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Chemicals, sustainability and the new industrial revolution

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By John Richardson on 16-May-2024

By John Richardson

BLOOD BAGS, syringes, disposable hospital sheets, gowns and medicine packaging. Modern-day medicine, which has greatly extended the quantity and quality of our lives, would be impossible without the plastics industry.

Computers, smartphones, washing machines, refrigerators and automobiles cannot be manufactured without plastics and chemicals.

Think of women in the developing world who still have to wash clothes by hand (this is, sadly, how some patriarchal societies work). Imagine the time and energy they would save if their families can afford their first washing machine, enabling girls and women to spend more time at school and freeing them up to attend college.

The smartphone is an amazing invention. The absence of decent roads in developing countries doesn’t matter a jot because, since the invention of the smartphone, buying and selling goods and services, issuing microfinance and keeping accounts up to date can be done on the go.

Consider modern-day food supply chains, A major cause of malnutrition is the result of consuming food that’s gone bad which causes stomach illnesses. Plastic films preserve food, as do of course refrigerators.

I could go on and on, but I shouldn’t because of space constraints. Suffice to further say here that every aspect of modern-day life would be impossible without chemicals and plastics.

Okay, I lie. One more example is the automobile. Automobiles are today largely made of plastics for cost and fuel-efficiency reasons.

Controlling the cost of transportation is critically important in order to give more people in the developing world access to life-enhancing mobility. Fuel efficiency matters in the battle to reduce carbon and cars made of plastics are lighter than cars made of metals.

The scale of future demand for nine of the world’s biggest synthetic polymers or plastics is illustrated by the chart below, from the ICIS Supply & Demand Database.

We forecast that global demand for the resins will this year total 299m, up from just 79m tonnes in 1992 which I believe was the start of the Petrochemicals Supercycle. By 2024, we predict that demand will reach 515m tonnes – a 72% increase.

The chart divides global demand into the three mega regions – the Developed World, The Developing World ex-China and China itself.

As you can see from the blue central bars, it will be the Developing World ex-China that drives most of the global growth. Its population is forecast to increase from 5.3bn in 2024 to 7.1bn in 2050 as the Developed World’s population edges slightly higher and China’s population declines.

Sure, redesign of plastics to reduce the consumption of plastics by weight in certain end-use applications could be more than we anticipate under our base case, reducing demand growth.

Demand growth may also be more negatively impacted than our base expects (this is why we provide scenarios for our clients) by bans on the use of plastics in some end-uses in the battle against plastic waste.

The battle against carbon emissions – both a separate and connected issue to plastic waste – may more negatively impact polymers consumption than we anticipate. Shoppers may prefer “less is more” as they adopt less material-intensive lifestyles.

Climate change could damage economic growth, especially in developing countries that could lack the financing and technologies to mitigate the impact of greater volatility in weather patterns.

But economic growth will of course still happen over the next 25 years and with growth will come poverty alleviation in the developing world.

Because of the nature of modern-day life, you cannot have one without the other. You cannot have economic growth and reduced poverty without more demand for plastics because, to repeat, we cannot do without plastics.

In other words, we can argue about growth levels from now until 2050. But growth is still going to lead to many more millions of tonnes of demand for plastics for essential applications.

The question on the exam paper is therefore how we meet this demand in as sustainable a fashion as possible. This is going to require the equivalent, in my view, of nothing short of a new industrial revolution.  

Dow CEO Jim Fitterling hits the nail on the head

Jim Fitterling, CEO of Dow Chemical, provided the best summary I have seen of the challenges that lie ahead for the chemicals industry. This was in a speech he gave in New York on 8 May, where he accepted the 2024 Palladium Medal Award from the Societe de Chimie Industrielle.

In this ICIS news report on the speech, my colleague Joe Chang wrote that the global chemical industry had no shortage of challenges. The keys to its survival and prosperity would be securing enough affordable energy for low-carbon production and tackling plastic waste in the environment while meeting growing consumer demand.

“The rise of data centres and AI [artificial intelligence] means that over the past year, many electric utilities have doubled their forecasts for how much additional power they will need by 2028,” said Fitterling.

“If Google switched its whole search business to AI, it would end up using an amazing 29.3 terawatt hours annually, nearly doubling the company’s entire energy consumption,” he added.

At the same time, the global push for decarbonisation was accelerating.

“You can either look at that and say, ‘that’s a bad combination’, or you can put your chemical industry hat on and say, ‘What an opportunity!’” said Fitterling.

Drawing inspiration from former Dow CEO and mentor Frank Popoff, the current Dow CEO sees the need to employ the “Popoff Principle” – Move fast, move with urgency, and most importantly, drive positive change.

