5.1. Discussion of Results
The analysis highlights a need for life cycle policies that encompass both energy and materials. The sector outlook is uncertain, and this poses a risk that investors must consider. The wrong investments in the coming years can result in billions of dollars of stranded assets. The uncertainty also creates a conundrum in terms of where to invest. The analysis suggests that global strategies cannot simply be applied equally at the country/region level without tailoring. At the country level, analysis shows a large potential for hydrogen in China, India and in the rest of the G20 countries (see
Figure 11). Biomass share in total final consumption is high in the “Rest of the G20” and in the “Rest of the World” countries. Solar thermal use is higher in India and the United States compared to others. Coal would continue to represent the largest fossil fuel use in China, whereas Japan’s sector would continue to rely on oil to a large extent. In other countries and regions, gas would comprise the majority of fossil fuel use.
New petrochemical complexes are concentrated in the Middle East (based on cheap oil and gas) and China (driven by national product demand). However, future location choice may be determined by the access to low-cost renewable power, biomass feedstock and CO2 storage potential. While it is possible to transport large amounts of biomass to central processing plants, the economics may favor smaller, decentralised plants close to biomass production sites. Such a decentralised structure is evident in existing biomass industries, such as sugar and ethanol plants, as well as pulp and paper mills, where access to fuel and raw material supply is crucial. Similar to existing sugar/ethanol biorefineries, new types of electricity/biofuel/biochemical biorefineries may emerge that can adjust their product mix based on market circumstances. North and South America, as well as South Asia, are potential locations for such a roll-out, given resource endowment and existing economic structure. Low-cost renewable-hydrogen production will be concentrated in remote desert locations, including in the Middle East and Africa as well as Australia and Chile, among others. Since hydrogen is a commodity that can be traded, it offers an opportunity for countries that already produce and export gas – a pillar of today’s chemicals production – to switch to renewable exports. Manufacture of products such as ammonia, methanol and other chemicals should take place nearby to hydrogen production sites in order to reduce shipping costs, thereby highlighting the opportunity for new industrial activities that may result in a global relocation of chemicals production. Such developments are evident, with green ammonia projects in Australia, Chile, Oman and Saudi Arabia currently under development.
Demand for chemicals is currently concentrated in developed countries [
46]. As developing countries catch up, demand for plastics could triple, as assumed in this analysis. However, concerted action to minimise consumption and maximise circular economy efforts may reduce plastics demand from nearly 1000 Mt in PES to 650 Mt in 1.5 °C case in 2050, with future fossil fuel-based production returning to the 2017 level of 350 Mt. Therefore, the growth potential is significant but uncertain. The outcome will depend on new product policy, waste management policies, innovation and R&D in material sciences, as well as logistics in end-of-life management of post-consumer plastic waste [
13].
We demonstrated a single zero-emission pathway based on the 1.5 °C case. We argue the robustness of this finding, since the pathway is comparable with the findings of other studies, as reviewed in
Section 2, whilst we added several new insights at the technology and material levels. The sectorial pathway assumes the rest of the global economy will join a zero-emission pathway, following the ambitious climate policy choices countries have started taking. However, key hurdles are present for the sector. In a nutshell, these are: (a) the availability, accessibility, and acceptance of CO
2 storage sites for the CCS route, but not their safety, which has been extensively proven; (b) the very high electricity and energy demand (due to the need to synthesise hydrogen via electrolysis and to energise CO
2 for the CCU route, with the associated strict requirement of very low carbon-intensity of the electricity mix); and (c) the availability of land for biomass production, as well as competition with other biomass and land use.
Decarbonisation solutions need to be developed by considering that a large share of the carbon is stored in products. This limits the contribution of traditional measures such as energy efficiency. New sources of carbon feedstock have been identified from CO
2 capture, biomass and recycling. The CCS route has two main advantages: (i) it can exploit the existing technology and the infrastructure of the current petrochemical and chemical industry, without the need for a complete reshaping of it; and (ii) CO
2 captured from point sources and/or from air plus permanent CO
2 storage in geological formations constitutes the key elements of the negative emissions technologies [
84]. The analysis assumed massive use of CCS, to the tune of 1.5 Gt per year (including BECCS as a backstop, which is not yet deployed globally). In comparison, today’s CCS use across all sectors is well below 50 Mt per year. It is likely that the incumbents will opt for CCS-based solutions that can be integrated into existing plants, while new players will aim for more innovative solutions. However, local acceptance and availability of suitable CO
2 storage sites could restrict its application. The key role of CCS in this sector is so far not fully appreciated and very few pilot projects exist beyond enhanced oil recovery. Therefore, the potential to ramp up CCS use is unclear. While there has been some progress on CCS for ammonia plants, other components are lagging. In the context of the life cycle of petrochemicals, emerging BECCS technologies and CCS for waste incinerators must be part of the solution. Our analysis suggests significant CCU use as captured carbon from chemical production processes would supply the carbon needed for green hydrogen-based routes. At the sector level, however, CCU must be combined with biomass use to fully replace primary fossil fuel feedstock and ensure carbon neutrality, as CCU for fossil CO
2 sources would yield only a 35–50% emissions reduction for the petrochemicals sector overall.
Around 1.3 Gt of biomass needs to be deployed. Large biobased industries will likely be located close to the biomass supply. Whereas harbors with large petrochemical activities, such as Rotterdam and Antwerp, are developing biorefineries based on imported biomass, the economic feasibility of such strategies is not yet evident. Another key uncertainty is the availability of sustainable biomass feedstock. To put the 1.2 Gt into perspective, that equals the potential bioenergy production of the United States [
85]. This illustrates the land use implications and the logistical challenges of such a strategy [
6]. More than one-fifth of all products should be biomass-based by 2050. Some studies suggest even more ambitious shares of 40% to 70% by 2050, but the progress in recent decades has been modest [
55,
86]. Food production and consumption requirements in a world with rising populations, sustainability concerns, changing consumption patterns and climate change effects result in an uncertain outlook for biomass-based production [
87].
