Carbon neutrality has mixed effects on the chemical industry

Will continue to change the supply and demand pattern of chemicals, and will also generate new trading logic

Will continue to change the supply and demand pattern of chemicals, and will also generate new trading logic

The impact of carbon neutrality on the non-ferrous and ferrous industries can be compared to supply-side reforms
.

For the chemical industry, carbon neutrality is more like a "green industrial revolution", optimizing supply and creating demand

A.
The concept and meaning of carbon neutrality

A.
The concept and meaning of carbon neutrality

Before understanding the specific impact of carbon neutrality on chemical futures products, it is necessary to briefly introduce the concept of carbon neutrality and carbon peaking and the significance of implementing carbon dioxide emissions reductions
.

What is carbon neutral

What is carbon neutral

Carbon neutral concept was first on the 75th United Nations General Assembly 22 September 2020 proposed a formal commitment to our country, "carbon dioxide emissions to peak by 2030, to achieve carbon neutrality in 2060"
.

From the previous greenhouse gas emission reduction commitments that China has participated in, it can be seen that the ultimate goal of carbon neutrality is not a whim, but a careful plan for the future

Carbon neutrality refers to the balance of carbon dioxide emissions through carbon dioxide removal technology, which is also called net zero carbon dioxide (zero carbon) emissions
.

Different from "net zero emission" and "climate neutrality", carbon neutrality only puts forward requirements for carbon dioxide emissions, and has not risen to the level of all greenhouse gases or the climate system.

Why to achieve carbon neutrality

Why to achieve carbon neutrality

In the traditional concept, carbon dioxide is colorless and non-toxic, and the respiration of organisms cannot be separated from carbon dioxide.
So why is the world committed to controlling carbon dioxide emissions? This comes back to the issue of global warming.
As the highest proportion of greenhouse gases, carbon dioxide can stop global warming for a long time if global carbon neutrality is reached and maintained
.

The hazards of global warming are self-evident.

Source of carbon dioxide

Source of carbon dioxide

According to the daily carbon emission detection method of global real-time carbon data (CarbonMonitor), global carbon dioxide emissions mainly come from electricity (39%), industrial production (28%), land transportation (18%), aviation (3%), and shipping (2%) and residents' consumption (10%)
.

In order to further explore China's path to achieve carbon neutrality, we sort out the sources of carbon emissions in three dimensions: energy, sector, and region

First, look at carbon emissions from an energy perspective
.

The structure of China’s primary energy is “rich coal, poor oil and less gas”.

Second, from the perspective of different industries, electricity production and supply (44%), ferrous metal smelting (18%) and cement production (14%) rank among the top three in terms of carbon emissions.
These three types of industries have or will face carbon reduction.
The pressure of the discharge
.

The national carbon emissions trading started before the end of June included power companies in the first batch of lists.

Third, from a regional perspective, the carbon emissions of densely populated and industrially developed areas are much higher than other areas
.

It can be seen from the carbon emission distribution map of CEADs that Shandong (8.

The path to carbon neutrality

The path to carbon neutrality

In order to achieve carbon neutrality as soon as possible, the state has proposed five feasible paths for industries such as power, industry, construction and transportation, which are intended to solve the two fundamental problems of reducing carbon emissions and increasing carbon absorption
.
With the rapid development of clean energy and new energy vehicles, electricity and transportation are expected to be the first to achieve carbon neutrality, while industry is the last to achieve carbon neutrality.
Therefore, we boldly guess that the impact of carbon neutrality on chemical products will appear tight and loose.
Features and specific impacts are discussed in the following categories
.

B.
How carbon neutrality affects chemicals

B.
How carbon neutrality affects chemicals

The chemical industry’s carbon emissions accounted for only 4% (petroleum processing and coking, chemical raw materials and chemical products), but the carbon emissions intensity of some provinces with large chemical production capacity far exceeded the national average of 1.
5 tons per 10,000 yuan, so the chemical industry’s The characteristics of carbon emissions can be summarized as limited total but outstanding intensity
.
However, the carbon emission and carbon emission intensity of different products and different production processes in chemical products vary greatly, and we will discuss them in detail
.

Estimation of carbon emissions of main varieties

Estimation of carbon emissions of main varieties

According to the "Accounting Method for Greenhouse Gas Emissions of Chinese Petrochemical Enterprises", the calculation of carbon dioxide emissions of chemical products mainly includes five parts, namely, fuel combustion emissions, flare combustion emissions, industrial production process emissions, carbon dioxide recycling, net purchased electricity and For the carbon dioxide emissions implied by thermal power, the detailed calculation methods and formulas are limited to space and will not be explained in detail.
We directly give the carbon emissions values ​​of different types of chemical futures products during the fuel combustion and production process
.
Among them, the public works part corresponds to fuel combustion emissions and carbon dioxide emissions implied by net purchased electricity and heat; industrial processes are carbon emissions in the production of chemical products, and do not consider the recycling of dioxide and the combustion emissions of flare gas
.

