Working together will help make our energy transition journey a success

With COP26 taking place, highlighting our need to work together to enact lasting change and prevent a global climate catastrophe, Michael Nelson spoke to Faustine Delasalle, director of the Energy Transitions Commission (ETC), about how to decarbonise heavy industry.

Michael Nelson (MN): Hi Faustine, nice to meet you. Perhaps you could start by explaining what the ETC does, and what role you play within the organisation?

Faustine Delasalle (FD): Thank you Michael, nice to meet you too.

So, I have two hats at this point in time. One hat is as the director of the ETC, which is a global coalition of players from across the energy landscape that was founded more than five years ago to work through pathways to low-carbon and, eventually, zero-carbon emissions in the global energy system. Through the work of the energy transitions commission, I have led a number of analyses that have focused on how to transition the energy system, including key energy-intensive sectors and hard to abate sectors.

In 2018, the ETC published a report called ‘Mission Possible’, which was the first global report to highlight the feasibility, technically and economically, to fully decarbonise the harder to abate sectors of the economy. On the back of that, we have created a new organisation called The Mission Possible Partnership (MPP), which brings together the ETC and our allies, including the World Economic Forum, to drive decarbonisation specifically in harder to abate sectors. So, the MPP is an umbrella organisation that supports initiatives in seven heavy industry sectors and three mobility sectors to help industry leaders progress towards net zero emissions as fast as possible.

MN: Could you clarify what the term ‘heavy industry’ means?

FD: What we have qualified as harder to abate sectors are sectors that we cannot easily electrify. There are a number of sectors that are quite easy to decarbonise by electrifying the power system, and other sectors like road transportation or manufacturing that can also very easily switch to clean electricity.

But for heavy industrial processes that require very high heat in particular, it is much more difficult to electrify them in the short term, and for those sectors we need to find additional solutions. This includes four sectors in heavy industry – chemicals, cement, and steel. Then, on the mobility side beyond road transportation, the three key sectors are those over long distances – trucking, shipping and aviation – where, again, we need to find additional solutions beyond electrification.

MN: Steel accounts for somewhere around 11 per cent of global CO2 emissions, concrete 8 per cent. How are those emissions generated?

FD: All the hard-to-abate sectors put together represent about 30 per cent of global emissions today. Those emissions come almost exclusively from the use of fossil fuels in production processes, or in combustion engines in the mobility sector.

In heavy industry, processed emissions are also a factor. These CO2 emissions result from the chemical reaction which happens when you produce a product. For instance, in cement, about half of the emissions are processed emissions that are just intrinsic because of the way the cement is produced.

MN: What needs to change to see a reduction in those emissions in heavy industries?

FD: A simple switch to renewable electricity is impossible, because currently they are not using electricity as the main input for their processes. So, the full ecosystem around those industries needs to change. In heavy industry, you need to change the assets and the production processes to adapt to new forms of energy. In the mobility sectors, you need to adapt to new forms of fuels, as well as to new charging and refueling infrastructure. So, it is much more complex, in terms of transition, compared to what we can see in other sectors.

There are four major categories of options we have to reduce emissions in these areas.

One, which we have already established is quite tricky, is direct electrification. There will be opportunities to do it, but it is at an early stage of development and is not really commercially available yet. The second option is to use clean – blue or green – hydrogen. The third option is to use bio resources as a substitute for fossil fuels. However, the supply of sustainable bio resources is quite constrained, and not every industry will be able to turn to biomass as a solution. And the final option for heavy industry is carbon capture. In cement and concrete, for example, it is impossible to make a meaningful impact on emissions without carbon capture because of the processed emissions in those industries.

MN: How quickly do you think these solutions can be deployed?

FD: It is the million dollar question, right? What is very encouraging is that, compared to a few years ago, the technical viability of those solutions has really improved. Industry leaders are starting to invest in projects on an industrial scale. So, I am very confident that in heavy industry, we will see a first wave of projects before 2030.

In the heavy-duty transport sectors, sustainable aviation fuels are already being used. Admittedly, it makes up a small proportion of the fuel used in aviation, but it is used, and it is validated and approved by our certification agency. I think we will see the same in trucking and in shipping in the next few years. We will start testing those solutions on a small scale to begin with, and then it is going to be a race against time to scale those solutions as fast as possible in the late 2020s and beyond to limit cumulative emissions. We really need to see a huge deployment of those solutions in the 2030s to stay well below two degrees.

