Pursue a renewables-based strategy for industry & transport sectors: IRENA

An extract from IRENA’s summary report , ”Reaching zero with renewables: Eliminating CO₂ emissions from industry and transport in line with the 1.5^oC climate goal”

Limiting the rise in average global temperatures to 1.5 degrees Celsius (^oC) requires all sectors of the economy to reach zero carbon dioxide (CO₂) emissions early in the second half of this century. Doing so presents significant technical and economic challenges, particularly in some highly energy-intensive sectors of industry and transport. These challenges, however, cannot be deferred any longer. The Paris Agreement, in calling for rapid decarbonisation, has focused attention on the energy sector as a major source of global emissions. The latest studies from the Intergovernmental Panel on Climate Change (IPCC) show the window of opportunity closing fast for meaningful action to counter the global climate threat.

Options that would deliver only partial emission reductions, therefore, are not sufficient. Policy makers and industry investors need to focus unerringly on scaling up the few options consistent with reaching the zero-emission goal. Most of those options rely on renewable energy technologies. Four of the most energy-intensive industries and three key transport sectors stand out as the hardest to decarbonise. Together, those seven sectors could account for 38% of energy and process emissions and 43% of final energy use by 2050 unless major policy changes are pursued now.

This Reaching zero with renewables study outlines the best available deep decarbonisation options for those sectors. Prepared by the International Renewable Energy Agency (IRENA), it supports the aim of holding the global temperature rise at 1.5o C this century, compared to pre-industrial levels. Progress in these sectors has been limited to date. But two changes in recent years should allow for faster and deeper cuts in emissions. Firstly, societies worldwide have come to recognise the need for deep decarbonisation across all sectors, despite the challenges involved. Secondly, steady and continuing cost reductions for renewable energy open up a wider range of technology options. Renewable energy technologies, along with batteries and other enabling technologies, are now proven to be effective and affordable, in every country, for a growing range of applications. Renewables show more potential – whether for direct energy use or as feedstocks – than ever before. This makes them crucial to reach zero emissions.

None of the options identified, however, is commercially mature or ready for wide adoption quite yet. Uncertainties remain about their potential and optimum use, and none will be easy to scale-up. The reasons are varied and complex. But to begin with, they include: high costs for new technologies and processes; the need for enabling infrastructure ahead of demand; highly integrated operations and long-established practices; uneven, large and long-term investment needs; gaps in carbon accounting; and business risks for first-movers, including added costs and consequent “carbon leakage” in favour of competitors.

Addressing these challenges demands far more attention and creativity than is currently being applied. Sector-specific and cross-cutting actions are also needed urgently. One of the first steps must be a renewables-based strategy for industry and transport with the clear end goal of zero emissions. This, in turn, calls for inter-linked sector-level strategies at the local, national and international levels, built on the five technology pillars of demand reduction and energy efficiency, renewable electricity, renewable heat and biofuels, green hydrogen and e-fuels, and carbon-removal technologies. Renewables, together with demand reduction and energy efficiency, could account for over 80% of the CO2 emission reductions needed.

Focusing on the goal

Limiting the global average temperature rise to no more than 1.5°C above pre-industrial levels will require all sectors of the economy to reach zero carbon dioxide (CO2 ) emissions early in the second half of this century. Doing so will be very challenging, particularly in some key industry and transport sectors. Reaching zero requires a completely different mindset to that mostly adopted to date. Actions that deliver only partial emission reductions will not be sufficient, and some may actually hinder reaching zero. The focus of policy makers and industry investors must unerringly be on a pathway that progressively scales up those few options that are consistent with reaching the zero-emission goal.

Many of the options discussed in this report have been known about, debated and experimented with for 20 years or more, but in general that research and those discussions have not translated into deployment, and only relatively modest improvements have been made. Two things have, however, changed recently that potentially shift the paradigm and should allow for far more rapid progress in the next decade and beyond. Firstly, there is strong and widening societal recognition, and increasing political consensus, on the need for all sectors to make deep cuts in carbon emissions, despite the challenges in doing so. Secondly, renewable energy, and some enabling technologies such as batteries, have developed significantly and are now proven to be a credible and increasingly affordable option in all countries and in many applications.

