Whither Federal R& D?

by David Morris

The carbohydrate economy is at the takeoff stage. In the past 20 years, a sufficient platform of management, engineering and marketing experience has been built to enable a rapid expansion in the use of plants for non-food and feed purposes. The terrorism attack on September 11 instilled an increased urgency in those who want to wean our country away from dependence on fuels imported from the most politically unstable and hostile areas of the world.

The consumption of biofuels in vehicles soared from zero gallons in 1977 to almost 2 billion gallons in 2001. Electricity generated from plants increased threefold from 1981 to 1997. The market share of soy inks in the U.S. quadrupled from 1989 to 2000, from less than 5 percent to more than 22 percent.

Plants provide more than 1 percent of our transportation needs, about 2 percent of our electricity needs and 3 percent of our chemical needs.

The federal government has many tools at its disposal to expand the carbohydrate economy: incentives, mandates, regulations and R&D. This article focuses on research and development.

In 2001, total federal R&D spending on non-food and feed uses of plants was about $250 million. The Departments of Energy and Agriculture accounted for 90 percent of total spending. In the last few months, the Bush Administration has undertaken a major re-evaluation of its biomass-related R&D spending. The Department of Energy has proposed dramatic changes. Any change in the federal R&D strategy should incorporate several elements.

1. Public Access to Public Research. In 1980 Congress gave the Executive Branch permission to offer exclusive licenses to private companies to use research developed with public funds. Proponents argued that only with exclusive licenses would companies invest the capital needed to commercialize that research. Much of the research in the federal government is now conducted under this arrangement.
The federal government should seriously consider returning to a policy that allows public access to publicly funded research.

2. Dispersed ownership and production. A major expansion of the use of plant matter for non-food purposes could result in hundreds, even thousands of new processing and manufacturing facilities in rural America. The level of benefit for rural communities depends on the scale and ownership structure of those facilities.

Modestly scaled production enterprises encourage competition, innovation and cost reduction. They also would address one of agriculture’s most intractable problems: expanded production does not inevitably translate into higher incomes for farmers and rural communities.

In the 1980s, Minnesota changed its state incentive for ethanol to a direct payment to in-state producers. The payment was limited to the first 15 million gallons produced. The result? Today Minnesota boasts 14 bio-refineries. A vigorous competition exists and, with it, has come a steep technological learning curve.

Federal agencies do not take scale into account when fashioning R&D programs. A research agenda that focuses on ethanol plants that produce 15 million gallons a year, or 100-cow dairy operations or 1000-ton-a-year biochemical facilities may well be very different from one that focuses on large-scale operations.

Smaller scaled facilities lend themselves to farmer and local ownership. Public policy should support such ownership forms as a way of maximizing the benefit of expanding biomass consumption to rural areas and its farmers.

Consider the different impact of of an expanded market for ethanol on farmers who simply sell their corn to an ethanol facility versus those who own the ethanol facility. Those who simply sell their corn might see a 5-10 percent per bushel price increase. But those who sell their corn and share in the ownership will more than an extra nickel a bushel. They’ll also receive an annual dividend of 25-75 cents a bushel or more.

Today the nation boasts more than 100 famer-owned plants. None are older than 25 years and most are younger than 10 years old. Federal R&D should be oriented toward those types of facilities.

3. Process engineering versus crop engineering. Of the total R&D budget for biomass, the largest single expenditure, $33-53 billion a year, is devoted to genetic engineering. The federal government should distinguish between the genetic engineering of microorganisms used to boost manufacturing efficiency versus the genetic engineering of plants. The former has achieved massive productivity increases. The latter has not.

Genetic engineering that boosts manufacturing efficiency has a relatively low environmental risk. Genetic engineering of cultivated plants is high risk. The former is not an either/or proposition.

4. Enhanced coordination. Too often the left hand of the federal government doesn’t know what the right hand is doing. Agencies rarely coordinate their spending. Even within agencies, departments often don’t coordinate strategies. By Executive Order, President Clinton established a biomass research development board that crossed agencies. Congress later enacted legislation that created a similar cross-agency structure. It has yet to become operational.

A quarter of billion dollar research and development budget is significant, especially if spending is coordinated and its focus is to enable small- and medium- sized manufacturing enterprises to bring prosperity and security to rural communities and farmers.

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In June 2000, the Agricultural Risk Protection Act (PL 106-224) established the Biomass Research and Development Board. A technical Advisory Committee was created to advise that Board. In January, it submitted its first annual report to the Secretaries of Energy and Agriculture. A minority report was included. This article is based on the minority report.

A summary of that report, Accelerating the Shift to a Carbohydrate Economy: The Federal Role, by David Morris is available at [sorry this link is no longer available]

To read the Committee’s full majority and minority reports, go to the Department of Energy’s website: www.bioproducts-bioenergy.gov

FROM The Carbohydrate Economy, a SustainableBusiness.com Content Partner