Last updated on May 24th, 2020 at 08:15 am
Chemicals are used to produce almost everything in the world today. The chemical and petrochemical industry represents the largest contributor to industrial energy demand worldwide accounting for about 10% of global total final energy consumption and about 7% of greenhouse gas emissions associated with industry according to the International Energy Agency. Yet, as the world becomes increasingly decarbonized, the decarbonization of the chemical industry which is one of the biggest fossil fuel consuming sectors suggests ample opportunity for growth in the global green chemistry market opening potentially lucrative business and investment opportunities.
The global market for green chemistry, which includes bio-based chemicals (also known as green chemicals), renewable feedstocks, green polymers and less-toxic chemical formulations is projected to grow from US$ 11 billion in 2015 to nearly US$ 100 billion by 2020, representing a CAGR of 55.5% according to figures from Pike Research.
The growth is underscored by several drivers including greater awareness of the negative environmental impact of petrochemicals, increasing legislative pressure to reduce emissions, and increasing end consumer demand for sustainable and “green” products, which in turn is prompting large retailers and other institutions to adopt policies to source bio-based products and raw materials.
Currently, the chemical industry relies heavily on fossil fuels with petrochemicals (which convert fossil fuels such as oil and gas into products such as plastics, fertilizers, packaging, clothing, paints and coatings such as varnishes, cosmetics, medical equipment, detergents, tires etc) accounting for 90% of the total feedstock demand for the manufacture of chemical commodities. Driven by rising economic growth among other reasons, global demand for petrochemicals has nearly doubled since 2000 (much of it due to increased plastic consumption worldwide) according to data from the International Energy Agency (IEA). The petrochemical sector which currently accounts for about 14% of global oil demand and about 8% of global gas demand is expected to see its share of oil and gas consumption increase driven by greater plastics consumption in developing economies (outweighing the drag to demand from recycling efforts in developed economies) and the difficulty in finding suitable alternatives.
Of the nearly 10million barrels of oil per day growth in total oil demand in 2030, the chemical sector is expected to account for more than a third. Furthermore, of the 850 billion cubic meters increase in global gas consumption, the IEA expects the chemical sector to account for 7%.
There a few key possibilities for the decarbonization of the chemical industry, notable options include greater electrification of production processes, and replacing petroleum feedstock (which produces fossil fuel based chemicals), with alternatives such as bio-based feedstock such as plants and organic waste (to produce what is known as “green chemicals”). This suggests that as the world adopts measures to combat climate change, the traditional chemicals industry is ripe for disruption and the green chemistry market is in prime position to meet the global need for a decarbonized chemical sector.
Notable startups in the green chemicals game include Texas-based Solugen, a developer and manufacturer of plant-based alternatives for petroleum based products. In May this year, the startup raised US$ 32 million in its Series B round. Y Combinator, Refactor Capital, Western Technology Investment and others participated in the round.
Sub-sectors within the green chemistry market to watch include:
Much of the growth in petrochemical demand over the past decade has largely been driven by greater demand for plastics which has outpaced demand for other bulk materials such as steel, cement or aluminum. According to figures from the International Energy Agency, plastic production has nearly doubled since 2000 and looks set to continue growing driven by rising per capita plastic demand from emerging economies where plastic consumption per capita is just a fraction of developed economies. For instance, in South Korea, one of the world’s largest consumers of plastic, per capita plastic consumption stands at 98.9 kilograms per person as of 2015, compared with just 5.5 kilograms per person in Africa, 9.3 kilograms per person in India, and 27.8 kilograms per person in Brazil.
However, with countries around the world facing a growing problem of plastic pollution, there is a pressing need for environmentally-friendly alternatives. While recycled plastic could be a growth feedstock in the future (according to an article published in National Geographic, of the 8.3 billion tons of plastic produced over the past six decades, only 9% has been recycled) opening growth opportunities for companies such as UK-based Recycling Technologies, there is considerable potential for bio-plastics to also emerge as a growth market; European plastics trade association PlasticsEurope estimates that of the roughly 335 million tons of plastic produced every year, just about 1% are bio-plastics and demand is on an upward trend and according to trade association European Bioplastics, global bio-plastic production capacities are set to increase in the years ahead which suggests growth opportunities for bio-plastics manufacturers such as NatureWorks and Green Dot Plastics.
Fertilizers are an integral component in agriculture. As the world moves towards sustainable agriculture practices and organic food, bio-fertilizer is primed to be a beneficiary as synthetic fertilizers, which have harmful effects on the environment such as groundwater contamination, are replaced with bio-fertilizers which are environmentally friendly. Unlike synthetic fertilizers which are mostly fossil fuel based, bio-fertilizers are mostly derived from plants, and other organic residues such as animal waste.
The global bio-fertilizer market was valued at US$ 946.6 million in 2015 and the market is projected to grow at a CAGR of 14.08% between 2016 and 2022, according to forecasts from research firm MarketsAndMarkets.
The demand is underpinned by growing demand for organic food (which comprises just about 2% of total agriculture produced globally), and a growing need for sustainable agriculture (about 30% of land globally is considered degraded according to analysis by research firm Boston Consulting Group and 28% of cropland (including 56% of irrigated cropland) is in water stressed regions).
London-based bio-fertilizer startup Bio-F Solutions is an exciting startup to watch in this promising sector. Founded by a team of staff and students from the Department of Life Sciences at Imperial, the startup is pioneering a bio-fertilizer made of algae which contains microorganisms that remove naturally occurring nitrogen in the atmosphere and ‘fix’ it in the soil thereby enriching the soil enabling it to be used for new crops.
Nitrogen, phosphorus and potassium, also known as NPK, are the “Big 3” primary nutrients in commercial fertilizers, of which nitrogen is considered to be most important nutrient as plants absorb more nitrogen than any other nutrient. This is because nitrogen is essential to the formation of protein which is a key building block of the tissues of most livings things.
Although nitrogen makes up 80% of the earth’s atmosphere, it is in a form that is unavailable to plants. For plants to absorb this key nutrient, atmospheric nitrogen must be ‘fixed’ through methods such as crop rotation, green manure or compost. Bio-F Solutions’ algae-based fertilizer takes advantage of microorganisms present in algae (free-living bacteria which includes the cyanobacteria, also known as blue-green algea), which are naturally capable of transforming atmospheric nitrogen into fixed nitrogen which are usable by plants.