The chemical industry’s road to net zero

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.

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:

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)

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.

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.

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.

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.

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.