Catalyzing Change: The New Wave of Innovation in the Chemicals Sector

The chemicals industry, a $4.7 trillion sector responsible for 4% of global greenhouse gas emissions, is at a critical juncture for decarbonization. RMI and Third Derivative identify three primary innovation pathways: 'Make Less' (circularity), 'Make Better' (process efficiency), and 'Make New' (defossilized production). Despite the potential for near-zero emissions, the sector is undercapitalized, with only 3% of climate tech VC investment going to chemicals and plastics. Startups are navigating high capital costs and a 60% drop in clean industry investment in 2024 by leveraging non-dilutive funding, strategic partnerships with incumbents, and targeted certifications to access premium markets.

• The global chemicals industry is a $4.7 trillion sector producing 719 million tons of products annually, with production projected to grow by up to 46 percent by 2050. While it supports over 75 percent of emissions reduction technologies, it is responsible for approximately 4 percent of global greenhouse gas emissions.
• The chemicals innovation ecosystem is significantly undercapitalized. In 2022, defossilized chemicals and catalysts received approximately $7 billion in investment, representing only 3 percent of the industry's global annual capital expenditure. Over the last five years, only 3 percent of climate tech venture capital has been directed toward chemicals and plastics.
• Third Derivative and RMI categorize the necessary innovations for net-zero emissions into three strategies: 'Make Less' (reducing virgin feedstock demand via circularity and efficiency), 'Make Better' (reducing emissions in existing processes through electrification and efficiency), and 'Make New' (disruptive, low- or zero-emission production processes).
• Energy efficiency in existing plants offers significant potential, as thermal-based distillation currently accounts for 40 percent of a typical chemical plant's energy use. Innovations such as membrane separation, heat pumps, and AI/ML for process optimization are emerging, with some solutions showing internal rates of return above 10 percent.
• Defossilized chemical production—which avoids fossil fuels for both energy and feedstocks—has the highest emissions reduction potential but faces high costs. Total cost of ownership for these technologies is often four to six times higher than incumbents on a dollar-per-ton basis, primarily due to electricity costs.
• Startups face significant commercialization hurdles, including a 'chicken or the egg' dilemma where investors require de-risked technology but de-risking requires commercial traction. To mitigate this, startups are using prepurchase agreements, as-a-service models, and joint ventures with incumbents.
• Investment in clean industry fell nearly 60 percent in 2024 following record levels in 2023. This has increased the importance of non-dilutive capital, such as government grants and philanthropic funding, to bridge the gap for high-risk, high-impact early-stage technologies.

APA

RMI (2025). Catalyzing Change: The New Wave of Innovation in the Chemicals Sector. https://rmi.org/resources/catalyzing-change-the-new-wave-of-innovation-in-the-chemicals-sector/

Chicago

RMI. Catalyzing Change: The New Wave of Innovation in the Chemicals Sector. 2025. https://rmi.org/resources/catalyzing-change-the-new-wave-of-innovation-in-the-chemicals-sector/.

Wikipedia

{{cite report |author=RMI |title=Catalyzing Change: The New Wave of Innovation in the Chemicals Sector |date=11 August 2025 |url=https://rmi.org/resources/catalyzing-change-the-new-wave-of-innovation-in-the-chemicals-sector/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2025catalyzing, author = {{RMI}}, title = {{Catalyzing Change: The New Wave of Innovation in the Chemicals Sector}}, institution = {RMI}, year = {2025}, month = aug, url = {https://rmi.org/resources/catalyzing-change-the-new-wave-of-innovation-in-the-chemicals-sector/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }