LIGNOCELLULOSE-BASED ETHANOL AND BIOPRODUCTS Michel Lachance CQVB January 13, 2009

1. LIGNOCELLULOSE-BASED ETHANOL AND BIOPRODUCTS Michel Lachance CQVB January 13,2009 CQVB/LSBC/IRAP workshop Montréal-Vancouver

2. PLAN • Context • Objective of the workshop • The opportunity • Regional perspectives • Key issues characterizing the sector • •Feedstock availability • • Bioconversion processes • •Biorefinery approach • •Market readiness / acceptance

3. CONTEXT • Trends drive us towards a bio-based economy $400+ billion potential predicted for 2012 • Canada can take a leadership position, that presents both challenges / opportunities • The bioeconomy is based on renewable resources Biomass is the currency of that economy Necessity to use/process it in a sustainable way • A long road to go to make concrete that potential • To develop a competitive advantage: innovation Improve / develop technos to convert that biomas

4. GOAL of the workshop to review issues affecting commercialization of ethanol, chemicals and bioproducts from lignocellulose ☛ Technological trendswhich can favour commercialization ☛ Major opportunities / Most promising niches ☛ Technology gaps ☛ Weak linksin the chain ☛ Logistics issues to be taken into account ☛Obstaclesthat may prevent progress / success ☛ Economic dimensionsto be considered ☛ Factors / conditionsthat could facilitate / stimulate growth (standards, incentives, policies, etc.)

5. THE OPPORTUNITY (1) Canadian domestic ethanol consumption: 240M liters (7% of total volume of gasoline sold in Canada) Current production in Canada: 175 Ml Commitment to increase production to 750 Ml by 2010 To derive the full economic benefits of investments: • technology / commercialization efforts • interprovincial policies / incentives harmonization • export markets targets Concerns • volatility of prices • lack of international standards • feedstocks: availability / quality

6. THE OPPORTUNITY (2) Many point to chemical prodn along a biorefinery approach • central to operating an economical cellulosic ethanol facility Global chemicals market: $1.2 trillion in 2005 (60% commodities, 30% specialty products, 10% fine chemicals) Agressive growth expected over the next 2 decades Key platform chemicals: • glycerin, xylitol, sorbitol • 3-hydroxyproprionic acid, succinic/lactic/levulinic acids Applications • adhesives, resins, polymers • solvents, detergents, herbicides…

7. REGIONAL PERSPECTIVES QC and BC are well positioned to benefit from initiatives to develop lignocellulosic ethanol / bioproducts. - well-established forest industries - major supplies of biomass(forestry, agriculture, urban wastes) BC has an abundance of forest biomass; pine beetle-infested wood provides an impetus for accelerated implementation to recover economic value and protect forest resources and communities QC produces 60 % of newsprint consumed in north-eastern US and is developing its own expertise in bioethanol and biodiesel with a focus on forest / agriculture residues and urban wastes Both have developed a strong position of support for renewable and clean energy and climate change

8. ISSUES • Canada has 2 tiers of companies active in bioproducts production: •  40 Multinationals (DuPont, Domtar, Tembec, Cognis, etc.) • active in traditional sourced products and new ones • 220 SMEs concentrated in QC, ON, BC, ALB • (72% of SMEs bioproductsactivity in Canada) • < 70 related to lignocellulose-based bioproducts • To design initiatives,regional differences may influence the role played by provinces, as well as specific targets / desired benefits • Most importantissuesaffecting short / long term viability: • Efficient processing for separating components • Cost efficient energy release from cellulose/ hemicellulose/lignin • Cost reduction upstream (pretreatment) / downstream (logistics) • Catalyst and enzyme improvements • Receptors / Market acceptance

9. FEEDSTOCK issues ☛ a predictable, economical and consistent supply of biomass across a variety of feedstock types ☛good management of biomass supply across Canadian geographies, with open market conditions Some desired improvements : ►high yield crops and low fertilizer requirements ►new growing areas and new crops for biomass supply ►tolerance to drought, soil composition, climate extremes ►high sugars concentration and cell walls permeable to enzymes ►consistent biomass composition across multiple production platforms ►feedstocks from industrial wastes that require disposal and can be conveniently made available for high value

10. CONVERSION issues Technologies must be developed to produce bioproducts more efficiently from a wider range of feedstocks Some items for R&D initiatives: ►fermentation catalysts, setting conversion and cost targets for breaking down cellulose and C5 sugars Focus on microbiological / fungal biocatalysts ►separation / pretreatment technologies improving yields and providing more consistent products ►overcome barriers with inhibitory substances in sugar streams ►bioprocessing throughexisting infrastructure  re-explore the Fischer-Tropsch method

11. BIOREFINERY issues The integrated / diversified biorefinery will use more fractions of the biomass and produce the highest value possible in an eco-efficient manner But requires large-scale research, testing, and optimization Action items to be assessed as target initiatives: ►assess co-products value chain in addition to ethanol and prove value-added uses / markets for co-products ►enable capacity development through technology tests at scale-up and pilot plants ►provide public / private sector supportin rural communities to increase contractual business relationships at each stage of the bioproduct value chain

12. MARKET READINESSissues Development of receptors requires support Long term, national scale policy initiatives need to be put in place to ensure that Canada can compete globally Many sector stakeholders would benefit from insight and leadership Action items to be assessed as target initiatives: ►create a stable environmentto counter volatile global energypricing through long-term economic stabilization development programs ►provide incentives for energy crop conversion to supply biomass ►establish national quality standardsfor bioproducts / bioenergy, harmonized with international standards ►provide additional Incentives for renewal fuel standard to create larger numbers of receptors and further develop market readiness ►set infrastructure priorities through incentive programs to address large capital investment at commercial scale level

13. WHAT TO DO? To address identified issues impacting negativelycommercialization, “Action Items” are suggested for R&D or for policy development. Where possible, items were favored that could: ☛ mesh with existing initiatives ☛offer short-term benefits(< 18 months) ☛provide impetus toward action for a region These topics will be discussed in the Workshop.

14. MERCI / THANKS Questions?