Table of Contents
1 DELIVERING NET ZERO FOR INDUSTRY
1.1 What Is Industrial Decarbonisation?
The goal of industrial decarbonization is to reduce atmospheric greenhouse gas (GHG) emissions from all elements of industry while maintaining the industrial sector’s critical contributions to national economies competitiveness and prosperity. The different administrations’ strategies to attain net-zero carbon emissions by 2050 include decarbonizing the industrial sector, which, in the case of the US, now accounts for 30% of all domestic GHG emissions .
Decisionmakers are investing in the research, demonstration, and deployment of new technologies; sponsoring technical assistance programmes for workers; and facilitating the lineup of proven decarbonization concepts in the sector. For instance, in January 2022, the Advanced Manufacturing Office of the Biden-Harris administration issued a request for information on how America’s manufacturing sector could reduce its carbon footprint while making technologies that would still power the clean economy and boost competitiveness on the global stage.
Today our sectors are highly emitting, and combined produce 30% (14.8 billion tonnes CO2 eq) of global emissions from sectorial statistics . Energy use in industry is almost a quarter of all energy use with:
- Iron and Steel (7.2%): energy-related emissions from the manufacturing of iron and steel.
- Chemical & petrochemical (3.6%): energy-related emissions from oil and gas extraction and the manufacturing of fertilizers, pharmaceuticals, refrigerants, etc.
- Food and tobacco (1%): energy-related emissions from food processing (the conversion of raw agricultural products into their final products, such as the conversion of wheat into bread) and the manufacturing of tobacco products.
- Non-ferrous metals: 0.7%: these include aluminium, copper, lead, nickel, tin, titanium and zinc, and alloys such as brass. Their manufacturing requires energy which results in emissions.
- Paper & pulp (0.6%): energy-related emissions from the conversion of wood into paper and pulp.
- Machinery (0.5%): energy-related emissions from the production of machinery.
- Other industry (10.6%): energy-related emissions from manufacturing in other industries including textiles, wood products, mining and quarrying, construction, and transport equipment (such as car manufacturing).
Direct Industrial Processes (5.2%) comprise:
- Cement (3%): CO2 is produced as a byproduct of a chemical conversion process used in the production of clinker, a cement component. In this reaction, limestone (CaCO3) is converted to lime and yields CO2 as a byproduct.
- Chemicals & petrochemicals (2.2%): GHG can be produced as a byproduct from chemical processes – for example, CO2 can be emitted during the production of ammonia, which is used for cleaning products, purifying water supplies, and as a refrigerant, and in the production of many materials, including textiles, plastic, fertilizers, and pesticides.
1.2 Why We Need Strategies
Industrial products are vital to life over the world, from the fabric of our buildings to the materials we use in our daily life. Without manufacturing industry, there would be no COVID-19 vaccine, no cars, no food or the packaging it goes in. Most industries combine highly skilled workers and high end technology with ingenuity to make products that are traded across the globe. Industry plays an essential role in society, contributing thousands of billions to the overall economy. It is a high value area of employment, directly accounting for over 10% of some countries GDP and providing several millions direct jobs  as well as multiple jobs across the value chain.
Sound strategies cover the full range of industry sectors: metals and minerals, chemicals, food and drink, paper and pulp, ceramics, glass, oil refineries and less energy-intensive manufacturing. They also cover the new emerging industries, which will be the symbols of the net zero transition, including green hydrogen and carbon capture, usage and storage.
