How petrochemicals can become sustainable: an interview with Lee Sun-taek

The petrochemical industry is perhaps one of the most notorious sectors when it comes to environmental footprint. However, the timely importance of achieving carbon neutrality has pushed the industry to pursue green initiatives. In this interview, Lee Sun-taek at SK GeoCentric's Solution Business Strategy team introduced the business's strategies to mitigate environmental harms and use of carbon credits as well as his concerns regarding the commercialization of green technologies.

First, could you tell us about your current job?

I am currently the Head of the Solution Business Strategy Team at SK GeoCentric, a petrochemical company under SK Innovation. My team is responsible for developing business strategies to guide SK GeoCentric’s future growth. Specifically, we formulate marketing and growth strategies for existing general chemical products and explore new directions for the company’s expansion.

In particular, while the petrochemical industry is considered a declining sector and, in some ways, goes against the eco-friendly trend, it is an indispensable industry that produces plastics and the raw materials for plastics used in daily life. So, I work in a department that examines how we can lead the industry toward being less environmentally harmful and more eco-friendly, from production to consumption.

How do your plastic recycling and circular economy initiatives connect to the petrochemical industry you’re currently involved in?

I think there are two main ways. In the petrochemical industry, we used to import crude oil—which contains a high carbon content—from traditional sources like the Middle East. We are now developing strategies to transition to more eco-friendly raw materials. The second direction involves exploring how to recycle the products produced by this industry in an eco-friendly manner. These two aspects represent the major links between the petrochemical industry and environmental sustainability.

So, first, regarding raw materials, if we consider how to use eco-friendly raw materials to make plastics, the current production process—continuously extracting crude oil from the ground—involves costs associated with mining, environmental pollutants generated during the mining process, and fuel costs incurred in processing and transporting the oil. All of these aspects are production activities that run somewhat counter to eco-friendliness. So, when considering eco-friendliness from a raw material perspective, one approach would be to find alternative raw materials that function similarly to existing petroleum, rather than continuously extracting new oil from the ground.

For example, there’s the waste cooking oil generated from food preparation. Waste cooking oil contains a significant amount of oil. So, we collect the cooking oil used in our kitchens and in South Korea, there’s an industry dedicated to collecting and processing this oil. So, we invested in a technology that allows us to use the used cooking oil we have—specifically, a process that replaces petroleum with used cooking oil to make plastic—and we partnered with a company that collects and processes this used cooking oil.

So, while disposing of used cooking oil is simply a waste, if we recycle it and use it as a raw material for plastic, we can avoid having to extract oil from underground, drill for it, and produce plastic—thereby reducing the carbon dioxide emitted during that process. Furthermore, since we’re recycling waste cooking oil, we can also reduce the carbon dioxide generated by the various purification processes involved in refining and treating that oil, such as burying it in the ground or mixing it into river water. This allows us to reap the benefits of both. We are currently focusing our efforts on reviewing this as an eco-friendly raw material.

Yes, that sounds like a very efficient method.

Yes. While that is one strategic direction regarding eco-friendly raw materials, our second focus is on finding solutions for how to recycle used plastic. Ultimately, in a country like South Korea, where recycling is done so well and diligently, the environment is ideal for further recycling. For example, China hardly does any waste separation, right? As a result, the plastic generated there is already too heavily contaminated to be recycled—it’s mixed with food waste and all sorts of other trash. So, in a country like South Korea that does recycling so well, we can say that the infrastructure for recycling plastic is actually much better established.

So, by investing in technologies that allow us to recycle used plastic and securing those recycling technologies, we can mix the recycled plastic with the raw materials used to make new plastic. For example, if we need to produce 100 Coca-Cola PET bottles, 50 of them would be made from brand-new materials. Consequently, we would have to produce products that generate that much new carbon dioxide , whereas the remaining 50% is made from used, recycled PET bottles that are restored to like-new condition using this eco-friendly technology. By utilizing existing recycling technologies to truly recycle PET bottles, we reduce both the volume of waste and the carbon dioxide emissions generated during new production. So, broadly speaking, we are continuing to pursue development in two key areas: securing eco-friendly raw materials and recycling produced plastics to create eco-friendly products.

It seems you are making various efforts. Given that you are focusing on business strategy, the petrochemical industry is likely to face significant environmental regulations. How are you responding to these various environmental regulations?

