This article is based on the report titled “Food for Thought: The Untapped Climate Opportunity In Alternative Proteins” by BCG.
Alternative proteins are expected to account for 11% of total protein consumption by 2035. With support from technological advancements, investment, and regulation, this number can be bumped up to 22% of the global market over the next several years.
The food industry contributes to 26% of global greenhouse gas emissions, with animal agriculture alone responsible for 15% of those emissions. Alternative proteins are being explored as a way to reduce GHG emissions from the food system
11% market share for alternative proteins by 2035 could result in a reduction of 0.85 gigatons of CO2 equivalent (CO2e) worldwide. Which is equivalent to decarbonizing 95% of the aviation industry.
What is the Impact on Capital Employed (IoCE) of alt proteins?
Alternatives proteins have the highest CO2e savings per dollar of invested capital of any sector.
The emission savings can be turned into a financial benefit when assessed in terms of the market value of avoided CO2e emissions per dollar invested in mitigation efforts. This concept is referred to as impact return on capital employed, which Blue Horizon has dubbed IoCE (impact on capital employed).
If the estimated emissions value is between $50 and $80 per ton of CO2e, the transformation of the total addressable market (TAM) would result in emission savings worth $303 billion to $484 billion and an IoCE of $221 billion to $354 billion per trillion dollars invested, which is at least three times more than can be achieved from similar investments in other high-emitting sectors, such as transportation or buildings.
A Big Climate Impact
According to the United Nations, greenhouse gas emissions are projected to reach 55 gigatons by 2030 without a change in current policies. To reduce emissions and meet the goals of the Paris Agreement, countries have committed to reducing net GHG emissions by 50–52% below 2005 levels in 2030 and reaching net zero by 2050.
The transition to alternative beef, pork, chicken, and egg products could save over one gigaton of CO2 equivalent by 2035 or about 0.85 gigatons in 2030. This is equal to the decarbonization of most of the aviation or shipping industries or 22% of the building industry.
In their most optimistic scenario, which assumes that alternative proteins will capture 22% of the market, the decarbonization could reach 2.2 gigatons by 2030, which is 4% of the emissions predicted under the current policies scenario.
If alternative proteins completely replace animal proteins, global emissions would decrease by 6.1 gigatons by 2030, which is 11% of the projected current emissions.
In addition, a significant shift toward alternative proteins in diets would have a quick cooling effect on the planet as animal farming produces a significant amount of methane, which has a much higher global warming potential and a shorter atmospheric lifetime than carbon dioxide.
Reducing methane levels in the atmosphere will not only prevent further warming but also bring about a cooling effect.
A Sustainable Food System Means Big Changes
The shift to alternative proteins presents both challenges and opportunities for all players in the food industry. All players, including farmers, suppliers, manufacturers, and investors, must evaluate the pace of change and potential risks and rewards.
In the transition to alternative proteins, the value will shift toward the production and processing of new protein sources. The speed and degree of impact will vary depending on the type of protein and alternative being used.
The value of improved extraction methods for plant-based proteins may increase over time. Improved strains and cell lines for fermentation- and animal-cell-based proteins may also see a shift in value if new techniques can reduce the need for expensive culture media inputs or allow for the use of cheaper carbon sources.
Those upstream in the process, such as enablers of new protein sources and products, as well as those who remove key bottlenecks, will see greater returns. Proteins, ingredients, and processes that contribute to taste, texture, and nutritional value will continue to have high value, regardless of their position in the value chain.
Despite being critical to the shift to a more sustainable food system, farmers face some of the greatest risks and have the least resources, yet they have received little attention so far. All stakeholders must work together to create incentives for farmers to make the necessary transition.
The report highlights the potential of alternative proteins to play a crucial role in reducing greenhouse gas emissions and meeting the goals set by the Paris Agreement. Therefore, investing in alternative proteins have the highest CO2e savings per dollar of invested capital of any sector.
By 2035, alternative proteins are estimated to account for 11% of total protein consumption and could save over one gigaton of CO2 equivalent by then.
The shift to alternative proteins presents significant opportunities for all players in the food industry but also poses some challenges. To ensure the success of this transition, all stakeholders must work together to create incentives and evaluate the potential risks and rewards.
Thank you for taking the time to read this article! If you found it informative and interesting, consider joining my newsletter, where I explore the intersection of biology, technology, and business in creating a sustainable food system.