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Signals of Change
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The tech breakthroughs to decarbonize industry are already here

It is technically possible to produce cement, steel and plastics while releasing close to zero CO2 emissions, research from the Energy Transitions Commission (ETC) shows. The challenge will come in deploying these technologies at scale, coordinating across sectors and driving down costs.

Acombination of existing technologies will help…

Zero-carbon (green) hydrogen and the direct electrification of industrial processes will help reduce the carbon emissions associated with industrial energy demand, according to the ETC. Carbon capture and storage (CCS) can help eliminate the remaining emissions, including process emissions. Sustainably sourced bioenergy must be reserved mainly for aviation fuel.

But materials and energy efficiency are also critical

The energy requirements to recycle industrial materials are generally a fraction of those required for virgin materials. Research indicates that a more circular economy could reduce CO2 emissions from the plastics, steel, aluminum and cement sectors by 40% by 2050.

The economics are there but challenges remain

Analysis by McKinsey and the ETC estimates that cement decarbonization would cost on average $130 per ton while steel could be decarbonized for less (at $60 per ton on average). Plastics decarbonization, meanwhile, could come in at an average cost of $295 per ton.

End costs to consumers will be low

Research from the ETC suggests that full decarbonization by mid-century would cost the economy less than 0.5% of global GDP, with a minimal impact on consumer living standards. For example, low carbon steel use would add only 1 per cent to the price of a typical car while decarbonizing ethylene would likely increase the price of a soda bottle by the same amount.

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Cutting emissions from cement

The IEA and the Cement Sustainability Initiative (now the Global Cement and Concrete Association) estimate that the process emissions intensity of cement making could fall by nearly a third by 2050 – owning mainly to the substitution of alternative materials for lime-based clinker.

Steel standard and steel recycling

In November 2019, Responsible Steel – a membership body which includes many of the world’s largest steel manufacturers as well as customers – published its first ever steel standard which includes tough emissions standards. It is expected that the first Responsible Steel site will be certified in August 2020.

Hydrogen replaces coal for steelmaking

Replacing the coking coal used to make steel from iron ore is one way of decarbonizing the process emissions from steel, alongside the roll-out of electrified blast furnaces (which are already used for steel recycling). Hydrogen can be used to produce virgin steel via direct reduction of iron.

Electrification of plastics production and bio-based feedstocks to replace petrochemicals

Zero carbon plastics are already being produced by electrifying the heat input or switching to biogas or hydrogen. Carbon capture, meanwhile, can also be applied to the exhaust gases of pyrolysis furnaces. There is also a growing market for plastics made from bio-feedstocks rather than from (oil based) ethane or naphtha.

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The Circular Economy of materials is crucial

A more circular economy can reduce CO2 emissions from the four main heavy industry sectors (plastics, steel, aluminum and cement) by 40% globally, and by 56% in developed economies.

Plastics demand could halve by mid-century

Primary plastics production could be reduced by 56% versus business as usual, through more extensive mechanical and chemical recycling.

Primary steel demand to fall by over a third

Primary steel production could be cut by 37% from today, through reduced losses across the value chain, reduced downgrading in the recycling process, greater reuse of steel-based products, and a shift to car-sharing.

Buildings will require less virgin cement

Global emissions from cement production could be reduced by some 34% by 2050, just by adopting well-known circular-economy practices into building design.

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Cement leaders commit to science-based targets

Two of the world’s largest cement makers – Switzerland’s LafargeHolcim and Germany’s HeidelbergCement – both have approved science-based targets, while India’s largest cement maker Ultratech Cement Limited has committed to set a science-based target. These bold commitments demonstrate that leading companies are dedicated to transforming one of the hardest-to-abate industrial sectors for the zero-carbon future.

HYBRIT project launches zero carbon steel

The Swedish-based Hydrogen Breakthrough Ironmaking Technology project (HYBRIT) was launched in 2016 as a joint venture between the steel producer SSAB, iron ore extractor LAB and state-owned electricity company Vattenfall, with the support of the Swedish government. The aim is to develop a zero-carbon steelmaking process based on hydrogen reduction of iron – instead of coal and coke – and to scale a fossil-free, ore-based industrial steel production process by 2040.

Dalmia Cement targets net-zero emissions by 2040

Dalmia Cement is increasing its use of ‘blended’ cement, hence optimizing the clinker-to-cement ratio, and reducing its energy intensity. It has been able to reduce CO2 emissions to 342kg/t in its most efficient operations (in comparison to a global average of 900kg/t) – cutting costs by 27% at the same time. Dalmia is also the first global cement company to join RE100.

