Unaddressed non-energy use in the chemical industry can undermine fossil fuels phase-out

The global transition away from fossil fuels faces a significant challenge: approximately 13% (around 30 EJ) of global fossil fuel production is used for non-combustion purposes, with two-thirds serving as feedstock for primary chemicals production. This non-energy use contributes significantly to greenhouse gas emissions (approximately 1 GtCO2/year), making the chemical sector both 'hard-to-abate' and 'hard-to-defossilize'. The 2023 COP28 Global Stocktake notably omits this non-energy use, highlighting a gap in current global climate policy. This study investigates the intricate interplay between fossil fuel phase-out in energy systems and the continued use of fossil fuels as feedstock in the chemical industry. The co-production of fuels and feedstock in petroleum refineries creates interdependent material and energy system dynamics, making a straightforward transition away from fossil fuels challenging. The decreasing demand for fossil fuels in energy systems will inevitably impact materials systems, particularly as fuel-oriented refineries, which currently co-produce fuels and feedstocks, are expected to remain operational for an extended period due to their long lifespan and capital-intensive nature. Simultaneously, the demand for materials is projected to grow, driven partly by the energy transition itself (e.g., materials for renewable energy technologies). This study aims to understand how the integration of a growing chemical sector with the oil refining sector affects the fossil fuel phase-out and decarbonization of chemicals, considering the competition for resources like CO2, hydrogen, and biomass among various mitigation measures. The research hypothesis is that the chemical sector, despite its challenges, can strategically contribute to deep decarbonization, both sectorally and systemically. An integrated assessment approach is crucial to analyze this complex interaction, addressing questions concerning the supply of materials from refineries, the availability of alternative feedstocks, and the final use and carbon storage capacity of biomaterials.

Existing literature extensively addresses strategies for reducing emissions in the primary chemicals sector. These strategies include fuel switching for process heat, feedstock substitution, carbon capture, utilization, and storage (CCUS), and circular (bio)economy approaches. However, most studies analyze these strategies individually or in combination, overlooking the crucial co-production of energy and feedstocks in petroleum refineries and the broader implications for energy use and emissions pathways across sectors. This study addresses this gap by providing a global, integrated assessment perspective, unlike IPCC AR6 scenarios which lack detailed assessments of fossil fuels as feedstocks for primary chemicals while evaluating refinery activity and co-production. Questions regarding the supply of materials co-produced in refineries with decreasing utilization factors, the scalability and speed of alternative feedstock availability, and the final use and biogenic carbon storage capacity of biomaterials remain largely unaddressed from a global integrated assessment perspective.

This study employs the Computable Framework for Energy and the Environment (COFFEE) model, a global integrated assessment model (IAM) based on the MESSAGE framework. COFFEE uniquely incorporates detailed representations of various oil qualities, refinery typologies, and primary chemicals, allowing for a more comprehensive analysis than many other IAMs. The model considers a range of scenarios: Implemented National Policies (NPi), a 1.5°C scenario consistent with limiting global warming to 1.5°C above pre-industrial levels by 2100, and several sensitivity analyses. These sensitivity analyses include scenarios with restrictions on: (i) global carbon capture and storage (gCCS) deployment, (ii) global biomass availability (PBIO), (iii) biogenic carbon storage in unrecycled/unrecovered biomaterials (MNEToff), and (iv) a combination of all these restrictions ('all'). The scenarios explore supply-side mitigation measures, examining technological pathways, carbon feedstocks, energy use, and direct emissions for the primary chemicals industry. The model considers various technologies for producing high-value chemicals (HVCs), ammonia, and methanol, using fossil-based, bio-based, and CCU-based feedstocks. The model’s oil and gas sector representation is particularly refined, including oil qualities, crude trade, and various refinery typologies (Existing Topping, Cracking, Hycon, New Cracking, and Hycon options). The methodology accounts for the co-production of fuels and feedstocks in refineries and the flexibility of using gasoline as a substitute for naphtha in HVC production. Techno-economic assumptions for various technologies and feedstocks are detailed in supplementary materials. Demand patterns for primary chemicals are assumed to remain similar to historical trends, with a focus on 'drop-in' substitution alternatives. The model's output includes pathways for global CO2 emissions, fossil fuel use, carbon feedstock sources, technology pathways for HVCs, ammonia and methanol, oil production and refinery utilization factors, and direct CO2 emissions from the chemical sector. The regional breakdown of these aspects is also provided in supplementary materials.

