My colleagues Kristin Marshall and Runeel Daliah recently published an updated Lux Decarbonization Radar for Chemicals — a comprehensive report that lays out all the options for chemicals industry decarbonization. On some level, the news is good: The radar is thick with retrofit technologies, which alter a key step in an industrial process but don’t require an entirely new start. The report concludes that the chemicals industry has all the technologies it needs for decarbonization. Despite that relatively rosy outlook, I still can’t help but feel that the chemicals industry is missing crucial technology — and R&D leaders may be sleepwalking into a crisis.
The basic problem is that decarbonization is just one of many sustainability issues faced by the chemicals industry. I’ve been arguing that the chemicals industry faces a far more complex and challenging sustainability journey than any other basic material sector. Compare this to steel: There are issues of raw materials extraction, process waste, carbon emissions, and worker health and safety. The chemicals industry has all those concerns, plus it must manage the end of life of its products (which is both a waste and Scope 3 emissions issue), eliminate known health and contamination risks from its products (PFASs spring to mind), and must contend with potentially unknown health risks like microplastics. Steel, which has been around for hundreds of years, just doesn’t have these issues. The chemicals industry looks a lot more like a complex product like automotive: The car obviously produces a lot of emissions (bad) but also has a host of other negative effects from safety to space needs for parking to high upfront costs. That’s a tough problem to solve!
The chemicals retrofit solutions are good, mind you, and it’s worth moving as fast as possible with them because climate change is just that bad. But it’s also undeniable that the chemicals industry could spend a huge amount of money and effort on decarbonizing by 2050, and then look around and still be the focus of a huge amount of consumer and policy pressure, particularly related to waste and health. I think the automotive industry comparison is apt. In 2015, I contributed to a report that I’ve been thinking a lot about recently, in which Lux recognized that electrification was the step-change, transformative approach to automotive emissions. Electric vehicles (EVs) aren’t just more sustainable: They are much simpler, vastly more efficient, potentially much cheaper, and even fun to drive — in short, a better product — really only held back by the batteries. Realizing that this transformation was inevitable made it easy for us to make many other accurate predictions: We basically dropped our automotive lightweighting coverage because it just wouldn’t be necessary in an EV world. EVs aren’t a single solution for all the issues that cars present; systemic approaches like changes to land use and autonomy are also part of the answer. But EVs are a big, big deal.
When I look at the Decarbonization Radar, I don’t see an EV — a solution that fundamentally changes the product of the chemicals industry and solves the sticky problems of health, waste, and pollution. That’s not a reflection on the authors (certainly Kristin is aware of novel bioplastics, for instance), but rather a reflection on the industry itself, which is loath to consider any kind of change to the kinds of plastics or chemicals produced, or how they may be used. Consider this: Dow’s recent investor day presentation forecast olefins to grow at 3% to 4% annually through 2050! Dow is, for my money, the company in the industry most credibly committed to sustainability, and even it thinks plastics growth will go on forever. In reality, factors like single-use plastics bans, the rise of reuse models, and shifts to alternatives mean that the fundamental products for the industry will need to change.
I recognize that investor days are designed to put a rosy spin on things, and so it’s a little unrealistic to expect Dow to come out and say that the party’s over. Still, even academics seem unable to fathom these changes: This recent Nature paper on the refinery of the future takes it for granted that gasoline demand will go to zero by 2050 (a pretty shocking accomplishment, if true) but doesn’t even contemplate changes to products of the chemicals industry. Legacy automakers are currently getting their butts kicked by Chinese upstarts because they have failed to act on this fundamental change, and their competitors are now offering a product that’s not just more sustainable, but also better in every way. The chemicals industry needs to take note: It could be next.
