Gerard J. Ostheimer, Ph.D., Managing Director, below50 and Douglas L. Faulkner, “the Clean Tech Conservative” & President, Leatherstocking LLC
Special to The Digest
One can be forgiven these days for thinking the Four Horsemen of the Apocalypse have saddled up.
- Global deaths from COVID-19 are rising fast;
- Stock markets entered bear market territory;
- Oil prices have plummeted and are destabilized for the foreseeable future; and
- A veritable plague of locusts threatens East Africa and potentially Southwest Asia.
These developments follow shortly on harbingers of long-term climate disruption, including Europe’s warmest January ever, heat records in Antarctica, and the Australian firestorms.
The pandemic has only further disrupted trade and global supply chains that were straining from persistent, unresolved disputes.
Clearly, the global pandemic as well as the economic and energy disruptions warrant immediate concern and urgent action from government, business, and citizens. But, we, and others, are looking beyond today’s headlines and wondering if the world is passing through an inflection point. What are the lessons that society will draw from this witch’s brew of calamities, now and down-the-road? And, what will be the impact on the trajectory of the global and domestic bioeconomy?
Glut and Gloom
The 1 – 2 punch of the COVID-19 economic hit and the Saudi – Russian fight over oil markets have combined to collapse the price of oil. Low oil prices obviously do not bode well for the uptake of alternative fuels, chemicals, and renewable sources of energy. Dropping economic activity will reduce demand for energy. Dropping oil prices will make alternative fuels less competitive. Dropping markets will make many investors exceedingly concerned with risk and even less likely to invest in emerging technologies, like sustainable aviation fuel or bio-based products.
Be Careful What You Wish For
COVID-19 is giving the world a taste of the deep de-carbonization that is being called for by the most zealous climate change warriors. Some climate activists have repeatedly claimed that humanity’s survival requires rapid reductions in economic growth, travel, and even the human population. COVID-19 is inducing all three, and society is intimidated and horrified by its obvious impact on prosperity, freedom and on life itself.
Climate warriors readily acknowledge the need for social justice, but the pandemic will definitely limit people’s sympathy for action on climate change that fails to take a balanced approach. Reports, statistics and models of economic benefits from carbon reduction will not be enough to sell radical change. The destruction wrought by the virus will focus policymakers on economic reconstruction above all other concerns, and particular attention will likely be paid to those who have been left behind by globalism.
BC – Before COVID-19
Just prior to the pandemic we were feeling quite bullish on the global bioeconomy. More and more green shoots of progress were emerging in the global bioeconomy, such as the U.S. DOE commitment of $100 Mn to support the U.S. bioeconomy and UPM’s € 550 Mn MEGa-investment. In addition, there was wide support for climate action as demonstrated by the European New Deal, Jeff Bezos donation of $10 Bn, and several oil majors’ commitments to de-carbonize their operations and their products.
Pondering the New Normal
The impending global recession will be challenging for all sectors, and the combination with the collapse in oil prices the near term will be particularly hard on the bioeconomy. But there are some strong undercurrents that give us confidence for a healthy prognosis.
Here are four trends to watch which may well bolster biofuels and bio-based products industries in the longer run:
- Re-structuring of global supply chains: This was already underway before the Wuhan virus eruption, but the move away from Chinese dominance to a trading structure more based on local and regional suppliers will likely accelerate. This combined with renewed U.S. interest in energy independence may draw attention back to North America’s vast natural resources, like forests, as feedstocks for domestic renewable energy.
- A more realistic approach to climate change: After the pandemic subsides, the world will still need practical options for reducing greenhouse emissions, especially in hard to abate sectors like transportation. Electrification and hydrogen are long-term goals and depend on a vast scale-up of renewable power generation. Acknowledging that sustainable biofuels, bio-based chemicals and bio-materials are available now for hard to abate sectors is necessary for effective de-carbonization.
- Growing consumer demands for sustainability: Consumers with buying power, particularly younger buyers, prefer companies to deliver sustainable goods and to offer alternatives to products, like plastics, derived from petroleum. Eventually, consumer pressure will upend all sectors of the economy. Advanced biofuels and biobased products, if backed by scientifically-based and well-marketed proof of their superior sustainability will be well-placed to benefit.
- Marketing agriculture and forestry: As consumers appreciate the sustainability benefits of agriculture and forestry, solutions from the land will become more common and accepted. As these sectors modernize in the developing world, they will create useful opportunities for economic growth and meeting its growing needs for food, feed, fuel, and materials.
Ideally, the shock of pandemic – and the ensuing sense of vulnerability – will remind people that there are serious challenges to humanity and that real, practical action is required.
The global bio-economy has endured many peaks and valleys over the past decades. Our point – as ever – is that the bioeconomy provides real sustainable solutions to today’s challenges. We just need to convince the rest of the world that is the case.