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Save the Planet and Turn a Profit

Wed, 05/02/2007 - 8:38am
The chemical industry is poised to reduce greenhouse gas emissions while developing products that help others do so, too

By Joy LePree


Signs of global warming are all around us, from melting glaciers to stifling heat waves. The 10 hottest years on record have all occurred since 1990, and scientists say global warming is likely to disrupt water supplies, flood coastal areas, increase disease outbreaks, and cause fragile lands such as alpine meadows and coastal marshes to vanish. This data comes from the National Resource Defense Council (NRDC), which also says researchers, including those in the Defense Department, have investigated the possibility of abrupt climate change in which gradual global warming triggers a sudden shift in the earth's climate, causing parts of the world to heat up or cool down dramatically in the span of a few years. Sadly, the U.S. is the world's largest contributor to the climate problem. According to NRDC statistics, Americans make up just 4 percent of the world's population but produce 25 percent of the carbon dioxide pollution from fossil fuel burning. The U.S. emits more carbon dioxide than China, India, and Japan combined.

With such worrisome information available all over the news, it's obvious that government climate policies, fueled by public and industry concern, are inevitable. "When it comes to federal legislation regarding climate change, the overall trend is that it's moving so much faster than anyone would have thought," says Truman Semans, director for markets and business strategy with the Pew Center on Global Climate Change. "The number of briefings and activities is almost too hard to keep track of. Both in the House and Senate, there are powerful committees such as Energy and Commerce and Foreign Relations sitting up, listening, and becoming active in the cause.

"So far, a few small climate change-related items regarding technology and biofuels have passed and become law as part of the Energy Act of 2005. However, during the debate of the Energy Act of 2005, the Senate passed a resolution calling on Congress to enact legislation that will slow, stop, and reverse greenhouse gas emissions. This combined with the impact and influence of business and industry, as well as some state level legislation, has caused a flurry of activity that is sure to get something climate-positive passed sooner rather than later," says Semans.

This means that for companies to remain competitive in a climate-concerned economy where emission reductions are a certainty, they will need to position themselves to succeed in the face of two trends: a decline in the value of inefficient and greenhouse gas-intensive technologies and a corresponding increase in demand for climate-friendly technologies and services, says Semans.

Fortunately, the chemical industry is in a unique position to succeed in this new climate-concerned world. Not only have a significant percentage of chemical processors already started voluntarily reducing greenhouse gas emissions and increasing energy efficiency, but the industry is poised to provide products that will help the rest of the world reduce its greenhouse gas footprint, says Jack Gerard, president and CEO of the American Chemistry Council.

According to ACC statistics, the industry has decreased greenhouse gas emission intensity since 1990 by 30.6 percent and absolute greenhouse gas emissions by 10 percent while increasing production by nearly 30 percent.

In addition, the chemical industry has also been making contributions that will help others reduce emissions and increase efficiencies. Gerard said, for example, the business of chemistry makes building insulation materials that save as much as 40 BTUs of energy for every BTU of energy consumed to make them. "Not only is the chemical industry setting the standard and demonstrating that it's good business to reduce greenhouse gases, but we are the ones who are going to produce the products that will allow everyone else to achieve significant reductions in greenhouse gas emissions," says Gerard.


2 to Tango: Climate-Focused Organizations

There are a number of organizations and programs forming to address the need for climate change through either voluntary action or mandatory policy. Two with strong chemical industry participation include the EPA's Climate Leaders Partners and the U.S. Climate Action Partnership (US CAP).

1.
EPA launched Climate Leaders as a voluntary industry-government partnership in February 2002 with 11 partners. By the end of 2002, the program had 35 charter partners. As of January 2007, there were 109 partners — 59 of which had announced greenhouse gas reduction goals while the rest said they are completing inventory procedures prior to setting a reduction goal. The program works with companies to develop long-term comprehensive climate-change strategies. Partners set an aggressive, corporate-wide greenhouse gas reduction goal to be achieved over 5 to 10 years and then begin to mitigate their climate footprint, develop a corporate-wide inventory of the six major greenhouse gases and a management plan, and report inventory data annually while documenting progress toward the reduction goals. In exchange, EPA offers free technical assistance, national recognition, and outreach and peer exchange opportunities.

