Energy and Climate Protection

As an energy-intensive company, we take responsibility for the efficient use of energy and global climate protection. We are committed to the Paris Climate Agreement. Our innovative products enable a reduction in greenhouse gas emissions in many areas. At the same time, we are working to significantly reduce our own carbon footprint with our carbon management.

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

Million metric tons of CO₂ equivalents

Strategy

Climate protection is very important to us and is an important part of our corporate strategy. We significantly raised our climate protection targets in 2021: As a leading chemical company, we want to reduce total greenhouse gas emissions¹ from our production sites and our energy purchases by 25% by 2030 compared with 2018 – despite targeted growth and the construction of a large Verbund site in southern China.² By 2050, we aim to achieve net zero emissions from our production sites and our energy purchases.

We have bundled our global activities to reduce greenhouse gas emissions in our carbon management (see “Global targets and measures”). We only consider external offsetting measures as a temporary stop-gap if our activities do not make the desired contribution to reducing emissions. By 2025, we plan to invest up to €1 billion to achieve our climate protection targets. Additional investments of up to €3 billion are to follow by 2030.

Our new organizational structure aims to drive forward our climate protection targets and carbon management activities with even greater focus and speed: The Corporate Strategy & Sustainability unit in the Corporate Center will continue to develop targets and track global target achievement, while the Net Zero Accelerator unit, which was launched at the beginning of 2022, will focus on accelerating the implementation of existing and new cross-company projects to reduce emissions. The emphasis is on low-carbon production technologies, the circular economy and renewable energies. Both units report directly to the Chairman of the Board of Executive Directors. This ensures that climate protection-relevant aspects are integrated into strategic decision-making processes as well as into core business activities. In parallel, our operating divisions are working on division-specific projects to reduce emissions, supported by the global service units.

We consistently align our actions with our climate protection targets, based on a comprehensive analysis of our emissions. Group-wide CO₂ emissions are anchored in the BASF Group’s steering and compensation systems as a most important nonfinancial key performance indicator, giving them even more weight. Investments and acquisitions are assessed with regard to their impact on our climate protection targets.

We are gradually integrating our suppliers into the management of greenhouse gas emissions along the value chain. To this end, we launched our Supplier CO₂ Management Program in 2021.

We offer our customers solutions that help prevent greenhouse gas emissions and improve energy and resource efficiency. More than 60% of our annual research and development spending³ goes toward developing these products, optimizing our processes, and toward research projects to make our processes more energy and resource-efficient and to prevent greenhouse gas emissions.

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 support the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). 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. We also participate in the program established by the international nonprofit organization CDP for reporting on data relevant to climate protection and have done so since 2004. BASF achieved a score of A– in CDP’s 2021 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.

We report on greenhouse gas emissions in accordance with the Greenhouse Gas Protocol as well as the sector-specific standard for the chemical industry.

Climate protection is a shared task. This is why we support various national and international initiatives and are involved in partnerships. For instance, in 2021 we worked with Together for Sustainability (TfS), the World Business Council for Sustainable Development (WBCSD) and the World Economic Forum’s Low-Carbon Emitting Technologies Initiative (LCET) to harmonize the methodological approaches used to calculate Scope 3 emissions. This will help increase the transparency of greenhouse gas emissions along the supply chain and will provide the basis for a Scope 3 target-setting methodology for the chemical sector.

• More information on climate protection

Global targets and measures

Compared with baseline 2018, we want reduce greenhouse gas emissions from our production sites (excluding emissions from the sale of energy to third parties) and our energy purchases by 25% by 2030, i.e., from 21.9 million metric tons to 16.4 million metric tons. This corresponds to a reduction of around 60% compared with 1990. Our long-term goal is net zero greenhouse gas emissions by 2050 (Scope 1 and 2).

Energy supply of the BASF Group 2021 – Electricity supply^a

Energy supply of the BASF Group 2021 – Steam supply^a

The BASF Group’s emissions reported under these targets in 2021 amounted to 20.2 million metric tons of CO₂ equivalents (2020: 20.8 million metric tons of CO₂ equivalents). We were able to reduce emissions by around 3% year on year despite significantly higher production volumes due to the increased use of renewable energy and measures to improve energy efficiency and optimize processes. Lower ammonia production due to the high price of natural gas also reduced emissions.

To achieve our ambitious climate protection goals, we have adopted comprehensive carbon management. This has five levers to reduce greenhouse gas emissions: Using renewable energies for both electricity and steam production (gray-to-green and power-to-steam levers), developing and applying new carbon-free and low-carbon production processes (new technologies lever), using alternative raw materials (bio-based feedstocks lever), and ongoing measures to further increase energy and resource efficiency in our production (continuous opex lever).

