Decarbonize the Chemical Industry Through Electrification

The chemical industry is the third-largest source of industrial emissions. And yet, little has been done to decarbonize the sector. So, how does the chemical trade catch up on the path towards decarbonization? According to a new paper written by researchers from DC-MUSE: through electrification.

The paper argues that electrification powered by low-carbon sources should be viewed more broadly as a viable pathway to decarbonize the chemical industry. New sustainable chemical production methods need to be developed and deployed, and current emission-intensive chemical production technologies need to be reconsidered.

According to Dharik Mallapragada, a principal research scientist at the MIT Energy Initiative and DC-MUSE member: “When it comes to climate action and dealing with the emissions that come from the chemical sector, the slow pace of progress is partly technical and partly driven by the hesitation on behalf of policymakers to overly impact the economic competitiveness of the sector.”

Electrified processes can be more flexible than fossil fuel-driven processes. They can also reduce chemical production costs. So, the paper’s authors outline ways to electrify the industry and present the opportunities and challenges associated with each pathway.

“Generally, the perception is that electrification can play a role in this sector … in that it can replace fossil fuel combustion by providing the heat that the combustion is providing,” Mallapragada added. “What we argue is that electrification could be much more than that.”

Electrification is one of the major themes for the Neuberger Berman Carbon Transition & Infrastructure ETF (NBCT), which seeks to invest in companies that help enable the replacement of technologies that use higher carbon-emitting fuels with those that use low-carbon resources as a source of energy. This includes companies that support smart grid and electric vehicle charging solutions, as well as electricity transmission and distribution that helps expand usage of low-carbon solutions.

“The big piece for us is the electrification, which is very important,” said Fred Edwards, ETF specialist at Neuberger Berman. “We’ve got some exposure to utilities, and we see that as the first iteration of this whole process. Those tend to be safe havens when markets are down, so that helps our approach.”

NBCT also invests in companies focused on producing renewable energy and issuers that directly facilitate the carbon reduction goals of infrastructure owners.

Because the fund is actively managed, the team can nimbly pivot to microtrends happening within the megatrend of the connected consumer.

“That’s the case for active management: things change so quickly,” Edwards said. “There is a big picture, but there’s also the micro that’s managed in real-time.”

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