Zero-emission EU industry ‘within reach’ but costly, study says

Heavy industries like cement, steel and chemicals are heavy users of fossil fuels, accounting for about 14% of Europe’s greenhouse gas emissions. [Shutterstock]

Bringing emissions from heavy industry down to net-zero by 2050 is possible but will require costly new production processes and a 25-60% increase in near-term capital investments to reach €40-50 billion per year, according to new research published on Thursday (25 April).

Achieving net-zero emissions for European energy-intensive industries is “within reach” but time is running out, with 2050 only one investment cycle away, says a new study by Material Economics, a consultancy.

“Different industrial strategies and pathways can be combined to achieve net-zero emissions,” says the study, produced with the Wuppertal institute in Germany and the Institute of European Studies at the Vrije Universiteit Brussels (VUB).

“Many new solutions are emerging, thanks to a more circular economy with greater materials efficiency and extensive recycling of plastics and steel, as well as innovative industrial processes and carbon capture and storage,” the study says.

Bringing industry emissions down to net-zero is possible. Here’s how.

The EU needs an industrial strategy that helps basic material industries achieve net-zero emissions by 2050, and innovation needs to be a large part of it, write Tomas Wyns and Gauri Khandekar.

“Hard to abate” sectors

Heavy industries like cement, steel and chemicals are heavy users of fossil fuels, accounting for about 14% of Europe’s greenhouse gas emissions. They are considered “hard to abate” sectors because they require high-temperature heat for industrial processes which still rely on liquid or solid fuels that produce emissions when burned.

Industrial carbon emissions have stagnated since 2012 in Europe and are not expected to decrease at least until 2030, according to Carbon Market Watch, an environmental NGO which also published a report on heavy industry today.

Worldwide, heavy industry represents an even bigger share, accounting for 30% of global CO2 emissions – and those are only projected to increase as the world economy continues to grow, says the Energy Transitions Commission, an expert group.

This makes heavy industry a central player in the global decarbonisation challenge, and a particularly difficult nut to crack.

“Energy intensive industries are the backbone of the European economy and are well placed to deliver key inputs to the low-carbon transition,” said Laurence Tubiana, CEO of the European Climate Foundation, a non-profit group which commissioned the study by Material Economics.

“In previously conservative sectors, we now see front-runners that are really envisioning different production models and technologies – including zero-carbon aluminium, steel, gas, and automobiles,” Tubiana said in a statement.

“The phase when abatement of emissions from industry was considered impossible is over. Industry leaders are looking at totally disruptive technologies and visions,” she said.

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“Telling contradiction”

On the bright side, the study by Material Economics says the GDP impact of the low-carbon transition would be “small” in all three main pathways identified. Overall, the additional cost of reducing emissions to zero are €40-50 billion per year by 2050, the study found, with prices of cars, houses and other consumer goods increasing by less than 1% to pay for more expensive materials.

“Contrary to popular belief, a number of solutions to help energy-intensive industry reach net-zero emissions have been identified. These include increasing energy savings, scaling up renewable energy deployment and applying circular economy models,” said Carbon Market Watch.

However, the study also reveals “a telling contradiction,” according to its authors. “All pathways require new production processes that are considerably costlier to industry, as well as significant near-term capital investment equivalent to a 25-60% increase on today’s rates,” it warns.

New low-CO2 production processes are estimated to cost 20-30% more for steel, 20-80% more for cement and chemicals, and up to 115% more for some of the very last tonnes of CO2 that must be cut, the study says.

“We shouldn’t be surprised that it will be more expensive to make CO2-free cement, plastics, ammonia and steel,” said Per Klevnäs, the lead author of the study at Material Economics.

“These are important industries, and we absolutely cannot do without them,” Klevnäs conceded. But he said the price of manufactured products like automobiles won’t be overly impacted by a rise in the costs of plastics, or steel.

“It is a significant cost if you’re a steel company” fighting with competitors in China, Klevnäs told EURACTIV in a telephone interview. “But it becomes negligible” when looking at how much cost it brings to an end product like a car, he added.

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“We have the technologies”

These conclusions are broadly accepted by energy-intensive industries themselves, even though their own cost estimates may differ.

“We have the technologies, we know how to take these energy-intensive industries very low or net-zero emissions,” said John Cooper from Fuels Europe, a trade association representing petroleum refiners.

The solutions involve a combination of electrification, hydrogen, biomass and CCS to achieve full decarbonisation, Cooper told an event organised in Brussels last February by the Florence School of Regulation. Besides, energy intensive industries have already managed to cut their energy consumption by 20% since 1990, thanks to a shift to biomass, biogas, and electricity, Cooper said, referring to a separate report published last year by the Institute of European Studies at the VUB.

But he also said achieving full decarbonisation will often require “a complete scrapping” of existing industrial equipment which is currently designed to operate with fossil fuels. “We are talking about a massive replacement programme for the production infrastructure,” Cooper stressed.

The figures are dizzying: The transition to a net-zero carbon industry will require “repeated investments, year after year, of hundreds of billions of euros,” Cooper said – all within a relatively short timeframe. “2050 is one large investment cycle away from today,” he warned, stressing that industrial plants are built to last at least thirty years.

Just looking at the power sector, the transition to zero-emissions industry will require tripling the amount of electricity production, Cooper said, referring to the VUB/IES study. This is more than estimates by trade association Eurelectric, which says only a doubling of  power production will be necessary.

And these costs cannot be borne solely by companies in energy-intensive industries, which are facing fierce competition from within Europe as well as from low-cost countries like China.

This is why supporting policies “will be essential” for companies to make the leap forward, says the study by Material Economics, which singles out affordable electricity and a more circular economy as the two most important factors to keep down the overall costs of the transition.

“EU industrial companies have a major journey ahead” and many are already making significant progress to be the first with a low-CO2 offering to their customers, confirmed Per Klevnäs, the lead author of the study.

“Policymakers now need to catch up, ensuring that investment and commitment to low-CO2 production and innovation becomes the profitable choice,” he said.

Below are the three main pathways for zero-emission industry identified in the  study:

  • Circular economy: By 2050, 70% of steel and plastics could be produced using recycled feedstock. In the case of plastics, using end-of-life plastics as feedstock for new production could substitute the need for constant additions of new oil and gas, which are a major source of CO2 emissions. A more circular economy is a large part of the answer. Better materials efficiency throughout value chains could cut 60-175 Mt CO2 per year by 2050.
  • Innovations in new, clean production processes and significant increases in renewable energy production will help enable deeper emission reductions over time. Between 110-200 Mt CO2 could be cut by 2050 by deploying new industrial processes.
  • Carbon capture and storage and use (CCS/CCU): All pathways developed in the study show that there are cases where not all the emissions can be abated through circular economy and electrification. CCS and CCU will be required to reduce between 45-220 Mt CO2 emissions per year by 2050, depending on the scale of deployment envisaged.

In the green transition all industries must pull together

As Europe’s energy ministers gather in Linz this week, they have the chance to widen and deepen the European Union’s ambitions for the green transition, writes MEP Jeppe Kofod.

[Edited by Zoran Radosavljevic]

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