For those of you who have been patiently awaiting a commercially viable alternative to our economic dependence on oil, natural gas and coal, the past year has seen some very encouraging technology and business breakthroughs in the growth and development of a modern bio-based economy. These breakthroughs are so material and meaningful that it is perfectly legitimate to ask whether we are today standing at the cross roads, the tipping point, in the transformation of our economy and society away from the costs and limitations created by our dependence on petroleum products, towards the growth and freedom possible through the development of a competitive bio-based economy.
Policy-makers understand the fundamental logic behind the bio-based economy. At its most basic level, it is extremely clear and simple: coal, oil and natural gas have long been the engine of the world economy, both as energy sources and as raw materials, but that will change significantly in the coming decades. As fossil fuels become scarce and expensive to develop, and the demand for energy continues to grow, this increased scarcity and cost will leave us with no choice but to find cheaper, more abundant, renewable sources of energy and materials. What is new is the growing understanding that our need for a bio-based economy is not driven exclusively by the need for alternative sources of energy and materials. We will need to have the capacity to feed 9 billion people by 2050; a challenge that cannot be met alone through traditional agricultural and manufacturing practices but will require bio-based solutions. Increasing demands for clean potable water, reduced energy consumption and CO2 emissions, growing urbanization and climate change are all challenges that cannot be successfully met by continued reliance on fossil fuels; an alternative solution is required and now exists; not as a nice to have, but a need to have if we are to successfully navigate the challenges that confront us today and in the generations to come.
Both the U.S. and Europe are still working to recover from the financial crisis and competitive pressures from Asia and Latin America are only set to grow. With this in mind, policy makers have correctly identified the bio-based economy as one of the drivers for sustainable economic growth and jobs, meeting the needs of a growing population while protecting our environment. Advanced biofuels alone will not only create more high quality rural jobs and a more sustainable income for farmers, but also boost many other sectors from services to distribution. In addition, it will decrease our dependence on oil and improve the environment. The debate has long been couched in the context of whether finding alternatives to fossil fuels is the "right" thing to do for climate change and environmental reasons; it is now inarguable that developing and adopting such alternatives is the "smart" thing to do if we hope to foster economic growth and development, create jobs, drive innovation and sustain our quality of life.
The U.S. has been a leader in incentivizing and facilitating the commercial development of a bio-based economy through such policy programs like the Renewable Fuel Standard (RFS). The U.S. produced 315 million barrels of fuel ethanol and 7.4 million barrels of biodiesel in 2010. A further 350 to 400 bio-refineries will have to be built to meet the RFS volume requirements of 16 billion gallons of advanced biofuels per year by 2022. More recently, and most encouragingly, the Obama administration has made a real statement of intent by announcing its decision to develop a National Blueprint -- a road map to develop the bio-based economy. A clear energy strategy, and commitment to a long term policy position by US political leaders enables private companies, like DSM, to make the capital commitments necessary to realize the vision and potential of a bio-based economy; and create the jobs and growth through investment and development that the U.S. needs. The Obama administration, and the Bush administration before that, through the DOE and others have acted in a bipartisan and consistent manner with respect to government investment and incentive as a catalyst to private sector development of a bio-based economy. These actions have positioned the U.S. as a leader in this field, and will lead to sustainable economic development in the years to come.
In Europe, the EU's executive body -- the European Commission -- recently unveiled its bio-economy strategy and action plan: "Innovating for Sustainable Growth: a Bioeconomy for Europe." The plan focuses on three key aspects: developing new technologies and processes for the bioeconomy, developing markets and competitiveness in the bioeconomy and pushing policymakers and stakeholders to increase collaboration. Significant funding is also being made available, most notably from the €80 billion of the EU Research and Innovation program Horizon 2020.
And more needs to be done. There is an urgent need to create an agricultural infrastructure for collecting plant residues (waste) and connect the farm fields with the industrial infrastructure to produce food, fuel, chemicals and advanced materials. We also need a more supportive and stable framework to help bridge the gap between research and markets to encourage investment. The disconnect in understanding the bio-based economy between politicians and business leaders on the one hand and the general public on the other remains a major concern as well.
The recent policy developments represent a major shift in the status of the bio-based economy, and the willingness of politicians to provide the necessary leadership and direction. Driven by the U.S. and the EU, there is now a real opportunity to create a robust and ambitious international consensus around the acceleration of the bio-based economy.
Business is also playing its part
My company, DSM, has always focused on making sustainable bio-fuels from agricultural residue. We recently announced progress in our advancements in cellulosic bio-ethanol. In practical terms, this means we will soon start making a fuel grade ethanol from corn crop residues and other agricultural residue rather than from sugar and starch. Over time, time needed to overcome the big technical challenges in making chemical products from agricultural residue, critics have cast doubt on the viability of advanced biofuels.
Thankfully, our scientists have now unlocked the cellulosic bio-ethanol opportunity and with our U.S. joint venture partner POET, we will make cellulosic ethanol a commercial reality by 2013 with an expected production of 20 million gallons growing to 25 million gallon per year. Our process uses about 25% of the residue, leaving 75% on the field for nutrient replacement, erosion control and other important farm management practices. Independent studies amongst others by Iowa State University have shown that this amount of residue removal will not affect the quality of the soil. With over 1.3 billion tons of biomass available for ethanol production in America, it's possible to replace millions of gallons of gasoline. The environmental and economic benefits will be equally impressive. And what's more, POET-DSM plans to expand cellulosic ethanol production within the existing network of POET's ethanol plants in the US and license the technology to other producers in America and around the world.
DSM has committed $125 million of its own money to this endeavor because it firmly believes in the commercial potential of advanced biofuels, and the necessity of this renewable energy source if we are to create jobs and drive economic growth today, and meet the challenges of tomorrow. Such large and material financial commitments by private companies like DSM requires continued commitment by our political leaders and other stakeholders to our collective vision that we can and must move from our dangerous reliance on fossil fuels to commercially viable alternatives. This commitment must be manifest in not only thought and words, but continued action.
The bio-based economy is far more than just bio-fuels. It is also about replacing the oil-based chemicals and materials in cars, shoes or electronic goods, with chemicals and materials derived from renewable biomass. This is a market that's already grown leaps and bounds, in terms of both the quality and commercial viability. Indeed, McKinsey estimates that this market will be worth €450 billion by 2030.
I am highly encouraged by recent developments. Now we will have to prove that we can successfully deliver the projects to make the bio-based economy a reality. That is the real challenge for all of us who are committed to a bio-based and sustainable future. So have we reached the crossroads, the tipping point? I believe we have!