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The Path to Decarbonizing the Chemical Industry: A Strategic Blueprint


The chemical industry, a significant contributor to global CO2 emissions, faces immense pressure to decarbonize. This blog delves into a strategic blueprint for decarbonizing the chemical industry from 2020 to 2030, highlighting critical avenues, stakeholders, and potential impacts.


Introduction

The chemical industry produces essential materials and products ranging from fertilizers to plastics. However, this industry’s operations are heavily reliant on fossil fuels, making it a significant contributor to global greenhouse gas emissions. Annually, the production of primary chemicals alone emits about 1 billion tons of CO2, with additional emissions from processes such as hydrogen production for ammonia, pushing the total to approximately 1.35 billion tons. When considering emissions from related upstream and downstream activities, as well as post-use disposal, the industry’s total CO2 emissions exceed 3 billion tons annually, accounting for around 2.5% of global emissions. Decarbonization in this context means implementing strategies and technologies that reduce carbon emissions without compromising industrial growth.


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Challenges in Decarbonization

  • A significant portion of emissions arises from the production of basic chemicals such as ammonia, ethylene, and methanol.
  • Ammonia production alone contributes about 500 million tons of CO2 annually, primarily due to the Haber-Bosch process, which requires substantial fossil fuel-based energy.
  • Ethylene and polypropylene production through hydrocarbon cracking add further to the emissions tally.
  • Methanol production from syngas also significantly contributes to emissions.
  • The industry’s dependence on fossil fuels for the high temperatures needed in chemical reactions is a major hurdle.
  • The current infrastructure is heavily invested in and optimized for fossil fuel use.
  • Shifting to renewable energy sources presents both technical and economic challenges.
  • Chemical processes generate CO2 emissions not only from fuel combustion but also from the reactions involved in hydrogen production and other chemical syntheses.

Decarbonization Dimensions

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Strong start need to be made during the 2020-2030 period that can provide some modest short-term successes but more importantly, build a robust platform for significant decarbonization post-2030.

What could be the roadmap for such a start? Analyses along the following dimensions could be useful to arrive at it.

  • Decarbonization avenues – A comprehensive list of low-carbon or zero-carbon alternatives available for the industry
  • Stakeholders – Key decarbonization stakeholders within and outside the industry
  • Strategic intent – Tactical and long-term low-carbon objectives

Key Decarbonization Avenues

  1. Energy & Resource Efficiency
    • Technology Integration: Incorporating digital tools and AI-powered applications to optimize processes.
    • Waste Heat Recovery: Converting low-grade waste heat into useful energy, reducing overall consumption.
  2. Green Hydrogen
    • Production Shift: Transitioning from fossil-based hydrogen to green hydrogen produced via water electrolysis powered by renewable energy.
  3. Renewable Heating
    • Bioenergy Utilization: Using renewable natural gas from biomass waste to replace fossil fuels in heating applications.
  4. Electrification of Heating
    • Renewable Energy: Electrifying heating processes using renewable energy sources like heat pumps and electric boilers.
  5. Recycling and Reuse
    • Advanced Recycling: Enhancing recycling processes to convert semi-processed raw materials and waste into valuable products.
  6. Low-Carbon Waste Feedstock
    • Waste Utilization: Using plastic waste and other low-carbon feedstocks for chemical production.
  7. Bio-Based Alternatives
    • Sustainable Materials: Increasing the use of bioplastics and bio-based chemicals to replace traditional petrochemical products.
  8. CO2 Capture & Utilization
    • Emission Reduction: Capturing CO2 emissions and converting them into useful chemicals and fuels.

Status & Current Potential

Hence, several decarbonization avenues exist for the chemical industry. But each carries its own benefits and constraints. It is thus important for the industry to have better clarity on the status and decarbonization potential that each of these avenues presents.

To enable this, for each avenue, a brief summary is provided on the current status and its likely impact on decarbonization for two periods: 2020-2030 and 2030-2050.

Decarbonization avenueStatusImpact 2020-2030Likely impact 2030-2050
Energy & resource efficiencyCommercializedHighModerate
RecyclingCommercializedModerateHigh
Renewable heatingEarly stageModerateModerate
Bio-based alternativesEarly stageModerateHigh
Low-carbon waste feedstockEarly stageLow-moderateModerate
Green hydrogenPilotsLow-moderateHigh
Electrification of thermal processPilotsLowHigh
CO2 capture & utilization– CO2 capture: Pilots/early stage
– CO2 utilization: R&D
LowHigh

Stakeholder groups and decarbonization avenues

Which of the decarbonization avenues should each stakeholder group focus on during the 2020-2030 period? The following, brief analysis could help.