• More information on climate protection
• See the forecast for a projection of greenhouse gas emissions in 2022

Energy supply

Our total energy consumption, comprising fuel demand in our own central power and steam generation plants, primary energy requirements in our process plants, and net power and steam imports, was 58.8 million MWh in 2021.

To generate our own steam and power, we mainly use natural gas (80.3%) and substitute fuels (17.4%). These are residues from chemical production plants that cannot be reused in the BASF Verbund. We cover more than 58% of our electricity demand with our own gas and steam turbines in highly efficient combined heat and power plants. To achieve the highest possible energy yield with the lowest possible greenhouse gas emissions, we continuously invest in our combined heat and power plants. One example is our gas and steam turbine power plant at the Schwarzheide site in Germany, which is undergoing a €73 million modernization. Once it is started up in 2022, it will produce 10% more electricity and the CO₂ emissions factor of the power generated will be around 10% lower thanks to higher fuel efficiency.

Compared with separate methods of generating steam and electricity, we saved 15.0 million MWh of fossil fuels and avoided 3.0 million metric tons of carbon emissions in 2021. In 2021, 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.

Another important component of carbon-optimized energy supply at our sites is the Verbund system. It helps us realize synergies and manage value chains in a resource-efficient way. For example, waste heat from one plant’s production process is used as energy in other plants. The Verbund saved us around 21.4 million MWh in 2021, which translates to 4.3 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 7.3 million metric tons of carbon emissions in 2021. That is why we will continue to invest in the creation and optimization of Verbund structures and drive forward the consolidation of production at highly efficient sites.

A central component of reducing greenhouse gas emissions as part of our carbon management is gradually shifting our energy supply to renewable sources. This applies to both our electricity and steam supply and our production processes, where we will increasingly replace fossil fuels with energy from renewable sources. The electrification of our processes will significantly increase the BASF Group’s green power demand over the coming years.

To ensure access to energy from renewable sources, we are pursuing a make and buy approach. Firstly, BASF is investing in its own renewable power assets, particularly offshore wind farms. Secondly, BASF will purchase green power on the market through long-term supply agreements with plant operators, green power agreements or renewable energy certificates, depending on the region and market regulations. A key purchasing criterion is the “additionality” of the energy purchased. This means that power is primarily generated by new wind and solar farms.

In 2021, we entered into pioneering cooperative agreements to transform our energy supply. For instance, we currently hold a 49.5% share in Vattenfall’s Hollandse Kust Zuid (HKZ) offshore wind farm. Pending approval of the relevant merger control authorities, we plan to sell shares in HKZ to Allianz Capital Partners in the first quarter of 2022. This will reduce our interest to 24.3%. The originally agreed power purchase volumes remain unaffected by the transaction on the basis of a long-term fixed-price power purchasing agreement. Once fully operational, expected in 2023, HKZ will have a total capacity of 1.5 gigawatts. We will use part of the electricity generated there at the Verbund site in Antwerp and at other European production sites. Under a letter of intent, together with RWE we are developing a project concept for an offshore wind farm in the German North Sea with a capacity of 2 gigawatts. Provided the regulatory framework is adapted by the authorities, this wind farm could supply the Verbund site in Ludwigshafen, Germany, with green electricity before 2030. Together with enviaM, we are also planning to build and operate a solar park with a total installed capacity of 24 megawatts peak (MWp) to supply the Schwarzheide site in Germany.

In addition to these cooperative ventures, in 2021 we concluded further long-term supply agreements for green power. In Europe, these include a power purchase agreement for wind energy with the Engie group (volume: up to 20.7 TWh / term: 25 years) and an offshore wind power purchase agreement with Ørsted (installed capacity: 186 MW / term: 25 years). We will procure energy for our new Verbund site in Zhanjiang, China, from a wind and solar park with a capacity of 400 megawatts. Further long-term supply agreements for wind and solar power were concluded in the United States for the Freeport and Pasadena sites (both in Texas).

In addition, we have converted existing agreements to green power and have acquired renewable energy certificates in a number of regions. The aim is to gradually replace these temporary measures with our own power assets or long-term supply agreements.

In total, over 88 sites worldwide (2020: 19) were already partially or fully powered by emission-free electricity at the end of 2021. The carbon footprint of purchased electricity in 2021 was around 0.21 metric tons of CO₂/MWh (market-based approach), significantly lower than in the previous year (0.41 metric tons CO₂/MWh).

Specific greenhouse gas emissions and energy efficiency

Energy use and greenhouse gas emissions are closely linked to capacity utilization and production volumes at our plants. Specific greenhouse gas emissions in 2021 amounted to 0.564 metric tons of CO₂ equivalents per metric ton of sales product,⁴ a decrease of 11.7% compared with the previous year (2020: 0.639 metric tons of CO₂ equivalents per metric ton of sales product). This was mainly due to higher demand compared with the previous year and consequently, better and more stable capacity utilization at our plants. In addition, the increased use of renewable energy had a positive impact on specific greenhouse gas emissions. Since 1990, we have been able to lower our overall greenhouse gas emissions from BASF operations by 49.7% and even reduce specific emissions by 75.4%.