There are four key strategies to hasten industrial emissions reductions:
- Energy Efficiency
- Industrial Electrification
- Low-Carbon Fuels, Feedstocks, and Energy Sources (LCFFES)
- Carbon Capture, Utilization, and Storage (CCUS)
Energy efficiency is a primary decarbonisation strategy and the most cost-effective choice for GHG emission reductions in the near term. Ways and means for achieving decarbonization through energy efficiency include:
- Smart energy management to optimize performance of industrial processes at the system-level
- Integrated management and optimization of thermal heat from manufacturing process heating, boiler, and combined heat and power (CHP) sources
- Advanced data analytics and smart manufacturing to increase energy productivity in manufacturing processes
Take advantage of recent advancements in low-carbon electricity, from both grid and on-site renewable generation sources, will be decisive for industrial decarbonization efforts. These consist of:
- Electrification of process heat using radiative heating, induction, or advanced heat pumps
- Electrification of high-temperature range processes such as those found in cement, iron, and steel
- Substituting thermally-driven processes with electrochemical ones
Low-Carbon Fuels, Feedstocks, and Energy Sources
Opting for low-and no-carbon fuel and feedstocks reduces combustion-associated emissions for industrial processes. Global efforts on this front include:
- Development of fuel-flexible processes
- The use of biofuels and bio feedstocks
- Integration of hydrogen fuels and feedstocks into industrial applications
Carbon Capture, Utilization, and Storage
CCUS is a multi-component strategy for trapping generated carbon dioxide from a point source and using the captured CO2 to make new products or storing it long-term to avoid release into the atmosphere. Components of this strategy comprise:
- Post-combustion chemical absorption of CO2
- Development of processes to utilize captured CO2 to manufacture new materials
- Development and manufacturing optimization of advanced CO2 capture materials that improve efficiency and lower cost of capture
1.3 Current Approaches
Governments and international agencies have been working in partnership with industry, its workforce, customers and communities, sharing the costs and opportunities of the long-awaited green industrial revolution. Contemporary strategies build on the ambition and actions set out in the Industrial Decarbonisation and Energy Efficiency Roadmaps to 2050 derived from recent UN Conferences of Parties (COPs). This involves updating the pathways analysis and adapting actions to reflect new net zero targets, considering fully the role of hydrogen fuel and resource efficiency, and expanding to consider all of global industries.
These strategies are supposed to reflect advice and feedback from trade associations, businesses, environmental groups, academics and the Intergovernmental Panel on Climate Change (IPCC) . Workshops explore themes such as incentives to adopt low carbon technologies, the importance of a clear policy and funding landscape, and carbon leakage risks. The role of the administration, industry and the consumer in the net zero transition are discussed periodically at roundtables with industry representatives, as well as raw materials, energy, and supply chain stakeholder forums.
Among the world’s top economies, the United Kingdom was the firstto pass laws to end its contribution to global warming with its 2050 net zero target . With the late publication of a decarbonisation strategy for industrials, the UK became the first to also show how it can have a thriving sector aligned to net zero.
2 INDUSTRIES TOWARDS DEEP DECARBONISATION
2.1 Industry Structure
While there is potential to reduce energy intensity and GHG emissions with commercially available processing and recycling technologies and practices meeting long term emission targets requires a transition to low carbon process innovations. These innovations enable the replacement of fossil fuels with electricity, hydrogen or biomass (e.g., electric glass melting, hydrogen direct reduction in steel or biofuel in lime kilns), replacement of feedstock (such as geopolymers in cement or bio-based plastics) or integration of CO2 emission capture (CCS) into the process design.
There is a growing literature where such technical options are assessed, see e.g. . So, how industry structure affects deep decarbonization? One important implication of the industry’s long investment cycles is that new factories installed today need to be ready to comply with 2030 and 2040 GHG emission reduction targets.
The scale, energy and capital intensity of energy-intensive industries (EIIs) and their sometimes oligopolistic production form significant barriers to entry both for new EPI firms and for new providers of their technology. Such barriers may inhibit transition since new entrants have been identified as important drivers to sustainability transitions in other sectors, like automotive and energy.
Some radical innovations that enable processing at a lower temperature and smaller scale may reduce these entry barriers. For example, the use of thin slab casting in combination with scrap-based mini mills, allowed the US firm Nucor to develop from a marginal steel producer to the largest steel company in the U.S. . The dependency on brown field investments in industrialized countries may limit the introduction of low carbon innovations that require radical technical changes in the existing infrastructure.
