Oil derrick in field of canola plants

Episode 28 – Skyfill and unsustainable sustainability with Jim Lane

Nov 30, 2023

In this episode, I have the great pleasure of having our first omnipresent guest, Jim Lane, who is everywhere within the biobased economy with his leading daily publication The Digest. In the midst of driving the Bold Goals Initiative, catalysed by the US Inflation Reduction Act, and running the Advanced Bioeconomy Leadership Conference (ABLC), we catch up with Jim on current perspectives on the bioeconomy and a little soothsaying on what the next few years might look like.

We take a broad tour across ethanol, bio and renewable diesel, biochemicals, biomaterials and hydrogen. We briefly examine the origins of the current North American bioeconomy from the mid-00’s, reflecting on the drive for employment, energy security and emissions reduction and how the financial crash of 2008 and the discovery of shale gas affected early growth.

Through our discussions Jim introduces a concept of ‘Skyfill’, to describe carbon emissions (akin to Landfill for material waste) and reflects on the need for transparent mechanisms for dealing with carbon and the inevitable unaffordability of government subsidies currently seeking to drive industrial and consumer behavioural change. Jim refers to this situation as ‘unsustainability in the name of sustainability’!

We touch on feedstocks and the lack of abundance of what we need, arguing we have too many sugars and too few oils from which to drive the industrial bioeconomy. Jim reflects on a little industrial history as we discuss the current energy and chemical market structures and how some thought should be given to not creating future strong oligopolies when it is hard to anticipate what the right mix of technology solutions might be. In discussing transport, while I suggested thermodynamic efficiency should be the key driver, Jim points to economics and consumer preferences that will drive consumer behaviour, particularly in transport (energy) markets.

We close by traversing the world of biopolymers, the challenges around no renewable chemicals standards (unlike fuels), how drop in molecular equivalent products are playing out against their functional equivalents (or new polymers) in the market and the respective challenges in delivering functional, cost-in-use competitive products. Jim concludes with some optimism, noting that we need to grow faster to meet the carbon targets being set by governments and the private sector.

Transcript

CB: Hello everyone, and welcome to Tech Transfer Talk. My name is Cameron Begley, Managing Director of Spiegare. And today a great treat, in that we have Jim Lane joining us from The Digest. For those that don’t know what that is, Jim is one of the greatest voices when it comes to the bio-based economy. He’s been involved in this space for over a decade, and every weekday morning, without fail, one gets the latest news from around the world of what’s happening in a very dynamic space, and we have the opportunity today to have a chat with Jim and get his views on the journey to date, and what a little bit of the future might look like. Jim. Hello.

JL: Awesome to be here. Great to spend some time with you always, Cameron, and great to have a chance to spend time with your listeners.

CB: Yeah. Thanks, Jim. Jim, we first met at one of Ganesh Kishore’s gigs in Oakland, I think, is the first time we sat and spoke at any length.

JL: Yes, in beautiful Beserkeley. Yeah…

CB: Beserkeley…

JL: The home of innovation. Yeah, Kish’s thing. Yeah. That’s, uh, can’t say what happened there, but…

CB: No, we can’t.

JL: It was, but it was really, really dynamic. Yes, but it’s a place where you can meet. You’ll be sitting next to someamazing company you’ve never heard of, that’s going to change the world, nitrogen fixation or whatever. And then on the left-hand side, you got a Nobel Prize winner. You just never know who’s going to show up, so…

CB: It was Bezerkeley is a perfect description of it, Jim. It was an incredible meeting. And while we can’t talk about it, I am prepared to raise what we talked about as we chat today, which was a little bit about feedstocks. But I’m interested. Jim, firstly, how did you immerse yourself into the bio-based economy? That’s not necessarily your natural habitat from where you started in in Australia.

JL: That’s right. I started as a, sort of, intern cadet at the Sydney Morning Herald, where the bioeconomy is not part of the everyday gruel. And, you know, it’s been a long journey. I mostly did sports writing. But, you know, you learn a lot about biotech doing sports because, especially if you’re the junior sportswriter. And of course, you don’t actually get to go. And I was covering golf at the time. I didn’t get time with Greg Norman. What I got was, Greg Norman is building a golf course, and you’re going to go introduce yourself to the superintendent, who’s going to spend three hours talking to you about grass. And actually, there’s a huge amount of biotech in grass. And after about, you know, the first two hours, you run out of exciting anecdotes about people mowing and you actually get some science. So, I learned quite a bit about turf, and it was always very hip to the topic. But of course, grasses are, you know, the basis of what we’re doing today. I mean, corn is a grass and so on and so forth. Every everything in the world that we eat is pretty much a lawn. And it, yeah. So that was really, one thing led to another and that was the, I fell into it and boy, what a happy fall that was.

