It's our pleasure to present BASF's Circular Economy Program to you. Today's keynote and the subsequent Q&A are being live-streamed. A replay will be available later tonight. One further remark, today's presentation contains forward-looking statements that may not prove to be accurate. We do not assume any obligation to update these forward-looking statements above and beyond the legal requirements. With this, I give the floor to Martin Brudermüller, CEO and CTO of BASF.
Ladies and gentlemen, a warm welcome to this year's R&D webcast. I hope you will share my excitement for research in today's digital format. Research touches and improves all aspects of everyday life. That's also why I brought along a few everyday items. Actually, a soap and a detergent bottle. These show how we all consume resources and produce waste every day. It is possible to do things differently, because all these items were actually made with recycled plastics. This is exactly what our talking points are today about the circular economy. How can we keep raw materials circulating? How can we avoid waste and conserve resources and protect our environment? How can we ensure that this is also economically viable? With the circular economy, we decouple economic growth from resource consumption. In some ways, we have been doing that for a long time.
Our Verbund is a good example of this. In many areas of the chemical industry, however, production is still designed along linear value chains. The path to a circular economy will require enormous efforts on our part. This is not the only challenge. In parallel, we are pursuing an energy transformation towards carbon neutrality. Ultimately, this means a carbon-neutral circular economy. I'm convinced that this is the way in the future. Our success in this area will have a direct effect on our future profitability and competitiveness. With the European Green Deal in the EU, it aims to become carbon neutral by 2050. In our previous R&D webcast in January 2019, I talked about how BASF wants to contribute to this goal with its carbon management program.
The circular economy is another pillar of the European Green Deal and a key issue of the future in society and in politics. Transitioning towards a circular economy will help to address our global resource and emission challenges. The European chemical industry sees itself at the center of this transformation. As European Commission President Ursula von der Leyen put it, the Green Deal is Europe's man on the moon moment. We are developing technologies to make this a success. At BASF, we have long been conducting research on innovations to close material loops. We are currently pursuing more than 20 circular economy projects. The transformation to a circular economy affects all of our customer industries. To drive forward the exceptionally ambitious transformation of our company, BASF has launched a circular economy program. As part of this, we have set ourselves ambitious goals.
BASF has committed to processing around 250,000 metric tons of recycled raw material each year by 2025. We will increase our sales with circular solutions to EUR 17 billion by 2030. This is double the current figure. Sales of circular solutions include products that are based on renewable or recycled raw materials, close new material cycles, or increase the resource efficiency and durability of products. To achieve these goals and close as many loops as possible, we are concentrating on three action items. First, new feedstock, second, new material cycles, and third, new business models. New feedstock means we will continuously increase our share of recycled and renewable raw materials. New material cycles means that we will also need to consider recycling at the design stage for new materials. We are working on new product-specific material cycles.
Last but not least, we are developing new business models in which digitalization helps to conserve resources. One good example of this is smart farming with digital tools. In today's R&D webcast, we will introduce some of our solutions for the first two action areas, new feedstocks and new material cycles. Let's begin with the feedstocks for our production Verbund. Today, only 1/3 of all plastic waste is mechanically recycled in Europe. Globally, it is even less, only 20%. The share of plastic waste that is sent to landfill or even ends up polluting the environment is a shocking 60% globally. Chemical recycling does not play a noticeable role yet. It only accounts for 0.1% in Europe and even less globally.
Due to the ever-growing volumes of plastic waste, and given that plastics are a valuable resource, we must strive to keep as much as possible in the material cycle. How can we do this? Let's take a look at the plastics value chain. Plastics are mainly produced from fossil raw materials such as naphtha. Naphtha is fed into a steam cracker, which produces olefins and aromatics that are then processed into polymers such as polystyrene, polyamide, or polyethylene. These plastics have many advantages and are suited to a wide range of applications. However, at the end of their service life, they become plastic waste. In Europe, 2/3 of this plastic waste does not re-enter the value chain, and this is where our ChemCycling project can make a difference. Chemical recycling can significantly increase the overall recycling rate. It perfectly complements mechanical recycling.
In chemical recycling, plastic waste is pyrolyzed and converted into an oil. The polymer chains are chemically broken down into small molecules. The purified oil can be used in BASF Verbund. For example, it can be fed into a steam cracker together with fossil raw materials. The big advantage of chemical recycling. It can handle mixed and uncleaned plastic waste. These waste streams cannot be recycled mechanically and are mostly incinerated today. One example is multilayered food packaging. This has been developed to ensure that products remain fresh and prevent spoilage while reducing the weight of the packaging. The individual layers can certainly not be separated for mechanical recycling. However, it is possible to chemically recycling this type of waste. In addition, chemical recycling reduces the consumption of primary fossil resources, and this helps avoid CO2 emissions.
A life cycle assessment conducted on behalf of BASF concluded that pyrolysis of mixed plastic waste emits 50% less CO2 than incineration. This study was reviewed by three independent experts. When recycled and fossil feedstocks are used together, they are mixed, and the recycled feedstock is not traceable. However, by applying mass balance approach, it is possible to allocate the recycled feedstock to a specific customer product. The allocation is audited by a third party to ensure that this has been calculated properly. This concept is widely accepted, and it is also used, for example, for the products like green electricity. There is no separate grid for green electrons either. In the chemical industry, however, this is a new approach, and it is essential for the circular economy. Together with BASF's ChemCycling products, customers buy certificates that guarantee a certain share of recycled material in the production Verbund.
This concept has huge benefit for our customers because it is a drop-in solution. The ChemCycling products are indistinguishable from those manufactured from primary fossil feedstock. They are virgin grade and suitable for use in all kinds of high-performance applications. Another aspect of sustainability is that existing plants can be used for this transformation. The regulatory framework will determine at the end whether the technology will become established in the waste industry. Authorities need to more widely adopt a technology-neutral definition of recycling. This would allow chemically recycled raw materials to count towards recycling targets, just as mechanically recycled raw materials already do. We want to rapidly implement chemical recycling on a large scale. To achieve this, BASF is working with partners such as the Norwegian company Quantafuel, the German company Pyrum Innovations, and the Hungarian company New Energy. Why is chemical recycling not yet established?
