Bio-based Chemicals
Environmental issue:
Petrochemicals, i.e. chemical products derived from petroleum and natural gas, serve as essential building blocks for manufacturing a wide array of consumer and industrial goods. These include fuels and synthetic materials such as plastics and rubbers, but also chemicals for cosmetics, lubricants, paints, and fertilisers among others (Figure 1). Distinguishing between fuels, materials, and chemicals aids in identifying both shared and product-specific environmental impacts.
While indispensable for countless human activities, all petrochemicals are produced through processes such as cracking and reforming fossil fuels, currently accounting for 12% of the global oil demand. This share is projected to rise to nearly one-third by 2030 and half by 2050, surpassing the demand from trucks, aviation, and shipping. Due to their fossil origin, petrochemicals are responsible for 10% of Global GHG Emissions. Furthermore, the synthesis and manufacturing of ll petrochemical products inherently involves the use and discharge of polluting molecules, which must be safely managed to prevent toxic leakage into the environment.
In addition, chemicals pose distinct risks due to their small size, which enables them to be easily dispersed into air, water, and soil, to migrate into ecosystems even far from their production sites, and to recombine in unpredictable ways. Their resistance to biodegradation leads to persistent accumulation in the environment, causing longterm harm. For example, eutrophication occurs when fertilisers accumulate in water bodies, triggering excessive algae growth and oxygen depletion, damaging aquatic ecosystems. Other well-known pollutants derived from petrochemicals include Persistent Organic Pollutants (POPs), such as PFAS or “forever chemicals”, which bioaccumulate and contaminate soil and water, and Volatile Organic Compounds (VOCs), which contribute to phenomena like ozone depletion and acid rain.
Solutions:
Bio-based chemistry plays a crucial role in addressing petrochemicals pollution at its source. By substituting fossil raw materials with renewable feedstock, it transforms the traditional “refinery” into a “bio-refinery” (Figure 2), with beneficial impacts along the entire value chain. Upstream, the adoption of renewable feedstock directly translates to lower demand for fossil fuels and related GHG emissions; transformation processes typically run at milder conditions and are often combined with principles of green chemistry; from an End-of-Life perspective, bio-based chemicals do not accumulate in the environment as they are mainly biodegradable. Overall, bio-based chemicals have a much lower embedded carbon compared to their fossil counterparts, supporting companies to meet their “Net Zero” and decarbonisation targets.
This translates to increasing support by regulatory frameworks. In Europe, the Horizon Europe R&I program (2021– 2027) allocates €2bn to support research and innovation, including initiatives in bio-based chemistry. The EU has also been actively restricting and phasing out chemicals deemed hazardous to environmental and human health, such as pesticides and volatile organic compounds (VOCs) typically caused by solvent-based coatings (see other examples in Figure 3). In the USA, approximately €800Mn has been dedicated to the development of bio-based products, although regulation is less stringent compared to Europe.
The primary barrier to adoption remains cost. Transportation of biomass and lower process efficiency can drive prices for bio-based chemicals to as much as 3x that of their petrochemical equivalent – only few processes have reached comparable price points. The willingness of consumers to pay for biobased products can increase to +50%, but differs widely across end markets, resulting in different rates of adoption. Higher penetration occurs in cosmetics, where the willingness to pay a premium for green products is higher. (Figure 4).
Improvements in technological processes and supply chain maturity are expected to enhance the economic feasibility of biobased chemicals.
Investment opportunities:
The global biochemicals market is valued at ca. €180bn, with Europe representing ca. 30% (ca. €50bn). The market has been growing at a low single-digit rate, but is expected to accelerate to ca. 7%-10% CAGR for the coming years. Driven by environmental benefits linked to decarbonisation of the chemical industry, the biobased chemicals sector represents a transformative investment opportunity. Biobased chemicals succeed in applications where large brands set decarbonisation targets and consumers are willing to pay a premium. Production costs in most cases are still higher than fossil chemicals due to feedstock logistics costs and lower process efficiency, however advances in technology and supply chains are expected to make bio-based chemicals more cost-effective.
Valorisation of low-cost feedstock (e.g. by product/ waste), process efficiency, and production of high-value output are the three key drivers for successful projects. In this context, investment opportunities primarily lie in:
- Large specialty chemical companies transitioning faster to bio-based alternatives, such as Evonik and Borregaard, who are leading the development of bio-refinery processes;
- Technology and equipment providers, such as Andritz and Valmet (EMC),who
are critical for improving process efficiency, scaling production, and reducing the
costs associated with bio-based chemicals.