CB: Yeah. Absolutely. So, you’ve been on this journey I think, you know, let’s call it a decade, maybe a little bit more than that, Jim, now.

JL: Yeah, I started The Digest 16 years ago. So it’s been a while now. It goes back to, you know, a couple of financial crashes ago.

CB: Yeah. This is a good way to count the length of time you’ve been in them. They’re like rings on a tree.

JL: Three rings of financial disaster. Yeah. That’s the way to count. That’s probably how they’ll count time 10,000 years from now. They’ll look back and they’ll see. But this will be a very fat year because of biotech. Biotech is really changing the world in a way that that internet did a generation ago.

CB: When you jumped into the fray, we were in the middle of a Bush administration that was, in some respects, I think, catalyse what the bio economy is becoming at the moment. They were a little bit ahead of the Europeans. You were in the mix of that, the world of 1G and the aspiration for 2G, ethanol, biodiesel was a thing, but the renewable diesel probably wasn’t. Bio products was stuff that people talked about, but not much of it. Is that the world you entered and what did you make of that world when you first saw it?

JL: Yeah, it wasn’t like that scene in The Maltese Falcon where Humphrey Bogart holds the Falcon and says, ‘It’s the stuff that dreams are made of.’ It really was a dream back in the day. Of course, ethanol had come along in the 1970s. Initially it goes back to the 30s. It was a viable alcohol fuel. And Henry Ford actually had all his cars able to run on alcohol fuel. That’s kind of ancient history. But it came back in the 70s because of the oil crisis. And it really came back strongly in Brazil. Originally, they had a program called Pro Alcohol. And, they’re utilising their sugarcane assets to replace their dependence on foreign fuel. And they were very, very successful. It became something that inspired corn farmers coming out of the 1980s. There was a big agricultural crisis in the United States, actually, there was a worldwide depression in grain prices. And so, there was a lot of shift to trying to find that second product. And the second product was to move into energy. And a lot of bipartisan legislation got passed in the US. You had a lot of that US, Brazil. That’s one of the reasons why Europe was not, advanced at the time, because the technology was very advanced, and a lot of the technology comes out of Europe. But the desire to get off foreign oil, was really about energy independence and security at that time, which is why the enabling legislation was called the Energy Independence and Security Act was passed in 2007. So that’s kind of the background, but it was really one or two molecules, one or two feedstocks, as you pointed out. And it’s gone exponential from there. There are thousands of, you know, pathways now, if you consider all the various molecules, feedstocks and so on and so forth, it’s really changed.

CB: So, a couple of things happen though, in the sort of, in that ’08-2010 period which, be interested in your reflections on how that affected the trajectory of the bioeconomy. And they were, there was a financial crisis in ’08-’09. And then this thing called ‘shale gas’ turned up, particularly in North America. Not, which I think the effects of rippled a little bit through, through the global economy. So how much of an impact did these two phenomenahave on the rate of uptake or the rate of change in the bioeconomy?

JL: Well, the traditional way that the bio economy was sold was called the ‘Three E’s’. There was employment, there was emissions, and there was energy security. Those were the three E’s. Fracking technology took a lot of the support or a lot of the urgency away from energy security, and the rising sense of financial crisis put emissions and climate change very much on the back seat or on the back foot. And, so that really stalled a lot of things. Now, there were good things that came out of the financial crisis, because there were a lot of stimulus programs that were passed all around the world, Europe, in the US in particular. And a lot of that money ended up, you know, filtering into cleantech. And some of that went into the bioeconomy, but it was embryonic at the time, and most of what people were doing were scaling up ethanol to reach a, in the United States, a 15-billion-gallon mandate. But other places around the world had E10 mandates, that kind of thing. So mostly we were doing capacity building and that reached, basically what they called the blend limit, because there’s a limit to how much ethanol you can put in a standard vehicle. There’s no limitation in a slightly modified vehicle that can run up to 85% in the US, 100% in Brazil. But that was really what caused the stalling out was that the absence of a market and the fuel and on the biodiesel side, same thing. You had vehicles that were approved for like 2%, 5% biodiesel blends. It’s gone a lot further since then. But, and there’s been a push on 15% ethanol. But that was really what it was more about markets constraints.

CB: Yeah. Interesting.

JL: And some of that’s been addressed by getting what’s, the move to what’s called ‘drop-in fuels’.

CB: Yeah. Yeah, absolutely. And we’ll certainly talk about renewable diesel in the moments ahead of us. That blend wall is an interesting phenomena. And I mean, ethanol is ethanol whether it’s 1G or 2G. Biodiesel is different to renewable diesel but 2G ethanol, I talked to a few of your Wolfpack colleagues, I think remain skeptical about 2G ethanol. Same molecule, different starting point. Really difficult to get to, more intransigent feedstock. How are you viewing the 2G outlook at the moment?