Apart from the regulatory hurdles, this is mainly due to technological challenges. There are two main challenges here. First of all, the pyrolysis process needs to work reliably on a large scale, regardless of the composition of the plastic waste. In the scale-up, new simulation tools enabled by BASF supercomputer will help by reducing development time and the costs of reactor design and optimization. Secondly, the pyrolysis oil needs to be very clean and of consistent quality. The chemical industry has very narrow specifications for raw materials, and so smart solutions for purifying the pyrolysis oil will be crucial. Many different types of plastic are required for a wide range of applications. The different chemical compositions of the different polymers give them their useful properties. Many plastics do not just contain carbon and hydrogen, but also other atoms, such as chlorine, nitrogen, oxygen, or sulfur.
These heteroatoms are marked in orange here on the slides. In the chemical plant, they can cause corrosion, create safety risks, or poison process catalysts. That's why all the heteroatoms in the plastic waste must be removed during the pyrolysis process. Here, a BASF core competence comes into play, catalyst development. Together with Quantafuel, BASF is developing purification catalysts using our high-throughput testing laboratory at hte GmbH in Heidelberg. Why is BASF involved in chemical recycling anyway? After all, we no longer produce mass plastics for single-use applications. However, the challenge around recycling concerns us very much. BASF is practically well-positioned to make chemical recycling a reality. Firstly, thanks to our backward integration, we are able to flexibilize our raw materials. Secondly, we can leverage our Verbund. We manufacture out 45,000 sales products from only a small number of raw materials. The third component is our mass balance concept.
BASF has 10 years experience with certified mass balance approaches. Finally, we are experts in high temperature and high pressure processes, and catalyst development is one of our strengths. BASF has the knowhow to further develop and support the scaling up of this and existing pyrolysis technology. BASF started the ChemCycling project in 2018 already. In a pilot phase, we fed some batches of pyrolysis oil already in the Verbund. We manufactured a small range of prototypes with customers. For example, laundry detergent bottles, cheese packaging, refrigerator components, or insulation boxes. In October 2019, we announced a partnership with Quantafuel, including a BASF investment of EUR 20 million. Quantafuel's first commercial-scale pyrolysis plant in Skive, Denmark, is currently ramping up regular production. At the same time, we are already working on the second generation in the laboratory.
Next year, Quantafuel and BASF will start up a pilot plant in Kristiansund, Norway. In 2020, the first commercial volumes of high-performance plastics from recycled feedstocks were sold to pioneering customers. We will establish further partnership, we have done, for example, with Pyrum Innovations and with New Energy to broaden our feedstock base. We invested EUR 16 million into Pyrum to support the expansion of their pyrolysis plant and the rollout of the technology. Pyrum's pyrolysis plant can currently process up to 10,000 tons of waste tires per year. Waste tires are another completely new feedstock for the chemical industry. We will utilize most of the pyrolysis oil and process it into new chemical products. BASF and Pyrum anticipate that production capacities of up to 100,000 tons of pyrolysis oil derived from waste tires could be built up within the coming years together with additional partners.
New Energy will supply BASF with up to 4,000 metric tons of pyrolysis oil per year derived from waste tires as well. We are also working on a joint feasibility study to convert other plastic waste streams. Fossil raw materials are not the only possible feedstocks. We started introducing alternative feedstocks about 10 years ago using bio-based raw materials and the biomass balance concept. With our circular economy program, we also want to increase the volume of renewable raw materials from sustainable resources. In a wide variety of businesses, BASF has already developed products based on renewable raw materials. You can see some of the examples from all the BASF segments on this current slide. All these examples are important and valuable for our customers. However, none of them can be scaled up as efficiently as chemical recycling in combination with the mass balance concept.
I would like to introduce the second action area of our circular economy program, new material cycles. Here, we focus on product-specific recycling loops. Important examples are the mechanical recycling of plastics and the recycling of battery materials. The mechanical recycling of plastics is a success story. 50 million metric tons of used plastics are reprocessed globally, a remarkable achievement and the result of a heavy investment. Mechanical recycling has limitations. It requires clean mono-material streams. This is crucial because the chemical structure remains unchanged. It is a polymer-to-polymer process. Mechanically recycled plastics do not generally have the same quality as new plastics. This is due to impurities. The thermal and the mechanical stress during the recycling process damages the polymer chains. The performance of recycled plastics is lower and often fluctuating.
This is problematic in demanding applications where strict quality and hygiene requirements must be met, such for example as in food packaging. Despite these limitations, there is ample room for growth in mechanical recycling. The use of tailor-made additives can improve the properties of recycled plastics. BASF is developing these additive solutions to help create more value from recycled content and, in this way, increases the circularity of plastics. Together with optimized waste management and improved sorting technologies additives will play a central role in mechanical recycling, and this will allow for a higher proportion of plastics to be reused. We expect the production of plastics from mechanical recycling to almost triple by 2030, driven by improved technologies and regulation. This corresponds to a growth of around 10% per year. As the global market leader for plastic additives, we are expanding our broad portfolio.
It will include new additive solutions, specifically optimized for mechanical recycling. This allows us to participate in this growth and to become the leading supplier of plastic additives in this area as well. A very well-established mechanical recycling system is the one for PET bottles. I think you are all familiar with that one. What you might not know is that the quality of the plastic deteriorates with each recycling cycle, and the lifespan is actually limited. PET tends to yellow and to gray when it's recycled. This illustrates that mechanical recycling loops are not endless. Technical solutions are required to improve the quality of recycled plastics and to increase the number of recycling loops. Our researchers are developing additives that can specifically stabilize recycled plastics and improve their properties. If innovative stabilizers are added during the production of the recyclate, discoloration can be completely prevented.
