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3—
Range of Biobased Products

At the turn of the century most nonfuel industrial products—dyes, inks, paints, medicines, chemicals, clothing, synthetic fibers, and plastics—were made from trees, vegetables, or crops. By the 1970s, organic chemicals derived from petroleum had largely replaced those derived from plant matter, capturing more than 95 percent of the markets previously held by products made from biological resources, and petroleum accounted for more than 70 percent of our fuels (Morris and Ahmed, 1992). However, recent developments are raising the prospects that many petrochemically derived products can be replaced with industrial materials processed from renewable resources. Scientists and engineers continue to make progress in research and development of technologies that bring down the real cost of processing plant matter into value-added products. Simultaneously, environmental concerns and legislation are intensifying the interest in agricultural and forestry resources as alternative feedstocks. Sustained growth of this burgeoning industry will depend on developing new markets and cost-competitive biobased industrial products.

Numerous opportunities are emerging to address industrial needs through the production and processing of biological materials. Today's biobased products include commodity and specialty chemicals, fuels, and materials. Some of these products result from the direct physical or chemical processing of biomass—cellulose, starch, oils, protein, lignin, and terpenes. Others are indirectly processed from carbohydrates by biotechnologies such as microbial and enzymatic processing. Table 3-1 shows



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Page 55 3— Range of Biobased Products At the turn of the century most nonfuel industrial products—dyes, inks, paints, medicines, chemicals, clothing, synthetic fibers, and plastics—were made from trees, vegetables, or crops. By the 1970s, organic chemicals derived from petroleum had largely replaced those derived from plant matter, capturing more than 95 percent of the markets previously held by products made from biological resources, and petroleum accounted for more than 70 percent of our fuels (Morris and Ahmed, 1992). However, recent developments are raising the prospects that many petrochemically derived products can be replaced with industrial materials processed from renewable resources. Scientists and engineers continue to make progress in research and development of technologies that bring down the real cost of processing plant matter into value-added products. Simultaneously, environmental concerns and legislation are intensifying the interest in agricultural and forestry resources as alternative feedstocks. Sustained growth of this burgeoning industry will depend on developing new markets and cost-competitive biobased industrial products. Numerous opportunities are emerging to address industrial needs through the production and processing of biological materials. Today's biobased products include commodity and specialty chemicals, fuels, and materials. Some of these products result from the direct physical or chemical processing of biomass—cellulose, starch, oils, protein, lignin, and terpenes. Others are indirectly processed from carbohydrates by biotechnologies such as microbial and enzymatic processing. Table 3-1 shows

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Page 56 TABLE 3-1 Increase in Worldwide Sales of Biotechnology Products, 1983 and1994a   1983 ($ millions)b 1994c ($ millions) Fuel and industrial ethanol 800d 1,500e High-fructose syrups 1,600 3,100 Citric acid 500 900 Monosodium glutamate 600 800 Lysine 200 700 Enzymesf 400 1,000 Specialty chemicalsg 1,300 3,000 Total 5,400 11,000 a Table excludes pharmaceutical products. b Data from Hacking (1986). c Data from John VicRoy, Michigan Biotechnology Institute, Market Analysis, 1994. d Data based on Hacking (1986): 1983 ethanol price = $1.70 per gallon and volume = 180 million bushels corn (approximately 2.5 gallons ethanol per bushel). Total ethanol sales = $0.8 billion. e Data based on February 21, 1994, Ethanol Profile, Chemical Marketing Reporter: 1994 industrial ethanol (fermentation) price = $1.70 per gallon and volume = 75 million gallons; fuel ethanol price = $1.1 per gallon and volume = 1.2 billion gallons. Total ethanol sales = $1.5 billion. f Includes feed grades. g Includes diverse products such as gums, vitamins, and flavors. worldwide markets for several biobased industrial products (excluding pharmaceuticals) made from microbial and enzymatic conversion of carbohydrates. The gross annual sales of these biochemicals in 1994 exceeded $13 billion (Datta, 1994). Analyses of historical and present market growth rates suggest that the worldwide market for specialty chemicals will grow 16 percent per year (Datta, 1994). A wide range of biobased industrial products and technologies will be introduced to diverse industrial markets. Ethanol and oxygenated chemicals derived from fermentable sugars will be key precursors to other industrial chemicals traditionally dependent on petroleum feedstocks. In the long term, with advances in genetic engineering, large-scale fuel production from lignocellulosic plant materials may become cost competitive with petroleum fuels. In other cases, biobased technologies such as enzyme catalysts are promising replacements for more hazardous industrial chemical processes. Increasingly, niche markets will be sought for a wide array of custom-engineered plant polymers (e.g., chiral compounds) not available in petrochemical-based products.

