Energy and Climate Protection

Strategy

• Climate protection target: CO₂-neutral growth until 2030
• Carbon management to reduce emissions

Climate protection is very important to us and is an important part of our corporate strategy. As a leading chemical company, we want to achieve CO₂-neutral¹ growth until 2030. We aim to keep total greenhouse gas emissions from our production sites and our energy purchases stable at the 2018 level while growing production volumes. Based on our growth plans until 2030, this would mean reducing our specific greenhouse gas emissions by up to one-third compared with 2018. To achieve this, we have adopted comprehensive carbon management with three strategic levers: optimizing our plants, increasingly sourcing low-carbon energy, and developing completely new, low-emission technologies and processes. With these innovations, we want to lay the foundation for significant emissions reductions from 2030 onward. In connection with our climate protection target, we made Group-wide CO₂ emissions one of our most important key performance indicators at the beginning of the 2020 business year. This makes emissions even more important to the operational and strategic steering of the BASF Group.

Our climate protection activities are based on a comprehensive analysis of our emissions. We report on greenhouse gas emissions in accordance with the Greenhouse Gas Protocol as well as the sector-specific standard for the chemical industry. Sharp increases in our greenhouse gas emissions, due for example to the startup of large-scale plants, are progressively offset. We assess investments and acquisitions with respect to the impact on our climate protection target. If, for technical or economic reasons, our carbon management activities cannot stabilize emissions at the 2018 level, we will also consider taking short-term external offsetting measures such as purchasing certificates.

Most of our greenhouse gas emissions are from the consumption of energy. At sites with internal supply capabilities, we primarily rely on highly efficient combined heat and power plants with gas and steam turbines, and on the use of heat released by production processes. Furthermore, we are committed to energy management that helps us analyze and further improve the energy efficiency of our plants on an ongoing basis. We continuously analyze potential risks to our business operations arising in connection with the topics of energy and climate protection and derive appropriate measures.

We offer our customers solutions that help prevent greenhouse gas emissions and improve energy and resource efficiency. More than 40% of our annual research and development spending² goes toward developing these products and optimizing our processes, as well as toward research projects to make our processes more energy and resource-efficient and to prevent greenhouse gas emissions.

We participate in the program established by the international nonprofit organization CDP for reporting on data relevant to climate protection and have done so since since 2004. BASF achieved a score of A– in CDP’s 2020 climate change questionnaire, again attaining Leadership status. Companies on the Leadership level are distinguished by factors such as the completeness and transparency of their reporting. They also pursue comprehensive approaches in managing the opportunities and risks associated with climate change as well as strategies to achieve company-wide emission reduction goals.

Climate protection is a shared global task. This is why we support various international initiatives and are involved in partnerships. For instance, we are committed to an ambitious climate policy as part of the Business 20 (B20) – the central dialog platform between business and politics in the G20 group of countries. In 2020, we helped draft climate protection recommendations for the G20 Summit in Saudi Arabia as a member of the B20’s taskforce on Energy, Sustainability & Climate. BASF also supports the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In 2020, we contributed to the TCFD report on climate-related scenario analyses as a member of a TCFD advisory group. Since the 2019 reporting year, BASF’s annual report has included an overview showing the sections and subsections in which TCFD-relevant information can be found.

Schematic overview: development of the BASF Group’s greenhouse gas emissions (Scope 1 and 2)

Million metric tons of CO₂ equivalents

Global target and measures

We want to achieve CO₂-neutral growth until 2030. In other words, we aim to maintain total greenhouse gas emissions from our production sites (excluding emissions from sale of energy to third parties) and our energy purchases at the 2018 level (21.9 million metric tons of CO₂ equivalents) while increasing production. In 2020, the emissions reported under this target amounted to 20.8 million metric tons of CO₂ equivalents, an increase of 3.5% compared with the previous year (2019: 20.1 million metric tons of CO₂ equivalents). The decline in emissions due to measures to increase energy efficiency and optimize processes as well as lower production volumes were more than offset by the integration of the polyamide business acquired from Solvay in January 2020 and the fact that there were fewer shutdowns of large-scale, emission-intensive plants.