Fitterling outlined a four-pronged approach to a more sustainable, reliable and affordable energy transition, one that could spur a new generation of energy investments in the US.

“First, we need an ‘all of the above’ approach to our energy sources. Renewables? Absolutely. But also low-emission baseload sources and technologies like natural gas, all forms of hydrogen and advanced nuclear,” said Fitterling.

On the nuclear front, Dow is working with X-Energy and the US Department of Energy to deploy small modular nuclear reactors (SMRs) at its site in Seadrift, Texas, which would supply zero-carbon power and steam to its plants.

Secondly, more supportive policies like permitting reform are needed to encourage investment.

“The process we have now isn’t just slow. It actually discourages private investment and delays new projects. It is also being politically hijacked to put individuals and agencies in the position of determining winners and losers – and taking the market out of the equation,” said Fitterling.

The third prong is a “desperately” needed economy-wide, market-based price on carbon for heavy industries such as chemicals.

While tax incentives and subsidies to reduce carbon emissions help, a more efficient framework would be an Emissions Trading System (ETS) which would be transparent, revenue-neutral and market-based, he said.

The fourth prong is meaningfully building out energy infrastructure.

“We have to convince our legislators that today’s infrastructure simply can’t support tomorrow’s energy demands. We need across-the-board investments to modernise and stabilise our national infrastructure,” said Fitterling.

Between 2015 and 2021, data centre operators increased their electricity usage by a compound annual growth rate (CAGR) of 25%. Meanwhile, renewables had grown energy production at a 7% CAGR, and also can’t provide 24×7 reliability, he pointed out.

A more aggressive advocacy approach was needed to elevate these energy issues to the front page, as well as counter misinformation, which is eroding the US’ ability to act with urgency, he added.

Effectively addressing plastic waste was vital to the industry’s future, and the Dow CEO was encouraged by the latest round of talks in Ottawa, Canada for a UN global plastics treaty.

“Compared to previous negotiations, I’m hearing many more rational voices embracing our view – the view of Dow and the industry’s plastics chain – that we can have the many life-enhancing benefits of plastics and eliminate plastic waste at the same time,” said Fitterling.

The first step in eliminating plastic waste from the environment was designing plastics and plastic products to be recyclable in the first place, he pointed out.

The second key step was promoting and scaling up a more robust recycling ecosystem.

While it was “almost fashionable” to blame producers for plastics waste, around 3bn people around the world lacked access to basic waste management. About 95% of leakage occurs in emerging markets with underdeveloped waste management systems, he said.

Demand for recycled plastics outstrips supply and was growing, but the ecosystem to collect, sort and efficiently recycle plastics waste was not keeping up, he said.

“That disconnect is fatal and it must be fixed. We need a more robust and efficient collection and recycling infrastructure,” said Fitterling.

As part of this ecosystem, advanced (or chemical) recycling was needed along with mechanical recycling to derive the greatest value from waste, as some plastic waste simply cannot be mechanically recycled.

Another critical element to addressing plastic waste was developing a new, socially inclusive financial and risk model to catalyse a new, more circular plastics economy, he said.

“Building a new, self-sustaining, modern waste system won’t be cheap. But it will drive the creation of new and better jobs. It will drive a more circular economy,” said Fitterling, who highlighted it will also lower emissions.

“But we also have to face reality. We must address the expensive elephant in the room. None of this happens without the necessary public-private financial models that enable greater capacity while also de-risking these investments,” said Fitterling.

“We live in a dollar-and-cents world. That means we need to embrace enabling concepts like Extended Producer Responsibility (EPR) and mass balance accounting that help support the entire plastics value chain and incentivize greater use of recycled plastics,” he added.

Government support for these efforts would be critical – policies that preserved the many benefits of plastics while also helping eliminating waste, the CEO said.

Through its history, the chemical industry had a formidable record of achievement in overcoming challenges and can do it again in making the energy transition a reality and ending plastics pollution, said the Dow CEO.

Key to this was harnessing talent – not just chemical talent, but a new generation of workers who understood robotics, AI, machine learning and analytics, he said.

“We need more skilled workers. And we need passionate workers who aren’t afraid of challenges and who understand how energy and climate and materials are inextricably linked – people who aren’t afraid to get their hands dirty to create the future.” said Fitterling.

Hear, hear! Let’s get on the with the new industrial revolution, harnessing, as the Dow CEO says, enthusiasm and talent from inside and outside the chemicals industry.

And let’s not be as shy about promoting the benefits of plastics as they have greatly enhanced the both the quality and quantity of our lives through increased life expectancy. We need to get out there and make a better case for our industry by talking more effectively to the general-public and legislators.