How to feed the chemical industry with clean carbon

By Max Hefti, Investment Manager, Energy

The chemical industry is, obviously, here to stay. As an essential piece of the modern economy, producing key chemicals needed for agriculture, consumer products, pharmaceuticals and much more, if anything, it is only set to grow. It makes one recall the 1967 film The Graduate, where an older associate delivers future career advice to the main character in one-word: “plastics”. The line is no less relevant today than it was over 50 years ago: the global plastics industry is set up for robust expansion in the years ahead, one of the main drivers of surging growth in chemicals of all stripes. Today, if you delivered this advice, you could just say “chemicals”.

This growth, however, comes with a downside, in the form of greenhouse gas emissions-intensive processes wherein carbon—mostly obtained from liquid hydrocarbons like oil—is converted into precursor materials. Of the 550 megatonnes of carbon that the global chemical industry consumes for feedstock per year, 88% comes from these unsustainable sources. With demand for carbon feedstock expected to more than double by 2050, the chemicals industry will need to leverage less-polluting means if it wants to do its part to help the world meet urgent climate targets, while simultaneously serving as the basis for continued growth in other industries—including those helping the world shift to a lower-carbon model.

Thankfully, it has a number of options at its disposal, although none without limitations and tradeoffs.

Chemical recycling:

Billions of pieces of waste (mostly plastic) could be broken down into their constituent components, out of which carbon can be extracted. Growing need for chemicals means that virgin feedstock will need to come from somewhere, however, and chemical recycling requires energy too. Logistical challenges in collecting mass quantities of waste for recycling also need to be considered.

Carbon capture and storage (CCS):

Keeping existing processes and fossil feedstocks largely in place, carbon dioxide emitted following chemical synthesis could be captured and sequestered underground. The chemicals industry is not the only one contemplating utilizing CCS to shrink its climate footprint, and the appeal of such cross-sectoral applications for CCS has boosted its prospects significantly in recent years. Uncertainties include the complexity of setting up a carbon transport-and-storage supply chain (including high costs of monitoring storage sites, a challenge that one Emerald portfolio company, SpotLight, is looking to tackle). Carbon capture also requires plenty of heat, which could have climate impacts of its own.

Direct air capture (DAC):

Grabbing carbon dioxide directly out of the atmosphere has become a gold-rush industry, with several players looking to launch successful business models in the negative-emissions space. The chemicals industry could use some of the carbon captured as a feedstock, thereby offsetting its process emissions. Employing DAC and CCS simultaneously could see the chemicals industry transform, over the long-term, from a polluter into a climate-positive sector. DAC, however, is a major energy hog: the electricity required to supply enough carbon for the global chemicals sector, in addition to hydrogen generated via non-emitting processes, would eclipse all generation capacity on the planet today. This fact alone is enough to limit DAC’s appeal for the time being.


The carbon locked away inside plants and other bits of organic matter could also be harnessed as feedstock, a process that is already happening today, to a limited extent. Since plants absorb carbon dioxide as they grow, this “circular” carbon could help offset process emissions (again turning chemicals into an emissions sink if applied in concert with CCS). Yet growing enough biomass to provide the carbon for the global chemical industry would require staggeringly huge quantities of land and water, making it a decarbonization option of finite utility for now, although in the short term it is still the most abundant renewable carbon that the industry can leverage.

These drawbacks mean that alternatives still command a “green premium” of several times the price of fossil feedstocks. But the landscape is changing: policies placing a price on carbon or offering incentives for decarbonization are spreading, and net-zero pledges are proliferating throughout the chemicals industry. Ultimately, a blend of solutions—including, potentially, novel or synthetic feedstocks that cut out carbon entirely—will be needed to reduce the climate impacts of the chemicals industry.