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Barriers, Challenges, and Opportunities for Chemical

Companies to Set Science-Based Targets

December 2020

This document presents the results of the Science Based Targets initiative’s chemicals sector

scoping project with considerations for further target-setting method development. To

summarize existing resources and support further work, the document provides an overview of

current chemical company science-based targets, a proposed sector boundary for company

activities, results of a stakeholder survey, and considerations for further research.

SBTi Chemicals Scoping Document

December 2020

Table of Contents

Acknowledgments .................................................................................................................. 3

1. Introduction and Overview ............................................................................................... 4

2. SBTi Background and Current Targets ............................................................................ 6

SBTi Target-Setting Methods ....................................................................................... 6

SBTi Criteria ................................................................................................................ 6

Chemical Companies with SBTs .................................................................................. 8

3. Scope and Composition of Chemicals Sector .................................................................10

Disaggregating the Chemicals Sector .........................................................................14

4. Summary of Stakeholder Survey Results .......................................................................18

5. Considerations for Further Research and Method Development ....................................22

Scope 1 and 2 Emissions ...........................................................................................22

Scope 3 Emissions .....................................................................................................24

Other Greenhouse Gases ...........................................................................................29

Recommendations and Next Steps .............................................................................30

References ............................................................................................................................32

Appendix A: Detailed Survey Results ....................................................................................36

Appendix B: Scope 3 Category Priorities ...............................................................................66

Appendix C: SBTi Target-Setting Methods ............................................................................70

Appendix D: Overview of Chemical Company SBTs and Distribution of Emissions ...............76

Appendix E: Top Seven Chemicals Based on Global Production Volumes ............................80

Appendix F: Target Setting for Category 12, End-of-Life Emissions ......................................81

SBTi Chemicals Scoping Document

December 2020

Acknowledgments

This scoping document was developed by World Resources Institute on behalf of the Science

Based Targets initiative with support from Guidehouse. The Science Based Targets initiative

mobilizes companies to set science-based targets and boost their competitive advantage in the

transition to the low-carbon economy. It is a collaboration between the Carbon Disclosure

Project (CDP), the United Nations Global Compact (UNGC), World Resources Institute (WRI),

and the World Wide Fund for Nature (WWF), and it is one of the We Mean Business coalition

commitments.

During the development of this work, we benefited from advice of the SBTi Chemicals Expert

Advisory Group, the SBTi Technical Working Group, and stakeholders participating in a public

survey in summer 2020.

Primary authors:

Nate Aden, WRI

Michiel Stork, Guidehouse

Kylee Chang, WRI

We would like to thank Fernando Rangel Villasana (WWF), John Sottong (WRI), Peter Levi

(IEA), Emma Borjigin-Wang (CDP), Jeroen Scheepmaker (Guidehouse), Jens Burchardt (BCG),

and Pedro Faria (CDP) for their contributions to this publication.

Supported by 3M Foundation

The SBTi chemicals sector scoping project was carried out in consultation with an Expert

Advisory Group with representatives from over 25 organizations. We would like to recognize the

following individuals for their contributions in the SBTi Chemicals Expert Advisory Group:

Maureen Tholen (3M)

David Meneses (Air Liquide)

Andreas Horn (BASF)

Phil Ruxton (Croda International Plc)

Anastasia Behr (Dow)

Rich Helling (Dow)

Salla Sulasuo (DSM)

Peter Levi (International Energy Agency)

Philip Blakeman (Johnson Matthey)

Ridhima Kapur (Novozymes)

Golnar Azimi (Perstorp)

Prasanna Rajendran (Reliance Chemical

Products Limited)

Ananda Sekar (SABIC)

Grant Forman (Sasol)

Brian Rakvica (Syngenta)

Liam McCarroll (Univar Solutions)

