How Southeast Asia’s Low-Emission Chemicals Sector Can Expand

With chemical production set to grow rapidly, decisions made this decade will determine whether Southeast Asia locks in high emissions or accelerates cleaner production pathways.

Southeast Asia’s chemicals sector is enormous, economically indispensable, and poised for rapid expansion. Nowhere is that more evident than on Singapore’s Jurong Island, an industrial hub built on reclaimed land that hosts over 100 global energy and chemicals companies and employs over 27,000 people. These chemical plants and refineries produce the plastics, fertilizers, solvents, and advanced materials that power the region’s manufacturing, agriculture, and urban development.

This scale also makes the sector one of Southeast Asia’s largest and fastest-growing sources of emissions. Jurong Island alone accounts for over half of Singapore’s emissions, and direct emissions from refining and petrochemicals make up about a third of the country’s total. Comparable patterns appear in regional hubs such as Thailand’s Map Ta Phut, Southeast Asia’s largest petrochemical complex; Indonesia’s ammonia and oleochemical centers; and Vietnam’s rapidly expanding manufacturing zones, where chemical production remains heavily dependent on fossil energy and resource-intensive feedstocks. As demand rises, so do pressures on land, water, and air — unless cleaner production pathways are adopted.

While Southeast Asia accounts for just 4.5 percent of global chemicals output today, it is becoming a growth engine for the sector. The region is expected to capture about 13 percent of the global chemicals market growth this decade, expanding nearly three times as fast as the world as a whole. This surge could have significant climate implications, yet it also represents a significant decarbonization opportunity: the chance to steer rising demand toward cleaner, lower-emissions chemical production before additional emissions make it even harder for the region to reach its reduction targets.

Singapore is showing what it looks like to seize that opportunity. With a national commitment to achieve net-zero emissions by 2050 and an interim target of reducing emissions 45–50 percent by 2035, the country has implemented the region’s strongest carbon tax and embedded decarbonization into economic planning across agencies such as its Ministry of Trade and Industry (MTI), Economic Development Board, and Jurong Town Corporation (JTC).

Delivering these ambitions will depend not only on policy targets but on access to commercially viable technologies that can be piloted, tested, and scaled within existing industrial systems. Many of the required solutions, from low-carbon fuels to circular feedstocks and advanced process technologies, are emerging from startups and innovation ecosystems rather than incumbent producers. As US and European markets mature, Southeast Asia offers a complementary growth frontier for these innovators, with a rapidly expanding industrial base paired with increasingly coordinated and predictable policy signals. For American companies seeking a durable, business-friendly environment in which to scale internationally, the region presents a timely opportunity to expand into high-growth markets that are actively building their low-carbon industrial infrastructure.

JTC’s “Sustainable Jurong Island” strategy outlines pathways to decouple industrial growth from emissions through sustainable and circular products, carbon capture, utilization, and storage (CCUS), and CO₂-conversion, efficiency upgrades in refineries and crackers, expanded renewable energy, and low-carbon hydrogen pilots. To deliver on this strategy, JTC and Third Derivative recently announced a collaboration to expand the pipeline of climate-tech startups able to pilot solutions on Jurong Island — positioning the hub as a testbed for the next generation of low-carbon technologies and providing startups with transformative access to industrial-scale pilot and deployment opportunities.

Momentum is similarly growing across the region. Thailand’s petrochemical leaders are investing heavily in low-carbon materials, including SCG’s expansion of its biodegradable plastics line, PTT Global Chemical’s USD 2.8 billion program focused on bioplastics, mechanical and chemical recycling, and green chemistry pilots, and joint initiatives within the Eastern Economic Corridor to scale specialty polymers and circular feedstocks.

Indonesia, already the world’s fifth-largest ammonia producer, is launching an ambitious clean hydrogen and ammonia strategy, anchored by 17 clean ammonia projects led by Pupuk Indonesia, and partnerships with Japan and Saudi Arabia to build export-oriented low-carbon ammonia capacity. Vietnam and the Philippines are expanding manufacturing and electricity demand at a breakneck pace; and Malaysia’s fast-growing data center industry is generating new demand for functional chemicals, specialty materials, and cleaner power. Together, these trends signal that Southeast Asia is primed to become a proving ground for innovations in the chemicals sector.

