An Economic Impact Analysis of the U.S. Biobased Products Industry

forside USDA ReportThis report was prepared for the U. S. Department of Agriculture (USDA) BioPreferred® program and the Congress of the United States of America as mandated in Section 9002 of the 2014 Farm Bill (the Agricultural Act of 2014; P.L. 113-79). The conclusions and recommendations are those of the authors and have not been endorsed by the USDA. The report is a follow-up to the October 2014 report, Why Biobased? Opportunities in the Emerging Bioeconomy prepared for USDA.1 As presented, this report seeks to answer the six following important questions regarding the contributions of the biobased products industry in the United States:

  1. (i)  the quantity of biobased products sold;
  2. (ii)  the value of the biobased products;
  3. (iii)  the quantity of jobs created;
  4. (iv)  the quantity of petroleum displaced;
  5. (v)  other environmental benefits; and
  6. (vi)  areas in which the use or manufacturing of biobased products could be more effectively used, including identifying any technical and economic obstacles and recommending how those obstacles can be overcome.

Established by the Farm Security and Rural Investment Act of 2002 (2002 Farm Bill) and strengthened by the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) and the Agriculture Act of 2014 (H.R. 2642 2014 Farm Bill), the USDA BioPreferred program is charged with transforming the marketplace for biobased products and creating jobs in rural America. The program’s mandatory federal purchasing initiative and voluntary “USDA Certified Biobased Product” label have quickly made it one of the most respected and trusted drivers in today’s biobased marketplace. Private and public purchasers now look to the USDA BioPreferred program to ensure their purchases are biobased. Beginning in 2005 with its first designations of six product categories, the program now has designated 97 product categories representing approximately 14,000 products on the market today. With the Federal Government spending about $445 billion annually on goods and services, there is an incredible opportunity to increase the sale and use of biobased products as required by federal law. Executive Order 13693, Planning for Federal Sustainability in the Next Decade,2 increases federal agency accountability for achieving BioPreferred purchasing requirements.

Although there have been several studies of the contribution of the biobased products sector to the global and European economies, this report is the first to examine and quantify the effect of the U.S. biobased products industry from economics and jobs perspectives. The report is intended to provide a snapshot of available information and a platform upon which to build future efforts as more structured reporting and tracking mechanisms may be developed. This report is focused on biobased products and, as such, does not include biobased fuels or other energy sources except when analyzing co-products.

 

As detailed in the report, we took a three-pronged approach to gathering information on the biobased products sector. We interviewed a broad spectrum of representatives of government, industry, and trade associations involved in the biobased products sector to understand the challenges and future growth potential for biobased products; we collected statistics from government agencies and published literature on biobased products, economics, and jobs; and we conducted extensive economic modeling using IMPLAN modeling software, developed by the U.S. Forest Service, to analyze and trace spending through the U.S. economy and measure the cumulative effects of that spending. The model tracks the way a dollar injected into one sector is spent and re-spent in other sectors of the economy, generating waves of economic activity, or so- called “economic multiplier” effects. IMPLAN uses national industry data and county-level economic data to generate a series of multipliers, which, in turn, estimate the total implications of economic activity as direct, indirect, and induced effects. Contributions analyses were conducted to assess the effects of specific biobased segments within the U.S. economy. A contribution analysis is an evaluation of the economic effect of an existing sector, or group of sectors, within an economy. The results define to what extent the economy is influenced by the sector(s) of interest.

The seven major overarching sectors that represent the U.S. biobased products industry’s contribution to the U.S. economy are:

  •   Agriculture and Forestry
  •   Biorefining
  •   Biobased Chemicals
  •   Enzymes
  •   Bioplastic Bottles and Packaging
  •   Forest Products
  •   Textiles

    This report specifically excludes the following sectors: energy, livestock, food, feed, and pharmaceuticals.

    As summarized in Figure 1, the total contribution of the biobased products industry to the U.S. economy in 2013 was $369 billion and employment of four million workers. Each job in the biobased industry was responsible for generating 1.64 jobs in other sectors of the economy. Figure 2 shows these numbers in more detail. The 1.5 million direct jobs directly supporting the biobased industry resulted in the formation of 1.1 million indirect jobs in related industries and another 1.4 million induced jobs produced from the purchase of goods and services generated by the direct and indirect jobs. Similarly, the $126 billion in direct sales by the biobased products industry generated another $126 billion in indirect sales and $117 billion in induced sales.