Transcript Title

Climate Change and the
Role of the Chemical
Industry
Presentation for the PlasticsEurope/APPE joint General
Assembly Event
Brussels, May 28th, 2009
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Contents
▪
Context and objectives for the study
undertaken for ICCA
▪
Methodology
▪
Results
McKinsey & Company
| 1
Global temperatures are clearly rising
“Business as
usual” scenario
Temperature anomaly (°C)
Recent past
▪ 11 of the 12 past years have been
the warmest since 1850, when
temperature chronicles begin
▪ Last 5 years (2002-06) amongst
6 warmest on record
▪ Late 20th century warmer than any
period during past 1,000 years and
is warming up by ~ 0.13°C/decade
Future
▪ Under "business as usual" scenario,
temperature will increase by ~ 6°C
by end of century1
▪ Climate models are converging –
increasingly high level of scientific
consensus
Year
Pre-industrial
Industrialization
heavy usage of
fossil fuel
1 Further temperature increase due to the onset of self-reinforcing feedback loops at certain thresholds not included (e.g., methane emissions from
melting permafrost)
SOURCE: IPCC, 2007; Stern Review; McKinsey
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Containing global warming below 2°C requires reduction
of GHG emissions by 35-50 GtCO2e vs. BAU by 2030
Global GHG emissions
GtCO2e per year
70
70
Peak at 550 ppm, 3.0°C
Peak at 510 ppm, 2.0°C
Peak at 480 ppm, 1.8°C
Current pathway /
Business-as-usual
(BAU)
60
-38
50
Technical measures
< €60 per tCO2e
Focus of the study
40
30
32
-9
20
23
Additional measures
Behavioural changes
& expensive
measures
10
0
2005
SOURCE: McKinsey
2010
2015
2020
2025
2030
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McKinsey’s global GHG abatement cost curve shows this is not impossible
Global GHG abatement cost curve beyond 2030 BAU
Cost of abatement1 below EUR 60 per tCO2e
1 This is an estimate of the maximum potential of all technical GHG abatement measures below EUR 60/tCO2e,
if each lever was pursued aggressively, not a forecast of what role different abatement measures and technologies will play
SOURCE: McKinsey
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McKinsey's experience in climate change related work
Climate change related McKinsey projects1
Numbers, 2002 to March 2009
NOT EXHAUSTIVE
Share of projects Jan - Mar 2009 by service line2
Percent
~510
Other
Environmental
10
Finance
5
Biosystems
407
Water
19
9
16 Energy Efficiency
Abatement & 11
Regulation
12
Sustainability
Transformation
14
Clean Energy
Technologies
Share of projects Jan - Mar 2009 by region
Percent
134
Other/tbd
10
13
Asia
126
25
South America
2004
05
06
4
Europe
13
07
08
5
45
2009
28
North America
5
Middle East
1 Not exhaustive
2 Energy Efficiency incl. Sustainable Cities; Clean Technologies incl. Renewables, EV, CCS; Biosystems incl. Biofuels
SOURCE: CCSI
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Objective of the ICCA study was to create the "climate change story"
for the chemical industry
Elements of the report
Messages
▪
Positioning
"First industry to create full carbon transparency"
▪
Methodology
"Representative sample, conservative approach,
external validation"
▪
Current impact
"Abatement by a factor x higher than own emissions"
▪
Outlook
"Potential to further improve the x:1 ratio, and the
absolute impact of its low carbon solutions"
▪
Supporting factors
"Need for regulatory conditions that stimulate demand
for low carbon products and favor innovation"
SOURCE: McKinsey/ ICCA
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Contents
▪
Context and objectives for the study
undertaken for ICCA
▪
Methodology
▪
Results
McKinsey & Company
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Life cycle emissions of chemicals cover entire life cycle of products
Extraction
(feedstock
and fuels)
SOURCE: McKinsey/ ICCA
Production
(direct and
indirect
energy
emissions,
process
emissions)
Disposal
(incineration
w/ or w/o
heat
recovery,
recycling,
landfill)
Total life
cycle
emissions of
chemical
products
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More than 100 CO2e life cycle analyses (cLCAs) were made …
Category
Transportation
Insulation
Building
Overall
abatement
potential
Agriculture
Packaging
Consumer
goods
Power
Lighting
SOURCE: McKinsey/ ICCA
Subcategory
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Autom. weight reduction
Lubricants
Lower friction
Engine efficiency
Aviation weight reduction
Marine fuel reduction
Building insulation
Fridge insulation
Construction material
Piping
Windows
Feed supplements
Fertilizer & crop protection
Preservation
