Many companies in the chemical industry are committing to ambitious goals to reduce their CO2 emissions and ultimately achieve net zero status by 2050. Pressures from government agencies, investors, and consumers are, however, driving decarbonization commitments in the chemical industry. But with strategic investments and partnerships, the industry may be able to achieve moderate decarbonization by 2030 based on efforts with this strategic intent. I started my career in the chemical industry in the wake of the 1970s oil crisis. Co-processing of CO 2 in oxidative dry/wet conversion of methane is one of the examples, which provides an efficient solution for CO 2 utilization. Arnout de Pee is a partner in McKinseys Amsterdam office, where Occo Roelofsen is a senior partner, Eveline Speelman is an associate partner, and Maaike Witteveen is a consultant. It is only natural for most industries to initially view decarbonization as something that is thrust upon them. Such a transformation will involve and engage many participants in each industry from the top management all the way to the blue collar worker. In a best-case scenario, the industry could become carbon negative by the early 2040s by using carbon dioxide and biomass to make methanol and by storing residual carbon underground. However, Mexico's dependence on chemical imports is much higherabout 28 . Decarbonization and Electrication in the Current Industry In order to decarbonize the chemical industry, we need to reduce carbon di-oxide emissions by closing and moving beyond the current carbon cycle. Creating acceptance, and even demand, for low-carbon industrial products throughout the supply chain will take education, changes to industry standards, procurement policies, financial incentives and low-carbon product standards. While bioplastics still contribute only about 1% of total plastics production worldwide, their contribution is likely to be much larger in future given the significant environmental harm from conventional plastics. Please email us at: Pathways and obstacles to a low-carbon economy. Industrial energy efficiency improvements bring great energy savings, but more potential needs to be unlocked. WRI relies on the generosity of donors like you to turn research into action. The following observations, which reflect current commodity prices and technologies, can help industrial companies focus their efforts (Exhibit 2): Almost irrespective of which decarbonization option a company choosesexcept for energy-efficiency improvementsdecarbonization leads to an increase in demand for electricity. Switching to more sustainable fuels and using carbon capture, use and storage (CCUS) can be part of the solution. Fundamentally, consumers of these industrial products need to both accept and demand zero-carbon products, but we have a long way to go. However, you may visit "Cookie Settings" to provide a controlled consent. U.S. industries account for 30% of national greenhouse gas (GHG) emissions, while the industrial sector globally accounts for 40% of all GHG emissions. But political resistance has resulted in a sector-by-sector approach to decarbonization in the United States, and a reliance on incentives and sometimes standards in place of mandates. Search all of the site's content. In 2022, the chemical industry will likely have a sharper focus on decarbonization strategies due to increased attention from stakeholders, regulatory change, and technology innovation. If we include emissions from hydrogen production for ammonia, the total primary chemical industry emissions increase to about 1350 million tons of CO2, or about 2.5% of total annual global greenhouse emissions. These products are also at a current disadvantage because they cost more. U.S. Infrastructure Investment and Jobs Act, essential provisions to address industrial emissions, INSIDER: Designing Low-carbon Product Standards for Cement and Steel in the United States, A Low-Carbon Future in the US Depends on Decarbonizing Petroleum Refineries, Decarbonizing US Industry: 3 Questions, Answered, Financing Low Carbon, Resilient and Inclusive Cities Through Multi-Level Governance. Such capture and/or utilization could be especially relevant for hard-to-abate industries. However, sustained investments in the U.S. chemicals industry are expected to continue the strong growth in domestic bulk chemical production. +1 (202) 729-7600, This website uses cookies to provide you with an improved user experience. Green hydrogen produced through water electrolysis powered by renewable energy will help in CO2 emission reductions in chemical and many other hard-to-abate industries. Industrial processes such as steel, cement, and chemical production as well as oil, coal and gas extraction and refining produce 30 percent of global CO2 emissions and 33 percent of methane emissions. China's industrial sector is moving toward deep decarbonisation, as can be seen in the following trends. Never miss an insight. Other provisions in the law create programs to design, pilot and demonstrate approaches to put carbon captured from industrial facilities back in the ground permanently. The path to net zero in the chemicals and related industries will rely on a mix of known and novel process technologies. The industry should however utilize the 2020-2030 period to experiment, learn and build capabilities and partnerships to benefit from these in future. Key improvements These are more difficult than the quick wins, and some of them may not be in the direct control of the industry. View DOE's new Energy Justice Dashboard for more info on locations of adverse environmental justice and health outcomes and how they might align with industry. Steelmaking accounts for 5% of industrial emissions in the United States. Methanol is produced from syngas which in turn is derived from natural gas. DOE is committed to decarbonizing the nations industrial sector to create good-paying jobs for American workers, spur economic growth, and create a cleaner, more equitable future for all Americans. The U.S. Department of Energy today released a request for information (RFI) seeking input on the opportunities and challenges for decarbonizing the U.S. industrial sector. Their recommendations are designed to advance technology demonstrations and