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Page 57 Commodity Chemicals and Fuels Biobased industries of the future will include plant-derived commodity chemicals (those selling for under $1.00 per pound) to provide transportation fuels and intermediate chemicals for industrial processing. Ethanol is critical because this oxygenate can serve as a transportation fuel and also is a precursor to many other industrial chemicals. For example, corn starch fermentation yields ethanol, which then can be dehydrated for production of ethylene, the largest petroleum-based commodity chemical. The U.S. Department of Agriculture (USDA) estimated for 1996 to 1997 that 12 million metric tons of corn of a total 252 million metric tons of corn grain produced in the United States were put into ethanol fuel production—about 1.1 billion gallons of ethanol fuel (ERS, 1997b). Ethanol Large imports of foreign crude oil in the 1960s and 1970s stimulated interest in fuel ethanol (Harsch, 1992). In the United States the primary approach taken was gasohol, a blend of 10 percent ethanol in gasoline. Researchers found that ethanol and its derivative, ethyl tert-butyl ether, work as octane enhancers, increasing the efficiency of burning gasoline in an internal combustion engine. Similar interest in ethanol occurred in Brazil, and, with subsidies from the government, Brazil forged ahead with ethanol production. Until six years ago nearly 95 percent of the cars produced in that country ran on ethanol. Since then the price of crude oil has dropped and Brazil has converted to ethanol-gasoline blends (Anderson, 1993). In the United States, ethanol occupies a niche in the transportation fuel market as an oxygenate in urban areas that do not attain U.S. Environmental Protection Agency air quality standards for carbon monoxide in response to the Clean Air Act Amendments of 1990. Gasoline is blended with an oxygenate fuel such as ethanol or methyl tert-butyl ether (MTBE) to increase the combustion efficiency of gasoline and decrease carbon monoxide emissions in cold weather. Due to its lower cost in comparison to ethanol, MTBE has been the primary oxygenate used, and its use ranges from 63 to 81 percent of the total demand for oxygenates (EIA, 1997). Total estimated U.S. production of MTBE in 1995 was 8 billion kilograms; estimated ethanol production for 1994 was 4.3 billion kilograms (Committee on Environment and Natural Resources, 1997). An interagency panel assessed the air quality, groundwater and drinking water quality, fuel economy and engine performance, and the potential health effects of MTBE and other oxygenates (Committee on Environment and Natural Resources, 1997). In its review of the draft

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Page 58 federal report, the National Research Council concluded that the cold-weather air pollution effects of oxygenated fuels were unclear. While data on the occurrence of MTBE in groundwater and drinking water are scarce, MTBE has been detected in groundwater (Squillace et al., 1996), stormwater (Delzer et al., 1996), and drinking water (Committee on Environment and Natural Resources, 1997). Because MTBE is very soluble in water, is not readily sorbed by soil and aquifer materials, and generally resists degradation in groundwater, the interagency group recommended that there be an effort to obtain more complete monitoring data, behavior and fate studies, and aquatic toxicity tests for wildlife and to establish, if warranted, a federal water quality criterion. Specific well-targeted research will be needed to answer questions about potential tradeoffs in using these chemicals as additives to gasoline (NRC, 1996b). Demand for starch-based ethanol is influenced by the commodity market price for corn. During the 1995 to 1996 marketing year, high demand for corn grain drove up corn prices to record levels, leading to high input costs and a downturn in ethanol fuel production. Many ethanol producers opted to suspend ethanol production and do maintenance on their manufacturing facilities. Other producers diverted ethanol fuel production to the alcoholic beverage market. The USDA expects that producers will need to reestablish long-term contracts with blenders to regain market share lost when corn markets experienced a period of high input pricing in 1995 to 1996 (ERS, 1997b). In the long term, large-scale production of fuel ethanol from lignocellulose materials could become technically feasible and economically favorable. A key will be demonstrating that recent and anticipated technical innovations work at larger scales with representative raw materials. The cost of bioethanol must drop significantly if it is to penetrate a much larger fraction of the transportation fuel market. This change will occur only if economical lignocellulose conversion technologies are developed—a long-sought achievement. Use of these alternative feedstocks with new conversion processes may reduce production costs sufficiently to allow access to the commodity fuel market, even without subsidies or tax incentives. The case study of lignocellulose-ethanol processing described in this chapter illustrates one approach toward reducing the costs of ethanol production. Biodiesel Biodiesel is a fuel that likely will not be an economically viable product in the near term. Vegetable-based diesel fuels are appealing in part because these biobased fuels confer some potential environmental benefits. Because production costs for soy-based diesel currently are ex-

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Page 59 tremely high, soy-based diesel fuel faces stiff competition in most petroleum-based diesel fuel markets. For example, in Europe biobased diesel is more popular because incentives are offered to encourage its use. Further research and development may increase the demand for biobased diesel fuel in the long term. Biodiesel is made by transesterifying plant oil(s) with methanol in the presence of a catalyst to produce fatty acid methyl esters. Methanol for the reaction is readily available from biomass, natural gas, or coal. Oils that can be processed into biodiesel include soybean, canola, and industrial rapeseed (Harsch, 1992). If the reacted oils have the correct carbon chain length, the fatty acid methyl esters will have chemical characteristics similar to those of conventional diesel fuel when they combust in modern diesel engines. Biodiesel is usually mixed with petroleum-based diesel fuel in a ratio of 20 percent biodiesel to 80 percent diesel fuel (B20). The U.S. Department of Energy (DOE) has moved to the rule-making process for inclusion of B20 as an approved alternative fuel under the Energy Policy Act of 1992. If this acceptance occurs, government-owned fleets of small diesel engines will be able to meet alternative fuel guidelines with biodiesel under that act. Biodiesel does confer some environmental benefits. One advantage of biodiesel over petroleum-derived diesel is the virtual absence of sulfur and aromatic compounds (Abbe, 1994). Further, combustion of biodiesel produces lower emissions of carbon monoxide, unburned hydrocarbons, and particulate matter than combustion of petroleum-based diesel (Abbe, 1994). Consideration of emissions is particularly important in urban areas suffering from poor air quality. Biodiesel may be valuable in the future because the fuel can be used in today's diesel engines without modification and in various blends without negative impacts on engine performance (Hayes, 1995). An increased focus on biodiesel largely results from its success in Europe. The crop of choice in Europe has been rapeseed, and the European Union has implemented subsidies for farmers growing oilseed crops to promote biodiesel production. European production of biodiesel and implementation of government policies to promote its use have progressed relative to the United States. A gallon of biodiesel requires 7.35 pounds of soybean oil and other inputs valued between $0.50 and $0.70. If soybean oil costs $0.25 per pound, biodiesel must cost at least $2.33 per gallon excluding taxes, or at least four times the cost of tax-free petroleum-based diesel (Hayes, 1995). The USDA estimated a hypothetical market price of $4.25 per gallon for biodiesel (ERS, 1996b). As a result of these high costs, biodiesel may be used only where it is mandated (i.e., in urban transit fleets and government-owned diesel vehicles), which limits the ultimate market size and encourages vehicle owners to seek less ex-

