Chemicals

Countries and regions making notable progress in decarbonising the chemicals sector include: 

• The European Union accounts for the largest number of electrolysis projects for ammonia and methanol production, in addition to having the highest plastic recycling rates in the world. 
• Trinidad and Tobago, though small in size and population, has great potential to reduce carbon emission, and has started to take action. The low-emission hydrogen project NewGen, which will provide low-emission hydrogen for the production of ammonia, is expected to be launch next year. This project could have a significant impact, as Trinidad and Tobago ranks among the top ten ammonia and methanol producers, and among the top three exporters.
  

The chemical sector is the largest industrial energy consumer but only the third largest industry subsector in terms of direct CO₂ emissions. This is because around half of the chemical sector’s energy input is consumed as feedstock – fuel used as a raw material input rather than as a source of energy. Ammonia production is responsible for the highest share of emissions accounting for 45% of emissions from primary chemical production, followed by methanol (28%) and high-value chemicals² (27%). 

The chemical sector’s emissions must peak in the next few years and decline by about 15% relative to current levels by 2030 to get on track with the NZE Scenario, despite growth in demand for the sector’s outputs. To achieve this goal, government and industry efforts must address CO₂ emissions from chemical production, as well as those generated during the use and disposal of chemical products.

2 High value chemicals: ethylene, propylene, benzene, toluene and mixed xylenes.

Oil and gas are currently the main feedstocks used in the chemical sector, as they serve as sources of hydrogen and carbon, which are used as raw material to produce basic chemicals such as ethylene, propylene and ammonia. Their use is set to grow in line with material demand. Energy is also used to fuel production processes, which is distinguished from feedstock as ‘process energy’. 

The coal-based chemical industry, particularly prevalent in China, poses a significant environmental challenge, as emission intensities are considerably higher than in natural gas-based production. Methanol can be produced from coal at a low cost in China, which has facilitated the large-scale production of plastics from coal. Coal accounted for an estimated 36% of process energy used in primary chemical production in 2022, but its use must decline by about 30% by 2030 to get on track with NZE Scenario milestones. In this scenario, oil use, which already accounts for a very small share of process energy for primary chemical production, further declines by 2030. Increasing electricity and bioenergy use make up most of the difference from declining coal and oil use.  

Increased energy efficiency – achieved both through incremental improvements to existing methods and step-changes resulting from switching to fundamentally more efficient methods (e.g. from coal- to natural gas-based processing) – is also important in the NZE Scenario.

The sector’s substantial energy consumption is driven by demand for a vast array of chemical products. Demand for primary chemicals – which is an indication of activity in the sector overall – has increased strongly in recent decades. After strong growth in 2021, as activity rebounded following the Covid-19 pandemic, production stagnated in 2022, in part due to the global energy crisis.  

Underlying this global trend are different dynamics between primary chemicals:  

• Ammonia: forming the basis of all synthetic nitrogen fertilisers, ammonia has seen relatively modest growth over the past decade (1% annually), with 2022 experiencing even slower growth, mostly due to a production decrease in Europe in response to high natural gas prices. China is the largest producer today (30% of global production). 
• High-value chemicals: being key precursors to most plastics, high-value chemical demand has grown 3.0% annually over the past decade, but in 2022 it remained stagnant due to declining production, predominantly in the European Union, Japan, Korea, Russia and Chinese Taipei. China, the United States and the Middle East are the largest producers today, together accounting for 57% of global production.  
• Methanol: the main end uses are for formaldehyde, fuel applications and intermediaries to produce high-value chemicals, replacing oil as feedstock. Demand has grown very quickly in the last decade (6.5% annually) and by around 2.4% in 2022. China, the world’s largest methanol producer, accounts for 58% of production.  

Material efficiency measures – including increasing plastics recycling, using nutrients more efficiently (in the case of ammonia fertiliser), and reducing the use of single-use plastics – are important in the NZE Scenario to reduce the growth in demand relative to baseline trends. Recycling, in particular, is needed to reduce the need for virgin polymers. Recycling rates vary widely, but globally recycled plastics only account for about 8% of total plastic production. While this share is increasing, progress needs to accelerate.

The main decarbonisation pathways for the chemical sector are carbon capture, utilisation and storage (CCUS) and the use of electrolytic hydrogen. In addition, given that about 30% of required process heat is below 200 °C, direct electrification technologies such as high-temperature heat pumps can create efficiencies. Recent innovations related to chemical production include: 

