Biology’s prize - the $5trn chemicals industry
08 02 2023 | George Darrah
The chemical industry is responsible for over 3 GT of emissions and nearly $5trn of global GDP annually[1]. Companies such as Dow, BASF and Ineos have committed to net-zero emissions by 2050[2][3][4], but reducing these emissions is expensive relative to many other sectors[5]. The chemical industry is a ‘hard-to-abate-sector’[6]. In parallel, demand for chemicals is expected to double by 2050[7].
Despite limited scale today, we expect biology to emerge as a key mitigation technology for the chemical industry – from providing biomass-based feedstocks through to manufacturing complex and biocompatible chemicals and materials. Broadly, this is a function of dramatic reductions in costs of technologies underpinning biology such as DNA sequencing and synthesis, biomolecule discovery and design, and CRISPR, coupled with rapid increases in computational power enabling experiments to increasingly be done ‘in-silico’.
Reducing the chemical industries ~1.5 GT of Scope 1 & 2 emissions remains mostly an engineering and chemistry problem. 0.5 GT can be avoided by switching to renewable energy and using H2 and green methanol as key industry building blocks. Similarly, using green H2 and renewable power in the Haber Bosch process will mitigate another 0.5GT of emissions[8]. The remaining balance of emissions may need capturing at source, according to Systemiq’s recently released Planet Positive Chemicals report. This could be an important source of carbon feedstock for the chemicals industry, and we believe that biology is key to efficiently capturing and converting that carbon. We’ll come onto that shortly.
The chemical industry’s ~1.5GT of ‘indirect’ or Scope 3 emissions are the hardest to abate. According to the Planet Positive Chemicals report, the extraction of fossil fuels used for chemical feedstocks releases 0.5GT and the remaining 1GT is emitted at end of life where fossil-based chemicals and materials are incinerated, and excess nitrates applied to fields re-enter the atmosphere as N2O[9]. It’s estimated that only ~10% of plastic ever created has been recycled and up to 70% of ammonia-based nitrogen is not taken up by crops.
We believe that biology has an enormous mitigation opportunity to abate the chemical industry’s Scope 3 emissions. At the core of this will be enabling economic processing of biomass, efficiently capturing carbon from the air, and low-emission manufacturing of chemicals and materials which can either be easily recycled or are ‘biocompatible’ (ie. they will decompose into fragments that can be easily metabolised by life).
Firstly, sourcing non-fossil carbon will be the key pain point for a net-zero chemicals industry. Sustainable biomass is a limited resource that comes in a wide variety of forms and shapes and requires low-cost processing technologies to make them available. These include techniques to convert mixed biomass feedstocks into building block molecules such as methane and methanol, but also direct replacements for liquid hydrocarbons like naptha, such as that under development by Xfuel. Others are moving one step further by converting complex biomass molecules like lignin directly into useful products such as benzene and other aromatics. Companies working on this include Lixea, Linium and Bloom Biorenewables.
However, switching to biomass feedstocks for chemical production instead of fossil fuels would use up to 50% of global sustainable biomass, and up to 100% in 2050 if plastic recycling rates don't increase[10]. This clearly isn't practical considering the need for biomass in net-zero aviation and marine fuels, and competition with the food system. A systems approach, including using cellular agriculture to improve food production efficiency and reduce land use, could increase sustainable biomass supply and free up land for other purposes.
Additional carbon will need to be captured from waste industrial gases. Systemiq’s Planet Positive Chemicals report suggests over 0.5GT/yr[11] will be required by 2050. Biology is rapidly emerging as a prime candidate for efficiently capturing CO2 and directly producing chemicals such as ethanol or acetone, with the addition of green hydrogen. Companies such as Secondcircle and PhaseBio Labs are doing this today, leveraging biology’s tolerance for impure waste gases. Directly capturing CO2 (DAC) from the air and using it to produce chemicals will remain choice of last resort due to costs: for today’s systems energy inputs per tonne of CO2 captured alone are >5x that of capturing carbon directly from the source of emissions[12]. However, emerging biology-based solutions such as Ucaneo’s enzyme powered DAC may disrupt the current cost paradigm, and ‘single-step’ DAC to methanol platforms (such as that under-wraps at Marble) could support the chemicals industry ultimately become carbon negative.
Converting carbon into building block molecules will continue to be largely performed by chemistry, but biology has opportunities where feedstocks are cheap and outputs are more complex. For example, industrial ethanol production using yeast beats chemistry, with production costs well below the $1000/tonne mark[13], a price point similar to many commodity chemicals. Sugar is cheap and yeast needs little if any genetic conditioning to convert the feedstock into alcohol in vast tanks. Microbyre is deploying this concept more broadly, by discovering bacteria that already eat a cheap feedstock and produce a chemical of interest, and then genetically editing them to perform inside an industrial scale bioreactor. In tandem, cell-free manufacturing systems such as Enginzyme and Cascade Biocatalysts’ reduce the need to build sterile bioreactor environments for finicky cells, and a dramatic increase in the number of industrially viable enzymes is being catalysed by enzyme discovery and design companies such as Basecamp Research.
