Farewell to the Fossil Era: How Is the Chemical Industry Moving Toward a Zero-Carbon Future?

While technology forms the foundation of this transition, economic viability and policy support are the decisive factors determining its speed and scale. The chemical industry’s shift toward net-zero emissions faces multiple economic challenges. Currently, green chemicals are generally more expensive than conventional fossil-based products. For example, 'green' ethylene—produced using renewable energy and CO₂ captured directly from ambient air—costs approximately three times as much as conventional ethylene. This cost gap stems primarily from the costs of renewable energy, capital expenditures for electrolyzers, and initial investments in carbon capture, utilization, and storage (CCUS) technologies. Costs are expected to decline gradually as technologies mature and production scales up. Historical experience shows that clean technologies such as solar photovoltaics, wind power, and lithium-ion batteries have all undergone significant cost reductions. Similarly, electrolyzer manufacturing and carbon capture technologies are also expected to follow comparable learning curves. The International Renewable Energy Agency (IRENA) forecasts that by 2030, alkaline electrolyzer system costs could fall by 40–60%, while proton exchange membrane (PEM) electrolyzer costs could drop by 50–70%. This would significantly reduce the production costs of green hydrogen and its derivatives. Carbon pricing mechanisms will play a crucial role in narrowing the cost gap between fossil-based and renewable chemicals. Currently, the European Union Emissions Trading System (EU ETS) carbon allowance price has approached €100 per tonne of CO₂—such a carbon price level would nearly double the cost of fossil-based hydrogen. As global carbon pricing mechanisms develop and mature, the environmental costs of fossil-based chemicals will be progressively internalized, thereby enhancing the competitiveness of green chemicals. Reconstructing supply chains and infrastructure also requires massive investment. Shifting from centralized fossil feedstock supply to distributed renewable feedstock supply necessitates building entirely new collection, transportation, and storage systems. In particular, hydrogen infrastructure—including production, storage, transport, and distribution networks—requires hundreds of billions of dollars in investment. Policy support is essential for this transition. Governments can create favorable conditions for the chemical industry’s transformation through various instruments, including R&D funding, tax incentives, carbon pricing, green public procurement, and standard-setting. Europe’s 'Fit for 55' package sets clear emission reduction targets and supportive measures for the chemical industry. The U.S. Inflation Reduction Act offers up to $3 per kilogram in tax credits for green hydrogen production, dramatically improving the economics of green hydrogen projects. China, meanwhile, has designated hydrogen as a strategic emerging industry in its 14th Five-Year Plan, supporting technological innovation and pilot demonstrations for green hydrogen. International cooperation is equally indispensable—especially in establishing a global green hydrogen market and harmonized standards. International hydrogen trade requires unified certification systems, safety standards, and quality specifications. Organizations such as IRENA and the Hydrogen Council are actively advancing the development of these international standards. 11. Transition Roadmap: Phased Progress and Regional Differences Achieving net-zero emissions in the chemical industry cannot happen overnight; it requires a clear, phased roadmap. Based on technology maturity, economic feasibility, and implementation complexity, the transition process can be divided into three stages. Stage 1: Near-Term Transition (up to 2030) This stage focuses on leveraging existing infrastructure, using carbon capture, utilization, and storage (CCUS) to reduce carbon intensity. Blue hydrogen and CCUS-integrated methanol production can serve as starting points, alongside improvements in energy efficiency and electrification.

[Interpretation] The European Chemical Industry Action Plan — PFAS Provisions

On 8 July 2025, to secure the future of one of Europe’s most critical industrial sectors, the European Commission launched an ambitious and comprehensive action plan to revitalize and modernize the EU chemical industry. Background ・ The chemical industry is the EU’s fourth-largest manufacturing sector, facing challenges including declining global market share and persistently high energy prices. Objectives ・ To promote clean production and the circular economy, and to strengthen global competitiveness. Key Focus Areas ・ Enhancing production resilience ・ Ensuring secure energy supply and decarbonization ・ Creating leading markets and fostering innovation ・ Simplifying the regulatory framework Measures ・ Establishing a Critical Chemicals Alliance to advance international trade, and to support the renewable hydrogen and bioeconomy sectors. Summary of PFAS-related Provisions ・ Objective: The European Commission plans to ban PFAS in consumer applications (e.g., cosmetics, food-contact materials, and outdoor apparel), while permitting their continued use in industrial applications only in critical sectors (e.g., health and defense), subject to strict conditions and ongoing development of alternatives. ・ Monitoring and Governance: A EU-wide PFAS monitoring framework will be established to centralize data, identify pollution hotspots, and facilitate the implementation of science-based solutions. ・ Remediation and Innovation: Emphasizing the 'polluter pays' principle, the plan prioritizes cleanup of contaminated sites and supports research and innovation to lower remediation costs and accelerate the transition to safe alternatives. Amid rising energy costs, weak demand, and intensifying global competition, this initiative lays out a strategic roadmap designed to bolster the chemical industry’s resilience, accelerate innovation, and drive green transformation. The plan represents a pivotal step in safeguarding the chemical industry’s central role in the European economy—a sector underpinning diverse fields ranging from healthcare and clean technologies to agriculture, defense, and construction. Executive Vice-President for Prosperity and Industrial Strategy, Stéphane Séjourné, stated: 'Chemicals are the mother of all industries—over 96% of industrial products rely on chemicals.' 'The Chemicals Action Plan unveiled today is our business blueprint to secure this vital sector’s future in Europe. It covers all levers for growth: from measures supporting production—ensuring we retain steam crackers and chemical production facilities in Europe—to trade defense tools protecting our chemical companies from unfair global competition—and to guaranteeing domestic demand for clean, 'Made-in-Europe' chemicals.' Enhancing Competitiveness and Strategic Resilience At the heart of the Commission’s proposal lies the creation of a 'Critical Chemicals Alliance', uniting Member States with industry stakeholders to prevent plant closures, support key production bases, and reduce external dependencies. This alliance will coordinate EU- and national-level investments—including Important Projects of Common European Interest (IPCEIs)—and provide targeted support to infrastructure essential for sustaining critical industrial ecosystems. To ensure fair global competition, the Commission will strengthen its trade defense arsenal, enabling rapid responses to foreign dumping or market distortions. Regulatory oversight of chemical imports will also be reinforced via the existing Import Monitoring Task Force, protecting domestic producers from unfair practices. Addressing Energy Costs and Accelerating Decarbonization

Podcast: Europe chemicals sector needs new ways of evaluating low-carbon technologies

22 hours ago

Former Dow executive Rafael Cayuela discusses in a Think Tank podcast how Europe's petrochemical industry must find new ways to evaluate low-carbon technologies amidst increasing global competition.

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2026-10-30

Podcast: Europe chemicals sector needs new ways of evaluating low-carbon technologies

Podcast: Europe chemicals sector needs new ways of evaluating low-carbon technologies

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