Demand for sustainability-related chemical products is predicted to increase by about 70% from 2023 to 2028, with a compound annual growth rate (CAGR) of 11%.1
Industries such as construction and automotive are increasingly seeking sustainable chemicals to meet consumer preferences for eco-friendly products, with many customers willing to pay a premium.
As described in our “Powered for change” report, decarbonizing heavy industries such as chemicals is crucial; without that, we can't improve the sustainability of any industry.
Chemical companies can capitalize on this growing market by producing bio-based chemicals, in turn helping to improve thousands of everyday end products, so they are more environmentally friendly.
A viable solution involves using “biomass”—organic waste materials—to make low-carbon chemicals.
Biomass can be divided into three categories: first generation (1G), second generation (2G) and third generation (3G).
Sources: 2021 FAOSTAT; 2021 USDA; Becerra-Pérez et al 2022; UFOP; Venkatramanan et al 2021.
Note: Values provided are calculated from the residue to product ratio for each crop (RPR); RPR varies by region, harvesting technique and crop season.
1 3G biomass is negligible; representative fraction of 3G biomass only.
2 90% triacylglycerol and 10% free fatty acids.
Chemical companies can use 2G biomass as an alternative to fossil materials such as crude oil and natural gas.
~50%
more 2G biomass available globally than currently needed for the chemical industry2
Assuming we replace fossil raw materials with 2G biomass while keeping other factors constant.
Currently, we have enough biomass to meet the world’s needs.
We recommend allocating biomass as follows:
1.
Prioritize use of biomass for food and animal feed.
2.
Allocate remaining biomass for materials (e.g. chemicals).
3.
For any leftover, employ it for biofuels and bioenergy.
Other renewable energy sources, such as wind and photovoltaic (PV), have higher energy conversion efficiency than biomass, so they are better alternatives for fuel and energy.
Platform molecules that are made using 2G biomass can be “dropped in” to existing processes.
This “drop in” approach enables companies to seamlessly substitute fossil-based chemicals with biomass-based alternatives, such as 2G ethanol, 2G methanol and e-methanol.
By incorporating these green platform molecules into current petrochemical processes, chemical companies can create a variety of low-carbon products, enabling the production of thousands of more sustainable final products.
And the drop-in approach provides sustainability and efficiency benefits.
- Decreasing greenhouse gas emissions, avoiding both the extraction of fossil raw materials and the emission of extra carbon dioxide at the end of the product's life.
- Preserving existing infrastructure, minimizing the need for extensive capital investments and ensuring compatibility with current manufacturing processes.
- Mitigating stranded assets, allowing the chemical industry to repurpose or phase out aging infrastructure and transition to more sustainable practices. Bio-based products don t directly require traditional steam cracking and reforming processes, which rely on fossil or recycled feedstocks such as pyrolysis oil.
Chemical companies can either purchase these eco-friendly molecules or manufacture them themselves
Buying 2G biomass-based chemicals—such as 2G ethanol, 2G methanol and e-methanol—from the open market would not be cost-competitive compared to fossil-based ones.
Unfortunately, competitively-priced, biomass-based chemicals are often sourced from 1G biomass, posing a threat to food supply.
Producing them in-house, by integrating the production assets into their value chains, could lower costs.
For example, biomass-based raw materials, or platform molecules (i.e., 2G ethanol), are the main cost drivers of biomass-based ethylene production. So, chemical companies need access to cheaper sources. Upstream integration, by investing in production of 2G ethanol (2G EtOH), can help chemical companies ensure the price competitiveness of sustainable products.
However, biomass sources and demand are not aligned geographically.
>70%
global biomass produced in Asia, Africa and South America4
>60%
anticipated global demand for biomass platform molecules in Northeast Asia and Europe5
The geographic mismatch between biomass sources and demand poses logistical challenges.
Further, to meet anticipated demand, production of platform molecules needs to increase.
