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• In the UK alone, industrial sectors (energy-intensive and less energy-intensive industries) contribute around £170 billion to the economy, accounting for 9% of GDP and 2.6 million direct jobs. However, industrial sites produced approximately 16% of UK emissions in 2021, require significant amount of energy and their pathways to net zero are expensive and technologically difficult.
• A suite of measures is likely needed to transition these industries to net zero including demand reduction and efficiency improvements, fuel and feedstock switching or carbon capture. The best pathway varies from sector to sector.
• There are novel and innovative technologies being developed to transition the industries. Many of these are nearing technological maturity; however, it is unlikely that one technology will emerge as a “winner” and the best route will depend on regional contexts.

Energy-intensive industries

Energy-intensive industries (EIIs) are those with high energy demands and usage, typically in the processing of raw materials or manufacturing sector[1]. They include, among others:

• Steel, iron and non-ferrous metals
• Cement and lime
• Chemicals
• Paper and pulp
• Ceramics
• Glass

It is common for industries to be located in coastal regions or near lakes or rivers, where they tend to create local, clustered hotspots of economic activity, for example, in the UK in South Wales, Southampton, Humberside, Teesside, Grangemouth and Merseyside. Such locations provide access to water for use in processing, washing, cooling, and importing feedstocks or exporting products. Industrial clusters also provide opportunities for decarbonisation in terms of shared infrastructure for carbon capture, utilisation, and storage (CCUS) and hydrogen.

However, the pathways to reducing or eliminating their greenhouse gas (GHG) emissions are often technologically difficult and/or expensive. And, given that energy makes up a high proportion of their costs, these sectors are extremely exposed to energy price changes, such as the energy prices rises in 2022. These factors make being market competitive a challenging prospect due to the capital-heavy nature of investments to reduce emissions.

Nevertheless, they do have the potential for a net zero by 2050, with any residual emissions offset by greenhouse gas removal measures and the benefits they bring. Getting there from where we are today is poised to be challenging – for the companies, workforce, supply chains, local communities, and governments.

Across the UK, industrial sectors (energy-intensive and less energy-intensive industries) contribute around £170 billion to the economy, accounting for 9% of the GDP and 2.6 million direct jobs [2]. The outputs of these industries are the building blocks of many consumer products, from buildings and infrastructure to plastic goods. Due to their role in the supply chain, they are central to reaching net zero emissions: from concrete and cement for construction to steel and aluminium for car manufacturers and wind farms.

Making a wind turbine

Decarbonisation drivers

In 2020, EIIs accounted for 26% of global CO₂ emissions[3] with emissions being reduced during the Covid pandemic but surging back during 2022. Emissions from industrial processes also include methane (CH₄) and nitrous oxides (NO_x), both potent greenhouse gases:

• Globally, iron and steel along with cement production contributed to 55.6% of the 9.37Gt CO2 released by EIIs during 2021.
• In the UK, industrial sites were estimated to have contributed 65 MtCO₂e in 2021, approximately 16% of the UK’s emissions.
• Industrial clusters represent around 20% of Europe’s GHG emissions[4].
• In China, the steel industry alone accounts for 15% of the country’s total CO₂ emissions[5], with industrial emissions totalling around 4.5Gt of CO₂ per annum[6].
• The industrial sector in India accounts for approximately 20% of the country's total GHG emissions[7].

Industrial processes and products CO2 emissions (MtCO2e) in 2019 - examples

And there are a growing number of reasons for industries to cut their emissions:

• National targets and legislation: More than 130 countries, including the UK, have set, or are considering a target to reduce GHG emissions to net zero by 2050. Of the top ten emitters, Japan, Canada and the EU have legally binding net zero commitments.
• These extend down into environmental regulations which companies must follow[8]. For countries with legally binding targets, such as the UK, this is the key reason why emissions must be reduced.
• Business opportunities: To build resilience, transparency, and competitiveness. This includes avoiding stranded assets, using waste products, and saving money through improving process efficiency, on-site renewable energy generation, energy storage and energy flexibility.
• Economics: Investment decisions are driving global market developments, e.g. rising taxes on carbon emissions. This impacts energy price changes and may incentivise fuel switching and decarbonisation.
• Local co-benefits: Changes which reduce GHG emissions can benefit the local environment by improving local air quality and reducing water pollution.
• Stakeholder sustainability expectations: There is a growing shareholder, customer, and employee expectation to minimise harm as part of wider environmental, social and governance (ESG) criteria.

Routes to net zero

Getting to net zero in these industries will take time and requires further development and cost reductions in future technologies and innovations. The main routes to reducing GHG emissions are the same for industrial processes as for other energy uses, with actions required across each area: demand reduction and efficiency improvement measures; where possible, switching to low carbon energy sources such as renewables; and, where the energy source cannot be made low carbon, carbon abatement measures such as CCUS will be required. Due to the specific processes, infrastructure, and resources involved, the best pathway varies from sector to sector and by location.

