The U.S. chemical industry produces over 70,000 different types of plastics, fabrics, personal care, fertilizer, pharmaceuticals, rubber and other products. The U.S. Department of Energy estimates that, combined with oil refining, chemical production is responsible for about 8% of the U.S.’s gross domestic product. Of that output, 28% is exported at an estimated projected value of $175 billion throughout 2025.Chemical production’s large role in the U.S. economy and the exports that sustain it make it a vital industry. Yet, it must adapt to growing pressure internationally for goods that are produced with zero or few emissions despite expectations that both U.S. chemical demand and greenhouse gas (GHG) emissions are expected to grow approximately 35% in a business-as-usual scenario.For the U.S. to remain competitive, retain access to important foreign markets and reduce its trade deficit in line with the Trump Administration’s goals, its chemical manufacturers must modernize and reduce emissions. A standardized carbon accounting framework is fundamental to maximizing investments in innovative, low-carbon technologies.Carbon-Based Trade PolicyInternational action to reduce greenhouse gases is increasingly including emissions-intensive industrial products like cement, steel and chemicals. Carbon tariffs on imports are a tool that can monetize a country’s industrial innovation and carbon advantage while inducing other countries to reduce their emissions. Fundamentally, the various forms of carbon tariffs work by levying fees on imports that exceed a set emissions-intensity threshold, such as tons of CO2 per ton of steel.The most prominent such measure is the EU’s Carbon Border Adjustment Mechanism, which would levy a fee on carbon intensive imports based on the EU’s carbon price. Other countries have carbon policies that could be expanded to include imports. Examples include China’s Emissions Trading System and Vietnam’s carbon market — which will soon cover domestic cement, steel and aluminum — and 27 additional countries that have carbon prices or taxes.If the EU’s pioneering carbon market serves as a model for other countries, incorporating relatively simpler commodities like steel and cement open the door for chemicals’ inclusion later, given the sector’s emissions. Globally, chemical production emits 1.3 billion to 2.5 billion tons of carbon dioxide equivalent (CO2e) per year, or up to 2.5% of all emissions; it comprises about 15% of industrial emissions, after steel and cement. As one of the largest chemical producers in the world, the U.S. share in chemical trade and emissions is substantial, as is its need to modernize.Chemical Sector Emissions in the U.S.A recent estimate suggests that the production life cycle of petrochemicals—chemicals derived from fossil fuels— emit 306 million to 343 million metric tons of CO2e in the U.S. Multiple pathways have emerged to reduce emissions from petrochemicals. However, reducing emissions from chemical production is expensive and can add an estimated 55% “green premium” or additional cost for foundational precursor chemicals. To meet international pressure for low emission chemicals and maintain its prominence as the global innovation center, the U.S. must work with producers to reduce emissions.
A range of supportive policies, including grants and incentives, were passed during the Biden Administration to derisk and encourage investment in low-emission industrial technologies and processes. A keystone policy is the Industrial Demonstrations Program (IDP), which awarded seven projects up to $500 million to manufacture low-emission chemicals. For example, a project is under negotiation for $200 million to recycle CO2 from chemical production to make new chemicals.These policies to spur innovative industry — many of which were created through the Bipartisan Infrastructure Law — are also creating tens of thousands of jobs and billions of dollars in investments across the country, particularly in areas that have been harmed by deindustrialization. However, their economic gains are being lost or are uncertain due to federal cutting of vital industrial programs.Satisfying Growing Demand for Low-Emission ChemicalsNotwithstanding the demand for low-emission products from countries with current or future carbon tariffs, there is growing voluntary demand from producers to make more sustainable products and from companies to purchase those products. For example, the Science Based Targets Initiative (SBTi) enables and collects corporate commitments to reduce emissions. Over half of its 11,000 members are targeting supply chain emissions, all of which nearly guaranteed to contain chemical products.However, these companies must understand the emission intensity of chemicals (i.e. GHG emissions per unit of product), including emissions along the value chain. But due to the fragmented nature of the industry this foundational information is often inaccessible and makes tracing emissions of 70,000 different end-use products notoriously