What started out as a business venture by a Glasgow scientist 170 years ago has erupted to become one of Scotland’s most important industries – a sector that remains key to economic growth over the coming decades.

Dr James ‘Paraffin’ Young opened the world’s first oil works in Bathgate in 1851, producing oil from shale or coal.

A coalition of companies, Scottish Oils, which later became part of BP moved its base to Grangemouth in 1924 – before petrochemical plants were commissioned in 1951, the first in Europe.

Today, the Grangemouth industrial cluster spouts out around one third of the total carbon emissions from Scottish companies – which is now causing a migraine for ministers drawing up plans to transform the nation's economy into a carbon net zero mantra.

HeraldScotland: Progress made in cutting emissions from 1990 to 2018Progress made in cutting emissions from 1990 to 2018

Concerns have been raised that because the industries operate in an international market, pricing out the Grangemouth hub with environmental restrictions before its competitors are compelled to follow suit could spell disaster for Scotland’s economy.

Figures from Sepa show that five Ineos sites at Grangemouth released 3.2 million tonnes of carbon dioxide into the atmosphere in 2019 – more than double than any other company.

The operation has an annual turnover of £1.2 billion – supports 900 direct employees and around 5,000 indirect workers through supply chains and service providers. Around 30% of Scotland’s GDP flows through Grangemouth port.

Before the pandemic, exported chemicals contributed £2.5 billion to Scotland’s economy.

Ineos’s operation at Grangemouth is home to Scotland’s only crude oil refinery and produces the majority to fuels used across the country.

Products manufactured at Grangemouth include chemicals used to make plastics, paint, car fuel tanks and adhesives as well as plastic food film and plastic bottles including for milk and shampoo – while polypropylene is used in production of carpets, cabling and water pipes.

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Ineos produces around one million tonnes of chemicals and more than nine million tonnes of clean fuel at Grangemouth every year and provides aviation fuel for Glasgow, Edinburgh and Prestwick airports.

But the pollution spewed into the atmosphere at Grangemouth has meant Falkirk Council accounts for around 8% of Scotland’s total emissions despite having less than 3% of the nation’s population with the authority area emissions per capital at the highest level in Scotland.

The Scottish Government has pledged to transform the country into a net zero economy by 2045, with the use of negative emissions technologies and carbon capture and storage expected to have been scaled up enough in the next decade to contribute to cleaning up Scotland’s heavy industry.

But MSPs have also promised to cut 1990 levels of carbon emissions by a whopping 75% by 2030. It took 30 years for Scotland’s emissions to be cut in half – from 1990 to the present day.

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Ministers want Scotland’s industrial sector to cut its emissions by 32% of 2018 levels, while ensuring that “Scottish industry remains globally sustainable and competitive”.

Some of Grangemouth’s operations can be decarbonised through electrification, as long as the energy is generated from renewable sources.

But very heavy, high heat processes, used in the petrochemicals industry can only be transformed at Grangemouth by “fuel switching” by shifting from natural gas to blue and eventually green hydrogen.

Blue hydrogen can be produced in bulk through steam natural gas reforming, with the carbon from the gas captured and stored.

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Green hydrogen uses electrolysis to split water into hydrogen and oxygen, but the technology has not yet been scaled up for widescale use.

But ministers are not keen to rock the boat with the industry – fearing multi-national companies could quit Scotland for cheaper operations overseas, which would be a disaster for the country’s economy.

Sasha Maguire, a Scottish Government senior economic adviser said that “there are risks to the industrial sector if it becomes less competitive on a cost basis and that Scottish industries would become less competitive if they were required to decarbonise at a faster pace than their competitors”.

HeraldScotland: The change in emissions, including industry, from 1990The change in emissions, including industry, from 1990

That worry is shared by the Chemical Industries Association, which has warned “there's no business case” for decarbonising anytime soon, “because we compete in an international market”.

Rich Woolley, head of energy and climate change at the Chemical Industries Association, told The Herald that “our industry primarily uses heat to drive chemical reactions and, in the UK, that heat is currently sourced from natural gas”.

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He added: “This energy use can be decarbonised by switching to electric-powered or hydrogen-fired heating equipment. Alternatively, depending on the site, it may be more appropriate to continue using natural gas, but to capture the combustion emissions at the end of the chimney.”

