A formula for the future of the chemical industry: moving beyond fossil resources to create jobs and value

Expanding the use of locally available biomass and renewable electricity, alongside increased recycling, could generate significant economic and employment benefits. In Germany, this could create up to 90,000 new jobs and around 10 billion euros in added value by 2045 – equivalent to an increase of 15 to 20 percent compared with today’s sector employment and value creation – while reducing dependence on fossil imports. This is the conclusion of a study by think tank Agora Industry, conducted together with Fraunhofer IKTS and Carbon Minds. The study explores various resource and import pathways towards a climate-neutral chemical industry in Germany and assesses their implications for investment, operating costs, employment and value creation. Originally published in German, the study is now available in English.

Significant economic and climate gains

Agora Industry identifies new economic opportunities in shifting to renewable carbon sources derived from recycled plastics and regionally available biomass. If companies also electrify production processes, the German chemical sector could cut around 80 million tonnes of carbon dioxide (CO₂) emissions along the value chain by 2045. In the long term, the sector could even become climate positive, generating some 15 million tonnes of negative CO₂ emissions per year from 2045, as biomass removes carbon from the atmosphere unlike fossil resources. 

Geopolitical shifts are reshaping the global chemical industry, but they also create an opportunity for strategic realignment. Countries that embrace the transition away from fossil fuels can strengthen the sector’s industrial resilience, reduce exposure to volatile fossil resources and build new partnerships around sustainable value chains. The Transitioning Away from Fossil Fuels Conference in Santa Marta earlier this year helped build political momentum for the global transition away from fossil fuels, with 57 countries launching a "coalition of the willing" to accelerate its implementation. Countries and regions can drive the transition by leveraging their competitive advantages, from technological leadership to abundant renewable energy resources or biomass potential. Germany, for example, has long been known for its strong foundation in chemical innovation and engineering expertise. Phasing out fossil resources would allow Germany to harness these strengths and reinforce the sector’s position as a technology frontrunner in the development and deployment of climate-neutral chemical production pathways.  

Investment certainty, combining short-term stability with long-term climate policy guardrails, is also critical to restoring confidence in industrial locations. In the face of ongoing geopolitical shifts, a clear direction for the industrial base can provide the stability needed to support industrial development and investment. At the same time, a successful industrial transition to renewable resources and electrification requires measures that safeguard industrial production, incentivise climate-neutral processes and foster a robust market for green products.

Domestic biomass and recycling can create jobs and reduce import dependence 

The Agora study compares several pathways towards a climate-neutral chemical industry in Germany, all based on existing technologies and solutions. Two scenarios yield the most positive effects: one centred on domestic renewable resources (the “domestic biomass” scenario), and the other combining domestic renewable resources and additional recycling with imports of green intermediate products (the “intermediate product import” scenario). 

According to Agora’s modelling, fully replacing petroleum-based feedstocks with domestic resources would shift production and value chain stages back to Germany, creating up to 53,000 new jobs. Converting domestic biomass into methanol as a substitute for crude oil, for example, would open new employment opportunities, particularly in rural regions. Expanded recycling could generate a further 35,000 jobs – bringing the total to around 90,000 and adding approximately 10 billion euros in value. 

Achieving this would require around 50 billion euros of investment in new equipment and facilities by 2045. The study’s authors emphasise that while switching entirely to domestic resources is technically feasible, producing green hydrogen at home to complement biomass availabilities can be cost-intensive. A more cost-effective approach is to combine domestic chemical production with imported green intermediate products, namely green hydrogen, methanol and ethanol. The modelling shows that for Germany, a mix using restricted domestic resources and allowing for imports of up to one third of green intermediate chemicals would create around 70,000 new jobs while reducing total investment needs by about a quarter, to 37 billion euros. This “middle path” would limit the chemical industry’s domestic annual investment requirements to 1.85 billion euros – equivalent to 12 percent of historical spending on industrial facilities – and generate an additional 7 billion euros in economic value. This demonstrates how combining local resource use with international partnerships can optimise costs, a lesson applicable beyond Germany.

Innovative approaches for a forward-looking chemical industry

Even a pathway that retains a significant proportion of fossil resources requires more biomass processing and recycling. This third scenario (“partly fossil”) in the study’s Germany model reduces imported fossil resources from around 80 percent today to roughly one third, with domestic resources covering the remainder. While investment requirements are lower at 34 billion euros, positive effects are also smaller, with around 60,000 new jobs and 5 billion euros in added value. Unlike the full renewable pathways, the “partly fossil” approach does not achieve negative emissions. 

Expanding recycling and establishing an innovative bioeconomy offers additional opportunities for chemical industries worldwide, supporting reduced fossil import dependence, greater technological sovereignty and the creation of secure jobs, while also benefiting the climate.

A suitable policy framework, both nationally and internationally, is essential to support companies amid global competition. Addressing the additional costs of climate-neutral production – in Germany around 1,000 euros per tonne of basic chemicals – requires reliable carbon pricing and mechanisms that account for indirect emissions, even if this leads to modest increases in end product prices.

The 68-page study Innovations for tomorrow: opportunities for a climate-neutral chemical industry was conducted in collaboration with Carbon Minds and the Fraunhofer Institute for Ceramic Technologies and Systems (IKTS). It was originally published in German, later translated into English and adapted for an international audience. Both are available for free download at www.agora-industry.org.