JL: It depends on the market, of course. Can market demand, if there’s no place to put the ethanol molecule, then 1G is always going to be less expensive than 2G for anytime soon. Let’s put it that way. The feedstock is cheaper. But you pointed out the technical challenges. So 1G pushed out 2G. There was just no place for 2G to go. And that has the way out for that and the way out for 1G as well. Because with, 1G is tied to gasoline, really at the end of the day it’s tied to petrol because it needs to go somewhere. And it’s blends with, in a standard light duty vehicle and with electrification. Now first G ethanol has a problem, but the way out for them is to go to, they want to dehydrate it and oligomerise it and make a hydrocarbon out of it. And you can do that. The economics of it depend on your carbon price. And if your carbon price is sufficient, then you can move all of this over to aviation fuel, where there is no limit really, relative to the supply. At that point, you’re talking about a 100 billion gallon market, 400 billion litres. And there’s, you know, there’s no demand constraint, there it’s really just about getting the carbon price to the right level.

CB: Yeah. So, so two, so two phenomena there that you’ve touched on, Jim, that I just want to touch on as we go past them. So, one is the rise of electrification. From your vantage point, do you see electrification now as or as likely to become the dominant energy pathway for road transport or land transport?

JL: It certainly seems that that’s what governments that set policies want. They want to move to electrification in the north. The global north. The question then becomes ‘Is the world climate agenda going to be set by the North or by the South?’ And, you know, traditionally it’s been set by the north. There’s been a lot of pushback on that recently. The global South is not a land of $70,000 available US to buy a fancy electric vehicle. That’s just not where that is going to be anytime real soon. So, we are going to need a different set of solutions for the global South. The global north, sure, why wouldn’t they electrify? There’s a lot of electricity available, the grids are reasonably stable. And, you know, we are talking about net zero, and we need every single technology that is available because net zero is a lot harder, you know, infinitely harder than people think.

CB: So, it’s interesting you’ve drawn two different drivers there, Jim, which is really good. One is the policy drivers of the global North, and who’s setting the agenda in the global South. And that tension, for want of a better word, around net zero and is global south going to drive that or global north. I guess the other thing that I’ve picked a little bit, from colleagues of mine in Asia, is electrification of road transport. There is really small, it’s Tuk Tuks and its scooters and its small motorbikes. So, it’s not, quite interesting, it’s not the $70,000 Polestar or Tesla or Mercedes or whatever it is. It’s actually small scooters and motorbikes, which are, you know, small, smaller build, smaller, smaller CapEx, etcetera, etcetera. So interesting, interesting forces at play there around electrification.

JL: For electrification, the smaller the better and the less lift, you know, the flatter the better. Where electrification really shines, I’m in a home in my home state here is Florida, it’s completely flat. So, you know, it’s well suited for that. But the minute you need lift in any form or really long range transportation of any type, whether it’s long-range trucking or, particularly marine where they’re traveling, quite a distance between ports. It’s just not possible to go out, 500 miles, turn around and come back and recharge your tanker. It just needs to travel that. So, the more lift you need, the more distance you need, yes, there’s going to be a challenge, even in the global north on electrification. And there are some challenges of course. Also, on, you know, whether the solar and wind, which is really what they’re talking about when they talk about electrification, everyone wants it to be electric, but they also want it to be green electric. And that’s the other piece of this. And you know, whether you can match that up, the exact supply. What about when the, you know, wind doesn’t blow, the sun doesn’t shine,

CB: The dunkelflaute, as I understand it’s called.

JL: That’s a big problem because they say that, you know, green energy is cheap, but it’s not cheap if you have to store it.

CB: The other thing you mentioned there, Jim, was the carbon price. And this is a very contentious conversation, I think, from jurisdiction to jurisdiction. Ccertainly in this part of the world where I’m speaking from in Canberra, it has been an unfortunately polarised conversation around emissions pricing and carbon pricing. And I get the sense that’s not dissimilar in your part of the world. Jim, how do you set a carbon price or get a signal when there’s such polarisation and, and such differences between jurisdictions, because carbon is a global thing.

JL: We found what works better is to have a market set price. When you have a government setting price by fiat, whether it’s $23 a tonne, two things happen. First of all, the number is way too low and secondly, it’s way too controversial. So, governments are known to fall for numbers that are woefully inadequate. So, they don’t solve the carbon problem and they certainly don’t solve the policy stability problem. They just become targets. And it goes back to the fact that people, you know, unfortunately, have not, as a society, accepted that we have to pay to, for skyfill in the way that we all agree that we have to pay for landfill. Nobody thinks that you can just dump trash on the street, and you know that you can empty your toilet at the end of the day in the gutter, which, you know, 600 years ago was very standard in medieval towns. People understood and related that to disease and to, you know, unhappy and healthy lives. But so, landfill appeared, and we all agree that we have to pay when we put things in the landfill, we all pay a fee and everyone the polluter pays. But we have not come to that point broadly in terms of sky fill. And until we get to a point where we agree as a society, it’s always going to be something that an opportunistic politician or any other public voice is going to be able to score points, by beguiling people into the idea that, you don’t have to do this and it’s expensive. That’s the other thing. The ill of the problem is so massive, and the cost at this point is getting really steep. And because we’re having to do this in 30 years instead of 60 years. So, we need to… it’s just getting expensive and controversial because of that.