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Barriers,Challenges,andOpportunitiesforChemicalCompaniestoSetScience-BasedTargetsDecember2020ThisdocumentpresentstheresultsoftheScienceBasedTargetsinitiative’schemicalssectorscopingprojectwithconsiderationsforfurthertarget-settingmethoddevelopment.Tosummarizeexistingresourcesandsupportfurtherwork,thedocumentprovidesanoverviewofcurrentchemicalcompanyscience-basedtargets,aproposedsectorboundaryforcompanyactivities,resultsofastakeholdersurvey,andconsiderationsforfurtherresearch.SBTiChemicalsScopingDocumentDecember20202TableofContentsAcknowledgments..................................................................................................................31.IntroductionandOverview...............................................................................................42.SBTiBackgroundandCurrentTargets............................................................................6SBTiTarget-SettingMethods.......................................................................................6SBTiCriteria................................................................................................................6ChemicalCompanieswithSBTs..................................................................................83.ScopeandCompositionofChemicalsSector.................................................................10DisaggregatingtheChemicalsSector.........................................................................144.SummaryofStakeholderSurveyResults.......................................................................185.ConsiderationsforFurtherResearchandMethodDevelopment....................................22Scope1and2Emissions...........................................................................................22Scope3Emissions.....................................................................................................24OtherGreenhouseGases...........................................................................................29RecommendationsandNextSteps.............................................................................30References............................................................................................................................32AppendixA:DetailedSurveyResults....................................................................................36AppendixB:Scope3CategoryPriorities...............................................................................66AppendixC:SBTiTarget-SettingMethods............................................................................70AppendixD:OverviewofChemicalCompanySBTsandDistributionofEmissions...............76AppendixE:TopSevenChemicalsBasedonGlobalProductionVolumes............................80AppendixF:TargetSettingforCategory12,End-of-LifeEmissions......................................81SBTiChemicalsScopingDocumentDecember20203AcknowledgmentsThisscopingdocumentwasdevelopedbyWorldResourcesInstituteonbehalfoftheScienceBasedTargetsinitiativewithsupportfromGuidehouse.TheScienceBasedTargetsinitiativemobilizescompaniestosetscience-basedtargetsandboosttheircompetitiveadvantageinthetransitiontothelow-carboneconomy.ItisacollaborationbetweentheCarbonDisclosureProject(CDP),theUnitedNationsGlobalCompact(UNGC),WorldResourcesInstitute(WRI),andtheWorldWideFundforNature(WWF),anditisoneoftheWeMeanBusinesscoalitioncommitments.Duringthedevelopmentofthiswork,webenefitedfromadviceoftheSBTiChemicalsExpertAdvisoryGroup,theSBTiTechnicalWorkingGroup,andstakeholdersparticipatinginapublicsurveyinsummer2020.Primaryauthors:NateAden,WRIMichielStork,GuidehouseKyleeChang,WRIWewouldliketothankFernandoRangelVillasana(WWF),JohnSottong(WRI),PeterLevi(IEA),EmmaBorjigin-Wang(CDP),JeroenScheepmaker(Guidehouse),JensBurchardt(BCG),andPedroFaria(CDP)fortheircontributionstothispublication.Supportedby3MFoundationTheSBTichemicalssectorscopingprojectwascarriedoutinconsultationwithanExpertAdvisoryGroupwithrepresentativesfromover25organizations.WewouldliketorecognizethefollowingindividualsfortheircontributionsintheSBTiChemicalsExpertAdvisoryGroup:MaureenTholen(3M)DavidMeneses(AirLiquide)AndreasHorn(BASF)PhilRuxton(CrodaInternationalPlc)AnastasiaBehr(Dow)RichHelling(Dow)SallaSulasuo(DSM)PeterLevi(InternationalEnergyAgency)PhilipBlakeman(JohnsonMatthey)RidhimaKapur(Novozymes)GolnarAzimi(Perstorp)PrasannaRajendran(RelianceChemicalProductsLimited)AnandaSekar(SABIC)GrantForman(Sasol)BrianRakvica(Syngenta)LiamMcCarroll(UnivarSolutions)SBTiChemicalsScopingDocumentDecember202041.IntroductionandOverviewThechemicalssectorplaysacentralbutcomplexroleinthetransitiontoalow-carboneconomy,notleastbecauseofthecurrentubiquityofandincreaseddemandforchemicalsinlow-carbonandenergy-savingtechnologies.Whilechemicalproductsareexpectedtocontributetothewell-below2°C(WB2D)climatestabilizationoutcomedescribedinthe2015ParisAgreement,emissionsrelatedtochemicalproductionwillneedtobereducedtomaintainglobalemissionsbudgets.Asof2020,thechemicalsvaluechainisthethird-largestindustrialsubsectorsourceofgreenhousegas(GHG)emissionsbehindcementandsteel.Thechemicalssector’sannualglobalscope1GHGemissionsamounttoapproximately1.8gigatonsofcarbondioxideequivalent(GtCO2e)(ofwhichnon-CO2GHGemissionsareestimatedat400megatons[Mt]CO2e)(IEA2020).1Whilethechemicalssectorhasachievedlargeenergyefficiencyimprovements—morethana55percentimprovementintheEuropeanUnion(EU)between1991andthemid-2010s—andsporadicemissionsreductions,includingintheUnitedStatesfrom2000to2015,highproductiongrowthhasbroadlyovertakentheseshiftstodriveaggregateglobalemissionsgrowth(Rissmanetal.2020;Aden2017;ZhengandSuh2019).Climatescienceindicatesthatglobalemissionsneedtobereducedbyapproximately75percentbetween2020and2050tolimitwarmingthiscenturytowell-below2°C(WB2D)abovepreindustriallevels;least-costenergyandclimatemodelingofthechemicalssectorindicatesthatitneedstoreduceemissionsbymorethan50percentbetween2014and2050tosupportaWB2Dscenario(SBTi2019;IEA2017).Atpresent,SBTiaddresseschemicalcompaniesinthesamewayastherestoftheeconomywithoutspecificattentiontosector-specificemissionssourcesorintensitypathways.Threefactorsthatdifferentiatethechemicalssectorfromitsenergyandemissions-intensivepeersareitshighuseoffossilfuelsasfeedstocks(ratherthanforenergyorheat),itsbroadvarietyofproducts,anditshighdegreeofintermediategoodstrade.In2018,thechemicalssectoraccountedfor14percentoftotalglobaloildemand.Itisalsothelargestindustrialconsumerofoilandgas,halfofwhichisusedasfeedstock(IEA2020).Feedstockuse,wherebyhydrocarbonsareincorporatedintochemicalproductsratherthanconsumedforenergy,leadstohighpotentialend-of-life(EOL)–relatedemissions.Estimatesofend-of-liferelatedemissionsdependonassumptionssuchastheportionofmaterialsthatarerecycled,incinerated,orlandfilled.Oneplastics-focusedstudyestimatedend-of-lifetoaccountfor9percentoftotallifecycleemissions(ZhengandSuh2019),andtheDutch(StorkandLintmeijer2018)andGerman(Geresetal.2019)chemicalssectors’2050energyandclimateroadmapsestimatedscope3EOLemissionswouldamounttoapproximatelythesameorderofmagnitudeasthesector’sscope1and2emissionsifallproductsweretobeincineratedattheendoftheirusefullife1IEA’sETP2020reports~1.4gigatonsofcarbondioxide(GtCO2)/year.AppendixA,Question13listsadditionaldatasourcesdescribingthecurrentGHGemissionsoftheglobalchemicalssector;Section5ofthisreportincludesinformationonnon-CO2GHGemissions.SBTiChemicalsScopingDocumentDecember20205span.Whileestimatesvary,itisclearthatscope3,andparticularlycategory12(End-of-life),emissionsarematerialforthesectorbroadly.Becauseper-capitademandforchemicalproductsdoesnotexhibitthesamesaturationeffectsasotherindustrialsectors,chemicalsproductionisprojectedtogrowmorequicklythansteelandcementthrough2030,withsignificantdifferencesacrosstherangeofproducts(IEA2020).2,3Thechemicalssector’sGHGemissionsandtheirabatementarethuscentralchallengesforachievingglobalclimatestabilization.TheScienceBasedTargetsinitiative(SBTi)aimstorefinethechemicalsector’sgreenhousegasemissionsreductionpathwaywithaholisticapproach(includingscope3valuechainemissions).Intermediatescience-basedtargetsensurethatcompaniesstartintimeandstayontrack,evenwhentheaveragelifetimeofchemicalplantsislong(upstreamunitssuchassteamcrackersaretypicallyoperatedfor30yearsorlonger)(IEA2020).SBTiisavoluntaryplatformthatsupportscompanyclimateambitionthroughtransparentandrobustGHGemissionsreductiontargets.Inrecognitionofthecentralimportanceofthechemicalssectorforachievingbroaderclimatestabilization,theSBTilaunchedachemicalssectorscopingprojectinFebruary2020.TheWorldResourcesInstitute(WRI)leadsthisprojectwithtechnicalsupportfromGuidehouseconsulting.Toengageabroadrangeofstakeholders,theprojectincludedanExpertAdvisoryGroup,stakeholdere-maillist,andapublicsurveythatwasconductedduringthesummerof2020.ThisdocumentpresentsresultsoftheSBTichemicalssectorscopingprojectandconsiderationsforfurthermethoddevelopment.ThescopingdocumentcoversexistingSBTimethods;chemicalcompanieswithscience-basedtargets(SBTs);stakeholdersurveyresults;andconsiderationsforfurtherresearchandmethoddevelopment.Thefurtherresearchsectionidentifiesphysicalintensitypathwaysforkeyproducts,scope3resources,andnewend-of-lifetargetformulationsasrecommendednextsteps.Theappendicesprovidedetailedresultsofthestakeholdersurveyandothersupportinginformation.2IEA’sEnergyTechnologyPerspectives(ETP)2020comparesproductiongrowthforchemicals(high-valuechemicals,ammonia,andmethanol),withsteelandcementuntil2030.Thissourcealsoindicatesthattherewillbeaverageannualgrowthratedifferencesbetweenvariousproducts—forexample,currently3–4percentperyearforvariousplasticsresinsandaround1percentperyearforammonia.Notethatthegrowthrateofspecificchemicalproductsisuncertainandinfluencedbytechnicalinnovationsandmaterialsubstitutions.3AppendixA,Question17providesanoverviewofsourcesthatcouldbeusedtoaddressfuturegrowthofthechemicalssectorinPhaseIIoftheSBTichemicalssectorscopingproject.SBTiChemicalsScopingDocumentDecember202062.SBTiBackgroundandCurrentTargetsTheSBTinitiativemobilizescompaniestosetscience-basedtargetsandbooststheircompetitiveadvantageinthetransitiontoalow-carboneconomy.TheinitiativeisacollaborationbetweentheCarbonDisclosureProject(CDP),theUnitedNationsGlobalCompact(UNGC),WorldResourcesInstitute(WRI),andtheWorldWideFundforNature(WWF),andisoneoftheWeMeanBusinesscoalitioncommitments.ThechemicalssectorscopingprojectisoneofSBTi’songoingsectordevelopmentprojects.TargetsadoptedbycompaniestoreduceGHGemissionsareconsidered“science-based”iftheyareinlinewithwhatthelatestclimatesciencesaysisnecessarytomeetthegoalsoftheParisAgreement—tolimitglobalwarmingtowell-below2°Cabovepreindustriallevelsandtopursueeffortstolimitwarmingto1.5°C.Amongcompaniesglobally,thereisagrowingmomentumforscience-basedtargetsettingthroughtheSBTi.AsofDecember2020,1,090companiesandfinancialinstitutionshavepubliclyjoinedtheSBTi,amongwhich520companieshavereviewedtargetsthatmeetSBTicriteria(SBTi2020a,“CompaniesTakingAction”).ThepaceofcompaniesjoiningSBTidoubledfortheperiodfromApril2018andOctober2019comparedtotheprevious36months.Likewise,betweenNovember2019andOctober2020,193scope1and2targetshavebeenapprovedbytheSBTi(57percentofwhichare1.5°C–aligned),notincludingthestreamlinedsmallandmedium-sizedenterprises(SME)service.Thisshowsamajorincreasecomparedtopreviousyears,withtheSBTiapprovingonaverage16targetspermonth,comparedtoanaverageofjust6permonthoverthepreviousfouryears.WhenSBTiwaslaunchedin2015,science-basedtargetsettingemergedasanovelcorporatesustainabilitypractice.TheonsetoftheglobalCOVIDpandemicin2020hasnotslowedthepaceofcompanycommitmentssuchthatSBTihasexceededits“1,000committedcompaniesbyendof2020”goal.Today,SBTsarebecomingarecognizedvehiclefortransparentandrobustcorporateclimateambition.SBTiTarget-SettingMethodsSBTipresentlyusesthreemainpubliclyavailabletarget-settingmethodsforscope1and2targets:absoluteemissionscontraction,theSectoralDecarbonizationApproach,4andeconomicintensitycontraction.MorebackgroundonSBTitargetcomponentsisavailableinAppendixC.SBTiCriteriaToensuretargetrigorandcredibility,SBTihaspublishedarangeofmandatorycriteriaforallcompanySBTs.Asof2020,therearemorethan20criteriathatareupdatedannuallyandcanbereviewedindetailintheSBTicriteriaresource(“Resources,”SBTi2020c).Thefollowingisa4WhilethefirstversionoftheSectoralDecarbonizationApproachpresentedaneconomicintensitypathwayforchemicalsandpetrochemicals(Krabbeetal.2015),theSDAisgenerallyaphysicalintensitymethod.SBTiChemicalsScopingDocumentDecember20207condensed,butnotexhaustive,listofthekeyelementsofthecriteriamostrelevantforchemicalcompanies:•AnSBTshallcoveraminimumof5yearsandamaximumof15yearsfromthedatethetargetispubliclyannounced.Companiesarealsoencouragedtodeveloplong-termtargets(e.g.,uptoyear2050).•Theboundariesofacompany’sSBTshallalignwiththoseofitsGHGinventory.•SBTsshallcoveratleast95percentofcompany-widescope1and2emissions.•Theemissionsreductionsfromscope1and2sourcesshallbealignedwithwell-below2°Cor1.5°Cdecarbonizationpathways.•Companiesshalluseasingle,specifiedscope2accountingapproach(“location-based”or“market-based”)forsettingandtrackingprogresstowardanSBT.•Directemissionsfromthecombustionofbiomassandbiofuels,aswellasGHGremovalsassociatedwithbioenergyfeedstock,mustbeincludedalongsidethecompany’sinventoryandmustbeincludedinthetargetboundarywhensettinganSBT.Ifbiogenicemissionsfrombiomassandbiofuelsareconsideredclimateneutral,thecompanymustprovidejustificationoftheunderlyingassumptions.(AnyotherGHGremovalsthatarenotassociatedwithbioenergyfeedstockarecurrentlynotacceptedtocountasprogresstowardSBTsortowardnetemissionsintheinventory.)•Ifacompanyhassignificantscope3emissions(over40percentoftotalscope1,2,and3emissions),itshallsetascope3target.•Scope3targetsgenerallyneednotbescience-basedbutshouldbeambitiousandmeasurableandclearlydemonstratehowacompanyisaddressingthemainsourcesofvaluechainGHGemissionsinlinewithcurrentbestpractice.•Thescope3targetboundaryshallincludethemajorityofvaluechainemissions,forexample,thetopthreeemissionssourcecategoriesortwo-thirdsoftotalscope3emissions.5Thenatureofascope3targetwillvarydependingontheemissionssourcecategoryconcerned,theinfluenceacompanyhasoveritsvaluechainpartners,andthequalityofdataavailablefromthosepartners.•SBTsshouldbereviewedataminimumeveryfiveyearstoreflectsignificantchangesthatwouldotherwisecompromisetheirrelevanceandconsistency.Ingeneral,acompanymustrecalculateitstargetsif:oscope3emissionsbecome40%ormoreofoverallscope1,2and3emissions;oexclusionsintheinventoryortargetboundarychangesignificantlyand/orexceedallowableexclusionlimits(morethan5%ofscope1and2emissionsand/ormorethan32%ofscope3emissions);omethodologyforcalculatingthebaseyearinventory(e.g.,improvedemissionsfactorsoraccesstoprimarydata)changes;5PerSBTitargetvalidationcriteria,scope3targetsmustcoveratleasttwo-thirdsoftotalmandatoryscope3emissions,asdefinedinTable5.4oftheGHGProtocolScope3standard.SBTiChemicalsScopingDocumentDecember20208omethodologyforcalculatingthetarget(e.g.,growthprojectionsorotherassumptions)changes;oorchangeincompanystructure(e.g.,anacquisitionordivestment)significantlychangestheinventory,targetboundary,ortargetambition,atwhichpointSBTiwillreassessthecompany’stargets.Companiesareexpectedtodeterminesignificantchanges.•OffsetsandavoidedemissionsshallnotcounttowardSBTs.6Acceptanceandimplementationofthescope3criteriahavebeenasignalachievementoftheSBTinitiativeinsofarascompaniesdidnotpreviouslytakesuchresponsibilityfortheirvaluechainemissions.Chemicalcompaniescanchoosefromthefollowingmethodsforsettingscope3targets:•Absolutecontraction:Reduceabsoluteemissionsbyaminimumof1.23percentannuallytokeepglobaltemperatureincreasewithin2°C.•Physicalintensity:Reduceemissionsintensityperphysicalactivityorproductionoutputwithaunitthat’srepresentativeofacompany’sportfolio(e.g.,tonnesGHGpertonnesofchemicalproduct),which,whentranslatedintoabsoluteemissionsreductionterms,doesnotresultinabsoluteemissionsgrowth,andleadstolinearannualintensityimprovementsequivalentto2percent,ataminimum.•Economicintensity:Reduceemissionsintensitypervalueaddedbyatleastanaverageof7percentyear-on-year.•Supplier/customerengagement:ReduceemissionsbycommittingtodrivetheadoptionofSBTsamongsuppliersorcustomers(Tier1)overamaximumfive-yeartimeframe.ThesemethodsandcriteriahaveservedasthebasisforthefirstwaveofchemicalcompanySBTsdescribedbelow.ChemicalCompanieswithSBTsAsofDecember2020,theSBTirecognizes29chemicalcompaniesthathavepubliclycommittedtosettingscience-basedtargets,ofwhich11haveapprovedtargetsthatmeetallthecurrenttarget-settingcriteria.Twooftheapprovedchemicalcompanytargetsarealignedwith1.5°Cstabilizationthiscentury—themostambitiousleveloftarget.Consideringthechemicalssector’sdiverseproductmixandcircumstances,thereisnosingleapproachormethodforallchemicalcompanies,andcompaniesarefreetochooseamongthemethodstosettheirtargets.AppendixDprovidesadetailedoverviewofthecompaniesandthetargetstheyhaveset.ThetargetlanguageandsummaryemissionsinFigureD1showtheextentofemissionscovered,6TheSBTiispreparingseparatenet-zeroguidancethatcoversoffsets,compensation,andneutralization;however,net-zerotargetsareintendedtocomplementandextendbeyondcompanySBTs,notreplaceorsupplantthem.SBTiisnotconsideringincludingoffsetsoravoidedemissionsinSBTs.SBTiChemicalsScopingDocumentDecember20209reflectingthatscope3emissionsgenerallyformasignificantportionofthesector’soverallclimateimpact.SBTiChemicalsScopingDocumentDecember2020103.ScopeandCompositionofChemicalsSectorWhendevelopingtarget-settingresourcesforthechemicalssector,itisrelevanttoestablishwhatis,andwhatisnot,coveredbycompanySBTs.7AsSBTisectormodelinghasthusfarbeenbasedontheInternationalEnergyAgency’s(IEA’s)EnergyTechnologyPerspectives(ETP)scenarios,theSBTichemicalssectorscopingprojectproposestoadoptthesectorboundaryanddefinitionforthechemicalssectorusedbytheIEAinitsETPtomaintainconsistency.8TheindustrialsectorscopingintheIEA’sETP(2020)modelingisbasedontheInternationalStandardIndustrialClassification(ISIC)(UNDESA2008)withthechemicalssectorcoveringDivisions20and21,9specificallythefollowing:•Division20:ManufactureofchemicalsandchemicalproductsoThisdivisionincludesthetransformationoforganicandinorganicrawmaterialsbyachemicalprocessandtheformationofproducts.Itdistinguishestheproductionofbasicchemicalsthatconstitutethefirstindustrygroupfromtheproductionofintermediateandendproductsproducedbyfurtherprocessingofbasicchemicalsthatmakeuptheremainingindustryclasses.oGroup201:Manufactureofbasicchemicals,fertilizersandnitrogencompounds,plastics,andsyntheticrubberinprimaryforms:▪Thisgroupincludesthemanufactureofbasicchemicalproducts,fertilizers,andassociatednitrogencompounds,aswellasplasticsandsyntheticrubberinprimaryforms.oGroup202:Manufactureofotherchemicalproducts:▪Thisgroupincludesthemanufactureofchemicalproductsotherthanbasicchemicalsandman-madefibers.Thisincludesthemanufactureofavarietyofgoodssuchaspesticides,paintsandinks,soap,cleaningpreparations,perfumesandtoiletpreparations,explosivesandpyrotechnicproducts,chemicalpreparationsforphotographicuses(includingfilmandsensitizedpaper),gelatins,compositediagnosticpreparations,etc.oGroup203:Manufactureofman-madefibers:•Division21:Manufactureofpharmaceuticals,medicinalchemicals,andbotanicalproducts(nofurtherdisaggregationinISIC)7IntheExpertAdvisoryGroup(EAG)ofSeptember9,2020,eightparticipantsconsideredthelackofoneoverarchingtaxonomyabarriertowardsettingscience-basedtargets,sixdidnot,andthreehadnoopinion.Thesectorscopewillinformthedistributionofscope1,2,and3emissionsforindividualcompanies.8Additionally,therewasanabsenceofaclearpreferencefromthechemicalcompaniesintheSBTiChemicalsSectorSurveyFindings(seeAppendixA,Question5);theCarbonDisclosureProject(CDP)taxonomyseemstobecommonlyused,butduetotherelativelylimitedamountofrespondents(32),nofirmconclusioncanbedrawn.9PersonalcommunicationwithIndustryLead,EnergyTechnologyPolicyDivisionatInternationalEnergyAgency(IEA),November2020.SBTiChemicalsScopingDocumentDecember202011Thechemicalssectorincludesbottom-upIEAETP(2020)modelingofthefollowing:•High-valuechemicalproduction(IEA’sETPdefinestheseasethylene,propylene,benzene,toluene,andxylene10;productionroutesincludesteamcracking,bioethanoldehydration,naphthacatalyticcracking,propanedehydration,methanol-to-olefins,andmethanol-to-aromatics)•Methanol-andammonia-production(bothfossilfuel–basedandbiomass-basedandelectrolysis-based).Theotherpartsofthechemicalssectorarecoveredinamorecrosscuttingmanner:•Fuelandemissionsassociatedwithanyelectricitygenerationareaccountedforinthepowersector.•Fuelandemissionsforheat,unlesssoldasimportedheat(e.g.,likeadistrictheatingnetwork)arerecordedwithinthechemicalsectorboundary.•Incaseofcarboncaptureandutilization(CCU),theenergyrequiredtocaptureCO2(andassociatedemissions)isincludedinthesectorsupplyingtheCO2.IEA’sETP(2020)11furtherindicatesthefollowing:•Theproductionofbiofuels12iscoveredwithinthefueltransformationmodelonthesupplyside,notinthechemicalssector.•Theproductionofnaphtha13inrefineries,andtheproductionofpropaneinrefineries,arebothnotincludedinthescopeofthechemicalssectorinIEA’smodeling,butwithintherefiningmodelonthefueltransformationside.Theconversionofnaphthatohigh-valuechemicalsandpropanedehydrogenationtoproducepropylenearecoveredinthechemicalssector.•Ingeneral,anymethanol/ammoniathatisusedinthefuturepurelyasagreentransportationfueliscoveredwithinthefueltransformationsector—thechemicalssectormodelcoversthequantitiesusedforexistingandindustrialapplications.•Toillustratehowthemodeldealswithcarboncaptureandutilizationandhydrogenuse:Productionofmethanoltosatisfyexistingandindustrialdemandformethanol,bycombininggreenhydrogen(fromelectrolysis)withCO2ismodeled(aselectricitydemand)withinthechemicalssector;theCO2issourcedinthesupplymodel.TheenergyconsumptionforthecaptureofCO2isaccountedforinthesupplysector.