This enables the use of recycled plastics in applications of equal or even higher value. Another major challenge is actually in mechanical recycling is purity. Sorting and separating plastics is not trivial, and it is expensive. It does not always work perfectly despite all the technical progress that was made in the past. A good example here is again, PET recycling. Who of you actually removes the bottle cap before you dispose the bottle? The cap is mainly made from polypropylene, while the bottle is made from PET. Unfortunately, most polymers do not mix well due to their different chemical composition. It is like mixing oil and water. It creates droplets. On this slide, you can see microscope images of such a sample of mixed polymers. The droplets in the upper picture are clearly visible. In plastics, they cause brittleness and poor material quality.
By adding a compatibilizer, the mixture becomes more homogeneous and more stable. This can be seen at the picture at the bottom. Compatibilizers are surface-active molecules like modern detergents. They act as an adhesive between the two domains and improve the mechanical strength of the recycled material. Compatibilizers enable higher recycling rates and improve the economics of mechanical recycling. I would like to move on to another important area of R&D for new material cycles. By the year 2030, more than seven million electric cars will be registered in Germany alone. At the same time, the raw material for producing key vehicles components are limited. Moreover, sourcing these materials often has a substantial environmental impact. At the heart of an electric car is the battery, and at the heart of the battery are the electrodes.
The anode is made from graphite, and the cathode contains the valuable metals, cobalt, nickel, and lithium. Mining 1 kg of class 1 nickel, for example, requires more than 100 kg of drinking water. Lithium even requires more than 270 kg of drinking water. Therefore, it is imperative that metals are recovered as fully as possible. BASF supports the European Commission's goal of establishing a sustainable network for batteries here in Europe. To achieve this, we urgently need solutions to recover the valuable raw materials from used batteries in an economical and an environmental sound way. In the following, I will show you how we are helping to close the loop in the battery value chain. To build up a circular economy, the used battery packs must be collected, disassembled, and processed. The resulting so-called black mass plays an important role as an intermediate product.
To create a circular economy for battery materials, the two crucial steps of collection and metal extraction must be sustainable and economically viable. After disassembling the battery packs, the battery cells are shredded and sorted. Steel, copper, and aluminum can directly be sent to recycling. The remaining black mass contains the active electrode materials, cobalt, nickel, manganese, lithium, and the graphite. The black mass also contains a range of impurities. The valuable metals have to be extracted from the black mass in chemical process steps. There are two fundamentally different approaches here, pyrometallurgy and hydrometallurgy. In pyrometallurgy, the black mass is placed in a smelter and heated to around 1,500 degrees Celsius. The battery graphite burns in the process and supplies parts of the required energy with significant CO2 emissions, certainly. The noble metal, copper, nickel, and cobalt form a rather clean alloy, which can then be separated into individual metals.
The less noble metals, including lithium, are separated with additives as a slag. It is technically possible to extract the valuable resources lithium from the slag, but only at very high cost. Hydrometallurgy works with aqueous solutions at low temperatures. Copper, nickel, cobalt, and lithium can all be recycled in this way. However, the process involves many steps, which is always capital intensive. Plus, a whole range of byproducts are formed. For example, for every ton of lithium, at least 10 tons of sodium sulfate waste are produced. This is where our research comes in. Our work is based on hydrometallurgy, but with an important innovation. We extract the lithium first. Our process consists of two steps. In the first step, we directly extract lithium from the black mass as a hydroxide, which is actually what we want because lithium hydroxide is the lithium compound used to produce battery materials.
Today, hydrometallurgy only yields lithium carbonate, which later has to be converted to the hydroxide. Our idea delivers high yield, significant cuts of costs, and avoids large amount of undesired byproducts. In the second step, nickel and cobalt can now be extracted, this second step could directly be coupled with existing metal refineries and thus saving investment costs. Overall, the new BASF process will reduce the environmental footprint of lithium recycling and make the process chain more flexible. Let me summarize. Efficient lithium recycling is crucial for a reliable circular economy in electromobility. Our innovative process will reduce the CO2 footprint of lithium recycling and enable it to be combined with existing value chains. What are our next steps? We have successfully completed the lab work phase and are now currently in the scale-up phase.
The first successful pilot tests were conducted in 2020. We are now designing a pilot plant integrated into our production in Schwarzheide. We would like to put this pilot plant into operation in 2022. Ladies and gentlemen, I hope you enjoyed gaining some insights into important projects in BASF's circular economy program. Let me now spend a few more minutes on the third area of development, new business models. How we intend to monetize this transformation. Many of our customers aim to reduce their CO2 footprint. To truly support them, the industry needs a new level of transparency for its raw materials and processes. We recently announced that by the end of 2021, we will be the first chemical company to provide our customers with a carbon footprint for our 45,000 sales products.
With our proprietary digital solutions, we will be able to determine the overall CO2 emissions for each individual sales product. The product carbon footprint will be reported as CO2 units per metric ton of product. It will include all the emissions that occur until the product leaves the factory gate, meaning Scope 1, Scope 2, and Scope 3 emissions. BASF's customers have shown great interest in this innovative tool and the resulting transparency. Sustainability and digitalization are core elements of our corporate strategy, you know that. Calculating the product carbon footprint brings these two elements now together. With the innovative solution, BASF is once again a frontrunner when it comes to sustainability and additional customer benefits. We are talking about new business opportunities here.
