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Introduction

The European chemical industry has the ambition to become climate neutral by 2050 and is uniquely positioned at the heart of European manufacturing to help realise a climate-neutral society. With the iC2050 model, we add the “How� to the “What�.

The iC2050 model helps :

• identify various possible pathways to mitigate our impact on the climate
• us to better define the necessary conditions for allowing chemical production in the EU to become both climate-neutral and circular by 2050, for example, by quantifying the amount of natural resources and capital investments needed under each possible scenario

The chemical industry is often categorised as a “hard-to-abate� sector, referring to the inherent difficulty to reduce the sector’s GHG emissions. Within the “hard-to-abate� sectors, the chemical sector is particular due to carbon being at the very heart of its products and processes. Breaking down hydrocarbon molecule chains to create chemical building blocks is one of the founding principles of today’s chemistry. In a literal sense, the sector cannot decarbonise; rather, it must seek alternative sources of carbon and abate emissions associated with the management and transformation of that carbon.

Chemical companies are, therefore, �carbon managers� that rely on various sources of feedstock and energy, including fossil fuels, biomass, plastic waste, and even CO2 captured from industrial processes.

What is the iC2050 model?

iC2050 is a linear optimisation model which explores possible pathways towards a climate-neutral and circular chemical sector. The objective function is to minimise the Net Present Cost (NPC) of chemical production, while abiding by the greenhouse gas (GHG) abatement and circularity constraints.

Based on projections of future demand for chemical products up to 2050 and a description of the future operating conditions for the sector (defined by the user), the model computes the corresponding GHG abatement trajectory. Additionally, it equips users with insights to tackle different topics, such as:

• The mix of technologies that could enable the industry to attain climate-neutrality by 2050.
• The energy and raw material sources that would be utilised in chemical production.
• The contribution of circular practices, including recycling, utilisation of CO₂ as a raw material, and the employment of biomass.
• The potential impact of CCS and CCU.

The model covers the period from 2019 to 2050 with a yearly resolution. The year 2019 is based on historical data for demand and supply, while the model optimises the investment decisions for the following years. The model treats the EU27 countries as a single region, with an aggregated demand for chemical products.

The model focuses on 18 key chemical products covering building blocks, intermediates and polymers representing more than 60% of total industry GHG emissions and half of the final energy consumption of the sector. These chemicals are modelled in a detailed manner. The dynamics of their production pathways are fully represented and will serve as a proxy for the chemical industry’s abatement pathways. These products cover the main organic and inorganic building blocks, key commodity polymers and intermediates. They are critical to reach climate neutrality, as they represent the bulk of the industry’s emissions and energy use. The rest of the chemical industry (as defined under , excluding the pharmaceutical sector) is represented as an aggregate in the model.

The Carbon Managers report: exploring scenarios with iC2050

The Carbon Managers report was developed by °®ÓÎÏ·Öйú¹Ù·½ÍøÕ¾ in 2024 to showcase a series scenarios towards climate-neutrality in 2050 using the iC2050 model. The report provides a detailed explanation on the model and its underlying assumptions. A “Base Caseâ€� scenario has been developed to serve as a benchmark for further sensitivity analyses and scenario comparisons. The report later explores a set of alternative scenarios that helped us understanding the impact of different policies and variations on the enabling framework.

The “Base Case” Scenario

The “Base Caseâ€� scenario serves as a benchmark for our sensitivity analyses and examines how different framework conditions will affect the EU chemical sector’s transition to climate-neutrality. It  is a “snapshot representationâ€� of future operating conditions for the chemical sector, based on information that is publicly available today. It should however not be confused with a “Business as Usualâ€� scenario as it is already highly ambitious and implies a major transformation of the sector. It adopts, as much as possible, a neutral view and relies on existing EU regulation and adopted policies as the main source of information.

The chemical industry is often categorised as a “hard-to-abate� sector, referring to the inherent difficulty to reduce the sector’s GHG emissions. Within the “hard-to-abate� sectors, the chemical sector is particular due to carbon being at the very heart of its products and processes. Breaking down hydrocarbon molecule chains to create chemical building blocks is one of the founding principles of today’s chemistry. In a literal sense, the sector cannot decarbonise; rather, it must seek alternative sources of carbon and abate emissions associated with the management and transformation of that carbon.

Chemical companies are, therefore, “carbon managers� that rely on various sources of feedstock and energy, including fossil fuels, biomass, plastic waste, and even CO2 captured from industrial processes.

The European chemical industry has the ambition to become climate neutral by 2050 and is uniquely positioned at the heart of European manufacturing to help realise a climate-neutral society. With the iC2050 model, we add the “How” to the “What”. The iC2050 model helps identify various possible pathways to mitigate our impact on the climate. It also helps us to better define the necessary conditions for allowing chemical production in the EU to become both climate-neutral and circular by 2050, for example, by quantifying the amount of natural resources and capital investments needed under each possible scenario.