complex.To assist businesses and consumers intent on purchasing less carbon-intensive chemical products and design effective policy to reduce emissions, the U.S. needs globally aligned robust frameworks to monitor, report and verify data. This includes standardized frameworks to measure emissions across the value chain, develop industry average and low-emissions benchmarks for chemical production and report the emissions intensity of primary and end-use chemical products.Scoping out the ProblemTo reduce their products’ emission intensity, companies must know and eliminate the emissions from the facility making the product (Scope 1), the electricity they purchased (Scope 2) and all purchased goods and services up the supply chain and from use and disposal (Scope 3). And if down-stream suppliers want to sell low-emissions products, they must account for the emissions from the value chain of that product.Current U.S. federal law only requires facilities that emit more than 25 kilotons CO2e to report their Scope 1 emissions to the Environmental Protection Agency. The EPA’s 2009 Endangerment Finding determined that GHGs like CO2 fall under the agency’s regulatory purview, and challenges to this have been rejected by the Supreme Court several times. However, the Trump administration has ordered the EPA to reconsider this rule, which would effectively eliminate the requirement for nearly all facilities to collect and report this data. Additionally, certain public companies were required to disclose their total Scope 2 emissions in their Security and Exchange Commission filings until the Trump administration struck the rule. There are no existing or previous requirements for companies to measure and disclose Scope 3 emissions.This does not mean Scope 2 and Scope 3 data or efforts to collect it do not exist. Accounting frameworks designed by the Greenhouse Gas Protocol (GHGP) and International Standards Organization (ISO) guide multi-sector efforts like the Carbon Disclosure Project and Global Reporting Initiative, through which companies can voluntarily reduce their direct (Scope 1) and indirect emissions (Scopes 2 and 3).GHGP and ISO also underly sector-specific emission measurement frameworks and benchmarking. Together For Sustainability, a coalition of chemical companies, published carbon intensity accounting recommendations that align with the GHGP and ISO rules. Similarly, the Science Based Targets Initiative has developed draft guidance for chemical companies to set emission reduction targets.Additionally, there are databases for product life cycle assessments (LCA) and also the Federal LCA Commons, which is a repository of LCA methodologies that includes chemicals and petrochemicals. But these data are often secondary, used when data directly provided by an emitter are unavailable and produced using unharmonized standards and methodologies.Emissions Accounting and Complex Value ChainsMeasuring and accounting for greenhouse gas emissions can be done at the company-, facility- and, ideally, the product-level. Currently, the Clean Air Act requires high emitting facilities to collect and report their emissions to the EPA’s Greenhouse Gas Reporting Program (GHGRP). Companies aggregate facility-level (Scope 1) and Scopes 2 and 3 emissions, where possible, to estimate their corporate emissions.Companies or third parties use life cycle assessments to estimate a product’s carbon intensity by measuring emissions along its manufacturing process. For product-level data in the industrial sector this is typically “cradle-to-gate” emissions (A1 to A3 of a life cycle), which includes extracting and processing raw materials, transportation of the feedstock and fuels, and processing of the feedstock including direct or indirect emissions (from purchased electricity, for instance). For chemical products, carrying out LCAs often requires making difficult determinations about how to account for and attribute emissions among numerous products created through multiple manufacturing processes. In addition, life cycle assessments require establishing boundaries to determine a product’s emissions.An even more complete picture than cradle-to-gate is cradle-to-grave (feedstock to disposal) or cradle-to-cradle (feedstock to recycling) emissions accounting approaches, which include many other emissions and accounting variables typically out of the producer’s control.Including the disposal or recycling stages requires more considerations, some of which are heavily debated. Tracing the carbon intensity of a single product grows in difficulty with the number of processing stages, coproducts and disaggregation in the supply chain; this is further obfuscated by a lack of transparency and inconsistency in accounting methods.Each production stage typically occurs in separate, specialized facilities that can produce a diverse number of goods depending on demand fluctuations. Ideally, each facility would use standardized measurement systems and securely transmit primary data across the supply