2.2 Low Carbon Innovation Strategies
have had little motivation to seriously reduce GHG emission through low carbon innovation, given the lack of demand and limited policy support for these innovations. Low carbon innovation tends to only be successful when providing economic co-benefits, like energy or material efficiency gains. Emission reduction is in those cases often a side-effect. In cases like some low carbon cements, product properties might even decrease. Furthermore, end-of-pipe technologies like CCS also require changes in the core processes of most EIIs, which raise variable and investment costs but yield no co-benefits. Fuel-replacing low carbon innovations, in turn, are for their profitability dependent on how alternative fuel and electricity prices develop in relation to fossil fuel prices. These factors partly explain why the low carbon technologies are not breaking through commercially.
Where EPI firms perceive sustainability not as competitively advantageous, firms in business-to-consumer sectors like automotive, food, and energy perceive sustainability as an important means of competitive product differentiation and of boosting brand name perception. The lack of sustainability as a means of differentiation is thus a unique barrier to decarbonization transition in EIIs, at least so far.
To reduce GHG emissions, EIIs currently focus mostly on incremental process innovations, exploiting co-benefits with specialized materials where possible, recycling and, to a lesser extent, changing feedstock and fuels. However, the tendencies to realize these incremental innovations differ strongly between firms, as some do not even have a well-functioning energy management system, and therefore lack the organizational structure to engage effectively in even incremental low carbon innovation. In Europe, this has improved with the monitoring, reporting and verification requirements of the EU ETS.
2.3 How Different Factors Affect Deep Decarbonisation?
With the acceptance of international, long term GHG emission reduction targets, policy makers have initiated public-private research collaborations with firms and knowledge institutes from different sectors. These collaborations aim to develop shared future visions on how to competitively decarbonize EPIs and pool financing and expertise to facilitate the development of low carbon innovation.
Such collaborations are particularly important when the low carbon innovations are costly and bring little co-benefits. The Sustainable Process Industry through Resource and energy Efficiency (SPIRE) roadmap for example was established to make European process industries “more competitive and sustainable” . Such formal ollaborations can be found at different governmental levels across the world; collaborations for clean and competitive steel for example, include the European ULCOS, the Japanese Course50 and the US AISI technology roadmap program. Despite being often restricted to pre-commercialization, such PPPs are generally identified as important governance tools to stimulate and guide sustainability transitions.
Economic competitiveness is the main barrier to implementing and enforcing GHG emission control regulations in EPIs. These industries are for example largely shielded from the direct cost of the European Emission Trading Scheme (EU ETS), resulting in lower emission reductions than other targeted sectors. Furthermore, EPIs typically pay lower energy taxes, compared to other energy users; German EPIs even profited from the Energiewende through lower energy prices. The regulations that are in place focus on incremental innovations that also have economic benefits, examples are energy efficiency improvements, fuel shifts and minor process improvements. In the Netherlands, for example, plants have to legally adopt all energy efficient measures with a payback period of less than five years, but this is not sufficiently enforced. These regulations drive firms to prioritize investments needed to maintain the license to operate (e.g. pollution abatement to meet regulatory standards) over GHG emission control.
So although government supports deep decarbonization throughout the R & D and pilot stage, support for upscaling through a stronger demand-pull and effective regulations are lacking. Such support and regulations are also underdeveloped in some other sectors, like agriculture, but seem to be applied more in the automotive and energy sectors, where they form important drivers to sustainability transition.
The industry associations typically oppose GHG emission regulations because they perceive them as cost drivers that affect their global competitiveness and consequently employment. They argue that regulatory burdens will increase compliance costs and cause a significant competitive disadvantage which, in a highly globalized market, would force affected companies to move their production to other, less regulated countries, where they might emit the same or more than they did originally (i.e. the “carbon leakage” argument).