Key results of the “Base Case” scenario

Direct Scope 1, which refer to process emissions and on-site combustion emissions related to plant operations, steam generation and utilities consumption, continuously decrease up to 2050 due to switching to alternative production technologies, low-emission heat generation, and the deployment of carbon capture at the process level.

Scope 2 emissions, which refer to emissions from electricity generation (whether produced on-site or purchased from third parties), decrease up to 2040, after which they reach zero, based on the assumption that the power sector would become climate neutral after year. Although processes and heat supply become more electrified, scope 2 emissions decrease with the lowering GHG intensity of the electricity supply.

Scope 3 upstream and end-of-life emissions, which refer to indirect upstream and downstream emissions, decrease mainly after 2040 due to the reduction in upstream emissions and the increase in mechanical and chemical recycling which reduce the demand for virgin raw materials and help reduce end-of-life emissions from incineration.

To meet the 2040 climate target on direct emissions (from on-site processes and combustion), most investments take place between 2030 and 2040. Over the entire period, the largest amount of capital investments (149 Bio�) is allocated to the production of alternative feedstock within the perimeter of the chemical industry. Investments are made in biomass gasification for the production of biomethane as it is used as both a source of feedstock and fuel for heat generation. Chemical recycling, in particular plastic waste pyrolysis, also begins early in the period, as it is one of the main instruments available in the model to abate end-of-life emissions for polymers. After 2030, these investments nearly triple compared to the first decade.

Carbon capture solutions which begin receiving financing around the mid-2020s, also represent a significant share of investments (19.5 Bio�), particularly after 2030.

The deployment of abatement solutions for the 18 chemicals outlined in the Carbon Managers report (pages 39-40) represent altogether more than 200 Bio�. A share of these investments, which are reported under each individual process are directed to electric and biomass boilers. Altogether, these investments represent 6.5 Bio� over the assessed time period.

In 2019, the majority of the feedstock consumption is fossil-based (95% of total feedstock mass consumed), with the biggest share related to fossil naphtha going to steam crackers, and reformate gasoline for the production of aromatics.

By 2050, the share of bio-based feedstock increases above 40% of total consumption, while the share of fossil feedstock decreases to around 35%. Feedstock from chemical recycling of polymers emerges as one of the technologies to abate end-of-life emissions and as an alternative source of feedstock. It represents 14.6% of the total feedstock consumption in 2050.

The share of electricity from total final energy consumption increases gradually up to 2050, where it reaches the upper limit of the availability constraint at 300 TWh. The increase in electricity consumption is due to the deployment of electric boilers as a source of low-emission heat, and the deployment of alternative production technologies like (partially-)electrified cracking that requires electricity as an energy source. Direct electricity consumption for hydrogen and chlorine production also increases over the entire period.

The shift towards electrification of processes and heat generation, along with the deployment of alternative production technologies, results in an increase in energy efficiency. The final energy consumption per unit of production decreased by 17% in 2050 compared to 2019. Energy consumed as feedstock per unit of production decreased by 16% in 2050 compared to 2019. This is due to the switch to more efficient alternative production processes, and the use of recycled materials that replace the raw material consumption.

The deployment of solutions for reaching the climate and circularity objectives result in a net present cost of �2.18 Trillion, divided between capital and operational expenses.

The impact of policies

In the The Carbon Managers [pages 107-140], we also consider the impact of policies on the abatement pathway of the chemical sector. The emission reduction target in 2040 has been varied to assess the impact of a higher or lower GHG reduction target by 2040. A lower direct emission reduction of 81% compared to 1990 has been explored, followed by a higher reduction of 94%.

The impact of setting higher alternative feedstock targets was then assessed through the Feedstock Target scenario. In this scenario, an alternative feedstock target of 83% has been added in 2050. This scenario was initially infeasible under the same assumptions as the Base Case scenario. The constraints on enabling conditions were therefore released to enable the model to find a feasible solution.

Finally, an assessment of the impact of renewable energy targets for hydrogen was done. The Renewable Energy Directive (RED) has set targets for Renewable Fuels of Non-Biological Origin (RFNBOs) mandating a minimum share of hydrogen from RFNBOs in the industry (42% in 2030 and 60% in 2035). The electricity availability was increased from 300TWh to 1000TWh per year to enable the model to source the necessity electricity for electrolysis.

The underlying assumptions and results can be seen in detail in The Carbon Managers report.

The full assumptions and results of the “What if?� analyses can be found in The Carbon Managers report.