chain. Realistically, uncertainty likely dominates as each facility could use different standards to measure Scope 1 (e.g. direct metering, mass balance, stoichiometry) and Scope 2 emissions and allocate co-products (mass, economic or energy balances).If facilities do not publicize product-level emissions or disclose their production technologies, secondary data such as public LCAs or aggregated data can be used. However, this introduces uncertainty. Secondary data resources may vary and there is no strong incentive to use systems with greater granularity, such as ClimateTRACE and other initiatives. Emissions from feedstocks are an additional complicating factor, as fugitive methane emissions are frequently underestimated or ignored. Additionally, lower-carbon alternative feedstocks like biomass and captured CO2 have complex emissions profiles that can range from negative to positive emissions depending on many factors. Shorter, simpler supply chains reduce the number of Scope 3 variables. For example, one study examining carbon accounting uncertainty for primary chemicals assessed 19 different ammonia production pathways with four feedstocks. In contrast, they assessed 63 pathways for ethylene with 14 feedstocks and a larger range of carbon intensities. Ammonia requires fewer processing facilities than ethylene, reducing the number of stages where carbon intensity data must be calculated. And most ammonia goes toward a single use.As a result, setting emission standards for ammonia is more straightforward than most primary chemicals. This shorter, more integrated supply chain is conducive to policy that relies on life cycle assessments and emission benchmarks. For example, Japan has enacted a low-carbon ammonia standard and the European Union includes ammonia as the first primary chemical included in its Carbon Border Adjustment Mechanism.Case Study: Ammonia and EthyleneAmmoniaSynthetic ammonia fertilizer is the foundation for the modern agricultural system. Its supply chain is relatively straightforward, as is measuring its carbon intensity. Natural gas is extracted and transported to an ammonia plant where it is processed into hydrogen and combined with nitrogen to make ammonia. That ammonia is then transported to customers to be used directly (most common) or is processed once more at the same plant or another facility into a different fertilizer. While ammonia can be used for other products like explosives, plastics or fuel (a potential decarbonization tool) in the U.S., 88% of it goes toward agriculture.
Nearly all ammonia goes toward a single use and is produced in integrated facilities meant to only produce ammonia (or possibly fertilizer derivatives), enabling consumers to more easily identify their product’s source and emissions.EthyleneEthylene is the most produced primary chemical in the U.S. and is the precursor to common plastics and products such as bags, detergents and pharmaceuticals. It starts with natural gas, which is processed into ethane (among other natural gas liquids). Ethane is sent to a chemical plant where it is broken down in a steam cracker into ethylene and other primary chemicals. The ethylene is then converted into a multitude of polymers (intermediate chemicals), before being turned into thousands of different chemical end products.
Unlike ammonia, each step of ethylene’s supply chain can branch off into a multitude of different products, sometimes made in the same reactor. In turn, those products follow their own supply chains. For example, ethane, a chemical feedstock, is produced alongside other natural gas liquids like butane and propane. Ethylene is produced in the same reactor as other primary chemicals, the ratios of which depend on the facility design and daily market fluctuations. The branching paths continue through polymerization and final plastic conversion. Existing and Proposed Standards FrameworksEthylene and other primary chemicals that face similar accounting difficulties lack harmonized standards, making it difficult to set decarbonization policies. However, some organizations have worked to design harmonized approaches that could be incorporated into policy.The “general standards” are foundational frameworks that sector-specific organizations use to develop standards for their industries. The chemical sector-specific standards propose methods to estimate, track and communicate product carbon intensity and emission reductions. Most, if not all sector-specific standards, will indicate that their proposals comply with general frameworks set by, for example, ISO and GHG Protocol.The Industrial Transition Accelerator developed a similar summary of standards for ammonia and methanol that have broad uptake in policies across multiple countries and regions. Emissions Accounting Frameworks GuidanceDescriptionKey Guidance Contribution for ChemicalsGeneral Standards Frameworks (Economywide)ISO 14064 and 14067Overarching principles frameworks that guide how companies, projects and third parties manage emissions and data.ISO standards