•Theproductionofpharmaceuticals.TheresultingscopeofthechemicalssectorisvisualizedinFigure1below.10Thisdefinitionofhigh-valuechemicalsisusedthroughoutthisdocument.11PersonalcommunicationwithakeyauthorfromIEAETP2020.12ThedesireforconsistencywiththeIEAmodellingscopeistakenabovethepreferencetoincludebiofuelsinthescopeofthechemicalssector,asexpressedinthesurvey(seeAppendixA,Question7).Reasonsforinclusionincludedthechemicalnatureoftheproductionofbiofuelsandthesimilaritybetweentheproductionprocesses.Biofuelsarelinkedtochemicalbusinessesandchemicalproduction—theonlydifferenceisfeedstockcomposition.Furthermore,theGHGemissionsabatementleversaresimilartobioplasticsandbiochemicals.13Manychemicalcompaniesagreedthatasarawmaterial,naphthaproductionemissionsshouldbeincludedinscope3andnotscope1and2(sevenparticipantsoftheExpertAdvisoryGroupofSeptember9,2020,supportedthis,fouropposed,andsevenhadnoopinion).SBTiChemicalsScopingDocumentDecember202012Figure1:VisualizationofChemicalsSectorComponentsandBoundariesNotes:CCU=Carboncaptureandutilization;FCC=Fluidizedcatalyticcracking;H2=Hydrogen;NGL=Naturalgasliquids;LPG=LiquifiedPetroleumGas;MtO=Methanoltoolefins;MtA=Methanoltoaromatics;PDH=Propanedehydrogenation.Powerdenotesselectedelectricityuse.Notediscussionbelowonclassificationofchemicalrecycling.Source:SBTi.SBTiChemicalsScopingDocumentDecember202013ThemiddlebandwiththedottedborderinFigure1representsthescopeofthechemicalssector.Thecolorsareusedtodistinguishbetweenvariousproductandprocessflows.Thisboundaryindicatesscope1and2emissionsfromprocessesinsideandoutsidethechemicalssectorasfollows:•Scope1and2emissionsofthechemicalssector:oScope1and2emissionsoSteamcrackersproducingethylene,propylene,benzene,toluene,xyleneoProductionofhydrogen/syngas,andproductionofammoniaandmethanoloProductionofbio-basedchemicalsoProductionofCCU-basedchemicalsoChemicalrecycling14;continuedinclusioninthechemicalssectorrequiresfurtherassessmentoProductionofindustrialgases15oPharmaceuticals16•Scope3emissionsofthechemicalssector:oProductionofnaphthainrefineriesoProductionofpropylene(fluidizedcatalyticcracking[FCC])andbenzene,toluene,andxylene(BTX)(catalyticreforming)inrefineriesoProductionofethaneassideproductofnaturalgasoMechanicalrecyclingTheaimofthisfigureistoprovideaconsistentboundaryforchemicalsandoilandgassectoremissionsaccounting.Thisboundaryimpliesthattherewillbecompaniesoperatingrefineriesand,forexample,steamcrackers,whichmaywellberequiredtocombinetheapproachesofbothsectorswhensettingtargets.SBTialreadyallowscompaniestocombineapproachesandtargetswheretheycrossmultiplesectors.Inthiscaseoverlapmaysometimesbeunavoidableamongcompaniesoperatingindifferentpartsofthevaluechainstartingfromtheoilandgassectorallthewaydownstreamtotheproductionofdownstreamgoodssuchaspolymers.17Oneimplicationofthisproposedapproachisthatoilandgascompanieswouldbeexpectedtocontinuetoincluderefinery-relatedemissionsintheirscope1and2targets,andthatthesewouldbescope3emissionsforchemicalcompanies(unlessthechemicalcompaniesalsoownandoperatetherefineries—aschemicalcompaniesaretypicallydoingcurrently).14Notallchemicalrecyclingrouteshavebeenvisualized.15Hydrogen(inlightblueinFigure1)isoneexampleofanindustrialgas;others(notshowninthefigure)includecarbonmonoxide(CO),nitrogen(N2),andcarbondioxide(CO2)(anon-exhaustivelist).16Inclusionofpharmaceuticalsinthescopeofthechemicalssectorisinlinewiththepreferenceexpressedinthesurvey,notingthatmostrespondentsdidnothaveanopinion.Reasonsforsupport:chemicalsareusedtoproducepharmaceuticals,whichisanindustryexpectedtogrow,andthechallengesassociatedwithcollectingdataon“purchasedgoods”emissions.Reasonsfordissent:differencesinproducedquantities,ancillarymaterials,footprintperton,regulatoryoversight,andtheindustrystructure.17MoredetailonthepositionofFCCandcatalyticreformingispresentedunder“DisaggregatingtheChemicalsSector”discussionbelow.SBTiChemicalsScopingDocumentDecember202014Forwardoptions:Inprinciplethescopeofthechemicalssectorhasbeendefinedabove,whichchemicalcompaniesmayreferencewhensettingSBTs.However,therestillareuncertaintiestobetracked,whichcouldchangethescopechoicesoutlinedabove.Goingforward:•Thedividinglinebetween“oilandgas”andthe“chemicals”sectorsmustbeconsistentlydrawnbychemicalsandoilandgascompanies.•Theimplicationsofmovingthepharmaceuticalssectortothechemicalssectorneedtobeassessedforpharmaceuticalcompanies.AsofDecember2020,thereare25companiesself-classifiedunderthepharmaceuticals,biotechnology,andlifesciencessectorthathavecommittedtosetSBTs,ofwhich19haveapprovedSBTs.Thesecompanieswillnotbeexpectedtoupdatetheirtargetsbasedontheproposedsectorboundaryandshouldcontinuetoreduceemissionsusingsector-agnosticpathways.TheSBTiisstillexploringtheproposedchemicalssectorboundaryspecificallyforpharmaceuticalcompanies;thus,companiesthatplantocommitorsetanSBTshouldproceedusingexistingSBTicompanyguidanceandmethods.•TheSBTi-widedesiretobuildsector-level1.5°Cphysicalintensitypathways(whichtheIEAhasnotpublished)needsadditionalresearch.•AssessmentandguidanceareneededtodeterminewhichrecyclingprocessesfallunderthechemicalssectorandwhichfallunderInternationalStandardIndustrialClassificationofAllEconomicActivities(ISIC),Division38,Group383,Class3830,MaterialsRecovery18(UNDESA2008)—thisincludesthepyrolysisandgasificationprocessesvisualizedinthechemicalssectorinFigure1above.Inclusioninthelattercategorycouldinsomecasesreducethedemandforproductionofchemicals.Theimpactofmechanicalandchemicalrecyclingprocessesfallinginsideoroutsidethescopeofthechemicalssectorshouldbeassessedwhenfurtherdevelopingthemethodology.•WhenbasingthetrajectoriesforindividualproductsonIEA’sETP,consideraccountingfortheproductionofchemicalsthatIEAmodelsinothersectors(suchasmethanolandammoniausedasfuels,andpropyleneandBTXmadeinrefineries).•Considerdevelopmentofintensitypathwaysfortheproductionofchemicalssectorfeedstocksincludingnaphtha,ethane,andmethane.Thesepathwayscouldinformscope3,category1targetsforcompaniesinthechemicalssector.DisaggregatingtheChemicalsSectorThechemicalssectorisdiverseandheterogeneous.Dependingonwhereachemicalcompanysitsinthevaluechain,itmayproducebuildingblockssuchashigh-valuechemicals(includingethyleneandpropylene)andammoniathroughveryenergy-intensiveprocesses,resultinginlargescope1and2emissions.Atthesametime,chemicalcompaniesproducecomplexspecialtychemicalsandoftenpurchasebuildingblocksrequiringsignificantlylessenergy,resultinginrelativelylowscope1and2emissionsandlargerscope3emissionsincategory118ISICDivision38,Group383,Class3830—MaterialsRecovery—isrelevantforchemicalrecyclingandforchemicalcompaniesthatoperatemechanicalrecyclingprocesses.SBTiChemicalsScopingDocumentDecember202015(Purchasedgoodsandservices).Furthermore,thechemicalssectorproducesanenormousnumberofdifferentproducts(IEA2020).Finally,processemissions,whichoccurduringtheproductionofsomechemicals,requireseparateabatementlevers.Giventhisdiversity,thereisacompellingcasetodisaggregatethechemicalssectorwhendevelopingsector-specificguidanceforsettingSBTs,albeititisnotpossibletoaddressallproductsindividually.“Weproducemanytensofthousandsofproductsinmanycountries”—Anonymouschemicalcompanyrespondent.Respondentstothesurveyindicatedthatdisaggregatingthechemicalssectorcouldbedoneatproductiongrouplevel(e.g.,plastics,surfactants,solvents)oratproductlevel(e.g.,ammonia)andpotentiallyatsubsectorlevel(e.g.,“baseorganics”and“polymers”).Thedisaggregationofthechemicalssectorcouldbedoneinthefollowingways:19•Developnewpathwaysforkeyindividualproducts,suchasammonia;and/or•Coveralltheotherproductswithspecificpathwaysforproductgroupsorsubsectors.KeyindividualproductsTheproductionofalimitednumberofproductsgeneratesmostofthechemicalssector’sscope1emissions.Theproductionofthe18highest-volumechemicalsemitsmorethan~75percentofthechemicalssector’sscope1and2greenhousegasemissionsglobally,asshowninFigure2(IEA,ICCA,andDECHEMA2013).EuropeanCommissionetal.2009alsoindicatesthedominanceofalimitednumberofchemicalsproductsintheoverallsectorgreenhousegasemissions20.Asbuildingblocksfortherestofthechemicalsindustry,thesechemicalsrepresentasignificantopportunitytoreducescope3,category12,end-of-lifetreatmentofsoldproductsemissions.2119Thesurveygivesfurtherthoughtsonsubdivisioncriteria(AppendixA,Question19).20ThisreportbytheEuropeanCommissionetal.(2009),“MethodologyfortheFreeAllocationofEmissionAllowancesintheEUETSPost-2012SectorReportfortheChemicalIndustry“statesthatthetop18mostemission-intensiveactivitiesinEuropeemit89percentofthe(petro)chemicalsector’sGHGemissions(basedoncommunicationwithCEFICin2009);notethatthispercentagewillnowlikelybesomewhatlowerwiththeabatementofnitrousoxide(N2O)emissioninnitricacidproduction—inthisdataset,itisshownasthetopemitter.21High-valuechemicals(definedbytheIEAasethylene,propylene,benzene,toluene,andxylene)representthestartofthecurrent,fossil-based,hydrocarbonvaluechains,whileammoniarepresentsthefossil-basedstartoftheN-componentoffertilizers.Replacingtheseproductionrouteswith,forexample,bio-based,recycled,orcarboncaptureandutilization(CCU)–basedlowcarbonroutesoffersthepotentialtomitigatetheseemissions(directly,suchasrecyclingmaterials,orindirectly,suchasfirstcapturingCO2fromtheairasfeedstockforhydrocarbonsthatareincineratedattheendoftheirlife).SBTiChemicalsScopingDocumentDecember202016Figure2:GlobalGreenhouseGasEmissionsversusProductionVolumesofTop18Chemicals,2010Notes:GHG=Greenhousegas;MtCO2e=Megatonscarbondioxideequivalent;BTX=Benzene,toluene,xylene;Kt=kilotonne.GHGemissionsforolefinsinthisfigurerepresentthatofsteamcrackingprocess.Ammoniaispresentedonadifferentaxisontheright.FigureisbasedonCO2emissionsonlyanddoesnotincludeothergreenhousegases.Source:IEA,ICCA,andDECHEMA2013.TheIEA’srecentlypublishedETP(2020)callsammonia,ethylene,methanol,propylene,andbenzene,toluene,andxylene(BTX)the“sevenchemicalbuildingblocksunderpinningtheindustry.”Theglobalproductionvolumesofthesesevenchemicalsrepresentsapproximatelytwo-thirdsofthechemicalssector’senergyuse22(ETP2020);theyarelistedinAppendixE.Additionally,Figure2illustratesthattheproductionofthesechemicalsleadstothehighestgreenhousegasemissions.CurrentIEAmodelingcontinuestofocusonthesechemicals,asmanyabatementroutesrelyonthem.23ProductGroupsorSubsectorsTheIEAdoesnotsubdividethechemicalssectorfurtherthanthesevenbuildingblocksmentionedaboveand“therest.”TheInternationalStandardIndustrialClassification(ISIC)(seeearlierClasses201,202,203,andDivision21)inessencedividesthechemicalssectorintobasicchemicalsandothers(withsomefurtherdisaggregationfor“others”),whichdoesnotseemtoprovideapracticaldisaggregationforthepurposeoftargetsetting.22Theotherportionisspreadoutamongsmallercategoriesofproducts;seeFigure2.23AbatementroutesincludeseveralCCUroutes(e.g.,methanol,potentiallyfollowedbymethanol-to-olefins),bio-basedroutestowardethyleneandBTX,bio-naphtha,electriccracking,andusingpyrolysisoilascrackerfeedstock.Notcoveredbythesesevenbuildingblocksare,amongothers,functionalCCU(toproducepolyols),functionalbio-basedchemicals(suchaspolylacticacid),andmechanicalrecycling.Withinchemicals,ammoniaaccountsforcloseto50percentofcumulativeemissions,methanol,andhigh-valuechemicalsaccountforabout25percenteach.SBTiChemicalsScopingDocumentDecember202017However,theactivitygroupclassificationusedbyCDPcouldprovideamoredetailedsubdivision,distinguishingthefollowing:•Agriculturalchemicals•Basicplastics•Biofuels•Inorganicbasechemicals•Nitrogenousfertilizers•Otherbasechemicals•Personalcareandhouseholdproducts•SpecialtychemicalsInthesurvey,andinthesecondExpertAdvisoryGroupmeeting,thequestionwasraisedwhetherindustrialgasesshouldbetreatedasaseparatesector,subsector,orproductgroup.Movingforward,theintentionistosubdividethechemicalssectorintoseveralproducts,ataminimum:•Thesevenbuildingblocksidentifiedabove:oHigh-valuechemicals(ethylene,propylene,benzene,toluene,xylene)oAmmoniaoMethanol•Giventhecentralandincreasingroleofhydrogen,itcouldalsobelogicaltotreatH2asakeyindividualproduct.24Theremainderofthechemicalssectorcanthenbefurthersubdividedintosomeproductgroupsorsubsectors(e.g.,for“industrialgases”suchasnitrogen[N2],carbonmonoxide[CO],andcarbondioxide[CO2],orfertilizers).Inthisproductgroup/subsectorapproach,itisimportanttoconsiderhowtodealwithfunctionalbio-basedchemicals(differentmoleculesprovidingthesamefunctionalityastheirfossil-basedequivalent);likewise,forfunctionalCCUchemicals.Mostoftheindividualproductsincludedhere(propylene,benzene,toluene,xylene,ammonia,andmethanol)areproducedinthechemicalindustry,butsomemayalsobeproducedinothersectorsinthefuture.Whendevelopingnewintensitypathways,theemissionsimpactofvaryingprocessesandsectorsforagivenproductshouldbetakenintoconsideration.Productintensitypathwaysneedtobereconciledtomaintainconsistencyandtoavoidcreatingloopholes.Optionstomaintainconsistencycouldincludemovingallproductionroutesforgivenproductstoaparticularsector.24Treatinghydrogenasakeyindividualproductcomeswithadditionalchallenges,asgreenhydrogenisalsoanabatementleverfortheproductionofmanyotherkeyproducts.Notethathydrogenisincludedherein“industrialgases.”SBTiChemicalsScopingDocumentDecember2020184.SummaryofStakeholderSurveyResultsDuringthesummerof2020,SBTiconductedapublicsurveytogatherchemicalssectorstakeholderperspectivesonscope3data,sectorlow-carbontransformation,andthechallengesandopportunitiesforsettingcompanySBTs.25Thesurveywascompletedby59respondents,ofwhom40workedforchemicalcompanies.Intheirsurveyresponses,employeesofchemicalcompaniesindicatedavarietyofchallengestosettingscience-basedtargets(AppendixA,Question11).26Arelativelyhighshareofrespondents(>30percent)indicatedthefollowingsixbarrierstotargetsetting;thesearelistedinorderofdecreasing“popularity”below.1.Scope3DataAvailabilityThediversityandwideuseofproductsacrossnumeroussectors’supplychainscompoundsthescope3challengesfacedbychemicalcompanies.Lowavailabilityandqualityofdatawasthetopissuereferencedbysurveyrespondents.CurrentSBTipracticeofacceptingscreeningandestimatedscope3datahelpscompaniesthatarenewtodevelopingcompanyGHGemissionsinventories.Respondentsnotedthatcurrentreportingonscope3canbeonerousforsuppliersanddifficultforpurchasingcompaniesandsuggestedthiscouldbeimprovedbymakingrelevantdataavailableinacentralizedandautomatedmanner,forexample,bybuildingoncurrentlifecycleassessment(LCA)andbenchmarkinginformation.2.TechnologicalReadinessThispointissummarizedbyacompanyrespondentwhoindicatedthat“thetechnologicalreadinessforsomeofthehigh-CO2abatementprojectsistoolow.”Chemicalssectorstakeholdersperceiveanurgencytodevelopandscaleupinnovations,includingtheneedforsufficientlyaffordablerenewableenergythatcouldimpacttheGHGemissionsreductiontrajectoriesofsomeproductgroupsdifferentlythanothers,andshouldbeconsideredwhensubdividingthechemicalssectorintosubsectors.CompaniesalsomentionedthelackofSBTiacknowledgmentoftheirlong-termresearchanddevelopment(R&D)investmentsasachallengeforacceleratingtechnologicaltransformation.TheconcernabouttechnologicalreadinessalsolinkswithquestionsaboutSBTitreatmentofnegativeemissionstechnologiesincompanies’SBTsandnet-zerotargetformulations.273.BusinessModelUncertainty“Clientsarenotwillingtopaymoreforproductswithalowergreenhousegasfootprint.”28WhileSBTiprovidesinformationaboutthebusinesscaseformitigationinSBTi’sScience-BasedTargetSettingManual(SBTi2020d),costallocationsvarypersectorandcompany.29Whenclientsofthechemicalssectorsetscience-basedtargets,theyoftencommittoreducingtheir25Detailedsurveyresults,includingadescriptionofsurveyrespondents,isavailableinAppendixA.26Basedonrespondentswhoindicatedtheyworkforachemicalcompany.27TheSBTiisdevelopingastandardtoguidecompanynet-zerotargetsetting;throughtheirSBTs,companiesareexpectedtocontinuereportingandreducingtheirscope1,2,and3emissions;additionalinformationisavailableathttps://sciencebasedtargets.org/net-zero.28Thisisarepresentativesentimentselectedbysurveyparticipantsratherthananindividualquote.29TheSBTimanualisavailableathttps://sciencebasedtargets.org/resources/files/SBTi-manual.pdf.SBTiChemicalsScopingDocumentDecember202019scope3emissionsfrompurchasedgoodsandservices,whicharedirectemissionsfromchemicalcompanies.Thiscontributestoagrowingdemandforchemicalcompaniestosetscience-basedtargets.4.MethodAvailabilityAsdiscussedaboveanddetailedinAppendixD,manychemicalcompanieshaveusedexistingsector-agnosticmethodstosetSBTs.However,somehaveexpressedapreferencetopostponetheirscience-basedtargetdevelopmentuntilthedevelopmentofsector-specificphysicalintensityorothermethodsbecomeavailable.WhilethisprojectreflectsSBTirecognitionofthesector’simportanceandintentiontodevelopfurtherresources,chemicalcompaniesareencouragedtoworkwithSBTitosetGHGmitigationtargetsintheabsenceofphysicalintensitymethodsforallproducts.5.PolicyLinksTheuncertaintyaroundfuturecostsofemittingGHGsmakesitdifficultforcompaniestodeterminethecorrecttimingofinvestmentsandGHGemissionsreductionmeasures.Furthermore,respondentsnotedthatcurrentpoliciesprimarilycoverthesector’sscope1and2emissions,whilescience-basedtargetsettingalsoaimsatreducingscope3emissions.Relatedtothepolicypoint,onecompanysuggesteddifferentialcarbontaxeslinkedtoemissionsintensitytoincentivizeeffectivemitigationactions.SBTiisexploringhowtheinitiativecanbestconnectsectorandcompanycriteriawithpolicyandregulatorymechanisms.6.CooperationovertheValueChains“Theprocessofinvolvingoursuppliersorothernewpartnersinthereductionofthescope3emissionswillbetoochallenging.”30Whilethischallengeexistsforallindustrialsectors,chemicalcompanieshavevocalizedthatitmaybemorechallengingforthesector,giventhedifficultyofaccessingprimarydataondownstreamcategoriesincludingend-of-life(EOL)emissions.Thisisrelatedtotheperceptionthatdeliveringonscope3targetsisoutsideofthechemicalcompanies’controlduetothefollowing:•Limitedleverage(asthefewchemicalcompaniesupstreaminthevaluechainhavemanyclients);and•Highdiversityandlimiteddataavailability(manydifferentproducts,producedinmanycountrieswithevenmoreapplications).Whilethefirstgroupofleadingchemicalcompanieshavealreadysetandbeguntoimplementsupplierengagementtargets,increasedengagementwithinvestors,advocacygroups,andotherstakeholderswillbeimportantforcatalyzingbroadercooperationacrossvaluechains.ThisbroadercoordinationwillalsobeinfluencedbytheSBTiNetZeroStandardandthenegativeemissionsaccountingconsiderationsmentionedabove.30Thisisarepresentativesentimentselectedbysurveyparticipantsratherthananindividualquote.SBTiChemicalsScopingDocumentDecember202020OtherIssuesNotSpecifiedintheSurvey•Emissions-intensivegrowth:UsingthemostwidelyadoptedSBTmethod—absolutecontraction—posesachallengeforchemicalcompaniesbecauseofexpectedhighdemandgrowthforchemicalproducts.•Timeframe:Duringthisscopingphase,somechemicalcompaniesindicatedthatthe5to15–yeartimeframeofSBTsistooshortforlow-carbontechnologytomaterialize,asthetypicallifespanofachemicalplantis30years(ormore).Inits2020ETPreport,theIEAestimatesthat“itwilltakeatleast25yearstoreplaceallthechemicalproductioncapacityaroundtheworld,includingthatassociatedwithplantsthatwillbebuiltinthecomingyears.”31Concernsaboutemissionslock-inandstrandedassetssuggestthatinvestmentshouldbedirectedawayfromfossilfuel-andemissions-intensiveassets.•Companysize:OnecompanysuggestedthatSBTidifferentiate“large”and“other”companiesbasedontotalemissionsfootprinttoreflectmitigationfeasibility.In2020,SBTiintroducedaseparateSMEtrackforsmallandmedium-sizedcompaniesthatprovidesflexibilitybeyondthecompanytrack.Ageneraldynamicindicatedbythe520companieswithapprovedSBTsisthatlargecompanieshavetheresourcesandcapacitytoleadinreducingtheiremissions.Whilechemical-specificguidancewillnotresolveallbarriersandchallenges,itcanhelptoeliminatesomeandtomakescience-basedtargetsettingmorefeasibleforagrowingnumberofchemicalcompanies.Inthatlight,itisencouragingthatmorethan80percentofchemicalcompanyrespondentstothesurveyindicatedthattheircompanyisatleastconsideringSBTs(AppendixA,Question3)32foravarietyofdifferentreasons.Thefollowingsixquestionssummarizeongoingsectorchallenges:•Wherearetheboundariesofthechemicalssector?•Givenitsheterogeneity,howcanthesectorbedisaggregatedmeaningfullyandeffectively?•Howshouldcompaniesaddressscope1and2emissionslinkedwithenergyuse,externallyproducedheat,self-generationofelectricity,combinedheat,andpower(CHP),processemissions,andfugitiveemissions?•Howshouldcompaniesmeasureandaddresstheirscope3emissionslinkedwithdataavailabilityandEOLtreatmentofsoldproductsemissions?31IEA’s(2020)ETP2020;thisremarkshouldbynomeansbeinterpretedasIEAstatingthatnothingcanbedoneintheshorttomediumterm,asitfurtherstates,"Intheshorttomediumterm(2020–40),technologyperformanceimprovementsandswitchingtoalternativefuelsprovideaconsiderableportionofemissionssavingsintheSustainableDevelopmentScenario,accountingforaround30and40percent,respectively,ofreductionsrelativetotheStatedPoliciesScenario.”32Theremaybeabiasamongtherespondents(sincewillingnesstoanswertheSBTiChemicalsSectorSurveycouldwellindicateanabove-averageinterestinscience-basedtargets);nevertheless,respondentsworkedformanydifferentchemicalcompanies,includingcompaniesoperatingupstreaminthevaluechain(themostenergy-intensivepart).SBTiChemicalsScopingDocumentDecember202021•Howshouldcompaniesdealwith(differencesin)valuechainintegration(e.g.,somecompaniesowningcrackersandpolymerplants,andothercompaniesonlyoperatingoneofthetwo)?•Howshouldcompaniesdealwithnon-CO2greenhousegasemissions?Thesechallengesarediscussedinthefollowingsections.InspirationonhowtotacklesomeoftheotherabovementionedchallengescanalsobefoundinAppendixA,Question10.SBTiChemicalsScopingDocumentDecember2020225.ConsiderationsforFurtherResearchandMethodDevelopmentThissectionprovidesdiscussionofchemicalssector–specificconsiderationsforexpandingSBTadoptionandimplementation.Thediscussioniscategorizedintoscope1and2emissions;scope3emissions;othergreenhousegases;andrecommendednextsteps.Scope1and2EmissionsAsfossilfuelcombustionisalargesourceofGHGemissionsinthechemicalssector,developingprocessestoreducescope1emissionsisthetoppriority.Promisingscope1and2mitigationoptionsincludeelectrification(e.g.,ofnaphthaorsteamcrackers),newcatalysts(e.g.,toproduceethylenefrommethane),energyefficiencyimprovements,andgreenhydrogenfeedstockuse(Rissmanetal.2020).Thisscope1and2discussioncoverselectricity-relatedmitigationoptions,processemissions,andfugitiveemissions.Electricity-RelatedMitigationInparallelwiththerestoftheeconomy,chemicalcompaniesareincreasingtheelectricityshareoftheirtotalenergyuse.In2019,electricitymadeupapproximately10percentoftotalchemicalssectorenergyuse;by2070,itisexpectedtoincreaseto25percentintheIEA’sETP(2020)SustainableDevelopmentScenario.Electricityisusedtoproducechlorineandisusedinmanyotherprocessesincludingpumpsandcompressors.Asclean,renewableelectricitybecomescheaperandmoreplentiful,itcanalsobeusedforelectrolysisinprimarychemicalproduction,aswellasforlow/mediumtemperatureprocessheatwhenconvertingprimarychemicalstointermediateandend-usechemicalproducts.Furthermore,thereiscurrentresearchintoelectrifyingthesteamcrackingprocesswithwhichhigh-valuechemicalsareformed,butthetechnologyhasnotyetbeencommerciallydeployed.Approximately90percentofrespondentstotheSBTiChemicalsSectorSurvey(AppendixA,Questions15and16)reportedhavingdataonelectricityuseandself-production.Thissupportsthepotentialintegrationofchemicalssectorelectricity-relatedemissionswiththeSBTiSectoralDecarbonizationApproach(SDA)powersectorpathway(gramsofcarbondioxideperkilowatt-hour[gCO2e/kWh]).Combinedheatandpower(CHP)isusedregularlyinthechemicalssectorandpresentsanear-termefficiencyopportunity;atthesametimeCHPposesanemissionsaccountingchallengeforsomecompanies.CHPinstallations,whenownedandoperatedbythechemicalcompany,areincludedinthecompany’sscope1emissions.33Whilesomecompaniesselltheelectricityproduced,othersconsumetheelectricitytheyproducethemselves.33Thesedisplacescope2emissionswhenthecompanyusestheelectricityproducedinitsownprocesses.SBTiChemicalsScopingDocumentDecember202023ForwardOption:•IntegrategrowingchemicalssectorelectricityusewithSBTiSDA1.5°Candwell-below2°Cpathwaysforelectricitygeneration.