The following rules can be summarized from the following table: (1) The carbon emissions of the same variety and different processes generally meet the relationship of gas head <oil head <coal head.
Because of the complete industry chain and abundant by-products, the crude oil is actually allocated to the carbon emissions of a single product.
The amount and intensity are not high, and natural gas itself is a clean energy source, so the carbon emission of coal chemical industry is the highest among all the processes
.
(2) The carbon emissions per ton of chemical products in the coal-based process are from high to low: olefin>PVC>ethylene glycol>methanol>urea
.
Because olefins, ethylene glycol and methanol are the raw materials for many chemicals, and the production capacity of other processes is not low, PVC has become a key concern in carbon dioxide emission reduction
.
(3) The reduction of carbon emissions in the production process can only be achieved by optimizing the process and increasing the absorption, which is more difficult to achieve than public projects
.
To give an intuitive example, the total carbon emissions of electrolytic aluminum are extremely high, but the carbon emissions mainly come from the link of electricity consumption.
Changing the source of electricity from thermal power to hydropower can effectively reduce carbon emissions
.
The main source of carbon emissions from the PVC calcium carbide method is also electricity consumption.
In addition to converting thermal power to wind power or photovoltaics, limiting the capacity of calcium carbide method and increasing the capacity of ethylene method is the only way to reduce PVC emissions
.
(4) At present, the average price of carbon emission allowances in the 8 domestic pilot markets is about 30 yuan/ton.
Combined with the current spot prices of chemical products, we can see that methanol and urea have the highest carbon emission costs.
In the future, if the company’s carbon emission allowances are tight , Then the spot prices of methanol and urea may increase to compensate for the increase in cost
.

How carbon neutrality affects the supply and demand side of chemicals

How carbon neutrality affects the supply and demand side of chemicals

Intuitive data shows that the pressure to reduce emissions is mainly concentrated on PVC and methanol in the coal chemical industry
.
In fact, in the "National Carbon Emission Trading Management Measures (for Trial Implementation)", "Guiding Opinions on Coordinating and Strengthening Responding to Climate Change and Ecological Environmental Protection" and "Ensuring the Completion of the Energy Consumption Dual Control Targets in the Fourteenth Five-Year Plan" Calcium carbide, synthetic ammonia, and methanol are also mentioned in documents such as "Several Safeguard Measures for Tasks"
.
From the perspective of the subdivision process, the calcium carbide and synthetic ammonia in the traditional coal chemical industry are all high energy-consuming and high-carbon emission varieties, while the new coal chemical industry has many by-products, high profitability, low comprehensive carbon emission intensity, and high economic benefits.
Under the goal of peaking carbon during the Fourth Five-Year Plan period, traditional coal chemical industry is a key production-restricted area.
Below, we will analyze the impact of various varieties from both the supply side and the demand side
.

For most chemicals, the impact of the dual-carbon target is mainly to optimize supply and create demand
.
Optimizing supply is embodied in two aspects: compressing outdated production capacity and encouraging new processes
.
The new production capacity of most chemical products is strictly limited, especially the high energy consumption and high emission products such as PVC, methanol and synthetic ammonia in the traditional coal chemical industry, which are more restricted
.
The new process greatly reduces carbon emissions by using cleaner energy, increasing the utilization rate of raw materials, and increasing the treatment of exhaust gas, and will gradually replace the existing backward production capacity
.
For example, the latest DMTO-III technology of Dalian Institute of Chemical Technology not only reduces the unit consumption of methanol to 2.
66 tons, the new catalyst also increases the yield of olefin monomers, avoids the C4/C5 cracking step, and directly reduces carbon dioxide emissions
.
In addition, BASF’s new technology replaces natural gas as the heat source for steam cracking of ethylene with a new furnace with electric heaters, which can reduce carbon dioxide emissions by up to 90%
.

