The second Trump administration has burst onto the scene with a flurry of new policies. We look at the first bioeconomy-related policies to emerge and how they may impact the biobased industries.
US exits Paris Agreement again
As expected, the Trump administration wasted no time in withdrawing the US from the Paris Agreement climate deal once again.
This doesn’t affect the biobased industries directly, since belonging to the agreement did not oblige the US to hit emissions reduction goals.
However, the move does reinforce the basic policy priorities of the new administration: economic growth through fossil production, regardless of greenhouse gas emissions or other environmental factors.
Are biofuels subsidies at risk?
More directly consequential for the bioeconomy are possible changes to Biden’s 2022 Inflation Reduction Act (IRA).
Trump and many Republicans have been heavily critical of the IRA’s subsidies for clean energy. The Trump administration has already frozen IRA spending on the wind and EV industries. This week, Texas Republican representative Beth Van Duyne introduced a bill to repeal the biofuel-relevant sections of the act.
Biofuel producers will be watching Republican policies particularly closely over the coming months. They, much more than biochemicals or bioplastics producers, depend on government incentives, meaning they have more to lose from potential rule changes.
Biofuels and biomass suppliers were key beneficiaries of Biden’s which supported biofuels expansion through two key provisions. One of these is section 45Q, which provides tax credits for biofuel producers that achieve carbon sequestration and carbon capture, utilisation, and storage deployment. For the last two years, industry players have planned their strategy and investments around this support.
45Z is the other IRA tax credit relevant to the biofuels industry. It promised a clean fuel tax credit for eligible producers starting in January 2025.
Cutbacks to either provision would lower biofuels’ capacity growth outlook over the next few years compared to the scenario where they remain in place. The impacts would hit companies all along the supply chain, from farmers that provide the feedstock to the processors that create car and aviation fuels from the biomass.
Buffer factors: Republicans could ringfence biofuels
Despite the risks, biofuel tax credits could escape the worst of Republican clean energy cuts.
There are several factors that should buffer biofuels and biomass production against the most extreme policy moves to eliminate all Biden-era credits.
First, biofuels have also been less caught up in the US culture wars around environment and decarbonisation than other forms of renewable energy such as wind, solar and EVs.
Trump’s political credibility certainly rests on removing what it calls market-distorting subsidies to the EV and wind sectors, having made his hostility to the EVs and wind industries clear throughout his campaign.
Yet Trump’s biofuels position is less clear and with biobased industries less visible in Republican rhetoric, there is less political pressure on the party to distance itself. Combined with the fact that significant portions of the Republican rural support base rely on the biofuels industry, it is feasible that his government leaves current subsidies largely untouched.
Second, there is a spectrum of views on clean fuel credits among Republicans: Representative Van Duyne may have moved against 45Z, but some of her party colleagues are not keen on eliminating it.
Representative Van Duyne is from oil-rich Texas. However, four of the top six fuel ethanol producers in the US are Republican strongholds: Iowa, Nebraska, Indiana, and South Dakota. Their representatives are likely to push back against any repeal.
Republicans from biofuel-producing states were already organising to retain the biofuel credit starting from November 2024, right after the election of Trump. Randy Feenstra, a Republican Iowa representative, led Republican colleagues to request stakeholder feedback on the IRA, arguing that Biden’s law could be remade to fit the Republican agenda. The group is interested in how to edit the biofuel tax credits policy so it supports more domestic energy production and rural development.
Whether IRA biofuel benefits will remain in a state that can support investment and capacity growth will depend on how effectively the industry and producer states can lobby the new government. To achieve this, they will have to speak with one voice on how the sector can support key administration goals, such as energy security and economic competitiveness.
Why the bioeconomy could support Republican policy
The case of biofuels shows how there is nothing inherently contradictory between the bioeconomy and a Republican vision of a more industrially competitive, self-sufficient, and energy-secure US.