To effectively replace fossil raw materials in petrochemical processes, we need to increase production of ethanol and methanol using 2G biomass:
<1%
estimated chemical industry demand met by current ~550 kiloton/year 2G ethanol and 2G/e-methanol production capacity6
~€3T
capital expenditure required to build 3,000 2G ethanol and 3000 2G/e-methanol plants7
50 TWh
of renewable energy required per year to power the new plants, mainly driven by the hydrogen needed to produce e-methanol8
To address geographic disparities and meet demand, chemical companies could operate small plants remotely.
Chemical companies could establish plants using a decentralized hub-and-spoke model. They could wield their process and technology expertise to build smaller, more modular plants in Asia, Africa and South America that they could largely operate remotely, minimizing the need for local process know-how. Organizations could achieve this setup by creating an ecosystem of investors, operators and engineering, procurement and construction (EPC) companies.
These plants could be located near the source, producing 2G ethanol, 2G methanol and e-methanol, establishing a liquid chemical market. Transporting these denser liquids instead of bulky, low-density biomass—such as wheat straw—would use space more efficiently, lowering transportation costs.
This strategy would reduce raw material and transportation costs while creating economies of scale for the chemical plants themselves. It would also provide chemical companies with direct access to the valuable eco-friendly raw materials of the future.
Locating plants for 2G ethanol, 2G methanol and e-methanol in these regions would diversify sources of low-carbon raw materials, increase supply-chain resilience and benefit from lower labor costs.
As the market expands, chemical companies will need to work with others to manage biomass resources wisely.
.3 GT
gap expected between biomass supply and demand by 20309
To ensure we manage biomass resources efficiently across sectors, collaboration among stakeholders, policymakers and industry leaders will be paramount.
By aligning priorities and implementing effective strategies, we can optimize biomass use and promote the responsible and efficient management of resources:
- The biofuels industry competes for biomass resources. However, other renewable sources of energy offer higher efficiencies and lower environmental impact, making them preferable for meeting energy demands. By deprioritizing biomass for biofuels, we can allocate it to more critical sectors, such as food production and material applications.
- We can also help to manage demand for biomass by increasing recycling rates beyond the packaging industry. And we can invest in research, technology and infrastructure to improve recycling capabilities.
In summary, chemical companies can capitalize on this promising new market by focusing on five key actions:
1.
Leverage 2G biomass to produce eco-friendly chemicals.
2.
Invest in platform molecule production to decrease costs.
3.
Establish remote modular plants in markets near biomass sources.
4.
Collaborate for sustainable biomass management.
5.
Encourage increased recycling rates and invest in recycling capabilities.
Sources
1 Accenture Research analysis of data from market reports, Oxford Economics. Note: Chemical market based on Oxford Economics chemical sales in real US$: 2023 US$4.4T, 2028 US$5.2T—a difference of US$800B.
2 2021 Accenture research and analysis, FAO.com, USDA.
3 2022 Accenture research and analysis based on Oxford Economics, our proprietary market model and industry knowledge. Note: Via the drop-in approach and net of emissions from end-of-life product combustion.
4 2022 Accenture research and analysis based on FAOSTAT.
5 2022 Accenture research and analysis, including data from Oxford Economics, ICIS, MDPI.
6 2022 ETIP Bioenergy; 2022 Methanol Institute.
7 2022 Accenture research and analysis. For 2G ethanol: Capacity assumption of 50kt/a*plant; For e-methanol: Sum of 2G and e-methanol; Capacity assumption for 2G methanol of 150kt/a*plant; Capacity assumption for e-methanol of 250kt/a*plant
8 2022 Accenture research and analysis. Process Energy demand: Desalination 0,003 GWh/kt H2O; Electrolysis 39 GWh/kt H2; 2G EtOH prod. 0 GWh/kt EtOH (self suff.); CO2 purif. 0,1 GWh/kt CO2; Green MeOH prod. 0,17 GWh/kt MeOH
9 2022 Accenture research and analysis, based on: FAOSTAT, USDA, Becerra-Pérez et al. 2022, Oxford Economics and Mordor Intelligence biofuel capacity forecast.
Written by
Holger Vegelan
Managing Director – Strategy & Consulting, Chemicals & Natural Resources
Felix Schröder
Senior Manager – Strategy & Consulting, Chemicals & Natural Resources