Agora Energiewende Webinar: Technology and policy options for a climate-neutral energy-intensive industry

14 Apr 2020

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.@KWitecka from @AgoraEW on:

“Technology and policy options for a climate-neutral energy-intensive industry”

Options for the steel, cement and chemical industries


Industry has long been out of the discussion, why?

Rationale :

Industrial Emissions


3 sectors account for 66 % of industrial emissions

Most CO2-intensive:

Where do they come from?


Industry emits 1/5th of national territorial emissions, of which 60 % are steel, chemicals and cement

Despite energy efficiency measures, emissions stayed constant.

Energy efficiency measures are only able to compensate for continued demand.

This applies to a global scale.

If we believe in continued economic growth, energy efficiency measures are not sufficient.

Strategies to avoid process-based emissions

3 types of strategies:

Key technologies


Costs : @AgoraEW study database with…

Industry re-investment needs

Example of steel: technology could be ready and deployed by 2025 from a technical point of view. Even if not enough green hydrogen available, temporarily natural gas could be used.

Important not to lift the re-investment cycle beyond 2025.

European/German industry is working on different pilot plants, but large-scale deployment framework is missing

Policy instruments for enabling a climate-neutral industry

Key message: all plants that are built today, will still exist in 2050 (lifetimes of 20/30 tot 70 years are not unusual)

–> any future investment from now on must therefore be climate neutral

Re-investment need

Example : Germany.

53 % of steel infrastructure will need to be replaced by 2030 59 % for chemicals 30 % in cement-sector

Employment : lots of people are affected by investment decisions. Strategic decisions have big impacts.

Marginal abatement costs and carbon price

…but marginal abatement cost of new technologies are significantly higher than conventional tech.

The CO2-price in the EU ETS is not enough to introduce these technologies to the market.

Therefore, other policy instruments needed.

Other policy options

[I] High CO2-price with border adjustment, under discussion in Europe

[II] Policy mix:

Industrial value chain perspective

Upstream -> competitive prices for electricity, infrastructure for CCS, green hydrogen quota Midstream -> minimum CO2 price, carbon contract for difference, green financing instruments Downstream -> low-carbon materials quota / standards

Option I : High CO2 price with border carbon adjustment

If basic materials are imported -> carbon adjustment

If export to other countries -> also border adjustment? Question if this is feasible (WTO)

Tracking of CO2 content needed: difficult administration, room for fraud

Option IIA: Carbon contract for difference

Money coming from carbon content surcharge on products

Illustration for steel industry:

Break even of CO2 abatement around 100 EUR / tonne CO2

Still free allocation based on old allocation benchmark

Difference would be covered by carbon contract for difference


-Energy efficiency is not sufficient -Ambition is high for 2030 -It is not possible to focus first on other sectors, new investments must be carbon neutral now.

Questions and answers