In a few years, BASF will command an entire toolbox, including renewable feedstock under the biomass balance approach, recycled feedstock through ChemCycling technology, green or turquoise hydrogen from electrolysis and methane pyrolysis, renewable energy resources, and last not least, the necessary transparency on footprints and reduction potentials. This toolbox will enable us to support our customers with sustainable solutions. It will allow us to differentiate from competitors. It is clear, however, that incremental specific CO2 reductions have their price for our customers and the consumers. At the same time, lower emission products have higher growth rates. This is why we are convinced that the transformation towards a low carbon and circular economy will actually create opportunities for BASF's profitable growth. Ladies and gentlemen, to conclude, I would like to address our carbon management program once again.
With the Green Deal, the EU has the ambitious goal of being climate neutral by 2050. BASF has taken a clear position with its corporate strategy. We have committed ourselves to climate neutral growth until 2030. This means that we will further reduce specific CO2 emissions per kilogram of sales product by an average of around 1/3. We are developing fundamentally new technologies to reduce emissions even further. The carbon management program and the circular economy program enable us to support our customers with tailor-made innovations all the way to carbon neutrality. These innovations drive BASF's sustainable growth. This depends on excellent R&D with creative, high-motivated employees. This is exactly what we have at BASF. Innovations have made BASF successful. With innovations, we will continue to be successful in the future. Thank you very much. Now we are happy to take your questions.
Yeah. Dear ladies and gentlemen, we would like to move on to the Q&A session. To ask a question, please use the chat functions and many of you have already done so. Let me briefly introduce Christoph Jaekel to you. He will join Martin Brudermüller for the Q&A. Christoph is heading BASF's corporate sustainability unit. He is a chemist by education. He received his doctorate at the University of Bonn and joined BASF in 2002 after a postdoc fellowship at Stanford University. Since then, he has held various positions in process research and chemical engineering, and also in the intermediates division before he joined in 2012, BASF's battery materials unit. Since 2014, he's now in the corporate strategy division. With that, we get it going. The first question is from Christian Faitz, Kepler Cheuvreux.
Can you please, give some information on the economic value proposition for products coming out of the ChemCycling process? What are the production costs versus conventionally produced materials?
Christian, this is very tough to answer because we are now in the phase where we actually conduct also the concepts and the projects with our customers. It's very clear that at the very end, there will be partially also higher costs for the customer. They have, on the other hand, also costs for not doing anything. What I think is very important is also the regulatory framework. Actually what in Europe at least happened so far is that progress has very high-flying ambitions and visions, but we have not talked about what is the right regulatory framework to make this happen. We have to land in reality, and we need actually a regulatory framework that is adjacent to a forceful industry strategy. Otherwise, if we don't do that, it is actually not a competitive transformation, and that is what we are aiming for.
For example, for chemical recycling, there is not so much regulation yet because the system was totally focusing on mechanical recycling. For that reason, there are many loose ends which we have to certainly combine. Regulation on one hand, our own, let's say supply and buildup of the capacities, but also the customer projects where we certainly also discuss about costs at the very end. I would say there are some cases that are evident that they are very economic today. Certainly in this whole area of these transformations with the Green Deal, there are also some question marks for the future, which we have to see how they are actually workable with the combination of technologies from outside and the right regulation from politics on the other side.
The next question is from Laurent Favre, Exane BNP. He would like to know how likely is it that Antwerp and Ludwigshafen could run on pyrolysis oil by 2030. Is it a possibility or probability? What would be the magnitude of related investments? Are you seeing tractions among customer companies regarding their willingness to pay a significant premium? It's a bit the same.
Christoph.
Yeah, I can take that. Let's start from scratch, at the beginning, square one. If we are filling all our crackers in Antwerp and Ludwigshafen, it's going to be a huge amount of material. Just remember that we just published our commitment to feed in 250 KT of recycled feedstock into BASF by 2025. This will definitely not be enough to fill all our capacity of our steam crackers in Antwerp and Ludwigshafen. I think this will be still a long way to go until we would be fully be able to fill it. I would also pose the question whether it will be fully possible because there has to be much happening also on regulation and on sorting and making the material available. Just reconsider that we also have, with the mechanical recycling, a very good technology already in place.
The benefit of chemical recycling is really to use the material, the mixed plastic waste that mechanical recycling cannot sufficiently recycle. This is the material that in the very end also needs to be available, collected, and made available, to enable it as a feed-in into our production capacity. To your question in terms of investment, I would say this is way too early to answer that question right now. We are still in the ramp-up of this technology, and we have to see where we end up. Let me give you maybe one thought to that. Essentially, what we need to do is we need to make this pyrolysis oil available, and that means there needs to be a buildup of enough pyrolysis capacity. Will BASF own all those pyrolysis units? I don't think so.
We will make sure that we have access to this material, but there will be a whole industry developing, and that means I would not expect that BASF would have to take the burden of all those investments.
Maybe just to quickly add on that, because we talk about CapEx constraints also. At the very end, this is the advantage of this solution. As I said, it's a drop-in solution. The Verbund actually has the facilities without further investment to step-by-step replace the raw materials. The advantage also with the mass balance approach, that we actually have the broadest portfolio to allocate the atoms that are coming in via the recycled materials, via the certification system. We can offer actually materials based on recycling feedstock, which others can't do. I would say it is also from that aspect, a very interesting concept because it is actually rather CapEx light, I would say.
We have another question from Christian Faitz, Kepler Cheuvreux. Can you talk about alternative power sources for running your crackers?
Well, that's an interesting topic, and that is more of the carbon management program where you know that I told you already that we studied ourselves very much in detail to understand where our limitations are and which kind of technologies we need. We know ourselves very much in detail. One thing is very clear. If we want to go towards CO2 neutrality, then we need masses of renewable energy, at cheap prices certainly. Because there is also what you have to do that you replace steam, actually by electricity to produce some of the steam, but also steam-driven turbines have to be converted into electrical drives. That means roughly that our electricity demand will be three to four times as high as it is today. At the very end, it has to come from all kind of renewables.
