By Wu Ching-fang, Commonwealth Magazine

The Formosa Plastics Group, the world’s 10th-largest petrochemical company, has announced its intention of becoming carbon neutral by 2050. Considering that the conglomerate generates more than 50 million metric tons of carbon emissions a year, how does it intend to reach that goal?

The Formosa Plastics Group is one of Taiwan’s main economic arteries. Its four major subsidiaries – Formosa Petrochemical Corp., Formosa Plastics Corp., Nan Ya Plastics Corp., and Formosa Chemicals & Fibre Corp. – had a combined revenue of NT$1.7 trillion (US$58 billion) in 2021, accounting for around 10% of Taiwan’s GDP that year.

As one of the few fully vertically integrated petrochemical conglomerates in the world, Formosa Plastics provides essential support to countless industries with offerings that range from upstream refined oil products and naphtha cracking-produced raw materials to midstream plastics and downstream textile fibers.

Yet at a time of rising environmental and climate change awareness, one number stands out above any of its financial highlights: 51.83 million metric tons. That was the amount of carbon emissions generated by Formosa Plastics Group factories around the world in 2020, representing 20% of Taiwan’s total carbon emissions and coming in only second behind state-run utility Taiwan Power Co. (Taipower). The company knows that this output is untenable.

Facing pressure to tackle its carbon problem, this petrochemical giant has emerged as Taiwan’s first large enterprise to disclose a complete carbon reduction plan, in which it has pledged to achieve carbon neutrality over the next 30 years while maintaining business growth.

One of the world’s 10 biggest petrochemical companies, with manufacturing facilities in 40 locations around the world, the Formosa Plastics Group is betting on energy transition, innovative production methods, and new business models to limit its environmental footprint. To find out more about the conglomerate’s actions and challenges in combating carbon emissions and climate change, CommonWealth visited three of its facilities across Taiwan.

Mailiao: From coal to gas

The Formosa Plastics Group founders, brothers Wang Yung-ching and Wang Yung-tsai, built Asia’s biggest petrochemical facility, the Sixth Naphtha Cracker Complex, on reclaimed land off the coast of Mailiao in Yunlin County more than three decades ago. The 2,000-hectare, NT$900 billion installation includes an industrial port, a coal-fired power plant, and more than 50 factories that handle everything from plastics production to upstream refining. It is a vertically integrated hub, which allows the group to maintain complete control over the supply chain and flow of raw materials.

Operations at the complex are powered by a hidden system of energy generation. When coal ships arrive at Mailiao’s port, the product is unloaded onto an enclosed conveyor belt system and transported to the complex’s coal bunker. It then is sent to either to the onsite coal-fired plant to generate power for sale to Taipower or to cogeneration plants to create the electricity and steam used by factories in the complex. The first step in the company’s carbon neutral campaign will be to overhaul this system. By 2028, the ships most commonly entering the industrial port may be LNG carriers rather than bulk coal ships.

The Mailiao power plant has three coal-fired generators totaling 1,800MW of installed capacity, but these will be taken out of service by 2025 and replaced with two 1,200MW gas-fired generators at a cost of NT$95.2 billion, a sum roughly equal to Formosa Petrochemical’s paid-in capital.

The transition to natural gas will cut the conglomerate’s generation of carbon emissions by more than 6 million metric tons in the next 10 years, accounting for more than half of its 2030 carbon reduction goal. But Formosa Petrochemical Chairman Chen Bao-lang bluntly acknowledges that natural gas is still a carbon-generating fossil fuel that can only serve as a transitional energy source, and that using it would have economic consequences.

“If Taipower does not adjust its electricity purchase price, we will definitely be selling them gas-fired electricity at a loss because natural gas is really expensive right now,” he says. “Taiwan has the fourth-lowest electricity prices in the world. We have to think about more rational pricing.”

On the cogeneration side, Chen said the company was considering using zero-emissions biofuels, such as coconut and palm shells from Southeast Asia or wood pellets from North America.

“[State-owned petroleum enterprise] CPC Taiwan Corp. and Formosa Plastics could both develop hydrogen energy, but only Formosa Plastics’ process will be fully integrated, from importing natural gas and producing hydrogen to generating power,” says Lee Chien-ming, vice president of Taiwan Research Institute, a think tank. Building a foundation for natural gas infrastructure, Lee says, will pave the way for the group’s hydrogen development.

Renwu: Testing carbon capture

In Formosa Plastics’ early days, it produced industrial alkalis, a process that generated excess chlorine. To recycle that chlorine, Wang Yung-ching decided to make plastics, and he applied for a loan backed by American economic aid to build Taiwan’s first PVC (polyvinyl chloride) factory in Kaohsiung.

Now, some 60 years later, the Formosa Plastics Group produces more than 3 million metric tons of PVC a year, making it a major global supplier of the material. The material Formosa Plastics needs to recycle now is no longer chlorine, but colorless, odorless carbon dioxide.

To address this issue, Formosa Plastics’ factory in Kaohsiung City’s Renwu district completed a pilot carbon capture plant in January 2022 in partnership with the Industrial Technology Research Institute and National Cheng Kung University. The project will collect and purify more than 30 metric tons of CO2 a year from the test project’s chimney. 