2.
Introduced in January, US CAP includes nine U.S.-based companies — Alcoa, BP America, Caterpillar, Duke Energy, DuPont, FPL Group, General Electric, Lehman Brothers, PG&E, and PNM Resources — along with the Pew Center on Global Climate Change, the Natural Resources Defense Council, Environmental Defense, and the World Resources Institute. US CAP partners have outlined specific recommendations that ask the U.S. government to enact strong national legislation quickly to achieve significant reductions of greenhouse gas emissions. The framework that US CAP is shooting for includes mandatory approaches to reduce greenhouse gas emissions from economic sectors with the highest emissions, flexible approaches to establish a price signal for carbon that varies by economic sector, and incentives for other countries to take action.

Example #1: Alcoa

When it comes to producing chemicals, the climate change problem has a two-fold solution: increasing energy efficiency so less carbon-intensive energy is used and switching out greenhouse gas-intensive processes for ones that either capture the gases or reduce them dramatically.

Many leaders in the chemical industry have been voluntarily taking steps in both directions for some time now. For example, Alcoa, a large aluminum producer, has a strong commitment to climate change resolution engrained in its corporate philosophy. "Each year that we delay action to control emissions increases the risk of unavoidable consequences that could necessitate even steeper reductions in the future at potentially greater economic cost and social disruption," says Alain Belda, Alcoa chairman and CEO.

And the company's actions speak louder than its words. Alcoa has reduced greenhouse gas emissions by 25 percent since 1990 by aggressively reducing perfluorocarbon (PFC) emissions. The company also established the Alcoa Energy Efficiency Network in 2002 in partnership with the Department of Energy to conduct energy efficiency surveys at operating locations to identify areas of possible improvement. Further, the company has invested heavily in green power. Alcoa purchased enough renewable energy certificates to power four of its corporate centers in the U.S. effectively. These facilities are now operating on electricity generated by projects that produce electricity from landfill gas, avoiding the emissions of more than 13.9 million pounds of carbon dioxide annually.


Example #2: ExxonMobil

Similarly, ExxonMobil is making strides to reduce energy consumption and emissions. The company's Baton Rouge complex, which includes its Baton Rouge chemical plant and refinery, has been a leader in the firm's Global Energy Management System, which focuses on capturing energy savings through programs such as heat exchanger monitoring, a steam trap and steam leak repair program, and upgrading furnace air pre-heaters. The complex has improved energy efficiency by 12 percent in the past seven years, which has resulted in more than just cost savings. Since 1990, ExxonMobil Baton Rouge has decreased NOx emissions by 35 percent and VOC emissions by 68 percent.


Example #3: SC Johnson

Other chemical companies, such as SC Johnson, have become "climate leaders" in the EPA's Climate Leaders Partners program. SC Johnson pledged to reduce its greenhouse gas intensity, which is greenhouse gas emissions per pound of product, by 23 percent between the years 2000 and 2005. In addition, the company committed to an 8 percent absolute reduction in its emissions during this period — while experiencing significant growth. This required a major initiative capable of producing large-scale reductions of 30,000 tons per year, quickly.

Virtually all these reductions could be accomplished within the company's Waxdale facility, which is the largest facility and the largest source of greenhouse gases, accounting for more than one-third of the company's U.S. operational emissions. A team directed by Scott Johnson, vice president for global environmental and safety actions, and Frank Ericson, Waxdale's manager of environmental operations and central services, developed a strategy to cut back the facility's reliance on fossil fuels, in particular coal-intensive electricity, by using cogeneration to increase the efficiency of power consumption and by using a renewable power source to achieve significant emission reductions. The company was already purchasing waste methane from a local landfill for use in its boiler, but using landfill gas in a cogeneration system that simultaneously produces electricity and steam would result in far greater emissions savings. SC Johnson chose a turbine system for the combustion of the landfill gas because it was more efficient and delivered more of the high-temperature waste heat that the manufacturing process required than other options. The turbine system also had lower annual operating costs and a higher return on investment over a 10-year period.

The system should reduce greenhouse gas emissions by 30,000 tons a year — 50 percent of the facility's total emissions — and deliver virtually all the company's "climate leaders" commitment. The $5-million, 3.2-megawatt system will cut electricity and natural gas consumption roughly in half. And even though the Waxdale facility has low electricity rates — four cents per kilowatt hour — the system should save more than $2 million dollars a year in energy costs.


