Chemicals

The chemical industry’s road to net zero

April 22, 2022 4-MINUTE READ

RESEARCH REPORT

In brief

The EU Green Deal’s 2050 net-zero goal will be challenging for the chemical industry—but it will open up sizable opportunities for growth.
The industry will need to cut its annual GHG emissions by 186 million tons over the next 30 years.
Meeting those goals will require changes to plants and plant networks—and could cost the industry €1 trillion or more.
Large opportunities for growth will arise as customers use the industry’s innovative products to pursue their own initiatives for carbon neutrality.

The EU Green Deal, which calls for net-zero greenhouse gas (GHG) emissions by 2050, will affect businesses across the board—but it will have a tremendous impact on Europe’s chemical industry as it brings both significant challenges and huge opportunities.

To better understand this impact, Accenture and NexantECA, an energy and chemicals advisory company, conducted a comprehensive, plant-by-plant assessment of 236 chemical plants in Europe. This analysis determined that in order to reach net zero by 2050, the chemical industry will need to cut annual GHG emissions by 186 million tons over the next three decades.

"This in-depth research helps build a picture of key considerations for European chemical companies as they prepare for our sector’s biggest transformation in its history."

— MARCO MENSINK, Cefic Director General

By comparison, the industry has already reduced annual emissions by 171 million tons since 1990 according to the European Environment Agency (EEA). That’s good news, but capacity declines and plant shutdowns were a key driver of those reductions, as the EU share of total global chemical production fell considerably during roughly this same period. Thus, the industry has harvested much of the “low-hanging fruit” in reducing GHG emissions—and what remains will be more difficult.

Getting there will also be expensive, and involve:

Capital expenditures

Companies will need to make large investments in new core equipment and the design, construction and modification of large numbers of facilities.

Standstill costs

As companies retrofit, improve or rebuild plants, they will see months of halted production, leading to significant losses in profits.

New ways of operating

The industry will need to change traditional production processes and adopt new technologies—some of which are still in development.

Reshaping the plant network

New plants will need to be built in new locations to be closer to renewable energy sources, biomass materials or GHG-capture facilities.

The research found that altogether, achieving the 2050 Green Deal goals will require an investment in the €1 trillion range from the chemical industry. That in turn means that the industry will need to fill in a substantial funding gap, compared to current capital spending, and increase capital investments by more than €12 billion a year over the next three decades. (See Figure 1)

Figure 1: The industry’s EU Green Deal funding gap, 2021-2050 (€ billion)

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Accelerating global companies toward net zero by 2050

Implications beyond the core costs

Not all of the required changes will be under the chemical industry’s direct control. For example, the extensive modification and building of plants will require equipment manufacturers and the engineering, procurement and construction industries to expand their capacity significantly. And governments and businesses will need to address the social impact of the industry’s pursuit of net-zero goals, as plant downtime and closings affect employment and communities.

Access to the renewable energy needed for a net-zero industry will also be a challenge, as it will require an estimated additional 3.2 PWh of renewable energy—about five times the renewable energy generated in the EU today. Much of this will depend on the efforts of utilities and governments, but chemical companies will need to work closely with them, because the economic feasibility of increased renewable energy capacity depends on demand from plants, and plant electrification using non-renewable energy will not result in the needed reductions in GHG emissions.

About the Authors

Michael Ulbrich

Managing Director – Global Chemicals Sustainability Lead

DR. EIKE CHRISTIAN ESCHENRÖDER

Senior Manager – Strategy, Chemicals

Dr. Bernd Elser

Senior Managing Director – Global Lead for Chemicals and Natural Resources

MAIS HADDADIN FINN

Principal, Global Sustainability Lead – NexantECA

DR. NUNO FAÍSCA

Sector Leader, Head of Technology Evaluation and Management – NexantECA

RICHARD SLEEP

President – NexantECA

How these investments can pay off

Meeting the Green Deal’s goals will be expensive for the chemical industry. But there is more than compliance at stake, and chemical companies should weigh the costs of change against the monumental benefits of making that change.

Most industries will be affected by the EU Green Deal, as well as the growing consumer sentiment that favors environmentally friendly products. Those realities have prompted companies in a variety of industries to make public commitments to sustainability—and they will need to change many of the offerings they bring to market to meet these commitments. And chemical products will be a big part of the solution for these customer industries.

"A carbon-neutral EU chemical industry would still produce the plastics and chemicals needed by its customers. However, it would do so using different sources of energy."

— RICHARD SLEEP, NexantECA President

Going forward, chemical companies that focus on net-zero innovations and produce new materials that are lighter, more sustainable and made with processes that result in lower GHG emissions will find expanding markets for their offerings, in Europe and elsewhere. As European chemical companies reshape themselves for the Green Deal, they are likely to gain a head start in the race to bring carbon-neutral, sustainable and circular economy-related solutions to market, giving them a competitive advantage in global markets.

Ultimately, the chemical industry can play a critical enabling role in the success of the EU Green Deal by helping companies across industries reach their net-zero goals—and at the same time, position itself to prosper and grow in a more sustainable future.