Decarbonizing industry to tackle climate change is an extremely complex problem that will need all stakeholders working in concert.
The Intergovernmental Panel on Climate Change (IPCC), a United Nations body, issued a dire warning in its recently released report. “Global surface temperature will continue to increase until at least the mid-century under all emission scenarios considered. Global warming of 1.5°C and 2°C will be exceeded during the 21st century unless deep reductions in carbon dioxide (CO2) and other greenhouse gas emissions occur in the coming decades,” the report said in its summary assessment for policymakers.
As a part of the Paris Climate Accord, most nations agreed to limit global temperature increase to well below 2°C and pursuing policies to limit this increase to 1.5°C. This was reaffirmed in the COP26 Summit held at Glasgow in November last year. Towards this end, all countries had pledged to reduce their carbon footprint. This was to be done through a system of Nationally Determined Contributions (NDCs).
A substantial proportion of these pledges to meet NDC targets are linked to Green Energy, which is an intrinsic and vital component to curb carbon emissions, but another critical factor is decarbonization.
If major economies like the US, the European Union (EU), China and India have to achieve their net-zero emissions target by 2050-2060, then decarbonizing industry has to be a priority.
This is, however, easier said than done. Efforts to decarbonize industry, therefore, need to rest on four pillars. The first is to find alternative energy sources that are carbon-free or low carbon and good enough to generate the intense heat and energy required for industrial production. The second is to move, wherever possible, to processes that do away with the use of carbon or upgrade process which can use low carbon energy. The third pillar, where CO2 emissions are inevitable – at least based on currently available technology – is carbon dioxide Capture and Utilization or Storage (CCUS). The last option, slightly more controversial, is to create carbon offsets by planting and growing trees.
Let us look at each of these pillars and the policy and technology challenges they pose:
Low carbon/clean energy source
Along with renewable strategy like solar and wind, there are many emerging new areas which are going to play a vital role in shaping the future. Two key areas are hydrogen and off-shore wind & new energy technology.
The option that offers the most promise is Green Hydrogen which can be an excellent source of GHG-free heat when combusted. There is a delicious irony in the move towards Green Hydrogen. The element already has a range of uses in industrial production. Most of the hydrogen produced today is by burning fossil fuels. According to the International Energy Agency, currently, 6% of global natural gas and 2% of global coal go to hydrogen production.
However, an alternative method exists to produce hydrogen – by electrolysis of water that splits it into hydrogen and oxygen. While electrolysis needs electricity, if power from renewable sources is used for this process, the resulting Green Hydrogen could provide an answer to a seemingly intractable problem.
Electrolysis is a relatively mature technology, though currently expensive. It is quite possible that as industries and governments move to decarbonize and economies of scale kick in, it can become more commercially viable.
Another possible cleaner energy source is ammonia. Presently, ammonia’s primary usage is in the manufacture of the fertilizer, urea. However, it has a high energy density of 3kWh per litre. The beautiful part is that global transportation and storage infrastructure already exists for the gas, and it could, as a result, form the basis of a new, integrated worldwide renewable energy storage and distribution solution. On the flip side, current production processes of ammonia require massive amounts of fossil fuels accounting for almost 2% of global GHG emissions.
Efforts are on to capture, utilize and store the CO2 emitted in the process – more on this later – resulting in the production of so-called ‘Blue Ammonia’. Last year, Saudi Arabia shipped 40 tons of Blue Ammonia to Japan to be burnt in a power plant to produce electricity.
New energy technology
Many countries are planning to boost the capacity and use of offshore and new energy technologies via floating offshore wind farms; wave and tidal ocean energy installations; floating photovoltaic installations; the use of algae to produce biofuels.
Low-Carbon chemical processes
In several industries, where carbon is used as a reducing agent – steel, for example – investments are being made to improve existing processes or innovate low-carbon ones.
There are several decarbonization initiatives which can be implemented in steel industry specially in Blast Furnace (BF) area which is one of the key energy intensive process. Three of them being explored are: a) Optimizing the BF burden mix by maximizing the iron content in raw materials to decrease the usage of coal 2) Increasing the use of fuel injection through, for example, pulverized coal injection (PCI), natural gas or even hydrogen, and 3) using coke oven gas in the BF as an energy source.
