Decarbonizing Refining and Petrochemicals: Big Challenges, Big Opportunities
New RMI analysis reveals that US refineries emit almost 30 percent more than has been disclosed through industry self-reporting.
End-use combustion of finished products like gasoline and jet fuel accounts for most of the total emissions from oil and gas. But the transformation of crude oil and natural gas into these products is an underappreciated and highly emissions-intensive segment of the value chain.
In the United States alone, the refining and petrochemical industries emit the CO₂ equivalent (CO₂e) of 100 new coal-fired power plants annually. Whereas refining breaks down crude oil into its various components to make fuels like gasoline and diesel, the lesser-known petrochemical industry is responsible for transforming oil and gas into everyday products like plastics and pharmaceuticals. Despite these two industries’ significant climate impacts, until recently, the only comprehensive estimation of the emissions produced by both the refining and petrochemical industries came from data reported by the companies themselves.
The Emissions Out the Gate: State of the Refining & Petrochemical Industries report, developed with generous support from Bloomberg Philanthropies, helps industry leaders and policymakers understand the emissions associated with refining and petrochemical production so they can take next steps with transparent, adequate knowledge of current and projected climate impacts.
Given the scale of emissions in these industries, incomplete reporting can seriously hinder climate action. For perspective, in 2019, the global refining sector accounted for 1.4 gigatons (Gt) of CO₂e in Scope 1 emissions. (These are emissions that a company produces directly — for example, by burning fuel to operate machinery.) The petrochemical sector emitted 1.6 Gt CO₂e. Together, the refining and petrochemical industries produce more emissions than heavy manufacturing industries like steel (2.3 Gt), aluminum (0.3 Gt), or cement (1.5 Gt).
The refining and petrochemical industries help turn unusable crude oil and gas into thousands of products — from gasoline and jet fuel to plastics, pharmaceuticals, lubricants, and asphalt. Petroleum-derived products are not only ubiquitous, but there are multiple production pathways across a web of highly technical processes. These realities make it difficult to quantify emissions across the value chain, and in turn complicate efforts to decarbonize the sector.
What the Data Shows
1. Although our modeling supports the accuracy of petrochemical data, we find that current reporting in the refining industry is inaccurate.
Our estimate of Scope 1 emissions from US refineries in 2019 is 29 percent higher than the self-reported emissions data from industry, with a dramatic discrepancy in methane emissions specifically.
2. The United States is responsible for a significant portion of global refining and petrochemical capacity and direct emissions, while capacity growth outside of the United States is a concern.
In 2019, the United States contributed 19 percent and 18 percent of global refining capacity and emissions, respectively.
In the petrochemical industry, the United States made up 13 percent and 10 percent of 2019 global capacity and emissions, respectively. This gap highlights that emissions-intensive fuel sources and feedstocks are more commonly used outside the United States, which is concerning considering the rapid petrochemical growth projected in emerging markets.
3. 2050 could look very different depending on the path forward.
Cumulative US refining and petrochemical emissions could make up anywhere from 11.6% to 14.2% of the US carbon budget to 2050, according to our estimates. The report considers two 2050 scenarios: a “Global Base Case” holding that global production practices and industry trends continue as they are today, and a “Global Low Emissions Case” that assumes countries meet their announced climate pledges in full.
In the context of these two scenarios, worldwide refining emissions would range from 0.7 to 1.2 Gt CO₂e in 2050. Global petrochemical emissions would fall between 1.1 and 2.1 Gt CO₂e in 2050. Together, Scope 1 emissions from refining and petrochemicals would total 1.8 to 3.3 Gt CO₂e.
According to the Intergovernmental Panel on Climate Change, cumulative global emissions must not exceed a budget of 764 Gt CO₂e from 2020 onward in order to preserve a 50 percent chance of limiting warming to 1.5°C. As seen in the first tab of the graph above, both industries adhering to the Global Low Emissions Case would abate 22.9 Gt CO₂e by 2050, effectively reducing the industries’ consumption of the global carbon budget from 13 percent to 10 percent. In the United States, according to Climate Action Tracker, the 1.5°C budget from 2020 to 2050 is 88.7 Gt CO₂e. Cumulative US refining and petrochemical emissions to 2050 would range from 12.6 Gt CO2e in the Base Case to 10.3 Gt CO₂e in the Low Emissions Case, representing an opportunity to abate 2.3 Gt CO₂e and reduce the share of the remaining national carbon budget from 14.2 percent to 11.6 percent.
The third and fourth graph tabs plot the projected emissions for refining and petrochemicals separately, revealing the diverging trajectories of the two industries. Both scenarios see refining emissions decreasing throughout the coming decades. In contrast, petrochemical emissions are expected to increase significantly in both scenarios up to 2030, at which point the aggressive decarbonization practices in the Low Emissions Case begin to bring emissions down.
4. Process matters.
The report highlights how a single petrochemical can be produced from different fuels and processes and that each of these production routes differ in emissions intensity.
Moving to lower emissions intensity routes can lead to significant emissions reductions. For example, if half of the ammonia currently produced from coal were switched to a gas feedstock, the total emissions of ammonia production would drop 15 percent.
RMI’s recently released Oil Climate Index plus Gas (OCI+) web tool, gives industry leaders and policymakers greater visibility on greenhouse gas emissions throughout the oil and gas supply chain. This information can be used to inform production route decisions throughout the refining and petrochemical industries.
Call to Action
Reducing oil and gas demand across sectors via technological, policy, and regulatory solutions is the most effective way to decarbonize the refining and petrochemical industries. Even as the United States is on the cusp of reducing petroleum-based transport fuel demand with the rise of electric vehicles, oil and gas consumption in other segments could remain strong for years to come. Complementary interventions will be critical in driving down demand.
Even as demand-side solutions are gathering momentum, reducing operational (Scope 1 and Scope 2) emissions should be a top priority. The most urgent focus areas include data collection and transparency, operational improvements, and production route adjustments. Improving data transparency, particularly in the largely opaque petrochemical industry, is a cost-effective and efficient way to better understand the extent of the problem — and to both identify and advance near-term decarbonization opportunities. Operational improvements, like the electrification of equipment — and increasing the use of renewable power — can substantially reduce industry-level emissions. Lastly, production route adjustments, like switching feedstocks, would produce immediate emissions reductions.
Near-term changes can reduce emissions from the refining and petrochemical industries — and help us limit warming to 1.5°C. But it is crucial that the industry moves quickly. By acting now, in line with the Low Emissions Case, these two industries can save 3 percent of the total carbon budget by 2050.
For more information about the Emissions Out the Gate report, please contact TJ Conway (email@example.com) or visit the Climate Intelligence Program website.