Companies across the entire UK economy recognise the opportunities for green growth. More UK-headquartered firms are aligned with the UN’s Race to Zero campaign than any other nation, including more than two thirds of the FTSE100. And they’re putting their money where their mouths are.
But all firms need to have some sense of the return they will get. And with high energy costs and inflation, there are more worries than ever about making their investments count.
It’s why confidence in government’s plans, commitments and delivery is more important than ever before – something we set out in our latest Going for Green report.
That’s especially true for those in the key foundation industry of chemicals. At least 96% of all manufactured goods contain chemical industry content, which puts this “industry of industries” right at the heart of both the challenges and the opportunities presented by the UK’s ambitions to reach net zero. If the industry can transition successfully, the impact they can make throughout the supply chain is huge.
Reducing their reliance on fossil fuels is complicated. It’ll take investment in a number of new technologies for them to piece together the solutions. And these will all need a serious level of consistency, commitment and collaboration to scale.
The chemical industry is committed to carbon reduction.
In October 2021, members of the Chemical Industries Association (CIA) came together in stating their collective ambition to halve CO2 emissions by 2034 and further reduce them by 90% by 2050. They highlighted their direct emissions could be reduced by as much as 80% by sufficient access to hydrogen, carbon capture and storage (CCUS) and clean electricity. The rest requires progress on energy efficiency, circularity (both chemical and mechanical recycling) and adapting to using other feedstocks (raw materials) besides fossil fuels.
At the time, Steve Elliot, Chief Executive of the Association said the fight against climate change could not be won without its members’ products and solutions. “But we can do even more and do it quicker for the country if the government were to further increase its level of support and deliver a more business-friendly policy environment.”
The problem is that the same argument could be applied now, nearly two years on, as chemical companies still don’t feel they have the certainty around government policy or the confidence around which technologies to invest in.
The effect of that uncertainty isn’t just amplified by current economic conditions – it’s made harder still against a backdrop of increasing international competition. The UK has taken its foot off the accelerator in making progress against its green ambitions, while other countries – most notably the US – are doing more to directly address the challenges in the supply chain, incentivising change and encouraging inward investment.
Dow’s Head of Government Affairs for the UK & Ireland James Clark refers to the opportunity for government to connect decarbonisation and inward investment much more clearly: “We've got a world-leading silicones factory in Barry, south Wales, so we’re really pleased to see chemicals included in the government’s advanced manufacturing agenda. But there needs to be a government strategy and an appropriate level of support – both in reducing uncompetitive energy and regulatory costs and providing more flexible industrial decarbonisation infrastructure grants – to help us make the changes that we all want to achieve.
“Having a level of certainty of funding will better position the UK internationally. Decarbonising the chemical industry has huge scope 3 reduction benefits and will back highly skilled jobs in the UK too.”
Because it’s not just about the energy they use, but also what they produce.
According to the CIA, solutions generated by the industry are used in households, workplaces, and in everyday life which save at least two tonnes of greenhouse gases for every tonne the sector emits. And innovation within the chemical industry will underpin how all sectors can work together to reach net zero.
Clark points to Dow materials that go into energy infrastructure (including solar panels, wind turbines and underwater cables) and contribute to energy savings in transportation and in buildings (from EV batteries and the foam that reduces the need to carry spare tyres to window sealants and insulation).
The company has also partnered with Mura Technologies, which is launching the world’s first commercial scale plastics chemical recycling plant in Teesside later this year. Phase one will supply Dow with 20,000 tonnes per year of a 100% recycled feedstock – increasing to 80,000 tonnes “dependent on a supportive policy environment”.
Supportive policy can build on innovation already happening.
With the UK aiming to eliminate all 'avoidable' plastic waste by 2042, working towards only recyclable, reusable or compostable plastic packaging being placed on the market by 2025, chemical recycling clearly has an important role to play. The UK government already supports it. The UKRI has put £60m against a five-year Smart Sustainable Plastic Packaging programme. And the recently introduced plastics packaging tax is broadly seen as a step in the right direction – and chemical recycling is in scope.
But what happens next could determine the speed of progress. The government is currently consulting on the use of a “mass balance approach”. It’s a way of calculating and verifying the amount of recycled chemicals and bio-based feedstock used in production of things like plastics, coatings and solvents and allocated to the end product – like the chain of custody model you see for fairtrade products. It means plastic waste unsuitable for mechanical recycling can be used as part of existing processes and in existing plants to make more sustainable products – reducing the use of fossil fuels.
“With mass balance our industry can move faster towards a net zero transition. Without it, the transition risks being compromised,” explains Daphne Vlastari, Head of Public Affairs, UK & Ireland, at BASF. “If we need entirely new standalone infrastructure for producing plastics solely from recycled waste, this would take years to construct, with billions in cost and a high climate footprint.”
The EU are due to publish their own mass balance proposals in early 2024 – adding another dynamic to the increasing international competition. “And given its potential for sustainable chemicals manufacturing more broadly, the importance of clear government signals and policy to help align value chain actors and unlock investment cannot be underestimated,” continues Vlastari.
Collaboration and vision will drive the change.
In the meantime, BASF has joined forces with SCI (Society of Chemical Industry) and 13 other organisations, including Unilever, Reckitt and the University of Sheffield on a carbon utilisation initiative to demonstrate how industrial waste gases can be used as feedstock for making chemicals, converting them into sustainable materials for consumer products. Called Flue2Chem, the two-year programme is backed by a £2.68m grant from Innovate UK. If successful, it could help the UK cut 15–20 million tonnes of carbon dioxide emissions a year.
But Vlastari adds that more is needed to showcase the government’s support for the industry’s net zero transition. With the UK government expected to publish its first Chemicals Strategy in decades by end of 2023, there is also a need to develop a vision for the future of the sector.
This needs to bring together a plan for capitalising on the UK’s R&D leadership including in areas such as carbon utilisation and advanced manufacturing; supporting the deployment of innovative technologies such as chemical recycling; as well as addressing other barriers to investment such as the availability of affordable and green energy. To support a more resilient economy, as well as deliver on green growth opportunities.
Whether it’s through product or process innovation, chemicals companies are committing to change. You can find more examples of what other companies are doing on the CIA website. And they all show new ways of working, new business models and new types of collaboration.
But they also highlight the scale of the heavy lifting required of the industry. If it’s forgotten in policy making, and doesn’t get the support and clarity it needs, it won’t be able to make the changes quickly enough to meet climate targets.
And if the chemicals sector can’t, the UK can’t – and the country will fail to truly capitalise on the opportunities that green growth brings.
Find out more about how the government can help give firms like these the confidence they need in our Going for Green report.
Read more about Dow's progress.