• Methanol: In October 2022 the first commercial-scale emission-to-liquids plant, the Shunli CO2-to-methanol plant, was commissioned in China. This plant is currently the largest of its kind in the world, with a production capacity of 110 kt.  
• Ammonia: The world’s first industrial dynamic green power-to-ammonia demonstration plant is under construction in Denmark and due to launch in early 2024. The project is being developed in partnership between Skovgaard Energy, Topsoe, Vestas and ABB. “Dynamic” here means that ammonia production can react to any change in hydrogen production from the variable renewable energy-powered electrolysers – it will only operate when there is sufficient renewable energy, without the help of storage. 
• High-value chemicals and plastics: innovation is also continuing on low-emission alternative materials to produce so-called “bioplastics”. The Italian company Aquafil and its “Effective” project is just one of the multiple examples in this field. Nonetheless, concerns about poor biodegradation and the availability and management of bio-resources have slowed the uptake of these technologies. 
• High temperature heat pumps: Due to the availability of large amounts of waste heat in the production of most chemicals, about 80% of process heat below 200 °C (equivalent to about 25% of all process heat) can be supplied by high temperature heat pumps. One example from a chemical plant in the United Kingdom employs a 12 MW heat pump to recycle excess steam at 152 °C and raises the temperature to 211 °C, reaching a coefficient of performance (COP) of 5.3 (530% efficiency). 

The chemical sector is also increasingly important to the decarbonisation of other sectors, such as shipping, and potentially also iron and steel. Researchers at the Max Planck Institute for Iron Research, Germany, recently successfully proved at a laboratory scale that green steel can be produced with ammonia.³

Innovative plastics recycling techniques can provide benefits including reducing the need for virgin production, reducing downcycling (in which a material is recycled into a lower-value end use) and reducing plastic waste. Yet only 8% of plastic production uses secondary plastic today. Many different methods are being developed to recycle plastics. Mechanical recycling is often preferable due to its lower energy consumption releative to chemical recycling, but its deployment is limited by the purity of the available plastic waste. Pyrolysis is one of the leading technologies being explored today to deal with the increasing complexity of plastic waste streams. Other options include gasification and solvent dissolution, such as PureCycle’s process for propylene plastic recycling. In April 2022 Aptar and PureCycle achieved a testing milestone, when Aptar used prototype material from the PureCycle process with performance similar to conventional resin. 

3 Note that non-traditional uses of ammonia and methanol, such as advanced fuels, are not included in the chemical sector activity, emissions and energy values on this page – they are rather in the fuel supply sector in IEA’s accounting framework.

In the NZE Scenario, the chemical sector accounts for around 5% of the total expected CO₂ emissions to be captured by 2030 (outside of the CO₂ used to produce urea) and 11% of low-emission hydrogen consumption. While related low-carbon technologies are being deployed at an increasingly rapid rate, development of the necessary infrastructure to support them is lagging behind. Based on projects currently under development, dedicated CO₂ storage capacity could reach around 110 Mt CO₂/year by 2030, which is far less than the nearly 1 100 Mt CO₂/year that is captured and stored by 2030 in the NZE Scenario. In the other hand, hydrogen infrastructure is also crucial for the decarbonisation of the chemical sector. Staying on track with the NZE Scenario would require around 15 000 km of hydrogen pipelines (including new and repurposed pipes) by 2030.

Many governments have introduced policies addressing industrial emissions specifically – these are discussed further on the IEA’s tracking page for industry. Several major policies and commitments have also been made to specifically address pollution stemming from chemical sector products:  

• Many countries have been taking action to curb plastic pollution, with over 60 countries introducing bans and levies on plastic packaging and single-use items. Recent developments include a ban on many single-use plastic items in India from 2022, and a ban on several new items announced in Canada, also implemented in 2022. 
• In 2021, France laid out a roadmap for the decarbonisation of its chemical industry, including a new target of 31% lower emissions by 2030, and concrete steps for lowering emissions across the sector. The United Kingdom and Germany laid out similar roadmaps in 2015 and 2019 respectively.  
• Many countries are devoting considerable funds to improve plastic recycling technology and ensure that it is widely deployed, including Austria, Denmark, Finland, Japan and Sweden. 
• The European Union launched the Chemicals Strategy for Sustainability in 2020, as part of its European Green Deal. The strategy includes initiatives to protect against the hazards of chemical pollution, and to promote the decarbonisation of the industry. 
  

Many encouraging international developments relating to chemicals have recently been announced, including the following:

• In March 2022 the UN adopted a historic resolution to end plastic pollution, committing to create a legally binding international agreement by 2024. 
• In 2022, Japan announced two joint agreements – one with Australia and the other with Indonesia – committing to jointly support initiatives to accelerate the development and commercialisation of low- and zero-emission technologies, towards the transition to net zero emissions. These technologies include clean fuel ammonia, low-emission hydrogen and derivatives produced from renewable energy.
  

Many private-sector and non-governmental actors in the chemical industry are beginning to take important actions towards decarbonisation. The First Movers Coalition, which works across a number of emissions-intensive sectors, is developing an initiative on reducing chemical sector emissions, due to be launched at the Clean Energy Ministerial 2023, India, in July. Furthermore, global chemical companies, in collaboration with the World Economic Forum, are creating the Low-Carbon Emitting Technologies Initiative, an organisation devoted to decarbonising the chemical industry through the proliferation of clean technology, due to start by the end of 2023. Leading global chemical companies have also begun to set objectives under the “Science-based targets” initiative for the sector.