Scenario analysis for energy transition in the chemical industry: An industrial case study in Saudi Arabia

Abstract

Carbon emissions from the industrial sector represents nearly 21% of global carbon emissions. The chemical manufacturing industries are a major part of the industrial sector, which tends to be less included in battle against climate change. This paper analyses the impact of natural gas prices on carbon abetment costs while analysing IRR and payback period for different CO2 prices, using the linear optimisation model MESSAGE. We show that carbon capture and solar technology may provide the technology mix for deep carbon reduction targets by 2030. In addition, the volatility in natural gas prices was found to create an increase in the abatement costs by $20/Ton as the gas prices increase by $0.10/MMBTU. Furthermore, we find that the minimum carbon price needed is $27/Ton to make investments viable though at a long payback period, 9.5 years. Results show practical scenarios complemented with policy recommendation for energy transition in the chemical industry to achieve climate targets by 2030. This suggests that current commercial prices of carbon ($29/Ton in Europe) may be sufficient to pay off the costs required for carbon capture.