MN: What support can governments lend to heavy industries to increase investment or incentivize companies to reduce their emissions?

FD: Policy interventions need to create demand for greener products, because at this point in time, those solutions will be costlier than the alternative. That can be done through mandates – for instance, fuel mandates in the transport sectors – but it can also be done in heavy industry through product standards for end consumer products, for buildings, for machinery, etcetera, which will then force manufacturers to decarbonise their supply chains to meet those carbon standards.

Creating a level playing field is another way which governments can support decarbonisation in heavy industries, particularly for those sectors that trade internationally, because at present, given how the markets are shaped, if one player moves much faster than the other, they just risk losing market shares. So, that level playing field is very important. It can be created through carbon pricing, or through regulation, but crucially, it has to protect against unfair competition from international companies, which is why the whole discussion around common border adjustment in Europe is quite interesting.

The next thing is supporting investment. We will not need to support investment all the way to 2050, but in the very early stages of development, it is riskier for banks and asset managers to support investment. We will need to de-risk public finance and make it easier for private finance to support investments over the next ten to 15 years. It is not for forever, but it is an important step to ensure that those initial projects get off the ground.

Finally, the energy infrastructure will be under huge strain with the demand for new forms of renewable energy, and that energy needs to be available via new forms of production, new energy transportation systems, and so on. Governments can help in planning for that by anticipating the needs, and supporting financial investment in energy networks.

MN: Are there any companies or countries which are doing something that sets an example for other people to follow in this regard?

FD: Through the MPP, we have gathered groups of companies that are demonstrating that they are ready to change without waiting for policymakers. They will need support from policymakers down the line, but they are already ready to take the first steps, even if they do not have the policy guarantee. For instance, in September, more than 100 companies in the shipping sector made different forms of commitments that will get us closer to having zero carbon ships on deep sea routes by 2030, and that is extremely encouraging. What is also quite encouraging is to see financial institutions starting to organise and support the transition. We are working with colleagues at RMI on the development of investment principles in different sectors, across MPP, with the steel investment principles, that we hope to launch in early Q1, and that is also quite important because the support from financial institutions will be critical in that transition.

There have been some interesting announcements by groups of governments around support to green shipping, for instance, including from the US government. So, that is also quite encouraging, and I think the European hydrogen policy is also quite encouraging. But those efforts, in my view, remain quite fragmented, and we are missing a piece that could really bring together a coherent strategy for all of those sectors that thinks through the supply and demand side of energy.

MN: I suppose it is easy for governments to talk a good game, but much more difficult to pin them down on things.

FD: Yeah. And it is also because a number of the sectors are international sectors. I think national governments sometimes struggle to understand what they can do to really move the needle. But there are things that they can do, including supporting diversification projects, engaging partner countries and trade partners, and, in particular, creating a level playing field.

MN: That is the reason why summits like COP are so important, because it gets everyone around the table to talk. What are the main objectives that must be achieved by the global community for the summit to be considered a success going forward?

FD: For the hard-to-abate sectors, specifically, I think there has been a missed opportunity in the sense that, even in the revised versions of the NDCs that have been submitted pre-COP, they are not mentioned anywhere near enough. They are the forgotten part of the NDCs.

What the summit in Glasgow should enable us to do is to put those sectors on the agenda, and remind national delegations that there is more to be done that will enable carbon-intensive industries to meet their CO2 targets faster, while future proofing those industries and economies in preparation for the transition. In that sense, it is really encouraging to see the number of private sector players highlighting what they are already doing and the commitments they are making, because it will provide policymakers with proof that these solutions work. They can then put policy mechanisms in place that will support progress in the early stages of development.

MN: What are your final thoughts heading in to COP26?

FD: This transition will require the mobilisation of everyone in the value chain. We have touched upon this a little already, but given how deep the transformation needs to be in those heavy industry and heavy mobility sectors, industry leaders themselves cannot do that alone. They need to collaborate with each other, but they also need to collaborate with the energy suppliers, technology providers, consumers, financial institutions and governments to create the right environment for investment. That collaboration is tricky to put in place, but it is what will make or break the success of the industry transition.

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