1. The chemical sector in the global decarbonization picture and its arising opportunities

The chemical sector is one of the most important: globally, the industry contributes to about 95% of manufactured products, and output is projected to double by 2050 to address growing economies and populations[1],[2]. Unsurprisingly, the sector is one of the largest contributors to global greenhouse gas emissions, accounting for 30% of total industrial energy use, and is the third largest industry contributor to direct CO₂ emissions (with 14%).[3]

Despite this, there are several emerging trends in the GCC which indicate that the region is pivoting toward a lower emissions trajectory. Renewable energy investment, carbon capture, blue and green hydrogen and the influence of circular economy are just some of the trends that promise great opportunity for the chemical industry in the region.

The chemical sector can start to capitalize on the growing trend of renewable energy on national level across the GCC: the UAE and Saudi Arabia have made significant commitments and investments into clean energy sources. Moreover, in the first half of 2021, approximately USD 2.8 billion of renewable energy project contracts were signed in the MENA region [1],[2],[3].

Carbon Capture, Utilization and Storage (CCUS) prospects also provide great promise to the chemical sector, as they could help cut down global emissions by 38% by 2060[1]. Given the importance of such technology for high-emissions industries, several Research and Development (R&D) projects have started taking shape in the region. CCUS has potential of becoming an important lever to decarbonization and a tool to diversifying the chemical sector’s income streams.

Investments in blue and green hydrogen are, in addition, showing promise for the chemical industry. In the GCC, investment in this area is growing rapidly with the UAE, Kuwait and Oman having national hydrogen strategies and pilot projects, and Saudi Arabia aiming for generating 4 MT per annum by 2035.[2],[3] The chemical industry could capitalize on this growth by using hydrogen for industrial heating or as a low-carbon feedstock.

Finally, circular economy and its associated design principles promote waste reduction and circular design, and waste management and recycling are seeing support and investment from countries like Saudi Arabia and the UAE.[4]  Tapping into a circular economy mindset and utilizing waste from other industries can provide the chemical industry with alternative feedstocks, lower-carbon products, and synthetic fuels.

2. Building blocks for the chemical industry in the GCC

Understanding the chemical industry’s current emissions trajectory and the need for change toward lower-carbon ways of working presents both a challenge and an opportunity for the sector. The current trend toward lower-emission operations in the GCC is an opportunity for the sector to update its approach and become a leading force in the region and globally.

To start this journey, there are five suggested building blocks that can initiate the first steps on a decarbonization journey. While complete transformation to net-zero will take both an operational and cultural transformation, and many approaches to addressing decarbonization in this diverse industry exist, these foundational steps typically establish a good basis from which to act.

Firstly, companies need to understand their own GHG emissions sources, which includes scope 3 emissions. Such a baselining exercise will help identify emissions hotspots and form short-term priorities and longer-term goals.

Secondly, science-based targets should be set in relation to reducing emissions. Understanding emission reduction potential and committing to a science-based target (SBT) will ensure that a company is aligned with the global 1.5°C target, and that climate risks are mitigated. Globally, of the 48 chemical companies committed to SBTs that are approved by the Science-based Targets Initiative (SBTi), 32 have targets that are aligned with a 1.5°C scenario. At this moment no companies in the GCC region have publicly committed to an SBT[1]. This presents an opportunity for commitments that demonstrate global leadership.

After understanding the emissions picture and having committed to SBTs, developing a net-zero roadmap is the next step on a decarbonization journey. A comprehensive net-zero roadmap will help to focus efforts on major identified decarbonization levers with carbon offset measures for the short, medium and long term. It will also help to identify low hanging fruits that can be implemented, and the tasks that will require more time and investment.

Developing a net-zero finance mobilization plan is the next important building block. Preparing to finance the net-zero transition is essential to actualize decarbonization targets, and identifying budget scenarios for the short, medium and long term should be considered to ensure sufficient resourcing of the journey.

Finally, it is important that organizations plan for an orchestrated approach and assess their in-house capabilities and plan for change, as a successful implementation will require the whole organization’s involvement. The first four steps can only be implemented effectively and sustainably with skilled personnel on board, capability development and change management. Assessing internal capabilities and plugging skills and knowledge gaps is essential to enabling action.

True net-zero transformation cannot be achieved in isolation without the involvement of external stakeholders such as policy makers, suppliers, customers downstream and financial institutes. Collaboration will be a key lever for success.

3. Conclusion

There is growing realization in the industry, particularly in the GCC, that an ambitious step-up is needed in order to address climate change. While initial changes have been taking place, more scale is required to achieve the required impact.

If the industry is to address net zero head on, commit to SBTs and collaborate with internal and external stakeholders, it can start to realize new opportunities and pivot toward new ways of working that diversify income, mitigate risks, and pioneer change.

Note: this article represents summarized excerpts from a white paper, ‘Net zero opportunities for the Chemicals industry’, developed in collaboration between dss⁺ and the Gulf Petrochemicals and Chemicals Association (GPCA), that will be available in March 2023.

References:

[1] Planet Positive Chemicals, Pathways for the chemical industry to enable a sustainable global economy, Center for Global Commons, September 2022 [Accessed at: https://cgc.ifi.u-tokyo.ac.jp/research/ chemistry-industry/planet-positive-chemicals.pdf]

[2] Towards a Net-Zero Chemical Industry: A Global Policy Landscape for Low-Carbon Emitting technologies, May 2022 [Accessed at: https://www3.weforum.org/docs/WEF_Towards_a_Net_Zero_Chemical_Industry_2022.pdf]

[3] Ibid.

[4] MENA Region Awards $2.8 Billion RE Projects In First Half Of 2021, Solar Quarter [Accessed at: https://solarquarter.com/2022/03/02/mena-region-awards-2-8-billion-re-projects-in-first-half-of-2021-report/]

[5] The Global Chemical Industry: Catalyzing Growth and Addressing Our World’s Sustainability Challenges, International Council of Chemical Associations (ICCA) [Accessed at: https://sdg.iisd.org/news/icca-reporthighlights-

chemical-industrys-contribution-to-global-economy/]

[6] Planet Positive Chemicals, Pathways for the chemical industry to enable a sustainable global economy, Center for Global Commons, September 2022 [Accessed at: https://cgc.ifi.u-tokyo.ac.jp/research/ chemistry-industry/planet-positive-chemicals.pdf]

[7] Carbon Neutral Energy Intensive Industries, technology Brief, UNECE [Accessed at: https://unece.org/sites/default/files/2022-11/Industry%20brief_EN_2.pdf]

[8] Transforming Industry through CCUS, IEA [Accessed at: https://www.iea.org/reports/transforming-industry-through-ccus]

[9] The Gulf looks to carbon capture and hydrogen to drive the energy transition, Oxford Business Group [Accessed at: https://oxfordbusinessgroup.com/news/gulf-looks-carbon-capture-and-hydrogen-drive-energy-transition]

[10] Hydrogen in the GCC, Netherlands Enterprise Agency [Accessed at: https://www.rvo.nl/sites/default/files/2020/12/Hydrogen%20in%20the%20GCC.pdf]

[11] Towards a Net-Zero Chemical Industry: A Global Policy Landscape for Low-Carbon Emitting technologies, May 2022 [Accessed at: https://www3.weforum.org/docs/WEF_Towards_a_Net_Zero_Chemical_Industry_2022.pdf]

[12] Barriers, Challenges, and Opportunities for Chemical Companies to Set Science-Based Targets, 2020 [Accessed at: https://sciencebasedtargets.org/resources/files/SBTi-Chemicals-Scoping-Document-12.2020.pdf]