Exhibit 1: Chemical Sub-Sectors and their respective industrial hubs across ASEAN

The Chemicals Innovation Landscape Across Southeast Asia

To help scale these innovations, Third Derivative and RMI launched two initiatives focused on industrial decarbonization: the Industrial Innovation Cohorts, focused on supporting groundbreaking startups in the cement, steel, and chemicals sectors, and the Future Industries Partnership, which builds on the foundations of Industrial Innovation Cohorts with a specific focus on deploying solutions in Asia and the Middle East, where industrial growth and rapid urbanization are driving urgent demand for scalable, low carbon technologies. Based on insights from these initiatives, Third Derivative categorizes innovations into three buckets that are needed to reach net-zero emissions across heavy industry:

1. Make Less: Innovations to reduce demand for virgin feedstocks through materials substitution, recycling, upcycling, and increasing efficiency in supply chains and material use — in addition to non-technology efforts like reducing overconsumption and overproduction.
2. Make Better: Reducing emissions in existing processes through direct electrification, materials feedstock innovations, and process efficiency.
3. Make New: Disruptive technologies and novel processes to fundamentally change how materials are produced, with low or zero emissions from the start.

* Note: The startups mentioned below are representative of the types of technology needed to advance “Make Less,” “Make Better,” and “Make New” pathways in the region. The companies are not necessarily currently operating in Southeast Asia.

Make Less: Scaling the Circular Economy

Reducing virgin material use not only cuts upstream extraction impacts but also lowers process emissions across major chemical hubs. Much of the region’s feedstock, whether crude oil, palm oil, or natural gas, is fossil-based or land-intensive. As demand for plastics, fertilizers, and oleochemicals grows, so does the strain on waste systems, ecosystems, and energy supply.

“Make Less” refers to strategies such as material substitution, reuse, recycling, and process efficiency that reduce reliance on virgin feedstocks and, ultimately, plastic waste. In Southeast Asia, this includes not only fossil-based inputs but also land-intensive bio-based feedstocks, such as palm oil, which underpins a large part of the region’s oleochemicals industry. Converting plastic waste into fuels or new materials eases landfill pressure; precision nutrient application reduces fertilizer overuse; and using residues in oleochemicals limits further land conversion. Startups like WasteX produce biochar from agricultural residue, allowing farmers in Indonesia and India to increase their yield up to 95 percent, and reduce fertilizer use by 50 percent. Reusable packaging, like Alterpack’s fully biodegradable packaging made from spent grain, lowers demand for virgin plastics going into single-use products.

Circularity is becoming essential for reducing emissions, unlocking new value streams, and maintaining competitiveness. Startups like ACE Green Recycling offer clean alternatives, recovering battery materials through a zero-emissions process that converts waste into high-purity lithium carbonate, graphite, and other battery-grade chemical intermediates that can re-enter cathode supply chains via third-party refining. GreenLIB addresses an earlier bottleneck by using low-temperature, modular pre-treatment to upgrade crude black mass into clean, refinery-ready critical minerals before it enters global supply chains. Zincovery complements these approaches by selectively recovering high-value metals such as zinc from industrial residues and waste streams, creating circular feedstocks for downstream chemical and materials applications. Together, these innovations reduce reliance on virgin mining and create cleaner, more efficient supply chains for the critical minerals increasingly required across Southeast Asia’s chemicals, manufacturing, and energy-storage industries.

The ability to scale circular solutions varies across the region. Singapore, Malaysia, and Thailand are relatively well-positioned due to strong policy frameworks, centralized industrial zones, and mature recycling systems. In Singapore, investments in chemical recycling and closed-loop manufacturing on Jurong Island, including Shell’s upgrade to pyrolysis oil and EDB’s Circular Economy Roadmap, are creating a national testbed for circular innovation. Malaysia benefits from an existing recycling base and a national plan to phase out single-use plastics. Thailand, home to major polymer and petrochemical players, is advancing circularity through public-private partnerships and investments in bioplastics and recycling infrastructure.

In contrast, Indonesia and the Philippines face structural barriers, including archipelagic geography, decentralized waste management systems, and high volumes of low-value plastics such as sachets. Still, both offer high-impact opportunities, especially in oleochemicals, where waste valorization of palm residues could reduce land pressure. Vietnam sits in the middle. Its export-oriented manufacturing base is under rising pressure from global buyers to reduce embedded carbon in plastics, packaging, and intermediate materials, but limited formal recycling infrastructure exists.

Embedding circularity will require strategies tailored to each country’s waste flows, industrial context, and regulatory environment. With the sector growing faster than the global average, early action offers a chance to guide expansion toward lower emissions and resource use and more resilient supply chains.

Make Better: Electrifying and Optimizing Production

Southeast Asia’s chemical industry is set to double by 2050. Much of this growth will come from expanding existing plants that rely on fossil-based heat for drying, distillation, separation, and other thermal processes. Without intervention, coal could still supply 30 percent of the region’s industrial energy by mid-century, far exceeding the global average of 19 percent, with process heat remaining the dominant driver. Reducing emissions from these systems is essential if the region is to maintain industrial competitiveness in a decarbonizing global market.

