Brussels has published a transition pathway for the $4.7-trillion-a-year sector, which accounts for 5.8% of global emissions. Oliver Balch reports
Certain images tend to dominate when thinking about the worst sectors of the modern economy for climate change: flaring oil wells, gas-guzzling SUVs, smoke-belching factories, and, as the science now shows, methane-expelling ruminants.
Rarely, however, does the chemical industry spring to mind. It should. Of all leading industrial sectors, only steel and cement production have a larger carbon footprint. Including petrochemicals, estimates put its total emissions at 5.8% of the global total.
As a business-to-business industry, the average consumer can be forgiven for not having chemical brands in the forefront of their minds. Yet, the products of this $4.7-trillion-a-year industry find their way into almost every segment of the consumer goods market, from the sulphates in your shampoo to the microfibers in your polyester T-shirt.
Regulators have been more vigilant. Last September, for example, the U.S. Senate endorsed a global climate treaty geared towards a dramatic “phasedown” of hydrofluorocarbons (or HFCs), a major source of greenhouse gases. Regulators in Australia, meanwhile, recently introduced a new environmental management standard for its domestic chemical industry.
The issue for chemical manufacturers is less the end goal than the practical steps required to arrive there
But nowhere is the pressure higher than in Europe. In October 2020, the European Commission laid down a marker for the global chemicals industry, arguing that only with the “right chemistry” could the trading bloc’s ambition for a climate-neutral economy be met.
The details of the EU’s chemical strategy for sustainability are still being worked out, but the industry has, at least in its public statements, welcomed the move towards a greener, less carbon-intensive future.
In an interview, Marco Mensink, director general of Cefic, the European chemical sector’s main trade body, is at pains to express the industry’s commitment to climate neutrality by 2050. The issue for chemical manufacturers is less the end goal than the practical steps required to arrive there.
“Let’s not debate the ‘what?’ Let’s discuss the ‘how?’ ” he says. “How do we get there? Which measures can we take, and how do we sequence those measures?”
Never slow to spot a business opportunity, the world’s largest management consultancies are queuing up to help point the way forward. Deloitte, McKinsey, Accenture and BCG are just some of the advisory firms weighing in with advice on transition strategies for the chemicals sector.
In late January, the European Commission published its own “transition pathway” for the industry. The 75-page report seeks to set out the economic advantages of a shift to lower-carbon chemicals (chiefly in terms of future competitiveness), as well as describing its contribution to such a transformation (e.g. strategic funding, regulation, infrastructure, skills, and so forth).
The take-away messages are broadly similar: start by setting clear, science-based reduction goals; adopt eco-efficient processes; design for reuse and circularity; and, above all, invest heavily in the research and development of new, low-carbon solutions.
At a strategic level, it makes for sound (albeit generic) advice. Moreover, proof that it works is slowly emerging. According to Cefic, emissions from the production processes of European chemical brands has reduced by 65% over the last three decades, largely thanks to significant reductions of nitrous oxide emissions (down 92.5%) and fluorinated gas emissions (down 89%).
Lowering energy-related emissions is a relatively easy win compared with other carbon-cutting measures
Individual case studies of good practice can also be found. Many focus on energy reduction. This makes sense. Not only is the chemical sector the world’s largest industrial energy consumer but lowering energy-related emissions is also a relatively easy win compared with other carbon-cutting measures, such as inventing new green chemistries, say, or reformulating carbon-intensive staple products.
BASF is one of those making much of its sustainable energy efforts. Like many of its competitors, the German chemical giant has invested heavily in renewables, including a long-term power purchase agreement with Danish energy firm Orsted to take the output of its 186 megawatt wind farm in the North Sea (due for completion in 2025).
It also counts a new subsidiary, BASF Renewable Energy, which it launched last year to oversee electricity trading in Europe, as well as to increase the supply of clean energy for its parent company.
Shifting the chemical industry’s energy mix takes some doing, mind. The reactions required to make the basic “building block” chemicals on which the sector depends (sulphuric acid, ethylene, sodium hydroxide, propylene and nitrogen) require far higher temperatures than is customary for electricity-run facilities.