Initial results in using Green Hydrogen to directly reduce iron in blast furnaces indicate the potential to reduce GHG emissions between 18-38%. Similarly, aluminium majors Alcoa and Rio Tinto have partnered to develop a carbon-free aluminium smelting process that replaces the traditional carbon anode with a ceramic one, eliminating the resulting CO2 emissions.
While such novel production processes can contribute to reduced GHG emissions, the fact remains that process chemistry being what it is, emission of CO2 seems unavoidable for the foreseeable future. This, inevitably brings us to the next pillar to decarbonize industry – CCUS.
Carbon capture
CCUS refers to capturing CO2 emissions and storing them in deep geological formations. The captured carbon dioxide can also be used to enhance crude recovery by pumping it into oil wells. This might seem slightly backward, but data shows that, at least until alternative technologies relating to Green Hydrogen or process changes become mature, CCUS is presently the most cost-effective way to help industry decarbonize.
The Blue Ammonia that was shipped from Saudi Arabia to Japan, for example, resulted from capturing and utilizing CO2.
Carbon offsets
Various Carbon offsets scheme provides the option to compensate to for emissions made elsewhere. Governmental Imperatives
Given the complexity of the challenges of decarbonizing, it is increasingly evident that it is an issue that cannot be addressed by industry alone. However, it will necessarily play its part. Governments have to step in and play a significant role. They can use a combination of measures – incentives, using their power as large buyers of industrial products and introducing regulatory actions – to help the process.
Incentives
Decarbonizing will be expensive. Existing industrial plants will need to be retrofitted to use cleaner energy options like Green Hydrogen. According to a report by McKinsey & Company, the total costs of fully decarbonizing just a few select sectors globally are estimated to be approximately USD 21 trillion between today and 2050.
Quite clearly, industry alone will not have the resources to do this. Governments will have to step in to provide incentives like tax breaks and even direct subsidies to fund this transition. These expenses can, perhaps, be recovered by imposing ‘Green Taxes’ on the final consumers of industrial products, though such measures are likely to be unpopular and controversial.
The second set of incentives could promote investments in research and development of innovative technologies that help decarbonize industrial processes. Some major countries are already exploring this option.
Using purchasing power
Governments are often the largest buyers from heavy industry – especially steel and cement used in large-scale infrastructure projects. They can use this buying power to opt for products that have been manufactured more sustainably. The Industrial Deep Decarbonization Initiative (IDDI), announced recently by the UK and Indian governments under the auspices of the United Nations Industrial Development Organization (UNIDO), is an excellent example of this. The idea is that these two countries, along with a few others, will try and create market demand for low-carbon industrial materials, especially more sustainable steel and cement.
Regulatory actions
Another option that governments have is to use their regulatory powers to force industry to decarbonize and become more sustainable. The EU, for example, has announced it plans to impost a carbon tax on its borders. The logic behind the move is sound. To curb GHG emissions, the EU plans to set challenging emission targets for industries in member countries. These targets are bound to increase the prices of various commodities. This would give a competitive advantage to producers in nations that do not have emission targets built into their systems. A carbon tax seeks to level out this playing field. Experts, however, have pointed out that such a tax would be fiendishly difficult to calculate and impose.
A ‘Green Tax’ mentioned earlier can also be another regulatory measure to force industry to accelerate decarbonization and make final consumers aware of the environmental costs of their buying choices.
Government of India, for example has proposed a vehicle scrappage policy which makes it expensive to maintain Transport vehicles older than eight years. Vehicles older than this threshold could be charged the Green Tax at the time of renewal of fitness certificate at the rate of 10 to 25 per cent of the road tax, and personal vehicles are likely to be charged Green Tax at the time of renewal of Registration Certification after 15 years, the proposal said. Vehicles like strong hybrids, electric vehicles, CNG, ethanol, LPG vehicles are exempt from this tax.
As the move to decarbonize industry gathers momentum in the coming days and years, all stakeholders – governments, industry and final consumers – will have to play their part if we are to mitigate the climate emergency that stares in our face.
At TÜV SÜD, we assist companies in carbon management in three principle ways – advisory, auditing and certification and training.
Our advisory services support organizations in analyzing the climate impact inherent to their business activities at all stages of the value chain. We facilitate defining appropriate targets and developing and implementing measures to achieve these targets sustainably.
Since 2005, we have validated and verified more than 800 climate change projects with an equivalent CO2 saving of over 250 billion tons under various international treaties and protocols globally.
