Summary
The International Council of Chemical Associations (ICCA) this week released a study of the the "life cycle" impact of the industry on greenhouse gases (GHGs). The study concludes that while being a major emitter of GHGs, the chemical industry currently saves the world 11% of total CO2 emissions be enabling applications and technologies that serve to reduce overall societal emissions. Of great importance are chemical-based insulation, crop fertilizer/protection chemicals and improved lighting.
Analysis
The International Council of Chemical Associations (ICCA) recently commissioned a study of greenhouse gas (GHG) emissions based upon the United Nations climate control framework which was conducted by McKinsey and Company under review by the Oko Institut. The independent study is a life-cycle analysis claimed to be the first such industry-focused study that considers all impacts of an industry over the lifetime of the production, use and disposal of its products. The study is a noteworthy milestone in the GHG debate and sets a cornerstone of the public debate.
First, and perhaps most interesting, is the framework itself, which considers not only the emissions of CO2 attributed to feedstock and chemical production (of which the chemical industry is among the largest emitters), but also the benefits chemical products bring to society by enabling applications and downstream technologies that offset these emissions by reducing or foregoing CO2 emissions when the chemicals are put in use. This balanced view of of the life-cycle shows that the industry's direct emission are completely "offset" by downstream savings and net society an estimated 11% savings of total global emissions of CO2. Substantial savings are coming from:
- Insulation - where reducing heat loss foregoes the generation of CO2 from burning fossil fuels. Polystyrene and polyurethane foams have shown great promise in this area and leaders of these chemistries include Huntsman, Dow, BASF and Bayer Materialscience.
- Fertilizers and Crop Protection - where chemicals increase crop yields and therefore slow the destruction of forests (CO2 absorbers). Leaders in this area include Agrium, Syngenta, Bayer Cropscience, and Monsanto.
- Lighting - by converting to fluorescent sources thus reducing the burning of fossil fuels to light less efficient incandescent sources.
- Other savings come from plastic packaging, marine anti-fouling coatings, synthetic textiles and auto weight reduction.
Unfortunately, while the chemical industry can claim downstream benefits for chemicals, current regulatory discussion in the US about carbon trading will not allow them to claim and monetize these carbon "offsets".
Second, the framework and study results help to structure the debate and discussion about GHGs and climate change in a way that favors the chemical industry. Unlike the decades following the Clean Air Act on 1970 when the industry message was adversarial and defensive, this proactive and aggressive approach should provide a moral platform from which the industry can more effectively negotiate and craft the direction of regulations and their impact. We are already seeing this play out as some of the leading chemical producers have embraced certain cap-and-trade options.
Lastly, the study goes on to look at future abatement scenarios with forecasts of how the industry can reduce its own GHG emissions while continuing to enable additional downstream savings. Again, the message is positive although the details much more vague and uncertain. This is disappointing as it suggests that reduction in emissions from its own sources may be very difficult to accomplish without significant improvements in technology. Nonetheless, major reductions in emissions could come from:
- Improved process yield (thus less CO2 per unit output) from catalysis and process improvements
- Process energy savings with reduced energy consumption per unit output.
- Abatement technology to capture or reuse CO2 generated during chemical production.
- Sustainable feedstocks that consume biomass that otherwise would generate CO2 as it decomposes
In summary, the chemical industry has put itself in the forefront of the GHG debate with a well thought-out and executed study. The study will give the industry and individual chemical producers a playbook for keeping the climate-change message together and upbeat.
Michael Brown consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