•DeveloptypicalCHPscenariostohelpchemicalcompaniesbetterunderstandhowtoincorporateelectricityintoscience-basedtargetsetting,34andbuildofftheGHGProtocol’sGuidanceonCHP(WRIandWBCSD2006)asadditionalguidanceforchemicalcompaniesproducingelectricityfortheirownuse,sellingelectricity,andprocuringand/orsellingheattoothers.•WhenusingtheIEA’sETPmodeling,ensureconsistencyregardingCHP-generatedelectricityandheat-useemissionsaccounting.ProcessEmissionsApproximately15percent(200MtCO2)oftotalchemicalssectorcarbonemissionsareestimatedtocomefromproductionprocesses.35Thesearecausedbyreactions(otherthanenergy-relatedactivities)thatgenerateCO2andreflectthedifferenceincarboncontentbetweenthefeedstockandtheproduct36;notethatnon-CO2gasescanalsoformprocessemissions—thesearedealtwithbelow.Theseprocessemissionsarewelltrackedandreported(AppendixA,Question21).37Asmallmajorityamongrespondentsofthesurvey(AppendixA,Question22)38suggestedthatprocessemissionsshouldbeconsideredseparatelyfromfuel-relatedscope1emissionswhendeterminingtargettrajectories;reasonsincludeddifferencesofemissionsourcesandabatementmeasuresanduniqueabatementchallenges.WhileSBTiwillcontinuetousetheGreenhouseGasProtocolCorporateStandardandCorporateValueChain(Scope3)Standardtoguidecompanybaselineinventories,itwillconsiderexplicittreatmentofprocessemissionsinchemicalcompanies’targetformulations.ForwardOption:Thespecificnatureofprocessemissionscanbeconsideredinthemethodologydevelopment—totheextentthatapproachestocoverspecificproductsdonotalreadydoso.FugitiveEmissionsFugitiveemissionsresultfromintentionalorunintentionalreleaseofgasesorfrompressurizedequipmentleaksandotherunintendedorirregularreleases.Inchemicalplants,methaneleakagecontributestototalgreenhousegasemissions.39Themajorityofsurveyrespondents34TheadditionalCHPrresourcescouldaddressthefollowingsituations:•AchemicalcompanyownsaCHPandsellselectricity•IdentifyingthepointatwhichthereisamitigationbenefitfromreplacingCHPwithgrid-procuredheatandelectricity35Thisexcludesnon-CO2GHGemissions;thesearediscussedinalaterchapter.36Notintendedhereasformaldefinitionofprocessemissions.3793percentofrespondentsworkingforachemicalcompanyindicatedtrackingandreportingprocessemissions.3861percentofrespondents.39ConsistentwiththeGHGProtocol,methaneisincludedasoneofsevenkeyGHGs;however,othervolatileorganiccompounds(VOCs)arenotincludedthoughtheymayproduceanindirectgreenhouseeffect.SBTiChemicalsScopingDocumentDecember202024workingforachemicalcompanyreportednotknowingoronlypartiallyknowingtheamountoffugitiveemissionsintheirplants(AppendixA,Question23).40AlthoughtheGHGProtocolrequirescompaniestoestimatetheseemissions,onlyabouthalfofrespondentswereabletoanswerthequestionontheshareofscope1emissionsthatwereformedbyfugitiveemissions,withmostpercentagesbelow5percent,andaroundhalfoftheanswersbelow1percent(AppendixA,Question24).41Allinall,theinitialimpressionamongrespondentsisthattheseemissionsformasmallpercentageofthechemicalssector’soverallscope1emissionsbutthequantitiesarenotwellknown.Onerelatedconsiderationforfutureworkiswhethertoaddadata-reportingrequirementspecificallyonfugitiveemissions,socompaniesprovideanestimatejustifyingchoiceofemissionfactors.Alternatively,defaultleakageratescouldbeexplored.ForwardOption:Whendevelopingchemicalsresources,considerwhethertoprovideadditionalmethodsorrequirementsonmodelingandmitigatingfugitiveemissions.Scope3EmissionsSinceitsinceptionin2015,asignalachievementoftheSBTihasbeencompanies’ownershipofvalue-chainemissionsviatheirandfinancialinstitutionscope3emissionsinventories.Indeed,mostcompanieswithapprovedSBTshavesetscope3emissionsreductiontargets(SBTi2020d),andthisisexpectedtobethesameforchemicalcompanies.42Asdetailedabove,SBTicriteriarequirecompaniessetascope3targetifacompany’sscope3emissionsaccountfor40percentormoreoftotalscope1,2,and3emissions,whereaggregatescope3targetsmustcollectivelycoveratleasttwo-thirdsofthetotalscope3emissions(SBTi2020d).“SABICagreeswiththeuseofscope3emissionsaccountingtounderstandfullvaluechainclimateimpactsofchemicalsproduction.Assuch,SABICiscompilingafullscope1,2,and3emissionsinventory,includingemissionsfrompurchasedfeedstocksandemissionsrelatedtotheend-of-lifetreatmentofsoldproducts,thatSABICintendstopublish”—FrankKuijpers,GeneralManagerCorporateSustainabilityatSABIC.Figure3belowillustratesthe15categoriesofupstreamanddownstreamscope3emissions,withemphasisonthemostmaterialcategoriesforchemicalcompanies(categories1,10,11,and12).4340Amongrespondents,59percentreportednotknowingoronlypartiallyknowing.41Only18outof39respondents;otherpercentagesmentionedwere70percent,25percent,and“approximately<10percent.”42Especiallywhenasimplifiedapproachisused,assumingthatallhydrocarbonproductswouldbeincineratedend-of-life.43Thiscorrespondstothetopfourfocuscategoriesindicatedbysurveyrespondents(refertoAppendixA,Question9).MoredetailsaregiveninAppendixB.SBTiChemicalsScopingDocumentDecember202025Figure3:OverviewofGHGProtocolScopesandEmissionsacrosstheValueChainNotes:CO2=Carbondioxide;CH4=Methane;N2O=Nitrousoxide;HFCs=Hydrofluorocarbons;PFCs=Perfluorocarbons;SF6=Sulfurhexafluoride;NF3=Nitrogentrifluoride.Source:WRIandWBCSD2011.DataDataavailabilityandqualityvaryacrossscope3categoriesandareespeciallylimitedincategorieswithoutexpenditureinformation,suchasEOL-relatedemissions.Onlyabout25percentofrespondentsworkingforchemicalcompaniesknowwhathappenswiththeirproductsattheendoflife(AppendixA,Question20),whileapproximately50percentindicatedthatthisholdsthembackfromcurrentlysettinganSBT(AppendixA,Question11).Ontheotherhand,mostrespondentsworkingforchemicalcompanies(AppendixA,Question14)44knowtheamountoffossilenergyuse(relevantforscope1emissions)andthesharethatisusedasfeedstock(relevantwhendeterminingscope3emissions).Inrecognitionofcompanyscope3datachallenges,theSBTimanual(2020d)providesthefollowingaccountingguidance:“Ausefulapproachtocalculatingscope3emissionsistofirstcalculateahigh-levelscreeninginventory.Suchaninventorycanbeusedtodirectlysetatarget44Amongrespondentsworkingforchemicalcompanies,83percentknewtheamountoffossilenergyuseandtheshareusedinfeedstock.SBTiChemicalsScopingDocumentDecember202026ortoidentifyhigh-impactcategoriesforwhichmoreaccuratedataareneeded.Overtime,companiesshouldstrivetodevelopcompleteinventoriesandimprovedataqualityforhigh-impactcategories(e.g.,collectprimarydata)tobettertrackprogressagainsttargets.”Thisprincipleof“makingthepracticalbestofimperfectdata”isinlinewithWBCSD’s(2013)“GuidanceforAccountingandReportingCorporateGHGEmissionsintheChemicalSectorValueChain”tousedefaultfactorsforend-of-lifetreatmentuntilspecificdataareknown.Forexample,forsomeproducts80percentlandfillingand20percentincinerationcanbeassumedfortheirend-of-lifetreatment;assumeadefaultcarboncontentofchemicalwasteas80percentbasedonpetroleumproducts,solvents,plastics;assumethat(forsomeproducts)forlandfill,50percentofthecontainedcarbonisconvertedintoCO2(globalwarmingpotential[GWP]=1)and50percentintomethane(GWP=25).Defaultemissionsfactorsareintendedtoprovidepreliminaryscreeningmethodsandanincentiveforcompaniestodevelopprimarydatacollectionmechanisms.Anotherscope3datachallengechemicalcompaniesfaceistheprevalenceofintermediateproducttrade.TheGHGProtocolCorporateValueChain(Scope3)AccountingandReportingStandard(WRIandWBCSD2011)indicatesthatwhenacompanyproducesanintermediateproductwithmanypotentialdownstreamapplications,eachofwhichhasadifferentGHGemissionsprofile,itmaybeunabletoreasonablyestimatethedownstreamemissionsassociatedwiththevariousendusesoftheintermediateproduct.“Insuchacase,companiesmaydiscloseandjustifytheexclusionofdownstreamemissionsfromcategories9,10,11,and12inthereport(butshouldnotselectivelyexcludeasubsetofthosecategories)”(WRIandWBCSD2011,61).Somechemicalcompaniesareusingproductmassbalanceandcarbonmaterialflowanalysestoestimateandtrackdownstreamemissions.Buildingonthis,theExpertAdvisoryGroupindicatedthatpartofthescope3targetcouldincentivizeimprovingdataavailabilitybyfocusingoncooperationwithvaluechainpartnersinemissionhotspots.Companiescouldthenprioritizedataqualityimprovementforactivitiesthathaverelativelylowdataqualityandrelativelyhighemissions(WRIandWBCSD2013b).Forexample,forpurchasedgoods,companiescanuse(amixof)thefollowingdatasources,withincreasingaccuracy:1.Input/outputapproach,usedatabases(e.g.,theDEFRA[2020]database)tocalculateemissionsperspendingcategory2.Buildingthelifecycleapproach,usealifecycleassessmentorrelateddatabasesofsingleproducts,andmultiplytheactivitiesrelatingtoupstreampartwiththevolumetoestimatetheupstreamscope3emissions3.Tier1suppliers/customersprovideGHGemissionsoftheirproducts(primarydata),multipliedbythepurchased/soldvolumeThefirsttwodatasourcesarebasedon“typical”data,creatingdifficultiesforeffectivelymeasuringprogress.Forthethirddatasource,companieswouldbenefitfromguidanceonSBTiChemicalsScopingDocumentDecember202027securingmoreprimarydata,understandingpotentialimplicationswhenadjustingtheirbaselinetoreflectthisincreasingaccuracy,andmeasuringprogressofanabatementstrategyagainstabaseyearusingtypicaldata.AsolutionforcompaniescouldbetoasksupplierstosetSBTs,thusavoidingallocationandGHGaccountingburdens.Forwardoptions:Moreresourcescouldbeprovidedtoguidetreatmentofpurchasedgoodsandservices(category1)anddownstreamcategory10,11,and12emissionsforchemicalcompanies.Guidancecouldbeprovidedonthefollowing:•Howtoworkwithandimprovelimitedandlow-qualitydata•Howtodevelopahybridmethodcombininggeneraldatasetsandprimarysupplierdata•Howtomeasureprogresswhenworkingmainlywithsecondarydata•HowtoimprovedataovertimeChemicalcompaniescouldcooperatetowardashareddatabaseincludingthecategory1“Purchasedgoods”andcategory12“End-of-life”emissionsofanincreasingnumberofchemicalproducts—buildingonexistingLCAdatabases.Overtimethesedatacanbereplacedbysupplier-specificdata.SuchaprocesshasalreadybeeneffectivefordisseminatingSBTsandforthebroaderemissionsmitigationambitionforpurchasedgoodsinothersectors.RelevantScope3CategoriesTheCorporateValueChain(Scope3)AccountingandReportingStandardprovidescompanieswithgeneralguidancetoassesstheirvaluechainemissionshotspotsandonwheretofocusreductionactivities.Giventhespecialnatureofthechemicalssector,furtherguidanceforsomescope3categoriesmaybeuseful.TableB1inAppendixBpresentschemicalssector–specificreasonstoprovidesector-specificguidanceforasubsetofscope3categories,thepercentageofrespondentsindicatingthattheywouldneedsector-specificguidance,andtheproposedwayforward.Ingeneral,thereishighprioritytodevelopmoreresourcesandguidanceforcategories1and12andamediumprioritytodevelopguidanceforcategories10and11.TableBForcategory1(Purchasedgoodsandservices),companiescanchoosefromanyofthescope3target-settingmethodsdescribedabovetosetemissionsreductiontargets;however,facedwithahighdiversityofreactants(feedstocks/intermediates),thismaybechallengingforchemicalcompanies,anditwillbeimperativetoprovideresourcesonhowtostandardizethecollectionandinterpretationofdata.Toinformfeedstock-relatedtargets,itmaybeusefultodevelopintensitypathwaysfornaphtha,ethane,andmethane.Moreresourcesshouldalsobedevelopedforaccountingandreportingemissionsfrompurchasedrenewable-basedand/orcircularfeedstocks(e.g.,describinghowtodealwithupstreamemissionsfrombiomassandhowtoallocateemissionsintherecycledmaterialsvaluechain).Forcategory12(End-of-lifetreatmentofsoldproducts),uniquetothechemicalssector,manyproductsgenerateemissionsduringdisposalwhentheyareincineratedorsenttolandfill,SBTiChemicalsScopingDocumentDecember202028thusmoreresourcesarerequiredtoincreasetheaccountingandreportingoftheseemissions.Withregardtocircularfeedstocktargetsandemissionsaccounting,resourcesandguidanceforcategories1and12shouldbecomplementary.Moredetailsonaproposedapproachforcategory12,End-of-LifesoldproductsemissionstargetsettingcanbefoundinAppendixF.PleaserefertoTableB1inAppendixBformoredetailsonchemicalssector–specificreasonsfordevelopmentofguidancefortheremainingscope3categories.ForwardOption:ThefollowingshouldberesolvedinthenextphaseoftheSBTichemicalssectorscopingproject:•Whether(andinwhichcases)tomakeinclusionofend-of-lifeemissionsinthetargetboundariesand/oracircular/renewablefeedstocktargetsmandatory.45•Ifso,whetherthistargetcouldbemetwithanend-of-lifeapproachand/orwithacircularmaterialsorend-of-lifetargetapproach.AdvantagesanddisadvantagesofbothapproachesarepresentedinAppendixF.•Furtherguidanceshouldconsiderlimiteddataavailabilityforscope3data,andshouldthuspartiallyusetypicaldata,whilestimulatingfurtherdatacollection.•Additionalresourcesshouldprovideguidanceonhowtoclassifyproductsas“durable,”orwhichtypicalplastic/chemicalproducts/productgroupsare“durable,”asthiscanleadtoadifferenceofmorethanafactor50inthescope3,category12emissions;seeAppendixF.•Howtheguidanceshouldbeapplied(andhowtoproperlyaccountforemissions)forcasesofbio-basedchemicals46(UpdateonGreenhouseGasProtocolCarbonRemovalsandLandSectorInitiative,”WRIandWBCSD2020),recycling(mechanicalandvariousformsofchemicalrecycling),CCU,andelectrification,especiallyforcategory12.45InconformancewithGHGProtocolandSBTi,thiswouldlikelyonlybemandatorywhenscope3,category12emissionsarematerial.46TheSBTiapproachtobio-basedenergyandfeedstock,landuse,andnegativeemissionsaccountingwillbeinformedbythreenewGHGProtocolstandardsandguidance:CarbonRemovalsStandard,LandSectorGuidance,andBioenergyGuidance.Thisguidancecouldalsoclarifytheemissionsfactortobeusedforcarbon(C)incaseitisincinerated(asnow,theWBCSDguidance[2013]seemstosuggestthatthisproduces1ofCO2pertonneofCburnt).SBTiChemicalsScopingDocumentDecember202029OtherGreenhouseGasesNon-carbonKyotogreenhousegasesalsocontributetothechemicalssector’stotalemissions,asshowninTablebelow.Table1:Global,EuropeanUnion,andUSGreenhouseGasChemicalsSectorEmissionsGas2010globalemissions(MtCO2e)a2017EUemissions(MtCO2e)b2019(partof)USemissions(MtCO2e)cCO21,200120160HFC+PFC210d~4b7.8eN2O1407.616SF612~4bSeeHFC+PFCCH44.9~4b0.3Notes:MtCO2e=Megatonnes,carbondioxideequivalent;CO2=Carbondioxide;HFC=Hydrofluorocarbons;PFC=Perfluorocarbons;N2O=Nitrousoxide;SF6=Sulfurhexafluoride;CH4=Methane;EU=28membercountriesoftheEuropeanUnion;notefigurepresentsdatawithtwosignificantfiguresofprecision.a.Chemicals,directandindirectgreenhousegas.b.BasedonCEFIC’s(2020)2020Facts&FiguresoftheEuropeanChemicalIndustryreport(chemicalssectorGHGemissionsincludingpharmaceuticals).TotalemissionsforHFC+PFC,SF6+CH4around4MtCO2e.c.Basedontheemissionsof449reportinginstallations,manufacturingorganicorinorganicchemicals.Theextenttowhichtheseinstallationscoverthefullchemicalssectorisunclear.d.HFConly.e.AllfluorinatedGHGs.Sources:Fischedicketal.2014,753;CEFIC2020;USEPA2020.AlthoughthescopesandtheemissionsfromthethreesourcesinTable1vary(e.g.,directvs.direct+indirect,bygeographyandyear),andinrecognitionthatsubstantialnitrousoxide(N2O)emissionshavebeenabated(especiallyinnitricacidproduction),stimulatedbypoliciessuchastheEuropeanUnionEmissionsTradingSystem(EUETS)andseveralcleandevelopmentmechanism(CDMprojects)since2005,twoconclusionscanbedrawn:•Theglobalchemicalindustry’sdirectCO2emissionsaremuchbiggerthanthesumoftheemissionsoftheothergreenhousegases.47•Morechemicalssector–specificguidancemaybeusefulforcompaniestocomplywithSBTicriteriathatrequiretheinclusionofnon-CO2KyotoGHGemissionsintheirGHGinventory(withexclusionsupto5percent),giventhematerialityofthesegasesinthechemicalssector,notablynitrousoxide(N2O)andperfluorocarbons/hydrofluorocarbons(PFC/HFC)andtoalesserextentmethane(CH4)andsulfurhexafluoride(SF6).Thenon-CO2GHGemissionsoriginatefromprocessesincludingthefollowing:•N2O:Adipicacid,nitricacid,caprolactam,glyoxal,andglyoxylicacidproduction•HFCs/PFCs:Usedassubstitutesforozone-depletingsubstancesinavarietyofindustrialapplicationsincludingrefrigerationandairconditioningequipment,aerosols,solventcleaning,fireextinguishing,foamproduction,andsterilization47ExpressedasCO2e.SBTiChemicalsScopingDocumentDecember202030•CH4:Siliconcarbideproductionandfromotherchemicalprocesses(USEPA2019;CEFIC2020)Forwardoptions:•AseparatefocusontheproductionofHFCs/PFCsandpotentiallySF6couldbeconsidered.Asafirststep,increasingtheunderstandingofemissionsduringproductioninthechemicalssector,andontheirdownstreamscope3emissions,48wouldbeapriority.•TherecouldalsobealogicforfocusingonN2O:oFornitricacid,thiscanbestbedoneaspartofaneffortfocusingontheproductionoffertilizers(asthisalsoenablescoveringthetrade-offbetweenurea-basedandnitrate-basedfertilizers);andoForN2Oemissionsduringtheproductionoftheotherchemicals,thiscouldbeaseparateactivity.•Emissionsreductionpathwaysfornon-CO2greenhousegasesshouldbedeterminedsincethesepathwaysarenotpartIEAmodeling.49RecommendationsandNextStepsDuring2020,theSBTinitiativesurpasseditsgoalof1,000committedcompaniesandfinancialinstitutions.Tobuildonthispositivemomentumandmaximizeemissionsmitigationimpact,theinitiativeupdatesitstarget-settingcriteria,iscurrentlyproducinganet-zerotargetsstandard,andcontinuestodevelopsupportemissions-intensivesectors.Asdiscussedinthisdocument,thechemicalssectorisaprioritysectorforresearchandmethoddevelopmenttofacilitatebroadercompanyadoptionofSBTs.Theforward-lookingoptionsoutlinedaddressspecificscope1and2,scope3,andnon-carbonGHGemissionsissuesidentifiedbychemicalssectorstakeholdersduringthisproject.Withinscope1and2,theoptionsincludelinkagewithSDAelectricitypathways,elaborationofCHPaccountingapproaches,explorationofseparateprocessemissionstargetsetting,andresourcestosupportmoreconsistentquantificationandinclusionoffugitiveemissionsincompanybaseyearinventories.Thescope3optionsincludedevelopmentofhybridprimaryandsecondarydataapproachestoimprovedataqualityandmeasureemissionsperformance,increasedrequirementsondownstreamemissionsreportingandtargets,andconsistenttreatmentofend-of-lifeandpurchasedgoodsandservicesemissionsforrecycledmaterials.WhilecarbonaccountsforthevastmajorityofGHGemissionsacrossthesector,non-carbonGHGmitigationoptionscanbepursuedinparallelwithcarbonabatement.Tocatalyzegreaterchemicalssectormitigationactioninthenextphaseofwork,thisdocumentbuildsontheseoptionstopresentthreetop-linerecommendations:48TheCorporateValueChain(Scope3)AccountingandReportingStandard(WRIandWBCSD2011)requirescompaniesthatproduceandsellGHGs,includingallKyotoGHGs,andproductsthatcontainorformgreenhousegasesthatareemittedduringuse,toreporttheseemissionsinscope3,category11:Useofsoldproducts.49Thisincludesadecisionaboutwhethertosettargetsforeachnon-CO2componentseparately,tohaveone“non-CO2GHGemissionreductiontarget,”oraggregatetotheleveloftotalcarbondioxideequivalent(CO2e).SBTiChemicalsScopingDocumentDecember202031•DevelopachemicalssectorSectoralDecarbonizationApproach.UnliketheSDAforsteelorcement,theproposedchemicalssectorSDAwouldincludespecificemissionsintensitypathwaysforthelargestproductcategories(ammonia,ethylene,propylene,BTX,methanol,andhydrogen).Itwouldalsoincludeoneormoreresidualphysicalintensityapproach(es)forthethousandsofotherchemicalsproducts,perhapsusinganon-specifiedphysicalintensitycontractionapproachsimilartoSBTi’streatmentofvehiclemanufacturing.•Improvechemicalssectorscope3resources.Toaddressthechemicalssector’shighdegreeoffossilfeedstockuse,heterogeneity,andprevalenceofintermediateproducttrade,additionalaccountingandtarget-settingresourcesshouldbedevelopedforkeyupstreamanddownstreamemissionssources(scope3,categories1(purchasedgoodsandservices),10(processingofsoldproducts),11(useofsoldproducts),and12(end-of-lifetreatmentofsoldproducts)).Theseresourceswouldincludesector-orproduct-specificemissionsfactorsforcompaniesthatlackprimaryemissionsdata.•Developend-of-lifeaccountingandtarget-settingapproachesforchemicals.Whileagrowingnumberofcompaniesacrosssectorsarefocusingontheircategory1(Purchasedgoodsandservices)emissions,chemicalcompaniesareuniquelypositionedtoincreasetheshareofsecondarymaterials.Consistentboundaryandaccountingapproachesacrosscategories1and12couldfacilitateinclusionofthesenewtargetformulationsintochemicalcompanies’SBTs.50ThescopeandfocusofthenextphaseoftheSBTichemicalssectorprojectwilldependonfunding,externalcollaboration,initiativepriorities,andcapacity.Aconsortiumapproachtofundingincludingarangeofcompaniesandperhapsinterestedfinancialinstitutionsandindustryassociationswouldhelptoensurerelevance,applicability,andcredibilityoffurtherchemicalssectorresearch.Keyexternalcollaboratorsincludechemicalcompanies,dataprovidersstartingwiththeIEA,climatemodelinggroups,andvalue-chaincounterpartssuchasfeedstockproducersupstreamandintermediategoodsusersdownstream.SBTiisprioritizingnet-zeroresourcesandsupportofGHG-intensivesubsectorsinitsnextphaseofwork.Updatestotheclimatescience(e.g.,intheIntergovernmentalPanelonClimateChange’s[IPCC’s]upcomingSixthAssessmentReport),policydiscussions,andcompanyperformanceasrevealedinSBTimonitoringandverificationwillalsoinfluencenextphasework.ThegoalisthatthenextphasewillhelptotransformofthechemicalssectorfromoneofthelargestandgrowingsourcesofGHGemissionsintoamitigationsuccessstoryfirmlyonthepathtonetzerothroughwidespreadSBTadoption.50Intheirsurveyresponses,chemicalcompaniesindicatedtheirpreferenceforcircularitytargets;seeAppendixFforadditionalinformation.SBTiChemicalsScopingDocumentDecember202032ReferencesAden,Nate.2017.“NecessarybutNotSufficient:TheRoleofEnergyEfficiencyinIndustrialSectorLow-CarbonTransformation.”EnergyEfficiency(November8):1–19.https://doi.org/10.1007/s12053-017-9570-z.CEFIC(TheEuropeanChemicalIndustryCouncil).2020.2020Facts&FiguresoftheEuropeanChemicalIndustry.https://cefic.org/app/uploads/2019/01/The-European-Chemical-Industry-Facts-And-Figures-2020.pdf.DEFRA(DepartmentforEnvironment,FoodandRuralAffairs).2020.