Neste converts plastic waste into fuels

The Finnish energy company Neste is collaborating with the British company ReNewELP to convert plastic waste into fuels, chemical feedstocks and new plastics. A plant is planned in the UK that could convert 20,000 Mt of plastic waste into fuels. Analysts Material Economics estimate that the lifecycle carbon emissions of plastics produced through chemical recycling could fall to 1 ton of CO2 per ton of plastics, compared to over 5 tonnes of CO2 for virgin plastics.

Unilever targets net-zero emissions

Major consumer products company Unilever is creating a new €1bn Climate and Nature Fund to spend solely on climate change projects and commit to reaching its zero-emissions goal by 2039. The fund promises to achieve a deforestation-free supply chain, promote regenerative agriculture and transition to biodegradable ingredients by 2023, as key ways to reach this goal.

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COVID-19 and Green stimulus

The heavy industrial sectors are all trade, capital and labor intensive, so the challenges posed by the Covid-19 crisis are stark. However, the opportunities created by a fiscal stimulus to refit plant and operations are huge. The IEA has been clear that “clean energy should be at the heart of any stimulus”.

Additional investment support on top of carbon pricing

When growth in the global economy returns, carbon prices will be required but should be carefully designed to avoid international competitiveness effects. However, high upfront investment costs may act as a barrier to investment (even where carbon prices make a shift to zero-carbon technologies economical).

Public support for innovation and investment

Harder-to-abate sectors should benefit from public support for innovation and investment. Electrolysis cost reduction for Green Hydrogen is a key priority alongside investment in transport and storage tank infrastructure for Hydrogen and ammonia. The deployment of Carbon Capture and Storage (CCS) has been stalled for too long and needs rapid attention and funding.

Energy policy should plan for increases in clean power demand from industry

National decarbonization plans and industrial strategies should set out an integrated vision for power decarbonization and electrification, ensuring that increased power demand (including that for electrolysis) can be met by zero-carbon power.

Biomass use must be constrained

The use of forest bioenergy is severely constrained by the availability of truly sustainable feedstocks. Bioenergy typically produces less than 1% of the energy that solar power can produce per hectare, making electricity-based solutions more effective where available and technically feasible.

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Consumers are demanding green products

Two-thirds (67%) of consumers would like to see a carbon label to illustrate that “products have been made with a commitment to measuring and reducing their carbon footprint”, according to the Carbon Trust. Unilever plans to put labels on 70,000 of its products that show how much greenhouse gas was emitted in the process of manufacturing and shipping them to consumers.

Buyers are starting to work together to move markets

Improved materials circularity cannot occur without greater coordination between companies in a supply chain. High-quality recycling requires new approaches to product design as well as to end-of-life dismantling and materials separation. Major buyers can accelerate change and ResponsibleSteel, for example, is set to launch a Buyers’ Forum in late 2020.

Regulation and consumer pressure are combining to push for clearer labelling

Adequate labelling of lifecycle and embedded carbon intensity of products (e.g. cars, appliances) and services (e.g. flights) could create traceability and become a powerful tool for consumer awareness.

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The power sector has a huge role to play

In any feasible path to a net-zero-carbon economy, electricity’s share of total final energy demand will rise from today’s 20% to over 60% by 2060. As a result, total global electricity generation must grow from about 20,000 TWh today to 85-115,000 TWh by mid-century (about 5 times as big) at the same time as fossil fuels are phased out, according to the ETC.

Hydrogen demand will rocket

Achieving a net-zero-CO2 emissions economy is highly likely to require an increase in global hydrogen production from 60 Mt per annum today to something like 425-650 Mt by mid-century, according to the ETC.

But Green Hydrogen production costs are falling rapidly

Bloomberg New Energy Finance predicts renewable hydrogen could be produced for $0.8 to $1.60/kg in most parts of the world before 2050. That would make green hydrogen cost competitive with current natural gas prices in Brazil, China, India, Germany and Scandinavia on an energy-equivalent basis.

Energy efficiency is a non-negotiable

Strong policies to improve energy efficiency, increase materials efficiency and circularity, and manage demand for heavy-duty transport could reduce the additional demand for electricity by around a quarter, according to the ETC. Given the scale of the investment challenge, it is vital to maximize the opportunity. Saving a KWh remains a great deal cheaper than generating an additional KWh, IEA data shows.

Upfront investment needs remain significant

In the industrial sectors, total incremental capital investment from 2015 to 2050 could amount to $5.5 to $8.4 trillion, according to McKinsey. A particular difficulty is creating strong enough financial incentives to trigger the required investment from the private sector. In heavy industry, very long asset lives could delay the deployment of new technologies, unless there are strong policy incentives for early asset write-offs. In steel, for instance, a switch from blast furnace reduction to hydrogen-based direct reduction may require scrapping of existing plants before end of useful life.

