconomy will help to increase bio-innovation and its competitiveness,” Klaus Pellengahr, from the Danish enzyme producer Novozymes, told me.

Lack of private investment

The EU provides lots of funding for bio-based technology in the early stages, but European companies have trouble attracting private investors to commercialize the technology.

One of the reasons for this lack of interest from private investors is that the regulatory system is hard to navigate across the different member countries. This means that bio-based companies have an uphill struggle commercializing their technology.

I find that some regulations, though valuable and sensible for protecting the consumer … need to be reformed so that they are easier to use,” Leya commented. “Feed additives from algae could improve meat and fish quality and survival of fish larvae in hatcheries, but cannot enter the market unless this specific algal species is listed in the novel food catalog. But getting it listed is extremely expensive and takes some years.

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Even if a company does attract private investment, VC firms have short-term goals, which can be problematic for establishing bio-based companies. “VCs are another problem because you have to have an exit strategy in your business. You grow it to sell it, which is not sustainable, Stein explained.

These issues could be addressed if the government reforms the regulatory system and increases supportive funding programs for the nascent bio-based industry. “I’d love to see a lot more investing by not only the industry, because the industry always wants to make money, but more of a top-down approach by the government,” Stein commented.

Economic short-sightedness

While bio-based industries may provide a long-term value for society, they are usually more expensive than fossil fuel sources in the short term. Client companies wanting to maximize profits for their shareholders are unlikely to pay for bio-based goods for this reason.

It still is less expensive to use traditional sources as these processes are established and have been used for a long time,” Leya told me. “As long as the traditional resources can still be bought at lower prices than products from alternative bio-based resources, the traditional, chemical, ones will be used.

Another reason why the bio-based industry is expensive is because fossil fuel products are often priced artificially cheaply. Back in 2017, for example, fossil fuel companies worldwide received government subsidies totaling a whopping €4.6 trillion. In addition, many companies have been able to pump greenhouse gases into the environment without paying any tax on emissions. While the EU has implemented a trading scheme to incentivize reductions in emissions, it has had mixed results.

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If we incorporated a carbon dioxide tax in Europe or worldwide, for example, in an instant many products would double or triple their price. And then a bio-based economy would become much more efficient,” Stein commented.

Making the bioeconomy more appealing for the industry, therefore, requires a more level playing field in terms of subsidies, with prices that better represent the environmental cost of the materials. In addition, measures to better integrate bio-based methods into the economy could help bring down the costs.

Lack of public awareness

Another obstacle to bio-based companies is limited public understanding about the bio-based industry. Well known figures such as the UK broadcaster David Attenborough have greatly improved our awareness of the need for change, but there is a lot more to teach the public about the bio-based industry.

Of course, there is a will … of the consumer to use ‘green, sound, alternative’ products, but often they are not willing to pay the price or do not really understand which product really is environmentally green,” Leya said. “A product is not necessarily green just because that word is printed on the label.

Another factor is public distrust of organisms modified by gene editing tools such as CRISPR/Cas9, whose many potential applications include improving the production of sustainable bio-based products such as biofuels. At present, EU regulators reflect this distrust by strictly regulating the commercialization of gene edited organisms, despite the fact that gene editing is more precise and direct than approved methods of modifying DNA, such as selective breeding.

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If you look at normal genetic modification such as breeding, it’s like firing a shotgun at your genetic material and seeing what comes out,” Stein explained. “If you look at CRISPR/Cas9, you take one gene and replace it — it’s like shooting like a sharpshooter. People don’t tend to know how it works and therefore a lot of education is needed.

Europe’s long road to sustainability

European biotech is definitely making leaps and bounds in developing technology to support a circular economy. For example, the French biotech Carbios is developing ways to turn old clothes into recycled plastic, and Afyren, another French biotech, converts plant waste into industrial chemicals.

Even with advances in biotechnology, the circular economy is still a long way off from becoming a reality. A lot of the challenges boil down to the idea that the cost of doing bio-based business is higher than business based on fossil fuels. Policymakers, therefore, will need to invest big public grants into kickstarting the circular economy.

An equally big responsibility falls on the consumers to demand more bio-based sources from companies and governments. “It is the market that will regulate the entry of algal biotechnology onto the everyday market,” Leya said. “That’s the good and the bad side of a free market.

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Achieving sustainability will also involve improving how efficient we are with resources in the first place. “I doubt that we can convert our complete industry into a green one, unless we start using fewer resources much more efficiently,” Leya added.

In terms of policy, there are encouraging movements in the right direction. Last year, the EU updated its official Bioeconomy Strategy to provide more support for bio-based companies. The circular economy has been one of the foci of the €80B Horizon 2020 project, which will finish next year.

Stein hopes that these movements will deliver practical results that will help bio-based companies to increase their foothold on the market. “My biggest hope would be that elements of a circular economy get incorporated into the real industry,” he concluded. “This means everything that comes with it: resource efficiency, sustainable energy. I’d love to see it. And I’m definitely working on it.


Images from Shutterstock, Tobias Marschner for Fraunhofer IZI-BB, Felix Jorde

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