Climate change has been making headlines recently, with the US administration pledging large amounts of spending towards reaching climate targets after the US re-joined the Paris Accord. The climate change challenge is complex and risky, this is why addressing it early on and in a timely manner provides guaranteed benefits to humanity. Transforming society to a low carbon future involves changing critical economic sectors such as buildings, transport, and agriculture.
However, GHG emissions from certain industrial sectors will be the hardest to address. The good news is industries can be incentivized to balance societal and business interests while embracing long-term solutions. The industrial sector can address climate change by reducing the intensity of industrial activity by improving energy efficiency. In addition, there is a need to shift to low-carbon energy sources and to reduce the use of high-carbon energy sources.
“The biggest industrial GHG emitters such as steel, cement and chemical are also amongst the hardest industries to transform to low carbon.”
There is an important role for the industry to play in achieving a sustainable and inclusive growth path. This needs to be done in the context of providing high quality, low-carbon and affordable products and services, and contributing positively to economic and social development. The industry also needs to strengthen its resilience to climate change risks and enhance its capacity to address the opportunities from climate change. This sector can play a vital role in the development and deployment of climate-friendly technologies, including low-carbon technologies. We expect that the industrial sector will play an important role in the development and deployment of climate-friendly technologies, including low-carbon technologies.
Moving industrial processes to low carbon has several challenges; first these processes require high energy densities, and many of them rely on low energy costs to maintain business continuity, as well as reliable high temperature energy sources. While commercial renewable energy sources are available to the industrial sector, electricity costs become a limiting factor for certain processes that require large amounts of energy at high densities and high temperatures. Some companies are developing new technologies in biofuels, and solar, among others, however the cost competitiveness of these solutions are far from the edge of feasibility.
The biggest industrial GHG emitters such as steel, cement, and chemical are also amongst the hardest industries to transform to low carbon. The steel, cement, and glass industries are the most challenging, followed by aluminum, chemicals, and other metal processing industries. This is followed by mining, manufacturing, and traditional food and beverage.
Technology’s Role
While much hype is given to technologies like carbon capture and utilization (CCUS) and Hydrogen, the financial feasibility and practicality of deploying such technologies within the industrial sector is questionable at minimum. This is due to: 1) laws of physics and thermodynamics constraints that make such technologies less cost effective from an operational cost standpoint than alternative existing technology, and 2) due to the lack of related financial incentives and enforcement and verification when using such technologies.
We however believe that there are at least two candidate technologies that can be deployed in industrial settings that can competitively compete on costs, reliability, and don’t require enforcement, verifications, or external financial incentives. The first is small modular reactors (SMR) , which we discussed in another article. SMR technology provides high temperatures and reliable energy to the hard to decarbonize industries. Such technology can also generate steam for district heating applications in places like Sweden, and produces fresh water through desalination. New reactor technology will be capable of generating heat and feedstocks for the chemical, steel, and concrete industries, as well as energy for heavy transport such as shipping and aviation. If such technologies match the lifecycle of traditional reactor plants (20-40 years)[1] it would align with the existing industrial infrastructure investment life cycle. In addition, such technology does not require carbon capture verification, which we expect will be problematic in the future.
The second technology is a Geothermal energy plant which can also provide a reliable high temperature heat as well as a reliable energy source, however, it will be limited to certain geographical locations. The premise of geothermal energy extends from the technology used to decarbonize heavy industries to a business transformation opportunity for oil and gas-based industries.
There is an important role for the industry to play in achieving a sustainable and inclusive growth path. We expect that the industrial sector will play an important role in the development and deployment of climate-friendly technologies, including low-carbon technology. However, this needs to be done in the context of providing high quality, low-carbon, and affordable products and services, and contributing positively to economic and social development. The industry also needs to strengthen its resilience to climate change risks and enhance its capacity to address the opportunities from climate change. This sector can play a vital role in the development and deployment of climate-friendly technologies, including low-carbon technologies. The role of the industrial sector in the low carbon transformation will affect other sectors and will act as a driving force for further transformation of the agriculture sector which we will discuss next.
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[1] “Nuclear power plant ageing and life extension – International Atomic ….” https://www.iaea.org/sites/default/files/29402043133.pdf. Accessed 26 May. 2021.