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Page 60 pensive alternatives (Hayes, 1995). Some research on other plant-based diesel fuel alternatives may be warranted. Direct substitution of plant oils for diesel fuel would be cheaper than the manufacture of biodiesel because the transesterification process imposes significant additional costs. Unfortunately, the high viscosity of the oils causes poor atomization and creates flow characteristics that are generally incompatible with present-day diesel engines (Harsch, 1992). A different lower-cost alternative that merits consideration is the use of ethanol or butanol solvents for transesterification of plant oil. In the United States, biodiesel would be unlikely to completely replace petroleum-based diesel. Even if all of the vegetable oil currently produced in the United States (about 3.1 billion gallons per year) went into biodiesel production, plant-based diesel production could provide only 6.4 percent of the nation's annual diesel consumption of 45 billion gallons (Harsch, 1992). Production of 3 billion gallons of biodiesel necessary for agricultural uses would require farmers to dedicate 40 million to 60 million acres to biodiesel crops (Harsch, 1992). Introduction of biodiesel as a blend with conventional diesel fuel is a more feasible goal in the United States and one that could have significant benefits in areas where the environment is sensitive to disruption by conventional diesel emissions or spills. Intermediate Chemicals Intermediate chemicals play an integral role in the U.S. economy. Organic chemicals are synthesized primarily from petroleum for production of numerous nonfuel industrial products such as paints, solvents, clothing, synthetic fibers, and plastics. Without these products the United States could not maintain its modern way of life. When petroleum supplies are interrupted, price volatility occurs in international petroleum markets. These events can have widespread economic consequences on oil-importing nations. Increasing the diversity of strategic feedstocks with biobased raw materials could help mitigate economic downturns created by oil shortages. Thus, intermediate chemicals are an important market targeted by the biobased industry. Ethylene Ethylene is perhaps the most important petrochemical because of the value of its numerous derivatives such as polyethylene, ethylene dichloride, vinyl chloride, ethylene oxide, styrene, ethanol, vinyl acetate, and acetaldehyde. Before the new lignocellulose conversion technology came on the horizon, the ethylene market was considered inaccessible to

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Page 61 TABLE 3-2 Hypothetical Production Cost Comparisons for Ethylene Commodity Year Average Variable Costa ($/lb.) Average Fixed Costb ($/lb.) Average Total Cost ($/lb.) Pricec ($/lb.) Petroethylene 1993 0.02 0.08 0.10 0.21 Projected petroethylene 2005 0.06 0.08 0.14   Biobased ethylened 1993 0.13 0.01 0.14   a Average variable costs include costs for labor, inputs, and energy in the case of biobased ethylene, but labor is omitted in the case of petroethylene because the figure was not available. This will raise the average total cost for the petroethylene somewhat but by only approximately 4 percent. In the case of petroethylene, the input material was naptha, and credit was given for the propylene and gasoline that would be coproduced. b Average fixed costs include costs for land and capital. c Price for ethylene on December 23, 1993, as quoted in Chemical Marketing Reporter. Prices will vary annually. d Cost data for biobased ethylene were developed using Donaldson and Culbertson (1983) estimates of input requirements, yields, and plant costs—combining input requirements with 1993 price data to estimate material and utility expenditures, updating capital expenditure data with a price index for plant and equipment, and giving annual payment for a 15-year mortgage. The ethanol production cost of $0.46 per gallon (see Appendix A, Table A-2) converts to 6.6 pounds of ethanol per gallon = $0.12 per pound (ethanol cost for the ethylene process). SOURCE: Gallagher and Johnson (1995). biobased production (Lipinsky, 1981). Today, biobased ethylene production based on ethanol derived from corn stover still is not cost competitive with petroethylene sources. In the near term, ethylene based on lignocellulose fermentation could move into the margin of competition against petrochemical sources (see Table 3-2). Petroethylene costs are expected to be $0.14 per pound by 2005 based on increasing cost projections for oil prices, using long-term projections developed by the World Bank. Bio-ethanol costs likely will remain stable owing to a slowly growing demand for agricultural products. Ethylene would be produced in large-scale operations that already process ethanol, thus enabling manufacturers to manage the costs from sluggish marketing periods. With rising petroleum prices or further improvements in the biobased ethylene route, the cost advantage of petroethylene could erode. Acetic Acid Acetic acid could be a large-volume chemical target for the biobased industry. It is used primarily as a raw material in the production of vinyl

