A planet positive transition of the chemical industry
The global chemical industry generates $4.7 trillion in revenues annually, representing ~4% of global GDP, and directly employs over 15 million people. The products from the chemical industry underpin our way of life, health and prosperity and our transition to a net-zero-emissions economy. They are present in the healthcare, packaging, agriculture, textiles, automotive, construction and virtually any industrial or manufacturing sector, in fact 96% of manufactured goods depending on their use.
The global chemical industry also accounts for around 4% of global greenhouse gas emissions today. Beyond climate impacts, the leakage of chemicals and downstream products (e.g., plastics and fertilisers) into the environment has a range of other adverse impacts on the nine identified planetary processes that regulate the stability and resilience of the Earth system, also referred to as planetary boundaries. While the vast majority of the carbon sourced for chemicals is fossil by nature, renewable carbon sources are limited with further consequences on biodiversity and land-use. In addition to this imparitive of urgently required change of the chemical industry, legislation and downstream customer industries (e.g. food and textile) are pushing for a transition to circularity and climate neutral end-consumer products.
But the chemical industry transition is lagging. As a matter of fact, it is considered the hardest to abate sector for a variety of reasons: long asset lifetimes, 10,000s of products with embedded carbon and a complex range of production technologies. Nevertheless, unless the chemical system transitions to a sustainable model of operation, it makes it challenging for the global economy fueled by chemical products to be truly sustainable.
“Planet Positive Chemicals”, a landmark report released by Systemiq, the system change company, and the Center for Global Commons at the University of Tokyo shows that the chemical industry must end its fossil dependency and become a planet-positive force by embracing a more circular, low emissions operating model. The industry can reinvent itself as a climate solution – becoming carbon negative by early 2040s and acting as a carbon sink by 2050.
Getting to true net zero scope 1-3 emissions will require combined efforts on demand and supply side. Today, the global chemical value chain is predominantly linear, with low reuse and recycling rates and significant waste generation. For example, up to 70% of nitrogen input in fertilizer is not taken up by crops and only 9-14% of plastic ever created has been recycled. Applying circular economy approaches to its current linear value chain can reduce total demand in the system by around 400 Mt versus business-as-usual and net zero growth without sacrificing any functional benefit or utility. Tremendous business opportunities are awaiting companies able to align their portfolio with a circular net zero world. Society will inexorably move towards a circular economy (CE) given it is:
- The cheapest way: CE would save over $1 trillion in transition costs needed from 2020-2050 (~30% of total)
- The greenest way: CE reduces demand for primary chemical production leads to less microplastics, nitrogen run-off and other pollutants
- The safest way: CE reduces the reliance on new pre-commercial technologies such as CCUS and bio-based or waste-derived feedstocks
The chemical system transition also requires a supply-side shift away from fossil-based inputs for feedstocks and energy, towards inputs that are based on alternative forms of carbon (biogenic, atmospheric and point source CO2, solid waste), green hydrogen, and renewable energy. There is no silver bullet technology solution for the transition, but a combination of abatement of production emissions (scope 1&2), embedding climate neutral carbon feedstocks (scope 3 upstream) and capturing end-of life emissions at incinerators via CCS/U (scope 3 downstream) will be critical.
All the above demand and supply side interventions can get us to a planet positive future by mid-century, where over 80% of carbon is renewable (i.e., from non-fossil sources), the industry can create 500 million tons of negative emissions and a 2.5x growth of the chemical industry to enable the abatement of other industries (largely ammonia for shipping and methanol as new carbon feedstock). This transition also creates 29 million new jobs globally and economic development opportunities for the global south due to its abundant and affordable renewable energy sources.
The system transformation requires coordinated action from the chemical industry and companies in its upstream and downstream value chains, the energy system, innovators and governments. This may include establishing a first movers demand coalition comprising converters, brands, retailers, shipping companies and fertilizer companies to guarantee a market for low-emissions chemicals through offtake agreements. Such a coalition can also demand mandatory recycled content regulations and call for more stringent end-of-life recycling and CO2 emission reductions as part of extended producer responsibility obligations. Brands and retailers will be instrumental in driving the implementation of circular economy approaches for plastics such as elimination and reuse models. Downstream collection and sorting of plastics must be optimized, mechanical and chemical recycling infrastructure must be expanded, and end-of-life incineration facilities must be upgraded to include carbon dioxide capture. We already see some of these movements, for example at the port of Rotterdam, in Houston’s industrial cluster or recent large scale chemical recycling investments in France.
The Planet-Positive Chemicals report aims to help the industry and policy makers unite around a common view of the path ahead and accelerate the transition to a sustainable model of operation. Along this journey toward a new chemical industry lies the potential for the industry to act as a carbon sink, or a carbon management vehicle. With the proximity of a 1.5-degree world, this is a once-in-a-century opportunity and the industry cannot afford to miss it. In essence, the vision for a 2050 chemical industry requires investment and innovation today, or risk rapidly following an irreversible business- as-usual trajectory.