Despite the global economic recovery and growing demand for chemical products, CO₂ emissions are expected to be at the prior-year level in 2021. We will implement targeted measures to stabilize emission levels. These include the implementation of further projects to increase energy efficiency and optimize processes, for example, to significantly reduce nitrous oxide emissions in Ludwigshafen, Germany. In addition, we are switching energy supply agreements to renewable energy sources, for example, in Freeport, Texas, where we have signed long-term supply agreements for wind power. Emissions will also be reduced by the divestiture of BASF’s global pigments business in 2021.

Specific greenhouse gas emissions in 2020 amounted to 0.639 metric tons of CO₂ equivalents per metric ton of sales product,³ an increase of 11.3% compared with the previous year (2019: 0.574 metric tons of CO₂ equivalents per metric ton of sales product). This was mainly due to changes in BASF’s portfolio from the acquisition of the carbon-intensive polyamide business from Solvay and the sale of the less carbon-intensive construction chemicals business. In addition, some plants could not be run at optimal capacity due to weaker demand as a consequence of the coronavirus pandemic, which led to higher specific emissions. Since 1990, we have been able to lower our overall greenhouse gas emissions from BASF operations by 48.1% and even reduce specific emissions by 72.1%.

Energy supply of the BASF Group 2020

Specific greenhouse gas emissions from BASF operations

Metric tons of CO₂ equivalents per metric ton of sales product³

We achieved our goal of introducing certified energy management systems according to DIN EN ISO 50001 at all relevant production sites⁴ by the end of 2020.

Through the introduction and ongoing maintenance of certified energy management systems, we want to identify and implement further potential for improvement in energy efficiency. This not only reduces greenhouse gas emissions and saves valuable energy resources, but also increases our competitiveness.

A global working group is responsible for steering the introduction of certified energy management systems and providing ongoing implementation support. All energy efficiency measures are recorded in a global database, analyzed and made available to BASF sites as best practices. We are currently pursuing more than 200 technical and organizational measures to reduce energy consumption and increase competitiveness. Further sites across all regions were certified in accordance with ISO 50001 in 2020. These include four sites in the United States, three sites in China, and one additional site each in France and Chile. At the end of 2020, 81 sites were certified worldwide, representing 91% of our primary energy demand.

Certified energy management systems (ISO 50001) at BASF Group sites worldwide, in terms of primary energy demand^a

%

Energy supply and efficiency

• Internal supply and Verbund system as important components of our energy efficiency strategy

To generate our own steam and power, we mainly use natural gas (82.7%) and what are known as substitute fuels (14.9%). These are residues from chemical production plants that can no longer be reused. We cover more than 70% of the BASF Group’s electricity demand with gas and steam turbine plants in highly efficient combined heat and power plants. Compared with separate methods of generating steam and electricity, we saved 12.0 million MWh of fossil fuels and avoided 2.4 million metric tons of carbon emissions in 2020. In 2020, internally generated power in the BASF Group had a carbon footprint of around 0.24 metric tons of CO₂ per MWh of electricity and was below the national grid factor at most BASF Group locations. The figure for purchased electricity in 2020 was around 0.41 metric tons of CO₂ per MWh (market-based approach). As part of our carbon management, we therefore initially aim to reduce the carbon footprint of purchased electricity.

The Verbund system is an important component of our energy efficiency strategy: Waste heat from one plant’s production process is used as energy in other plants. In this way, the Verbund saved us around 18.7 million MWh in 2020, which translates to 3.8 million metric tons less CO₂ released into the environment. With combined power and steam generation as well as our optimized Energy Verbund, we were thus able to avoid a total of 6.2 million metric tons of carbon emissions in 2020.