C.
Restrictions on new chemical plants

C.
Restrictions on new chemical plants

Creating demand also has two meanings: one is that the existing chemicals are more widely used, and the other is that new materials with environmental protection and low carbon emissions replace old materials
.
There are countless examples of the former.
Take photovoltaics and new energy, which are the most popular in the near future, as examples
.
The essential material in solar panels is EVA (ethylene-vinyl acetate copolymer).
After the outbreak of photovoltaic demand, the price of EVA has risen by more than 30% since March
.
Similarly, ABS, PP, and thermoplastic elastomers are widely used in new energy vehicles, directly increasing the demand for styrene and polyolefins
.
In the latter, the replacement of old materials by new materials will not significantly increase the total amount of terminal demand, and more will affect the use of raw materials
.
For example, after the promotion of biodegradable plastics, the original use of plastic films has decreased, which is negative for the price of polyolefin general materials
.

On the whole, the dual-carbon target has limited impact on polyolefins and ethylene glycol, while it is good for PVC and synthetic ammonia (urea) to provide limited production, for soda ash to increase the demand for photovoltaic glass, and for styrene to bring new energy vehicles.
The increase in demand for ABS covers the entire industrial chain for methanol
.
The following is a detailed interpretation of the most influential PVC, methanol and soda ash
.

PVC new capacity is limited: The dual-carbon target has been mentioned above that will limit the output and capacity of PVC, because about 80% of domestic PVC production capacity comes from the calcium carbide process
.
The production of calcium carbide is a strong endothermic reaction, which consumes a lot of electricity.
The cost of electricity accounts for about 40% of the total production cost.
At the same time, the raw material quicklime also emits a large amount of carbon dioxide during the calcination process.
The entire process is high energy consumption and high carbon emissions
.
In the future, there is almost no possibility that the production capacity of calcium carbide process PVC without calcium carbide will be put into production, and the commissioning speed of the ethylene process is very slow.
PVC production capacity is about to reach its peak, and the demand side maintains steady growth, and the potential supply-demand contradiction is bound to increase
.

Calcium carbide supports the price of PVC: Due to the dual control policy implemented in Inner Mongolia and Ningxia, the price of calcium carbide has increased by more than 50% recently, directly driving the price of PVC to a record high, and even the abnormal phenomenon that the price of PVC is higher than that of PP
.
In the future, the start of calcium carbide will continue to be limited, and the low production and high price of calcium carbide will form an effective support for PVC
.

The demand for soda ash has exploded: the carbon emissions and energy consumption of soda ash itself are not high, but the raw material is limestone like calcium carbide, and a large amount of carbon dioxide is emitted during the calcination process, so new capacity has been strictly limited in recent years
.
Glass accounts for 40% of the downstream demand for soda ash.
Benefiting from the rapid development of the photovoltaic industry, photovoltaic glass alone is expected to bring 1.
2 million tons of new demand for soda ash in 2021.
The contradiction of insufficient supply of soda ash will exist for a long time
.

The methanol industry is actively eliminating outdated production capacity: Due to the high cost and high pollution of traditional coal-to-methanol plants with a capacity of less than 400,000 tons, they have been gradually eliminated in recent years.
Only in 2020, the eliminated production capacity will reach 4 million tons, accounting for 4% of the total production capacity
.
At present, 22 million tons of devices with a capacity of less than 400,000 tons are concentrated in the northwestern region.
In the future, they will face the dual pressure of production restriction and elimination.
Under the dual-carbon target, capacity withdrawal may even be accelerated, but the withdrawal speed is not expected to be faster than 1 million.
With the commissioning speed of large-scale plants of more than one ton, methanol production capacity will continue to grow steadily
.

Methanol gas head is still disturbed: In 2020, the production capacity of natural gas to methanol will account for 11.
58%.
Due to the insufficient supply of natural gas and the relatively high price of coal, the proportion of gas head devices will continue to decrease in the future
.
At the same time, since natural gas is a clean energy source and is the focus of increasing the proportion of consumption under the carbon neutral goal, the gas head device will face a shortage of raw natural gas supply more frequently, similar to the coal-to-gas conversion in 2018
.

The potential for new methanol demand is huge: China's methanol fuel demand accounts for only 3%, which is a long way from the 15% in developed countries in Europe and America
.
The Dalian Institute of Physics and Chemistry has demonstrated the feasibility of using methanol fuel to reduce carbon dioxide emissions, that is, using renewable energy such as solar energy, carbon dioxide and water to produce clean methanol liquid fuel
.
In addition, hydrogen production from methanol can replace the process of “hydrogen production by electrolysis of water” known as the “electric tiger”, thereby reducing carbon dioxide emissions.
At present, the consumption of hydrogen production from methanol has reached 4.
8%, which exceeds the traditional demand for formaldehyde and formaldehyde.
Dimethyl ether has become the fourth largest downstream of methanol
.

To sum up, the dual-carbon target will continue to influence and change the supply and demand pattern of chemical products in the next few decades, and it will also generate new trading logic
.