Title : Market-based insetting mechanisms for accelerating the chemical sector decarbonisation
Abstract:
The chemical sector contributes over 7% of global GHG emissions, with emissions heavily concentrated in Scope 3, presenting a formidable barrier to achieving net-zero targets. This work introduces an innovative book-and-claim (B&C) insetting market model—anchored in traceable Environmental Attribute Certificates (EACs)—designed to retain climate value within supply chains. Through the collaboration of engineers, economists, chemists, policymakers, and investors, our model operationalizes upstream emissions abatement (e.g., green feedstocks, CCS) as tradable low-carbon chemical attributes, enabling downstream actors across FMCG, automotive, apparel, and electronics to transparently claim and monetise their Scope 3 reductions.
Our roadmap outlines a phased digital architecture evolving from internal tools (2026–2027), to federated platforms (2027–2029), culminating in AI-enabled, smart contract orchestration post 2030. A dynamic activation approach supports concurrent validation, market formation, and system integration, each with tailored enablers and maturity metrics.
Economic analysis identifies a rapidly scalable market—potentially US $20 billion by 2035, with EAC prices between $56–240 tCO₂⁻¹, and downstream entities (e.g. plastics producers) achieving footprint reductions of ~40%. Importantly, EAC pricing exceeds marginal abatement costs, ensuring commercial viability, and supports durable premium positioning for low-carbon products.
Crucial enablers include development of interoperable digital registries, automated MRV systems, investment architectures, governance frameworks, and regulatory alignment with EU and international policies. These ensure integrity, transparency, and trust in the emerging market.
This model transforms abstract sustainability goals into actionable, investable mechanisms for systematically decarbonising hard-to-abate chemical value chains. It offers a replicable blueprint for market-driven transitions in other sectors, realigning economic incentives with environmental accountability.