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Page 62 acetate, acetic anhydride, cellulose acetate, acetate solvents, terephthalic acid, and various dyes and pigments and as a solvent in the chemical processing industry. The food, textiles, and pharmaceuticals industries also use acetic acid in their manufacturing processes. In 1992, 1.9 million tons of acetic acid were produced in the United States (Ahmed and Morris, 1994). Acetic acid may be combined with dolomite lime to produce calcium magnesium acetate, an important deicing agent for the transportation industry. Biobased acetic acid may be produced by fermenting corn starch or cheese whey waste or as a byproduct of the sulfite wood pulping process. A better understanding is needed of the relative costs of production of acetic acid from renewable resources as compared to petroleum-based feedstocks. Fatty Acids Fatty acids, readily available from plant oils, are used to make soaps, lubricants, chemical intermediates such as esters, ethoxylates, and amides. These three important classes of intermediates are used in the manufacture of surfactants, cosmetics, alkyd resins, nylon-6, plasticizers, lubricants and greases, paper, and pharmaceuticals (Ahmed and Morris, 1994). Of the approximately 2.5 million tons of fatty acids produced in 1991, about 1.0 million tons (40 percent) were derived from vegetable and natural oils; the remaining 1.5 million tons were produced from petrochemical sources. Twenty-five percent of all plant-derived fatty acids used in the coatings industry comes from tall oil (a byproduct of kraft paper manufacture). The range of compounds in tall oil is quite large and unique, including long-chain unsaturated fatty acids. Specialty Chemicals Specialty chemical markets represent a wide range of high-value products. These chemicals generally sell for more than $2.00 per pound. Although the worldwide market for these chemicals is smaller than those for bulk and intermediate chemicals, the specialty chemicals market now exceed $3 billion dollars and is growing 10 to 20 percent annually (Datta, 1994). Examples of biobased specialty chemicals include bioherbicides and biopesticides; bulking and thickening agents for food and pharmaceutical products; flavors and fragrances; nutraceuticals (e.g., antioxidants, noncaloric fat replacements, cholesterol-lowering agents, and salt replacements); chiral chemicals; pharmaceuticals (e.g., Taxol); plant growth promoters; essential amino acids; vitamins; industrial biopolymers such as xanthan gum; and enzymes. Specialty chemicals can be made using fermentation and enzymatic

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Page 63 processes or directly extracted from plants. Genetic engineering has now made possible microbial fermentations that can convert glucose into many products and can yield an essentially unlimited diversity of new bio-chemicals (Zeikus, 1990). Likewise, one could engineer plants to produce some of these same chemicals. Furthermore, industrial researchers are discovering that plants can be altered to produce molecules with functionalities and properties not present in existing compounds (e.g., chiral chemicals). It is anticipated that advances in biotechnologies will have significant impacts on the growth of the specialty chemicals market. Enzymes Fermentation of biological materials will continue to be a primary source of most enzymes used today and new enzymes produced in the future. Enzymes serve two major purposes. Some function as biological catalysts in industrial processing of food ingredients, specialty chemicals, and feed additives. Others are components in end products such as laundry detergents, diagnostics, laboratory reagents, or digestive aids. Worldwide enzyme sales totaled $650 million in 1989 (Layman, 1990) and grew to approximately $1 billion in 1993 (Thayer, 1994). European companies dominate world enzyme production; the largest company, Novo Nordisk, currently supplies 40 to 50 percent of world sales (Thayer, 1994). Analysts predict enzyme sales will grow 10 percent annually over the next few years for traditional markets and new uses. The three largest markets for enzymes are the detergent, starch, and dairy industries. The enzyme market in 1989 broke down into 40 percent for detergents, 25 percent for starch conversion, and 15 percent for dairy applications (Layman, 1990). The remaining 20 percent included leather, pulp and paper, and animal feed manufacture. This last category is of particular interest because it includes industries that historically have caused adverse environmental impacts and, consequently, may have incentive to use more environmentally benign processes like those based on enzymes. Soaps and Detergents Industrial production of soaps and detergents in the United States totaled $14.9 billion in 1993 (Ainsworth, 1994). Almost half of the laundry detergents in the United States and 90 percent of those in Europe and Japan contain enzymes. The partial ban in the United States of water-polluting phosphates from detergents in 1982 led to increased use of enzymes in soaps and detergents (Ahmed, 1993). The replacement of traditional chlorine bleach with peroxygen-based bleach additives (such as perborate bleach) also has enabled enzymes to play an important role in