Food production efficiency
Food packaging
Shopping bags
Electronic components
House ware
Service wear
Textile
Low temp detergents
District heating
Solar power
Wind power
CFL lighting
LED lighting
Number
of cLCAs
1
9
1
9
1
0
1
7
1
3
1
8
All cLCAs
externally
validated by
the Öko
Institut
4
2
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... Comparing the CO2e emissions from using a chemical industry product
with the total avoided CO2e emissions from not using a non-chemical
industry product
Chemical
products
emissions
over life
cycle of
chemical
product
SOURCE: McKinsey/ ICCA
Non-chemical product
emissions
over life
cycle of nonchemical
alternative
Difference
Gross
in in-use
emissions
emissions
savings
due to performance
difference
between
chemical and
non-chemical
product
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Results presented in two ways – Gross savings ratio or X : 1,
and net emission abatement
Gross savings (or X : 1) ratio
"Chemical industry saves X kgCO2e
for every 1 kg emitted"
1
Net emission abatement
"Global CO2e emissions would be Y
Gt higher without chemical industry"
Emissions, GtCO2e (2005 example)
46
46+Y
Y
X
Chemical Gross
industry savings
emissions
SOURCE: McKinsey/ ICCA
World
as-is
World w/o
extensive
use of
chemicals
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The impact of the chemical industry was evaluated under three
scenarios – current and two forward looking
Today
▪ CO2 emissions for the
▪
▪
industry calculated over
the entire life cycle of
its products based on
current data from IEA,
EIA, SRI, etc.
More than 100 and
representative sample
of life cycle analyses
(cLCAs) done and
externally validated to
assess GHG impact of
chemical products vs.
non-chemical products
Conservative
assumptions taken for
products/ applications
not covered by cLCA’s
SOURCE: McKinsey/ ICCA
2030 BAU scenario
▪ Projection into 2030
under the assumption
of a business-as-usual
scenario (BAU)
– No major changes
in regulation
– Volume growth
assuming no major
disruptions
– No technological
breakthroughs
(“frozen technology”
assumption) – just
standard efficiency
improvements in
production
2030 abatement scenario
▪ Projection into 2030
under the assumption
of an aggressive
trajectory towards a
low carbon society
– Regulation to
increase the use
of products/
applications with a
positive
abatement effect
– Globally
consistent
regulation and
initiatives to
reduce the
industry’s “own”
emissions
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Contents
▪
Context and objectives for the study
undertaken for ICCA
▪
Methodology
▪
Results
McKinsey & Company
| 13
Total life cycle CO2e emissions linked to the chemical industry
amounts to 3.3 Gt
GHG life cycle emissions of chemical products, 2005
GtCO2e
3.3
0.4
0.5
2.1
0.3
Extraction
Production
Disposal
High GWP
gases1
Total
1 HFC-23, HFC-32, HFC-125, HFC-134a, HFC-143a, HAFC-1521, HFC-227ea, HFC-236fa, HFC-4310mee, CF4, C2F6, C4F10, C6F14, SF6; GWP
factors according to IPCC 1996
SOURCE: IEA; EPA; IPCC; WEF; McKinsey/ ICCA
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Production emissions are composed of energy and
process emissions
Production emissions
Production emission methodology
Type of
emission
Direct
energy
emissions
Rationale
Sources used
▪
▪
Fuel consumption
required for process to
run (excluding fuels for
feedstock purposes)
IEA
Chemical industry production
emissions
GtCO2e, 2005
2.1
0.6
Overall
production
emissions
Indirect
energy
emissions*
▪
▪
▪
SOURCE: McKinsey/ ICCA
▪
IEA
0.8
▪
Process
emissions
Electricity generated
off-site
N2O (adipic acid/nitric acid,
caprolactam)
CO2 (ammonia, calcium
carbide, titanium dioxide,
soda ash, methanol, ethylene, EDC/VCM, ethylene
oxide, acrylonitrile, carbon
black)
HCFC-22
▪
▪
IPCC emission
factors
SRI/Tecnon
production
values
0.7
Production
▪
US EPA
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Extrapolations were made for products/applications not covered by cLCAs
Chemical
industry
emissions
Assumption on savings
Products1 with alternatives
available today and for
which cLCAs were calculated
Savings (positive or negative) calculated
from detailed comparative cLCAs
Products1 with
alternatives available
today, but no cLCAs
made
Products1 with no
realistic alternative
available today
Gross savings equal to life cycle emissions
– conservative compared to using average
CO2e savings from case studies
Zero savings (only emissions) – very
conservative
1 Or applications
SOURCE: McKinsey/ ICCA
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The chemical industry saves 2.6 tons of CO2e per ton emitted.
