This article is a response to a prompt from a student on the linkage between carbon credits and the PetChem industry in the context of global decarbonization.
One argument against carbon credit trading is that it does not sustainably limit emissions, given that the current global goal is to reach net-zero by 2050. However, would this not mean that the entire petrochemical industry must decline, and eventually cease completely?
In the long run there is not a necessary link between the role of carbon credits in coordinating emissions reduction and the future state of the petrochemicals (Petchem) industry.
The main driver of progress
Ultimately for meaningful progress on global emissions reduction there needs to be a reliable incentive to supply low carbon energy and remove carbon dioxide, either at point source or from the atmosphere. This incentive needs to be sufficiently higher than the cost to supply low carbon energy or carbon removal services ($60 — $100/ton US) and is the primary driver of the progress of emissions reduction. For now the main source of that incentive is set by government policies either via quotas such as the cap and trade ETS in Europe or a carbon tax. Carbon credit markets do not provide this incentive, but rather they help to coordinate the transmission of the incentive from buyers to sellers.
Decline, but not cease
Given that petroleum is a finite resource ultimately it would decline for that reason alone, however the pace of that decline due to the added need to decarbonize from climate change would depend on the shape of the path to net zero, technology mix, and political factors.
To meet net zero by 2050 would require a substantial reduction in the total global scale of the size of the market for liquid fuels (oil) because it is not economical to capture the emissions from cars and aviation, which are the major products from liquid petroleum. However, it does not need to cease completely, and may not reduce as dramatically for specialized global PetChem hubs (potentially Singapore) if they simultaneously increased their relative global market share while the total market size decreases.
The IPCC report on pathways to 1.5C include large amounts of energy production from oil and gas well into the 21st century. The reason for this is due to two factors
- Lack of viable technological substitutes for certain types of activities — aviation, cars, production of industrial materials such as cement and steel
- Availability of carbon capture and sequestration (CCS) technology to utilize the energy from petroleum at point sources, such as power plants, without the carbon pollution.
Since CCS is one of the two main options for the supply of carbon credits, it is one linkage between the PetChem industry and carbon credits.
For a full description of CCS technologies applied to Singapore see the report by Green New Deal “Carbon Capture and Utilisation”
For details on voluntary carbon markets see
- Kollmuss WWF “Making sense of the voluntary carbon market: a comparison of carbon offset standards” 2008
- Kreibich, Nicolas Wuppertal Institute for Climate, Environment and Energy, 2021 “Caught in between: credibility and feasibility of the voluntary carbon market post-2020“
- Tan, Audrey The Straits Times “Green Pulse podcast: What is the voluntary carbon market” 4 Apr 2022
For general information about carbon taxation for Singapore, see 350 Singapore’s ”Vision 2050: A People’s Climate Action Plan for Singapore: Section B: Carbon Tax” September 2019
For an overview of decarbonization technologies for Singapore, see the report by Green New Deal SG “Decarbonizing energy in Singapore”