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Page 64 the soap and detergent industry due to their compatibility with the newer additives (Ainsworth, 1994). Enzymes are naturally diverse and function in various cleaning agent roles. Protease, lipase, and cellulase enzymes are used in soaps and detergents to break down and help remove dirt stains. Celluzyme, a Novo Nordisk product, removes microfibrils that emerge from cotton fibers after use and cause an ''old and gray" appearance (Falch, 1991). In addition, detergent enzymes reduce energy use because they are effective in much cooler wash waters. Food Processing Enzymes The largest use of enzymes as catalysts is in the production of high-fructose syrup from starch. Amylases break down starch to glucose; then glucose isomerase is used to isomerize the glucose into fructose. The resulting mixture of glucose and fructose is used as a sweetener in soft drinks. Enzymes also have several uses in the dairy industry. The enzyme rennin coagulates milk protein and is used to make dairy products such as cheeses. Lactase is used to produce lactose-free milk. Cellulase Enzymes Relatively small amounts of cellulase enzymes are used now, primarily in the food industry. A large-scale fermentation industry based on lignocellulosic materials will require huge volumes of cellulases, much larger amounts than for any other enzyme, at much lower enzyme prices than currently available. Reducing the costs of cellulase enzymes is a key research priority for reducing the costs of industrial processing of biobased raw materials. Other Uses for Enzymes Various industries use enzymes as end products or biocatalysts at a smaller scale. The leather manufacturing industry has traditionally used lime and sodium sulfide mixtures to dissolve hair on animal skins—a process that is polluting and unpleasant to work around. Proteases provide an alternative treatment that loosens and removes the hair, allowing it to then be filtered off. Proteases also result in a better-quality end product (Falch, 1991). The pulp and paper industry also uses enzyme technologies, especially xylanases for bleaching to replace chlorine. The textile industry uses cellulases for making "stonewashed" jeans (Wrotonowski, 1997).

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Page 65 Animal Feed Industry The animal feed industry is currently developing beneficial applications of enzymes on a large scale. Certain antinutritional compounds are present in animal feeds. Beta-glucans create viscous mixtures after being solubilized, and these impair animal digestion by causing poor absorption, poor diffusional rates of solutes in the digestive tract, and a low rate of nutrient uptake. Addition of beta-glucanases (enzymes that degrade beta-glucans) to animal feeds removes the beta-glucans and their associated problems. This technique makes it possible to produce efficient animal feeds from grains that are high in beta-glucans, such as barley and oats. It also decreases the amount of manure produced by animals consuming the feed. Enzymes may lessen the contribution of animal feeds to phosphate pollution. Phytic acid, the major plant storage compound for phosphate, comprises about 60 to 65 percent of the phosphorus content in animal feeds made from cereal grains. Phytic acid forms complexes with iron and zinc ions and makes these metal ions less available for assimilation by animals. Moreover, animals cannot degrade phytic acid, so producers add inorganic phosphate to animal feed as a supplement, although most of the supplemental phosphate is excreted. The estimated 100 million tons of animal manure produced each year in the United States is thought to liberate 1 million tons of phosphates, contributing significantly to phosphate pollution. Addition to animal feeds of phytase, an enzyme that degrades phytic acid, allows animals to digest the phytic acid and better assimilate the iron and zinc ions. Less phosphorus consequently needs to be added to the feed, thereby reducing the contribution of animal feed to phosphate pollution. The animal feed industry can benefit from the addition of a variety of enzymes to feed mixes. It is important to note that modifications of feed composition can be made through genetic engineering of plants to allow for optimization of the feed directly. Biobased Materials Increased consumer demands for environmentally benign products are leading to numerous opportunities in the biobased materials market. Diverse materials are produced from agricultural feedstocks, including wood and paper; cotton, kenaf, and other textiles; industrial starches; and specialty polysaccharides such as xanthan, fats and oils, and proteins (Narayan, 1994). Also under development are biobased composites such as one made of soybean protein and waste paper.

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Page 66 Bioplastics Renewable resources such as industrial starches, fatty acids, and vegetable oils can serve as sources for bioplastics. Biodegradable thermoplastics—such as starch esters, cellulose acetate blends, polylactide, thermoplastic proteins (e.g., zein), and poly(hydroxybutyric acid) BOX 3-1 Plastics from Plants and Microbes Poly(hydroxybutyrate) (PHB) and its variants, generally known as polyhydroxy-alkanoates, are natural polymers commonly produced by plants and microbes. PHB is a truly biodegradable plastic material that is naturally and efficiently degraded to carbon dioxide and water by many common soil bacteria. It is also a common food storage material in bacteria that accumulates inside bacterial cells when carbon is in excess but some other nutrient limits growth. In bacteria such as Alcaligenes eutrophus, PHB may represent as much as 90 percent of the total cell mass under the appropriate growth conditions. PHB is derived from acetyl-CoA, a component of primary metabolism, by a process involving three enzymes. The enzyme beta-ketothiolase condenses two molecules of acytl-CoA to yield acetoacetyl-CoA. This compound is reduced to beta-hydroxybutyryl-CoA by acetoacetyl-CoA reductase and then condensed to a nascent polymer chain by PHB polymerase. Commercial production by fermentation is currently under way for poly-3-hydroxybutyrate-3-hydroxyvaleate (PHB-V), a PHB that has characteristic similar to polypropaline or polyethelene. Nevertheless, a broader commercial use of these natural polymers will require new biological and engineering technologies to enable large-scale production. One possible approach is to increase and improve synthesis in the host bacterium by mutating the existing biosynthetic pathway. Another is to move the genes for PHB synthesis into other bacteria, plants, or yeasts for increased production. At Michigan State University, Sommerville and colleagues pioneered this approach using the common weed Arabidopsis as a "bioreactor." The researchers manipulated genes for PHB synthesis in Arabidopsis and showed the plant produced PHB at a low level. Moving the genes to the target expression in a different part of the plant cell (i.e., from the cytoplasm to the chloroplast) dramatically increased PHB production. Increased understanding of the basic science underlying the plant and bacterial metabolic and biosynthelic pathways has made possible another exciting development. New polymer structures can now be engineered by manipulating the PHB metabolic pathway in various plants and microbes. For example, less brittle plastics may result if low amounts of poly(hydroxyvalerate) are coproduced in bacterial or plant cells that manufacture PHB. These polymers are readily biodegradable and have properties that make them a suitable substitute for petrochemical-derived thermoplastics. The new-found ability to "engineer" chemical derivatives of such polymers in living cells holds the promise of a truly environmentally benign bioprocess. SOURCE: Poirier et al. (1995).

