THE GLOBAL MANUFACTURING & INDUSTRIALISATION SUMMIT
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KNOWLEDGE HUB

Global annual greenhouse gas emissions have grown 41% since 1990, and they are still climbing. Rapid urbanisation and advances in technology has led to increased demand on the energy grid to churn out power produced by carbon-heavy fuels like coal and oil – despite the negative environmental consequences. But is there another way to power the world?

Since the industrial revolution, the dichotomy between economic growth and environmental damage has been growing. For example, global manufacturing value-added output is set to reach almost $13.8bn next year, yet around 70 percent of global greenhouse-gas (GHG) emissions comes from the energy sector, with manufacturing making up 12.4 per cent of this value – and rising.

Until now, coal, oil and gas have provided cheap energy the world over but for the first time, renewable energy sources are gaining traction – partly due to the pressure governments are placing on industry to reduce their carbon emission levels to achieve national targets.

Decarbonisation is the reduction of carbon emissions per unit of electricity generated. It is the substitution of traditional energy sources for newer, cleaner ones and the process of governments, sectors and businesses choosing cleaner energy solutions. Although the progress of renewable energy has been mixed, recent technological innovations have increased efficiency and as a result, some believe it could hold the key to achieving the emission reduction targets contained in the Paris Agreement.

It is estimated that by creating, refining, and applying new processes, technologies, and feedstocks on a large scale, decarbonisation could allow carbon dioxide emissions from industry to drop by 60 percent in 2040 and by 80 to 95 percent by 2050. But this is a monumental task that does not come cheap. According to a study by McKinsey – Decarbonisation of industrial sectors: The next frontier–  the cost of implementing the six most promising decarbonisation strategies could amount to around EUR 21bn by 2040, and about EUR 55bn by 2050 as new forms of energy require entirely new infrastructure and energy delivery systems. In addition, the Intergovernmental Panel on Climate Change (IPCC) argue that to achieve the targets outlined in the Paris Agreement, there must be “virtually full decarbonisation by 2050” – a very steep requirement for change.

However, increasing research suggests that despite the monumental task, decarbonisation would provide far-reaching benefits on top of a reduction of emissions including lower energy prices and a smarter, more flexible and more efficient energy system that takes a step closer to the circular economy model.

So, what does decarbonisation in the manufacturing industry look like?

The McKinsey report explains that the most useful method of decarbonisation are energy-efficiency improvements including; the electrification of heat, the use of hydrogen made with zero-carbon electricity as a feedstock or fuel, the use of biomass as a feedstock or fuel, and carbon capture and storage (CCS) or usage (CCU). This is because using renewable resources to produce heat allows the biggest drop in emissions whilst producing the most energy. Therefore, if newly built factories and plants are designed to use biomass as a fuel or feedstock – the manufacturer would eventually reap financial benefits and allow productivity levels akin to traditional energy with a far smaller carbon footprint.

However, decarbonising manufacturing is complex – it is not simply a management decision. The ability to decarbonise a factory or plant relies on a host of external factors such as the availability of technology and infrastructure for instance. For example, any manufacturers considering decarbonisation must understand whether there are low or zero carbon fuel sources available at a location and whether the facility has access to storage capacity for captured CO2 as without these provisions, it is impossible to bring the new energy sources, at the scale needed, into the factory.

Therefore, in order to drive adoption of decarbonisation in the manufacturing sector, McKinsey suggests that industrial companies considering decarbonisation should seek opportunities for collaboration – such as through co-investing in a shared carbon-storage infrastructure or supporting and jointly investing in the research and development of decarbonisation technology. Doing so would provide a stronger ecosystem within which decarbonisation could thrive.

On a macro level, the process of decarbonisation requires public and regulatory support. For example, there must be backing for carbon storage, tax incentives and even a commitment to help train and develop the skills needed to run manufacturing operations on a zero-carbon power system. Consequently, if decarbonisation is to reach its potential, policymakers must develop road maps of support for industrial decarbonisation that suggest adjustments to regulations and incentives to support decarbonisation efforts – on a local and regional level. Doing so is the only way to encourage industrial and power companies through the transition and unlock investment into technology in this field.

In some instances, this process is already underway. For example, Germany’s Federal Cabinet has adopted a National Hydrogen Strategy and appointed a National Hydrogen Council to enable the decarbonisation of transport and core domestic industries including manufacturing. The strategy includes making EUR 310mn available to invest in green hydrogen research and innovation by 2023 and promotes the development of green hydrogen to be used in industries that include steel making and chemicals as well as for aviation and heavy transport fuels.

Meanwhile in the UK, which just a decade ago sourced more than 40% of its electricity from coal now derives 30% of the country’s electricity from renewable energy – of which 18% of electricity is generated from nuclear power. Indeed, Agneta Rising, director general of World Nuclear Association said; “All forms of low-carbon power generation will be needed for the UK to achieve its target of net-zero by 2050.” She went on to highlight the importance of considering how decarbonisation can help deliver the dual ambitions of stimulating economies and achieve ambitious carbon targets in the post-virus recovery period.

Although the pandemic has caused global chaos, it also presents the opportunity to spark changes that will cause beneficial economic, social and environmental effects – of which decarbonisation is just one. In Europe, the EU recovery effort is centred around encouraging businesses to help ignite economic recovery whilst simultaneously considering the EU Green Deal. For example, the European Commission stated that renewables and hydrogen are “key for deep decarbonisation, and therefore central to the green recovery”. Indeed, according to a report by the Financial Times, EU officials are “under pressure to approve cash injections only if companies can prove their business models are compliant with global climate goals like the Paris Agreement”. In many countries the virus has reduced the demand for electricity due to a reduction in manufacturing output. This has led to the switching off of fossil fuel power generation methods. The UK passed a significant landmark this week (9 June 2020) going two months without using fossil fuels as part of the mix of power generation feeding into the National Grid.

The question of how to structurally decouple economic growth from carbon emissions has been around for decades, yet new technology, advances in renewable energy power generation capabilities, heightened awareness of the global climate crisis, and now the pandemic may have created the perfect opportunity for decarbonisation to be seriously considered by the industries and sectors currently using the most power. Indeed, there is growing support for the idea that embracing decarbonisation could help regenerate economies, without inducing a rebound of CO2 emissions. The onus is now on governments to provide the platform and industry to drive forward the change.

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