Let's be very clear, in Germany here, you have some contribution from local solutions like windmills and solar parks close by. If you look on the potential and the amount of energy, it is actually only offshore wind parks that can deliver these masses of energy. That will be also a very important part of the future, how companies like BASF can tap into sufficient and stepwise increasing amount of renewable energy, certainly at competitive prices.
The next question is from Georgina Iwamoto, Goldman Sachs. Can circular economy work if not all regions are participating? It makes sense in a net consuming region such as Europe or a one-party state like China. How do you convince regions that are net exporters of natural resources to adopt a circular approach?
I can take that. I think where the real development is right now happening, you're totally right, this is happening in Europe. There is the foundation of the circular economy developing very quickly, also on the regulatory side, driven also by consumer demand. I think that brings us as BASF as a competitive advantage because we are already here and working on our concepts to address these opportunities. We see also when you think about, for example, single-use plastic initiatives on legislation, you see it all over the place, actually. You see it in China, you see it in California, this is happening.
I say this is a global opportunity, although, Europe I see moving faster than the other regions, and this is basically our home base, and this is where we can build up our expertise to also make it then happen in the other regions.
Georgina, to add on that, we have big discussions now with politics, and I said there is a lot of ambition and vision, but also not yet clear how actually to do it. I make a very clear statement here. If we consider from day one that we need border adjustment measures to put somehow cost and control at the border of Europe to other regions, then I think you confess already that it's not economic. That is why I tell the politicians, let's be really smart with an enabling framework, tech schemes, funding schemes, OpEx, CapEx, all these kind of things, where we bring something together, what the society and the politics want to happen, and how we can actually support this transformation.
I think if we manage that, and I'm convinced it is possible, both on the circular part as well as it is on the CO2 part, then I think actually we don't have the problem that we have this distortion between the regions. It is basically also a no-brainer that other regions will follow us. I think with this much more constructive proposal to go forward than looking for punishing. One thing is very clear, the other regions will be very innovative too, how they fight back on these kind of market distortions. At the very end, we in Europe, we depend on global trade, and that is why I think we have to have a little bit of different ambition.
The next question is from Thomas Wrigglesworth, Citi. It's about battery recycling. Do you think that the returns are more attractive in recycling batteries than manufacturing? Will BASF only build recycling capacity in line with building cathode materials? Do you see these businesses separately?
Shall I take this one? Those businesses are inherently connected to each other. This is very important. To enable electric mobility, you have to make available batteries, and for that you have to make available battery materials. This is the business in which we are in. Right now, you see that it is actually, when you look at the volume ramp-ups, it is actually quite a challenge to make sure that you have access to all the necessary raw materials at the moment. On the same time, you also see that the lifetime of a battery is going in a car above around 10 years. When you look now at battery recycling, right now, you cannot really have the material coming from battery recycling. Right now, we still heavily need to rely on other sources.
I would say in 10 years' time, then you have developed that business, and it needs to be then integrated and fully connected, to make the closed loop. Because in the very end, it's going to be a stretch to make available such amount of materials just from taking it from the soil.
The next question is from Raj Chinthapalli, nova-Institut. I hope I pronounced it correctly. Do you think biomass is losing to recycling, or do you still see this as part of the solution?
Well, I think as Christoph said, if you look in the total volumes which we consume as raw materials, I would say there is ample space for all kind of materials. It will take a long time until we really convert everything. In the extreme case, I would say we might have a good mix that could be a partial recycled and pyrolysis oil, but this could be at the same moment also bio-based oils. It is a little bit also dependent on what direction customers want to go. We clearly proceed with both, because you have also a little bit different industries. There are some industries that are more on the trip of being bio-based. They certainly would always love to have something which is starting from bio-based and is 100% ending in bio-based.
If you tell them what the investment costs are and how you price that in and how long it takes until to fill their plants, they are actually less happy than just when they come with the idea. If you explain that these drop-in solutions and the mass balance, actually, if they understand it, they acknowledge that this is a very smart concept for both. For us ramping up and for them growing into this new business model. I would say there is a good space for both, and I would not make a bet what actually in 20 years is bigger. I think now in the first instance, we will accelerate ChemCycling very quickly. That was also mentioned by Christoph, and I made that, I think, very clear with the partnerships. It could easily be that also in 10 years, biomass is catching up.
The good thing is our concept can actually cater both.
We have two questions from Andrew Stott, UBS. I start with the first one. Is there any way to monetize the extensive work you are doing for customers on product carbon footprints, or is this just a future cost?
I'll take quickly this one. The interesting thing is, that surprises also some of the customers, if you start to talk with them about the product carbon footprint, they have not thought so much about that. If, for example, a car maker sends me a letter and says, "My car in 2039 is CO2-free, in its production." You talk to them and say, "What does that mean?" All the Scope 3 materials, or, for example, the engineering plastics of BASF, have to come in without CO2. If you discuss what actually we bring in today with industry standards, you basically talk in detail, in transparency, you say, okay, this part is coming actually from raw materials. This part is coming from energy. This part is coming from traditionally produced high CO2 emission contacted hydrogen .
You can discuss with them, we can actually replace piece by piece and work the backpack, the CO2 backpack in steps down. You have to tell them and say, "Okay, if I use green hydrogen instead of the classical hydrogen by steam reforming, it is higher cost." The question is, what is the final cost for their product for the consumer regarding also increasing CO2 costs and image? They also want to have to look for their reputation and the image at the very end. How that translates in maybe paying more for the raw material, but decarbonizing my final product. I have to say there are some pioneering customers who are very advanced in that thinking. We have good discussions. I have also to say there are some customers who have not even started to think about it.
You can also not start with something if you have actually nothing to offer. This is why we want to tap relatively quickly to have this ramp, then we will see if there is more demand for green hydrogen and they pay for it. We have actually to build the capacities for green hydrogen. Once again, Andrew, this is what I like. I don't have to build a 100 green hydrogen plant with 50,000 tons of hydrogen. No one buys it. I can go stepwise, and this also can go in a much better utilization of CapEx. Let's be very clear, this whole thing starts to roll. The first thing is, what is the technical enablement? I think we know how to do that. Now we have the product carbon footprint, translate this into brutal reality on products level.