series sets the overarching frameworks for accounting and verifying GHG emissions and product carbon intensity.GHG ProtocolProvides precise measurement and calculation methodologies that comply with ISO principles.Scope measurement guidance is applicable to the chemical sector. Scope 3 guidance is particularly useful for assessing product carbon intensity.PACT Pathfinder FrameworkEstablishes a framework for companies to convey product carbon intensity data across the value chain.Framework for primary data conveyance is applicable to specific sectors.ISCC Carbon Footprint CertificationEnables the certification of product intensity for products and value chains.ISCC’s foundational certification system that is furthered tailored for specific sectors and products (see below).Chemical Sector-Specific FrameworksSBTi Chemical Sector GuidanceSets sector-specific guidance for companies to reduce their emissions to achieve global net zero by 2050.Draft guidance for the chemical companies to calculate and set emission targets for specific products. Provides calculation tools for reducing process and heat emissions using accepted reduction tools.TfS Product Carbon Footprint Guidelines for ChemicalsGuidance developed by industry to estimate product carbon intensity, aligning with ISO and GHG Protocol principles.Establishes standard, comparable accounting and reporting standards that companies can use to measure cradle-to-gate emissions, with an emphasis on Scope 3 measurements.Dow Product Carbon Footprint CalculationMethodology developed by Dow to estimate life cycle emissions through standardized carbon intensity calculations.Adds on to existing frameworks supply chain methodology that uses a consistent calculation system (mass-balance) across suppliers to estimate a chemical product’s final carbon intensity.SCSS Certification Standard for Product Carbon Intensity and Reduction for Chemicals and Co-ProductsEstablishes the requirements for producers to achieve third-party certification of a product’s estimated carbon intensity and how it has been reduced.Adds the specific requirements a chemical producer needs to achieve certification by a third party in addition to methodologies (e.g. TfS, Dow) they may have used to estimate product carbon intensity.Plastics EuropeMethodology for emission allocations in steam crackers.Establishes “Main Products” and “Co-Products” from steam crackers. Emission factors should only apply to Main Products, prioritizing Mass Basis allocation.RMI Plastics GHG Reporting GuidanceEstablishes carbon accounting guidance for the plastic processing and molding sectorFocuses on how plastic producers, rather than just chemical producers, can measure and report their own emissions to increase Scope 3 transparency and drive informed purchasing decisions.How to Improve Data TransparencyOther industrial subsectors such as cement and steel are leading the charge in setting product-level reporting standards and carbon labels to kickstart private, state , federal and international green procurement initiatives. This is partially due to the relative simplicity of their supply chains which produce far fewer different products for which emissions must be accounted than the chemical sector. This, in combination with the public sector’s outsized share of demand for cement and steel, facilitates development of emissions reporting frameworks alongside green procurement programs.There’s an opportunity for policymakers and companies to work together to codify proposed or similarly interoperable and harmonized standards for the chemical sector. Although the Trump administration abolished the Buy Clean program, a pivotal purchasing program to drive clean cement and steel production, some states have passed their own Buy Clean programs and U.S. producers will still face international pressure to reduce emissions for exports.Maintain and Amend Reporting RequirementsIt would disadvantage U.S. competitiveness for the Trump administration to follow through on its efforts to eliminate or hamper emissions reporting. This data is the bedrock for future action and should be collected for U.S. chemical companies to innovate ahead of competitors.Assuming the databases are maintained, some of the information that polluting facilities report to the EPA — emission volumes, process units and fuel use — are publicly available, while other data — feedstock types and volumes and amount of product — are classified as Confidential Business Information (CBI). While CBI rules protect producers by keeping vital information away from competitors, these rules also complicate attempts by third partis to calculate Scope 3 emissions or estimate product carbon intensity.GHGRP’s public interface could add reasonable measures of transparency that enable third parties to estimate or verify production emissions while also protecting producers’ confidentiality. One simple way to do this would be to list the main products manufactured in a chemical facility.Currently, facilities are not required to list