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Page 67 (PHB)—show great promise for replacing the plastics derived from petrochemicals that generally are not biodegradable (see Box 3-1). Graft plastic polymers (plastics based on plant materials and petrochemicals) are less bio- degradable than plant-based bioplastics. Bioplastics comprise about 5 percent of the total polymer, plastics, and resin market (Ahmed and Morris, 1994). The bioplastics industry has generated new markets for industrial starches. Starch can be directly manufactured into products such as biodegradable loose-fill packaging to replace nondegradable polystyrene-based packaging peanuts. Fermenting starch into lactic acid or PHB yields other starch-derived thermoplastics. The Cargill Company has introduced polylactide-based thermoplastics for single-use disposable products such as utensils, plates, and cups. ICI Corporation has commercialized biodegradable PHB plastics for shampoo bottles and other higher-cost disposables. Plant matter also provides a new material for direct processing into plastic and polymeric resins. A graft copolymer of latex and starch is used to make coated papers. Certain starch-based plastics are also in commercial use, as are various graft polymers between starch and synthetics. One class of graft polymers absorb many times its weight in water and has many applications such as absorbent soft goods (e.g., absorbents for body fluids, disposable diapers, hospital underpads, and related products), hydrogels, and agricultural products (such as seed and bare root coatings and hydromulcher) (Doane et al., 1992). These hydrophilic graft polymers are prepared using polyacrylonitrile in which the nitrile substituents have been hydrolyzed with alkali. Many new starch-based polymers and applications are expected to appear soon in commercial uses. Soy-based Inks Soybean oil-based inks were introduced to U.S. markets in the 1970s in response to the oil shortages. More recently increased emphasis on improving worker safety and reducing environmental emissions has spurred interest in alternatives to petroleum-based inks. Soybean oil is a carrier for a pigment in ink formulations. Plant-derived inks require less use of hazardous chemicals during equipment maintenance, produce lower evaporative emissions of volatile organic hydrocarbons, and are biodegradable. Soybased inks are more desirable because the lighter color of soybean oil enhances the true color of colored ink pigments compared to petroleum-based inks. Black soy-based inks typically require a larger proportion of oil than pigment in comparison to colored printing inks. Because soybean oil costs more than petroleum, black soybased inks are at a cost disadvantage. Some research indicates that soy inks can spread

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Page 68 about 15 percent farther than petroleum-based inks, offsetting the differences in cost (EPA, 1994). Forest Products Forest products currently comprise the largest source of renewable resources for the biobased materials industry. The United States annually produces more than 260 million tons of lumber, paper, and derived wood products with a combined value exceeding $131 billion (Chum and Power, 1992). Currently, wood and paper products account for $96 billion or 87 percent of agricultural and forest products used in industrial production (ERS, 1997b). Solid wood is used for lumber and many other products and is the major building material in the United States. Approximately half of the 1993 U.S. wood harvest, 266 of the 501 million cubic meters harvested, was initially sent to solid wood products mills. The mill residue remaining was sent to pulp mills or used for fuel. Overall, approximately 28 percent of the 1993 harvest ended up in solid wood products (Ince, 1996). Preexisting uses of silviculture crops in the pulp and paper industry may provide predictable markets and sustain production of woody silviculture crops while new uses develop in the manufacture of high-value materials and chemicals. The pulp and paper industry is one of the largest industries in the United States, producing 64 million tons of pulp and 88 million tons of paper in 1991 (imports, exports, inorganic fillers, and recycled pulp account for the difference in tonnage between pulp and paper; Miller Freeman, Inc., 1995). Recent innovations may expand the applications of cellulose pulp. The U.S. Forest Products Laboratory developed a "spaceboard," a lightweight structural composite made by molding pulp fiber slurries into waffle-shaped forms (Hunt and Scott, 1988) that is now commercialized. Scientists have also developed moldable plastic materials by combining pulp fibers with thermoplastics. These materials have many potential uses, for example, in car bodies and packaging materials. Courtaulds, a company from the United Kingdom, and Lenzing, an Austrian firm, each have begun large-scale production of lyocell, a cellulosic fiber made from a solvent spinning process and sold under the trade name of Tencel. Like rayon, Tencel is wood-pulp based; however, rayon requires dry cleaning and Tencel is washable. Tencel is the first new textile fiber to be introduced in 30 years and has been described as the "best thing since cotton." Cotton and Other Natural Fibers Cotton is one of the most promising industrial crops. Cotton is a