Efficiency improvements: Reducing demand and making efficiency improvements at industrial sites could be achieved through increasing product longevity, improving processes, and installing more efficient equipment, as well as material efficiency and circular economy measures such as expanded material reuse and recycling networks. Specifically, a more circular economy could reduce CO₂ emissions from four major industry sectors (plastics, steel, aluminium, and cement) by 40% globally and by 55% in developed economies like Europe by 2050[9]. A specific risk, however, is that investing in efficiency improvements could create stranded assets by causing delayed investment in other decarbonisation activities. It is, therefore, important for businesses to maintain a long-term strategic focus and be aware of the future implications of immediate actions.

Diversification of energy sources: Focus on the source of energy is also required to reach net zero. Electrification has become more economically attractive for some producers as it has become more feasible to electrify processes which require lower heat (of less than 1,000ᵒC), with increasing supply of low-carbon electricity. For other processes, which may require higher temperatures or round-the-clock heating, other options will be more appealing. These include low-carbon hydrogen, biomass, and thermal storage.

Abating fossil fuels: Another element is the use of measures to address emissions that cannot currently be reduced entirely by other means – particularly where emissions can’t be abated as they are produced during the process, such as in steel and cement production. These measures include CCUS, and CO₂ removal approaches such as direct air capture (DAC),  bioenergy with carbon capture and storage (BECCS), carbon offsetting and nature-based solutions:

• The IEA predicts that to reach net zero emissions, 5,000 million tonnes of CO₂ will need to be captured globally per annum by 2050. These measures, as well as market mechanisms such as product standards and carbon taxes, could also limit so-called ‘carbon leakage’ by safeguarding the competitiveness of local and national industries. As such, CCUS is predicted to become a £200 billion global industry with the potential to export skills, expertise, and supply chains. However, it is also expensive per tonne captured and there are concerns that it legitimises continued fossil fuel use and risks locking manufacturers into fossil fuel-based processes.
• Carbon offset is another way through which EIIs can mitigate their carbon emissions by funding projects, on compliance or voluntary markets, that take a similar amount of CO₂  and other GHGs out of the atmosphere. The projects may include forestation, renewable energy funding, carbon or methane capture or energy conservation funding. In order for offsets to be effective they must provide funding for a project that otherwise would not have occurred ("additionality"). "Additionality" of CO₂ reduction of removal must be clearly specified in the offset. They also must be unique, real and measurable and have a long-lasting effects. Finally, offset instruments must not be exploited ("greenwashed") to cover up an environmentally harmful activity or delay more significant actions.

Future technologies

Whilst the hierarchy of measures indicates the overall approach to achieving net zero greenhouse gas emissions, there are technologies and pathways where sectors differ. For example:

• For steel, the introduction of alternative ore-based production processes using hydrogen, including Direct Reduced Iron (DRI) technology, as well as increased electric arc furnace production, are seen as critical to decarbonisation.
• Within cement production, process emissions from clinker calcination account for two-thirds of emissions. Therefore, clinker substitution, in which alternative materials including volcanic ash, ground limestone and broken glass are used, is being pursued as a key decarbonisation step.
• Within aluminium production, inert anode technology is seen as a promising option for the sector to decarbonise, as most aluminium production facilities currently use carbon anodes.
• Electrification is seen as a major opportunity for the paper industry, as 96% of these operations could be electrified using existing technologies[10] – as it mostly requires temperatures below 400ᵒC during its manufacturing processes.

For more information on each of the sectors and their potential pathways to reaching net zero emissions, please see the International Energy Agency’s (IEA) Achieving Net Zero Heavy Industry Sectors in G7 Members report[11].

Notably, many low-carbon technologies have reached large prototype and demonstration phases. For example, steel production using green hydrogen or electric arc furnaces could be scaled commercially by 2025.

However, at their current pace of development, most of these technologies won’t be commercially ready for industry adoption before the second half of the 2020s. This is particularly important, as energy-intensive industries operate in highly competitive, global markets and face low profit margins, high capital costs for equipment, and long asset life (of over 15 to 25 years). This means that 2050 is just one investment cycle away and therefore urgent decisions will be needed on which technologies to install or pursue.

It is also unlikely that one of these technological methods will emerge as a “winner”. The IEA calls for at least two or three different near-zero emission methods for each sector. Integrating the whole system, infrastructure and technology maturation timelines will be key to an effective and smooth transition.

As part of its industrial decarbonisation strategy, and due to the natural distribution of these industries, the UK government is focussing its industrial decarbonisation efforts on regional clusters as a way to build these integrated systems.

However, it remains uncertain how the UK government will support the decarbonisation of dispersed sites. Also, high costs will be incurred to abate their large quantities of emissions, as a result of connecting them to existing networks or shared infrastructure considering the distance from clusters.