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Fossil fuel companies and countries created a deadlock in negotiations over a much-needed treaty governing their use.
About $2 trillion will have been invested in clean energy by the end of this year, according to the World Energy Outlook, published the International Energy Agency (IEA). The strong growth in clean energy indicates that global demand for each of the major fossil fuels—coal, gas, and oil—will peak by 2030. According to the IEA’s current policies scenario, coal will begin to decline around 2025, while oil and gas demand will peak toward the end of the decade.
Major oil and gas companies such ExxonMobil, Shell, and Saudi Aramco are not passively observing these declining trends. Instead, they are pivoting to safeguard their financial futures. One prominent strategy involves redirecting investments from traditional fossil fuel applications to petrochemicals and feedstock production—the raw materials for plastics products. The ongoing negotiations over the global plastics treaty—a multilateral effort under the United Nations Environment Programme (UNEP) aimed at tackling—have emerged as a key battleground.
At the fifth and supposedly final round of negotiations by the Intergovernmental Negotiating Committee held in Busan in November 2024, 220 fossil fuel and chemical industry lobbyists were registered. Taken together, they would be the largest single delegation at INC-5. While fossil fuel and petrochemical companies are legitimate stakeholders in the negotiations given the impact the plastics treaty will have on their industry, their disproportionate representation compared with other key groups such as youth, Indigenous peoples, and scientists raises concerns about undue influence. Fortunately, the world will have another opportunity to reach agreement in the first half of next year, when the U.N. will host a gathering to continue negotiations. To break free from deadlock and to secure a robust and effective plastics treaty, negotiators must navigate the resistance of oil majors and oil-producing countries—while also building consensus around capping, or even reducing overall production.
In a decarbonizing world, oil majors have seized on petrochemicals and plastics as growth areas. For instance, ExxonMobil has included petrochemical investments and projects as part of the company’s “Climate Solutions” portfolio, including the $2 billion expansion of chemical production at Baytown, Texas, which was announced in 2023. Saudi Aramco, in partnership with TotalEnergies, took a major $11 billion investment decision in 2022 for the construction of a world-scale petrochemical facility in Saudi Arabia, the Amiral complex, which will start commercial production in 2027, with a capacity of 1 million tonnes of polyethylene per year. Polyethylene is the is the most commonly produced plastic in the world, primarily used for packaging such as plastic bags, films, bottles, and containers. (Saudi Arabia’s Basic Industries Corporation is already the world’s top polyethylene supplier.)
Yet the most significant development is the surge of new petrochemical plants in China. As it accelerates its production of plastics and synthetic fibers, China is transforming global oil demand. Between 2019 and 2024, China added approximately 44 million tons of production capacity for ethylene and propylene, the two most critical petrochemical building blocks. This is equivalent to the total capacity currently present in Europe, Japan, and South Korea combined.
If stringent measures to control plastic production are implemented, these billion-dollar investments in petrochemical production will face significant risk, potentially undermining the industry’s long-term growth strategy.
Compounding matters is the fact that the growth potential of the petrochemicals sector might be overestimated. A recent analysis by Carbon Tracker Initiative found that it is unlikely that growth in petrochemical demand could prop up oil demand. For example, to balance the decline in oil demand driven by the global adoption of electric vehicles, petrochemical demand would need to grow at an annual rate of 3.9 percent until 2035.
The environmental cost of this shift is stark. Plastics derived from fossil fuels, far from being a climate solution, are a significant contributor to greenhouse gas emissions throughout their lifecycle—from production and transportation to disposal. A 2024 study by the Lawrence Berkeley National Laboratory estimates that global production of primary plastics generated about 2.24 gigatonnes of carbon dioxide equivalent in 2019, representing 5.3 percent of total global greenhouse gas emissions.
Back in 2018, the IEA identified the petrochemicals sector as an “energy blind spot”—a major area of energy demand that failed to attract the level of attention from policymakers that it deserves. Petrochemicals are projected to drive more than one-third of the growth in oil demand by 2030 and nearly half by 2050, surpassing sectors like aviation and shipping. Additionally, the petrochemical industry is expected to consume an extra 56 billion cubic meters of natural gas by 2030—roughly equivalent to half of Canada’s total gas consumption.
The pivot to petrochemicals and plastics is deeply intertwined with environmental and policy challenges, particularly in the context of global efforts to address plastic pollution. The expansion of petrochemical production of feedstocks for plastics risks undermining global environmental goals, creating a collision course with international efforts to curb pollution.
