(Part One of a Series on Petrochemicals and Plastics)

On April 22, the Biden administration released its latest economy-wide greenhouse gas (GHG) emissions target for the US: a 50% reduction from 2005 levels by 2030. This and other similar targets, including the Paris goal of reaching net-zero global emissions by 2050, means that near-term decisions across all economic sectors require enhanced scrutiny. Progress in some sectors is well under way—for example, the world is transitioning to cleaner sources of energy and reducing demand for traditional fossil fuel products especially in the transportation and power sectors.

To make up for lost demand, Big Oil is allocating significant resources to boost production of petrochemicals – especially plastics. This Hail Mary movement to increase plastics production faces a significant and growing landscape of risks, as covered in As You Sow’s recent report, “Plastics: The Last Straw for Big Oil?” One key risk highlights the question of what role plastics and other petrochemicals play in the climate crisis. Stay tuned for future blogs pertaining to other risks including ocean plastic pollution, public health and environmental justice, and economics and stranded asset risk.  

Big Oil’s Plastic Narrative

Big Oil and the plastics industry are making their viewpoint known: they see plastics as a growing ”low-carbon” opportunity. Joshua Baca, Vice President, Plastics, at the American Chemistry Council (ACC), summarized this stance in a statement responding to As You Sow’s report:

“As our standards for sustainability and the world's population grow, we'll need more plastics to live better and with a lower carbon footprint — not less. Today's plastics help to dramatically reduce greenhouse gas emissions by significantly lowering energy use in our homes and vehicles, efficiently delivering clean drinking water, and helping keep our food fresh and medicine and medical supplies sanitary.”

Baca’s statement exemplifies the complicated narrative pushed by industry regarding the climate impact of plastics. First and foremost, industry claims that plastics will play a vital role in a low-carbon society, but this does not tell the full story. While plastics can indeed serve essential purposes (for example, in healthcare) and can reduce GHG emissions through “light-weighting” technologies like vehicles, so they need less fuel to run, such examples divert attention from the largest and fastest growing market for plastics: packaging plastics that are predominantly single-use.

In response to this concern, oil and gas companies make sweeping claims that all plastics are low-carbon and alternatives are unsustainable. However, a closer look at the nuances of industry-sponsored life cycle assessments (LCAs), and  the larger supply chain-level impacts of the petrochemical industry, show that these claims are largely unfounded.

Much research has gone into assessing the limitations of plastic LCAs. While useful in understanding the life-cycle impacts of a certain product, LCAs can also be manipulated to promote certain outcomes and ignore others. As such, transparency of data and assumptions used remain key issues. For example, assumptions made about end-of-life (such as recycling rates) and emission boundaries can heavily skew results. Furthermore, LCAs often do not incorporate zero-waste pathways like reuse and elimination into their analysis.

The Full Picture – Petrochemicals Contribute to the Climate Crisis

The IEA identifies the petrochemical industry as the largest industrial consumer of energy and predicts it will account for the largest increase in oil demand growth through 2050. Carbon Tracker’s analysis found that much of this growth is tied to the production of plastics in particular.

GHG emissions are present at every stage of the plastic life-cycle, from the extraction of oil and gas for feedstocks to the end-of-life of petroleum-based products. A comprehensive study, originally published in Nature, found that the life-cycle GHG emissions of global plastic production alone amounted to nearly 1.8 billion metric tons CO2e in 2015. The study found that the largest portion of these emissions came from resin production (61%), followed by final product manufacturing (30%), and end-of-life (9%).

Resin production includes the “cracking” of ethane into ethylene, which is the dominant plastic production pathway in the U.S. Steam cracking of ethane requires high temperatures and pressures and is the most energy intensive step of the process. One study found that crackers and other petrochemical facilities in the U.S. Gulf Coast alone could emit more than 206 million metric tons CO2e annually by 2030, about 38% of the total projected emissions from oil and gas infrastructure in the area. End-of-life pathways for plastics (which include recycling, landfill, incineration, and open burning), though the smallest portion of total life-cycle emissions in the Nature study, can still heavily affect calculated emission factors for plastics. While traditional pathways like mechanical recycling achieve GHG savings, recycling rates even in developed countries are abysmally low. Furthermore, low availability of appropriate recycling infrastructure and higher rates of open burning in the Global South (where plastic demand is forecast to grow) poses an increasing climate risk.

Studies have concluded that these plastic life-cycle emissions, under a business-as-usual growth rate, could alone consume between 15-19% of the remaining global carbon budget. As such, it is deeply problematic to consider plastics as a “low-carbon” pathway. Instead, an absolute reduction in plastic production is urgently needed as a key part of the transition to a net-zero economy – and all levels of society are stepping up.

What to Watch – Alarm Bells for Investors and other Stakeholders

Although the economic downturn of COVID-19 has delayed some petrochemical projects, the American Chemistry Council states that as of February 2021, 40 U.S. chemical projects are still currently under construction with 80 more planned, valued at $31 billion and $81 billion, respectively.

Stakeholders must be vigilant and question the economic and societal impacts of construction or expansion of such a large number of potential petrochemical “superpolluters.”

Investors can act now, beginning with more robust company engagement on these issues. Companies should provide accurate and clear reporting of all relevant scopes of greenhouse gas emissions, across all company divisions, and account for such emissions in their target setting. “Plastics: The Last Straw for Big Oil?” provides benchmarking questions to help guide investors as they press companies on this issue.

The next few years of decisions in this space are critical – will polluting infrastructure be locked into place or avoided? Companies that innovate and scale solutions that truly align with society’s climate goals have the chance to emerge as leaders in the transition to a net-zero future, while those that neglectfully dismiss the potential for reduced demand will lag behind.