Finally, solving end of life will remain a serious challenge for existing materials. Breaking the string of C-C bonds at the core of polymers is really hard – it’s why they’re such wonder materials, strong and resistant to degradation. Enzymatic approaches are emerging, pioneered by companies such as Epoch Biodesign, Evoralis and Scindo, but rapid enzymatic recycling across most plastics at industrially relevant scale is a decade or more away. Mechanical recycling remains woefully sub-scale[14], and despite recent developments chemical recycling remains expensive. More immediately promising are upstream innovations into materials that are biocompatible but retain performance comparable to existing materials, such as those under development by One.Five.
Effectively financing biomanufacturing assets is front of mind for us. Capex will remain more expensive over the next 5 years for building first-of-a-kind facilities, and corporates will continue to be reluctant to share scale-up risk with start-ups. While accessing ‘pilot-facilities-for-hire’ is slowly becoming easier as governments invest into biomanufacturing hubs[15], there remains an enormous capacity gap looming for biomanufacturing start-ups looking at scale-up[16]. Start-ups such as Liberation Labs and Planetary are building out contract manufacturing infrastructure to meet this demand, using big slugs of equity to do so. However, we expect equity financing for biomanufacturing facilities to peak this decade as they become a recognised asset class, attracting billions of project development finance dollars, accelerated by the work of companies like Synonym.
We remain firm in our belief that the biology powered companies being built today will ultimately underpin a net-zero chemical industry. The graveyard of companies trying to displace chemistry with biology in the chemical industry is deep. However, there has been a paradigm shift in the underlying costs of key technologies as ‘faster-than-Moore’s-law’ cost curves in the fundamental technologies underpinning biology show no sign of abating. In parallel, external decarbonisation pressures on the chemical industry are only increasing: we are only just starting to understand the significance of the USA’s IRA, and Europe is set to follow.
Disrupting a $5trn industry is an immense prize. If you are building a start-up targeting decarbonisation of the chemical industry, get in touch with us.
Special thanks to co-contributors Amy Varney, Andreas Wagner, Gustaf Hemberg, Georgina Fleming, Jane Leung, Louis Millon, Mike Muskett, Michele Tarawneh, Siddharth Ram Athreya and Steve Weiss
Usina São Martinho ethanol plant Brazil, one of the world’s largest ethanol fermentation plants. Photograph - Robert Clark.
[1] https://www.systemiq.earth/wp-content/uploads/2022/10/Main-report-v1.22.pdf
[2] https://www.ineos.com/sustainability/
[3] https://corporate.dow.com/en-us/science-and-sustainability/commits-to-reduce-emissions-and-waste.html
[4] https://www.basf.com/global/en/media/news-releases/2021/03/p-21-166.html
[5] https://www.wri.org/climate/expert-perspective/unlocking-hard-abate-sectors
[6] A term coined by the Energy Transitions Commission, a think-tank convened by our friends at Systemiq
[7] Primarily driven by growth in green ammonia production, while polymer production is expected to decline with increased circularity.
[8] https://cen.acs.org/environment/green-chemistry/Industrial-ammonia-production-emits-CO2/97/i24
[9] https://www.systemiq.earth/wp-content/uploads/2022/10/Main-report-v1.22.pdf
[10] Global sustainable biomass production is estimated at 40-60EJ/year by the Energy Transition Commission’s 2021 report ‘Bioresources within a Net-Zero Emissions Economy’. According to the report, if the chemical industry sourced all its carbon requirements from biomass today, it would require 20EJ/year. A doubling of production with no increase in circularity would necessitate 100% of sustainable biomass supply.
[11] https://www.systemiq.earth/wp-content/uploads/2022/10/Main-report-v1.22.pdf
[12] Point source CO2 capture is significantly less energy intensive than direct air capture, at about 0.35 MWh/t CO2 (compared to ca. 2 MWh/t for DAC)
[13] To a large extent this is because ethanol contains oxygen. Ethanol has relatively low energy content, so if you equate to hydrogen carbon only molecules, cost would be <$1500/te not <1000 $/te – Mike Musket
[14] https://www.icis.com/explore/resources/news/2020/10/08/10560941/significant-risk-of-eu-missing-plastic-recycling-targets/
[15] https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/14/fact-sheet-the-united-states-announces-new-investments-and-resources-to-advance-president-bidens-national-biotechnology-and-biomanufacturing-initiative/
[16] https://www.bcg.com/publications/2021/the-benefits-of-plant-based-meats
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