Decarbonisation Versus Profits

Mercedes Maroto-Valer discusses how the chemical industry can contribute to post-pandemic net zero

GLOBAL governments have recently been (rightly) focussed on the unprecedented Covid-19 pandemic, but the climate crisis continues. As we begin to consider rebuilding our lives, it is vital that the green agenda remains at the forefront of our minds. This global tragedy has taught us hard-learned lessons that we must not forget, not least the importance of being prepared for the worst-case scenario, and the importance of global coordination at all levels to overcome catastrophe. 

As our economies globally are getting re-started, we need to be ready to act. It is more important than ever before to share plans for societies that are both economically and environmentally sustainable. Decarbonisation is key. As we recover from the current pandemic, we have an opportunity to rebuild our communities in a way that will help protect us against future pandemics, and the very real climate change tragedy on the horizon.

In June 2019, the UK became the first major economy to pass laws demonstrating its commitment to achieving net zero by 2050. Many industrial areas of the UK remain heavily reliant on carbon fuels. Industry represents nearly one quarter of all UK carbon emissions and the reduction of this figure is crucial for the UK Government to achieve these goals by 2050. 

The task ahead

The £20m (US$24.6m) Industrial Decarbonisation Research and Innovation Centre (IDRIC) is funded by UK Research and Innovation (UKRI) on behalf of the UK Government. It will work with the UK’s six major industrial clusters and biggest emitters of carbon dioxide – Grangemouth, Teesside, Humberside, Southampton, South Wales and North West England – taking them on a path to net zero. IDRIC is tasked with addressing the challenges of industrial decarbonisation and transforming these areas into world-leading, low-carbon manufacturing hubs, delivering at least one low-carbon industrial cluster by 2030, and the world’s first net-zero carbon industrial cluster by 2040. 

The UK chemical sector is thriving in many respects and is widely considered a global leader in pharmaceuticals. In 2018 the sector made £55.5bn¹ in revenue and was the second-largest manufacturing industry in the UK. That same year, public and private R&D spending in chemical and pharmaceutical manufacturing businesses was £5.4bn, and significant employment opportunities were available across the sector, with 153,000 skilled positions filled, and around half a million people whose jobs depended on the industry. The petrochemical industry, which creates an array of essential products such as plastics, medicines and even inks, currently employs around 99,000 people and generates £12.1bn² for the UK economy.

Conveniently located to reach Europe and beyond, all chemical-producing regions across the UK have access to active ports, and chemical production has increased in recent years³. However, as the industry faces the uncertainty of Brexit and what this means for medium- to long-term investment opportunities, coupled with the unique challenges the industry must face due to ambitious climate policies in the UK, it is essential that we find new, innovative ways for the chemical sector to thrive.

There is no escaping the fact that this is a highly carbon-intensive industry. Globally, the chemical sector consumes 28%⁴ of industrial energy, much of which is generated by fossil fuels. These are used for process energy, or as carbon feedstock. Herein lies one of the biggest issues faced by the industry. While infrastructures can be redeveloped to use low-carbon energy sources such as hydrogen, bioenergy and renewables to deliver the power and heat required to drive chemical reactions, the dependence on carbon feedstock means the sector is likely to increase future global oil demand, unless we find alternative solutions.

Typically, chemical manufacturing sites have long lifetimes, so upgrading or replacing these to decrease carbon emissions means it is necessary to start investing and planning immediately.

Cost is another challenge. Existing technologies that can deliver lower CO₂ – such as hydrogen, bioenergy and carbon capture, utilisation and storage (CCUS) solutions – are often expensive to purchase and install. For SMEs, these may seem impossible to consider. However, it may be possible that these technologies and systems will become more economically viable if the demand increases, driven by policy change based on Market Potential Analysis⁵. This would leverage the size of the market and determine how long policies are required in order to prevent technology lock-in, and how changing the offering surrounding a technology can increase market share. This analysis could identify the factors most likely to accelerate adoption and show when cost reductions might be seen. These factors include the incumbent market forces such as energy prices, and changes in business models that support investment in these innovations.