Now the customers have to buy in. We will see we have very advanced and very innovative customers who go quick. We will have also customers who run behind in the field. That is nothing that settles out immediately, but it will over time. At the very end, I mentioned that the products with lower product carbon footprint, they are actually accelerated products. We define accelerated products as those who have a competitive advantage in terms of sustainability. The nice thing is, and we saw that even in the corona times, the accelerated products have a higher growth rate. They also showed in the pandemic.
Period. A higher growth rate, actually they have a comparably higher CM1 margin, compared to competitive products. I think that is good news. This is actually what we want. It has to translate into profitable growth. I hope, I'm convinced, that actually the customers will come to us because we will be the ones who can offer the best way to go with them towards CO2 neutrality. That includes certainly the circular part.
The second question from Andrew Stott. It's about ChemCycling. Is there a revenue target for the Quantafuel JV? How differentiated is this to other recycling projects out there?
I take this one. I make it quite short. This is a single project, we will not disclose single project revenue streams right now. Please understand that. Let me also say that we have a structured partnership, and we are constantly checking and evaluating to further broaden that partnership, depending on the milestones that we go together.
We can add, Christoph, at the very end, if we would not have scenarios with just what I said, that this could pay out economically. We will not build on and go for partnerships for one plant after the other to lose money. That is also very clear. I think there will be good chances, certainly, and that has to happen quick, not after building five plants, but now making the first experience with the Skive plant and the other plants, and to see how we can convert that, as I said, into business model and earning money with it. Very clear.
The next question is from Charlie Webb, Morgan Stanley. It's about battery recycling again. Most battery recycling is done in Asia. What gives you the confidence that this will become a localized industry? Can you provide a sense on your return expectations for such an investment longer term?
Yeah, Charlie, let me try to answer that question. This is something that we clearly have on our radar screen. We are not only focusing on the European market, as you probably know. We are also looking for opportunities in Asia and also even in North America. You know that we have actually, when you follow us, that we have certain assets already in North America. We believe that, in the very end, we need to collect the battery material, the recycled battery material. This is the challenge that you have, let's say a more tedious logistics setup. That is the reason why we believe that, first you will have to collect this all locally before you bring it together. This is the simple logic behind that.
The next question is from Olivier Eugène, AXA Investment Managers. Can CO2 be captured and used as a raw material in a Verbund logic?
Well, Olivier, this is a long discussion. Let me very clearly say, CO2 and water are among the two stable molecules in the world, and that's why you actually burn a carbon source and it ends in CO2, because that's the sink of the energy landscape. You actually do that because you want to use that energy. If you think from that perspective, now taking the CO2 and bringing it back into some functionalized carbon-based products, would actually be reinvesting all the energy which you got by burning it. I know some politicians dream, and there are some people who say the raw material of the next century is actually CO2. Clearly stating this is nonsense. You have to at least put the same amount of energy into it. It's normally you lose efficiency, so it's actually more.
There is always the better option not to burn it and to have another energy source, and with this clearly said, directly using renewable energy for achieving certain reactions or processes. There will be some last CO2 at the very end, and we talk more about the last mile. If you have, for example, 95% of CO2 avoided by smart electrification and whatever, and you have to consider the last 5%, you might actually use that with green hydrogen to do something like form of Fischer-Tropsch, where you actually build alkanes and gasoline fractions from carbon, to do that. Which I think is not a very economic part, for sure. It can make sense to supplement something. There are also some very few chemical reaction where you actually can feed in CO2. Like we, for example, have dry reforming, which is an interesting thing.
If you produce syngas, you can actually use a methodology where it consumes also CO2. That's why it's dry and not steam reforming. If you look on the volumes for that, it's actually negligible. I would say very clearly the clear strategy has to be to avoid it. One clear word also on CCS, so capturing and storage, that might have some local circumstances where you can do that, but I strongly doubt whether this is the big solution in the world, because you have to put it in and you have to be sure for generations that the CO2 is never coming out. I doubt also that the societal acceptance to live on big bubbles of CO2 is very limited once they understand what that means.
I think the prime strategy has to be avoid CO2 and use renewable energy as smart and as effective as you can.
The next question is from Chris Counihan, Credit Suisse. When you review your current business portfolio using the circular economy framework, does this suggest further changes, either M&A or divestments are needed?
I can do a first-
I do the second part.
First one. Yeah. As usual, when the markets are changing dynamically, and this is what is actually happening right now, then obviously we take a keen look also at the opportunities, but also at the risks. I will not exclude that we would think about also portfolio topics. Right now, I would say this is too early for that. Right now, we need to see how these markets are developing, and we will make sure that we capture all the opportunities in that. We will also make sure that we work together with the regulatory bodies to ensure that this transition is happening in an economically sound manner, so that it is really possible. Depending on this development, we also have to take a look at the portfolio, for sure.
Very clearly, there are companies who actually drive their portfolio in direction low CO2. They sell everything that is CO2 intensive. At the very end, if you go to the product carbon footprint, you have to include Scope 3. It doesn't help you actually to bring that out of the portfolio. It is at the end, if you purchase the raw materials, in your balance as well. I tell you very clearly, BASF is the company, as you know, who has these long value chains and with this, the most comprehensive portfolio, which is the energy intensive capital, CO2 intensive starting point of the value chain, and actually, a very limited CO2 and energy demand at the very end of the value chain. We have the ambition to also enable the transformation at the front end, in the beginning of the value chains.