“Make Better” focuses on electrification, energy efficiency, and process optimization. The most promising approaches fall into four groups:

Low-temperature processes. Many drying, washing, and separation steps operate below 130°C and are among the most straightforward to decarbonize. These applications can be electrified using industrial heat pumps, supported by waste heat recovery and low-temperature solar thermal where conditions allow. Startups are already demonstrating how these solutions reduce fuel consumption, lower emissions, make use of the heat that would otherwise be wasted, and be deployed with minimal disruption. AtmosZero’s modular electric boiler, which replaces fossil-fired steam production with a high-efficiency heat-pump system, delivers low-temperature steam using clean electricity, allowing chemical producers to decarbonize a major emissions source with minimal retrofit requirements. Skyven Technologies recovers waste heat and upgrades it into usable steam and process heat through industrial heat pumps, while PwrCor enables facilities to convert low-grade waste heat into electricity or useful thermal energy.

Medium-temperature processes. Distillation and evaporation require higher temperatures between 130°C and 500°C and account for most heat-related emissions in the chemical industry. A growing set of technologies can reduce both energy demand and emissions at this temperature range, including advanced membrane separation, modular electric boilers, thermal batteries, and emerging high-temperature heat pumps. Thermal batteries, such as those developed by Kraftblock, NOC Energy, and Antora, can complement these electrification approaches by storing heat generated with electricity and delivering it on demand. In the near term, these systems are best suited to medium-temperature applications such as steam generation, drying, and distillation, enabling facilities to shift energy use to periods of low-cost, renewable electricity while maintaining reliable process heat. Via Separations replaces energy-intensive distillation with membranes that cut energy use by up to 90 percent. Additionally, Membravo’s membranes recover resources and reduce costs in hydrogen, water, and chemical processes across industries. In regions with suitable resources, geothermal heat and steam can also be delivered directly for power and to industrial users, offering a firm, low-carbon source of medium-temperature process heat in countries such as Indonesia or the Philippines.

High-temperature processes. Steam cracking and synthesis of ammonia or methanol require temperatures above 500°C, where electrification remains challenging. Hyperheat is tackling this problem through its high-temperature electrical e-furnace, which can be retrofitted into existing systems to produce heat up to 2000°C. As mentioned above, some thermal battery startups have begun pilots targeting process heat up to 1000°C, and most thermal battery startups are targeting these higher temperature processes longer term as challenges around material degradation and heat delivery at higher temperatures are solved. While electrified and other renewable thermal solutions are being developed and scaled, using alternative fuels, like biomass or hydrogen, can provide incremental emissions reductions with limited capital expenditure. For example, steam crackers on Jurong Island generate hydrogen as a co-product, which can be blended into existing boilers—many of which can already accept 20–50 percent hydrogen—to displace fossil fuel use in process heat. Additional examples are Oort Energy, which has developed high-efficiency proton exchange membrane (PEM) electrolyzers that lower the cost and speed of deployment of clean hydrogen supply, and HYDGEN, which designs modular anion exchange membrane (AEM) and PEM electrolyzer systems optimized for decentralized, on-site production of ultra-high-purity green hydrogen. Aurora Hydrogen offers a complementary approach by producing hydrogen via methane pyrolysis, generating low-carbon hydrogen without direct CO₂ emissions and creating an alternative pathway for sites where electrification or large-scale electrolysis may be constrained. These technologies allow chemical producers to integrate hydrogen more easily into their current processes directly on-site, without major infrastructure upgrades.

Cross-cutting solutions. Digital tools such as AI-enabled controls, predictive maintenance, and real-time diagnostics can improve efficiency across all temperature ranges. Heat recovery and flexible operations that shift energy use to periods of higher renewable availability offer additional gains, particularly for mid-sized producers.

Clean and affordable electricity remains the primary barrier to scaling these solutions. Regional grids are still fossil-heavy, and procurement rules often restrict industrial users from accessing renewables directly. Reforms that allow embedded generation, direct procurement, and greater grid flexibility will be essential in implementing these technological solutions.

In the Philippines, where industrial users already consume over 30 percent of national electricity and demand is expected to quadruple by 2050, electrified steam and process heat offer especially high-impact opportunities. Rich in renewable energy resources, the country is well-positioned to meet its growing demand with more solar, wind, biomass, and geothermal. Indonesia’s vast geothermal potential—29 GW, the largest in the world—could support stable, low-carbon steam for chemical production if paired with the right infrastructure and regulatory tools to help support its critical mineral processing load growth. GeoAgni is developing a modular, closed-loop geothermal system that can generate 24/7 baseload clean energy onsite at industrial parks, data centers, or commercial buildings. Thailand and Malaysia are also expanding solar and industrial energy-efficiency programs, creating openings for electrification technologies. As chemical production expands, improving existing systems through electrification and optimization offers one of the most practical paths to lower emissions without inhibiting industrial development.