EPIs supply other companies and are therefore less subject to consumer pressure to become more sustainable. This pressure trickles down the value chain when big manufacturers of end-products, such as IKEA, decide to demand more sustainable basic materials. However, customers of EPIs are typically not willing to pay a price premium for cleaner basic materials, believing they cannot channel this premium to the end-consumer, even though the net price impact is often very small. One reason is in transparency, since so far, consumer products typically do not show the carbon footprint of the materials they use. An analysis of the concrete industry shows that there is no willingness to pay this price (and risk) premium; not even by public agencies, which are the most important buyers of concrete.
Channeling the price premium to the end-consumer is particularly troublesome in the price-competitive mass markets for basic materials, but may be easier in the smaller market segments for specialized materials with higher value-added that compete more on quality and less on price. The distance of EPIs from the consumer and the ensuing lack of demand for clean materials is an important inhibitor to the decarbonization transition. Public visibility of clean products stimulates demand and public pressure for these products and is found to facilitate transition in consumer sectors, like agriculture and especially the automotive and energy, where driving electric vehicles or installing solar panels on rooftops signals the consumer’s sustainable lifestyle.
3 STUDY CASES
3.1 Port of Rotterdam
Global and EU-wide decarbonisation policies will also affect the industrial cluster at the Port of Rotterdam, as the bulk of the port’s economic activities focuses on trading, handling, converting and using fossil fuels, i.e. fossil carbon. This makes the port’s businesses especially vulnerable to global and European decarbonisation actions, as the stepwise phasing out of fossil resources is at the very core of any decarbonisation strategy. Furthermore, with annual CO2 emissions of well over 30 million tonnes, the port is one of the major European hot spots of GHG emission and therefore bears a particular responsibility to contribute to European GHG emission reduction efforts actively.
Therefore, already in 2007, the Port Authority set an ambitious goal of reducing the harbour’s emissions and its industrial complex by 50% by 2025, compared to 1990 levels, as part of the Rotterdam Climate Initiative . The fact that since then, emissions in the port area had increased substantially and that the targets at that time did not yet reflect current international decisions on long-term climate change targets, the Port Authority commissioned the Wuppertal Institute for Climate, Environment and Energy to conduct a study on Decarbonization Pathways for the Industrial Cluster of the Port of Rotterdam. This study aims to focus on learning about the possible challenges and chances for the port’s industrial cluster if there will indeed be ambitious climate mitigation efforts in Europe and globally in the coming decades. For this purpose, four different scenarios are developed, describing what the port’s industrial cluster could look like in 2050 in case of ambitious decarbonisation efforts globally and in Europe and to what extent the entity might contribute to GHG mitigation.
A stepwise approach has been taken to derive the scenarios (see Figure 3). First, the results of global and European GHG mitigation scenarios are compared with regards to their potential consequences for the businesses of the port’s industrial clusters. Consequences include the expected changes in the electricity generation mix (e.g. phase out of coal and/or new investments into carbon capture and storage technologies); there will also be changes in the transport sector which could lead to a significant decline in European demand for fossil transport fuels, directly affecting the demand for refinery products. Secondly, the European decarbonisation scenarios are analysed in respect to the technological characteristics of their respective decarbonisation strategies. These may be, among others, a focus on the use of biomass if biomass is assumed to be available in a sustainable manner and in sufficient quantities or a wide-reaching electrification of energy systems and a conversion of chemical feedstock to synthetic fuels.
The study’s three decarbonisation scenarios for the Port of Rotterdam demonstrate that several potential pathways would allow the industrial cluster to adapt to the changing environment successfully .