“UK'sCarbonFootprint—AnnualGreenhouseGasandCarbonDioxideEmissionsRelatingtoUKConsumption.”GOV.UK,September16.https://www.gov.uk/government/statistics/uks-carbon-footprint.EuropeanCommission,Ecofys,FraunhoferInstituteforSystemsandInnovationResearch,andÖko-Institut.2009.“MethodologyfortheFreeAllocationofEmissionAllowancesintheEUETSPost2012—SectorReportfortheChemicalIndustry.”November.https://ec.europa.eu/clima/sites/clima/files/ets/allowances/docs/bm_study-chemicals_en.pdf.FischedickM.,J.Roy,A.Abdel-Aziz,A.Acquaye,J.M.Allwood,J.-P.Ceron,Y.Geng,etal.2014.“Industry.”InClimateChange2014:MitigationofClimateChange.ContributionofWorkingGroupIIItotheFifthAssessmentReportoftheIntergovernmentalPanelonClimateChange,editedbyO.Edenhofer,R.Pichs-Madruga,Y.Sokona,E.Farahani,S.Kadner,K.Seyboth,A.Adler,etal.Cambridge,UK,andNewYork:CambridgeUniversityPress,p.753.Geres,Roland,AndreasKohn,SebastianLenz,FlorianAusfelder,AlexisMichaelBazzanella,andAlexanderMöller.2019.“AufDemWegZuEinerTreibhausgasneutralenChemischenIndustrieinDeutschland.”DECHEMA,FutureCamp,VCI,September.https://www.vci.de/vci/downloads-vci/publikation/2019-10-09-studie-roadmap-chemie-2050-treibhausgasneutralitaet.pdf.Huppmann,Daniel,ElmarKriegler,VolkerKrey,KeywanRiahi,JoeriRogelj,KatherineCalvin,FlorianHumpenoeder,etal.2019.“IAMC1.5°CScenarioExplorerandDataHostedbyIIASA.”IntegratedAssessmentModelingConsortiumandInternationalInstituteforAppliedSystemsAnalysis.doi:10.5281/zenodo.3363345.https://data.ene.iiasa.ac.at/iamc-1.5c-explorer.IEA(InternationalEnergyAgency).2017.“EnergyTechnologyPerspectives2017.”June.https://www.iea.org/reports/energy-technology-perspectives-2017.SBTiChemicalsScopingDocumentDecember202033IEA.2018.“TheFutureofPetrochemicals—TowardsMoreSustainablePlasticsandFertilisers.”October.https://webstore.iea.org/download/direct/2310.IEA.2020.“EnergyTechnologyPerspectives2020.”September.https://www.iea.org/reports/energy-technology-perspectives-2020.IEA,ICCA,andDECHEMA(InternationalEnergyAgency,InternationalCouncilofChemicalAssociations,SocietyforChemicalEngineeringandBiotechnology).2013.“TechnologyRoadmap—EnergyandGHGReductionsintheChemicalIndustryviaCatalyticProcesses.”June.https://icca-chem.org/wp-content/uploads/2020/05/Technology-Roadmap.pdf.IPCC(InternationalPanelonClimateChange).2018:GlobalWarmingof1.5°C.AnIPCCSpecialReportontheImpactsofGlobalWarmingof1.5°CabovePre-IndustrialLevelsandRelatedGlobalGreenhouseGasEmissionPathways,intheContextofStrengtheningtheGlobalResponsetotheThreatofClimateChange,SustainableDevelopment,andEffortstoEradicatePoverty,editedbyV.Masson-Delmotte,P.Zhai,H.-O.Pörtner,D.Roberts,J.Skea,P.R.Shukla,A.Pirani,etal.Geneva:IPCC.Krabbe,Oskar,GielLinthorst,KornelisBlok,WinaCrijns-Graus,DetlefP.vanVuuren,NiklasHöhne,PedroFaria,etal.2015.“AligningCorporateGreenhouse-GasEmissionsTargetswithClimateGoals.”NatureClimateChange5,no.12(December):1057–60.https://doi.org/10.1038/nclimate2770.Randers,Jo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mpanydidnothaveSBTs,23thattheircompanyisconsideringSBTs,4thattheircompanyhascommittedtosettingSBTs,and4answeringthattheircompanyhaspubliclyapprovedSBTs(seeFigureA1below).51Thetotalnumberwasdeterminedaftereliminatingdoubleentriesbythesameperson(includingonecasewithdifferentanswers—whenwetookthelatestanswers).Whenmultiplerespondentsfromthesamecompanygaveanswers(tworespondentsforfourcompanies,andfourrespondentsforonecompany),allrespondentswereconsideredaftercheckingthattheiranswerswerenotliterallythesame.52Thirty-eightself-identifiedasworkingforachemicalcompany;twodidn’tanswerthisquestionbutweretreatedassuchbasedontheircompanyname.53Otherrespondentsrepresentedanongovernmentalorganization(NGO),amemberorganization,atradeassociation,fourbroadercompanieswithchemicaldivisions,atesting/inspection/certificationorganization,twocompaniesproducingconsumergoods,twosolutionproviders,threeconsultants,anenvironmentalimpactagency,aninvestor,agovernment-fundedproviderofsustainabledevelopmentservices,andoneunknown.SBTiChemicalsScopingDocumentDecember202037FigureA1:SurveyResults:CompanieswithScience-BasedTargetsSource:SBTiChemicalsSectorScopingSurvey,20204:Doyourcompany’sproductsreleasegreenhousegasesattheendoftheiruse-phase(e.g.,hydrocarbonswhentheyareincinerated)?Amongrespondentsworkingforchemicalcompanies,29answered“Yes,”and8answered“No.”Asmostchemicalcompaniesproducehydrocarbons,theoverwhelmingpositiveanswertothisquestionisinlinewithexpectations.Theanswertothequestionisusedinsomelaterquestions,todistinguishbetweenchemicalcompaniesforwhichtheseemissionsare,orarenot,relevant.SBTiChemicalsScopingDocumentDecember202038SCOPE:5:Whichsectorclassification(taxonomy)doyoucurrentlyuse(e.g.,NACE,NAICS,GICS,CDP)?TableA1belowsummarizeshowrespondentsansweredthisquestionfortheoptionsalreadymentionedinthequestion.TableA1:SurveyResults:SectorClassificationSectorclassificationRespondentstotalaRespondentsworkingforchemicalcompaniesNACE86NAICS97GICS84CDP1613Otherclassifications43Answersonlyindicatingtheactualcompanies’classification96Notanswered1810Notes:NACE=NomenclaturegeneraledesactivitiéséconomiquesdanslaCommunautéEuropéenne;NAICS=NorthAmericanIndustryClassificationSystem;GICS=GlobalIndustryClassificationStandard;CDP=CarbonDisclosureProject.a.Includesrespondentsworkingforchemicalcompanies.Source:SBTiChemicalsSectorScopingSurvey,2020OnerespondentfromachemicalcompanyremarkedthatwhilethecompanyreportsinGlobalIndustryClassificationStandard(GICS),duetothevarietyofapplicationsofthecompany’sproduct,theclassificationisnotideal.Anotherrespondentalsofromachemicalcompanyremarkedthatthecompanyhaditsownsystem,includingelementsfromStatisticalClassificationofEconomicActivitiesintheEuropeanCommunity(NomenclaturestatistiquedesactivitiéséconomiquesdanslaCommunautéEuropéenne,NACE)andGICS;54further,SustainabilityAccountingStandardsBoard(SASB),USEnvironmentally-ExtendedInput-Output(USEEIO)2002,andStandardIndustrialClassificationSystem(SIC)werementioned.No“other”classificationhasbeenmentionedmorethanonce.Thenumberofrespondentsgivingactualcompanies’classificationsuggeststhatthequestionwasnotcleartothem.Intotal,32respondentsansweredthequestionbyprovidingatleastonesectorclassificationmethodology.54ThesehavealsobeenincludedinthenumbersforNAICSandGICS.SBTiChemicalsScopingDocumentDecember2020396:ShouldtheSBTichemicalsmethodologytobedevelopedalsoapplytopharmaceuticals?Sixteenrespondents(ofwhom13workforachemicalcompany)responded“Yes,”7(ofwhom5workforachemicalcompany)responded“No,”and24respondents(ofwhom16workforachemicalcompany)indicatedtheydidnothaveanopinion.FigureA2belowshowsthedistributionofopinionsfromthe47respondents(theresultisnotmuchdifferentwhenincludingonlyrespondentsworkingforchemicalcompanies).FigureA2:SurveyResults:ShouldSBTiChemicalsMethodologyApplytoPharmaceuticals?Source:SBTiChemicalsSectorScopingSurvey,2020Reasonsforvoting“Yes”:•Expectedgrowthofthepharmaceuticalssector•Chemicalsareusedintheproductionofpharmaceuticals•Similarityinthechallengetomap“purchasedgoods”emissionsReasonsforvoting“No”:•Thebigdifferencebetweenproducedquantities,yields,ancillarymaterials(suchassolvents),footprintperton,differencesinregulatoryoversight,andthedifferentstructureoftheindustry•PharmaceuticalsaremadefromspecialtymaterialsthatdonothaveknowncarbonfootprintsRespondentshavedifferentviewsonthesimilarityofproductionprocesses,forsometheexistenceofsuchsimilaritiesisthereasontovote“Yes”;forothers,itsabsenceisthereasontovote“No.”Tworespondentspointedoutthatpharmaceuticalscanbeconsideredinthecategoryof“Specialtychemical”bythenatureoftheprocess.SBTiChemicalsScopingDocumentDecember202040Respondentspointedoutthatpharmaceuticalscanbeproducedthroughchemicalroutes(inwhichcaseinclusioninthechemicalssectormightmakesense)andthroughbiotech/biologicalroutes(inwhichcasethismightnotmakethatmuchsense).Onerespondentpointedoutthatscope3emissionsarelikelybiggest,andanotheranticipatedlackofcommonlyavailabledata;yetanotherrespondentspecifiedthatunderstandingscope3’sdownstreamemissionsmightbechallengingforthepharmaceuticalcompaniessellingintermediates.7:ShouldtheSBTichemicalsmethodologytobedevelopedapplytothemanufactureofbiofuelsasindicatedabove?Twenty-sixrespondents(ofwhom19workforachemicalcompany)responded“Yes,”6(ofwhom4workforachemicalcompany)responded“No,”and13(ofwhom9workforachemicalcompany)indicated“Noopinion.”FigureA3belowshowsthedistributionofopinionsfromthe45respondents(theresultisnotmuchdifferentwhenonlyrespondentsworkingforchemicalcompaniesareincluded).FigureA3:SurveyResults:ShouldSBTiChemicalsMethodologyApplytoBiofuels?Source:SBTiChemicalsSectorScopingSurvey,2020Themainreasontovote“Yes”isthatbiofuelsareproducedchemically,andinsimilarprocessesaspetrochemicals/linkedtochemicalbusinessesandchemicalproduction;justthefeedstockisdifferent.Furthermore,theGHGemissionabatementleversaresimilartobioplasticsandbiochemicals.Themainreasonstovote“No”arethatbiofuelsshouldbecoveredunderenergy,oilandgas,orfuelsectorsandthatbiofuelsandbiomaterialsbringupmanyissuesaroundland-usechangeandbiogenicCO2uptakesandemissionsthatarenotcommonforchemicals.Somerespondentsdistinguishbetweenthedifferentscopesbysuggestingthefollowing:SBTiChemicalsScopingDocumentDecember202041•Applythemethodologytothescope1and2impactsofbiofuels,nottotheuse-phase(scope3).•Ifthemethodologyfocusesonproduction,coverageunderthechemicalssectorwouldbelogical;ifonuse,coverageundertheenergysectorwouldbelogical.Othersexpressdoubtduetothefollowing:•Biofuelscanreduceemissionsinmanyways—100percentrenewableenergycanofferthepotentialtoeasilycapturebiogenicCO2—leadingtonegativeemissions.•Biorefineriesprocessingvariousfeedstockstoproduceproductsflexiblyintofuelandchemicalswillbenefitfromaconsistentmethodologyfortargetsettinginthesetwoindustries.•Theapproachshouldbeinclusivethroughoutthevaluechainforalltypesoffuels.•Manychemicalsareincreasinglybeingsynthesizedfromnatural/agriculturalmaterialsasanalternativeto,forexample,petroleum-basedmaterials.Accountingforbiogeniccarbon/sequestrationduringgrowthmustbesimilarlyconsideredforthechemicalsindustryandforthebiofuelsindustry,toavoidcompaniesclaimingcarbonneutralitysimplyoffthebackofusingnaturalmaterial,whichsequesterscarbonatbeginningoflife.RespondentsnotethatthemethodologycouldclarifyhowtodealwithCO2formedduringbio-processes(excludingcombustion).8:Otherremarksaboutthismethodologytobedevelopedandthescopeofchemicalproductstowhichitshouldapply.Respondents’commentsonthescopeofthemethodology:•Clarifythatthisalsoappliestofoodadditives,biochemicals,etc.,whicharepartofspecialtychemicals.•Wequestionthefactthattodayindustrialgasesareincludedinthissector.Adedicatedmethodologytobedevelopedwithourpeerswouldbewelcome.•Itmustapplytotheplasticsindustry.Nosignificantprogresscanbemadeindecarbonizingthechemicalssectorwithoutguidanceforplasticsproductionasituseshydrocarbonfeedstocks.•Polymers•Ammoniaandammoniumnitrate•Broadlyitmustencompassallkeychemicalprocessessuchascrackers,ammonia,urea,basicchemicals,andchemicalintermediates(e.g.,methanol,syngas,basicpolymers,specialtypolymers,finechemicals).Ideallythescopeshouldincludeallchemicals.•Ingeneral,IwouldprefertosetabroaderscopesothatcompanieswithabroaderportfoliodonotrunintotheriskthatapartoftheirportfolioisnotcoveredbytheSBTmethod.SBTiChemicalsScopingDocumentDecember202042•SBTichemicalssectormethodologyshouldincludespecificguidanceforspecialtychemicalsvs.commoditychemicals.Theaddedvalueforspecialtiesisgreater,andthesupplychainstendtobemorecomplex.•Shouldconsiderpolyolefins,hydrocarbons,andfertilizers.Respondents’commentsonthemethodologyingeneral:•Needstobeofsufficientdetailtoprovidethelevelofguidanceneeded.Ifthatmeanssubdivision(e.g.,biofuels),thenthisshouldbeapplied.•Downstreamscope3emissionsintheuse-phaseofchemicalsareverydifficulttoquantifybecausewedonottracktheprocessesofourcustomers.Thisespeciallyappliestoscope3,category10—Processingofsoldproducts.•Methodologymusttakecomplexcompaniesintoaccount.•Ithinkmanyoftheprinciplesdevelopedthroughthisworkwillapplytootherintermediate“heavy”industries.However,Idonotbelievethattheseotherindustriesnecessarilyneedtobeconsidered.•Themethodologyshouldincentivizeanddrivethetransitionfromfossil-basedchemicalstobio-basedmaterials,giventhatthebio-basedchemicalshave(fromacradle-to-graveperspective)lowerspecificGHGemissionsthanthefossil-basedcounterpart.However,atthemoment,atcompanylevelthisimpactisnotcaptured.Forexample,abio-basedchemicalcompanywithhighgrowthwillseeitsemissionsincreasingwhileatsectorlevelthiscancontributetoadecreaseinoverallsectoremissions.•Itshouldavoidthedoubleaccountingofemissions,whichhappensifnotappropriatelyconsidered.SBTshouldbeapplicabletoscope1and2formanufacturingcompaniestoavoiddoubleaccountingofemissions.Moreover,ifcompanies’operationsaremoreonthesupplychainside,suchasassemblingunits,thenSBTshouldbeapplicabletoscope3.SBTiChemicalsScopingDocumentDecember2020439:Scope3categoriesforwhichamethodologyneedstobedevelopedspecificallyforthechemicalssector.TableA2:SurveyResults:Scope3CategoriesThatRequireaMethodologySpecificallyfortheChemicalsSector#CategoryRespondents(%)Respondents,chemicalssector(%)Respondents,chemicalcompanywithend-of-lifeemissions(%)UPSTREAM1Purchasedgoodsandservices6963682Capitalgoods1816203Fuel-andenergy-relatedactivities(notincludedinscope1or2)3634404Upstreamtransportationanddistribution3641365Wastegeneratedinoperations4950566Businesstravel1616167Employeecommuting1116168Upstreamleasedassets434DOWNSTREAM9Downstreamtransportationanddistribution33343210Processingofsoldproducts56474811Useofsoldproducts76666812End-of-lifetreatmentofsoldproducts76727213Downstreamleasedassets43014Franchises73015Investments131316Numberofrespondents453225Source:SBTiChemicalsSectorScopingSurvey,2020TableA2abovedoesnotshowmaterialdifferenceswhenrespondentsworkingforchemicalcompaniesaresingledout;also,focusingonrespondentsworkingforchemicalcompanieswithend-of-lifeGHGemissionsdoesnotchangethepictureatall.SBTiChemicalsScopingDocumentDecember202044FigureA4:SurveyResults:Scope3CategoriesThatRequireaMethodologySpecificallyfortheChemicalsSectorNote:Totalnumberofrespondents=45.Source:SBTiChemicalsSectorScopingSurvey,2020Respondents’comments:•General:oInthecaseof,forexample,fertilizers,theuseoftheproductleadstoemissionsofCO2andN2O.Theseneedtobetakenintoaccount,eitherinscope1orinscope3downstream.oAcurrentchallengeforupstreamislackofadequatequalitydata.Typically,databaseslikeecoinventareusedforpurchasedchemicals,butthesemayonlybeupdatedonceperdecade.oEmissionsfromprocessingofbasicchemicalsatthecustomers’endarescope1and2emissionsofthecustomers.Emissionsofpurchasedgoodsarethesuppliers’scope1and2emissions.Includingthosewouldleadtodoublecounting.oThebiggestchemicalssectorcontributorstoscope3(ataminimumthetopfivecategories)shouldbepartofthescopeofthemethodology.Thosecategoriesforwhichchemicalssectorcontributionsaresimilartothoseofanyotherindustrycanbeexcluded.oImportant:Howcanwehandlegrowth?•Upstreamcategories:1234567891011121314150510152025303540Scope3categoriesNumberofrespondentsSBTiChemicalsScopingDocumentDecember202045oThechemicalssectorisalargeconsumeroffossilfuels.TheupstreamCO2andCH4emissionsthatarereleasedintheexploration,production,andtransportationoftheseshouldbeconsidered.oCategory1–Purchasedgoodsandservices:▪Guidanceinparticularduetothebroadrangeofgoodsnecessarytoproducechemicals,standardizationofemissionfactors,guidanceonhowtoaccountforemissionsreductionactivitiesfromsuppliers/rawmaterials.▪Wehaveanenormousnumberofsuppliers(55,000+)andrawmaterialsforveryspecificprocesses.Wedonothaveaspecificgroupofsuppliersthatcoversalargepercentageofourrawmaterials(allsupplyinlowpercentagesrelativetototalsupplychain),soitisextremelydifficulttomanagethisnumberofsuppliersandrawmaterials.•Downstreamcategories:oDownstreamprocessesarespecificallychallengingbecausereliablefiguresaredifficulttoobtainduetothediverseapplicationandcustomerstructure.oProductfatewillbedifficulttoaddressduetothewiderangeofapplicationsandprocessestheymaybeusedin(verydifficulttobuildacompleteproducttrail).oItisimportantthatcertaincategories,suchasEnd-of-life,whereproducersdonothavefullcontrol,arehandledcarefullyfortargetsetting.Standardizationofapproachestoaccountingaswellasfurtherclarityonwhatisincludedandhowtoproperlyaccountforcertaincategories,suchascategory10:Processingofsoldproducts(whichcouldincludealldownstreamconversionsofachemicalintermediate),requireguidance.oProductsareintermediateswithmanypotentialenduses.AccordingtotheGHGProtocolTechnicalGuidanceforCalculatingScope3Emissions(WRIandWBCSD2013),acompanythatproducesintermediateproductswithmanypotentialdownstreamapplications,eachwithapotentiallydifferentGHGemissionsprofile,cannotreasonablyestimatethedownstreamemissionsassociatedwiththevariousendusesoftheintermediateproducts.oIimaginetheinclusionofcategories1,10,11,and12willbefairlyexpected.However,Iwonderifitisalsoworthwhileconsideringtheuniquewastestreamswithinthechemicalssector.Itisalsothecasethatmany“waste”streamsinthechemicalssectorcangoontobeusedbyothercompaniesasaninput.Now,thesearenotconsideredsoldproducts;however,iftherearegoingtobeusedbyanotherbusiness,dothoseemissionsfallintocategory5or11?oCategories10and11:▪Mostchemicalsareintermediatestootherproducts,assuch,Ibelievethereareuniquecharacteristicsapplicabletotheprocessinganduseofsoldproducts.Typically,thechemicalproducersdonotdefinehowtheirproductsareusedbytheircustomers.▪ThebigchallengesdownstreamarethatmanychemicalsgointoamyriadofvariedproductsandapplicationsandundergochemicalSBTiChemicalsScopingDocumentDecember202046transformations.Tracking,orevendefining,whatthedownstreamprocessingoruseiscanbecomplex,uncertain,andinmanycasesunknowntothechemicalproducer.Insomecircumstances,theuseofasoldproductcouldalsobereductionoravoidanceofemissionsbyothers.oCategories10,11,and12:▪Weprovidematerials(300,000+specialtyproducts)forbusiness-to-business(B2B),andasaresult,theuse-phaseofchemicalsisverydifficulttoquantify.Eachcustomerhasadifferentuseforourproducts,andwehavenowaytotracktheprocessesofour1,000,000+customers.▪Residualwastefromexplosivesmanufactureisgenerallyclassifiedashazardousandcannotbesenttolandfill;onsiteburninganddetonationiscommon.Similarly,detonationofexplosivesintheuse-phasewillwarrantmoresophisticatedemissionsestimationmethodologies.oCategory11:Canbecomplexandopaqueandwithlimitedcontrolofthecompany,itself.Hardtointerpretcurrentmethodologyguidance,morespecificexamplesforchemicalsindustrywouldbehelpfulasaminimum.Useofcategory(11)canalsodependonthefeedstocksthecustomersthemselveschoosetoimplement(e.g.,bioorfossil)—thesoldproductdoesthesametaskirrespectiveoftheembeddedcarboninthefeedstock.oCategory15:Guidanceifthecompanywhereinvestmentismadedoesnotreportitsownemissions.CHEMICALCOMPANIES’OBSTACLESTOANDBENEFITSOFSETTINGASCIENCE-BASEDTARGET:10:Describebrieflyhowyouhaveorganizedreducingyourcompanies’(scope1,2,and3)greenhousegasemissions.Outof29respondents,28workingforachemicalcompanyprovidedinputonatleastoneofthecategories,anillustrativeselectionisgivenhereforeachofthecategoriesprovidedinthequestion:•Governance(24inputs):55Manyrespondentsfromchemicalcompaniesreporthowtheeffortstosetanddeliverongreenhousegasemissionsreductiontarget(s)arestructured:oTwelvereportahigh-levelbodyoverseeingthestrategy,targetsetting,and/orprogress,ofwhom2reportthechiefexecutiveofficer(CEO)tobetheexecutivesponsor.55Anyinputhasbeenincludedhere,apartfrominputssuchas“N/A”or“Notyet”(inputssuchas“Planned”havebeenincluded).SBTiChemicalsScopingDocumentDecember202047oTenreporttohaveoneormorededicatedteam(s)(e.g.,includingsustainability,environment,healthandsafety,operations,procurement)todrivethegreenhousegasemissionsreductionprogram,progress,andreporting.•Involvement/Endorsementtopmanagement(24inputs):CEO/Board(ofdirectors)/Topmanagementinvolvementissecuredin24chemicalcompanies(from28respondentstothisquestion)by,forexample,endorsingtargets,strategies,oractionplans;sponsoringordrivinggreenhousegasemissionsreductioninitiatives;oroverseeingprogress.Otherinput:oAyearlycapitalexpenditures(capex)budgetissecuredforGHGreductionmeasures;scope2improvementissupportedbyaspecialsourcingmandate.•Internalcarbonpricing(21inputs):Elevenrespondentsfromchemicalcompaniesreporttheircompanyhasinternalcarbonpricinginplace(forstrategic,research,andinvestmentdecisions),sevenareconsidering,planning,piloting,orimplementingthis.•Strategyprocess(21inputs):FourrespondentsfromachemicalcompanymentionSBTasasignificantelementintheirstrategy.o“Thestrategytakesbothabottom-upandtop-downapproachtoseekfeedbackfromthesites,businesses,andrelevantfunctionstoinformtheoverallstrategy.Alltargetsaresetatcorporatelevelandcascadedthroughoutthebusiness.”o“Integratedintostrategicriskanalysis,businessstrategy,andfinancialplanning;early-stagescenarioanalysis;embeddedemissionsreductionprograms.”o“Wehaveintroducedsustainabilityassessmentinvariousprocessessuchastechnologydevelopment,designphaseofmegaprojects,qualificationofproducts,etc.,lowhurdleratesforsustainabilityprojects.”oOtherrespondentsfromachemicalcompanyindicatethatstrategicgreenhousegasemissionsgoalsarecurrentlybeingdeveloped,orregularlyupdated(PlanDoCheckAct).•Targetsformanagersyear-endperformanceevaluation(18inputs):Twelverespondentsfromchemicalcompaniesreporttheircompanieshavegreenhousegasemissionsreduction/sustainabilitytargetsinplacefor(some)(high-level)managers;fourareconsideringorplanningthis.