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Page 69 BOX 3-2 Biopolymers The great majority of all biomass consists of natural polymers, and the great majority of all biomass is carbohydrate in nature. This means that the majority of all biomass is in the form of carbohydrate polymers, called polysaccharides. These natural polymers (biopolymers) can be used both as nature provides them and as the skeletal framework of other derived polymers. By far the most abundant of these carbohydrate polymers is cellulose, the principal component of cell walls of all higher plants. It is estimated that 75 billion tons of cellulose are biosynthesized and disappear each year, most of the disappearance being through natural decay. Cellulosic plant materials are used as fuel, lumber, and textiles. Cellulose is currently used to make paper, cellophane, photographic film, membranes, explosives, textile fibers, water-soluble gums, and organic-solvent-soluble polymers used in lacquers and varnishes. The principal cellulose derivative is cellulose acetate, which is used to make photographic film, acetate rayon, various thermoplastic products, and lacquers. The world's annual consumption of cellulose acetate is about 750,000 tons, 400,000 to 450,000 tons being produced in North America. Cellulose acetate products are biodegradable. While use of biopolymers, largely polysaccharides, as is and in modified form is now considerable, only a infinitesimal amount of that available is now utilized commercially in applications also served by petroleum-based polymers; so the potential is enormous. Broader application of such preformed polymeric materials awaits research and development. plant fiber composed of 90 percent cellulose. The long fibers of cotton make it an ideal material for weaving and spinning into cloth. Cotton confers qualities on fabrics that are difficult to duplicate with synthetic fabrics. Demand for cotton products has resurged in recent years, and the United States harvested approximately 18 million bales of raw cotton in 1996 to 1997 marketing year (USDA, 1997a). Advances in biotechnology and genetic engineering are now enabling development of cotton cultivars with improved pest resistance, yield, and quality, thereby potentially reducing production costs and better matching cotton characteristics to specific applications. Natural fibers other than cotton occupy various U.S. niche markets, such as specialty fabrics, papers, cordage, and horticultural mulches and mixes. Heightened environmental concerns are helping natural fibers find their way into new markets as well. Jute, hemp, sisal, abaca, coir fibers, and products derived from these fibers are currently being imported but could be produced domestically.

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Page 70 Targeting Markets This section identifies opportunities for replacing products made from nonrenewable fossil feedstocks with biobased chemicals and materials. In the midterm, biobased products will be primarily oxygenated chemicals and materials; petroleum will remain a more competitive feedstock for hydrocarbon-based liquid fuels and aromatic and alkane chemicals. Over the longer term, adoption of biofuels and biobased aromatic and alkane chemicals could grow significantly, given investment in the necessary research and development and perhaps carefully chosen incentives. The manufacture of chemicals is now dominated by fossil fuel sources; this market may represent the greatest opportunity for replacement of petrochemicals with biobased material. Only about 10 percent of the 100 million metric tons of chemicals marketed in the United States are biobased. The remaining 90 million tons of organic chemicals currently derived from fossil fuels potentially could be replaced by renewable resources. Biomass processing—fermentation of starch or cellulose accompanied by additional chemical, thermal, and physical processing steps—can produce a number of oxygenated intermediate chemicals, including ethylene glycol, adipic acid, ethanol, acetic acid, isopropanol, acetone, butanol, citric acid, 1,4-butanediol, methyl ethyl ketone, N-butanol, succinic acid, itaconic acid, lactic acid, fumaric acid, and propionic acid. These intermediate chemicals have uses in the manufacture of such polymers as nylon, polyesters, and urethanes; of various plastics and high-strength composites; and of solvents, coatings, and antifreeze. Numerous chemical markets may be filled by agricultural feedstocks. Development of fermentation industries over the next few decades could be accomplished in three progressive phases: (1) glucose from corn feedstock, (2) sugars from lignocellulosic crop residues from silviculture and agriculture, and (3) establishment of a large "carbo-chemistry" industry using sugars derived from the most cost-effective local sources. Another approach Would be to produce industrial chemicals in genetically engineered plants. These chemicals and materials could then be separated from the plant matter and upgraded by processing, possibly biological processing in some cases. Apart from pulp and paper, ethanol fuel is probably the largest single biobased industrial product. The United States produced about 1.1 billion gallons of ethanol in the 1995 to 1996 marketing year (ERS, 1997b), less than 1 percent of annual domestic gasoline consumption. The United States used 1.8 billion tons of mostly fossil fuels in 1989, triple the amount of all of the plant matter consumed for food and nonfood purposes combined (Ahmed, 1993). Large-scale production of ethanol fuel from lignocellulose may become economically feasible with new processing technologies, although this may take decades to materialize.

