Renewable Matter # 4 / June

The New Chemistry Is Worth $80 Trillion

Interview with Rafael Cayuela

edited by Mario Bonaccorso, interview with Rafael Cayuela

For the chemical industry it is an epoch-making change. The way to sustainability is a journey of no return, fuelled by the need to tackle climate change and energy efficiency challenges, rather than oil price volatility. All this will create an unprecedented business opportunity: $80,000 billion by 2050. Raw materials (more shale gas and biological resources), the kind of products (more sustainable), markets and players will change, with Europe and the United States still in the lead, but Brazil, Russia, India and China are bound to have more and more prominence. Rafael Cayuela, author of The Future of the Chemical Industry by 2050, a book published in 2013 by Wiley about the future of the world’s chemical industry, will discuss such themes with Renewable Matter.

Let us begin with your book, regarded as the Bible by those in the know. Will you help us understand where the world’s chemical industry is heading for?

Over the last ten years, the chemical industry has gradually shifted its focus from operational efficiency and commodities to real innovation and technological convergence. Sustainable chemistry is progressively bound to become the standard of advanced economies, while the emerging economies will have to follow suit, as they will increasingly have to apply more stringent and global regulations. 

The need to make energy use more efficient and to reduce CO2 will entail a considerable cost for the industry, but more importantly a huge business opportunity. In a world ready to live with barely 4,000 grams of CO2 per capita a day by 2050, from 28,000 of 2010, the chemical industry, technology and innovation are to play an extraordinary role. Against this backdrop, the need to reduce emissions and energy use will represent the single biggest business opportunity in human history, up to $80,000 billion by 2050. The chemical industry will be at the forefront of such sustainable solutions.

 

Following this line of reasoning, the plunge in oil prices in the last few months should not have negative repercussions on the choice to invest in renewable resources. Is it the case?

I should think so because the use of biological resources by the chemical industry does not simply depend on economic reasons, but on the need to deal with climate change and to develop a sustainable economy.

Every historical innovation stems from the need to solve a problem. But history should not decide what the problem is, that is a government’s job, then industries must find a solution to it.

Let me give you a historic example: when at the beginning of the Second World War the supply of natural rubber from Southeast Asia was stopped, the United States asked the chemical industry to research in alternative productions. Thus synthetic rubber was invented, also known as GR-S (Government Rubber-Styrene), which subsequently was marketed in record time to meet the needs of the USA and its allies during the Second World War.

 

With regard to the demand side, to what extent do you reckon the demand for biobased products is important, bearing in mind that – according to some market analyses – some consumers are prepared to pay a premium price just to buy sustainable products?

I think this is not a remarkable phenomenon, if we consider the issue in macroeconomic terms. Even assuming that 5-10% of consumers are prepared to pay a surcharge for a green product, we are still talking about the richer countries, so 10 million in Europe and 10 million more in the United States. This alone cannot drive the chemistry market.

 

So do you believe that programs such as the US BioPreferred – supporting demand by forcing public authorities to buy green and implementing a system of standard and labelling for biobased products – could be useful to facilitate the bioeconomy?

I strongly believe that governments have a major role to play in steering towards change. In this perspective, the BioPreferred program, supporting the demand for biobased products, is positive. But we need to make sure that governments should not spell out the solution to the industry. Their task is to pose a problem, as with the above-mentioned example of rubber. Otherwise, market distortions might arise. In order to tackle the challenge of climate change and energy supply, using biological resources is just one of the responses available to the chemical industry. 

 

 

Would shale gas be another viable response?

By all means. Today, the industrial sector – not only the chemical industry – must adopt an overall view taking into account not only the price of raw materials but also CO2, water and waste prices. By using shale gas, CO2 prices are reduced by 30%. So it is doubly useful in that it keeps the CO2 and oil prices low with an added effect on the chemical industry because it strengthens its tendency to focus on its specializations rather than commodities. The employment of shale gas to obtain low-cost methane has dramatically revolutionized the American chemical sector and it is having a strong impact on China as well.

Having said that, one should be aware that, between 2008 and 2010, oil prices have reached extremely high peaks, which are unlikely to occur again. This sudden rise was started when China joined the WTO at the beginning of 2000, with its strong demand for energy and its poor energy efficiency. Today China is reaching Europe’s and the USA’s energy efficiency and that means less millions of gallons of oil each year.

The economy and energy scenarios are evolving rapidly and it is difficult to make forecasts. One thing is certain: it looks like we had been stranded in the desert for years, forced to pay water like champagne. But today we are no longer in that situation.

 

The focus on the CO2 emissions should make us say that a refinery employing not locally-sourced biomass is not sustainable. In Italy the reconversion of ENI refinery in Sicily into a biorefinery employing oil palm imported from Malaysia is highly controversial. What do you reckon?

Clearly, if biomass is imported from faraway countries, CO2 emissions are not reduced. It is fundamental that biomass be locally sourced in order for the integrated biorefineries to be truly connected with the nearby environment. Of course, the best solution is not always attainable. In ENI’s case, in Sicily, the need to protect jobs prevailed over the estimates of environmental sustainability.

 

To summarize, can the way towards sustainability be regarded as a journey of no return for the chemical industry?

I truly believe so. The chemical industry will be required to cope with increasingly stringent, global, targeted and efficient rules. It will therefore have to be more and more proactive. Companies and industries able to forestall the next regulations and to be in the lead will dominate the future.

Technical convergence and technological collaboration will be at the forefront of what in my book I refer to as “the third industrial revolution”. Innovation will be the core of the chemical industry. The ability to work along the whole of the value chain and to innovate through a wide variety of technologies and sectors will underpin innovation and development. To this end, new business paradigms and legal frameworks as well as new competences and performance metrics will have to be shaped.

Businesses, industrial sectors and countries that will not be able to think strategically and to innovate and adapt to the new challenges of the climate change will not survive.