Sustainable chemicals pathways

Defossilisation will inspire a significant transformation in the global chemicals industry—but it’s one that’s already started. As the charts below show, inputs and feedstocks will have to evolve from fossil fuels to low- or zero-carbon sources like biomass and green molecules.² In turn, new technologies will be required to deploy these feedstocks and to ensure that carbon emitted in the processing of chemicals is limited.

As the above chart shows, there is a high degree of interconnectivity within the processing of chemicals. Olefins and aromatics are based on the same chemical intermediate feedstocks (ethane, propane and naphtha), whereas methanol and ammonia, for the most part, are derived from natural gas. In our modelling, one of the newer intermediate feedstocks, green hydrogen, has particularly great potential to become a platform, as it can be used to produce a wide range of chemicals. We also project that the CO₂ obtained from renewable sources will become a necessary commodity, required to defossilise non-energy uses in the chemicals production process. And the industry will need to adopt best practices such as recycling and circularity, new technologies such as renewable energy for heat and electricity, and renewable feedstocks to replace fossil fuel feedstocks.

The chemicals industry faces a unique challenge, because it’s doubly reliant on fossil fuels. At the beginning of many chemical processes, the industry depends on the use of fossil fuel–based feedstocks, such as crude oil, naphtha or natural gas, that are converted into base chemicals. These base chemicals enable the production of the end-use products such as plastics, solvents, fertilisers and pharmaceuticals that all of society relies on. But the industry is also reliant on fossil fuel energy to produce high-temperature heat and electricity, which are required to drive chemical processes. The associated emissions are significant, as 52% of the chemicals industry’s total CO₂ emissions are related to the production of the seven chemicals covered in this study.

To successfully defossilise the chemicals industry, its total CO₂ emissions—both energy-related and non-energy-related—must be addressed.

And to understand the pathways necessary to defossilise the seven major base chemicals, we first need to assess the three principal energy requirements of the chemicals industry processes.

1. Energy for heat processes. The industry consumes fossil fuel energy in the form of crude oil, natural gas and other resources in a variety of high-temperature processes, often occurring in the range of 500°C to 1,000°C, that create intermediate feedstocks. Depending on the chemical, this energy for heat can range between 15% and 56% of the overall energy use.
2. Non-energy uses. Natural gas, naphtha and other intermediate feedstocks that are applied in chemical conversion make up the non-energy use of fossil fuels. Non-energy emissions are driven by chemical processes in which CO₂ is a by-product as well as the transformation of fossil feedstocks into further hydrocarbon products. Depending on the chemical, these feedstocks (intermediate chemical products) can represent between 48% and 85% of overall use.
3. Electricity. At present, electricity is not a major energy source in the production of intermediates or large chemical building blocks; it accounts for about 1.1% of the sector’s overall energy demand. Electricity does, however, have specific uses in chlorine production, air separation units and auxiliary processes required to power the production facilities. And electricity demand will increase in the future as heat processes are likely to become more and more electrified.

As the chart below shows, individual chemicals present different energy profiles based on the types of processes that are involved in producing them. Ethylene and propylene require proportionally greater amounts of energy for heating processes, for example, whereas ammonia and methanol require proportionally greater amounts of non-energy use in the form of feedstocks that are significant CO₂ emitters. Non-energy use, however, is not a predictor of non-energy CO₂ emissions, because emissions originate from the corresponding chemistry involved. In all seven of the key chemicals under consideration, electricity provides a negligible amount of energy.

Defossilising the chemicals industry can be achieved through investment in three essential infrastructure pillars:

1. The construction of new sites and retrofitting of old ones that will be capable of producing renewable chemicals.
2. Heat supply for conversion processes, primarily through direct electrification (e.g., electric steam crackers or heat pumps), as well as heat integration and green fuels.
3. Renewable feedstock supplies (e.g., biogenic sources such as lignin, synthetic renewable carbon and renewable hydrogen).

As part of our study, we estimated the bands of investments required to defossilise the seven chemicals. Our analysis focused on the first two components of this effort, site infrastructure and heat supply. The upshot: the chemicals industry will require cumulative investment in its net-zero transformation of between US$440 billion and US$1 trillion through 2040, and between US$1.5 trillion and US$3.3 trillion through 2050. For comparison, global capital spending in 2022 in the chemicals industry was €267 billion (US$290 billion at the time of publication), according to the European Chemical Industry Council. These investments would not only bring environmental benefits; they could also be a significant driver for continuous growth and employment around the world.

The mechanisms of defossilisation differ for each of the seven chemicals. For ammonia, net zero can be achieved primarily through renewable hydrogen, as it is the main abatement option. Because 90% of the cost of ammonia production comes from the hydrogen inputs, our investment analysis considers the investment required for the generation of renewable electricity and subsequently renewable hydrogen. Our pathway for ammonia defossilisation will require a total cumulative investment of between US$200 billion and US$970 billion.

Renewable methanol will require investment in new production sites for the biomethanol and e-methanol routes. The former uses biomass feedstocks, including forestry and agricultural waste, and by-products, such as biogas from landfills, sewage and municipal solid waste (MSW). E-methanol uses renewable hydrogen, as in the case of ammonia. Our pathway for methanol defossilisation will require a total cumulative investment of US$150 billion to US$440 billion.

The olefins (ethylene and propylene) will require an investment of between US$900 billion and US$1.5 trillion for new production sites, mainly for the electrified steam crackers and bioethanol-to-ethylene conversion processes. The aromatics may demand a total investment of US$220 billion to US$370 billion, mainly for the breakdown of lignin resources and methanol-to-aromatics process.

The chart below splits the investments required into the following silos: ammonia, methanol, olefins and aromatics (benzene, toluene, xylene). Each has estimates in a wide band owing to substantial uncertainties about circularity, demand and technology cost changes. Improvements in circularity alone could have a significant impact on the projections: the global economy is currently less than 10% circular. Some technologies are in their early phases and have an uncertain development path. And the reduction of costs for renewable chemicals will depend strongly on the pace of renewable production development.

PwC authors

Volker Fitzner, a leading practitioner in the global chemicals sector, is a partner with PwC Germany.

Jürgen Peterseim, a specialist in net-zero and energy transition strategies, is a director with PwC Germany.

Also contributing to this article from PwC Germany are Marcela Camps de la Maza, Dario Galvan, Meike Leu, Tim Malich, Anselm von Urach and Moritz Zahn.

University of Technology Sydney authors

Sven Teske is an Associate Professor and Research Director at the Institute for Sustainable Futures, University of Technology Sydney, Australia.

Maartje Feenstra is a Senior Research Consultant at the Institute for Sustainable Futures.

Also contributing to this article from the University of Technology Sydney are Senior Research Consultants Dr. Sarah Niklas and Dr. Simran Talwar.

_{¹ Full decarbonisation isn’t possible in the chemicals industry, because carbon is essential to the production of many chemicals. But the sector can still pursue net-zero targets through defossilisation, defined by the Royal Society as ‘replacing fossil-derived feedstocks with alternative, non-fossil sources of carbon.’
² Green molecules refers to energy carriers that are produced using renewable energy sources and therefore have a low- or zero-carbon footprint, making them ‘green.’}