Europe is the region with the most advanced environmental regulations. For example, in Europe—specifically Germany—there is a requirement to transition 50% of total automobile production to eco-friendly vehicles, such as electric or hybrid cars, by a certain deadline. As for environmental policies related to SK GeoCentric, there are ongoing European policies mandating that 10% of the plastic used in cars produced in Europe must be eco-friendly plastic—either plastic made from recycled materials or plastic made from eco-friendly raw materials.

Consequently, the majority of our plastics are ultimately consumed in developed countries, and among those, Europe is driving the strongest push for eco-friendly policies. Therefore, we are closely monitoring the direction of these policies in European countries to identify environmental requirements and restrictions for plastics used in new vehicles. Furthermore, we are tracking regulations requiring that 20% of specific plastic components in new home appliances—such as refrigerators and TVs—must be made from eco-friendly materials.

So, we are closely monitoring these eco-friendly policies and forecasting their direction. We are investing in eco-friendly technologies aligned with that direction and securing eco-friendly raw materials. Ultimately, we are aligning with the trend where consumers recognize that the products we manufacture contain a high proportion of eco-friendly materials, and even if they are slightly more expensive, they should be consumed for the sake of the environment.

Since you mentioned Europe’s advanced environmental regulations, another thing that comes to mind is Europe’s emissions trading system. Korea also has an emissions trading system, and I learned that SK GeoCentric is subject to this system. I’m curious about your current activities in this aspect, whether you’re actively trading emissions allowances, or trading surplus or deficit allowances.

The emissions trading market is growing steadily, and the trading market for carbon credits is also expanding in Korea. However, while regulations are in place, I understand that carbon trading—specifically the trading of carbon credits—is not yet as active as it is in Europe or other developed countries. I believe one reason for this is that the price of carbon credits varies somewhat from country to country.

For example, if we reduce carbon emissions by 100 units, the price of those 100 units when sold as emission credits in Europe is much higher, whereas in Korea, the price of carbon emission credits—which correspond to those emission reductions—is relatively lower. Since standards vary from country to country, this poses a challenge for Korean petrochemical companies, many of which export products to Europe and the United States. Because the standards for carbon emission credits differ slightly among these countries. Consequently, there are some limitations to trading carbon credits domestically. Therefore, this aspect appears to be an area where South Korea’s carbon credit system needs improvement.

We have brought together various SK Group companies under a large committee called the Environmental Committee. Within this committee, various affiliates come together. For example, some affiliates have surplus carbon credits, while others are in short supply. To ensure the SK Group as a whole can make the best possible use of these credits, we are first encouraging trading among affiliates. This allows companies in need of credits to obtain them from affiliates with a surplus—that is, affiliates that have secured a large number of credits through extensive eco-friendly activities. By maximizing this disparity, we are conducting transactions to fill the gaps We are currently facilitating such transactions.

As I mentioned earlier, SK GeoCentric is actively introducing eco-friendly raw materials and recycling produced plastics to secure carbon credits from an environmental perspective. Consequently, we are actually supplying these secured carbon credits to other affiliates and generating revenue from them. In a sense, we are utilizing this as a strategy to generate revenue within the eco-friendly industry.

Finally, while you’ve achieved these various accomplishments, looking ahead, the responsibility on the industry is quite significant when it comes to achieving carbon neutrality. As a petrochemical company, what do you see as the biggest technical or economic challenges in achieving this carbon neutrality goal?

Ultimately, I believe the commercialization of eco-friendly technologies is the most critical factor. While there are many research organizations and technology institutes dedicated to developing these technologies, for them to become commercialized, companies must actively invest, and the developed technologies must be adopted and utilized in actual industrial settings. However, most technologies haven’t reached commercialization yet, or even if the technology is sound, the initial investment required for commercialization is too high, so many projects don’t actually make it to market. That’s why most petrochemical companies, including SK Go Setric, are engaging in industry-academia collaboration to thoroughly test these eco-friendly technologies and facilitate their commercialization. After all, you need the technology to avoid losses when pursuing this eco-friendly industry.

So, for example, when it comes to recycling the plastic I mentioned earlier, if the technology required for recycling is too expensive, or if the supply chain costs too much even after securing the technology, recycled plastic will end up being more expensive than regular plastic. If the price rises above a certain level, consumers may simply turn away from it. This would lead to a decline in corporate profitability, and with lower profits, it becomes difficult to sustain eco-friendly policies. Therefore, I believe the biggest task for petrochemical companies is to commercialize these eco-friendly technologies by carefully considering both the government’s policy direction and the potential for technological advancement.