Chemicals giant BASF, spurred on by customers, allocates up to $4.7 billion for CO2 cuts

BASF, the world’s largest chemicals producer by sales, pledged on Friday to spend up to 4 billion euros ($4.7 billion) to slash greenhouse gas emissions by a quarter by 2030.

Chief Executive Martin Brudermueller said BASF faced growing pressure from carmakers and other big customers to cut emissions and the spending plan included a goal to become carbon neutral by 2050.

The results would give the German company a competitive edge, Brudermueller said, but the emissions goal also posed a challenge, given the group’s unchanged commercial ambitions to grow faster than the market.

The new goal to cut CO2 relative to 2018 levels replaces a commitment Brudermueller made in 2018, shortly after taking office, to keep emissions constant until 2030 despite output growth. BASF had previously not publicly assigned an investment budget to those efforts.

The plan to be net-zero by 2050 draws BASF level with promises made over the last two years by rivals such as Dow Inc and DuPont, who aligned themselves with a key pillar of the 2015 Paris climate accord.

Brudermueller told Reuters he was initially hesitant about the 2050 goal. “I’m really not that interested in the last few steps of the way but much more in the first steps… Our focus is on what we do by 2030.”

But recent technology advances and pressure from industrial customers such as auto makers or consumer goods giants have tipped the balance, he said.

“I’m receiving letter after letter from our customers, saying by this or that deadline we need your products to be CO2-neutral… Market pressure is building and investor pressure along with that,” Brudermueller said in an interview.

BASF makes catalytic converters, insulation foams, coatings, vitamins and engineering plastics, among other products.

The main thrust of the climate investments, up to 1 billion euros by 2025 and another 2 billion-3 billion by 2030, will be replacing fossil fuel with renewable electricity for the company’s vast energy needs, which will likely inflate electricity consumption three to four times.

That compares with 3.1 billion euros that BASF spent on plants, equipment and other long-term assets overall in 2020 and 3.6 billion earmarked for this year, driven by the construction of a new chemical complex in China and as it seeks to become a major supplier of battery chemicals.

Brudermueller said climate change was the biggest challenge of the century but being able to offer CO2-free plastics and chemicals also gave a competitive edge, provided that consumers and society at large are prepared to pay a premium for that feature.

BASF’s 2018 greenhouse gas emissions were 21.9 million tonnes of CO2 equivalents.

The CEO said he also needs lawmakers’ support for the drive towards becoming carbon neutral, for instance urging Germany to end a scheme known as EEG that puts a surcharge on all electricity use, not just based on fossil fuel, to fund solar and wind power.

Brudermueller said the push was close to his heart but also existential for the group. “Does this company find a way into a CO2-free future or not? If not, would you invest your money in it? Probably not.”