The study's key findings demonstrate the critical role of alternative carbon feedstocks in achieving climate goals and phasing out fossil fuels in the chemical sector. Scenarios with stricter restrictions on biomass supply, CCS deployment, and biogenic carbon storage require earlier and more extensive climate action. These restricted scenarios show a need for an additional reduction of at least 6 GtCO2 per year by 2030 compared to the 1.5°C scenario. The competition between mitigation and feedstock substitution is evident, with restrictions on bio-based feedstocks and CCS leading to greater reliance on fossil fuels for primary chemicals production. However, the study also finds that the chemical sector can achieve net removal levels as low as -1 GtCO2/year by 2050 under favorable conditions. By 2050, in all 1.5°C scenarios, fossil fuel use is significantly reduced compared to 2020 levels: coal use by 95–99%, gas by 19–47%, and oil by 40–60%. However, oil use shows less potential for reduction by 2100 (22–42%) compared to gas (22–87%) and coal (82–97%). This persistence of oil use is linked to the substitution of gasoline for naphtha and insufficient expansion of alternative feedstocks to meet growing primary chemicals demand. The refining sector shrinks in capacity, with utilization factors dropping initially and then increasing as new, more complex and petrochemically integrated refineries are built. Mitigation scenarios show significant increases in liquid and solid biomass use in the chemical sector. Fossil fuel use as feedstock can be reduced by up to 62% by 2050 in the gCCS scenario, but this drops to 28% in the 'all' scenario (with all restrictions). Steam cracking remains the leading technology for HVC production, but refinery-sourced HVCs decline due to the shrinking refining sector. On-purpose routes based on methanol and ethanol increase in importance. Biomass gasification with CCS is favored for ammonia production (BECCS), while CCU plays a key role in methanol production. The chemical sector can achieve net CO2 emission reductions of -0.73 GtCO2/year in the 1.5°C scenario and -1 GtCO2/year in the gCCS scenario by 2050, primarily due to BECCS and biogenic carbon storage. However, when all constraints are active, the sector only reaches net-negative emissions by 2070.

The study's findings highlight that the primary chemicals sector, while 'hard-to-abate' and 'hard-to-defossilize', can contribute significantly to systemic decarbonization if sufficient alternative feedstocks are available and biogenic carbon storage in durable materials is properly accounted for. Ambitious feedstock substitution can reduce fossil fuel dependence, but constraints on carbon capture and biomass availability limit the potential for this substitution. The transition away from fossil fuels requires significant restructuring within the primary chemicals sector, including a shift towards on-purpose routes for HVC production and the increased utilization of biomass gasification with CCS for ammonia and CCU for methanol production. The study’s findings emphasize the interconnectedness of energy and materials systems and the need for integrated policy frameworks that consider potential synergies and trade-offs. The results highlight the risk of continued fossil fuel reliance if non-energy use of fossil fuels is not adequately addressed in climate policies. Future research should address demand-side measures, chemical recycling, and the potential of innovative technologies such as Crude-Oil-to-Chemicals (COTC) processes.

This research demonstrates the critical importance of addressing non-energy fossil fuel use in the chemical industry for achieving ambitious climate targets. While the sector presents challenges, it also offers opportunities for significant decarbonization through feedstock substitution and carbon capture technologies, contingent on sufficient availability of alternative feedstocks and consideration of biogenic carbon storage. The study underscores the need for integrated energy and materials policies that account for systems interdependencies and avoid unintended consequences. Future work should explore demand-side strategies, chemical recycling, and the development of new technologies to further reduce emissions in the chemical industry.

The study focuses on supply-side mitigation measures and assumes unchanged demand patterns for primary chemicals. Demand-side measures, final disposal of materials, and the complexities of specific chemical products are not explicitly considered. The model employs a limited set of technologies, and the long-term impact of technologies such as COTC is not fully explored. The assumption on biogenic carbon storage is based on current regional rates of recycling, landfill, and incineration, which could change significantly in the future. While acknowledging these limitations, the study provides valuable insights into the crucial interplay between energy and material systems in achieving climate goals.