Should European decarbonisation efforts until 2050 achieve only the lower end of the EU’s long-term target range – an 80% GHG emission reduction vs. 1990, the transport sector’s fossil fuel demand would still be of considerable size by the middle of the century. In this case, the generally favourable conditions for refineries at the Port of Rotterdam might allow them to continue to operate at only a modestly reduced scale compared to today. An increasing share of their output would continue to supply a relatively stable petrochemical production in the port’s cluster. However, this would require the area’s refineries to be able to increase their market share in a declining European fuel market. In the case of highly ambitious European decarbonisation efforts – achieving emission reductions of 90% or more by 2050 vs. 1990, fossil fuel demand in the transport sector would be minimised by the middle of the century. Some limited refinery capacities could still be present in this scenario, as there would be a small remaining demand for hydrocarbon products. However, it is difficult to assess whether the production of these refinery products would indeed take place in Rotterdam in the future. Even if the refineries were to cease production eventually, the study’s decarbonisation scenarios show that the production of chemicals in the port area could nonetheless continue beyond the middle of the century. Base chemical production at the port could switch from using mineral oil products as feedstock to natural gas liquids, or it could be radically transformed so as to rely on plastic waste as feedstock in a closed carbon cycle approach.
Unabated fossil-fuel electricity generation is likely to be entirely or largely phased out by 2050 in case of ambitious decarbonisation efforts in Europe. On the other hand, sustainably produced biomass is a scarce resource that will likely be needed as a feedstock for low carbon fuel. Small volume but high-value biomass-based speciality chemicals could nevertheless be an exciting field of business in the future at the port. These decarbonisation scenarios have sketched several ways to deal with the fossil fuel power plants currently operating at the port, especially the two new coal-fired power plants on the Maasvlakte. These could be equipped with CCS technology if the various challenges faced by this technology can be overcome in the next ten to twenty years.
However, even coal-fired CCS plants’ life-cycle GHG emissions will be too high in a highly ambitious European decarbonization setting. This analysis proposes that if enough sustainable and adequate biomass can be made available at reasonable costs at the port, the power plants might eventually be converted to run solely on biomass and garbage, with CO2 absorbed and heat used via a heat grid. Because of the limited quantity of sustainable biomass accessible globally, and the potential need to use this capacity to replace fossil fuels in other applications, its use in the power generating sector may only be justified if “negative” emissions can be accomplished through the use of CCS technology. Furthermore, renewable electricity generation from wind turbines and solar PV facilities can and should play an increasing role in the port area in the years and decades ahead.
3.2 EU Steel Industry
The energy-intensive industries face the challenge of becoming climate neutral in line with the 2015 Paris Agreement. Consequently, there is a growing interest in decarbonization options that go beyond incremental efficiency improvements. The EU EIIs have already reduced their greenhouse gas (GHG) emissions by 36% between 1990 and 2015  and much of the low-hanging fruit of incremental efficiency gains has been reaped. Yet, these sectors still account for about 15% of EU GHG emissions while producing essential materials and goods for the European economy. Further emission reductions toward climate neutrality (i.e., net-zero emissions) are possible but require rapid development and implementation of new technologies or changes to existing primary production processes, as well as increased material efficiency and more circular material flows.
As one of the largest EII emitters, the EU steel industry accounts for about 20% of industrial GHG emissions and EU steel production is expected to increase in the coming decade. While global demand for steel had by 2012 increased fourfold since 1960, the total European per-capita steel stock is expected to increase by 15% by 2050 .
There are two general ways of reducing steelmaking emissions: through emissions efficiency (EE) and materials efficiency (ME). Increased ME measures enable less primary production for the same level of service or functionality, while increased EE contributes to decarbonization of primary steelmaking. While EE measures are relatively easy to define, the literature contains different definitions of ME. Some contrast ME strategies that require less material production (e.g., longer lifetime, modularity, repair and reuse, less material and yield improvements), with energy and carbon efficiency strategies that imply stable or increasing material production (e.g., energy efficiency, recycling, and carbon capture technologies). Other literature takes a wider approach to ME, by including options both to reduce demand and to increase circularity, for example, through increased steel recycling, e.g., ArcelorMittal, 2019 .
