Transitioning the Chemical Industry to a Net-Zero Pathway

At the recently held Global Symposium on Resource Efficiency & Circular Economy, FICCI & RECEIC unveiled the report ‘Transitioning the chemical industry to a net zero pathway’. The report highlighted the need for a material transition in the chemical industry as both urgent and undeniable. As one of the fastest-growing sectors in India, the chemical industry plays a pivotal role in the country’s economic aspirations. However, its heavy dependence on fossil feedstocks presents critical challenges, ranging from high greenhouse gas emissions to resource security concerns. The transition towards bio-based alternatives is no longer an option but a necessity, aligning with India’s net zero commitments and global sustainability imperatives. In this Weekend Musing, I touch upon some of the critical challenges faced by the chemical industry and the five-pillar strategic policy framework which can help us pave the way towards sustainable chemistry.

Biomass is proposed as the cornerstone of this transition. With an estimated annual availability of ~500 million tonnes, biomass offers a dual advantage: it serves as both a renewable energy source and a chemical feedstock with significantly lower lifecycle climate impacts compared to fossil sources. Recent studies even show bio-based chemicals outperform biofuels like ethanol in terms of sustainability. Biomass use could reduce GHG emissions, lower import bills, boost energy security, and unlock rural employment via decentralized collection and processing systems. The ethanol blending programme showcases this potential, having already saved $14 billion in crude import costs and generated $28 billion in revenues for farmers and distillers.

To ensure this shift is environmentally responsible, the report stresses the importance of “environmental guardrails”:

- Biomass must be sustainably source, avoiding land-use change, deforestation, or competition with food crops.

- Feedstock choice should favor second-generation (2G) biomass (e.g., agricultural residues) and third-generation (3G) sources (e.g., algae), which are non-edible and more sustainable.

- All production must be guided by full lifecycle assessments (LCAs) to confirm real GHG reductions and avoid unintended environmental harm.

Despite the promise, the transition faces significant hurdles:

- High upfront costs: Bio-based alternatives are 1.2 to 4.2 times more expensive than fossil counterparts.

- Technology gaps: Many bio-based solutions are still at early stages of readiness and require capital-intensive scaling.

- Supply chain bottlenecks: Issues include seasonal availability of biomass, lack of storage and transport infrastructure, and policy restrictions on certain feedstocks (e.g., rice, molasses).

- Feedstock competition: India's biomass is in demand across energy, fuel, and chemical sectors. Without clear policy prioritization, market forces may undermine the goal of material transition.

To overcome these barriers, the report recommends a five-pillar strategic policy framework:

1. Technology Development Support

   - Establish dedicated bio-based chemicals tech funds.

   - Promote industry-academia collaboration.

   - Provide viability gap funding and create startup incubation centers.

   - Focus on scalable technologies using used cooking oil (UCO), lignocellulosic biomass, and advanced bio-conversion methods.

2. Industry and Economic Competitiveness

   - Offer tax incentives and PLI-like schemes to support large companies, MSMEs, and startups.

   - Build domestic capacity for globally competitive manufacturing of sustainable chemical inputs.

3. Supply Chain Development

   - Build decentralized biomass collection hubs by 2030.

   - Create quality standards and traceable market mechanisms.

   - Foster rural entrepreneurship and integrate farmer collectives.

   - Start with proven models like UCO-based biodiesel and chemicals.

4. Risk Financing

   - Launch green bonds and similar instruments.

   - Provide subsidies and duty exemptions on bio-based feedstocks.

   - Support early-stage capital needs for pilot and commercial-scale bio-refineries.

5. Green Public Procurement and Consumer Awareness

   - Set mandatory green procurement targets across government agencies.

   - Establish robust certification frameworks for sustainable products.

   - Run national campaigns and integrate sustainability into education curricula to drive demand and awareness.