We further improved energy and resource consumption in production with numerous projects around the world in 2020. In China, for example, we reduced our steam demand by optimizing steam traps at the Caojing site and installing a steam cooler at the Nanjing site. In the United States, we saved electricity by replacing a cooling tower at the Geismar site and modernizing a chilling unit in Freeport, among other measures. Process improvements at many other sites led to additional savings in steam, electricity and fuel.

We also rely on locally available sources to supply our sites with power. We generally consider the use of renewable energies in our decision-making processes, especially when purchasing electricity. Our research also helps to increase the efficiency of technologies for using renewable energy sources.

Carbon footprint and climate protection products

• Reporting on greenhouse gas emissions along the entire value chain
• Customers’ use of BASF climate protection products avoids greenhouse gas emissions
• Calculation of product carbon footprints to increase transparency for our customers

BASF has published a comprehensive corporate carbon footprint every year since 2008. This reports on all emissions along the value chain – from raw materials extraction to production and disposal. It also shows, on the basis of selected climate protection products, the emissions avoided through the use of these products.

The greenhouse gas emissions arising before and after BASF’s activities in the value chain (Scope 3 in accordance with the Greenhouse Gas Protocol) amounted to around 92 million metric tons of CO₂ equivalents in 2020 (2019: 100 million metric tons of CO₂ equivalents). In 2020, BASF implemented a new digital application to calculate transport-related emissions, which evaluated around 68 billion metric ton kilometers for transport within BASF and to BASF customers by distance and transportation mode.

Our climate protection products offer our customers solutions to avoid greenhouse gas emissions over their entire life cycle compared with reference products. The systematic analysis we conduct on our portfolio – Sustainable Solution Steering – rates the use of these Accelerator solutions as particularly good with respect to climate protection and energy.

Greenhouse gas emissions along the BASF value chain in 2020^{a, b}

Million metric tons of CO₂ equivalents

One example of Accelerator products are our lubricant additives, which give hydraulic fluids long-term lubrication stability combined with wear and corrosion protection. These can be used to design high-quality products with a longer service life. Together with our customer Fuchs Petrolub, we examined the environmental and climate friendliness of different hydraulic fluids. A joint eco-efficiency analysis analyzed three mineral oil-based fluids from Fuchs over their entire life cycle, including over 8,000 hours of use in a crawler excavator.

This showed that a standard hydraulic fluid has the lowest carbon footprint during the production stage. BASF uses more energy to produce the lubricant additives needed for high-performance hydraulic fluids, which means that these have higher carbon emissions. However, these products offer a significant advantage during the use phase: Compared with a standard hydraulic fluid, these reduce friction and increase pump efficiency, which significantly reduces the excavator’s fuel consumption. They save 9,600 liters of diesel over 8,000 hours of crawler excavator operation. Viewed over the entire life cycle, the high-performance hydraulic fluids therefore have a much better carbon footprint than standard hydraulic fluids. Overall, the reduction in greenhouse gases corresponds to around 30 metric tons of CO₂ equivalents. In addition, high-performance hydraulic fluids have a much longer service life, which also saves fossil resources.

The findings of the study show that the advantages of high-performance oils first become clear in a holistic cradle-to-grave assessment that also considers the use phase. The product-related greenhouse gases emitted from resource extraction to the production of precursors and the BASF product (cradle to gate) are an important part of this approach.

In the future, we will calculate cradle-to-gate greenhouse gas emissions for almost all of our products to increase carbon transparency for our customers. We use an in-house digital solution to calculate the product carbon footprint (PCF). The methodology follows general standards for life cycle analysis such as ISO 14044 and ISO 14067, as well as the Greenhouse Gas Protocol Product Standard. We used the new method to calculate PCFs for the first products in 2020. We want to make the data for around 45,000 sales products available by the end of 2021. The transparency this creates enables us to target our CO₂ reduction measures to those areas where our customers can later achieve the greatest value added from lower carbon emissions in the value chain.