The chemical sector is a significant source of carbon emissions. As of 2022, it is responsible for 935 million metric tons of CO2 annually, or 2% of total global emissions, making it the third largest emitting sector. Half of the sector’s energy input is consumed as feedstock (fuel used as a raw material rather than a source of energy). Indeed, it is the largest industrial energy consumer and the largest consumer of oil, gas, and coal raw materials of all the industrial sectors.
95% of all manufactured products rely on chemicals in one way or another, making for a hugely diverse value chain in the chemical sector. More than 80% of chemicals are sold to other industries and go through multiple transformations in various value chains before reaching the end-user. An example of this is the pharmaceutical industry (1).
The chemicals and pharmaceutical sectors face many common and unique challenges to decarbonisation, with the chemical sector needing to cut approximately 186 million tons of annual GHG emissions over the next three decades (2). The high energy intensity of production processes in both sectors necessitates significant heat and power to drive chemical reactions and separate materials through processes like distillation, and this energy is often derived from fossil fuels.
Both sectors have complex, global supply chains, making it difficult to track emissions and implement uniform decarbonisation measures. A lack of infrastructure for renewable energy and low-carbon technologies, combined with slow policy action, further complicates the transition. Significant capital investment is needed to develop and deploy innovative technologies and retrofit existing inefficient plants. Technological limitations, where feasible low-carbon alternatives are still in development or not commercially viable at scale, further add to the difficulty. Addressing these challenges demands coordinated efforts between industry stakeholders, governments, and the scientific community to develop and implement effective decarbonisation strategies.
The Paris Agreement (3) sets out an international ambition to limit the increase in global average temperatures to well below 2°C above pre-industrial levels, and to pursue efforts to limit this to 1.5°C. To meet these goals, all sectors in the real economy need to reduce their emissions at a rate sufficient to be consistent with the emissions pathways established by climate science. Although there are increasing numbers of innovative approaches and projects to reduce emissions, according to the International Energy Agency (IEA) the chemicals sector is still a long way off from meeting its target of emissions peaking in the next few years and declining towards 2030, with a 18% CO2 reduction in 2030 compared to 2022 (4). In real terms, this would mean achieving emissions reductions in the value chain in alignment with the Paris Agreement’s goals and neutralising the impact of any residual emissions that cannot be eliminated. Emerging markets and developing economies face an even bigger challenge because of a greater reliance on coal as a feedstock (4), often being used in a gasification process to produce syngas before making other products such as methanol.
FOUR KEY STEPS TO DECARBONISE
Analysis
The first step is analysing current emissions to quantify the baseline. This is critical as it sets the starting point for setting targets and decarbonisation strategies. Understanding current emissions can be done at an organizational and value chain level through Scope 1, 2, and 3 footprints, as defined by the GHG Protocol (5).
Another method is measuring emissions at a product level, commonly known as a Product Carbon Footprint (PCF) or Life Cycle Assessment (LCA).
Analysing the footprints of your products, organisation and/or value chain will allow you to identify emissions hotspots and, with that information, focus on how to reduce emissions effectively.
For example, electricity is often a large source of emissions and therefore switching to renewable electricity would be a significant step towards reduction. Switching suppliers for raw materials with less carbon impact would be another way to identify hotspots and reduce emissions. Obtaining and using supplier-specific emission factors is key for accurate footprinting, as the carbon dioxide released when manufacturing raw materials will vary between suppliers and generic emission factors can only provide a best estimate.
Strategy Development
Once the baseline emissions are understood, developing a strategy to reduce emissions aligned with a Net Zero trajectory is crucial. The Science-Based Targets Initiative (SBTi)’s Corporate Net Zero Standard, released in 2021, is the most widely accepted framework for setting targets in line with climate science. In addition to defining and promoting best practices in science-based target setting, the SBTi also provides validation against their criteria.
Over 70% of the world’s top chemical producers have set science-based targets. The number of chemical companies setting or committing to set targets through the SBTi has grown significantly in the past five years, with an average organisation (Scope 1 and 2) reduction target of 40%-45% by 2030 or 2035 using baseline emissions between 2018 and 2022. Key chemical industry bodies have defined best practices for energy efficiency and the use of low-carbon fuels. The International Council of Chemical Associations (ICCA), which represents more than 90% of global chemicals sales, aims to reduce the sector’s energy use by over 40% and greenhouse gas emissions by 70% by 2050. In the pharmaceutical sector, 268 pharmaceutical, biotechnology, and life science companies have committed to targets with the SBTi, of which 121 have validated targets by the SBTi and 102 have set Net Zero targets (6).