Environmentalists have raised concerns about the reliance on carbon capture and storage as a solution – pointing to the technology being only around 90% effective and only one industrial Scottish project, the Neccus site, being brought forward so far.

Scottish Carbon Capture and Storage, a research partnership including the British Geological Survey and six Scottish universities, has also warned that the Scottish Government “will fail to deliver the infrastructure needed for net zero emissions in Scotland”.

The organisation added: “At a minimum, Scotland will need on- and offshore CO2 pipelines, between the Central Belt and the North East and out to the offshore storage sites, as well as potential upgrades to port and harbour facilities to enable the transport of CO2 by ship for storage in Scottish sites.”

But Mr Woolley insists that “the technology in all cases is proven”.

He added: “The challenge with these routes to decarbonisation is that they cost significantly more, making the economics unviable for now.

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“This is because chemical manufacturers compete in global markets on price, so first-movers cannot pass through the cost to the end consumer.

“We need policies which foster demand for low-carbon industrial goods, so UK assets can make a business case for low-carbon manufacturing.”

Dr David Comerford from the Fraser of Allander Institute believes “such tough climate rules should be coming on a global basis”.

He has warned that if there is a “staggered cross-country implementation” of decarbonisation rules, there is a risk “early adopters put their firms out of business, leaving the remaining firms able to increase prices and absorb extra costs”.

Alternatively, Dr Comerford has suggested that it could lead to a position where “early adopters make requisite investments that put them at a competitive advantage”.

Dr Comerford says there are “great opportunities” for the Grangemouth operation to transform into more sustainable models – pointing to blue hydrogen, ammonia and fertilizer manufacture using green energy, biogas and direct air capture of carbon dioxide.

He added: “Grangemouth’s proximity and links, the Forties pipeline, to depleted gas fields in the North Sea make it an ideal industrial complex to get into the whole CCS and blue Hydrogen area. Once it’s in the blue hydrogen area, its links to customers for hydrogen would allow it to expand into green hydrogen.

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“It seems to me that there’s a host of possibilities, and what an industrial operator should want here is for governments to intervene, e.g. carbon taxes, to make these possibilities profitable compared to the old alternatives.”

Chris Stark, the Scottish Government’s former director of energy and climate change, is now the chief executive of the Committee on Climate Change, an independent body that advises UK governments on policy.

He has warned that the SNP’s plans to drastically cut emissions relies on “almost six megatonnes of negative emissions by 2032” – adding “that is right on the edge of what we think is possible”.

He added: “Starting to decarbonise Grangemouth early is one of the options, and that might elicit a further two megatonnes.

“Grangemouth does not seem very keen on that idea generally. Therefore, getting the cluster of industries at Grangemouth to engage in carbon capture as an issue and then, in time, achieving negative emissions seems like an uphill task.”

Environment and Climate Change Secretary, Roseanna Cunningham, has explained the complexities of relying on future technologies, warning that “no-one has all the answers at this stage” adding that ministers are “committed to taking a ‘learning by doing’ iterative approach”.

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She added: “Unavoidably, the plan update is published against a backdrop of considerable uncertainty such as the pace of technological development.

“We expect technological change to unlock more and faster opportunities for decarbonising challenging areas and we are committed to monitoring these and amending our actions accordingly."

“We are confident that the plan update provides a credible pathway to meeting our targets. It sends a clear statement of intent, provides greater certainty for all parts of society, including other public bodies and businesses, to contribute further to delivery of our targets and is a clear call to action ahead of the next full climate change plan.”

HeraldScotland: petrochemicals company Ineos has a base at Grangemouthpetrochemicals company Ineos has a base at Grangemouth

An Ineos spokesman said: "Carbon dioxide emissions are closely linked to the amount of energy required for the conversion of raw materials to useful products to take place. We continue to look at ways in which this can be made to be more efficient, including further energy improvement and CO2 reductions that will ensure the long term viable future and global competitiveness of the site.

"We do our utmost to do this as efficiently and environmentally responsibly as possible – because this is how we will remain in business.

"If our products are no longer made in Scotland, then they will be manufactured elsewhere and transported back to Scotland, adding significantly to the global emissions per tonne of product needed by Scottish manufacturing."