The net abatement of 5.2 Gt equals ~11% of 2005 global emissions
Emission abatement of chemical industry
GtCO2e
Chemical industry emissions
Gross savings
(savings factor)
Net emission
abatement
3.30
Products1 with alternatives
available today and for
which cLCAs were calculated
1.45
1.45
6.01
7.46 (5.1)
Products1
with
alternatives available
today, but no cLCAs
made
Products1 with no
realistic alternative
available today
Total
1
1.00
0
1 (1.0)
0.85
0.85
0 (0.0)
3.30
-0.85
5.16
8.46 (2.6)
1 Or applications
SOURCE: McKinsey/ ICCA
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The main contributors are insulation, fertilizer & crop protection, and
lighting
Net abatement 2005
MtCO2e
Net abatement
volume per
chemical
application
Not explicitly calculated
No realistic alternative
available
Insulation
Lighting
Packaging
Marine antifouling
Synthetic textile
Automotive weight
Low-temp. detergents
Engine efficiency
Piping
Wind power
District heating
Green tires
Solar power
Other
Sub-total
Fertilizer & crop protection
Total
1:1
0:1
Net
2,400
700
220
190
130
120
80
70
70
60
60
40
40
230
4,410
1,600
6,010
0
3,560
850
5,160
w/o fertilizer &
crop protection
SOURCE: McKinsey/ ICCA
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Gross savings ratio could reach 4.7 : 1 and net emission abatement could
reach 18.5 GtCO2e if the appropriate abatement measures are taken
2005
Gross savings
ratio
Own
emissions and
gross savings
2030 BAU
2030 Abatement
2.6 : 1
3.1 : 1
4.7 : 1
3.3
6.5
5.0
8.5
20.3
13.8
23.5
18.5
5.2
Net abatement
GtCO2e
SOURCE: McKinsey/ ICCA
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While more than doubling output, the emissions linked to the chemical
industry would only be 50% higher by 2030 than in 2005 (largely due to
geographic shift)
Calculated evolution of chemical industry emissions
2005
2030 BAU
2030 Abatement
50%
Chemical industry is
expected to double
its output by 2030
6.5
1.6
1.5
3.3
5.0
2.0
0.5
3.3
Emissions,
2005
SOURCE: McKinsey/ ICCA
BAU
volume
growth
effect
Improve- Geogra- BAU
ment of phic shift emissions,
efficiency effect
2030
Beyond
BAU
improvement
measures
Effect of
volume
growth
beyond
BAU
Emissions
after
abatement
measures
implement
-ed 2030
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GHG abatement cost curve for the chemical industry
Society view1
Business view2
Process intensification level 3
EUR per tCO2e
140
Process
intensification
level 1
Catalyst
optimization
level 1
120
100
80
60
Fuel shift
coal to
biomass
CCS Direct
energy
Process
intensification
level 2
Motor systems
40
20
0
-20
0
100
200
300
400
500
600
700
800
900 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000 2,100
-40
-60
CCS
Ammonia
-80
Catalyst
optimization
level 2
-100
Fuel shift
oil to gas
CHP
Decomposition
of N2O from adipic
and nitric acid
Catalyst
optimization
level 3
Ethylene
cracking
1 The curve presents an estimate of the maximum potential of all technical GHG abatement measures below EUR 60 per tCO2e (society view) if each
lever was pursued aggressively. It is not a forecast of what role different abatement measures and technologies will play
2 4% interest rate, depreciation over life time of equipment
3 10% interest rate, depreciation over 10 years
SOURCE: McKinsey
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In the abatement scenario, the net abatement is 3.5
times higher than in 2005
Net abatement
MtCO2e
Net abatement
volume per
chemical
application
Not explicitly calculated
No realistic alternative
available
Insulation
Lighting
Solar power
LC-ethanol
Wind power
CCS
Marine antifouling
Synthetic textile
Packaging
Automotive weight
Green tires
Low-temp. detergents
Engine efficiency
Piping
District heating
Other
Sub-total
Fertilizer & crop protection
Total
1:1
0:1
Net
6,800
4,100
15,950
2,000
1,000
700
600
400
350
300
300
100
100
100
50
50
200
17,150
2,500
19,650
0
1,200
18,450
w/o fertilizer &
crop protection
SOURCE: McKinsey/ ICCA
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