Federal Support for Alternative Protein for Economic Recovery and Climate Mitigation

Summary

• The United States is a key innovator and producer of alternative proteins in a globally competitive sector, whose rapid growth in recent years offers significant promise for reducing agriculture’s carbon emissions. However, the COVID-19 crisis threatens to wipe out the nascent industry’s advances. With food service outlets shut down, sales are declining, and the economic downturn is threatening the industry’s funding for R&D and expansion.
• Federal investment in the alternative protein industry would help ensure that the industry, which could generate over 200,000 jobs in the long-term, does not collapse and continues to innovate and grow.
• To support continued R&D, which is essential to the industry’s growth, Congress could create an interagency R&D program and increase Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) funding.
• To address the drop in financing for large company expansions and investments, USDA could guarantee on the order of $200 million in loans for alternative protein companies.

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Introduction

The United States has been a world leader in the nascent alternative protein sector, which has quickly produced innovative, high-demand foods with lower carbon emissions than animal protein sources, while avoiding risk of zoonotic disease. These foods include meat and dairy products made from plants, fungi or mycoprotein, algae, fermentation, and cultivated (“lab-grown” or “cell-based”) meat.

However, the COVID-19 pandemic and its induced economic downturn is threatening to wipe out the advances of the industry during an inflection point, when many companies are raising funds, launching production capacity, developing new products, or deploying them to market. Although the animal livestock industry has been at the center of the crisis’ negative impacts and sales of some plant-based meat products are thriving in grocery stores, the alternative protein industry is far from secure:

• Companies are losing a key revenue source as food service outlets close or severely decrease sales. Further, some companies have closed production facilities to mitigate potential risks from COVID-19, and many that rely on ingredients or inputs that are scarce or sourced from abroad face supply chain disruptions and price fluctuations.
• Due to the need for social distancing, startups and producers are facing restricted access to laboratories needed to bring their products to market or to improve products that are already being sold. Shortages of research equipment have forced project timelines to be pushed back until orders can be completed. Some companies may lack the capital to weather this and may find themselves needing to sell their equipment to raise funds.
• The economic crisis will likely lead to losses in venture capital (VC) funding and private equity, which the industry has depended on to finance R&D and commercialization. VC investment in alternative protein startups could fall about $300 million globally in 2020, if funding falls as much as it has for all startups in the first quarter of 2020.

Robust federal investment in alternative protein R&D and production would offer significant economic and environmental benefits. The plant-based food industry alone supports more than 60,000 higher-than-average paying jobs, providing $3.6 billion in income each year, in at least 35 different states., And the industry has been in the midst of rapid growth. If consumer demand and research developments continue, by 2030 the market could grow nearly ten-fold, generating nearly 200,000 jobs in the US. Likewise, continued innovation and price reductions in alternative proteins could substantially cut US greenhouse gas emissions related to livestock production — at least 20% — while mitigating or eliminating issues related to animal welfare, zoonotic disease risk, tropical deforestation, and microbial contamination.

Read the full report here.