The use of renewables both for energy and for feedstocks will be central to the pathway to zero emissions. The rapid decline in the costs of renewables over the past decade, and the future potential for further cost reductions and scaling, opens up options for the use of renewable energy that were previously dismissed. As this report shows there is a high potential for renewables use, much more than previous analysis has identified. Renewable electricity (from solar, wind, ocean and geothermal energy) and renewable heat and renewable fuels (from biomass and renewable electricity (producing synthetic fuels)) can address energy needs in industry and transport, and biomass and synthetic renewable fuels can provide industrial feedstocks, displacing fossil fuel sources. Renewable-based solutions have not been explored to date with the rigor and urgency that is needed.

While the solutions and policy measures needed for some sectors – including power and passenger vehicles – look relatively clear (although still challenging), there are seven industry and transport sectors which will be the hardest to decarbonise. Those seven sectors (shown in the graphic below) will account for 38% of energy & process emissions and 43% of final energy use by 2050 unless major policy changes are pursued. In all cases renewables could play a far larger role now. Renewables must grow to become the principal source of energy and feedstocks in the next few decades and could contribute circa two thirds of the reductions to direct emissions needed across these seven sectors.

Potential solutions are available for each of these sectors, but none of them are commercially mature and ready for wide adoption, and many uncertainties remain about their potential and optimum use. Analysis of options is often too siloed with the full life cycle of products not adequately considered, and the interdependencies, synergies and trade-offs between sectors are not well understood. Much deeper analysis and debate, and many more pilot projects to build evidence and experience, is needed. Actions to deliver those projects must be prioritised more highly by all stakeholders and must move more quickly towards scale-up over the coming decade.

This report explores what is possible. It has a twin focus: examining how the world could achieve zero emissions in key industry and transport sectors by around 2060, and assessing the potential role of renewables-based technologies in doing so. The report aims to provide both an accessible overview of the topic and a source of the latest key insights and data. It draws on insights from across IRENA’s technology analysis to date, as well as bringing together and summarising current expert understanding of key details including status, challenges, costs and potentials of the options. It signposts where further detailed discussions can be found and highlights gaps in our knowledge that should be the focus for further detailed work. By doing so this report can serve as a starting point for the more comprehensive and informed discussions that are needed among policy makers and other stakeholders.

Reaching zero by 2060

IRENA’s Global renewables outlook report (IRENA, 2020a), published in April 2020, focused on a pathway to 2050 consistent with a goal of limiting global temperature rise to “well below 2-degrees Celsius”. The report, however, also explored the additional abatement, beyond the Transforming Energy Scenario, needed to eliminate energy-related and industrial process CO2 emissions. That Deeper Decarbonisation Perspective (DDP) is not a full scenario but does provide guidance on the areas for accelerated action to reduce energy and process-related CO2 emissions to zero by 2060. The bottom bar in the figure below summarises the balance of reductions identified in the DDP analysis across different emission reduction measures in order to reach zero. This report builds on that analysis to explore how that DDP can be delivered, a prerequisite to limiting temperature rise to 1.5 °C from preindustrial levels.

Each of the sectors discussed in this report is in the early stages of exploring emission reduction strategies, but many of the options being looked at will only partially reduce emissions and are not consistent with the sector eventually reaching zero. In order to not waste resources, lose time or lock in emissions, a clearer focus is needed on the end objective of zero CO2 emissions when evaluating which options to pursue. Technologies and processes that cannot eventually lead to zero or close-to-zero emissions are only worth pursuing if they either greatly reduce the scale of the challenge for true zero-emission solutions, or if they will be replaced in the next 40 years or are a stepping stone to successfully implementing zero-emission solutions.