Per the mandate given by the U.N. Environment Assembly in 2022, the plastics treaty needs to tackle plastic pollution by addressing the entire lifecycle of plastics, from production to disposal. However, this comprehensive scope has become a point of contention. Oil-producing countries argue that in order to tackle pollution, the treaty should focus solely on improving waste management downstream and increasing recycling efforts, claiming that addressing actual production is unnecessary. While this is theoretically correct, the flaw in this approach lies in the fact that current waste management and recycling systems are already overwhelmed. In practice, less than 10 percent of plastics are being recycled, and 22 million metric tons of plastic waste leaks into the environment annually, according to the Organisation for Economic Co-operation and Development. The impact is disproportionately felt by countries and communities with inadequate waste management infrastructure, many of which are in the global south. These nations are among the strongest advocates for upstream measures to reduce overall plastic production, recognizing that without such interventions, the cycle of overproduction and pollution will persist unabated and the environmental crisis will worsen.
Production caps have been identified by scientists as a key mechanism to reduce plastic pollution. Modelling by researchers at the University of California Berkeley shows that a cap on global virgin plastic production at 2020 levels would yield a reduction of projected mismanaged plastic waste in 2050 from 121 down to 72 million metric tonnes. Proponents emphasize that upstream restrictions are essential to addressing the root cause of plastic pollution.
At Busan, negotiations were most contentious over Article 6 of the draft treaty, which includes provisions to set a global target to cap or reduce upstream virgin plastic feedstock production. Limiting virgin plastic production directly curtails the demand for petrochemicals derived from oil and gas, undermining the industry’s pivot strategy. Consequently, oil and petrochemical companies have lobbied heavily to oppose these provisions and emphasize a global increase in demand for plastics, especially in emerging economies. Negotiators from producer countries want Article 6 to be removed completely from the treaty text.
Oil majors have increasingly positioned themselves as advocates for chemical recycling technologies and emphasize them as a cornerstone of their sustainability efforts. However, their financial commitment to these recycling initiatives, such as advanced depolymerization and pyrolysis, is inadequate. While investments in chemical recycling technologies amount to hundreds of millions of dollars, these figures are negligible alongside the billions directed toward expanding petrochemical facilities and feedstock production. This disparity suggests that the push for plastic circularity may serve more as a public relations strategy than as a substantive shift toward reducing dependency on virgin plastics.
Several strategies can help the international community move past this deadlock in the negotiations.
The gradual implementation of restrictions on upstream production, with clear timelines and milestones, can make the transition to sustainable production levels potentially less threatening for industry stakeholders. Different options need to be explored, including time-bound global targets that can be revised once adequate infrastructure for a circular plastics economy has been established and global pollution levels have declined. A phased approach can provide industries and countries with time to adapt while maintaining momentum toward the goal of ending plastic pollution.
Addressing the subsidies for plastic polymer production could be an alternative to caps or reduction of petrochemical plastic feedstocks. According to an analysis by the Quaker United Nations Office and the consultancy Eunomia, subsidies are estimated to have reached $43 billion in 2024 and to rise to $78 billion in 2050 globally. Saudi Arabia accounts for the vast majority of these—$38 billion in 2024 and an estimated $64 billion in 2050. Removal of these subsidies would reduce Saudi Arabia’s polymer feedstock production by 2.8 million tonnes in 2050.
For national policymakers, it is becoming increasingly important to integrate climate and plastic policies. Aligning the plastics treaty obligations with international climate agreements such as the Paris Climate Accord will strengthen the case for upstream measures. Also, highlighting the climate benefits of reducing virgin plastic production can build broader political support for Article 6 and for allowing the treaty scope to cover the full lifecycle of plastics.
Oil majors will also need to start paying more attention to their investors. For example, a recent Petrochemical Investor Statement, signed by 80 institutions representing $7.3 trillion in assets under management, sets out a number of expectations for producers, including transparency in plastic production and setting sustainability targets. Furthermore, it supports an ambitious international, legally binding instrument. The growing demand for sustainable products and responsible corporate practices can provide an opportunity to influence oil majors indirectly.
The stakes in the plastics treaty negotiations are high for all parties. A strong treaty that includes binding upstream measures can be a transformative step toward addressing the twin crises of plastic pollution and climate change. Achieving this requires navigating the entrenched interests of oil majors and petrochemical companies while building a broad coalition of support among governments, civil society, investors, and progressive businesses.
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The post Big Oil’s Next Cash Cow Is Plastics appeared first on Energy News Beat.
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