The Future of Petrochemicals

Towards a more sustainable chemical industry

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About this report

Found across a vast range of modern products, petrochemicals are part of the fabric of our societies. Clothing, tyres, digital devices, packaging, detergents and countless other everyday items are made from petrochemicals. Petrochemical feedstock accounts for 12% of global oil demand, a share that is expected to increase driven by increasing demand for plastics, fertilisers and other products. Despite its size, the sector continues to take a back seat in the global energy debate. As part of the IEA on-going examination of energy blind spots – major areas of energy demand which fail to attract the level of attention from policy makers that they deserve – The Future of Petrochemicals explores the role of the sector in today’s global energy system and how its significance for global energy security and the environment is set to increase. It also draws a path to an alternative scenario consistent with the UN Sustainable Development Goals, exploring enabling technologies and strategies, and assessing their impact on energy demand.

Petrochemical products are everywhere and are integral to modern societies. They include plastics, fertilisers, packaging, clothing, digital devices, medical equipment, detergents, tires and many others. They are also found in many parts of the modern energy system, including solar panels, wind turbine blades, batteries, thermal insulation for buildings, and electric vehicle parts.

The Future of Petrochemicals takes a close look at the consequences of growing demand for these products, and what we can do to accelerate a clean energy transition for the petrochemical industry.

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Key findings

Demand for petrochemicals is surging...

Already a major component of the global energy system, the importance of petrochemicals is continuing to grow. Demand for plastics – the most familiar group of petrochemical products – has outpaced that of all other bulk materials (such as steel, aluminium or cement), and has nearly doubled since 2000.

Production growth for selected bulk materials and GDP, 1971-2015

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... and will continue to grow

Advanced economies, such as the United States and Europe, currently use up to 20 times as much plastic and up to 10 times as much fertiliser as developing economies such as India and Indonesia, on a per capita basis. This underscores huge potential for growth worldwide.

Per capita demand for major plastics in selected countries in 2015

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Petrochemicals are all around us

  • Plastic packaging for food and other commercial products can be made from a range of petrochemical products, including polyethylene and polystyrene
  • Globally, more than half of ammonia is converted to urea, which is in turn mainly used as a fertiliser used to increase crop yields and boost food production
  • Synthetic rubber is a major component of tires for cars, trucks and bicycles, and is mainly derived from the petrochemical butadiene
  • Many of the laundry detergents and items of clothing in our washing machines are derived from petrochemicals, such as surfactants and polyester fibre

Developing economies lead growth

Although substantial increases in recycling and efforts to curb single-use plastics are expected to take place, especially in Europe, Japan and Korea, these efforts will be far outweighed by developing economies sharply increasing their shares of plastic consumption (as well as its disposal). The difficulty in finding alternatives to petrochemical products for many applications is another factor underpinning the robust overall demand growth.

Production of key thermoplastics, 1980-2050

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Petrochemicals are rapidly becoming the largest driver of global oil demand

The growth in demand for petrochemical products means that petrochemicals are set to account for over a third of the growth in oil demand to 2030, and nearly half to 2050, ahead of trucks, aviation and shipping. Petrochemicals are also poised to consume an additional 56 billion cubic metres of natural gas by 2030, equivalent to about half of Canada’s total gas consumption today.

Oil demand growth by sector, 2017-2030

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And new dynamics in oil and gas are driving global competition

After two decades of stagnation and decline, the United States has returned to prominence as a low-cost region for chemical production thanks to the shale gas revolution. Today, the United States is home to around 40% of the global ethane-based petrochemical production capacity. However, the Middle East remains the low cost champion for key petrochemicals.

Simplified levelised cost of petrochemicals for selected feedstocks and regions, 2017

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The Clean Technology Scenario (CTS)

Despite the substantial benefits they provide – including a growing number of applications in various cutting-edge, clean technologies critical to a sustainable energy system – the production, use and disposal of petrochemical-derived products poses a variety of sustainability challenges that urgently need to be addressed.

The Future of Petrochemicals introduces a scenario that outlines an alternative path for the chemical sector that helps achieve several UN Sustainable Development Goals. The Clean Technology Scenario, or CTS, explores opportunities to mitigate air and water pollution, and the water demand associated with primary chemical production, alongside the over-arching goal of reducing CO2 emissions. The assumptions related to pollutants and other aspects of the future energy system are in line with the IEA’s Sustainable Development Scenario.

Environmental impacts decrease across the board...

In the CTS, air pollutants from primary chemical production decline by almost 90% by 2050, and water demand is nearly 30% lower than in the Reference Technology Scenario (RTS), the base case for projections in The Future of Petrochemicals. The CTS also emphasises waste management improvements to rapidly increase recycling, thereby laying the ground work to more than halve cumulative ocean-bound plastic waste by 2050 compared to the RTS.

Annual pollutants from chemical production in the RTS, 2017-2050

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... With a dramatic reduction in direct CO2 emissions

In the CTS, a 45% reduction in direct CO2 emissions is attained in 2050, relative to current levels, despite demand for primary chemicals increasing by 40%. Emissions are 60% lower in the CTS than in the RTS by 2050.

Direct CO2 emissions by scenario, 2017-2050

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But a broad range of efforts are required

The transition to the CTS is led by carbon capture, utilisation and storage (CCUS), coal to gas feedstock shifts, and energy efficiency. The contributions to emission reductions of plastic recycling and reuse and alternative feedstocks are less pronounced.

Contributions to emission reductions of plastic recycling and reuse and alternative feedstocks

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Plastics pollution in oceans & policy recommendations

When plastic waste finds its way into the ocean, it breaks down into small pieces that are commonly ingested by marine life. As the mass of larger debris – including containers, bottle caps, crates and old fishing gear – continues to degrade over time, the quantity of microplastics could increase significantly. This is an urgent environmental problem garnering much attention around the world.

Although plastic recycling plays a comparatively smaller role when it comes to emission reductions, improved waste management infrastructure – a necessary pre-requisite for the recycling increases in the CTS – lays the groundwork to drastically reduce plastic pollution from today’s unacceptable levels. In the CTS, cumulative ocean-bound plastic waste more than halves relative to the RTS. This excludes the impact of complimentary efforts to remove plastic waste from the oceans.

Annual and cumulative ocean-bound plastic leakage by scenario, 2010-2050

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Effecting the transition: top ten policy recommendations

To achieve a sustainable chemical sector, an interdisciplinary approach is needed throughout the value chain – from primary chemical production to waste management. There is no single or simple solution. In tackling environmental challenges, policies need to maximise co-benefits and ensure sustained impact.

Production

  1. Directly stimulate investment in RD&D of sustainable chemical production routes
  2. Establish and extend plant-level benchmarking schemes for energy performance and CO2 emission reductions targets
  3. Pursue effective regulatory actions to reduce CO2 emissions
  4. Require industry to meet stringent air quality standards
  5. Fuel and feedstock prices should reflect actual market value

Use and disposal

  1. Reduce reliance on single-use plastics other than for essential non-substitutable functions
  2. Improve waste management practice around the world
  3. Raise consumer awareness about the multiple benefits of recycling
  4. Design products with disposal in mind
  5. Extend producer responsibility to appropriate aspects of the use and disposal of chemical products


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