Conventional blast furnace and basic oxygen furnace (BF-BOF) steelmaking g (in which iron is produced from iron ore and coal, and further refined to steel) globally accounts for 72% of the sector’s overall GHG emissions , and 61% of EU steel is produced through this route. The remaining 39% of EU steelmaking follows the secondary electric arc furnace (EAF) route based on steel scrap, a slightly higher share than the global average of 28% according to the World Steel Association. Steel is highly recyclable and it is possible (to the extent that technology and quality requirements allow) to use a limited amount of scrap (<30 %) in the BF-BOF route, thus taking advantage of heat and reducing the need for virgin iron. Similarly, virgin iron can technically be used and mixed with scrap in EAFs.
Nevertheless, not all end-of-life steel scrap is recovered today, and the recycling potential is limited by contamination and limited availability of high-quality steel scrap. Although the share of secondary production could be increased up to 60–70% by 2050 in an optimistic scenario, primary production will still be needed in 2050. While secondary production in EAFs can be readily decarbonized by using emissions-free electricity, the primary route is more challenging and requires active pursuit of a combination of decarbonization strategies  (see Table 1).
4 CHARTING THE WAY FORWARD
Advance planning and timely action could drive technological maturation, lower the cost of industrial decarbonization and ensure the industry energy transition advances in parallel with required changes in energy supply.
To accelerate the shift to a low-emissions future, industrial companies can take the following steps :
- Review portfolio of assets at the level of individual facilities to understand their access to lowcost zero-carbon electricity, hydrogen, biomass, and CCS. This review should be done for both existing sites and for yet to be developed facilities, on a country-by-country basis. The expected access and costs of available resources, including disruptive scenarios, would have to be taken into account. A first outcome of such a review would be an understanding of the current and future attractiveness of each site in the broader portfolio, in light of these different scenarios. This might already lead to a shift in resource allocation over time.
As a next step, we then typically see a portfolio of activities evolve to improve an asset’s or portfolio’s resilience against these scenarios. Given the uncertainties, players would develop a portfolio of actions in line with the decarbonization options mentioned in this report. These would range from options to ‘sure bets’, taking into account the state of technology mentioned above.
- Identify those decarbonization options for which the industrial player is uniquely positioned to take a leading role. This could also lead to strategic investments in innovation or investments and/or set-up of partnerships, also in relation to securing a renewable energy supply.
- Pursue energy efficiency opportunities in the short term as a way of kickstarting decarbonization of production sites. Especially, using new technology, digitization and data analytics can provide an opportunity to capture untapped potential.
Governments and regulators can consider improving local conditions for industry decarbonization in the following ways:
- Develop a roadmap for industry decarbonization based on local access to resources. What we have seen from the analysis in this report is that the link between the industry sector and the power sector would need to be significantly strengthened, given the interdependencies both ways. A roadmap should therefore include a strategy for development and scale up of carbon storage infrastructure, biomass resources, low-cost renewable electricity, and/or hydrogen production or import. The roadmap could help set out a plan-based approach in the roll-out of associated infrastructure, such as carbon storage and (hydrogen) transport pipelines, and extension of the electricity grid to ensure timely connection to sites with newly developed decarbonized production facilities. Setting such a longer-term direction for decarbonization could support planning for decarbonization by other parties, including industrial companies, utilities and owners of key infrastructure (such as the electricity grid or hydrogen pipelines), and unlock investments with long payback times.
- Review the potential decarbonization pathways not only on costs, but especially on ‘countryvalue-add’ (such as jobs, competitive position). Such a review would typically lead to other mechanisms to support development and scale up of innovative decarbonization options, especially those which would provide local additional benefits, such as the strengthening of an existing industrial cluster, or increase in jobs.
- Align regulations with the decarbonization initiative and remove barriers by, e.g., creating policies to increase the reuse and recycling of plastics and steel or steering sustainable biomass to sectors that would reap the most benefits from it.
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