CB: I like the expression skyfill, by the way, Jim. I hadn’t heard that before, so thank you. The thing that’s, that strikes me is distinction between landfill and skyfill, though, is that landfill will be in someone’s specific jurisdiction with a direct effect to the people in that jurisdiction. Skyfill,  I popped the carbon up here, and it’ll turn up in Miami in a certain period of time due to the lovely flows of wind and dynamics and things. So why should I worry about my carbon going to you? And reciprocally, how can I stop you doing it even if I impose a restriction on myself? The sky fill problem is so much more difficult from a multi-jurisdictional perspective.

JL: Well, you’ve outlined the case for the tragedy of the Commons all over.

CB: Indeed, I have.

JL: Yeah. So, which is a whole ‘nother  podcast. But, for sure, if you think about it this way. That landfill, even though it is a less global problem. And you’re right, you know, it’s much more regionalised or localised. It’s not necessarily something that we solve in every home and every street. There’s not a landfill in every street. So, we do recognise that we have to deal with itas a group. And somebody is going to be closer to that landfill than someone else. There is going to be always a social discussion about how to do it right. And that will happen with skyfill. But you’re right. The complication is, and this is one that the polluter doesn’t necessarily have to pay in any way, shape or form because it’s not only an economic problem that doesn’t appear unless you impose it on yourself, but it’s also a pollution problem that that imposes itself on the poor Seychelles islands. And, you know, they’re the ones that will disappear first. And what the heck did they have to do with creating the problem? But it, it’s been going on for a long time. And this sort of thing that we see. I’m going to say something nasty about Europeans. Uh, not as a not as a group of people today, but, you know, the, habits of 500 years ago that, the idea back then was that you could burn down your forest or you could, you could uproot your forest and you could deforest. Europe was covered in beautiful forest for, you know, for millennia. And that’s all been, you know, chipped and stuffed up. That’s a lot of what skyfill is. And so, you know, now there’s this idea that, you know, ‘Tut tut, we Europeans are telling you that you Brazilians or you Indonesians can’t, can’t chop your forest up.’ So, there’s a little bit of a question of dates, if you will. And there’s, that’s something that creates more tension around it, because a lot of people feel that, that in the decolonialised times that we are living in, that they ought to have the same ability to, you know, do the same things that other people did to build their economies,

CB: Afforded the same opportunity.

JL: Big complex, ‘hot mess’, as we say in the United States.

CB: Yeah, a hot mess. Absolutely. I want to go back to that notion of, okay, so you got all this ethanol, and then you’re going to turn it into oligomers. This to me, in my universe, because I’m more, I guess I’m more of a fats and oils guy than an ethanol guy, right, as you might know. So, it’s interesting, the notion of, okay, so I’m going to make lots of ethanol and make, you know, notionally expensive water, or do I try and get more plant oils, fats, waste, used cooking oil, etcetera? Because that’s already got this beautiful string of carbons ready to go for me, rather than having to rebuild it from a pair of carbons in dehydrated ethanol. What are the tradeoffs that we have to deal with? We’ve got a feedstock trade off and then we’ve got a conversion cost trade off here, I think.

JL: Yeah. All these things come back to the basic idea that what we’re lacking is abundance. We’re just short on everything that we need. And I think it was Jay Fitzgerald from the Department of Energy said, ‘The problem is, we’ve got to keep making the carbon we need from the carbon we have’. Now where we have an overage, and we do potentially in the sugar side, we have too many sugars. We certainly don’t need to be eating as much sugar in our diets as we do. And we certainly don’t need as much ethanol. Now on the on the oilseeds side, we have a shortage. We are very short, but there is a lot of pushback on the use of some oilseeds like, palm because of the alleged impact or connection to deforestation. So, so oilseeds are just really, really precious right now. We need a lot more of them. We need a lot more of everything. We need more hydrogen, we need more biomass, and we need more direct routes, because of course, we want to not just create these intermediates where we make a sugar and then an ethylene, and then we make an oligomer, you know, we want to do things on a much more direct basis from CO2 and water directly in the future and make a hydrocarbon from that. But those days are, that’s a ways off.

CB: Yeah, that’s quite a ways off particularly, particularly if you’re using green energy in order to grab that CO2 and combine it with green hydrogen to make a totally green starting material.