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Page 71 Specialty chemicals represent a rapidly growing and diverse group of high-value industrial products. The benefits of some of these biobased products are well known (e.g., enzymes). At the same time, rapid advances occurring in the life and materials sciences will lead to discoveries of plant compounds that cannot be produced with petroleum feedstocks. Industry will vigorously pursue the most promising candidates for further development and commercialization. Since some of these products will be successful and others will not, this market will be constantly evolving. It will be important for academic and industrial scientists to monitor market trends and technological breakthroughs to identify promising target areas for future research. Significant opportunities exist to increase markets for biobased materials. Because most industrial materials can be produced from agricultural and forestry feedstocks, markets for biomaterials and biopolymers likely will increase. For example, the United States manufactures annually more than 5 billion pounds of industrial starches for multiple uses, including making paper and paperboard. Several biodegradable polymers—such thermoplastics as polylactide and poly(hydroxybutyrate)—have been developed and are now sold commercially in small quantities. It is likely that biobased materials, including biopolymers, will serve as important and diverse resources for a growing biobased industry. Capital Investments A substantial investment of capital will be required to commercialize biobased products. Capital investment figures estimated for nine biobased chemicals are shown in Table 3-3. The private sector currently is investing in lactic acid production for use in lactic acid polyester formation, a polymer that can substitute for polystyrene in many cases. The capital required for developing the remaining eight chemicals would be more than $6 billion. Scale-up and commercialization costs are significant barriers in moving laboratory discoveries into the market. Industrial researchers estimate that the relative costs of discovery, scale-up, and commercialization are 1:10:100. Hence, $1 million invested in basic research generates sufficient promising technologies to justify $10 million invested in scale-up and risk reduction efforts that, in turn, are sifted through to find sufficient proofs of concept to warrant $100 million invested in commercial-scale manufacturing facilities. Applying these ratios to the eight chemicals listed in Table 3-3 suggests that $600 million dollars would be required to adequately demonstrate promising production technologies at a pilot scale and that $60 million would be required to support research aimed at solving the technical issues that have the greatest impact on processing costs.

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Page 72 TABLE 3-3 Estimated Capital Requirements for Target Biobased Organic Chemicals Produced from Glucose Biobased Organic Chemical 1993 Output (Million pounds) Capital Requirements ($ millions)a Corn Required (Bushels per day) Acetic acid 3,658 1,350 378,000 Acetone 2,462 1,221 342,000 Butanol 1,328 1,157 342,000 Maleic anhydride 424 230 60,000 Methyl ethyl ketone 556 484 126,000 Isopropanol 1,236 1,084 303,000 Butanediol 200 196 42,000 Adipic acid 760 230 60,000 Lactic acid 10,063 2,208 882,000 a Capital requirements and development and commercialization costs were updated to reflect 1993 prices. Model uses estimated costs for input requirements, yields, and plant costs—combining input requirements with 1993 price data to estimate material and utility expenditures, updating capital expenditure data with a price index for plant and equipment, and giving annual payment for a 15-year mortgage. SOURCE: Gallagher and Johnson (1995), based on model developed by Donaldson and Culberson (1983). A Case Study of Lignocellulose-Ethanol Processing Corn stover—the stalks, leaves, and husks of corn—is a suitable feedstock for the process of converting lignocellulosics to ethanol and may provide a particularly low-cost input in the Midwest. A 1993 study by the DOE concluded that ethanol could have a price comparable to the wholesale price of gasoline if it were processed from wood chips at a large plant (Bozell and Landucci, 1993). This case study adapts the DOE cost study of wood chips to a process based on corn stover and examines how the supply of corn stover, process yields, and material flow can affect processing costs. The analysis assumes that processes for conversion of the lignocellulosics of corn stover to ethanol will be developed successfully, considers the potential impacts of transportation costs on the location of a large plant in the Midwest, and assumes that sufficient residues are left on the field to meet soil conservation goals. Eventually, a significant share of the U.S. fuel supply—7 percent of U.S. liquid fuel consumption—could be provided by ethanol produced from corn stover. The economic analysis in Appendix A suggests that up to 7.5 billion gallons of ethanol could be produced annually at a cost of about $0.46 per gallon. When corrected for fuel efficiency, the cost to replace a gallon of gasoline becomes roughly $0.58, potentially making the cost of ethanol competitive

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Page 73 without subsidies. An additional 4.5 billion gallons of ethanol may be produced at higher costs due to potentially higher prices for corn stover when the corn stover for alcohol has to compete with its use for animal feed. Several developments will need to occur before stover-based ethanol production becomes practical. Putting these findings into practice will require scale-up and demonstration of the technology at the pilot scale to confirm rates, yields, and performance on real feedstocks for extended periods. Additionally, the real cost of corn stover must be verified through actual collection and utilization tests. Additional research would be necessary to determine the competitiveness among various feedstocks, such as residues, plant byproducts, and crops from marginal low-rent areas. The implications of widespread harvesting of crop residues on soil and water quality is another area for investigation. Finally, upstream handling, pretreatment, and lignocellulose conversion technologies must be demonstrated before investment and operating costs can be more precisely established. Large-scale production of biobased ethanol may be a long-term possibility, but some major technical barriers still need to be overcome to reduce costs. Until now technologies for converting lignocellulosics to ethanol via hydrolysis and fermentation have not aroused commercial interest. However, recent advances may make practical the simultaneous conversion of cellulose and hemicellulose to ethanol at comparable fermentation rates, thereby enabling essentially complete conversion of lignocellulosic carbohydrates to ethanol (Ingram et al., 1987; Zhang et al., 1995). The new technology incorporates simultaneous saccharification and a recombinant microorganism for fermentation of 5- and 6-carbon sugars. The demonstration phase is just starting and may require as long as five years to confirm or refute current high expectations. A key to the production of fuel ethanol from lignocellose will be to demonstrate that recent technical innovations work at larger scales with representative raw materials. Apart from pulp and paper, ethanol fuel is probably the largest single biobased industrial product. In recent years the United States has generated over 1 billion gallons of fuel ethanol annually from corn starch, less than 1 percent of annual domestic gasoline consumption. Today's cost of bioethanol must drop significantly if it is to penetrate a much larger fraction of the transportation fuel market. This change will occur only if economical lignocellulose conversion technologies are developed—a long-sought achievement but one that is also much nearer than it was two decades ago.