When these criteria are applied, only a very small number of currently conceived options in each sector are consistent with a zero CO2 emissions objective; those options are listed in the sector chapters that follow. Approaches will differ across sectors, but the majority of emission reductions will be achieved through a combination of five “emission reduction measures”, three of which rely primarily on renewable energy. The application of these measures in each sector is explored throughout the report, but in each case a variety of other factors and trends will aid their use. Key among them is the continuous decline in renewable power costs and a rapidly widening field of deployment which opens up the potential for wider electrification. At the same time there is growing understanding of the value of demand-side flexibility as an enabler for higher shares of variable renewable energy (VRE) sources (such as solar and wind), which the industry and transport sectors can both contribute to and benefit from. (That flexibility potential is explored in IRENA’s 2019 report Innovation landscape for a renewable-powered future and the upcoming report Electrification with renewables: Driving the transformation of energy services.

Other examples of positive factors and trends include: the flexibility of some industrial processes to be relocated, opening up options to site them where there is the best access to low-cost renewables; the growing momentum behind green hydrogen with steadily improving technology and potential for declining costs; and the falling cost of batteries and rapidly growing supply chains for passenger electric vehicles with potential spill-over benefits for electric trucks. These and other trends explored in the report are opening up possibilities for industry and transport that make a zero-emission objective an achievable prospect.

Industry overview

The industrial production of key materials is an essential enabler of modern economies. As countries develop, demand for such material continues to grow. However, that production currently comes with high CO₂ emissions. Industry accounts for around 28% of total global CO2 emissions, but four industrial sectors in particular – iron and steel, chemicals and petrochemicals, cement and lime, and aluminium – account for almost threequarters of total industrial emissions.

The majority of energy used in industry is currently sourced from fossil fuels. But energy use is not the only source of emissions in the industrial sector; CO₂ emissions must also be eliminated from production processes and from the life cycle of products. Reducing emissions and eventually reaching zero will require radical shifts in how such materials are produced, consumed and disposed of. To date, however, the need to drive long-term emission reductions in these four industrial sectors has not received the necessary policy attention.

A number of reasons account for this lack of action. Two in particular are key. Firstly, only a few economically viable CO₂ emission reduction solutions are currently available for these industrial sectors, and no consensus exists on which of the options are most suitable. Secondly, carbon leakage — that is, the transfer of production to other locations where emission reduction requirements are lower – is a deterrent in promoting decarbonising efforts.

Transport overview

Transport plays a vital role in the world’s economy. It facilitates the movement of people and goods across the globe and enables modern life as we know it. This comes at a cost, however, as the transport sector is also a major source of emissions due to its current heavy reliance on fossil fuels. With the global demand for transport services expected to increase in future years there is an urgent need to identify ways to reduce emissions and advance towards the complete decarbonisation of the sector.

Transport emissions come from the combustion of fossil fuels in internal combustion engines and turbines. When combusting these fuels, a range of different greenhouse gases and pollutants are emitted, including CO₂ , carbon monoxide, nitrogen oxides, hydrocarbons and other particulate matter. The transport sector, as a whole, accounted for nearly a quarter of global energyrelated CO₂ emissions in 2017, with total CO₂ emissions of 8.5 Gt. An estimated 97% of transport-related emissions come from road, air and marine transport, while rail and other modes of transport account for the remaining 3%.

The preferable path to low CO₂ emissions has become clear for some but not all transport modes. Electrification with renewables is a viable option for rail and lightduty road transport (cars, sport utility vehicles (SUVs), small trucks), assuming that the electricity comes from renewable sources. In the case of rail transport, the use of electricity is already widespread, especially for passenger transport. In the case of light-duty road transport, battery electric vehicles have shown dramatic improvements in range (kilometres/charge), cost and market share in recent years.

For other transport modes, however, the optimal pathway has yet to become clear. Road freight transport, aviation and shipping are significant energy users and CO₂ emitters, and driving their emissions to zero by 2060 will be a challenge. This report examines the challenges and options available to reduce and eventually eliminate direct emissions in these three harder-to-decarbonise sub-sectors.