JL: Yeah, that’s the green dream, isn’t it? Yeah.

CB: That’s the green dream.

JL: The green dream is great until you actually start pencilling out, that I need this much green hydrogen, which means I need to make this much, you know, find this much water available to me. It’s got to be a very pristine water at this point. It’s very expensive to convert. We don’t have the catalytic ability to really, split water in an effective way at this point or a cost-effective way. And we don’t have energy storage, as I mentioned, that closer to the top of the hour. It’s very nice, this idea that you’re going to pull it off the grid. But what’s the grid? The grid’s have got a lot of coal on it. What are we doing that for?

CB: It’s black and gray, the grid predominantly, not a whole lot of green.

JL: Yeah. The gray grid. So, it’s. You know the idea of green production. Well, you know, let’s see about that.

CB: Let’s talk about hydrogen. Had a great conversation on this podcast with Paul Martin a few episodes back from out of Ontario, who, I think is one of the most knowledgeable people I’ve come across on the hydrogen debate. He reckons there’s no place for it in energy or maybe some very, very limited use cases, but I’m going to go with none. The phrase that I’ve coined is thermodynamic vandalism, but that might be a little bit too dramatic. He reckons there’s a 90-million-tonne market just to substitute the hydrogen we need into green. What are your takes on, not just Paul’s thinking, but what are you seeing from your vantage point on this, Jim?

JL: I think it’s silly to have a conversation about thermodynamic efficiency. If we were thermodynamic, this goes back to your point about scooters. If we were thermodynamically efficient or efficient in energy in any way, we wouldn’t be driving two-tonne vehicles around that are 90% empty 90% of the time.

CB: Amen.

JL: The efficiency is not what transportation is about. It’s a, or I should say energy efficiency. It’s been about economic efficiency and the ability to live where you want and live the lifestyle you want. That’s what it’s all about. If we were running an energy system truly on efficiency, yeah, we probably wouldn’t have hydrogen vehicles, would we? But that’s not the point. And it’s just not the right way to think about, it at all, because that’s not why we do it in any way, shape or form. And I would say the other thing I would caution, is that we don’t know what a hundred years from now looks like, and we don’t know the unintended consequences of going all in on a single energy platform. We do know from history that going all in on the petroleum platform, which was thought to be the wonder of the age and, you know, no negative consequences would come from that, was a foolish idea. And I’ll give an example, that the largest electric vehicle network or rail network in the world in 1915 was in the city of Los Angeles, which ripped it out and got rid of it because petroleum was far more efficient and effective and blah, blah, blah, blah, blah, which it probably was at the time. But it raises the question about whether monolithic monopolies and monopolism is a good idea. Are we not just going to be trading a dependence on regimes that perhaps don’t share our social values in some parts of the world, for regimes that don’t share our values in other parts of the world? Could be rare earth materials, it could be where you’re getting your electrons, that kind of thing. We need diversity. Not picking one thing that is currently the most efficient. But in 100 years we don’t know if it’s going to be. So that’s kind of my rap, is, you know, with all, Paul, I’m sure he’s correct on his numbers, but it’s just one way to think about it.

CB: So, no. So, Jim I think that’s really fascinating. So, what I’m, I’m drawing from that is, you’re looking at that through a few lenses. One is a geopolitical lens, you know, going all in and exposing yourself to potential trade relationships that may not sit comfortably with you in the future, for whatever reason might be social, might be…

JL: Yeah, because we don’t know. You know, we don’t know who’s going to be the happy regime. Our current, go back 100 years. Our current largest trading partners are, and bastions of the western way of doing things, were Japan and Germany and Italy. Gracious me, not always been that case, so let’s not make assumptions about who the friendlies of the future will be.

CB: Yeah. The second, the second really interesting point you made there was about market structure. And I think we can all recognise the disadvantages of oligopolies and monopolies. So why, so the risk of not having a diversity of energy sources or energy suppliers creates its own market structural problems. I think that’s what I took from that. The third one, which is one I haven’t really given a lot of thought to, which is strange, is that the notion that transport is about economic and lifestyle choices, not actually about energy efficiency. So, we have to allow for the consumer, heaven forbid, to be able to make some choices about how they want to move themselves around.

JL: Yeah, well, they will in the end.

CB: They will in the end. But actually recognise…

JL: We’re drowning the world in subsidies.

CB: Yes, we are.

