The Role of Carbon Transparency in Chemical Industry Growth

Blog by Lavanya Pawar
Published on March 17, 2023

The chemical industry is the largest user of energy, with oil as its primary feedstock. Its products are ubiquitous, from plastics to fertilisers, and demand for these products is expected to increase with the growing global population and rising living standards. However, this demand also means that the chemical industry is a major source of carbon emissions. To meet the challenge of reducing emissions while continuing to grow, the industry must adopt new approaches that balance economic growth and sustainability. In this article, we’ll explore how transparency can help the chemical industry reduce its carbon footprint and achieve a more sustainable future.

Oil and Chemical Industry

The chemical industry’s dependence on oil as both an energy source and a feedstock for producing key chemicals like ethylene, ammonia, and methanol is a unique aspect of its energy usage. While many other industries primarily use oil for energy, the chemical industry uses it as a raw material, which makes its emissions profile particularly challenging to address. The industry’s CO2 emissions are a direct result of the use of oil as a feedstock in the production process, and with the growing demand for its products, the industry is set to become the fastest-growing source of oil consumption.

The production of ammonia, in particular, is a significant contributor to the industry’s emissions. Ammonia is a key ingredient in the production of fertilizers, and its production relies on the use of natural gas, coal, or oil as feedstocks. The production process itself also produces significant amounts of CO2, with emissions coming from both the energy needed to produce the ammonia and the chemical reaction itself.

The chemical industry’s reliance on oil as a feedstock, combined with the growing demand for its products, means that the industry is a significant contributor to global carbon emissions. According to the International Energy Agency (IEA), the chemical industry is responsible for 5% of global CO2 emissions and is set to account for nearly 50% of the growth in global oil demand by 2050. This presents a major challenge for the industry, as it needs to find ways to reduce its carbon footprint while continuing to meet the growing demand for its products.

Opportunities for Chemical Industry

The chemical industry must take a multipronged approach to decouple CO2 emissions from chemical production growth. The International Energy Agency (IEA) suggests that carbon capture, utilization, and storage (CCUS) and other technologies will play a significant role in reducing emissions from the chemical industry. For instance, carbon capture and utilization can enable the chemical industry to use CO2 as a feedstock for chemical production, rather than releasing it into the atmosphere. Similarly, the use of bioplastics and recycled materials can reduce the industry’s reliance on fossil fuels as feedstocks, thereby reducing the carbon footprint of the sector.

At the production level, the industry can shift from coal to natural gas, especially in ammonia production, which can result in significant emissions reductions. In addition, the industry can invest in research and development efforts to promote low CO2 manufacturing and plant-level energy efficiency across the value chain. For example, the adoption of innovative technologies such as 3D printing, process intensification, and renewable energy can help reduce energy consumption and emissions in chemical production.

The role of transparency

Transparency creates a coordination game among all the players in the chemical industry value chain. Just like in a team sport, where every player has to work together to score a goal, all stakeholders in the chemical industry need to coordinate their efforts to reduce emissions. By incentivizing suppliers who reduce their own emissions, the industry can motivate all stakeholders to move in the same direction, towards a more sustainable future. This approach transforms the social dilemma from a competitive game where everyone tries to maximize their own profit, to a coordination game where everyone works together towards a common goal. By leveraging data transparency, the chemical industry can be on the right side of history by reducing their carbon footprint, avoiding ocean plastic pollution, and other forms of waste pollution.

In summary, decoupling CO2 emissions from chemical production growth will require a combination of technological innovation, market incentives, and collaboration across the value chain. By adopting new approaches that balance economic growth and sustainability, the chemical industry can achieve a more sustainable future while continuing to meet the growing demand for its products.

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