Synthetic feedstocks provide a technically feasible option, but our analysis suggests that given the high cost and small pilot plant deployment scale today, its growth will be too slow to have a significant impact by 2050. The same applies for green hydrogen; while demand may grow substantially on relative terms, the small capacity today means that a roll-out will take time. Around 0.3 GW of hydrogen electrolyser capacity is in place today, while the 1.5 °C case assumes 2435 GW of electrolyser capacity for the chemical and petrochemical sector alone by 2050. This equals nearly half of the total green hydrogen manufacturing capacity that is projected for 2050 in the 1.5 °C case [
40]. Green ammonia production will represent an economically viable early opportunity for renewable hydrogen deployment, and the first commercial plants are expected in the coming years. Wider use of hydrogen and other synthetic feedstocks will require the availability of low-cost electricity, high utilisation of electrolyser capacities and improvements in the efficiency and costs of electrolysers. Any transition in this sector will have profound effects on the power system and its cost-effective development will depend on the availability of renewable power. Growth of green hydrogen production must be matched by the roll-out of massive renewable power generation capacity, on top of the necessary transition of the existing generation capacity. Supplying the necessary power to meet 25 EJ hydrogen by 2050 would require around 7000 GW of electricity generation capacity, roughly the level of total global power generation capacity today [
40]. Assuming an average investment cost of USD 1000/kW for renewable power, this translates into a total investment of USD 7 trillion.
As the analysis shows, biomass-based feedstocks will be the key solution to stem the growing demand for fossil fuels for plastics and chemicals production. Production of 300–350 Mt of biomaterials (from less than 10 Mt per year today) requires a growth rate of 13% per year over the next three decades. This is compatible with the second scenario of the drawdown project (
https://drawdown.org/, accessed on 1 June 2021), where bioplastics demand grows to 357 Mt, or 46% of the market in 2050. Plants in Brazil and India have already demonstrated that bio-ethylene can be produced at competitive prices if low-cost biomass is available. The next step is the accelerated expansion of bio-based chemicals to substitute petrochemical-based polymers, starting with high value-added opportunities. Early niche markets include beverage bottles and cosmetics packaging.
The analysis assumes stringent circular economy measures, including minimisation of product use, such as one-way packaging, new ecological product design and maximum recycling efforts. Increased waste recycling is also essential. Around half of all plastics should be recycled by mid-century (from around 10% today); this includes chemical and mechanical recycling. Higher mechanical recycling rates require industry innovations, notably in collection and sorting. A better collection infrastructure would lead to a larger supply of well-sorted, high-quality, post-consumer plastics. This would increase the scale and further improve the economics of mechanical recycling [
88]. Chemical and feedstock recycling offer the possibility of operating at a larger scale with less pure feedstock. The various scenarios suggest rapid growth of pyrolysis, a technology that is not yet fully proven, and that would incur significant carbon and energy losses (see also
Supplementary Materials).
5.2. Strategic Implications
Overall, the sector’s development in the 1.5 °C case is very different from the sector’s current investment trends. This is a cause for concern, as it points to a significant risk of stranded assets that need to be better understood.
In this analysis, several key aspects that pertain to the decarbonisation of the global chemical and petrochemical sector have been combined, namely the energy impacts, emissions reductions potential and the costs and investment needs of the key low-carbon emission technologies covering the life cycle of chemicals and plastics, the impacts of decarbonisation on location choices and plant siting, as well as on materials use and waste handling, and finally, the role of accounting carbon storage in products as a crucial step in the complete assessment of the sector’s emissions. This combination helps to provide an overall picture for the sector’s net-zero pathway, thereby complementing the many existing studies that individually focus on the various components of decarbonisation. At the same time, the analysis is subject to uncertainty, as it is based on a set of bold yet uncertain assumptions regarding technology uptake for a limited number for key chemicals. Higher product granularity and further regional granularity may affect the findings.
While thorough technological analysis was carried out for certain solutions (e.g., energy efficiency, renewable energy heating and feedstocks, hydrogen and CCU/S), the potentials of recycling and other circular plastic strategies are uncertain. Technology progress continuously changes the outlook for a zero-emission pathway. For instance, green hydrogen has only emerged in the last couple of years. New prospects of green ammonia production and the scale up of hydrogen use in the production of methanol and other HVCs brighten the outlook for energy transition in the sector. The emphasis of the sector’s technology and emissions analyses has somewhat shifted strategy in recent years, from energy efficiency and biomass feedstocks to understanding the role of renewables for heating, hydrogen, CCUS and circular energy. It is unlikely that the technology transformation outlook will change fundamentally in the coming three decades, and we therefore regard our choice of five components as the key strategies. Specific to the chemical and petrochemical sector, most carbon is stored in products, and this limits the strategy scope; either carbon supply is carbon free, or CO2 is stored after use. This aspect is not properly reflected in existing models, as they lack material flows, and few industry strategies properly account for such scope-3 emissions. For example, if urea continues to be used as nitrogen fertiliser (and CO2 is released in the use phase), there is no way around biomass feedstock for ammonia production to ensure renewable CO2 supply. At a regional level, the analysis suggests the need for targeted solutions, notably for China and the Middle East, which deserve attention in the coming years. More refined analysis will result in a higher accuracy regarding the 1.5 °C case’s viability, and provide a better understanding regarding the steps needed from now until 2050.