A report released Thursday contends Iowa is better positioned than many other states to capture a large share of the emerging biorenewable chemical market, but it needs to offer a “modest” tax credit to lure jobs and plants to Iowa.
“The Case for a Renewable Biochemical Tax Credit” was researched and written by three Iowa State University professors. It was commissioned by the Iowa Biotechnology Association and the Cultivation Corridor, a regional effort to bring more bioscience companies to Iowa.
The report notes that first generation biofuels — ethanol and biodiesel — have been economic drivers for Iowa. Ethanol production in Iowa accounts for $2.253 billion per year of gross domestic product and supports more than 8,693 jobs.
“Alternative value-added bioproducts are important for further growth of the biomanufacturing industry within Iowa,” the report states. “Biobased chemicals represent such an opportunity.
“The United States market for chemicals (more than $250 billion per year) is immense and nearly as large in value as the transportation fuels market (more than $400 billion per year). Almost all of the chemical products, commonly called petrochemicals, are based on crude oil and natural gas, so they are target markets for biobased chemicals.”
The petrochemical industry developed by locating new plants close to oil refineries. The report contends the biochemical industry is expected to take a similar approach with ethanol and other biomanufacturing plants.
“This biomanufacturing infrastructure includes corn wet mills, soybean processing facilities, wood mills, corn dry mills, biodiesel plants and cellulosic ethanol plants,” the report said. “As Iowa has more deployed biomanufacturing capital assets than any other state, it is well positioned to be a preferred location for biobased chemicals manufacture.”
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The report states that the biochemical industry needs to attract large sources of capital due to the complexity and scale of the plants.
“Owners of this capital are more likely to invest if they perceive the industry is welcome and if it can benefit from modest tax credits,” the report says.
Gov. Terry Branstad called for a revenue-neutral biorenewable tax credit in his Condition of the State address this week. The Iowa Economic Development Authority wants to provide up to $10 million per year through a renewable chemical tax credit program, according to a study bill filed this week in the Iowa Senate.
“We have identified 30 biochemicals to start with that have a 20 percent to 40 percent growth opportunity,” said IEDA Director Debi Durham, in remarks at the Sept. 3 Business 380 Excellence Awards dinner. “It is the game changer that will set Iowa apart well into the next decade.”