•Fiverespondentsprovided“other”inputs.SBTiChemicalsScopingDocumentDecember20204811:WhatisholdingyoubackfromsettinganSBTrightnow?TableA3:SurveyResults:BarrierstoSettingScience-BasedTargetsBarrierRespondents(%)Respondents,chemicalssector(%)Respondents,chemicalcompanywithend-of-lifeemissions(%)StrategicNopressurefrominvestors242228Lackofclientswithupstreamscope3suppliertargets181924Clientsarenotwillingtopaymoreforproductswithalowergreenhousegasfootprint393840Nomanagementsupporta1198FeasibilityEvenafterinnovation,therearenowaystomeetascience-basedtarget1698Technologyreadinessforsomeofthehigh-CO2abatementprojectsistoolow(“innovationisneeded”)424144Infrastructurewillnotbereadyintime241616Itiseconomicallynotachievabletomeetascience-basedtarget292224Wecannotprocuresufficientrenewableelectricityfromtheelectricitygrid181312Amountofsustainablebiomassavailablewillnotbesufficient181312Amountofwasteavailableforrecyclingwillnotbesufficient864Processofinvolvingoursuppliersorothernewpartnersinthereductionofthescope3emissionswillbetoochallenging393436Processofinvolvingothernewpartnersinthereductionofthescope3emissionswillbetoochallenging181920PoliciesPolicymakersneedtointroducepolicies(i.e.,acarbontax)000LackofsufficientlystrictCO2regulationstoincludeexternalities241920UncertaintyaboutfutureCO2pricesandhencethecorrecttimingofinvestmentsinCO2abatement322524Policiestypicallyexcludescope3reductiontargets373440KnowledgeSBTiChemicalsScopingDocumentDecember202049Wedonotknowourcurrentscope1and2emissions000WedonotknowourcurrentemissionsofgreenhousegasesotherthanCO2334Wedonotknowourcurrentscope3emissionsatall834Wedonotknowourcurrentscope3emissionswithsufficientaccuracy474448Wedonotknowthelong-termcoststoreduceouremissions322836MethodologyCurrentmethodologieshavelimitations342538Methodologyforthechemicalssectorwillbeupdated;wearewaitingfortheupdateandwillthenseriouslyconsidersettingascience-basedtarget393844Wehavesomanymergers/acquisitionsinoursectorthatwecannotmeaningfullysetabaseline1368Wehavealreadysetascience-basedtarget,sothisquestiondoesnotapplytousb181912Other615048Numberofrespondents383225Notes:CO2=Carbondioxide.a.Includingoneentryunder“Other”:Gettingmanagementonboard.b.Fouroftheserespondentsdidnotindicateanyotherbarrierinthisquestion.Source:SBTiChemicalsSectorScopingSurvey,2020Under“Other”inTableA3above,thefollowingbarrierswerementioned:•MajorbarrieristoexplainthatanSBTneedstoincludescope3—aversionduetoscope3emissionstargetsbeingperceivedinternallyasnotcredible/achievablebecauseitisoutsideourcontrol(tworesponses).•Inadequateaccommodationofcompaniesthatrequirehydrocarbonsasfeedstock.•SeniormanagementisnotfullyinformedofhowanSBTissetandmanaged.Withthelackofthemethodologyforthechemicalssector,thishasbeensomeofthedifficulty.•TherateofchangeofwhatconstitutesanSBTishigh.Yes,theglobalsituationischangingrapidly,butitisquitechallengingtodevelopgoalsontargetsthatseemtochangeyearly.SBTiChemicalsScopingDocumentDecember202050Thefollowingargumentsweregiven(thefollowingisaselection):•“Webelievethatitishardforthechemicalssectortosetascience-basedtargetaccordingtothegeneralnonsectoralapproach(e.g.,30percentreductionofabsoluteCO2emissionsovera10to15–yeartimeframe).Formanychemicals,fossilfuelsareaninputmaterial,andCO2isreleasedduringproduction.Asubstantialinnovationisthereforeneededtodevelopnewlow-carbonprocessesforthosechemicalproducts,forexample,viacarboncapture(largescale)orelectrificationofprocesses,withsufficientrenewableenergybeingavailable.Evenifnewsolutionsexist,theseneedtobecomecommerciallyavailableandeconomicallyviable(competitive)comparedtoexistingsolutions/processes.Thiseitherrequiresastrongpolicypush(e.g.,viaincreasedcarbonprices)orstrongrenewableenergypricesreductiontoachievesimilarproductioncostswhenprocessesareelectrified.Still,thereisalongtimeframeneededtodevelopsuchnewlarge-scalesolutionsandforthosetobebroughttothemarket(durationuntilnewproductionplants/plantdesignsaredeveloped,tested,built,etc.).ThistechnologylimitationneedstobeconsideredwhendevelopingspecificSBTsforthechemicalssector,atleastwithregardtospecificproducts(e.g.,hydrogen).”•“Requiredinnovativetechnologiesaremostlylong-terminvestmentsorR&Dprojectsthattakelongertimestobedeveloped.Thus,theiremissionsreductionswouldonlytakeplaceafterthe15yearscut-offcriterion.Therealsohastobeawaytoaccountforpartofthereductionmeasuresaftertheinitiationofsuchprojects.”•“Theabsoluteandintensitycontractionmethodsrequireemissionscutsataratethat,especiallyintheshortterm,areeconomicallyjustnotfeasibleforus.We'dliketousetheSDAmethod,butthereisn'toneyetforour(sub)sector(s).”•“Weneedpractical,abundant,andcompetitivelypricedrenewablethermalenergysourcestoreplacenaturalgas.Weneedpracticalandaffordablecarboncapture.”•“WeneedanSBTmethodologyfortheindustrialgassectorcombinedwithaclearmethodologyforourchemicalcustomersthatinvolvesscope3forustoleverageourcontributiontotheGHGemissionsreduction.”•“Abilitytoinfluencethroughthevaluechaincanbelimitedforspecialitychemicalcompanieslikeus.Weareoftenasmallpartofoursuppliers’businessandhavelimitedinfluence.Wealsoexpectthatshiftsinproductmixmeanthatprimarymaterials(especiallyinorganicmetals)neededwillchangesignificantlyoverthelifeofanSBT,withoutthecorrespondingincreaseinendoflifetoproviderecycledmaterialsofsufficientquantityintheSBTtimeframe.Additionalguidanceonin-usecategorywouldbehelpful.”•“Appropriatetechnologyandleversthatcanhelpusachieveareachallenge.”•Weproducemanytensofthousandsofproductsinmanycountries,andwecurrentlyestimatescope3datauncertaintyis±50percent,despitestartingearly.Wetookontheformidabletaskofcalculatingourdownstreamscope3impactforcategories9through12,determiningthequantityofeachproduct,theproductcategoryitwasin(andwhethergreenhousegasemissionswerematerial).Thenwedeterminedemissionsfactorsforeachproductcategory.SBTiChemicalsScopingDocumentDecember202051•“Thereductionpathtobeconsidereddoesnotreflectthediversity,complexity,andlimitedfeasibilitywithinthechemicalssector(seechecksunder‘Feasibility’).”•ManyofourchemicalsindustryclientsdowanttosetanSBT.However,therearemultipleconcerns:oThekeyconcernisthatthebulkofscope3emissionsareeitherinrawmaterialpurchaseordownstreamprocessing/use,whereitisfeltthatthereisnotmuchinfluence;sotheycouldbesettinganunachievabletarget.Inparticular,considerationswouldbeasfollows:▪Thechemicalsindustryisnotthatbig,sotheremayonlybeafewcompaniesthatsupplytherequiredrawmaterial.Withsuchascarcecommodity,businessesdonothavethelevelofinfluenceovertheirsupplychainasifitwerealarge,competitivemarket.▪Manychemicalsbusinessesproduce>100sofdifferentchemicalseach,withmultiplepotentialapplications.Howdoyoufeasiblyassessthedownstreamprocessingoruseofallofthemwithoutmakingsignificantassumptions?▪Moreguidanceisrequiredonattributionofdownstreamemissions.Isitexpectedthateverypartnerinthesupplychainsettargetsoneffectivelythesamesetofemissions?Forexample,ifcompanyAsuppliestocompanyB(whichproducestheendproduct),category11willbethesameforbothcompanies.Dotheybothsettargetstoreduce,andifso,howisthiscaptured/accountedforwithintheglobalcarbonbudget?oGuidanceonhowtomanagemergersandacquisitionsiskey,elsetheywouldbere-baseliningeveryyear.Newsofthisguidancehasalsocausedbusinessestopauseastheyconsider,“Whyarewedoingtheworknowwhenwemightneedtoredoitnextyearanyway.12:WhatbenefitsdoyouseetowardsettingSBTsforyourchemicalcompany?Wearenotreportingonthisquestionhere,asweseethatsomerespondentsmisunderstoodhowthisquestionshouldhavebeenanswered.SBTiChemicalsScopingDocumentDecember202052STATISTICSFROMTHECHEMICALSSECTOR:13:Doyouhavesuggestionsforcredible,publiclyavailableliteraturesourceswithcurrentgreenhousegasemissionsoftheglobalchemicalssector,ideallysplitupperkeychemicalorproductionprocesses(steps)?Respondentsprovidedthesuggestionslistedbelow:•IEAEnergyTechnologyPerspectives2017paper•CarbonDisclosureProject•GHGProtocol•Sustainabilityreports•Sectorstudies•CEFICMid-CenturyVisionReport:https://cefic.org/thought-leadership/mid-century-vision/•https://ec.europa.eu/eurostat/home•https://www.iea.org/reports/the-future-of-petrochemicals•https://ec.europa.eu/clima/sites/clima/files/ets/allowances/docs/gd9_sector_specific_guidance_en.pdf•USEnvironmentally-ExtendedInput-Output(EEIO)isthebestwehavefound,butitisquitedated•EnvironmentalProductDisclosures•WeuseecoinventinLCAwork.Itisagoodstartingpointandwell-documented,butmanydatasetsareoldoroflowquality(butthatisknown,duetogooddocumentation)•TheNationalGreenhouseandEnergyReporting(SafeguardMechanism)Amendment(PrescribedProductionVariables)Rule2020•FertiliserCanada,FertiliserEurope,ammoniaindustry.com•TheNovaInstitutGmbHhasmarketreportsonbio-basedchemicals:http://nova-institute.eu•PossibleavenueswillincludecombinationsofreportsfromentitiessuchasPlasticsEurope,BestAvailableTechniquesReference(BATBREF)reports,(InternationalCouncilofChemicalAssociations(ICCA),EuropeanChemicalIndustryCouncil(CEFIC).•Thekeyissueinbothoftheseseemstobepublicaccess.IHSChemicalhasaGHGHandbookformanychemicalprocessesthatwouldprobablybeuseful,butitisnotavailabletothepublic.ThereistheUSLifeCycleInventorydatabasethatispubliclyaccessiblealthoughsometimesdifficulttoextractdatafrom.Whetheritiscredibleornotisamatterofdebate,butitisprobablybetterthannothing.•ThecurrentSBT-relatedliteratureonthistopicisthebestavailablesofar.However,itisveryEuropeanfocused.•Theeco-profilesdevelopedbyPlasticsEurope,thoughalittleold,havesomequitegoodGHGemissionssplitsforkeyplastics.Someofthesearesplitbyproductionprocess.SBTiChemicalsScopingDocumentDecember20205314:Foragivenfossilenergycarrierinput,doyoutrackandreportthesharethatisburntvs.thesharethatisusedasfeedstock?Forty-onerespondentsansweredthisquestion,ofwhich78percentanswered“Yes”(and22percent,“No”)(seeFigureA5below);theresultisnotmateriallydifferentforthe30respondentsworkingforachemicalcompany(83percent,“Yes”;17percent,“No”).FigureA5:SurveyResults:TrackingandReportingShareBurntvs.UsedinFeedstockSource:SBTiChemicalsSectorScopingSurvey,202015:Doyouknowwhatshareofyourscope2emissionsoriginatesfromelectricity,heat,steam,andcooling?Forty-onerespondentsansweredthisquestion,ofwhich90percentanswered“Yes”(and10percent,“No”)(seeFigureA6);theresultisidenticalforthe30respondentsworkingforachemicalcompany.Reasonstoanswer“No”werethatnodistinctionwasmadeeitherbetweensteamandheat,orbetweenheatingandcooling,andthattherewastheneedtoimprovethemanagementsystem.FigureA6:SurveyResults:KnowledgeoforiginsofScope2EmissionsSource:SBTiChemicalsSectorScopingSurvey,2020SBTiChemicalsScopingDocumentDecember20205416:Doyouknowhowmuchelectricityyourcompanyproduces?Forty-onerespondentsansweredthisquestion,ofwhom88percentanswered“Yes”(and12percent,“No”)(seeFigureA7);theresultisnotmateriallydifferentforthe30respondentsworkingforachemicalcompany(87percent,“Yes”;13percent,“No”).Reasonstoanswer“No”werethatpartoftheelectricitythatisgeneratedin-houseisnotcollected/controlled,andthatnotallCHPsareuniquelytrackedfortheirelectricitygeneration.OnerespondentremarkedthatwhiletheintroductiontothequestionnotesthatelectricityfromCHPbelongstoscope1,thisalsoholdstrueforheat.Thus,iftheCHPiscompany-owned,allemissionsfromthatplantwillbescope1.FigureA7:SurveyResults:KnowledgeofAmountofElectricityProducedbyCompanySource:SBTiChemicalsSectorScopingSurvey,202017:Canyousuggestcredible,publiclyaccessibleliteraturesourceswithlong-termprojectionsoftheglobalchemicalssector’sgrowth,ideallyperkeychemical/productionprocess,andideallywithtransparencyaboutassumptions?Twelverespondentsprovidedinput:•Sectorsassociations(AssociaçãoBrasileiradaIndústriaQuímica(ABIQUIM),AsociaciónNacionaldelaIndustriaQuímica(ANIQ),ICCA,CEFIC)•“WebelievethereportsofagenciesandindustryconsortiumssuchasPlasticsEurope,ICCA,CEFIC,aswellasstatisticsandforecastsavailablefrompaidservicessuchasthoseprovidedbyexpertconsultancies(ICIS,Nexant,etc).”•“Weusenonpublicsources.IEAhashadsomesimplemodels,atahighlevel.”•“Weleverageglobalmarketanalystinsightsandreports(WoodMcKenzie,Bloomberg).”•“IHSChemicalalsohassomegrowthprojectionsformanychemicalsbutnotverylongtermandcertainlynotpubliclyavailable.”SBTiChemicalsScopingDocumentDecember202055•TheNova-InstitutGmbHhasmarketreportsonbio-basedchemicalsgrowth—http://nova-institute.eu.•ChemicalWeekNews•“Thisisakeytopicandwesuggestlookingatvarioussourceswithsubsectoraltrajectories.Forexample,areviewwedidearlierindicatedthatsubsectoraldata(onewithhighestcorrelationwithhistoricalgrowth)fortheglobalchemicalssectorfromAmericanChemicalCouncil(ACC)couldbeacknowledgedasareasonableproxyfordeterminingmarketgrowth.”METHODOLOGICALCHALLENGES:18:Howadequate(1=Notadequateatall;4=Veryadequate)doyouconsiderthefollowingsubdivisionsofthechemicalssector?Thirty-sixrespondentsansweredthisquestion(ofwhom28workforchemicalcompanies).56Theyrankedthefourpossiblesubdivisionsofthechemicalssectorasfollows:•Productiongrouplevel(e.g.,plastics,surfactants,solvents):2.9•Productlevel(limitedamountofkeyproducts,suchasethyleneandammonia):2.8•Subsectorlevel(e.g.,baseorganics,baseinorganics,polymers,consumerchemicals,specialtychemicals):2.4•Unitoperationlevel(reaction,separation,etc.):1.9FigureA8:SurveyResults:AdequacyofDisaggregationApproachestoSubdividetheChemicalsSectorNotes:1=Notadequateatall;4=VeryadequateSource:SBTiChemicalsSectorScopingSurvey,202056Theorderoftherankingisthesamewhenconsideringjusttherespondentsworkingforchemicalcompanies,withsomewhatmorepreferenceforasubdivisionbyproductiongroupandevenlesspreferenceforaunitoperationlevel–basedsubdivision.SBTiChemicalsScopingDocumentDecember20205619:Whatothercriteriashouldweconsider(ifany)?Respondentswereaskedtoassumewewouldsplitupperproduct(suchasethylene,ammonia)andthentaketheglobalemissionsassociatedwithproducingtheproductsintoconsideration(andfocusonthosewhoseproductiongeneratesthehighestscope1,2,and3emissions);theywerethenaskedwhatothercriteriashouldbeconsidered.Twenty-tworespondentsprovidedinput:•“Therewillprobablybemuchdebateaboutthetopicofsubdividing.Eachlevelhasbenefitsandchallenges.Forexample,subdividingbyproductiongrouplevelmaybeeasierforcompaniesintermsoftheiraccountingsystems(likeSAP).Subdividingbyunitoperationmaybemosthelpfulintermsofenablingtheindustrytoaddresscommonissues.Totheextentthattheentirechemicalssectorneedsthesametypeofhelp(regardlessofwhatproductseachcompanymakes),thecommonissueswefacearealignedaroundunitoperations.That’salsohowtechnicalexpertiseiscommonlysubdivided.”•Ontheuseofproducts:o“Webelievethattheimpactofaproduct,forexample,toavoidglobalGHGemissions,needstobeconsideredsomehow.Theglobalwarmingoftheplanetdependsonthetotallevelofemissions;therefore,ifcertainproductscauseahigheremissionavoidancethanemissionscreatedduringproduction,thisneedstobeconsideredforthefullGHGbalance.Theimpactofproductsandtheirusemustnotbeneglected.”oTheuseofnitrogenproductsmustalsotakeintoconsiderationcropyieldmanagement,theoverallfoodsupplyandimpactsproduction,ourimpactonSDGs—specifically#2,ZeroHunger.•Ontheproductionprocess,valuechainandproducts:o“Therearelikelydifferentwaystoproducethoseproducts,andsothespecificprocessesusedshouldbeconsidered.“o“Supplier-specificprocesstechnologiesused”o“Region-specificenergycomposition/type”o“Variationsinqualitylevel(specification)”o“Whichprocessisusedforproduction;whatisthesourceofrawmaterials(e.g.,inthecaseofmethanolasrawmaterial,itisbasedoncoalornaturalgas)”+“Alternativetechnologyroutesforproduction.”o“Productsthatmakeupthemajorityofimpacts.Wehave300,000products,mostofwhicharesoldinsmallquantities.”o“Chemicalcompaniesaretypicallydiversifiedandmayincludeanumberofdifferentsubsectorlevelsand/orproductiongrouplevels.”oFocuscanbeontheproductsgeneratingthehighestemissions,butalternativelyalsoontheproductsgeneratingthehighesteconomicvalue.oPrioritizeproductswithhighgrowthprojections.o“Eachcompanyshouldhaveitsownproduct-by-productanalysistoreferencetheglobalnumbertohelpdriveinnovation/efficiency/decarbonization.”SBTiChemicalsScopingDocumentDecember202057oAssumptionaroundlevelofexistingabatement(BusinessAsUsual(BAU),wherethetechnologyisprovenandcommerciallyavailable);forexample,secondaryabatementcatalystfornitrousoxideemissionsinnitricacidproduction.o“Productcompositionanduseofeachproductandproductfate,includingfugitiveemissions.”oPrioritizeproductsforwhichsolutionssuchasbio-basedchemicalsareavailable.oTheremaybeaneedtosubgroupthechemicalssectorcompaniesaswehaveawiderangeofproductsincludingby-productsanddifferentenduses.o“Akeychallenge,particularlywithupstream‘data’isthatmanyprocessesmakemultipleproductswithunequaleconomicvaluebutmuststillbeallocatedinsomeway,usuallybymass.Ifsuppliersordatabasesusedifferentallocationmethods,thereportedburdenscanbevastlydifferent.”•Onscope3emissions:oWithregardtoscope3emissions,itisimportanttoconsiderhowproductsinteractandvolatizeinsoilandair,andhowtemperaturesandmoistureimpactemissions.Aglobalperspectiveistoogeneral,andregionalclarityisneededtoprovidemeaningfultargets.oItiskeytoconsiderapracticalwayofassessingscope3emissionsofchemicalintermediatesastheyflowintoseveralpossiblevaluechains,eachmappingtoadifferentendoflifeandotherconsiderations,whichalsovarybygeography.Hencereliablemarketstatisticsarerequired.Also,atethylenelevel,theremaybefeedstockdifferencesthatshouldbetakenintoconsideration.o“Productlifecycleinrelationtorecycle”o“Circulareconomy“•Variousotherpoints:o“Easeandscopeofobtainingthedata”oPointofattention:Reductionsofemissionsoverthevaluechainrelatedtooutsourcingpartoftheprocesstoaspecialist,thustransferringtheemissionsfromonesubsegmenttoanotheroRegionalaspectso“Thiswouldbeahugeleapforward”oCompanyrevenue,geography,yearsofoperation(history)20:Doyouknowwhathappenswithyourhydrocarbonproductsattheendoftheirlife?Twenty-tworespondentsworkingforchemicalcompaniesproducingproductswithend-of-lifeemissions(Question4)answeredthisquestion,ofwhich16(73percent)indicatedtheydonot,oronlypartially,knowwhathappenswiththeirhydrocarbonproductsattheendoftheirlife(seeFigureA9).5757Thepercentageremainsalmostthesamewhenincludingallrespondents(37)orallrespondentsworkingforachemicalcompany(28).SBTiChemicalsScopingDocumentDecember202058FigureA9:SurveyResults:KnowledgeofCompanies’HydrocarbonProductsEndofLifeFateSource:SBTiChemicalsSectorScopingSurvey,2020RespondentstoQuestion20wereaskedtosubstantiateincasetheyonlypartiallyknowtheseemissions,answersincludethefollowing:•“Thereisnofulltraceabilityforscope3.”•“Not"knowing"butsomesources,forexample,PlasticsEuropeorConversiosurveysindicateatleastalittlebithowtherealpicturecouldlook.Here,itiskeytohavereasonablyreliable,regularlyupdatedwastemanagementdistributionstudiesperchemicalproductdisposedpercountryoratleastregion.”•Wedonothavedetailedvisibility,butmostofourproductsareeaten.•“Ourproductsarebio-based;theyonlyemitbiogenicCO2sotheyarenotcontributingtodownstreamemissions.Thisbenefitofusingbio-basedproductsneedstobeaddressedintheguidance.”•“Littlelineofsightoffullchainofcustodyanduseofchemicalproductsafterinitialsaleanddistribution.”•“Unknownforproductswithhydrocarbons.Assumerefrigerantsreleasedtoatmosphere.”•“Aglobalchemicalcompanyhastypicallydiverseapplicationandcustomerstructure,deliveringtoallregionsintheworld.Itisverychallengingtoknowfullywhathappenswithhydrocarbonproductsattheendoflife.Thereareonlyfewcaseswherewerecyclebacktheproduct,orinparticularapplicationswheretheendoflifeiscombustion.”•“Yes,weagree,thisisaverycomplextopic,anditisoneofourchallengesaswell.Fornowweassumeallofourproductsareincinerated,andwecalculatetheCO2emissionsbyamountsofthecoalcontentofallourproducts.”•“Limitedliteratureonend-of-life(EOL)forourproducts.Likelytoincreaseinfuturewithmorecircularityintroduced.”•“Partially,wehavenowayofknowingexactlythemethodofdisposalforallcustomers;howtheyareused,etc.Eachcustomerisunique.”SBTiChemicalsScopingDocumentDecember202059•“Theendoflifeofourproductsvarysignificantlybasedonwhatproductstheyareusedin,sinceweproduceintermediates.”•“Specialtychemicalsandmaterialsgointoahighlydiversesetofenduses,someofwhichareconsumptive.”•Wehavemadeestimatesformostproducts,puttingeverythingintobroadcategoriesofthelikelyfate—landfill,incineration,wastewatertreatment.Thereishighuncertainty,noactualdata,andnoabilitytotrackyear-on-year.•Weproducecarboncontainingbio-monomersthatarereactedintovariouspolymers.Wedonotknowendoflifeforthesepolymers,whicharesoldintoavarietyoffragmentedendmarkets.•“Someareincinerated;someendupintheenvironment;asmallportionarerecycled.Quantitiesareunknown.”•Someofourproductsareusedinpackagingforconsumers,soverydependentonlocalwastetreatmentpractices.•Asintermediateproducers,wesellbusiness-to-business(B2B)anddon'ttracetheendoflife.However,weknowthatourcarboncontentisbiogenictoalargeextent.End-of-lifeemissionscanchangedramatically.•Reliableandconsistentmarketdatashouldbemadeavailableforallparties.Itisrequiredtosubstantiatepreciselytheendoflifeofhydrocarbonproducts.Somepolymerproductsthathavebeenproduced30to40yearsback,suchasplasticpipes,maybeinactiveservicelifenowandevenforextendedperiods.Howtoaccountforsuchfactors?•Basedonemissionsfactorsandmodelling,insomecasesnotbasedonactualtestdataateachphase.Emissionsfactorsaretoogeneralordon'tshowreductionachievements.•“Weestimateend-of-lifefateviaregionalstatisticsonwastestreams.Thisisaveryroughapproximationonly,startingwiththeassumptionthatproductssoldinacertainregionremaininthisregion.”•“Wedon'thavevisibilityintoeveryend-applicationinwhichourproductsareused,socannotreasonablyanswer'Yes'tothisquestionwithoutmakingalotofassumptions.”•“Weknowmostoftheend-of-lifefate,butcannotguaranteetheirusefornonintendedpurposes.”•Weonlyhavethisinformationonatheoreticalbasis.21:Doyoutrackandreportyourprocessemissions?Amongrespondentsworkingforachemicalcompany,93percentindicatetheytrackandreporttheirprocessemissions(FigureA10).585883percent,ifbasedonallrespondents.SBTiChemicalsScopingDocumentDecember202060FigureA10:SurveyResults:TrackingandReportingofProcessEmissionsSource:SBTiChemicalsSectorScopingSurvey,202022:Shouldprocessemissionsbetreateddifferentlyfromenergy-relatedemissions?Oftotalrespondents(41),61percentindicateprocessemissionsshouldbetreateddifferentlyfromenergy-relatedemissions.59Reasonsincludethefollowing:•Emissionsourcesandmitigationmeasuresaredifferent,soweneedtotreatthemdifferently(fourresponses).•Noeasyreplacementsortechnologysolutionstoaddressprocessemissions.Muchhardertodecarbonizethanenergy(tworesponses).•Giventheheterogeneousnatureofabatementpotential,processandenergy-relatedemissionsshouldbetreateddifferently:oNotethatnitricacidproduction–relatedprocessemissionscanmoreeasilybeabatedthanammoniaproduction–relatedprocessemissions.•Trackingprocessemissionscanbeverychallenging,itmaybenecessarytoadjustthresholdsforexclusion,ordevelopsector-specificestimationmethods.•Someprocessemissionssuchaspurgesareinevitableelements,sometimesforsafetyconsiderationsoftheplant.Insuchcases,ifprocesspurgesuptoapermissiblelevel;forexample,5percentorlessofthetotalareallowedtobeexcluded,itmakesthetargetaspirationsmorerealistic.•Theycanbeanorderofmagnitudedifferent.Reasonsnottotreatprocessemissionsdifferentlyincludethefollowing:•“Alltheseemissionscontributetoglobalwarmingsoallneedtobeaddressedandincluded;noreasontotreatthisdifferently.”•“Theyshouldbetreatedthesame,iftheyarebothscope1.”5953percentforthe30respondentsindicatingtheyworkforachemicalcompany.SBTiChemicalsScopingDocumentDecember202061•“GHGisGHG.ItishelpfultodiscloseprocessGHGseparatelytoenergy-relatedGHGtohelpdriveremoval/alternatives.”