Someone in the world has to do it. We need, in future, ammonia that is low CO2. We need olefins that are CO2 free. Just to take that away and say, I change now whole Verbund principle. It's not the right strategy for us. I actually want to win by showing that this is competitively possible. Competitively possible means it is maybe not the one-to-one replacement in cost, because some of that stuff will be more expensive. If I can translate that into margin at the very end by having this low CO2 footprint, then actually the whole equation works. I think there we have to be very clear. Europe is now the starting point with the Green Deal. Let's be very clear. Under Biden, the U.S. will follow quickly.
I can tell you from my experience and my contacts in China, they talk about 2060 carbon neutrality, but they already started with high speed to work on the same stuff. We have at the very end to consider, we will have a society which has to pay and spend differently with their disposable income. There will be parts that are more expensive because there is a CO2 price in there. I think BASF, with its technology breadth, we have the ambition that we also enable base chemicals, to make them less CO2 intensive, and then maybe at the end of the road, also CO2 neutral. We think, if we can do that, then we have also competitive advantage, because it translates in the whole chain.
Last thing I say, we will also create pressure with our suppliers, because we will talk the same question our customers talk to us about the CO2 footprint. We will start to talk out to our suppliers and say, "What you actually do to bring down the Scope 3 from BASF?" I think it will be an interesting discussion in the future. Not everything trivial, not all the business models clear, but I'm very confident that we move into a different world. I think we at BASF want to be prepared for that.
We have another question from Thomas Wrigglesworth, Citi. Do you see the shift to a less carbon-intensive profile resulting in a higher or lower margin for BASF, or will this ultimately be competed away? It's a bit in the same direction.
Well, I think I most probably answered that already.
Yes.
We will have areas of businesses where I would say that goes very smooth. We will have some other business areas where this will be a long fight and maybe it takes a few years more, which, however, could be easily coming from the consumer, or it can come actually also from politics, where they say, "You cannot sell that product anymore unless it is certain amount of circular." There will be maybe benchmark methods where you see, okay, how much CO2, and there will be the products that have more CO2 than industry average. They get under pressure, or they get a penalty. At the very end, I think it is a long journey, and it will also not happen all overnight that BASF is converting. This is what I think is so charming with our portfolio and our Verbund.
We can actually grow with a lot of customers in a lot of industries and go on this individual path. Some will be fast, some will be slower. I'm deeply convinced there will be a total mindset change in future, how things are operating. There will be a license to operate. Just ignoring, and just to remind you, we have 8 million tons of CO2 in Ludwigshafen, which is roughly 1% of Germany. If there's anyone believing that we can just keep that, it will not work. Maybe one day we have also to talk to you guys what it means, all want to have ESG, what the price for that is. I think it is a very interesting journey, and don't expect now that huge amounts of portfolio of BASF are converting into not being competitive tomorrow. It will be a long journey.
The next question is from Adlene Rodriguez, Jefferies. How much CapEx over the next decade is allocated to this? How does the new technology affect the steepness of the cost curves? I think it's related to circular economy in general.
Yeah. That's a little bit difficult to answer. I release Christoph from that stress. We have not detailed it totally down because, as you can imagine, you can categorize CapEx from a different point of view. You need, for example, new capacities. Then you say, "Okay, I create with different technologies, capacities with lower CO2." Then you can ask yourself, is this now circular or this grows or whatever? I think in that respect, several things actually will come together. Then I think the whole battery materials investments, they are actually catering also in that direction because we will, I think as we have told already, the Schwarzheide production. We have also shown there how we go stepwise down by the CO2 footprint. That means also we have to apply renewable energies there.
You can bake, actually, if you succeed in that, you can totally attribute this to circular and low CO2. I think we don't divide that very clearly. Let me also say at that point, and you know about our global island, our big investment in China, actually, where we are now in the technical discussions. Let me tell you very clearly, you would be maybe surprised, but I have exactly the same discussions we have here in Europe, we have actually with the Chinese government. We talk about green energy. We talk about certain profiles. We will do that whole investment with much lower CO2 footprint than a normal petrochemical size of that art would be. With that, I would even include partially the China investment into a kind of a low carbon.
I think we cannot divide that very clearly in buckets, but be sure that more of the CapEx in BASF will have and consider this aspect as part of the decision where we spend.
Maybe if I may add one sentence. We just had a discussion on the ChemCycling and the lightness of ChemCycling in terms of CapEx. We will definitely look for opportunities to have light CapEx approaches to cater to circular economy.
Yeah.
The next question is from Bernhard Brunner, BNP Paribas. How does BASF handle the digital transformation and the need for more and more modern devices regarding the production of more and more e-waste after their lifetime? Bit different question.
Yeah. There are many parts in that one. Digital transformation, I think is a third dimension, and that makes it so difficult for us because if you look actually what we have to do at the same time, we have also the Chemicals Strategy for Sustainability. We have to get digital, circular, low carbon, and even zero tox. That is actually already only four dimensions, which we have to do at the same time. I think fortunately enough, stuff comes together. When we talked about the product carbon footprint, which project, by the way, was run by Christoph. There is also a very big digital part in there. It's actually a methodology, AI, and whatever you need for that and the data, the huge amount of data we have over there.
You also know that we have in Ludwigshafen, the target of own 5G network, where transportation in BASF sites will be done by automatically guided vehicles, so without driver overnight and moved, which is partially of cost savings because that will be cheaper transport, less volumes in the working capital and so on. At the very end, a lot of this stuff goes together. The China investment, again, it will be the most modern, most digitalized plant BASF will have for a long time because a lot of that solutions are used actually there, and partially these solutions also help you to reduce CapEx. The last part was this electronic waste. We have not much dedicated ourselves to that one because actually plates and that stuff is not what is in our business.
We don't see a big identification with that one, but we have also not had a very close look into this. That is definitely something like the battery value chain and other materials. The ever-increasing amount of devices, just think about smartphones and also the valuable metals like rare earths in that. There is more and more recycling in that one too. I also assure you, BASF will not jump on every bandwagon, because we will do that stuff that I think is closer to our heart and to our technological strengths.