After the CO2 is captured, it has many applications. For example, it can be turned into alkanes – the most basic of petrochemical raw materials such as methane and ethane – through the process of hydrogenation, and then processed further into plastics, clothing, and other petrochemical products.

Formosa Petrochemical is also testing carbon capture at the Mailiao complex and intends to use the latest solutions developed by Lummus Technology, the American company that originally designed the naphtha cracking process used in Mailiao.

While Formosa Plastics and Formosa Petrochemical are both testing the capture of carbon directly from factory chimneys, Nan Ya Plastics’ ethylene glycol plant is giving some of the carbon generated by its production processes to downstream suppliers such as the Chang Chun Group to make acetic acid. It is also planning to convert CO2 into semiconductor and industrial-grade raw materials and hopes to be able to recycle all the CO2 it generates into usable resources by 2025.

Nan Ya: Circular business

Nan Ya, the world’s largest plastics processor, has been developing green materials for years due to the pressure imposed by its major international clients to embrace sustainability and carbon reduction.

“Behind the competition between brands is competition between supply chains on carbon reduction,” says Sunny Huang, executive director of garment manufacturing giant New Wide Group, who expects brand pressure in this area to be ramped up this year.

One key Nan Ya initiative is to recycle PET bottles. Nan Ya Chairman Wu Chia-chau said the company’s recycled PET technology is mature, and 90% of it is used to produce long-fiber functional textiles that have relatively high technical thresholds. Nan Ya recycled nearly 10 billion PET bottles last year, resulting in an 84% reduction in carbon emissions. The next step in the company’s circular economy campaign is to help big brand clients adjust their designs and materials and establish a recycling business model.

For example, Nan Ya currently collects waste materials from the contractors used by its international clients and then sorts them mechanically at its Shulin factory. To eliminate the sorting process and make materials easier to recycle, the company is working with clients such as Adidas to design and develop different clothing accessories like buttons and zippers using a single material.

Nan Ya is not the only group subsidiary collaborating closely with customers on sustainability. Formosa Plastics and Formosa Chemicals & Fibre are helping clients explore ways to create added value through the carbon cycle. Beyond its support for the big international brands, Formosa Plastics has gotten involved in such niche projects as diapers and fishing nets.

Traditional diapers use several different materials, including polyethylene for the outer waterproof layer, polypropylene (PP) for the inner non-woven fabric, and a superabsorbent polymer (SAP) liquid-absorbing material for the diaper’s middle layer. The first two are standard materials, but Formosa Plastics is the only producer of SAP in Taiwan. Because of the complexity of materials, recycling diapers is generally considered an impossible task.

Nevertheless, Formosa Plastics is giving it a shot by teaming up a diaper maker and a recycler. It has developed a PP that will be used to produce both the inner and outer layers of diapers. Yi Chun Green Technology Co., a recycling startup, will then collect these specially designed diapers when they are discarded, treat them with enzymes, and process them into recycled materials. Disposable diapers that have typically been incinerated may soon be turned into fibers, agricultural water-retaining crystals, and even water-absorbent materials covering submarine cables.   

Formosa Plastics’ sustainable diaper project could enter its next phase in Taoyuan in the first half of this year, with expectations of recycling about 4,000 diapers and cutting half a metric ton of carbon emissions per month. Meanwhile, Formosa Chemicals & Fibre, Taiwan’s biggest nylon fiber manufacturer, has chosen marine waste as its sustainability battlefield.

The company has worked with outdoor sporting goods brand Patagonia since 2019 to convert marine waste into recycled nylon through a chemical process. It currently produces about 500 metric tons of recycled nylon per month, and announced in January it would invest NT$1 billion to increase its capacity three-fold.

Formosa Chemicals & Fibre is also collaborating with King Chou Marine Technology Co., the world’s second-largest manufacturer of fishing gear. King Chou collects and disentangles discarded fishing nets and sends them to Formosa Chemicals & Fibre, which then uses them to make recycled caprolactam, a key element in the manufacture of synthetic fibers such as Nylon 6. It sells for US$2,600 per metric ton, 30% more than the original fishing net material was worth.

Long way to go

These three major initiatives – moving from coal to gas, capturing carbon, and recycling materials – are all important but will still only cut the Formosa Plastics Group’s carbon emissions by just over 10 million metric tons over the next 10 years. In the 20 years between 2030 to 2050, the group will still have to deal with the remaining annual 40 million tons. It plans to do so through the development of carbon-free hydrogen, ammonia, and biomass energy, as well as mature carbon capture, utilization, and sequestration technologies.

After the second oil crisis in the late 1970s, the petrochemical industry was branded internationally as a sunset industry, and many small and medium-sized downstream vendors went bust. At the time, CommonWealth interviewed Wang Yung-ching about the sector’s potentially bleak future, and his assessment is as applicable today as it was then.

“Saying that the petrochemical industry does not have a future is wrong,” he said. “The future is created by people. The Formosa Plastics Group is bound to find a new path forward.”

This article first appeared in CommonWealth Magazine Vol. 744 in March 2022. It has been reprinted, with editing and updating, with permission from the publisher. Translation from the original Chinese was done for CommonWealth by Luke Sabatier.