their products, but some can be inferred. For example, chemical plants may list an ethane cracker or ethylene processing unit among its emission sources. This reveals that the plant produces ethylene, but these typically produce other chemicals as well that should also be listed — without accompanying production volumes — to improve clarity within the chemical supply chain.Codify National Emissions Averages for Primary and Key Intermediary Chemicals and PlasticsCongress recently introduced several bills, some with bipartisan support, that would similarly address industry’s exposure to climate-based trade measures. Fundamental to these bills is the need to compare the carbon intensity of industrial commodities produced in the U.S. to that of other countries. The PROVE IT Act, most explicitly, would require the U.S. to study and publish average emission intensities for key commodities, including petrochemicals and plastics.While averages are subject to uncertainty and could differ substantially by facility, they could provide a workable benchmark for policy that protects domestic producers and reduces emissions. U.S. chemicals have been estimated to hold a carbon advantage over many of its competitors. These national average emission intensities for primary products would serve as placeholder values to help downstream producers in estimating their products’ emissions intensities in the absence of specific product data. To reduce errors from remaining uncertainty, the benchmark could be set slightly above the estimated average.Over time, policy could work to incorporate more specificity in their design, ideally with frameworks that align with international systems. Part of that work includes increasing transparency in how existing emissions are currently reported at facilities.Establish a Framework for Assessing and Communicating Chemical Product Carbon Intensity for Demand-Side PolicyNational averages and improving GHGRP’s reporting transparency are important first steps to developing and improving carbon intensity’s data accuracy. These should be foundational to enshrining standards for carbon accounting, tracking and reporting through product category rules (PCRs) and environmental product declarations (EPDs) for chemical products.EPDs are akin to nutrition labels for commodities and materials, disclosing a product’s global warming potential and other environmental impacts. PCRs are the rules that producers must follow when creating an EPD, outlining methodologies, definitions and scopes for covered products. In concert, EPDs and PCRs harmonize and standardize how producers measure and disclose their emissions, which unlocks policy opportunities (e.g. public procurement, advance market commitments) that benefit compliant and high-performing manufacturers. The Inflation Reduction Act authorized $250 million for the EPA’s EPD Assistance Program, which sought to develop EPDs and PCRs for construction materials and to feed into the now defunct federal Buy Clean Program. A similar program could develop a Digital Product Passports for chemical products, whereby an agency works with industry or a coalition like Together for Sustainability (TfS) to adopt proposed rules on scope, methodologies and metrics. Oregon’s rule on Extended Producer Responsibility uses cradle-to-gate LCAs on packaging and could serve as a model.An ambitious version of this could be geared toward specific products like the most highly-produced plastics. But given the heterogeneity of final products and their hundreds of minute additives, initial efforts could be more effective by defining the scope around primary chemical production — putting a carbon label on chemicals like ammonia, ethylene or benzene, toluene and xylenes (BTX) based on consistent emissions accounting principles. This reduces the number of upstream factors to incorporate while the system matures, emphasizes the production stage where the highest percentage of emissions are concentrated and involves some of the largest companies that are more likely to be able to afford, finance or incorporate emission reduction technologies in the near-term.Downstream purchasers can cite the percentage of reduced emissions that came from their less carbon-intensive primary chemicals. Over time, more downstream facilities and products can be included in the EPD’s scope, such tools like the MiQ-Highwood index for methane emissions.How the U.S. Can Become Global Data ChampionsU.S. dominance in innovative manufacturing relies as deeply on data as it does on the people putting steel in the ground to build new, advanced facilities. Manufacturers developing cutting-edge technology to compete with new international carbon tariffs and satisfy demand for cleaner, reliable materials must be able to agree on how to measure the carbon in their supply chains. By working with industry, policymakers can champion data infrastructure, leading the charge to enact frameworks that will guide manufacturing and trade and avoid being left behind by foreign competitors.