Green Chemicals: A Bio-based Shift From Petroleum
Contents
Introduction
Hazard Removal
Market forces
Facts, figures, forces
Investment opportunities
Market segments
Biosolvents, Biopolymers
Sectors
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Final Thoughts
Cautions, downsides
Green Chemicals Seek to Remove Hazards
Sustainablity applied to a notoriously dirty industry
For years, chemical products have been synthesized from fossil fuel sources. These traditional petrochemical processes require high energy and material input, are reliant on fossil fuel prices, and create products and waste streams that can’t be disposed of easily. This not only results in higher greenhouse gas emissions, but also contributes to environmental degradation, such as the contamination of water from fracking and the degradation of wildlife habitat, not to mention the health risks to workers from hazardous byproducts.
“Green chemistry” focuses on using renewable feedstock and innovative processes, increasing efficiency, and reducing waste to design less-hazardous syntheses and minimize their environmental footprint.
In October 2019, Brazilian petrochemical giant Braskem announced the launch of its recycled polypropylene in the United States in an attempt to transform the plastics chain from a linear economy into a circular one. Bioplastics such as polypropylene currently account for about 5% of the global plastics market, and are expected to account for a 40% share by 2030.
Apart from bioplastics, green chemistry spans multiple industries and has vast applications, including: food and beverage, personal care, automotive, agriculture, and more. Within these industries, green chemical products can be divided into biofuel, bio-plastics, and bioethanol/biosolvents, among others.
Market segmentation combined with various applications allows for diverse exposure when investing in the green chemical industry, including combining with corresponding industry investments. As the market moves away from fossil fuels, investments in green chemicals can serve as a suitable alternative in order to reduce greenhouse gas emissions and slow climate change.
“Green chemistry is the design of chemical products and processes that reduce or eliminate the use or generation of hazardous substances. Green chemistry applies across the life cycle of a chemical product, including its design, manufacture, use, and ultimate disposal.”
Market Forces Supporting Biochemicals
Market Forces
The global market is largely moving toward renewable resources-based solutions from traditional sources of chemical production. Especially in emerging economies such as India, China, Brazil, Russia, and Indonesia, the green chemical industry has recorded high growth rates and shown potential for expansion.
Concerns about the depletion of fossil-fuel resources and their effect on the environment continue to propel the growth of bio-derived chemicals and packaging. Rising fossil fuel feedstock costs and increased environmental regulations are incentivizing manufacturers to use green chemistry technologies to offset the capital investments required to meet regulations.
Market Facts & Figures
Biochemicals growing at 5% annually — meaning bio-based feedstocks are used in manufacturing rather than petroleum — would have the effect of taking 3.2 million cars off the road in terms of fewer emission, Morgan Stanley said, citing a calculation that utilized Department of Agriculture estimates for bio-based feedstocks replacing petroleum.
Bio-surfactants may grow to a $16.5 billion market by 2030, Morgan Stanley estimates. That would be a 39% share of the total surfactant market, up from 26% in 2020. The chemicals are used in fabric care, personal care, detergents and industrial applications.
Eight Areas Comprising the “Biosphere” of Chemicals
Investment Opportunities: Food, Personal Care and More
Green chemicals encompass a variety of industries, including food and beverage, personal care, packaging, automotive, and agriculture.
Food and Beverage
Increasing the use of enzymes to extract flavor compounds from natural sources in order to meet product demand has fueled the market for organic food additives.
Biochemicals have a wide application within the food and beverage industry, as bio-based additives (citric acid, lactic acid, amino acids) can be used as antioxidants, emulsifiers, flavor enhancers, stabilizers, thickeners, sweeteners, humectants, and as anti-foaming, gelling, glazing, and bulking agents in various types of processed beverages.
Personal Care
Demand for clean beauty products has pushed brands to substitute petrochemical ingredients with naturally derived ingredients. This segment includes biosolvents, biosurfactants, and bio-derived additives. By 2025, the organic cosmetics market may reach $25.1 billion, according to chemical maker Acme-Hardesty.
Concerns regarding harmful effects of synthetic chemicals on skin have shifted the market toward bio-derived ingredients, resulting in a 15% annual growth rate in green cosmetics, Philadelphia-based Acme-Hardesty said.
Biosurfactants have emerged as an area of attention due to increasing penetration and growth rates, Morgan Stanley says. Customers are demanding supply chain changes and are willing to pay higher prices for these products.
Packaging
A major reason behind the rising consumption of bio-based packaging materials is the growing popularity of ready-to-eat foods, especially in the U.K., U.S. and Germany.
Bio-based biodegradable materials are biopolymers that come from plants and microorganisms. Examples include starch-based plastics, cellulose, poly lactic acid (PLA), polycaprolactone (PCL), polyhydroxybutyrate (PHB), and chitosan.
Bans on plastic all over the world have led to increased adoption rates of biodegradable packaging, which have low environmental impact and relatively cheap manufacturing costs amid growing consumer awareness.
Automotive
Within the automotive industry, applications that use green chemicals (e.g., manufacturing, surface coating technology, and biofuel) are helping address concerns over the use of traditional chemicals regarding human health, hazardous waste, and carbon emissions.
With the innovation of biofuel production, renewable diesel from biomass replacing biodiesel (a blend of diesel from biomass and petroleum sources) as an alternative fuel source to petroleum-based diesel fuel presents another opportunity for reducing carbon emissions.
Hazardous heavy metals, brominated flame retardants, and phthalate-laced PVC plastic in car interiors pose a significant threat to human health, according to the Ecology Center. Bio-based products with low Volatile Organic Compound (VOC) emissions and no toxic release offer a safer alternative that also aligns with increasing regulations.
Agriculture
Researchers are looking at ways to incorporate agricultural waste into biochemical processes.