As part of our carbon management, we aim to make our plants and processes even more efficient and resource saving. An important component of this is the introduction and ongoing maintenance of certified energy management systems according to DIN EN ISO 50001 at all relevant production sites.⁵ These help us 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. In 2021, 76 production sites worldwide had certified energy management systems, representing 90% of our primary energy demand.

A global working group provides ongoing support to the sites and Group companies in implementing and maintaining certified energy management systems. All energy efficiency measures are recorded in a global database, analyzed and made available to BASF sites as best practices.

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

%

We are currently pursuing more than 250 technical and organizational measures to reduce energy consumption and increase competitiveness. Our employees are an important source of optimization ideas in this regard. For instance, suggestions for improvement submitted by our employees in 2021 enabled us to avoid around 12,000 metric tons of CO₂ at the Ludwigshafen site in Germany alone.

We further improved energy and resource consumption in production with numerous projects around the world in 2021. At the Ludwigshafen site in Germany, for example, a multi-stage evaporation system set up at one plant saves over 60,000 metric tons of steam per year. At another plant, additional heat integration made it possible to supply other users with higher-pressure steam, reducing fuel consumption on the power plant side. At the Shanghai-Caojing site in China, a modernized control concept reduced the fuel demand of a heat recovery unit, and at another plant, steam demand was reduced by additional heat integration using a cooler. At the Geismar Verbund site in Louisiana, steam demand was reduced by the use of optimized condensate separators. In total, these measures save more than 23,000 metric tons of CO₂ annually. We also achieved additional savings in steam, electricity and fuel through process improvements at many other sites.

Carbon footprint, product carbon footprint and climate protection products

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.

The Scope 3 greenhouse gas emissions arising before and after BASF’s activities in the value chain (in accordance with the Greenhouse Gas Protocol’s definition) were determined as around 101 million metric tons of CO₂ equivalents for 2021 (2020: 92 million metric tons of CO₂ equivalents).⁶ We are continually working to reduce greenhouse gas emissions from our business activities – in our own production and, together with our partners, along the value chain.

BASF was able to reduce emissions in the Scope 3 category “customers” by 2 million metric tons in 2021, primarily through the use of new blowing agents in polyurethane (PU) foams. Until now, the main blowing agents used were hydrofluorocarbons. These are used in the production of PU insulation materials to create foams with excellent insulation properties. The use of these hydrofluorocarbons in PU products will be prohibited in the European Union from 2023 due to their high climate impact. We are therefore gradually replacing them with hydrofluoroolefins, which have a much lower climate impact (measured by global warming potential, GWP). BASF began rolling out PU spray foams based on this new generation of blowing agents on the European market back in 2017. By the end of 2021, we will have almost completely converted our European PU spray foam production and will continue to systematically drive this forward in other regions as well.

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.

We calculate carbon footprints for around 45,000 sales products to increase carbon transparency for our customers (see box below). These Product Carbon Footprints (PCF) include all product-related greenhouse gas emissions generated until a BASF product leaves the factory gates (“cradle-to-gate”).

The extraction of the raw materials we require and the production of purchased precursors account for the largest share of the PCF. We currently use industrial averages and values from commercial databases as the basis for calculating these upstream emissions.

In 2021, we introduced a global Supplier CO₂ Management Program to create transparency and better steer and, in the long term, reduce upstream emissions. In a first step, we ask our suppliers to provide PCFs for our raw materials. We support them by sharing our knowledge of evaluation and calculation methods. In this way, we are also contributing to the standardization of PCF calculation. In a second step, we want to work with our suppliers on solutions to reduce product-related emissions and establish the PCF as a criterion for our purchasing decisions.

• More information on our emissions reporting
• More information on Product Carbon Footprints

Scope 3 emissions along the BASF value chain in 2021^a

Million metric tons CO₂ equivalents

Good to know

Product Carbon Footprint

We use an in-house digital solution to calculate the carbon footprint of our products (PCF). In 2021, this was recognized by organizations such as the German chemical industry association (VCI) with the Responsible Care Award for digitalization. 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, and has been certified by TÜV Rheinland.

We used the new method to calculate PCFs for around 45,000 sales products in 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. In 2021, we were able to offer the first products with a certified reduced carbon footprint through the use of renewable energy.

We also started to make the automated PCF calculation approach available to interested industry players by way of partnerships. In a first step, IT companies will be able to translate BASF’s methodology and in-house solution into a marketable software through licensing agreements.