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COP27: UN report shows pathways to carbon-neutrality in “energy intensive” steel, chemicals and cement industries

COP27: UN report shows pathways to carbon-neutrality in “energy intensive” steel, chemicals and cement industries

Steel works

The United Nations has warned the world will fall short on the 1.5-degree C average increase in temperatures target without rapid and large-scale action to tackle greenhouse gas emissions from the energy intensive industries, which account for about 25% of total CO2 emissions globally and 66% of those of the industrial sector. A new technology brief presented today at COP27 singles out the cement, iron and steel, and chemicals and petrochemicals industries as the most significant industrial CO2 emitters. The brief, focusing on the Pan-European, North American, and Arab regions – prepared by UN Regional Commissions UNECE and ESCWA – identifies key practical measures that should be turned into action. 

“Cement, iron and steel, and chemicals and petrochemicals industries are the backbones of modern economies. Their emissions are high, so they must play a pivotal role in the low-carbon post-Covid recovery”, said UNECE Executive Secretary Olga Algayerova. “There are pathways for these energy-intensive industries to transition to a carbon-neutral economy while maintaining or even improving their global competitiveness. Adopting circular economy approaches to help reduce needs for new materials will be crucial in this respect. Solutions must be implemented without delay” she added. 

Action needed in hard-to-abate yet key economic sectors  

Cement, iron and steel, and chemicals and petrochemicals industries (accounting for 27%, 25%, and 14%, respectively, of industrial CO2 emissions) are the foundation of modern economies, and are the starting point of many industrial value chains, providing both raw and processed materials.  

Cement is the second-most-consumed product globally after potable water. The cement industry alone is responsible for almost 7% of the world’s emissions. In comparison to other energy intensive industries, cement production generates about 7kg of CO2 per revenue dollar, compared to 1.5kg in steel production and 0.3 kg in chemicals production. According to IEA, the global demand for cement is expected to increase 12-23% by 2050. If the industry does not embrace technology solutions to cut its carbon footprint this anticipated growth will result in even larger GHG emissions. 

The iron and steel industry produces one of the most important engineering and construction materials and accounts for about 7-9% of anthropogenic CO2 emissions (approx. 3 Gt CO2/ year) (CCS Institute, 2020). To put it into context, if the steel industry were a country, it would be the 5th largest contributor to global CO2 emissions.  Steel is a component of electric vehicles, wind turbines, infrastructure and manufacturing processes. Countries worldwide are taking different approaches towards decarbonising the steel industry. As one example, the brief cites the use in the US of “green” hydrogen to forge steel, coupled with using recycled materials (scrap accounts for about 70% of raw metal input into steel production today in the country). 

The chemical industry is the largest industrial consumer of both oil and gas, as well as the largest industrial energy consumer overall. This consumption and production results in just under 1 GtCO2/yr of emissions from the sector, as reported by the IEA. This is because it uses fossil fuel as feedstock and not only as a source of energy. The chemical industry in Europe and the US contributes $1.1 trillion to GDP and employs over 1.7 million people. 

Given their high carbon footprint, emissions reductions in these industries must be a priority as countries seek to deliver on their Paris Agreement commitments, the brief argues. Yet, plenty of challenges remain to achieve carbon neutrality in the industrial sector. These include a wide range of difficult to replace energy intensive carbon emitting industrial processes; low-profit margins for commodity products in a globally competitive environment; and the expected rise of demand for carbon intensive materials in sectors such as buildings, transport, and health care.  

On top of this, decarbonisation of the production of cement, steel and chemicals is challenging and, in some cases, technically impossible. Energy intensive industries require high temperatures and chemical processes that are today most efficiently reached by burning fossil fuels. Their energy usage makes up a significant part of production costs. In addition, CO2 emissions are also often a by-product of the chemical transformation processes in the production of cement, steel and chemicals. Fossil fuel is also used as a feedstock in chemical transformation reactions and manufacturing.  

To tackle these challenges, the brief calls for structural shifts throughout the value chain and systemic approach to developing the “Circular Carbon Economy” and industrial clusters. This is key, it argues, to not only slashing emissions in these so-called “hard-to-abate” industries, but also to reduce costs, improve competitiveness and market readiness, and create green and sustainable jobs. 

All available solutions must be harnessed 

Drawing on a range of concrete policy examples and available technological and policy solutions, the brief sets out a range of key recommendations:  

  • Deploy technology solutions for carbon neutral industries: Countries need to support and encourage innovation and research and development to advance development and deployment of low- and zero-carbon technologies. Industrial energy efficiency, carbon capture, use and storage (CCUS), hydrogen, nuclear power and heat, and electrification are key to achieving carbon neutral industries.  

  • Embrace the concepts of circular carbon economy and industrial clusters, based on carbon reduction, capture, reuse and removal.  Investments like those made possible through the EU Innovation Fund and government and private sector initiatives can create sustainable jobs and provide a low-carbon stimulus to economies. 

  • Develop policy framework and institutional capacity to support transition to carbon neutral industries: Clear regulatory frameworks that allow commercialisation of low- and zero-carbon solutions and decarbonisation of energy intensive industries are necessary. Legislation needs to be adapted and include new regulations applicable across all energy intensive industries, such as taxing carbon emissions from industries, codes of practice for adoption of CCUS etc.  

  • Attract financing and promote public-private partnerships (PPP): Financing projects at an early stage is necessary to scale favourable conditions and allow earlier commercialisation of low- and zero-carbon solutions. Investments need to be directed towards modernisation and decarbonisation of energy intensive industries. There is a need for inclusive multi-stakeholder initiatives that are strengthened by public-private partnerships.  

  • Promote regional cooperation to share best practices and lessons learned: A sub-regional approach to share knowledge and best practices is needed to accelerate existing efforts, improve cost efficiencies for large infrastructure projects and promote projects of common interest. 

The brief further highlights international cooperation as essential to support all countries across the Pan-European, North American and Arab regions to accelerate the energy transition and attain carbon neutral energy intensive industries. Different countries and sub-regions require different solutions based on their socio-economic and political circumstances as well as access to natural resources. UN Regional Commissions UNECE and ESCWA will continue to offer a neutral platform for inclusive and transparent dialogue, exchanges of best practices and lessons learned, and consensus building on effective approaches. 

The brief is the latest in a series of technology briefs developed by UNECE as part of its Carbon Neutrality Toolkit

United Nations Economic Commission for Europe

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