JL: You know, at a governmental level to force people to have no economic alternative but to buy a certain vehicle. And that’s, that’s one way to do it. But in 30 years, I mean, remember, there’s the current maximum subsidy I’m aware of, and this is leaving aside the actual subsidies around electrons, but the vehicle subsidies could be $15,000 per vehicle or more with the various tax credits. But let’s say 15 is the current maximum. If you take the maximum state and the maximum federal, this is the United States, and you multiply that by the 1 billion vehicles that we have, in the world, and we need to buy them every 30 years. So that’s a $15 trillion, no, it’s more than that, it’s 15 gazillion, right? It’s, I think it’s 15 billion every, every 30 years. So, it’s, you know, it’s a huge amount of money and nobody can afford it, and nobody will afford it. So, that’s another thing is the subsidies, and the incentives are all very nice for now, but it’s kind of like giving, it’s like, a little bit like what happened in France with the pensions where, you know, they’re just these enormously generous pensions. And, and now the young people are finding out that they’re not going to be able to retire at that age. They’re not going to have the benefits because too much was given to grandma and grandpa.

CB: Yeah. It’s funny, I was having this conversation only, last week where I was feigning outrage that because I get two years of free registration for my EV, I will protest that I don’t get perpetual free registration, or I don’t get perpetual relief from road taxes so that, you know, why should I have to repair them? That’s because all the taxes in Australia fall on the fossil fuel consumers, no taxes fall onto the EV consumers, which is completely unsustainable. But you can see…

JL: Its unsustainable. That’s the problem. Is that the regime that’s been set up is unsustainable. And it’s in the name of sustainability. And so that is just backwards. And also, it creates the drowning of the market in incentives, that distortion, also creates a distorted infrastructure, and infrastructure is very difficult. Those are difficult problems to solve once you get them. We have yet, you know, enough.we have enough problems with world infrastructure and dependence on the reliance on some, you know, real bottlenecks, like the Straits of Malacca, you know, things like that, but without creating more.

CB: Yeah, yeah. And infrastructure, once you’ve placed the bed, it’s hard to unwind.

JL: Yeah. The infrastructure is really, really hard to unwind. Yes. And that’s one of the reasons why we found it so difficult to get off petroleum because the vehicles need petroleum. The stations are built for petroleum. The locations are built around, you know, the refinery locations, the whole logistics, where pipelines are. Eeverything is in the wrong place. And one of the things that also we have to recognise is, with climate change, the water’s going to move. I’m not talking about the ocean.

CB: Right. Oh, yeah. I was wondering whether you are speaking metaphorically there or literally. But I think you might mean both.

JL: Yeah. The rain is going to move because it’s going to change. I mean, climate change will ultimately change weather patterns, and you don’t have to shift the weather more than a couple of dozen miles to have that rain that was falling into this catchment area and going down this river, it starts going down another. So, all our cities are built around access to water. If you think about it, all our cities are in the wrong place and that’s a big problem. So, as I said, we’ve got enough infrastructure crises coming at us in the future, let’s not take any more on by creating monolithic dependence on something that, yes, pencils out wonderfully today, but who knows what the future will bring.

CB: Yeah, absolutely. I want to head off in a slightly different direction, but I think it’s intrinsically related, Jim, which is the chemical side of this equation. So, we’ve spoken a lot about energy and fuels and hydrogen, and some of the policy and infrastructure challenges, but we need chemistry as well. I think it’s not broadly recognised. Perhaps our listener base understands this, but it’s not broadly recognised that chemicals also come from fossil fuels – plastics and a lot of the things that we need in day-to-day life, most of the cars we drive are built from the same things that we put in the fuel tank. What’s the outlook here from your perspective? And there are a couple of sorts of buckets, if you like. One is the is the biopolymers, the PLAs, polylactic acids, the poly hydroxy alkenoates, etcetera of this world. The other is more the building blocks, the C4s and C6 type chemicals. What’s the outlook here from where you sit, Jim?

JL: Well, first of all, you’re absolutely right that chemicals are essential. Everything that we are is chemical. Everything we are as a material, we are stuff, you know, we are stuff, but also everything around us is made of molecules. They’re made from a lot of things, but a lot of it’s made from petroleum, but they’re made from wood. They’re made from, you know, some is made from biology. But the world has to be made sustainable. The physical world, not just the digital world. And so, yes, it’s a big, it’s a big opportunity. It’s a big challenge. The good news is that the prices are higher on chemicals than, let’s say, if you burn a molecule to, to release the energy. So, even though fuels tend to be the big markets, and so they’re the ones that evoke the most interest from a climate change point of view, there are some great opportunities on chemicals because they are just sold at a higher price point. So that’s the good news. The bad news is nobody pays much attention to them in terms of these big carbon, there’s no renewable carbon standard. There’s a renewable fuel standard, but no renewable chemical standard, no renewable material standard. So, it’s done on a voluntary market, which makes it subject to economics. In good times there’s a lot of money available. Sometimes a company has money. A lot of companies had money available during the pandemic because they, they save money on, on travel and transport of their people. And so, they made a lot of voluntary commitments, which they couldn’t keep up when 2022 arrived. So that’s, there’s instability. So, those are the kind of the macros, and those can only be addressed ultimately by having the same kind of regime, a renewable carbon standard, if you will. That’s broader. But in the meantime, you’re absolutely right. There are, you know lots, there are 50,000 terpenes, for goodness sakes. There’s all kinds of targets out there. The challenge that we have, and this goes back to what we were just talking about, about infrastructure, is everything we do is based on petroleum molecules, not everything, but the vast majority, the big refinery chemicals, which are methanol and xylene and benzene and toluene, and a couple of others, are made from petroleum. So, we’ve made our materials from what is easy to make from petroleum. We have to decide whether we’re going to make drop-in replacements, or we’re going to go for new materials that have betterproperties. And I’ll give you an example, just to make it vivid. And I’ll pick out plastic. So, the plastic bottle is made from a chemical blend called PET.