Make New: Scaling Defossilized Chemical Pathways

Optimizing existing systems is necessary, but fully decarbonizing the chemical sector will require rethinking how chemicals are made. “Make New” refers to next-generation pathways that eliminate fossil inputs altogether through green hydrogen, captured CO₂, sustainably sourced biomass, and novel catalysts or reactor designs.

As Southeast Asia continues building out its industrial base, it has the opportunity to integrate advanced, low-carbon production pathways from the outset. This creates room to deploy cleaner production routes from the start, avoiding the lock-in of legacy facilities that may operate for decades. The region’s geography and resources also create structural advantages: Indonesia and Malaysia have large renewable energy endowments suitable for green hydrogen and ammonia; Singapore is positioning itself as a hub for low-carbon fuels and CO₂ utilization; and Vietnam and the Philippines generate significant agricultural residues that can anchor bio-based chemical production.

Early signals of this shift are already visible. Indonesia has launched a national roadmap for green hydrogen and ammonia and is advancing multiple low-carbon ammonia projects anchored by Pupuk Indonesia. Singapore recently received its first green methanol delivery for bunkering, marking an early application of CO₂-derived fuels. These developments are supported by emerging policy tools, including incentives and early commitments from the shipping, aviation, and logistics sectors.

A growing number of global innovators, including several supported by Third Derivative, are pioneering technologies that illustrate how defossilized chemical production could take shape in Southeast Asia. CO₂-conversion technologies developed by companies including Oxylus and Aerleum turn captured carbon into e-methanol, synthetic fuels, and other chemical intermediates relevant to Singapore’s emerging low-carbon fuels and bunkering ecosystem. Bloom Biorenewables’ aldehyde-assisted fractionation (AAF) technology transforms lignocellulosic biomass, such as agricultural residues abundant in Southeast Asia, into high-value chemical feedstocks that align with the needs of many industries across Southeast Asia, such as Thailand and Malaysia’s large packaging and specialty-chemicals industries, as well as Vietnam’s fast-growing textiles and consumer-goods manufacturing base. Modular green ammonia innovators such as Nium, Andros, and Ammobia offer alternatives to fossil-based ammonia production that could be beneficial in countries like Indonesia, Malaysia, and Vietnam, where fertilizer and industrial chemical demand continue to rise. Regional innovator RWDC Industries is commercializing bio-based polymers that can replace petroleum-derived plastics.

Southeast Asia is well-positioned to become a proving ground for these emerging technologies. Demand for ammonia, methanol, polymers, and specialty chemicals is rising quickly across the region, and many facilities are being built or expanded today. This opens the door to piloting and scaling novel production routes rather than retrofitting decades-old assets. The region’s ports, refineries, and industrial zones also give it an advantage in demonstrating new molecules such as green methanol, CO₂-derived intermediates, and bio-based specialty chemicals.

Realizing the full potential of Make New will require accelerated investment, industrial partnerships, and clear policy signals. High capital costs, uncertain offtake, and supply chain readiness remain barriers, but the rewards are substantial. Southeast Asia has an opportunity that few regions possess: to align its industrial expansion with low-carbon pathways from the beginning and to position itself as a global leader in next-generation chemical production. The next step is scaling promising pilots into commercial deployment.

Make Southeast Asia Competitive

Southeast Asia’s chemical sector is entering a period of rapid growth, and without coordinated action this expansion risks locking in decades of high-emissions production. Yet this same growth presents a rare opportunity: governments are setting ambitious decarbonization targets, external pressures from export markets are rising, and new policies, pilots, and investment programs are opening doors for cleaner feedstocks, more efficient processes, and novel production pathways.

As the region works to strengthen supply chains, improve resource efficiency, and diversify feedstocks, companies that act early on circularity, electrification, and low-carbon innovation will secure cost advantages and long-term competitiveness. Real progress will depend on pairing the right technologies with the right partners — startups that bring solutions, corporates that can test and deploy them, and investors who can help scale what works. By accelerating these partnerships now, Southeast Asia can turn a looming emissions challenge into a platform for industrial resilience and global leadership in the next generation of chemical production.

Acknowledgements: The authors wish to thank HSBC and Global Industry Hub for their generous funding support of Third Derivative.