deployment, infrastructure development, public and private procurement programs and initiatives, and other efforts to drive adoption of low-carbon technologies and practices.. Washington DC 20002 The report sees green ammonia, used as a fuel, and green methanol, used as a raw material for plastics, as keys to the industry's reinvention. White Paper: Energy transition and decarbonization pathways for the chemical industry. Even so, the investments needed to fully decarbonize the ammonia, cement, ethylene, and steel sectors will be substantial: $11 trillion to $21 trillion through 20500.4 to 0.8 percent of global GDPdepending on the price of zero-carbon electricity. Abstract. Only a few clean generation options can reach sufficiently high temperatures. Our work establishes an NETL-led technology incubation center and will seek to develop collaboration with industry to assist the downstream chemicals sector in their decarbonization, as well as carbon management and sustainability efforts. But there is no escape from it and a strong start needs to be made from now. But it wont be easy. achieving deep decarbonization would require commercially pure hydrogen to displace fossil fuels for all combustion needs in process plants boilers, furnaces . This oil becomes a low carbon drop-in raw material feedstock for chemical production, in place of crude. We also use third-party cookies that help us analyze and understand how you use this website. The chemical industry has a CO 2 problem. Not sure where to find something? By Siemens Energy September 30, 2022. Switching to renewable energy addresses only a fraction of industrial emissions. Green hydrogen for decarbonizing the chemical industry. Reducing these emissions by switching to alternative fuels, such as zero-carbon electricity, would be difficult because this would require significant changes to the design of furnaces. The crosscutting decarbonization pillars are energy efficiency; industrial electrification; low-carbon fuels, feedstocks, and energy sources (LCFFES); and carbon capture, utilization, and storage (CCUS). Additionally, it is expected that demand for the products produced in the chemicals sector . SAP is ready to help chemical companies move toward a low-carbon economy to meet the requirements of their value chains and policy makers. But in most cases, industrial applications of these technologies are in their costly initial stages. Necessary cookies are absolutely essential for the website to function properly. Subscribe to our FREE Newsletter & Stay Updated. 2.7 Action 7: Develop and implement a strategy to integrate smarter use of energy and feedstocks in the chemical sector with Industrial Carbon Capture, Usage and Storage (CCUS) 30. Which of the decarbonization avenues should each stakeholder group focus on during the 2020-2030 period? Whether this will work on industrial emissions is yet to be seen. The zero-carbon transformation of the chemicals industry is critical to the national goal of carbon neutrality and the low-carbon transformation of the global chemicals value chain. By continuing to browse this site, you consent to the use of cookies and similar technologies. "New strategies and technologies are needed to decarbonize the chemicals industry. For the 2020-2030 period however, some stakeholders will be playing far more important and decisive roles for decarbonization efforts than most others. WASHINGTON, D.C. The U.S. Department of Energy (DOE) today awarded $57.9 million to 30 projects housed within industry, universities and the National labs that will help decarbonize the American industrial sector, advance the science of clean energy. Build for the future These comprise strategies needed to support massive transformations be they for technology, process or feedstock. Read our press release on the announcement by Secretary Jennifer Granholm. Some have also committed to investment ranging from a few hundred million dollars in the near term to as much as $5 billion by 2030. Energy & resource efficiency The chemical industry has been continuously implementing efficiency and emissions control measures for many decades across its value chain. But many are left wondering where to decarbonize and how to get started. For example, BASF, Linde, and Sabic are demonstrating electrification of a steam cracker at BASFs site in Germany. Decarbonization avenues A comprehensive list of low carbon or zero carbon alternatives available for the industry Decarbonization of industrial sectors: The next frontier, Sustainability & Resource Productivity Practice, McKinsey_Website_Accessibility@mckinsey.com, Read our latest thinking on decarbonization, Improving energy efficiency is a cost-effective way to lower CO, Where carbon-storage sites are available, CCS is the lowest-cost decarbonization option at current commodity prices. By clicking Accept All, you consent to the use of ALL the cookies. The key takeaway from the above summary is that the chemical industry has the opportunity to achieve moderate reductions for the present while they eye much higher reductions in future. All Rights Reserved. Second, 35 percent of emissions from these sectors come from burning fossil fuels to generate high-temperature heat (in the focus sectors, process temperatures can reach 700 degrees Celsius to more than 1,600 degrees Celsius). Worldwide, production of primary chemicals emits about 1 billion tons of CO2 annually. Hydrogen production from natural gas, used mainly as a feedstock for ammonia production, results in an additional 350 million tons of annual CO2 emissions. These cookies do not store any personal information. chemicals sector 27. Exhibit 1. Financial investors A new report from McKinsey, Decarbonization of industrial sectors: The next frontier(PDF21MB), finds that ammonia, cement, ethylene, During the next three decades, almost every industry is likely to undergo dramatic transformations in their efforts towards low carbon value chains. . and steel companies can reduce their carbon-dioxide (CO2) emissions to almost zero with energy-efficiency improvements, the electric production of heat, the use of hydrogen and biomass as feedstock or fuel, and carbon capture. The Industrial Decarbonization Roadmap focuses on five of the highest CO2-emitting industries where industrial