StakeholderTop 3 decarbonization avenues to focus on for 2020-2030Suggested activities
Corporate management– Energy & resource efficiency
– Bio-based alternatives
– Electrification of heating
Rapid investments for quick wins   Allot teams & finance for piloting & experiments   Form strategic partnerships  
Corporate researchers, scientists & engineers– Energy & resource efficiency
– Bio-based alternatives
– Electrification of heating      
Devise and implement smart improvements to existing technologies   Engage with university & academic researchers   Form multi-functional teams within company for experiments and pilots
Financial investors– Green hydrogen
– Electrification of heating
– CO2 capture & utilization
Identify attractive startups, businesses & technologies for investment   Explore multi-stakeholder investing partners to increase investment size and to share risks  
Government & policy makers– CO2 capture & utilization
– Green hydrogen
– Recycling    
Identify the right policies & incentives to drive high-potential, disruptive  innovations   Implement mandates that facilitate processes such as recycling  
Academic researchers– Green hydrogen
– Electrification of heating
– CO2 capture & utilization
Form partnerships with industry for experiments and pilots   Allot resources to get more bright minds to work on disruptive innovations
Entrepreneurs & startups– Renewable heating
– Bio-based alternatives
– Low carbon waste feedstock
Identify attractive sectors / niches where value can be added in the short term   Identify complementary partners for your startup or business   Reach out to relevant investors
Incumbent technology & solution providers– Electrification of heating
– Recycling
– Low carbon waste feedstock
Identify key corporates for pilots & implementation   Partner with complementary solution or services providers to overcome technology or implementation challenges   Form partnerships with academic researchers to finetune solutions

Strategic Intent

Quick Wins: Focus on energy and resource efficiency, renewable heating, and low-carbon waste feedstock. These areas offer immediate, achievable gains through process tweaks and digital technologies.

Key Improvements: Target recycling and bio-based alternatives. While more challenging, strategic investments and partnerships can yield moderate decarbonization by 2030.

Build for the Future: Emphasize green hydrogen, electrification, and CO2 capture and utilization. These long-term strategies require substantial R&D and infrastructure development but promise significant emission reductions post-2030.

By categorizing efforts into these strategic intents, stakeholders can prioritize actions that align with both short-term and long-term decarbonization goals, ensuring a balanced and effective approach.

Decarbonization Opportunities

It is only natural for most industries to initially view decarbonization as something that is thrust upon them. But as captains of many industries are realizing, while the transformation to a low-carbon industry can be painful in the short term, approaching it with the right mindset could result in significant medium and long-term opportunities and benefits.

Opportunities emerging from decarbonization is too large a topic to do justice in a short review such as this, but here are some interesting takeaways for chemical companies from decarbonization.

Decarbonization avenueKey business benefits & opportunitiesNotes
Energy & resource efficiencyProduction cost reductionAlso an opportunity to make products more competitive in costs and performance
RecyclingNew revenue streams from developing chemical recycling technologiesAlso, an opportunity to make products more competitive in costs and performance
Bio-based alternativesNew business opportunityExample:  Eastman’s Advanced Circular Recycling uses molecular recycling tech.
Low-carbon feedstockRevenue streams from developing pyrolysis and other waste-to-oil  technologiesThe pyrolysis sector still faces many scaling challenges. Entry of a large and established player might help the sector in crossing the chasm
Green hydrogen & CO2 utilizationMultiple product and business possibilitiesMost of the leading global  chemical companies have already invested in bioplastics in some form

Conclusion

Decarbonizing the chemical industry is a complex yet essential journey. With significant emissions contributing to global greenhouse gases, the industry must take decisive action. The 2020-2030 period is pivotal for laying the groundwork, focusing on energy and resource efficiency, green hydrogen, renewable heating, and other innovative pathways. Key stakeholders, from corporate management to policymakers, must collaborate and align their strategic intents for quick wins, key improvements, and future building. Embracing decarbonization not only addresses environmental challenges but also opens up new business opportunities, ensuring a sustainable and profitable future for the chemical industry.



About Narasimhan Santhanam (Narsi)

Narsi, a Director at EAI, Co-founded one of India's first climate tech consulting firm in 2008.

Since then, he has assisted over 250 Indian and International firms, across many climate tech domain Solar, Bio-energy, Green hydrogen, E-Mobility, Green Chemicals.

Narsi works closely with senior and top management corporates and helps then devise strategy and go-to-market plans to benefit from the fast growing Indian Climate tech market.

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