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Climate change is leading many oil companies to continue to
decarbonize their energy portfolios as projections indicate that
the 2 degree C for global warming as laid out in the Paris Accord
cannot be achieved. The resulting "Energy Transition" results in
further exploration of gas and renewables as growth sectors in
energy.
Carbon tracking for the full energy value chain is being
demanded. Today, financial institutions are advancing to require
oil companies to reveal and track their carbon footprints, chemical
companies' requirements for carbon tracking are expected to follow
in the near future.
Energy companies' efforts to shape a positive discussion around
actions that reflect climate change transitions have never been
stronger. Unprecedented amounts of operational emissions data,
scenario-based stress testing evidence and aggressive action
targets have been disclosed. Yet the industry is not aligned on
what to disclose, how to measure, or whether cleaner energy
diversification would add or destroy value. In the meantime,
countries are increasing regulatory focus on oil, gas and power
sector-specific measures that will cause even more change in the
future.
Increasing climate change concerns are expected to drive a need
for a greater understanding of greenhouse gases (GHG) emissions for
crude oil and chemicals through their value chain. The need to
understand unmanaged plastics waste threatens the very "license to
operate" for the chemical industry. Significant development is
underway in all aspects of plastics waste management, including
chemical process recycling technology development, further
refinement of mechanical process recycling, reclamation and
logistics systems development, improving circularity capability of
single use plastics, etc.
The petrochemical industry remains focused on future risks and
opportunities as the plastics value chain transitions from a linear
to circular infrastructure.
Disruptive forces could potentially reshape the consumption of
plastics and in turn disrupt chemical industries and Large Volume
plastics are at the nexus of these changes. The petrochemical
industry has unique challenges in the transition to circularity.
The integrated processes of petchems assets are among the largest
and most complicated in the world; this illustrates the advances in
the linear model and challenges of changing to a model of
circularity.
How will the chemical industry transition from a linear
to circular value chain?
Sustainability initiatives in chemicals extends from the need to
address end of life management of plastics to multiple examples of
the benefits of chemicals, including food usage, clean water, and
clean energy.
The transition from a linear (make, use, dispose) to circular
economy in which resources are used as long as possible while
extracting the maximum value during use and, at the end of each
service life, recovered to generate new materials and products will
require significant change at an accelerated pace if success is to
be achieved.
Many questions remain. What will be the pace of transformation?
What and when will inflection points occur? What disruptors will
result? How will the industry structure evolve? How might new
entrants displace incumbents and what positions in the value chain
are the most vulnerable? How will regulations and stakeholder
policies evolve? What are the resulting implications to economic
models? What insights and actions are needed to address climate
neutral initiatives? How will consumer system behavior change? How
will stakeholders evolve and how will it impact economies,
geopolitics, and efforts to address climate change and
pollution?
Chemical recycling technologies are a potential game changer for
the plastics industry. However, technology and scale to commercial
viability needs to accelerate much faster than current momentum.
Support for vast infrastructure improvements, including collection,
sorting and recycling requires aggressive government and financial
community support on a global scale.
In 2020 IHS Markit will prepare a special study, "Changing
Course: Plastics, Carbon and the Transition to Circularity",
which will provide a comprehensive understanding of the current
regulatory environment, stakeholder policies and industry group/NGO
initiatives and how these activities will develop under different
scenarios for society's transition to circularity. The study will
also provide an understanding how alternative technologies for
recycling and recovery, both mechanical and chemical, will develop
and fit within an overall macro infrastructure / reverse supply
chain designed for circularity. Implications of carbon valuation,
and how it might impact future capacity investment decisions will
be included along with an assessment of risk from demand loss via
demand deselection and replacement of primary supply with
post-consumer/ commercial resin and the implications for the
petrochemical chain.
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Posted 30 March 2020 by Dewey Johnson, Vice President Global Base Chemicals Insight, IHS Markit and
Robin Waters, Director, Plastics Planning and Analysis, IHS Markit