decarbonization technologies can have the greatest impact across the nation: petroleum refining, chemicals, iron and steel, cement, and food and beverage. The research reveals that only 21% of companies in the chemical distribution industry report their Scope 1, 2 or 3 emissions. March 29, 2021 3:59 pm ET Order Reprints Print Article The global push to reduce carbon emissions is bringing disruption to the chemicals industry, according to UBS New opportunities are. Grid decarbonization: While the grid is not a major contributor to the PVC value chain's carbon emissions . However, there are technologies and approaches ready now to reduce emissions from industry, and innovations that could fully decarbonize the sector. With the total gross value of all chemicals listed at When the wholesale price of zero-carbon electricity is no greater than $50 per megawatt-hour, using electricity to produce either heat or hydrogen would be more economical than CCS in many situations. It is not only one of the biggest sources worldwide of carbon emissions, which it mainly causes through thermal energy generation as well as plastics and ammonia production; it is also the largest industrial consumer of fossil fuels in the form of natural gas and oil. The ITV pilot will objectively assess the performance of emerging decarbonization technologies in industrial environments with a team of DOE National Lab experts. Industry represents 30% of U.S. primary energy-related CO2 emissions, or 1360 million MT CO2 (2020). Reducing carbon emissions about 45% below 2010 levels globally by 2030 will give the world the best chance to meet those goals. However, will it be possible to scale up electrolysis systems . Normalizing the goals announced by the companies baselines, we observe that Solvay followed by DSM and BASF have set highly ambitious goals and it will be interesting to follow their journey. This is an exciting area of research and piloting currently, as it has the potential to provide abatement at scale as well as new business opportunities for many stakeholders (think CO2 based chemicals, fuels, concrete). Decarbonization benefits the planet, economy, and business operations. This provides industry a path for continuing to produce the materials that form the foundation of society with lower carbon emissions. It can be used to decarbonize the processes used to produce iron and ammonia, for example, or to convert CO 2 back into hydrocarbons . Industries and companies are accountable to the environment, to the future generation, and most importantly, to the people of the geography they operate in. All in all, industrial companies can drastically lower their carbon emissions, but only by collaborating with other stakeholders. Decarbonization and Electrification in the Current Industry In order to decarbonize the chemical industry, we need to reduce carbon dioxide emissions by closing and moving beyond the current carbon cycle. Today, direct industrial emissions account for 23% of U.S. greenhouse gas emissions, making it the highest-emitting sector after transport and electricity. Solvay aims to cut emissions by 2030 to 26% of 2020 levels, while Sabic aims to cut 25% of 2010 emissions level by 2030. CO2 has been used on scale for urea production and for enhanced oil recovery, but it needs to be used in many other applications to make a real contribution to abatement. Hard-to-abate sectors are highly energy-intensive sectors where fossil fuels serve as the primary source as well as feedstocks and are seemingly difficult to substitute. The industrial sector has long been the biggest contributor to . The chemical industry is responding with its commitments to decarbonization, recycling, and resource recovery. Ammonia, cement, ethylene, and steel are commodities, so cost is the decisive consideration in purchase decisions. Three action areas in this sector include: reducing demand for carbon-intensive products and services improving energy efficiency in current production processes deploying decarbonization technologies across all industries, which in turn can be split between four supply-side decarbonization routes Electrification | Use of biomass | Use of hydrogen The decarbonization of the production and transportation of goods and services is a growing megatrend. DECARBONIZATION OF THE CHEMICAL INDUSTRY Cathy Tway, Johnson Matthey Cathy Tway began by scoping out the size of the chemical industry, including its contribution to global greenhouse gas emissions. What needs to be done to decarbonize the industrial sector? The former can be achieved through reuse or repurposing of chemical based products (especially plastics) and the latter through effective recycling processes. By 2025, U.S. exports should reach $182 billion. Pressures from government agencies, investors, and consumers are, however, driving decarbonization commitments in the chemical industry. Incentives for carbon capture are greeted with skepticism from some climate advocates who fear that it will lock in fossil fuel infrastructure and could contribute to continued reliance on fossil fuels at the expense of increasing the use of renewable energy. Decarbonizing the industrial sector is critical to labor and equity goals. ADI Analytics tracks global energy transition progress and trends, helps clients map various scenarios of limiting global warming, and its implications for the oil and gas, power, steel, cement, transportation, and petrochemical industries. The chemicals industry accounts for 6% of global greenhouse gas emissions and will face increasing pressure to decarbonize, as we see it. Workforce development and technical assistance programs, like DOE's Industrial Assessment Centers, will help prepare the existing 11.4 million American manufacturing workers and future workforce for the clean industry transition, improving health outcomes and long-term job prospects. Ultimately, elected officials and regulators need to limit pollution from the industrial sectors, both by incentives and standards. Abating CO2 emissions in the focus sectors is more difficult than it is in most others for four technical reasons (Exhibit 1). However, chemicals will continue to require refineries, so these facilities must be decarbonized. 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