CB: Yep.

JL: Which ultimately, is made from ethylene glycol, which is often made from sugar. It’s a biological, but the other part of it, xylene, is made from petroleum. So generally speaking, new technology is coming along the way, but PET is really all about the world of petroleum. Now there’s an alternative, it’s called FDCA or FDME, depending on who you talk to. And that is made from biology. Now, one of the things that’s really nice about it, is it solves a problem. If you’ve ever gone into a shop and you’ve noticed that when you get those really, really small, sizes of Coke, maybe, you know, six ounces or something, just a, you know, a couple of centimeters high, those are always made of metal. Those are still in cans. And you wonder why aren’t those made in plastic? And the reason is, is PET can’t really, doesn’t have the good barrier properties when it’s that small. So small PET doesn’t work and, but FDCA does. So, it has better barrier properties and it’s just a better plastic. So good news. It could be, you know, that successor to um to PET. But we have to make a decision: are we going to make alternatives or are we going to make replacements? And that’s, that’s  really been, put that together with the economic uncertainty that the lack of a carbon reliability, so it’s all a voluntary market, you put that together with this decision about what you’re going to make, and you have a recipe for exciting science and slow progress to scale. And that’s where we are.

CB: Absolutely. I think the thing and I do like the PET, PEF, sort of conversation, Jim, because it does have all those fantastic properties. But the thing that I understand is, that once you get above about 10% into the recycle streams, you end up with floppy PET bottles when it goes back through the mechanical recycling process, which is part of the handbrake. When you get into the recycling and sorting, you’ve got to keep them separate or you end up with reuse problems.

JL: Well, absolutely. We need to revirginise plastic rather than mechanically recycle. That’s one of the problems. We need to have higher recycling numbers. You know, reduce, recycle, you know, the whole nine yards. All that stuff makes a lot of sense. We’re not anywhere near where we need to be on recycling, but we also need to revirginise, for exactly what, the reason that you point out, we have to bring it back to a, you know, rather than mechanical and melting, bring it back to a, to a virgin material and then make a new plastic from it. You can do that.

CB: You can.

JL: It’s more expensive. Yeah, it’s more expensive. So, again, we have to make it, we have to make a decision as a society, do we want to spend more of our money on making the world safer and better, versus, you know, gee, let’s have pizza on Friday because it tastes good. So, we have to think about long term versus short term. It’s a very hard equation for individuals to go through. We’re not wired to think long term. And companies are not wired to think long term. And certainly, no person really thinks in a 200-year scale because we won’t be here. So, it’s asking a lot and people are coming around, but it’s slower than we would like. And of course, we’re late to the party. And the kind of urgency that we need to have is not there in people’s minds yet. Yeah, enough people’s minds yet. Yeah. So that’s…

CB; I’m gathering, I’m gathering, Jim, that when it comes to the chemical side of the equation, I’m, I’m inferring that you see that a policy intervention along the lines of the energy and fuel side is absolutely necessary to drive this along, because it’s nigh on impossible for bio-based to compete with molecularly equivalent or identical, chemistry. And we’re not seeing enough examples making it through of higher performing bio-based products that are getting all the way through and really making an impact.

JL: Let’s put a metric on it. It really, there’s two, and there’s two ways to look at it. First of all, is the actual production price. And then there’s the market price. Currently, the market price of petroleum has been nudging over 100, it’s in the 80s right now, I think today. It’s high and that makes a lot of technologies that are bio-based look pretty good because, you know, 50, 60, 70, you start to have some very interesting conversations. But the actual price, as we know, has gotten, I think, briefly during the pandemic crisis, got to be a negative price on petroleum. And certainly, the production price, the minimum production price of petroleum, where the CapEx is fully paid for and it’s just the, you know, the lifting cost in the Middle East, is $3 a barrel.

CB: It is. Yeah.

JL: And that is, you know, that is, you know, a 42 gallon, 300lb or, you know, 140, 130 kilo, bit there. And so, you can start to do the math and realise that the price is about two cents a kilo for the actual lifting cost of petroleum. And that is not something that anyone’s ever going to be able to compete with, starting with, let’s say, from sugar.