To address this challenge, BASF is currently experimenting with a large-scale, electrically heated steam cracker furnace at its Ludwigshafen site. Located in the German state of Rhineland-Palatinate, the demonstration plant will seek to reach the 850 degrees Celsius needed to break down hydrocarbons into usable organic compounds.
“The idea is to get to the root of the problem and focus on tackling the areas in chemical production where the most carbon is produced, rather than reformulating this product or that product – although we’re also doing that,” says Thomas Nonnast, a spokesperson for BASF.
Energy reduction is not the only decarbonisation measure with a potential system-wide impact. Examples include greater plastic recycling and reuse, a more targeted use of chemical fertilisers, and the adoption of lower-carbon raw materials (such as renewable biomass in plastic production).
Many of the most exciting ideas, however, remain unproven at scale – either because the technology or infrastructure have yet to develop or because the economics do not add up. Green hydrogen is one such widely tipped development. Others include ammonia-based shipping fuel, methanol from carbon capture and bio-based jet fuels.
There is a reticence amongst the financial community to take that leap of faith and invest in these technologies
New ideas are being added to this list all the time. In a new study, the London-based consultancy firm Systemiq suggests that emerging depolymerisation technologies could open the door to the increased reuse of hard-to-recycle PET packaging and polyester textiles (75% of which currently ends up in landfill or incinerators in Europe).
The study builds on a major report released by Systemiq published last September entitled “Planet positive chemicals”. The report maintains that a ratcheting up of proven technologies can put the chemicals industry on a net-zero footing by 2040. The snag is the cost: around $100 billion a year.
“At the moment, a lot of these technologies cost more, which creates a slight premium, says Peter Goult, programme director at Systemiq. “As a result, there is a reticence amongst the financial community to take that leap of faith and invest in these technologies as they still don't know who is going to buy these chemicals.”
Despite such market jitters, the European Commission is sticking to its conviction that the future of chemicals is determinedly green. To that end, it is hosting an inaugural workshop to highlight leading applications of its so-called safe and sustainable by design (SSbD) strategy.
Officially adopted in December, the SSbD framework sets out criteria to guide the sustainable design, development, production and use of chemicals. To illustrate the framework’s value, the commission’s Joint Research Centre is planning to unveil case studies relating to plasticisers, surfactants and flame retardants.
The choice of topics is already raising eyebrows among environmental groups, who worry that the initial focus on plasticisers (which are added to the common polymer PVC to make it more flexible) suggests a less-than-radical trajectory.
“As PVC in itself is not very sustainable, it makes little sense to see if the plasticisers that are added to it would pass the (SSbD) assessment,” reasons Henrik Edin, policy adviser at the International Chemical Secretariat, a governmental funded group focused on improving regulation.
More broadly, Jean-Luc Wietor, deputy policy manager for chemicals and sustainable production at the European Environmental Bureau, a Brussels-based network of 170 environmental organisations, echoes concerns about vagueness and a lack of an “overall concept” among European policymakers.
The transition pathway offers a welcome impetus to industry efforts to decarbonise
That said, he shares the wider view that the transition pathway, which was developed in close consultation with the industry’s biggest players, offers a welcome impetus to industry efforts to decarbonise.
What counts now, he argues, is how chemical companies respond: “If the chemical industry and the EU match words with actions, this will be a useful document.”
How this scenario plays out will depend in no small part on the pressure placed on chemical companies by the consumer brands that buy their products and keep them solvent.
In as much as demand-side pressure does exist, its focus has been on persuading chemical producers to remove toxic substances. Why? Because they threaten consumer health. The same could easily be said for the industry’s carbon footprint.
This article is part of the February 2023 issue of Sustainable Business Review. See also:
Policy Watch: Europe beefs up green deal in bid to parry Biden's climate subsidies
Society Watch: Drive to make ecocide an international crime gathers momentum
ESG Watch: How the 'global stocktake' will force investors to pull up their socks on climate
hydrofluorocarbons chemical industry EU transition pathway BASF green hydrogen PET