The next question is from Markus Dufner, Dachverband der Kritischen Aktionärinnen und Aktionäre. That is in English Association of Critical Shareholders in Germany. BASF buys commodities from companies such as Nornickel from Russia and Sibanye-Stillwater from South Africa, whose business model has so far not been circular. Both companies have a history of human rights and environmental violations. Will BASF commission independent audits? I think Christoph is on.
No, I can do this. Markus, yeah, we had the discussion certainly also on the precious metal in South Africa for quite some time. Let me take also Norilsk Nickel. If you look on, for example, where cobalt is coming today, and about 80% of cobalt is coming from the Congo, from the Democratic Republic of Congo, where we all know that there is also working conditions, child labor, which is actually burdening the whole value chain. I'm actually quite proud that BASF is working with a company having a European value chain, in this case also with our investment now, where we actually are not having exactly this issue because we come from different circumstances. Is everything perfect there? No. I think there is also work to do on sustainability issues, as we all know also here. Overall, I think this is exactly the right direction.
What we elaborated here is actually the recycling. The more material we have in the circle, and we put that then into the closed loop, then actually we neither have the child labor issue, we have nor, let's say, conditions which are maybe not perfect in the mining area. We have then a much better material balance in terms of energy and all this. We will have an increasingly higher share of the material that goes in circle. I think the direction is the right one, and we certainly try to work with those partners that are going that way and have a similar understanding with us. Is everyone perfect in today's world? No. That is the direction we want to go with our partners.
Another question from Olivier Eugène, AXA Investment Managers. What about circularity for products that are consumed quickly, for instance, in consumer products? Is it about circularity or biodegradability?
Yeah. This is where both things are coming together. When you think about circularity, just think about our product portfolio. We have our ecovio foils. They are biodegradable, and we consider them to be circular because they are being recycled through nature. It's not like millions of years. It's going after one or two years, so that recycling loop is taking place. I think this is where the things come together. Why not rely also on nature, on the power of nature, to bring together the thought of circular with the thought of bio-origin.
Another question from Laurent Favre, Exane BNP Paribas. We are moving now to agricultural solutions. You talked about the Green Deal. One of the subparts is the Farm to Fork Strategy and the reduction of usage of harmful pesticides. How much of a threat is that? Is it an opportunity to gain share from generics?
I think we addressed this also by our strategy in agrochemicals. I think when we had the capital market day, we have also partially touched this. First of all, that is the direction and which is the clear intention in Europe to reduce the amount of chemicals going on the field. This means we have to work. We cannot abandon that because we all know that this is nature and we need to do something against weed and insects damaging food. We have to do it in a smarter way. I think the solution is here, the digital farming approach. You know the drones that apply then per plant, much less quantity. That means we will see a reshuffling a little bit on how the value is generated in this chain. You might, in the future, earn less with the chemical part.
You might earn more with the digital service to do that, and you might, on the other hand, earn more with the seed, which is designed in a way to perform better under these circumstances. You have weather parts where we have more, let's say, weather fluctuations. We have to make the plants more resistant against these extreme weather conditions. That's why I think in the ag world, it is important that you have all these ingredients to design, actually, new solutions. I think as long as you have that innovation, we are actually less worried. That will change the business, and I think it will undergo, in the next decades, significant change. On the other hand, I feel that BASF is preparing itself quite well to cater that and to be among the winners.
I think this is why this value chain is also interesting. It is perceptive for innovations, and it's also driven by innovations. That is the way it goes. I am quite sure that this business has different business models in the future than it has today.
Another question from Christian Faitz, Kepler Cheuvreux, again, on Agricultural Solutions. What is your Agricultural Solutions segment role in circular economy? Why do you believe Agricultural Solutions is seen so critically by many ESG investors?
Yeah, maybe I can take this one. When you look at circular economy, it's not all about making the cycles, but it's also decouple growth from resource consumption. That is exactly what is so important in the ag chem area. Just as Martin alluded, if we have digital farming and predictive farming, then what we do is reducing the amount of material that the farmer needs to bring out to make sure that the crop is growing as a healthy crop and generating the yield he wants to achieve. This goes exactly into that direction. From that perspective, it is very important to make it more circular. Coming back also to the thought of bringing it together with a cycle through nature.
If we ensure that all the material that we bring out on the acres, like the plastic foils, the mulch foils, and they are biodegradable, this is the right path to go. This is a circular solution for ag chem. In this respect, I think this is the right connection and the right path forward.
Maybe to add to that one, if you listen to European Executive Vice President Timmermans, he talks about where the CO2 stems from. We address very much mobility, transportation, we address the industry. Actually, a huge amount of the CO2 is coming from agriculture. I think where the politics in Europe don't see that there is maybe adequate and fast enough move to reduce CO2 in agriculture. This is why I think this is something very high on the agenda and also from an ESG perspective. That translates exactly in what I said. The farmer needs help to do things differently in the future, and it will not come from himself because he actually depends on buying seed and buying the right chemistry and buying services and new digital solutions. Actually, these innovation drivers have to be one company. Among them is BASF.
This is why I think this is an interesting field. I would predict agriculture has to look different. If we are serious with CO2 reduction, then it cannot proceed over the next decades like it is today. For that reason, I can only say from a business perspective, something that has to move always means innovation and new business model, and this is also opportunities to earn money with. We want to be part of that journey also in the agriculture.
We have no further questions that haven't been touched on already. I would like to close this Q&A. We have come to the end of today's on the webcast. Hope you found it informative and enjoyable. If you have any further questions, please do not hesitate to contact a member of the BASF IR team. Thank you very much for joining us today. I think we felt that traction has really increased regarding these topics in recent one, two years. Thank you very much for joining and goodbye for now. Take care and keep in touch virtually.
Bye.
Bye.
All the best. Merry Christmas and Happy New Year.