Conventional, non-biodegradable pesticides create runoff that harms surrounding ecosystems and wildlife habitats, according to a 2021 paper published in Frontiers in Sustainable Food Systems. Regulatory restrictions currently result in a 2% decline per year in synthetic pesticides use, with a 10% increase in biopesticides as alternative agrochemicals, the paper said.
By 2030, biosurfactants could make up roughly 39% of the total surfactant market
SOURCE: IHS Data, Morgan Stanley Forecasts (includes North America, LatAm, Europe, Japan and China markets
Biosolvents, Biopolymers: Market Components
Biopoloymers
With bio-based packaging pushing demand for biopolymers, the market for biodegradable packaging in the beverage sector is anticipated to grow as the demand for bottled water and non-alcoholic beverages increases.
Compostable polyester and biodegradable fibers help facilitate the move away from petroleum-based polymers.
This reduces plastic use and the environmental disruption associated with plastic waste from not only consumers but also primary, secondary, and tertiary packaging in the supply chain.
BiosolventS
Biosolvents are used in the personal care, cleaning, and surface-coating industries, among others, and are increasingly popular due to growing consumer demand and human health benefits compared with petroleum-based products.
Biosolvents help reduce the handling of toxic chemicals and eliminate toxic waste streams in the textile industry—one of the major end users of chemicals.
Opportunities
“We now see a gravitation to bio-based chemicals, as awareness of petrochemicals' perceived impact to well-being and the environment increases among corporates, consumers and governments,” Morgan Stanley’s Navina Rajan said in a report.
Green Chemicals’ Impact
Green chemicals could help minimize the unintentional release of hazardous chemicals. They do this by degrading to innocuous products or getting recycled, the EPA says.
Green chemical production processes reduce the handling of toxic chemicals and thereby decrease risks to workers.
The use of renewable feedstock sidesteps increasing fossil fuel prices and reduces agricultural waste.
Market Movers: Current and Future Heavy Hitters
Market Leaders
DSM is considered the “greenest” chemical company in the world, according to the latest ChemScore. The Dutch company's products include nitrogen-based fertilizers, ammonium sulfate fertilizers, nylon 6 polymers, and caprolactam.
AkzoNobel is a paints and coatings company also based in the Netherlands. In partnership with organic chemists from the University of Groningen, AkzoNobel developed a process that allows it to turn biomass into a high-quality coating using light, oxygen, and UV light.
Cargill is a long-time player in the food and agricultural industry whose presence in the green chemical industry includes the production of bio-based binders, solvents, plasticizers, and more. Its non-toxic, biodegradable, and food-contact-safe AgriPure biosolvent has a wide range of applications.
Arkema is a specialty chemicals company based near Paris. Its bio-based products range from bio-polyamide to bio propylene to biosolvents for road surfacing.
GFBiochemicals holds more than 50 patents with 200+ pending patent applications worldwide.
Sherwin-Williams of Cleveland is among the world’s biggest paint companies, and has developed water-based acrylic alkyd paints with low VOCs that can be made from recycled soda bottle plastic (PET), acrylics, and soybean oil.
BASF is the largest chemical producer in the world. Based in Germany, is engaged in the pursuit of sustainable palm oil production and biopolymers, among other chemical applications.
Future Heavy Hitters
Sironix Renewables, based in Seattle, is a renewable biosurfactant company that, in 2019, won the ICIS Innovation Award and then the R&D 100 Award in 2020. Sironix boasts development agreements with Nouryon and Unilever.
Gevo is a renewable fuel and agriculture company with a focus on sustainable jet fuel, biodiesel, and agricultural practices.
Zymtronix is a company that optimizes biocatalysts using green chemistry principles, with a focus on enzyme immobilization to improve the stability and reusability of the specific enzymes used in industrial production.
Venture Capital/PE and Other Fund Investors
Truffle Capital: Paris-based Truffle has invested in green chemical companies including Carbios.
Javelin Capital: Based in New York, Javelin says it offers “financing solutions for assets, projects and operating companies in the green chemistry value chains.”
Solvay Ventures: The venture capital arm of Brussels-based chemical maker Solvay says it manages an $86 million fund that “supports sustainable materials and chemicals innovation.”
Final Thoughts & Potential Risks
The green chemicals space is rapidly expanding, despite concerns regarding adoption rates and the agricultural footprint of bio-based products. However, innovative solutions are appearing every day in this space, and the depletion of fossil energy will certainly shift the world toward bio-based products. Investments that enable these operations to scale and achieve cost effectiveness will see long-term returns.
There remain concerns about the agricultural footprint of bio-based products, especially in the land use category. Utilizing feedstock from agricultural waste provides an alternative way to supplement the food-producing function, and can lower the resources associated with feedstock cultivation.
Higher production costs and scalability are still issues for manufacturers hoping to commercially produce bio-based products.
Regulatory support will be needed to foster uptake of bio-based products that do not have a strong consumer pull. However, stricter environmental regulations regarding greenhouse gas emissions and waste production will compel manufacturers to adopt bio-based products more readily.
Global economic downturns could affect consumers’ willingness to pay higher prices for bio-based goods. For instance, certain bio-based product markets experienced slowed growth during the Covid pandemic—although most have managed to return to normal.
The 12 Principles of Green Chemistry
This provides a framework for learning about green chemistry and designing or improving materials, products, processes and systems.
Prevent waste
Atom Economy
Less Hazardous Synthesis
Design Benign Chemicals
Benign Solvents & Auxiliaries
Design for Energy Efficiency
Use of Renewable Feedstocks
Reduce Derivatives
Catalysis (vs. Stoichiometric)
Design for Degradation
Real-Time Analysis for Pollution Prevention
Inherently Benign Chemistry for Accident Prevention