How does the chemical industry pursue a low-carbon transition

The petrochemical industry is an important pillar of China's national economy, with a long industrial chain and wide product coverage, which is closely related to national economic construction and People's Daily life. Limited by the objective resource endowment of "rich coal, less oil and lack of gas", the coal-based chemical industry is increasingly attracting the attention of the market, and the pressure to reduce carbon dioxide emissions is increasing. With the proposal of dual-carbon targets and the pressure of dual-control indicators, Chinese chemical enterprises have begun to explore energy conservation and emission reduction work, actively seek change, and turn challenges into opportunities. Boston Consulting Group (BCG) has conducted in-depth research on the status quo of carbon emissions in China's chemical industry, the opportunities and challenges faced by low-carbon transformation, and combined with the development practice of leading enterprises, summarized the elements of carbon neutral transformation of chemical enterprises, and focused on sharing several key emission reduction measures, in order to provide path guidance for the carbon neutral upgrading and transformation journey of chemical enterprises.

The chemical industry is under great pressure to reduce emissions

The carbon emission of China's chemical industry generally presents the characteristics of limited total amount but high intensity. In 2019, China's carbon dioxide emissions were nearly 10 billion tons, of which the chemical sector accounted for about 4%. Compared with the power and heat, metal smelting and other sectors, the carbon emissions per unit income of the chemical industry were higher than the average level of the national industrial sector, and the emission intensity was prominent, and it still faced greater pressure to reduce carbon emission and control.

The chemical industry contributes a lot to the economy of some regions, and the promotion of carbon reduction work needs to respect the law and step by step. Under the influence of objective resource endowment conditions, the chemical industry has a high degree of economic contribution to some resource-intensive provinces. In the actual promotion of dual-carbon work, it is necessary to balance the dual considerations of economic development and ecological environmental protection, if the across-the-board restriction of high energy consumption projects, it may cause negative impact on regional development.

Recent policies have been frequently introduced to guide the dual-carbon work of the chemical industry, and timely correct the "one-size-fits-all" and "movement-style" carbon reduction behavior. In September 2021, The State Council issued the "Opinions on the complete, accurate and Comprehensive Implementation of the New Development Concept to do a good job of carbon Peak carbon neutrality", which is the top-level design of the dual-carbon "1+N" policy system, which listed some industries such as petrochemical and chemical industries as the first batch of key areas for energy conservation and carbon reduction. In October and November 2021, the National Development and Reform Commission and other departments successively issued policies to define energy conservation and carbon reduction targets for high-energy-consuming industries, including chemical industries. In addition, in the face of excessive efforts in some areas to pursue "double control" of energy consumption, policies have also been introduced in a timely manner to correct and adjust.

Opportunities and challenges coexist

In terms of challenges, basic chemical products such as synthetic ammonia, oil refining and methanol have the largest carbon reduction space. From the product itself, the chemical products with large annual carbon dioxide emissions are mainly synthetic ammonia, oil refining, methanol, calcium carbide, coal to oil and ethylene and other basic chemical products, especially the carbon emission of synthetic ammonia, oil refining and methanol has accounted for 30% to 40% of the entire petrochemical industry. As these basic chemical products are important raw materials for downstream products, it is urgent to find green alternatives.

The chemical industry faces pressure from downstream application industries on carbon control and carbon reduction of raw materials. The BCG study, conducted in collaboration with the World Economic Forum, found that upstream emissions account for about 80% of total carbon emissions in end-customer-facing industries such as electronics, construction, automotive, food and consumer. Many enterprises in the terminal industry have also set emission reduction targets, forcing the chemical industry as a raw material input to reduce carbon and control carbon.

Under the dual-carbon background, advanced application scenarios have spawned the development demand for green chemical materials and low-carbon technologies. For example, the trend of low-carbon travel has promoted the replacement of traditional fuel vehicles by new energy vehicles, led to the exploration and research of a new generation of battery technology and related raw materials, and the demand for materials such as lithium carbonate, graphite anode, and polyolefin separator has increased. Taking green recycling packaging as an example, it has driven the industry's attempts and practices to replace traditional petroleum-based materials with natural materials and bio-based materials.

The industry pattern is facing optimization, the new capacity of high-energy projects is limited, and the advantages of chemical enterprises with leading carbon emission control capabilities will become more and more obvious. On the one hand, the approval of new projects with high energy consumption will be stricter, and the new space for traditional projects will be greatly compressed. On the other hand, leading enterprises with leading carbon emission control levels use advanced processes and technologies to continuously optimize energy consumption, and expand high-quality production capacity through reduction and replacement, and the concentration and influence of leading enterprises will continue to strengthen.

A path to carbon neutrality

Starting from the leading practice at home and abroad, BCG summarized the three major elements of carbon neutral upgrading and transformation of chemical enterprises, namely strategic vision, emission reduction grasp and support system, and conducted in-depth discussion on several key emission reduction grasp.

Improve the level of operation. Through management optimization, equipment upgrading, technical transformation and process optimization, as well as energy cascade utilization and other ways to improve the operational efficiency of existing businesses, promote energy conservation and emission reduction.

Optimize the energy mix. Replacing traditional coal power with renewable energy is another key to carbon reduction. At present, there are five ways for Chinese enterprises to purchase renewable energy power: green certificate, direct investment, investment and construction of distributed energy projects, direct power purchase and market trading of distributed power generation. Enterprises should choose the appropriate green power consumption path according to their own conditions.

Raw material substitution. For chemical companies, there are challenges and opportunities to replace fossil raw materials with eco-friendly green raw materials (such as bio-based materials, recyclable materials).

Development and application of emerging technologies. Many chemical companies have also actively invested in the research and application of advanced carbon reduction and control technologies, including carbon capture, utilization and storage (CCUS), electrolytic water hydrogen production, etc., but in general, the current technology is still immature and the utilization scale is still small.

Optimize product mix. Chemical enterprises should also analyze the development strategy of product structure optimization under the dual-carbon policy, and explore and evaluate the feasibility of the layout of green new products. Combine the market appeal of the product with the strategic matching degree of the enterprise, identify new product opportunities with high potential, and take green and low-carbon into important consideration.

Develop a circular economy. Circular economy is an important direction of low-carbon sustainable development. In the actual implementation process, it faces the key requirements of ensuring raw material supply, building cost competitiveness, adjusting operation mode, long-term persistence and establishing ecological cooperation system.

In addition, enterprises can also consider carbon trading and carbon sinks to achieve carbon control goals.

Looking forward to the future, with the trend of low-carbon development of the global industry, the carbon neutral transformation of chemical enterprises is not only the challenge of The Times they face, but also the opportunity to adjust their own business to improve competitiveness and achieve sustainable development. Enterprises should turn challenges into opportunities, and early layout is particularly critical. On the one hand, through energy efficiency improvement, process optimization, the use of clean energy and other ways to promote the existing business energy saving and carbon reduction. On the other hand, pay attention to and explore the development and commercialization of advanced carbon reduction technologies and models, and conditionally carry out small-scale pilot and deployment to prepare for low-carbon upgrading and transformation.