The SBTi has also released draft chemicals sector guidance (7), which applies to companies that manufacture products that fall within the boundaries of the ‘chemicals sector,’ such as the production of primary chemicals, other base chemicals, intermediate chemicals, specialty chemicals, pharmaceuticals, consumer chemicals, and chemical recycling activities. Released in March 2024, the SBTi draft sector guidance was under consultation until July 15, 2024, with pilot testing now taking place where companies can apply to voluntarily pilot the implementation of the draft chemicals sector guidance.
This guidance includes 1.5°C-aligned emissions intensity convergence pathways (where an intensity metric converges to a common value such as tCO2e/kg of product) for ammonia, methanol, and high-value chemicals (which contribute 70% of direct emissions from the chemical sector).
Setting targets can be daunting, but it is a necessary step that provides the required long-term direction to the business, so that it can then move on to develop and deploy a supporting decarbonisation plan. The transition roadmap will outline actions over the next 5-20 years and is a crucial component of the journey if companies in the chemical sector are to evolve to be compatible with a Net Zero future.
In the chemical industry, one typical reduction pathway is switching to lower-carbon feedstocks, such as sustainable feedstocks like crops which can be transformed into products like biodiesel or bioethanol or using electricity from solar farms to produce hydrogen. Process optimisation and energy efficiency is another key reduction area. This can include ensuring raw materials are recycled where possible; streamlining processes to be more efficient and reduce the quantities needed; and capturing and redistributing excess heat, such as capturing heat from reactors and using it to produce steam. Carbon Capture and Utilisation (CCUS) technologies also offer an effective means of reducing emissions.
In the pharmaceutical industry the reduction pathway most commonly being explored currently is packaging materials, with many companies investigating the use of recycled materials and altering blister pack configurations to reduce the raw material quantities required. Though important, this decarbonisation intervention is not by itself going to deliver enough reductions. The production of Active Pharmaceutical Ingredients (API) is very energy intensive, with emissions ranging between 100-10,000 kgCO2e/kg of API (8).
Emerging technologies such as mechanochemistry offers far less energy-intensive processes to produce APIs. Typically, large quantities of solvents are required to manufacture APIs using current technologies, therefore integrating solvent recovery processes to existing plants offers the opportunity to reduce emissions and costs.
Take Action
Operationalising a decarbonisation strategy requires near, medium, and long-term actions and initiatives that will bring the plan to fruition. This includes identifying near-term actions such as engaging the value chain, amending procurement policies, and participating in joint industry programs to drive widespread industry change. Establishing internal carbon footprinting processes and robust data structures so that data is accurate and can be easily obtained is essential for efficiently measuring emissions. Embedding governance and monitoring principles for the transition across the business will ensure accountability.
Additionally, exploring and establishing how decarbonisation measures will be funded is crucial for the successful implementation of the decarbonisation plan.
Measure Impact
As companies deploy their transition plans to move to low-carbon operations, there is a need to measure and assess the impact continuously throughout the journey. Organisations can update their emissions regularly and compare them to see if reductions have been achieved, obtain third-party verification to ensure the robustness of decarbonisation claims, evaluate the need for better, more granular data in specific areas, adjust the strategies to address gaps, and disclose and report progress.
By focusing on thorough analysis, strategic planning, concrete action, and continuous measurement, significant strides can be made towards achieving Net Zero targets. Addressing regional differences, complexities of a global value chain, and fostering investment in low-carbon infrastructure will be essential to overcoming the unique challenges faced by these sectors.
REFERENCES AND NOTES
- IEA, International Energy Agency, Chemicals (https://www.iea.org/energy-system/industry/chemicals, Accessed on 29/08/2024)
- Accenture, The Chemical Industry’s Road to Net Zero (https://www.accenture.com/us-en/insights/chemicals/eu-green-deal, Accessed on 29/08/2024)
- United Nations Climate Change, The Paris Agreement (https://unfccc.int/process-and-meetings/the-paris-agreement, Accessed on 29/08/2024)
- IEA, International Energy Agency, Tracking Chemicals (https://www.iea.org/energy-system/industry/chemicals, Accessed on 29/08/2024)
- Greenhouse Gas Protocol, standards and guidance for footprinting (https://ghgprotocol.org/standards-guidance, Accessed in 29/08/2024)
- Science Based Targets Initiative, net zero aligned target setting (https://sciencebasedtargets.org/how-it-works, Accessed on 29/08/2024)
- Science Based Targets Initiative, chemicals (https://sciencebasedtargets.org/sectors/chemicals, Accessed on 29/08/2024)
- Greenhouse Gas Accounting Sector, Guidance for Pharmaceutical Products and Medical Devices (https://ghgprotocol.org/sites/default/files/Guidance-Document_Pharmaceutical-Product-and-Medical-Device-GHG-Accounting_November-2012_1.pdf, Accessed on 29/08/2024)