•“Theyareallemissionscontributingtoglobalwarmingpotential(GWP),sotheyshouldbetreatedsimilarly.Wealsoreportbiogenicprocessemissions.”23:Doyouknowtheamountoffugitiveemissionsinyourchemicalplants?Ofrespondentsworkingforachemicalcompany,41percentindicatedtheyknowtheamountoffugitiveemissionsintheirchemicalplants(FigureA11).60FigureA11:SurveyResults:KnowledgeofAmountofFugitiveEmissionsfromCompanyOperationsSource:SBTiChemicalsSectorScopingSurvey,202024:Whichshareofyourscope1emissionsisformedbyfugitiveemissions?Eighteenoutof39respondentswereabletoprovideapercentage,whichwasthefollowing:•70percent•25percent•Approximately<10percentMostrespondents(15)providedpercentages(well)below5percent:•<5.0percent(tworesponses)•4.0percent•<3.0percent•<2.0percent•<1.0percent(sevenresponses)•<0.5percent(tworesponses)•Almostnil6038percentbasedonallrespondents.SBTiChemicalsScopingDocumentDecember202062WHATYOURCOMPANYCANACHIEVE:Thelastfourquestions(25–28)aimedatunderstandingwhatGHGemissionsreductiontrajectoryrespondentswouldconsider“feasible”fortheirchemicalcompany.Thequestionsaskedforthetechnicallyfeasible(notconsideringeconomicsandassumingsufficientavailabilityofsustainableresources)potentialandforthemostambitiousplausiblepathway(includinganticipatedpolicydevelopment,innovation,andinfrastructuredevelopmentandanyotherlimitationstherespondentchosetoincludeornottoinclude)andaimedatsightyears2025and2035.Thesequestionsweredifficulttoanswer,assomeoftherespondentsindicatedinthelastgeneralquestion(Question29),remarking,thefollowing:•“Ourestimatesontechnicallyfeasibleorrealisticreductionsofscope1and2emissionsfor2025and2035arebasedonanassumedannualgrowthofourbusiness/productionoutput.Itisunrealistictoassumethatthereisnobusinessgrowth,andwethinkthatbusinessgrowth(aswellasspeedofinnovationandeconomics)needstobefactoredinwhendeterminingabsolutetargetsfortheindustry.”•“ResponsestoQuestions25–28considercompanygrowth,whileQuestions27–28alsoconsidercertainlimitationsoftechnologyshifts(e.g.,availabilityoflow-carbonenergyalternativeinremotesitelocations,unfeasibleprojectsineconomicterms,etc.)aswellascompanypreferences(e.g.,preferuseofpowerpurchaseagreements[PPAs]forrenewableelectricityratherthanenvironmentalattributecertificates[EACs]only).Excludingtheseassumptions,theemissionsreductionlevelscanbeincreased.”•“ProvidingdataonpotentialGHGemissionsreductionsbasedonlimiteddataiscurrentlyunrealistic,inmyview.Asanexample,ifcarboncapturestorageoruseisfeasibleandcosteffective,andthereisamarketfortheCO2captured,thiswouldhaveatremendouseffectonreducingourGHGfootprint—today,thatisnotthecase.Furthermore,technicaladvancesbeinginvestigatedarenotcurrentlyavailable.Thesequestionsneedtobebetterframedtoallowforareasonedresponse.EliminatingallroadblocksshouldresultinzeroGHGemissions—butthatisnotthecase.”Consequently,theresponseratewasrelativelylow,andapartfromthat,respondentsuseddifferentstartingpointswhenansweringthesequestions:•Someansweredwithabsolutereductions,otherswithintensityreductions,andmostdidnotspecifywhethergrowthwasincluded.61•Onerespondentprovidedcombinedscope1and2emissionsreductionnumbers.•Somerespondentsuseddifferentbaseyears—othersdidnotspecifythebaseyear.62•Sixrespondents63providedmoreambitiousrealisticnumbersthantechnicallyfeasiblenumbers.61Unfortunately,thesurveydidnotspecifythis.62Itisexpectedthatmostotherrespondentshadthecurrentsituationinmind,butthishasnotbeenmadeexplicit.63Thesehavenotbeentakenintoconsiderationintheevaluationbelow.SBTiChemicalsScopingDocumentDecember202063ItcanthusbeconcludedthatQuestions25–28werenotphrasedsharplyenoughtoenablefirmconclusionstobedrawn.Nevertheless,someconclusionscanstillbedrawn,64withsomecare:•Morerespondentswereabletoprovideemissionsreductionnumbersforscope1and2(17and16,respectively)thanforscope3(9).•Respondentsprovidedawidescatterofnumbers,withthetechnicalpotentialforscope1emissionsreductionsby2025rangingfrom5to80percent,65andforscope2emissionsfrom2to100percent.•Inallsightyears(2025and2035)andforbothscopes(technicalemissionsreductionpotentialandmostambitiousrealisticpotential),thescope2reductionpotentialishighest,andthescope3reductionpotentialislowest.•Thetechnicalemissionsreductionpotentialis~50percent(scope1),~30percent(scope2),and>100percent(scope3)higherfor2035thanfor2025.•Themostambitiousrealisticemissionsreductionpotentialis~50percent(scope1),~90percent(scope2),and>100percent(scope3)higherfor2035thanfor2025.FINISH:29:Isthereanythingelseyouwouldwanttocommenton?Belowareaselectionofcomments:66•“Thecalculationbasiscouldbemoreclearandtraceable.”67•Itisimportanttoconsiderbio-basedmaterialsasanalternativetofossil-basedchemicals.Themethodologyshouldincentivizeanddrivethistransition,giventhatthebio-basedchemicalshavelowerspecificGHGemissionsthantheirfossil-basedcounterparts,fromacradle-to-graveperspective(companiesshouldprovideevidencethatthisisindeedthecasetopreventmisuse).However,atthemomentatcompanylevel,thisimpactisnotcaptured.Forexample,abio-basedchemicalcompanywithhighgrowthwillseeitsemissionsincreasingwhileatsectorlevelthiscancontributetodecreasingtheoverallsectoremissions.•“Achievingsignificantreductionsisdependentupontechnologydevelopmentsforscalable,cost-effectivecarboncapturestorage(CCS)orcarboncapturestorageandutilization(CCSU).Withoutthat,SBTsforscope1and2areunreachableforourcompany.Also,wedonotthinkmandatingascope3targetisappropriatetosetaSBTforscope1and2.ThereshouldbeoptionstosetSBTsforscope1and2independentofscope3.Theaccountingforscope3isfartooimpreciseforustomanageameaningfulreductiontarget,letalonesecuremanagementsupport.”64Inviewoftherelativelylowresponserate,nodistinctionhasbeenmadebetweenrespondentsworkingforachemicalcompany,(not)producingproductsemittinggreenhousegasesattheendoftheirlife.65Thisnumberhasbeenprovidedbyarespondentworkingforachemicalcompany.66Somecommentshavebeenmovedtothequestiontheyrelateto.67WeassumethisrelatestoQuestions25–28.SBTiChemicalsScopingDocumentDecember202064•Ourspecificproductiongroupwillneedalongerrunway/timelinetoobtainsuggestedtargetsasaresultofseveralfactors:oTurnaroundschedules—ourindustryhasannualturnaroundschedulesforweeksatatime,whichimpactemissions.oSupply/demandforourproducts—itistiedtoanever-growingworldthatneedsourproduct,anddemandforourproductsgrowsat2percentannually,soishardtobaselineproductionaswearecontinuallyaddingnewproductiontomeetdemand.oTechnology—thereiscurrentlynonewtechnologythatcanhelptoreduceemissionsenoughtohitcurrent2030targets.oRenewableenergy—Asignificantamountofrenewableenergywouldberequired,andwithoutalargerandmoreeconomicalsupplyofrenewableenergythisisnotviable.oEconomics—Theeconomicsofcurrentandfuturetechnologyischallenging.•“Weneedsomesignificanttechnicalbreakthroughs.Wearelimitedbyaffordablerenewablethermalenergysourcesandaffordablecarboncapture.”•“SBTichemicalssector–specificguidancewouldbevaluableforourcompanyandindustry,toensureconsistencyandbroadindustryadoption.”•“Wecanonlyreinforcethemessagethatindustrialgasesneedtobeinadifferentsector.”•“Thisisareallydifficultsurveytocompleteasthequestionsarenotobviousandrequireahighdegreeofsustainabilityunderstanding.Itmightbeworthcheckingcomprehensionwithsegmentsofthesectorwhoarenotyetfullyengagedonsustainabilityandclimatechange.”•“Theabilitytooffsetshouldalsobeconsidered.”•“Howdoesthisframeworkaddressissueslinkedtomergersandacquisitions,especiallyasweseealotofconsolidationsinthisindustry?Whatchallengesareforeseeninprogressingonclimateandcouplinggrowth(e.g.,growthmayhappenincountrieswithoutstrongCO2regulationsormarketpull,inwhichcase,newassetshavetobedesignedforlow-carbonwithoutanyeconomicadvantagesorevenataneconomicdisadvantageofanexpensivedesign,asset,etc.).Howdocompaniesseethedualityofgrowthinvestmentsincountrieswherelimitsonavailabilityoffeedstockalsolimitsavailabilityforotherinfrastructureforcarbonmitigation,suchasrenewables,technology,etc.”•“Whenconsideringmethodologydevelopment,trade-offswithotherenvironmentalimpactsneedtobetakenintoconsideration.”•Manychemicalcompaniesrequirelowandmediumtemperatureprocessheattodrivechemicalreactionsandseparations.Wehaveandwillcontinuetoactivelydriveenergyefficiency,butultimatedecarbonizationwillrequirenet-zeroGHGsourcesofheat.Thishas,thusfar,madedeepdecarbonizationofindustrymoredifficultthanpower,transportation,andotherindustriestiedtoelectricity.•“Eagerlyanticipatingpublicationofchemicalssectormethodology.”SBTiChemicalsScopingDocumentDecember202065•“WeareinternallyworkingouthowaCO2roadmapandambitioncanhelpus.Wethinkthatthechemicalsectorguidancewillsupportusindefiningthepathway.”SBTiChemicalsScopingDocumentDecember202066AppendixB:Scope3CategoryPrioritiesTableB1:RationaleforDevelopingandPrioritizingChemicalSector–SpecificResourcesandGuidanceforEachScope3CategoryCategoryReasonsPercentageofrespondentsPrioritytodevelopspecificguidanceUPSTREAMCategory1PurchasedgoodsandservicesAsabroadrangeofdifferentgoodsfromahighnumberofsuppliersisnecessarytoproducechemicals,sector-specificguidanceshouldincludethefollowing:•Standardizationofemissionsfactors,guidanceonhowtoaccountforemissionsreductionactivitiesfromsuppliers/rawmaterials.•WBCSDguidance(2013)suggeststhatcompaniesshouldcalculateemissionsfromatleast80percent(byvolumeorweight)oftheiremissionsofpurchasedgoodsandservices,afterwhichresultscanbeextrapolatedtoestimate100percentofemissions.•Howtodealwithapotential“renewable/circular”targetforpurchasedfeedstocks(incoherencewithcategories3,5,and12).69HIGHCategory2CapitalgoodsN/A18N/ACategory3Fuel-andenergy-relatedactivities(notincludedinscope1or2)N/A36N/ASBTiChemicalsScopingDocumentDecember202067Category4UpstreamtransportationanddistributionN/A36N/ACategory5WastegeneratedinoperationsChemicalssector–specificguidanceshouldappropriatelydefinewaste.Bydefinition,by-productsfromoneprocessareconsideredwaste;however,inthechemicalssectortheseby-productsareoftenusedasfeedstockforanotherprocess.Theapproachforthiscategoryshouldalignwiththemethodchosenforend-of-lifetreatmentofsoldproducts.49N/ACategory6BusinesstravelN/A16N/ACategory7EmployeecommutingN/A11N/ACategory8UpstreamleasedassetsN/A3N/ADOWNSTREAMCategory9DownstreamtransportationanddistributionN/A33N/ASBTiChemicalsScopingDocumentDecember202068Category10ProcessingofsoldproductsChemicalssector–specificguidanceshouldexplorewhether,andinwhichcases,non-CO2GHGssuchasHFCsshouldbeincluded/excludedfromthiscategory.Itshouldalsocoverhowchemicalcompaniesproducingnon-CO2GHGsshouldaccountandreportemissionsinthiscategory.TheScope3GHGProtocolstatesthatcompaniesmaydiscloseandjustifytheexclusionofdownstreamemissionsfromcategories9,10,11,and12(butshouldnotselectivelyexcludeasubsetofthosecategories).“Incertaincases,theeventualenduseofsoldintermediateproductsmaybeunknown.Forexample,acompanymayproduceanintermediateproductwithmanypotentialdownstreamapplications,eachofwhichhasadifferentGHGemissionsprofile,andbeunabletoreasonablyestimatethedownstreamemissionsassociatedwiththevariousendusesoftheintermediateproduct”(WRIandWBCSD2004).NotdeemedrequiredbyWBCSD(2013)guidanceforthechemicalssector,as“thediversityofapplicationsgenerallycannotbereasonablytracked.Therefore,atthistimecategory10isnotrequired;however,ifcompaniescanaccountfortheseemissions,theyshouldincludethemintheirinventory.”56MEDIUMCategory11UseofsoldproductsDirectuse-phaseemissionsofsoldproductscanoriginatefromthefollowing:•Productsthatdirectlyconsumeenergy(fuelsorelectricity)duringuse•Fuelsandfeedstocks•Greenhousegasesandproductsthatcontainorformgreenhousegasesthatareemittedduringuse(WRIandWBCSD2011)Chemicalssector–specificguidanceshouldaddresshowtodealwiththefollowing:•Thelargenumberofendproductsthatintermediateproductsproducedbychemicalcompaniesendupin•Specificproductgroups,includingfertilizers(N2O/CO2emissions)andHFCsTheSBTimanual(2020d)specifiesthatinclusionofindirectuse-phaseemissions(e.g.,emissionsfromwashingapparelforamanufacturerofwashingpowder)isnotmandatoryintargetsetting.TheCorporateValueChain(Scope3)AccountingandReportingStandard(2011)statesthatcompaniesmaydiscloseandjustifytheexclusionofdownstreamemissionsfromcategories9,10,11,and12(butshouldnotselectivelyexcludeasubsetofthosecategories).76MEDIUMSBTiChemicalsScopingDocumentDecember202069Category12End-of-lifetreatmentofsoldproductsChemicalssector–specificguidanceshouldbeprovidedforthiscategory,asthesoldproducts,differentlythanformostothersectors,generateemissionswhentheywouldbe/areincineratedorsenttolandfill.Thisshouldbedoneincoherencewiththeguidanceforcategories1and5.TheCorporateValueChain(Scope3)AccountingandReportingStandard(2011)statesthatcompaniesmaydiscloseandjustifytheexclusionofdownstreamemissionsfromcategories9,10,11,and12(butshouldnotselectivelyexcludeasubsetofthosecategories).76HIGHCategory13DownstreamleasedassetsNotdeemedrelevantbyWBCSD(2013)forchemicalssector—butneedscheckingeverythreeyears.4N/ACategory14FranchisesNotdeemedrelevantbyWBCSD(2013)forchemicalssector—butneedscheckingeverythreeyears7N/ACategory15InvestmentsN/A13N/ANotes:N/A=Notapplicable(categorieswithoutanyrelevantchemicalssector–specificdevelopment);GHG=Greenhousegas;HFCs=Hydrofluorocarbons;CO2=Carbondioxide;N2O=Nitrousoxide.Source:Authors’assessment;“percentageofrespondents”isbasedonthesurveydescribedinAppendixA.SBTiChemicalsScopingDocumentDecember202070AppendixC:SBTiTarget-SettingMethodsIngeneral,anSBTmethodcomprisesthreecomponents:anemissionsbudget,anemissionsscenario,andanallocationapproach(convergenceorcontraction).Methodscanvaryintermsofeachofthesecomponents.FigureC1:ElementsofSBTiMethodsSource:SBTi2020dCarbonBudgetAcarbon(-equivalent)budgetisanestimateofthecumulativeamountofgreenhousegasesthatcanbeemittedoveraperiodwhilelimitingtemperaturerisetoaspecificamount.Thescience-basedtarget-settingmethodsapplytoallsevengreenhousegasesincludedintheKyotoProtocol,68andtemperaturegoalshavebeendefinedbasedontheParisAgreementtolimittheaverageglobaltemperaturerisetowell-below2°C(WB2D)abovepreindustriallevelsandpursueeffortstolimitthisincreaseto1.5°C.68ThesevenGHGsarecarbondioxide(CO2),methane(CH4),nitrousoxide(N2O),hydrofluorocarbons(HFCs),perfluorocarbons(PFCs),sulfurhexafluoride(SF6),andnitrogentrifluoride(NF3).SBTiChemicalsScopingDocumentDecember202071TheSBTiusesthetransientclimateresponsetoemissions(TCRE)69budget,whichisestimatedwithearthsystemmodelsofvaryinglevelsofcomplexity,aggregatedbytheIntergovernmentalPanelonClimateChange(IPCC)intheSpecialReportonGlobalWarmingof1.5˚C(SR15),andassignedprobabilisticbinsforeachlevelofwarming(IPCC2018,Table2.2).TheSBTiusesthe50thpercentileTCRECO2budgetassociatedwith1.5˚C,770GtCO2addstheapproximateprojectedimpactofnon-CO2emissions(320GtCO2e),andsubtracts100Gt,whichreflectstheapproximateimpactofnoninstantaneousearthsystemfeedbacks.70Thus,theSBTibudgetfora1.5˚Cscenarioevaluatesto990GtCO2e(670GtCO2).Likewise,theSBTiusesthe66thpercentileTCRECO2budgetassociatedwith2˚CwarmingasaWB2Dbudget,1,320GtCO2,whichevaluatesto1,540GtCO2e(1,220GtCO2).Formoredetails,refertoSBTi’s(2019)“FoundationsofScience-BasedTargetSetting”publication.ThusfarSBTihasusedaggregateglobalGHGbudgetsforscenarioanalysis.Onepotentialfuturedevelopmentwouldbetodevelopsector-orsubsector-levelbudgetsforwell-below2°Candfor1.5°C.ThisiscontingentonIPCCSixthAssessmentReportpublicationsanddata,aswellasresourceavailabilityandstakeholderengagement.ScenariosUsedforSettingSBTsWhileitisnotpossibletopredictfutureGHGemissions,scenariosprovidetrajectoriesforhowemissionsreductionscouldbeachievedbasedonassumptionsmadeaboutpopulation,policytrajectories,economicgrowth,andtechnologicaladvancesandtheircosteffectiveness,whileconservinganetGHGbudget.TheSBTiscenariosaredrawnprimarilyfromtheIntegratedAssessmentModelingConsortium(IAMC)andtheInternationalEnergyAgency(IEA).TheIAMChostsanensembleofmorethan400peer-reviewedemissionspathways,whichhavebeencompiledandassessedbytheauthorsoftheIPCCSR15(Huppmannetal.2019);andtheIEApublishesitsownscenariosregularly,whichprovideagreateramountofsectoralgranularity.“EnergyTechnologyPerspectives2020”bytheIEA(2020)exploresaStatedPoliciesScenario(STEPS)andSustainableDevelopmentScenario(SDS)fromthepresentdayto2070forthechemicalssectorandhasbeentakenintoconsiderationduringthisphaseoftheSBTichemicalssectorscopingproject.AllocationApproachSBTitranslatestheresultingcarbonbudgetunderlyingagivenemissionsscenariointopracticalrequirementsthataligncompanyemissionswiththesameemissionsreductionpathwayusinganallocationapproach.69ThemostcommonlyusedemissionsbudgetistheTCRE,whichestimatestheinstantaneousglobaltemperatureresponsetocumulativeemissions.70TheIPCCSR15alsoincludesadjustmentamountsfordifferentuncertaintiesanduse-casesoftheTCRE,suchasanestimateoftheimpactofnoninstantaneousearthsystemfeedbacks(e.g.,permafrostthawing),ifevaluatedto2100.SBTiChemicalsScopingDocumentDecember202072Thescience-basedtarget-settingmethodsusetwomainapproachestoallocateemissionsatacompanylevel:1.Convergence,whereallcompanieswithinagivensectorreducetheiremissionsintensitytoacommonvaluebysomefutureyearasdictatedbyaglobalemissionspathway(e.g.,theemissionsintensityofallelectricpowercompaniesconvergestoamaximumof29gCO2/kWhofelectricityin2050,whichcanalsobeexpressedasapercentage).Thereductionresponsibilitiesallocatedtoacompanyvarydependingonitsinitialcarbonintensityandgrowthraterelativetothoseofthesector,aswellasthesector-wideemissionsintensitycompatiblewiththeglobalemissionspathway.Theconvergenceapproachcanonlybeusedwithsector-specificemissionsscenariosandphysicalintensitymetrics(e.g.,tonsGHGpertonproductormegawatt-hour[MWh]generated).WhileSBTiunderstandsthatcompaniesfacevaryingenergyandemissionssystemsacrossgeographies,theconvergenceapproachreflectstheinitiative’sexclusiveglobalorientation,thatis,SBTidoesnotprovideforregionallydifferentiatedtargets.2.Contraction,whereallcompaniesreducetheirabsoluteemissionsoreconomicemissionsintensity(e.g.,tonsGHGperunitvalueadded)atthesamerate,irrespectiveofinitialemissionsperformance,anddonothavetoconvergeuponacommonemissionsvalue.Thecontractionapproachcanbeusedwithsector-specificorglobalemissionsscenarios.Thissectionalsodescribesdatainputsandoutputsforeachmethod.Becausethemethodsaresensitivetotheinputsused,andbecauseerrorscanpropagatethroughoutthemethods,companydatashouldbeasaccurateaspossible(seealsoSBTi[2020d]TargetSettingManual,Chapter3.3).Beyondcurrentlyavailablemethods,itisexpectedthatnewscenariosandmethodswillbedevelopedforarangeofspecificsectors,includingcomponentsofthechemicalssector.InformationonthesewillbepostedtotheSBTi’swebsiteasthemethodsaremadepubliclyavailableand/orvalidatedbytheinitiative.AbsoluteEmissionsContractionAbsoluteEmissionsContractionisamethodforsettingabsolutetargetsthatusescontractionofabsoluteemissions.Throughthisapproach,allcompaniesreducetheirabsoluteemissionsatthesamerate,irrespectiveofinitialemissionsperformance.Consequently,anabsoluteemissionsreductiontargetisdefinedintermsofanoverallreductionintheamountofGHGsemittedtotheatmospherebythetargetyear,relativetothebaseyear(e.g.,reduceannualCO2eemissions35percentby2025,from2018levels).Theminimumreductionrequiredfortargetsinlinewithwell-below2°Cscenariosis2.5percentinannuallinearterms.Companies,particularlythoseindevelopedcountries,arestronglyencouragedtoadopttargetswitha4.2percentannuallinearreductiontobealignedwithlimitingwarmingto1.5°C.SBTiChemicalsScopingDocumentDecember202073Thismethodisasimple,straightforwardapproachtosetandtrackprogresstowardtargetsthatisapplicabletomostsectors.Intheabsenceofsector-specificmethods,chemicalcompaniesmayusetheabsolutecontractionmethodtosetSBTs.Theabsolutecontractionapproachcanbeappliedtoindividualchemicalssectorproductsandproduct-groups/subsectors(seeTableC1).TableC1:AbsoluteEmissionsContractionApproachMethodCompanyinputMethodoutputAbsoluteemissionscontraction•Baseyear•Targetyear•Baseyearemissions,disaggregatedbyscope1,2,and3OverallreductionintheamountofabsoluteGHGsemittedintotheatmospherebythetargetyear,relativetothebaseyearNote:GHG=Greenhousegas.Source:SBTi2020dSectoralDecarbonizationApproachTheSectoralDecarbonizationApproach(SDA)isamethodforsettingphysicalintensitytargetsthatusesconvergenceofemissionsintensity.Anintensitytargetisdefinedbyareductioninemissionsrelativetoaspecificbusinessmetric,suchasproductionoutputofthecompany(e.g.,tonCO2epertonofproductproduced).TheSDAassumesglobalconvergenceofkeysectors’emissionsintensityby2060.Forexample,theemissionsintensityofsteelproductioninChina,theUnitedStates,andBrazilisassumedtoreachthesamelevelby2060,regardlessofitscurrentdiversity.Theexistingfifteenregionalpathwayshavenotbeenincorporatedintothismethodtomaintainglobalconvergence.TheSDAusestheBeyond2°CCelsiusScenario(B2DS)fromtheIEA’s(2017)“EnergyTechnologyPerspectives2017,”whichcomprisesemissionsandactivityprojectionsusedtocomputesectoralpathwaysalignedwithlimitingwarmingtowell-below2°C.Duetothelackof1.5°CscenariodatafromIEA,SBTicurrentlydoesnotprovideanSDAoptionfor1.5°Ctargets,withtheexceptionoftheelectricitygenerationsector,forwhichSBTihasdevelopeditsown1.5°Cpathwayandtool.Duetounavailablesubsectorandproductgroupemissionsdata,theSDAdoesnotpresentlycoverthechemicalssector.TherenewedpublicationoftheETPin2020hasraisedthepossibilityofupdatingtheSDAandperhapsincludingadditionalsectors,suchaschemicals.AsofDecember2020,theIEAhasmadetheETP2020datasetavailableforpurchase.ItincludesprojectionsatthegloballevelfortheSustainableDevelopmentScenario(SDS),whichcorrespondswithwell-below2°C;itdoesnotincludea1.5°Cscenario.SBTiChemicalsScopingDocumentDecember202074Targetedemissionsintensityvariesbycompanybaseyearemissionsintensity,projectedactivitygrowth,andsectoralbudgets.CompaniescanusetherelevantSDApathwaystocalculateintensityinthetargetyear.TheSDAcoversscopes1and2.Ithaslimitedapplicabilitytoscope3categories.TheSDA(seeTableC2)isnotapplicabletoindividualchemicalssectorproductsorproductgroups/subsectors.However,disaggregationofspecificproductsorproductgroups/subsectorshasbeenconsideredduringthisphaseoftheSBTichemicalssectorscopingproject.TableC2:SectoralDecarbonizationApproachMethodCompanyinputMethodoutputSectoralDecarbonizationApproach(SDA)•Baseyear•Targetyear•Baseyearemissions,disaggregatedbyscope1,2,and3•Activitylevelinthebaseyear(e.g.,buildingfloorarea,distancetraveled,etc.)