CB: Yeah.

JL: There’s just no way you can’t get sugar for two cents a kilo. And, you know, it’s unlikely you’re ever going to do that. So, that, what you’re going to see is, that it’s just slow going. Now, good companies like Origin Materials which have carbon negative materials, they’ve already got $10 billion in orders booked. So, they’re not worried about demand. They’re worried about ,you know, executing supply. So, and Bolt Threads just announced a SPAC merger. So, this is a company that makes, essentially a bio-based fabric or bio-based silk and, you know, good for them. And so, there is all kinds of opportunity. There’s no reason why this won’t grow. It is growing and it will continue to grow. It’s not going to grow anywhere near as fast as net zero by 2050. And that’s where I, really pointing to that need for a policy intervention. It’s not to make the bioeconomy happen. It’s to make the bioeconomy happen on a scale that will save us from, you know, the consequences of not being a net zero by 2050, which is, which is not the normal way you would operate a company. It’s kind of the economics of wartime, if you will, where you don’t really, economics are set aside, because of the existential threat to a nation.

CB: Yeah. No, that’s a really interesting distinction you’ve drawn there at the end. And good, good examples with Origin and Bolt as well. We’re nearing the end of our time sadly, Jim, and I just would like a little bit of a crystal ball moment with you around the next one to three years. You’re seeing a lot of activity. We’ve covered, we’ve traversed a hell of a lot of ground over the last 45, 50 minutes, Jim, a little bit of crystal ball moment, if you don’t mind.

JL: Yeah, I’ll take you, just a quickie tour. Let’s say, we talked about first generation ethanol. They need to pivot. We’ve talked about that. They’re going to need help on carbon scores to do that. Because we have to make a decision which carbon regime we’re going to be using, to which lens we’re going to be using, and we have to harmonise that around the world. We can’t have one lens and one country, another one, another one. It just creates chaos. So that’s one thing that’s going to, we need to see over the next three years is harmonisation, not just for first generation ethanol, but for all molecules. We need to see with renewable diesel, which is again on the fuel side, there’s more than 30,000,000,000 litres the planning board and announced, these are all about petroleum companies doing wholesale refinery conversions: Eni, Total, Phillips, Marathon. The key is feedstock. They need…

CB: Yes, it is.

JL: They need more feedstock. We talked about that earlier. On the alt protein side, we didn’t get too much into that, but plant-based foods are on a retreat because of soft demand. So, they need to, over the next year to three years, make their case again, that they made so well two or three years ago. But they got to get back to doing a little bit of consumer marketing. On the hydrogen front, we have to decide, do we want green hydrogen or do we want blue hydrogen? Blue is not as good and there’s a lot of pushback on that., but green is tougher to get to. When it comes to aviation fuels, we have to decide how we’re going to bridge the gap between what airlines are willing to pay and what producers need to charge. That has to get solved and has to get solved quickly. We just mentioned biomaterials. We need to, it’s an execution story, as I mentioned, we need to be able to, a lot of demand out there, plenty for the companies that are out there. But we do need more molecules. And you mentioned that the C4’s, not been a lot of activity on the four-carbon front for, for quite a while, and it’s an incredibly important area, we need more. There is good news on polylactic acid. Nature Works is building in Thailand. Keep an eye out for PHA which is another bioplastic, it’s biodegradable. But none of those are anywhere near the kind of scale that they could be and should be. So, we also need to be better at financing. Interest rates are rising, and that’s going to be a, you know, as we’re fighting inflation around the world because of getting out of the pandemic with all the stimulus, has created an interest rate crisis to try to tame inflation. So, you have a crisis, you tame it with stimulus. Then you have a, you know, another crisis which you have to, you know, deal with, with an interest rate drive. And that’s making it more difficult to pay for our goals. And so, we have to lean more on equity and less on debt. So, these are some of the things we have to, over the next year to three years, also in the plastics, as we mentioned, it’s a decision about whether we’re going to use these drop-ins, or whether we’re going to go for a truly, you know, these high-performance new molecules. That’s a longer road. And again, it runs into the infrastructure problem. So, we have to make, we have a lot of choices. The next year to three years is all about making smart choices and not necessarily, making, as they say, perfect the enemy of good.

CB: Yeah. Uh, Jim, that’s a great thought to finish on around the perfect being the enemy of the good. That has been quite a tour de force over the last hour or so. It has been terrific getting your contemporary thinking on all of these things and actually revisiting some of the history of it all. I hope we can do this again soon, Jim, and I’m looking forward to continuing to reading my Digest every morning and staying in touch with you. Thanks so much for your time.

JL: Cameron. Always a pleasure and a lot of fun to spend time with you today.

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