Examples #4: DuPont

DuPont is developing products that enhance the environmental profile of its traditional business such as refrigerants with lower greenhouse warming potential.

While many chemical companies look at how increasing efficiency and reducing greenhouse gas emissions can help the environment and their bottom line through savings such as those realized by SC Johnson, many don't realize the value to their top line, says Semans. "Lots of companies have documented significant dollar savings associated with energy and emissions reductions. Alone this is a good thing because it not only saves money but also positions them well on a cost basis with competitors who aren't making the same commitments. This is true for large chemical processors, and it's especially true in the lower margin commodity chemicals business," explains Semans. "But that's only the pure cost benefit side of the equation for emissions reductions. There's an additional dimension that's about the top line approach to integrating climate change in the business strategy, which seeks not only improvements to the bottom line but also to make money while helping society and other businesses address the climate problem." Gerard's building insulation is a great illustration of how the chemical industry is poised to see top line benefits from pending climate change action.

Semans says DuPont is a leader to be followed in the area of creating technologies that save the planet and turn a profit. The chemical giant has been developing new products that enhance the environmental profile of its traditional business such as refrigerants with lower greenhouse warming potential, automotive finishes with lower VOC content, and engineering polymers and coatings based on renewable materials.

"Sustainable growth is not a distant goal for 2015. It's about products and services we have in the marketplace right now and products that are moving through our R&D pipeline," says DuPont Chairman and CEO Charles O. Holliday Jr. "While we have made progress, we can and will do more, working closely with our customers and partners round the world. We realize that we do not have all the answers and need to partner with others to deliver the best solutions, when and where they are needed the most."

An example of such a partnership is one that was announced in June 2006 under which DuPont and BP joined forces to develop, market, and produce butanol, a new type of biofuel potentially superior to ethanol in terms of energy content, reduction in greenhouse gases, and ease of integration into existing fuel distribution infrastructure. DuPont projects that 60 percent of its business will stem from the use of biology to reduce fossil fuel use in the next few decades.

And that's not all the firm has in the works. DuPont's 2015 sustainability goals span all of its operations from R&D to manufacturing and marketing. The goals are tied directly to business growth, specifically to the development of safer and environmentally improved new products for DuPont's key global markets including transportation, building and construction, agriculture and food, and communications. Holliday says that revenues from the company's current safety and environmental offerings are increasing at double the company's average revenue growth rate. As part of its 2015 sustainability goals related to the marketplace, DuPont has committed to doubling its R&D investment in environmentally smart market opportunities, growing annual revenue by $2 billion or more from products that create energy efficiency and/or reduce greenhouse gas emissions, doubling annual revenue to $8 billion from non-depletable resources, and introducing at least 1,000 new safety products or services.


Time-Sensitive Advice

For chemical companies that haven't even begun to think about jumping on the climate change bandwagon — much less the marketing of climate-smart products — the time has come. "With pending legislation and pressure from firms that are already voluntarily reducing emissions and finding ways to turn climate change into a profit, companies that haven't taken any action need to get started," urges Semans.

"They should begin with a sensible, organized business strategy process with an understanding of the physical, regulatory, and reputational risks of not making climate-positive changes," says Semans. "Then, they need to understand how the markets and processes will change when greenhouse gas regulations become mandatory and how they can perform well under these from a cost and opportunity standpoint. Looking for business opportunities and potential partners now can get you ahead in the future.

"Additionally, the consensus is emerging that we are going to have greenhouse gas regulations very soon in this country," continues Semans. "It is really a no-brainer to get involved in the political process by joining any of the climate change organizations. From what we've seen this is very beneficial because the companies that are constructive and supportive of approaches are the ones that gain the trust to work closely with Congress when they are writing key bills.

"We strongly advise folks to take care of their own house first, then take a constructive approach that is supportive of greenhouse gas emissions reductions, and put it all together in a package that describes the positive opportunities and actions that can be taken," says Semans.


Joy LePree is a contributing writer for CHEM.INFO magazine. Comments about this article can be sent to Lisa Arrigo, editor in chief, at lisa.arrigo@advantagemedia.com.

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