Realising a renewables-based strategy for reaching zero

1. Pursue a renewables-based strategy for end-use sectors with an end goal of zero emissions. This involves developing linked sectoral strategies at the local, national and international levels built on the five technology pillars of demand reduction / energy efficiency, renewable electricity, renewable heat and biofuels, green hydrogen and e-fuels, and carbon removal technologies.
2. Develop a shared vision and strategy and co-develop practical roadmaps involving all major players. To ensure engagement, national and international visions and roadmaps for the sector must be supported by all key actors – across political parties, across competing companies, by consumers and by the wider public. International and inter-governmental bodies and initiatives can assist in building consensus.
3. Build confidence and knowledge among decision makers. Decision makers need to better understand the risks. Many more demonstration and lighthouse projects are needed. Those who can must lead – that is, developed countries, major economies, major companies, and public and private sector “coalitions of the willing” need to step up and show what is possible.
4. Plan and deploy enabling infrastructure early on. New approaches will require substantial new infrastructure – to produce and deliver large amounts of renewable power, biofuels and e-fuels. Infrastructure investment needs to come ahead of the demand. Carefully co-ordinated planning coupled with targeted incentives will be needed.
5. Foster early demand for green products and services. Creating early sources of demand for green fuels, materials, products and services – through public procurement, corporate sourcing, regulated minimum percent requirements, etc. – will help build the scale of production needed and help reduce costs. There are some good and bad examples of this that can be learned from.
6. Develop tailored approaches to ensure access to finance. Considering the specificities of these sectors – i.e., high CAPEX, long payback periods, etc. – tailored financial instruments along the whole innovation cycle are needed. Co-operation between public and private financial institutions can help.
7. Collaborate across borders. This is a global challenge, and the solutions needed are complex and expensive. Countries working alone will not be able to explore all options in the necessary depth. International collaboration can help countries share the burden.
8. Think globally, utilise national strengths. Relocating industrial production to places with better access to low-cost renewable energy could reduce costs and create new trade opportunities. Countries with large or expanding production should be supported in getting on the right (zero-carbon-compatible) track early on.
9. Establish pathways for evolving regulation and international standards. Regulations and standards are key enablers of change but can also be barriers – they require careful planning to ensure that they shift at the same pace as the technological changes.
10. Support RD&D and systemic innovation. Large gaps in capability and large cost differences between new renewables and established fossil fuel options still remain. Investment in research, development and deployment (RD&D) is needed across a range of technologies to reduce costs, improve performance and broaden applicability. Innovation must be systemic – that is, technology innovation needs to go hand-in-hand with innovation in business models, in market design, in system operations and in regulation.

None of the options outlined in the Reaching zero with renewables report are commercially mature and ready for wide adoption; many uncertainties remain about their potential and optimum use, and none will be easy to adopt. The reasons are varied and complex but include: the high costs of new technologies and processes; the need for enabling infrastructure ahead of demand; highly integrated operations and long-established practices; uneven, large and long-term investment needs; gaps in carbon accounting; and competitiveness and carbon leakage risks for first-movers. Addressing these challenges needs to be the focus of far more attention and creativity than is currently being applied. Sector-specific actions are explored in the report, but at the higher level there are a number of cross-cutting actions that should be addressed with urgency.

The world has made remarkable progress in the last decade in developing renewable energy sources and has made positive steps towards decarbonising power systems. Collectively it must now seek to make comparable progress in addressing carbon emissions in end-use sectors. That 40-year transition has barely begun, but it warrants far greater attention, planning, ingenuity and resources now if progress is to be made fast enough. There are significant challenges but also a range of promising options – particularly those that make use of low-cost and abundant renewable resources. With the right plans and sufficient support, the goal of reaching zero emissions in key transport and industry sectors is achievable.

The full report can be accessed by clicking here