•ProjectedchangeinactivitybytargetyearAreductioninemissionsrelativetoaspecificproductionoutputofthecompany(e.g.,tonCO2e/MWh)Note:CO2e/MWh=Carbondioxideequivalentpermegawatt-hours.Source:SBTi2020dEconomicIntensityContractionGreenhouseGasEmissionsperValueAdded(GEVA)isamethodforsettingeconomicintensitytargetsusingthecontractionofeconomicintensity.TargetssetusingtheGEVAmethodareformulatedbyanintensityreductionoftonsofcarbondioxideequivalentpervalueadded(tCO2e/$).UndertheGEVAmethod,companiesarerequiredtoreducetheirGEVAby7percentperyear(compounded).The7percentyear-on-yearreductionrateisbasedonanabsoluteemissionsreductionofabout75percentby2050from2010levels.Basedonrecenteconomicprojectionsandestimatesofhistoricemissions,the7percentrateisbroadlycompatiblewithhigh-confidenceIPCC(RCP2.6)pathways,anditsambitionisintermediatebetweentheIEA2DSandB2DSpathways,underidealizedconditionsthatareexpoundedbelow(IEA2017;SBTi2019).UnliketheAbsoluteContractionandSDAmethods,GEVAonlymaintainsaglobalemissionsbudgettotheextentthatthegrowthinvalueaddedofindividualcompaniesisequaltoorsmallerthantheunderlyingeconomicprojection.ThedifferentiatedgrowthofcompaniesandsectorsisnotbalancedbyGEVA(andothereconomicintensitytarget-settingmethods);thus,thecurrentlyacceptedGEVAvaluedependsonidealizedconditionswhereallcompaniesaregrowingatthesamerate,equaltothatofGDP,andGDPgrowthispreciselyknown.Forthesereasons,andduetothevolatilityofeconomicmetrics,economicintensitytarget-settingmethodsareconsideredlessrobustthanabsoluteandphysicalintensitymethods.SBTiChemicalsScopingDocumentDecember202075NotethatpercurrentSBTicriteria,scope1and2targetsusingGEVAareonlyacceptablewhentheyleadtoareductioninabsoluteemissionsinlinewithwell-below2°Cand1.5°Cscenarios.GEVAassuchismoreapplicableforscope3targetsetting(SeeTableC3).TableC3:GreenhouseGasEmissionsperValueAddedApproachMethodCompanyinputMethodoutputGHGEmissionsperValueAdded(GEVA)•Baseyear•Targetyear•Baseyearemissions,disaggregatedbyscope•Valueaddedinthebaseyear•Projectedchangeinvalueaddedbytargetyear•Possiblemetricsforcalculatingvalueadded:oValueadded=Salesrevenue–thecostofgoodsandservicespurchasedfromexternalsuppliersoValueadded=Grossprofit(inUSaccounting,oftenavailableintheannualfinancialstatement)oValueadded=Operatingprofit=Earningsbeforeinterestanddepreciation(EBITDA)+allpersonnelcostsAreductioninemissionsrelativetofinancialperformanceofthecompany(e.g.,tonCO2epervalueadded)Notes:Personnelcostsshouldincludepaymenttomanagementandboardmembers.Source:SBTi2020d;Randers2012Existingscope1and2SBTimethodsprovideafoundationforchemicalcompanytargetdevelopment.However,thelackofchemicalssector–specificphysicalintensitypathways,emissionsbudgets,andsectorguidancehavebeenanimpedimentforsomecompaniestosettargets.Beforereviewingthetargetssetthusfarbychemicalcompanies,itishelpfultounderstandthecriteriainSection2usedtoassessSBTs.SBTiChemicalsScopingDocumentDecember202076AppendixD:OverviewofChemicalCompanySBTsandDistributionofEmissionsAsofDecember2020,theSBTirecognizes29chemicalcompaniesthathavepubliclycommittedtosettingscience-basedtargets,ofwhich11haveapprovedtargetsthatmeetallthecurrenttarget-settingcriteria.TableD1:OverviewofSelectedApprovedChemicalCompanyScience-BasedTargetsCompanyTemperatureAlignmentScope1and2Scope3TargetLanguageNovozymesA/S1.5°CAbsoluteAbsoluteAbsolute:GlobalbiotechnologycompanyNovozymescommitstoreduceabsolutescope1and2GHGemissions50%by2030froma2018baseyear.Renewableenergy:Novozymescommitstoincreaseannualsourcingofrenewableelectricityfrom37%in2018to100%by2030.Absolute:Novozymesalsocommitstoreduceabsolutescope3GHGemissionsfrompurchasedgoodsandservices15%by2030froma2018baseyear.Ecolab1.5°CAbsoluteSupplierengagementAbsolute:Ecolabcommitstoreduceabsolutescope1and2GHGemissions50%by2030froma2018baseyear.Supplierengagement:Ecolabalsocommitsthat70%ofitssuppliersbyemissionscoveringpurchasedgoodsandservices,capitalgoods,upstreamtransportationanddistribution,businesstravel,anddownstreamtransportationanddistributionwillsetscience-basedtargetsby2024.Thetargetboundaryincludesbiogenicemissionsandremovalsfrombioenergyfeedstocks.PolygentaTechnologiesLimited1.5°CAbsoluteN/AAbsolute:PolygentaTechnologiesLtd.commitstoreduceabsolutescope1andscope2GHGemissions50%by2030froma2018baseyear,andtomeasureandreduceitsscope3emissions.SBTiChemicalsScopingDocumentDecember202077Thistargetwasapprovedusingastreamlinedtargetvalidationrouteexclusivetosmallandmedium-sizedenterprises(SMEs).BorregaardA/SWB2DAbsoluteAbsoluteAbsolute:NorwegianbiorefineryBorregaardcommitstoreduceabsolutescope1and2GHGemissions53%by2030and100%by2050froma2009baseyear.Absolute:Borregaardalsocommitstoreduceabsolutescope3GHGemissionsby30%by2030and75%by2050froma2017baseyearThetargetboundaryincludesbiogenicemissionsandremovalsassociatedwiththeuseofbioenergy.InternationalFlavors&Fragrances,Inc.WB2DAbsoluteSupplierengagementAbsolute:AmericanproducerofflavorsandfragrancesandcosmeticactivesInternationalFlavors&Fragrances,Inc.commitstoreduceabsolutescope1and2GHGemissions30%by2025,froma2015baseyear.Supplierengagement:InternationalFlavors&Fragrances,Inc.,alsocommitstoworkingwithitssuppliers(representing70%ofitssupplychainemissions)sothattheysettheirownscience-basedreductiontargetsandreportannualemissionsby2025.SabaráParticipaçõescWB2DAbsoluteN/AAbsolute:SabaráParticipaçõesccommitstoreduceabsolutescope1andscope2GHGemissions30%by2030froma2018baseyear,andtomeasureandreduceitsscope3emissions.Thistargetwasapprovedusingastreamlinedtargetvalidationrouteexclusivetosmallandmedium-sizedenterprises(SMEs).SyngentaAGWB2DGEVAGEVAIntensity:AgriculturecompanySyngentacommitstoreducescopes1,2,and3GHGemissions68%pervalueaddedby2030froma2016baseyear.TataChemicalsLimitedWB2DAbsoluteN/AAbsolute:TataChemicalsLimitedcommitstoreduceabsolutescope1and2GHGemissions28%by2030froma2019baseyear.RoyalDSM2°CAbsoluteIntensityAbsolute:DutchmultinationalRoyalDSMcommitstoreduceabsolutescope1and2GHGemissions30%by2030froma2016baseyear.SBTiChemicalsScopingDocumentDecember202078Intensity:DSMalsocommitstoreducescope3GHGemissionsfrompurchasedgoodsandservices,upstreamtransportationanddistribution,andwastegeneratedinoperations28%pertonneofproductproducedby2030froma2016baseyear.SumitomoChemicalCo.,Ltd.2°CAbsoluteSupplierengagementAbsolute:JapanesemultinationalchemicalcompanySumitomoChemicalcommitstoreduceabsolutescope1and2GHGemissions30%by2030and57%by2050froma2013baseyear.Supplierengagement:SumitomoChemicalalsocommitsthat90%ofitssuppliersbyproductweightwillinstitutescience-basedGHGreductiontargetsby2024.SekisuiChemicalCo.,Ltd.2°CAbsoluteAbsoluteAbsolute:SekisuiChemicalcommitstoreduceabsolutescope1and2GHGemissions26%by2030froma2013baseyear.Absolute:Thecompanyalsocommitstoreduceabsolutescope3GHGemissions27%by2030froma2016baseyear.Notes:N/A=Notapplicable;GHG=Greenhousegas;WB2D=Well-below2°C;GEVA=GreenhouseGasEmissionsperValueAdded.Source:SBTi2020aTheelevenchemical-companySBTsdescribedinTableD1aboveillustrateemergingbestpracticesforclimateactioninthesector.Aswithothersectors,thefirstwaveofchemicalcompanieswithapprovedSBTspredominantlyoperatedownstreaminthevaluechain.FigureD1belowillustratestheaggregateddistributionofSBTchemicalcompanies’baseyearGHGemissionsacrossscope1,2,and3categories.SBTiChemicalsScopingDocumentDecember202079FigureD1:AggregatedDistributionofSelf-ReportedBaseYearGreenhouseGasEmissionsforChemicalCompanieswithApprovedScience-BasedTargetsNotes:GHG=Greenhousegas;MtCO2e/year=Megatonsofcarbondioxideequivalent/year.Thenumberofcompaniesreportingemissionsineachscope3category(outof9companiesintotal)isasfollows:9incategories1,2,3,4,and68incategories5and77incategories9and124incategory103incategories8and11Source:SBTi.FigureD1demonstratesthesignificanceofscope3emissionsinthesector’soverallemissions.Ascompaniesimprovetheirscope3datacollectionpractices,thedistributionofscope3categoryemissionsmayshift.Theextenttowhichdownstreamemissionsfromscope3,categories9,10,11,and12isappropriatelyandconsistentlyincludedincompanies’inventoriesisanopenquestionsincecompaniesmaydiscloseandjustifytheexclusionfromthesecategorieswhenitsproductshavemanypotentialdownstreamapplications,eachwithadifferentGHGemissionsprofile(WRIandWBCSD2011,61).SBTiChemicalsScopingDocumentDecember202080AppendixE:TopSevenChemicalsBasedonGlobalProductionVolumesTableE1:TopSevenChemicalsbasedonGlobalProductionVolumesCategoryChemicalGlobalproduction(Mt/year)High-valuechemicalsEthylene255PropyleneBenzene110TolueneXyleneAmmoniaAmmonia185MethanolMethanol100Note:Mt=Milliontonnes.Source:IEA2018.TheIEAestimatesthatthesechemicalsaccountfortwo-thirdsoftotalchemicalssectorenergyuse—thatis,therearenumeroussmallerproductcategoriesthataccountforathirdofthesectorinenergyterms.Productheterogeneitycombinedwithvaryinggrowthratesandvolumeuncertaintyunderscorestheimportanceofmaintainingabroadperspectivetoensuresector-widedecarbonization.SBTiChemicalsScopingDocumentDecember202081AppendixF:TargetSettingforCategory12,End-of-LifeEmissionsDuetothecomplexityofthesectorandtheenormousnumberofdifferentendproducts/applications,chemicalcompaniesknowtheirscope1and2emissionssignificantlybetterthantheirscope3emissions.Thismeansthat,toremainpractical,theguidanceonscope3shouldbebalancedbetweenaccuracy(usingrealdatafromthevaluechainpartnerswhererelevant)andpracticalityfromadatapointofview(usingtypicaldata).Scope3resourcesshouldalsoenablequantitativetrackingofemissionsperformanceandachievementoftargets.Dealingwithend-of-life(EOL)treatmentofsoldproductsadequatelyintargetsettingisrelevant,asmanyofthechemicalssector’sproductscausegreenhousegasemissionswhentheyare/wouldbeincineratedattheendoftheirlife.Ifallproductsweretobeincineratedattheendoftheirlife,scope3,category12emissionsofthechemicalssectorwouldbehigherthanitsscope1and2emissionscombined(StorkandLintmeijer2018;Geresetal.2019).71However,theWBCSD(2013)guidanceindicatesthat,incasenodataareknown,defaultassumptionscanbeused.ReducingEOLemissionsrequiresadditionalconsiderationaroundabatementmeasures.Below,wesummarizekeyabatementmeasuresandfactorsinmeasuringandreportingEOLemissions,afterwhichwedescribepotentialoptions.KeyabatementmeasuresandfactorsinmeasuringandreportingEOLemissionsi.Bio-BasedChemicalsEnd-of-lifeemissionsofbio-basedandfossil-basedproductsarequantifiedbasedontheircarboncontent.TheSBTiCriteriaV4.1(2020),inlinewiththeGHGProtocol,requiresalldirectemissionsofCO2,CH4,andN2Ofrombioenergy72combustionthatoccurinthevaluechaintobeincludedinacompany’sGHGinventory,withCO2emissionsreportedseparatelyalongsidescopes1,2,and3.TheSBTiCriteria(2020)alsorequirescompaniestoprovideinformationaboutbiogenicemissionsandremovalsassociatedwithbioenergy,andtoincludetheseintheirtargetboundary.Theserequirementstransparentlyacknowledgetheemissionsfrombioenergyusewhileprovidinganopportunityfortarget-settingcompaniestopublishtheirunderstandingofremovals.Currentpracticecouldaccountforemissionsreductionsinscope3categories1and3ifachemicalcompanypurchasesfossiltobio-basedfeedstocks.Itisimportanttonotethatacompanycannotattributethereductionincategories1and3tocategory12.TheSBTichemicalsscopingprojectcouldconsiderengagingwitharangeofstakeholdersonelaborating71IntheNetherlands:~70percentofaggregatescope1,2,and3emissionsin2012,andinGermany~50percentin2020.72Bioenergyisenergygeneratedfromtheconversionofsolid,liquid,andgaseousproductsderivedfrombiomass.Biomassisanyorganicmatter,thatis,biologicalmaterial,availableonarenewablebasis.Thisincludesfeedstockderivedfromanimalsorplants,suchaswoodandagriculturalcrops,andorganicwastefrommunicipalandindustrialsources.SBTiChemicalsScopingDocumentDecember202082thetreatmentofbio-feedstocksandbioenergyuseinthechemicalssectorandareviewofstudiesestimatingtheextenttowhichsustainablebiomasswouldbeavailableforthechemicalssector.WhiletheGHGProtocolCorporateStandardprovideslimitedguidanceonhowtoaccountforremovalsfrombiogenicsources,thereisnoconsensusmethodyetonhowtoaccountfortheseremovals.TheGHGProtocolisdevelopingadditionalguidanceonhowtotreatotherbiogenicemissionsandcarbonremovalsin2021,whichwillbeadoptedbytheSBTi.ii.RecyclingIncaseofrecycling,theemissionsimpactcanbedistributedasfollowsoverthevariousplayersintherecyclingvaluechain:•WBCSD’s(2013)guidanceforthechemicalssectorindicatesthatemissionsfromtherecyclingprocessesshallbeincludedinupstreamscope3emissions(purchasedgoodsandservices)ofthecompanypurchasingtherecycledproduct.•Twoapproachescanbetaken:oInanEnd-of-Life(EOL)RecyclingApproach(alsoknownasavoidedburden),environmentalbenefitsareonlygrantedforthefractionofmaterialthatisrecoveredandrecycledaftertheuse-phase.Thismeansthatthechemicalcompanywhoseplasticisrecycledattheendofitslifetimereceivesthecredit,whilethecompanydecidingtoprocessrecycledproducts(likepyrolysisoilinanaphthacracker)seestheemissionsfromtherecyclingprocessinitsscope3,category1emissions.TheWBCSD’s(2013)guidanceforthechemicalssectorcouldbeinterpretedtofavor/prescribethisapproach,andthisapproachcouldbechosenwhenthereisnoqualitylossintherecyclingprocess,sufficientdemandforthesecondarymaterials,thelifetimeofproductsisshort(sothatthereisarelativelyhighcertaintythatthematerialswillbecomeavailableforrecycling),and/orwhenaimingtostimulatedesign-for-recycling.oInaRecycledContent(RC)Approach(alsoknownastheCut-offApproach),environmentalbenefitsareonlygrantedfortheactualfractionofsecondarymaterialinaproduct.A50/50distributionbetweenthetwoapproachescouldbeexplored.Alternatively,theEUhaspublishedanEUCircularFootprintformula(Wolfetal.2019),distributingthescope3benefitsofrecyclingbetweenthecompanyproducingtherecycledplasticandthecompanyprocessingit.Mechanicalrecyclingloopscurrentlytypicallystayoutsidethechemicalssector;itsonlyeffectisthatthedemandforvirginchemicalsdecreases.Stillmechanicalrecyclingispartofacircularsolution,anditisthusworthwhileexploringtheaccountingprinciples,forexample,formechanicallyrecycledplastics.Inthefuturechemicalcompaniesmightalsoundertakemechanicalrecyclingactivities,theimpactofwhichneedstobeincludedinthefurtherdevelopmentofthemethodology.iii.CarboncaptureandutilizationKeyquestionstoconsiderforcarboncaptureandutilization(CCU)abatementmeasures:SBTiChemicalsScopingDocumentDecember202083•HowtoproperlyaccountandreportcapturedCO2emissions?Possibleroutescouldincludethefollowing:oThecompanywhoseCO2emissionsarecapturedreducesitsscope1emissions,andthecompanythatisusingthecapturedCO2asafeedstockreducesitsscope3,category12:End-of-lifetreatmentofsoldproductsemissions;oroThecompanywhoseCO2emissionsarecapturedreducesitsscope1emissions,andthecompanythatisusingthecapturedCO2asafeedstockreducesitsscope3,category1:Purchasedgoodsandservicesemissions.•HowtodealwithCCUforshort-livedapplications(CO2builtinaproductthatisincineratedwithinweeks/months/years),inthecaseoffossilCO2,biogenicCO2,andDirectAirCapture(CO2capturedfromtheairspecificallyfortheCCUapplication)?iv.ElectrificationElectrificationplaysanimportantroleindecarbonizingofthechemicalssector.Thislevercan,incombinationwithCCU(seeabove)leadtoashiftofscope3end-of-lifeemissions/a“carbonremovaleffect”earlyinthevaluechain,attheexpenseofasignificantincreaseoftheelectricityconsumption(andthus,incasenot100percentrenewableelectricitywouldbeused,ofthescope2emissions).•Hydrogenplaysaroleinmanyoftheabatementroutes,especiallyincasegreenhydrogen(hydrogenproducedbyelectrolysis)isusedincombinationwithCCU(seeabove).v.OtherFactorstoConsiderinEnd-of-lifeAccountingFurthermore,end-of-lifeaccountingtakesthefollowingfactorsintoconsideration;theimpactonthemshouldbeconsideredwhendevelopingtheSBTmethodologyforthechemicalssector:•Impactonenergyrecovery;and•Chemicalproductsthatareassumednottodegradeforatleast100years—forwhichnoemissionsneedtobereported(WBCSD2013).TableF1showsthatthedifferencebetweenattributingthestatusof“durableplastics”ornotismorethanafactor50,eitherleadingtoareductionofthecalculatedGHGemissionswithafactor5,oranincreasewithafactor10incomparisonwithjustassuming100percentincineration.SBTiChemicalsScopingDocumentDecember202084TableF1:ImpactofWaste’s“DurablePlastic”StatusonEnd-of-LifeEmissionsDurableplasticsNondurableplasticsGWPaDefaultvalueb(%)DefaultvaluexGWP(%)Defaultvalueb(%)DefaultvaluexGWP(%)Sharetolandfill—convertedtoCO2c10040(80%x50%)40Sharetolandfill—convertedtoCH4d250040(80%x50%)1,000Sharetoincineration—convertedtoCO2e120202020CalculatedGHGemissionsrelativetojustassuming100%incinerationfN/AN/A20N/A1,065Notes:N/A=Notapplicable:GWP=Globalwarmingpotential;CO2=Carbondioxide;CH4=Methane;GHG=Greenhousegas.a.GWP=Globalwarmingpotential,relativetoCO2.b.Assumedshareoftheplasticconvertedwiththisroute.c.GWP=1.d.GWP=25.e.Incaseofenergyrecovery,partoftheemissionscanbeallocatedthere.f.ExcludingthebeneficialimpactofallocatingGHGemissionstoenergyrecovery.Source:BasedonWBCSD2013.OptionstoAccountforEnd-of-LifeEmissionsTwooptionstodealwithEOLemissionshavebeenexplored:•SettingatargettoreduceEOLemissionswithacertainrate;and•Targettohaveanincreasingshareofcircularfeedstock.ThefeasibilityofbothcouldbeexploredinPhaseIIoftheSBTichemicalssectorproject.1.TargettoReduceEnd-of-LifeEmissionsbyaCertainRateInthiscasetheend-of-lifeemissionsoftheproductsofchemicalcompanieswouldneedtodecreaseovertime.Furtherguidanceontheircalculationwouldneedtobedeveloped.73ThetargetshouldbebasedonaGHGemissionsreductionpathwayofthewasteprocessingsector,whichshouldbeinformedbyatargetreductionofthecurrentshareoflandfilling.Theseemissionsarenotwithinthedirectcontrolofchemicalcompaniesproducingtheintermediatesthatgointotheseandproducingbio-basedchemicalsorchemicalsfromrecycled73Thisguidancecouldincludethefollowing:-Whichplasticsshouldbeconsideredasdurable,andwhichshouldnot(andarethusassumedtodegradeduringlandfillingtoCO2and/ortoCH4)?-Howtodealwithtargetsaimedatreducinglandfilling(zerolandfilling)?-Whichshareofend-of-lifeemissionscanbeallocatedtoenergyrecovery(now,andinafuturewithincreasingsharesofrenewableelectricityandheat)?SBTiChemicalsScopingDocumentDecember202085materialsdoesnotalwaysreducetheseemissionsaccordingtocurrentcalculationguidelines(seeabove).Nevertheless,chemicalcompaniescouldengagewiththevaluechaintomeetthesetargets,byforexample:•Cooperatingwithclientsandcompaniesfurtherdownstreaminthevaluechain(e.g.,companiesproducingpackaging)/wastesorting/processingtostimulaterecycling[orCCS]),forexample,byengagingwiththemtosetascience-basedtargettoreducetheiremissions;thisengagementcouldincludechemicalcompaniespurchasingrecycledflows(e.g.,pyrolysisoil)forreuse.•ParticipatinginExtendedProducerResponsibilityschemes,inwhichproductsare,forexample,designed-for-recyclingIncasetheoptiontoreduceEOLemissionsbyacertainratewouldbechosen,theoptionschemicalcompanieswouldhavetodeliveronthescope3end-of-lifetargetwouldneedtobefurtherdefined.Advantages:•InlinewiththeusualapproachforSBT•ClosetotheEOLapproach(seeabove)•Targetcanbedeterminedrelativelystraightforwardly•Forscope3categoryofend-of-lifeemissions,thisisunexploredgroundswithinSBTi;asthiscategoryisimportantformanyofthechemicals,EOLemissionsreductiontargetscouldstimulatechemicalcompaniestoexplore—forthem—newwaystocooperateoverthevaluechaintoreduceemissions(includingmechanicalrecyclinganddesign-for-recycling).Disadvantages:•ChemicalcompaniesdonotcontroltheEOLfateoftheirproducts(manystepsdownthevaluechain,multipleapplications,diversecustomers,exporting).•Difficulttoprovethatthematerialisrecycled.•Datalimitations,asthechemicalproducts(intermediates)willbeconvertedoverseveralstepsinthevaluechain,intonumerousapplicationssoldinmanymarketsacrosscountries.•Chemicalintermediatesandtheproductsmadefromthemaretradedglobally,andchemicalcompanieswouldthusneedtocooperatewithalargenumberofwasteprocessorstocoverasignificantshareoftheirEOLemissionsintheirapproach;thiscouldpotentiallybepreventedbyworkingonamass-balancebasis.•ChemicalcompaniesintheExpertAdvisoryGroup(EAG)indicatedoverwhelminglynottobeinfavorofthisoptionforthereasonsmentionedabove.2.TargettoUseanIncreasingShareofCircularFeedstockAcircularfeedstocktargetwouldsetatargetontheshareofbio-based,recycled,andCCUfeedstock.ThistargetcouldbeexpressedonanenergyandGHGemissionsmitigationbasisandwouldneedtoincluderenewablehydrogen,electricity,biomass,andrecycling.74SettingsuchatargetwouldbenewfortheSBTi;thehydrocarbonnatureofmostproductsproducedby74Thealternative,tosetsuchatargetonamassbasiswouldnotmakesense:Forexample,itwouldgivealowweighttotheuseofgreenhydrogenandwouldnotbeabletodealwiththeuseofrenewableelectricity,whilegivingmuchweighttoreuseofCO2.SBTiChemicalsScopingDocumentDecember202086thechemicalssectorandtheresultingGHGemissionswhentheyareincineratedmightpotentiallyjustifysuchanewapproach.Advantages:•ClosetotheRecycledContentApproach(seeabove)•Chemicalcompaniescontrolthefeedstockstheypurchaseandtheprocessestheyoperate,sotheycancontroldeliveryonthistarget•Datagenerallyavailable•ThesecondmeetingoftheExpertAdvisoryGrouprevealedthattheparticipants(representativesfromthechemicalssector)hadaclearpreferenceforthisoptionDisadvantages:•ThiswouldbeanewandpotentiallyinconsistentapproachforSBTi•Couldstimulateimproperrecycling75•Doesnotstimulatemechanicalrecycling,design-for-recycling,andproductdurability,andcompanieswouldstillneedtobestimulatedtoengageinconsumerandcustomerbehaviorimprovementandrecyclingengagement.Howcouldacircular/renewabletargetbedetermined?Thetextbelowistobeinterpretedasafirststartofamethodologicalexercisetodetermineacircular/renewabletargetforSBTi.Thefollowingapproachcouldbeconsidered:Step1:Determinetheend-of-lifeemissionseachindividualproduct,eachproductgroup,and/orsubsectorscurrentlygenerates(potentiallyexcludingemissionsonlygeneratedafter>100years).Thiswouldneedtobebasedontypicaldataandshouldtrackthecurrentuseofrenewable/circularfeedstocks.Step2:Determinethegrowthrateoftheproductionforeachoftheproducts,productgroups,and/orsubsectors.Thegrowthrateoftheproductionofproductslikehighvaluechemicals(HVCs)isimpactedbyassumptionson,forexample,recycling,bio-basedproduction,andCCU-basedproduction.Asthesegrowthratesthusincludeprojectionsonanincreaseoftheshareofcircular/renewablefeedstocks,theyshouldbemadeexplicit.Step3:Determinethepathwayforthechemicalssector’sscope3categoryEOL(includingwaste)emissions.Thiswouldneedtobedeterminedinaseparatemodelingexercise.Step4:Determineforeachproduct(group)orsubsectortheoptionstoreducevaluechainemissionsrelatedtoeachofthekeycircular/renewablefeedstockoptions.75Thiscould,forexample,stimulatecompaniestoconvertwastestreamsthatcouldbeusedforlessenergy-intensivemechanicalrecyclingtopyrolysisoil(crackerfeedstocks).Improperuseofwastestreams(orbiomass)couldbediscouragedbyputtinglimitsonqualifyingstreams.Abalancebetweenpracticalityandperfectuseofeachfeedstockwillneedtobefound.SBTiChemicalsScopingDocumentDecember202087Step5:Determinetherequiredrateofincreaseoftheuseofcircular/renewablefeedstocksovereachoftheproduct(groups)and/orsubsectorstostaywithintheoverallpathway.

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