Climate mitigation will come at a cost for chemical firms

In a Net Zero climate mitigation scenario, we find that $570bn will be wiped off the global chemicals market by 2050, relative to a stated policy baseline. This is equivalent to 8% of total production.

What you will learn:

• Our new Industry Climate Service (ICS) assesses the implications of climate change and associated mitigation policies at the industry level. In climate mitigation scenarios, we find that chemical production is amongst the most negatively impacted sectors within manufacturing.
• As the price of carbon intensive inputs to production increases, sectoral competitiveness is disproportionately impacted, both domestically and internationally. This is due to firms’ reliance on carbon intensive inputs, which comes from two pivotal sources. Firstly, production is often energy intensive, with controlled high temperatures crucial to production of many chemicals. Secondly, raw materials used as feedstock in the sector are often oil or gas.
• Comparisons between countries’ chemical sectors are largely determined by the relative fossil fuel intensity of the energy mix. In North America, chemicals production sits nearly 14% below baseline by 2050 in our Net Zero scenario. The hit to output in Europe is less severe at 7%.