Climate Change Chemical Companies Make Slow Progress on CO2 Reduction

Editor: MA Alexander Stark

A new report ‘Catalyst for change’ analyses 22 of the largest global chemical companies with a total market capitalization of $ 626 billion and responsible for a quarter of all emissions of the sector at 276 million metric tonnes of CO2 emissions per year.

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The chemical sector is a large energy user, responsible for an eighth of global industrial CO2 emissions.
The chemical sector is a large energy user, responsible for an eighth of global industrial CO2 emissions.
(Source: Pixabay CC0)

London/UK — The report conducted by CDP reveals that the chemicals sector is making progress on climate risk but that rapid process innovations will be required in order for them to have any chance of aligning with the below 2-degree goal set out by the Paris agreement.

The sector is a large energy user, responsible for an eighth of global industrial CO2 emissions and plays a key role in the world economy, with nearly all manufactured products (95 %) relying on chemicals. Despite the industry’s ability to innovate on low carbon, it will struggle to ever fully decarbonise if it doesn’t make rapid and significant changes to its own highly polluting processes, CDP claims.

The report from CDP shows that the sector is still providing solutions on climate change on the product side, and is profiting from the low carbon transition, with around 20 % of revenues for the group coming from these products, representing close to $ 83 billion in revenues. Progress is also being made in their emissions and energy efficiency, with improvements of 2-5 % being made year-on-year and this is directly impacting the bottom line.

The report also highlights other potential risks for the sector:

Uneven regulatory risks: European chemical companies such as Akzo Nobel and BASF face tougher regulation from national carbon emission cuts and potentially higher capital expenditure as a result.

Upcoming regulation in China: Chinese companies make up 40 % of global chemical sales but are not disclosing environmental data. The Chinese Emissions Trading System launching at the end of 2017 could disrupt the wider industry as more Chinese based companies become regulated.

Plastic Packaging: A key output of the chemicals industry is plastic packaging, accounting for over a quarter of global plastics usage.

Paul Simpson, CEO of CDP, said: “As both a large energy user itself and a crucial part of other industrial supply chains the chemicals industry is an important, but often overlooked, sector when it comes to environmental impact. Today’s analysis shows it’s moving in the right direction across several climate metrics with encouraging signs on annual emissions and R&D, but it needs to go further and faster to invest in the technologies that will deliver efficiency and emissions improvements."

The CDP report assesses companies on four key metrics aligned with the recommendations from Mark Carney’s Task Force on Climate-related Financial Disclosures (TCFD).

According to the analysts, this year Akzo Nobel stands out in the industry through its commitment to decarbonization initiatives and as one of only two of the assessed companies with a science-based target.

Asian Paints, Covestro, Ems-Chemie Holding, Petronas Chemicals and Nippon Paint did not respond to CDP’s 2016 climate change questionnaire and are therefore not included in this report.

You can download the executive summary of the report below.

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