Pathway to Liftoff
Decarbonizing Chemicals and Refining

The U.S. chemicals & refining sectors are key economic drivers, employers, and export commodities.

U.S. chemicals production and oil refining contribute ~8% to GDP and are critical for energy security.¹ These sectors produce primary fuels for transportation, power, and heat; provide essential inputs to widely used downstream products, including plastics, fertilizer, and pharmaceuticals; and represent major U.S. export commodities.

Chemicals production and refining accounted for ~11% (~533MT) of energy-related carbon dioxide (CO2) emissions in 2021 and ~38% of all industrial energy-related CO2 emissions .^i,^ii,ⁱⁱⁱ This amount is equivalent to 1.5 times the total emissions of New York State, or one-third of all annual emissions from U.S. transportation.^iv,^v

The chemicals & refining sectors are not on pace to meet national decarbonization goals. Absent swift and widespread measures to decarbonize production emissions, the chemicals & refining sectors will continue to be major contributors to U.S. emissions over the coming decades.²

To remain on track with national industrial decarbonization goals, chemicals & refining production must reduce emissions by ~35% through 2030 and more than ~90% by 2050. Today through the mid-2030s, ~20% production emissions reductions could be achieved by the application of a suite of measures that are economic now without further government support. These measures take place within the existing footprint of a facility and could offer at least a ~10% internal rate of return (IRR) in the current policy environment. In addition, ~15% of production emissions in 2030 could be abated through (A) grid decarbonization and (B) demand reduction measures.

A Phased Approach

The decarbonization pathway could evolve over a phased approach to 2050.

2023–2030

Phase 1: Near-term acceleration of deployable pathway enablers

(i) accelerating energy and operational efficiency measures at most facilities, requiring a ~10% efficiency improvement at >80% of chemicals & refining facilities during this phase
(ii) adopting select electrification measures with a strong business case today and procuring or developing clean electricity in chemicals & refining facilities to reduce power-related emissions, accelerated with 48E incentives⁴
(iii) installing CCS on high-purity streams (e.g., natural gas processing with streams of >90% CO¬2 concentration), accelerated with 45Q incentives^vii
(iv) Continuing to use existing technologies (e.g., bio-based feedstocks to replace petroleum in existing refineries)⁶

Together, these levers represent a ~$90–120B investment opportunity by 2030 that could be implemented largely “inside the fence” of existing plants.⁷ Swift and widespread deployment of these economic measures is critical before turning to more costly measures down the road.⁸

2023–2030

2030–2040

Phase 2: Scaling decarbonization measures currently being demonstrated

Cost-effective deployment at scale of the decarbonization levers demonstrated during Phase 1 is key to making progress toward deep decarbonization across these sectors beyond 2030. In particular, the chemicals & refining industries will ideally be able to utilize the scaled infrastructure for clean hydrogen and CCS developed in the 2020s and early 2030s. Medium-term solutions will leverage levers (i) through (v) and further decarbonize transportation and the grid.

Additional emissions reduction in this timeframe will be driven by two factors:

(vi) adopting CCS on dilute emissions streams and
(vii) rapidly electrifying low- and medium-temperature heat sources

Additional GHG emissions reductions could be driven by the expanded use of biofuels and alternative feedstocks, which displace fossil carbon and have been shown to have lower process-based life cycle GHG emissions than fossil fuels.

2030–2040

2040–2050

Phase 3: Achieving net zero with technologies currently in R&D and pilot

Achieving net zero for downstream chemicals production and refining by 2050 would require near-universal adoption of the previously mentioned decarbonization measures (i) through (vii), plus several additional levers. Taken together, demand reduction for fuels and decarbonizing the power sector could reduce emissions of downstream chemicals production and refining by an additional ~20% by 2050.

Success after 2040 requires:

Increased overall adoption of clean firm power with storage (e.g., long duration energy storage or thermal energy storage) for low- and medium-heat electrification
Full adoption of clean hydrogen in ammonia production and significant uptake in refining, with at least 7–8 MTPA of clean hydrogen by 2050 (up from ~3–5 MTPA by 2030)
CCS on dilute streams could play a critical role in abating the remaining emissions gaps and would be needed to capture up to ~170 MTPA of CO2 in the chemicals & refining sector.

To achieve full net zero in these sectors, carbon removals would be needed for the remaining ~7% of emissions, including those from incomplete carbon capture.

2040–2050

Achieving decarbonization across the chemicals & refining industries will be challenging without end-use shifts by consumers and coordinated efforts across all relevant companies and governments.

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