Will there be enough carbon storage?

As Carbon Capture and Storage needs to become more widespread as a means to tackle residual industrial emissions, underground carbon storage will become ever more important, according to IPCC. A comprehensive survey is needed to ascertain the true global scale of the capacity and the differences between regions.

Plastics recycling doesn’t work without consumer buy-in

Reaching zero lifecycle emissions from plastics constitutes a significant challenge, as it requires eliminating end-of-life as well as production emissions, according to Material Economics. Limits to sustainable biomass supply will likely make it impossible to entirely substitute fossil fuels with bio-feedstock. It will therefore be essential to manage existing fossil fuel-based plastics through mechanical and chemical recycling, as well as secured end-of-life storage for solid plastic but this will require coordination and buy-in along the value chain from suppliers, to consumer brands and on to consumers themselves.

PRODUCING WHAT PEOPLE WANT IN A WAY THE PLANET CAN AFFORD

It is 2050. Industries now look markedly different. Not only do they generate Net Zero emissions, but they also deliver tangible socio-economic and environmental benefits for the world at large. Think, dignified employment, social inclusion, regeneration of nature, to name but a few. No single factor explains this radical transformation. Rather, it is the outcome of a general convergence of positive trends, from new technologies and novel business models to progressive public policies, enlightened consumer choices and forward-thinking investment decisions.

Industrial production now follows a circular logic that sees resources reused again and again. Unnecessary waste is consequently a thing of the past. Furthermore, the volume of natural resources used by industry is now well within the planet’s capacity to replace. One of the most significant plus points of today’s industrial framework is the presence of positive feedback loops. Most notably, regulations, financial markets and consumer behaviours are all structured in such a way as to reward those businesses that act responsibly. Climate action has therefore become a source of competitive advantage. In a similar vein, data-driven transparency systems allow misaligned companies to be quickly identified. Consequently, these high-carbon legacy firms are fast disappearing.

Finally, placing our industrial system on a more socially responsible and environmentally sustainable footing is proving a boon for businesses’ competitiveness. Net Zero companies find they are far more resilient to the effects of climate change and natural disasters, for instance. (The same, incidentally, is true for the communities where they operate). Among other business benefits they report are considerable efficiency savings, lower costs, greater employee engagement, stronger brand loyalty, and early access to new markets.

How to Take Action
Policymakers
  • Introduce a carbon price for plastic and chemical industries by 2030, and fully implement targets set by national recycling bills by 2040.
  • Drive demand for green cement, aluminium and other key industrial commodities by setting a minimum percentage of zero-carbon materials used in all public construction projects.
  • Encourage circular production by strengthening Extended Producer Responsibility rules for the consumer goods industry and establish clear national standards for the re-use of recycled materials.
  • Implement regulations on disclosure of climate related information.
Businesses
  • Apparel businesses to reduce emissions across all scopes by 30% by 2030, with clothing brands sourcing 100% renewable energy across their value chains by the same date.
  • Retailers to increase circular and plant-based product sales by 50% by 2030, with climate information appearing on all products and all problematic plastic packaging eliminated.
  • Cement and aluminium producers to reduce emissions by 30% by 2030, and chemical companies by 50% by the same date.
Investors
  • Introduce transition bonds for energy efficiency investments in the steel and mining sectors, and to divest from unsustainable mining projects.
  • Align portfolios with the Paris Agreement and net zero by 2050 goals.
  • Help scale nascent sustainability technologies across all industries through public-private research investments, with a particular focus on carbon-intensive sectors such as cement, aluminium and chemicals.
  • Stimulate the development of an incentivised secondary plastics market through support for measures such as Extended Producer Responsibility fees and appropriate carbon pricing.
Innovators
  • Spur the decarbonisation of all industry sectors by helping advance breakthrough information and communications technologies, such as artificial intelligence, blockchain and the Internet of Things.
  • Support efforts by chemical and mining companies to scale the use of renewable electricity throughout its value chain and propel low-carbon smelting technologies in the steel and aluminium sectors.
  • Accelerate plans for breakthrough technology deployment in the plastics industry and help retailers and consumer goods companies make better use of smart technologies.
Citizens
  • Increase demand for apparel manufacturers and consumer goods companies to design products with high content of recycled materials, low/zero carbon footprint, strong durability and low levels of obsolescence.
  • Pressurise governments and businesses to provide comprehensive options for recycling and find innovative ways to repair, reuse and upcycle end-of-life goods.
  • Help make the world’s oceans become plastic-free by 2030 by reducing consumption of single-use plastic packaging and by encouraging retailers and consumer goods companies to develop sustainable alternatives.