![]() (Electricity prices at this level have been attained in some places and will probably become more widespread.) As noted above, a variety of circumstances will dictate the price at which zero-carbon electricity becomes the more cost-effective decarbonization option. When the wholesale price of zero-carbon electricity is no greater than $50 per megawatt-hour, using electricity to produce either heat or hydrogen would be more economical than CCS in many situations.Further innovation could make other decarbonization options, such as electricity-powered production, cost competitive. Otherwise, CCS is still expensive, at least for now. It is also the only technology that can fully abate process-related CO 2 emissions from cement production. Where carbon-storage sites are available, CCS is the lowest-cost decarbonization option at current commodity prices.And because energy-efficiency improvements can have longer financial-payback times than companies will accept, many businesses will not pursue these improvements to the extent required for 15 to 20 percent emission cuts. That would be a good start, but it is far from enough to achieve the deep GHG reductions that many Paris Agreement pledges call for. Improving energy efficiency is a cost-effective way to lower CO 2 emissions by 15 to 20 percent.The following observations, which reflect current commodity prices and technologies, can help industrial companies focus their efforts (Exhibit 2): The regional-growth outlook for the four focus sectors matters, too, because certain decarbonization options are cost effective for existing (brownfield) industrial facilities while others are more economical for newly built (greenfield) facilities. Access to storage capacity for captured CO 2, along with public and regulatory support for carbon storage, will affect the possibility of implementing CCS. The most important factors are the availability and cost of low-carbon energy sources-specifically, zero-carbon renewable electricity and sustainably produced biomass. Companies must evaluate their options on a site-specific basis by closely examining these factors. The optimum mix of decarbonization options will vary from facility to facility, even within the same sector, because local factors determine which ones are most practical or economical. The most promising are energy-efficiency improvements, 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). Read our latest thinking on decarbonization Options for industrial decarbonizationĭespite the challenges described above, companies in the four focus sectors could bring their CO 2 emissions close to zero with a combination of approaches. Changing processes at existing sites requires costly rebuilds or retrofits. Finally, production facilities have long lifetimes, typically exceeding 50 years with regular maintenance. Third, industrial processes are highly integrated, so any change to one part of a process must be accompanied by changes to other parts of that process. Reducing these emissions by switching to alternative fuels, such as zero-carbon electricity, would be difficult because this would require significant changes to the design of furnaces. Second, 35 percent of emissions from these sectors come from burning fossil fuels to generate high-temperature heat (in the focus sectors, process temperatures can reach 700 degrees Celsius to more than 1,600 degrees Celsius). First, the 45 percent of CO 2 emissions from these sectors that result from feedstocks cannot be abated by a change in fuels, future only by changes to processes. Half of industry’s CO 2 emissions result from the manufacture of the four industrial commodities-ammonia, cement, ethylene, and steel-that are the focus of our report.Ībating CO 2 emissions in the focus sectors is more difficult than it is in most others for four technical reasons (Exhibit 1). ![]() ![]() The vast majority of industry’s GHG emissions, 90 percent, consists of CO 2. The challenges to reducing industrial CO 2 emissions Of these sectors will cost between $11 trillion and $21 trillion through 2050 and will require accelerating the build-out of renewable-energy capacity, to provide four to nine times as much clean power as industry would need in the absence of any effort to reduce emissions. A new report from McKinsey, Decarbonization of industrial sectors: The next frontier (PDF–21MB), finds that ammonia, cement, ethylene,Īnd steel companies can reduce their carbon-dioxide (CO 2) emissions to almost zero with energy-efficiency improvements, the electric production of heat, the use of hydrogen and biomass as feedstock or fuel, and carbon capture. Lowering industrial GHG emissions won’t be easy, but it is possible. ![]()
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