Decarbonizing Basic Chemicals Production in North America, Europe, Middle East, and China: a Scenario Modeling Study

The chemicals industry accounts for about 5% of global
greenhouse
gas emissions today and is among the most difficult industries to
abate. We model decarbonization pathways for the most energy-intensive
segment of the industry, the production of basic chemicals: olefins,
aromatics, methanol, ammonia, and chlor-alkali. Unlike most prior
pathways studies, we apply a scenario-analysis approach that recognizes
the central role of corporate investment decision making for capital-intensive
industries, under highly uncertain long-term future investment environments.
We vary the average pace of decarbonization capital allocation under
plausible alternative future world contexts and construct least-cost
decarbonization timelines by modeling abatement projects individually
across more than 2,600 production facilities located in four major
producing regions. The timeline for deeply decarbonizing production
varies by chemical and region and depends importantly on the investment
environment context. In a best-of-all environment scenario, to deeply
decarbonize production, annual average capital spending for abatement
for the next two to three decades will need to be greater than (and
in addition to) historical “business-as-usual” capital
spending, and cumulative investment in abatement projects would exceed
$1 trillion. In futures where key drivers constrain investment appetites,
timelines for decarbonizing the industry extend well into the second
half of the century.