Aside from the energy security provided by homegrown biofuel feedstocks like corn, the expansion of biopolymer production would benefit US farming communities. Major biofuel feedstock producers in the midwest are keen to exploit new higher-value industries for their crops.
In general, agricultural producers see selling into the higher-value biobased processing industries as a way to shore up their income and buffer against the volatility of prices for food commodities. Other farming sectors such as canola, soy, or sugar beets could also sell into new biobased markets.
Building a bigger bioplastics sector would also support the Republican goal of making US industry more globally competitive, especially in relation to China. China and other countries are pulling ahead of the US for biopolymer manufacturing as they diversify beyond petroleum products and strive to meet the growing demand for renewable goods.
Biotech becomes a security priority
Trump’s embrace of fossil industry deregulation could slow demand growth for biomaterials geared toward sustainable consumer goods: renewable clothing, packaging, and bioplastics.
However, there is one part of the US economy that could sustain or even increase investments into the most advanced biomaterials through the Trump presidency: the military.
Under Trump, data-driven biotechnology could feasibly become an arena of competition between the US and geopolitical rival China. On January 15, in the very final days of the Biden administration, the Commerce Department proposed new export controls on certain types of advanced biotech research tools.
Biotechnology includes ‘industrial biotech’ such as biofuels, bioplastics, and biochemicals but also encompasses higher-value products like agricultural biotech, usually involving genetic modification of crops and livestock, and pharmaceutical biotech.
The proposed biotech export controls could clamp down on the export of analysis and measuring equipment used to generate large, detailed biological datasets relating to biological molecules, cells, and organisms. Data platforms for processing biological data are generally associated with higher-value biotech industries, for example, in speeding up the discovery and production of pharmaceuticals.
The measure aims to slow Chinese progress in the most advanced sectors of biological research, such as AI-aided analysis of biological data.
Advanced biomaterials and the data-driven research that underpins them would mesh more easily with Trump’s focus on building the US’ military edge than the consumer and sustainability-led biomaterials aimed at decarbonisation.
To some extent, the securitisation of biotech could keep R&D money flowing into the most advanced areas of biotech, afloat despite a slowdown in commercial demand for renewable goods.
The security and military interest in biotech could eventually have spillover effects for commercial biobased producers. Just like in pharma, biomaterials producers are looking to use genetic data analysis to speed up their discovery of new biomaterials or new, more cost-effective manufacturing routes, for example.
Continued investment in data-driven biotech driven by military and economic competition with China could eventually bring down the costs of these tools, making them more widely available.
Tariff backlash would harm US bioplastics
Trump’s favoured policy instrument for building up domestic industry is tariffs on imports, not just on China but on historic trade partners and allies like Canada, the EU, and Mexico.
Although he has not imposed any so far, new tariff hikes are expected to come into force soon. Trump himself has threatened a February 1 deadline.
Imports tariffs could harm the US bioeconomy by triggering a general trade war. Countries like Canada and Mexico will likely retaliate with their own tariffs on US goods, which will harm many sections of the bioeconomy. For example, the top buyers of bioplastic made by US manufacturers are Mexico, Canada, and China, all of whom are in Trump’s crosshairs.
A narrowing of foreign markets would be a blow to US renewable materials producers. The importance of exports to the US bioplastics industry has been growing, with one estimate stating that 44.6% of industry revenue came from exports in 2022, up from 32.3% in 2017.
It is not just downstream biobased manufacturers that would be vulnerable to rising tensions between the US and traditional economic partners. US primary producers, those working in agriculture and forestry, would be affected by tit-for-tat tariff hikes too, given that US exports considerable biomass feedstock to China and other Asian countries.
It is clear that certain parts of the bioeconomy may face headwinds under a Trump presidency. Yet we should remember that the last explosion in climate tech investment, youth activism, and decarbonisation policy came right after the first Trump presidency.
Whatever the outcome of the next four years, it will be hard to turn back the clock on renewable materials. Once the pendulum swings back, demand and capacity in the US bioeconomy will almost certainly be bigger than they were in 2024.