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

The global chemicals industry, a $4.7 trillion sector responsible for 4% of global greenhouse gas emissions, requires urgent innovation to decouple from fossil fuels. RMI and Third Derivative identify three primary innovation pathways: 'Make Less' (circular economy and materials substitution), 'Make Better' (electrification and process efficiency), and 'Make New' (defossilized production using CO2 conversion and biomass). Despite the potential, the sector is undercapitalized, with only 3% of climate tech venture capital directed toward chemicals and plastics over the last five years. Key barriers to scaling include high capital costs, feedstock availability, and a 60% drop in global clean industry investment in 2024. The report emphasizes the role of strategic partnerships with incumbents, non-dilutive funding, and low-carbon certifications in accelerating the commercialization of these technologies.

• The chemicals industry is a critical but high-emitting sector, producing 719 million tons of products annually and accounting for approximately 4% of global greenhouse gas emissions. It is projected to grow production by up to 46% by 2050.
• The chemicals innovation ecosystem is significantly underfunded; in 2022, investments in defossilized chemicals and catalysts totaled approximately $7 billion, representing only 3% of the industry's global annual capital expenditure.
• Decarbonization requires a three-pronged innovation strategy: 'Make Less' focuses on circularity and reducing virgin feedstock demand; 'Make Better' targets efficiency and electrification of existing processes; and 'Make New' involves disruptive, defossilized production methods.
• Process efficiency offers immediate gains, such as replacing thermal-based distillation—which accounts for 40% of a typical plant's energy use—with membrane separation, potentially saving up to 90% of energy.
• Defossilized production, while offering the highest emissions reduction potential, faces severe economic hurdles, with total costs of ownership often four to six times higher than incumbent processes, primarily due to electricity costs.
• Commercialization is hindered by a 'chicken or the egg' dilemma where investors demand de-risked technology while de-risking requires commercial traction. Startups are mitigating this through prepurchase agreements, as-a-service models, and joint ventures.
• Investment in clean industry saw a sharp decline in 2024, falling nearly 60% compared to 2023, increasing the importance of non-dilutive capital such as government grants and philanthropic funding.

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} }