Transing Industry throughCCUSMay2019Transing Industry through CCUS Abstract PAGE | 1 Abstract Industry is the basis for prospering societies and central to economic development. As the source of almost one-quarter of CO2emissions, it must also be a central part of the clean energy transition. Emissions from industry can be among the hardest to abate in the energy system, in particular due to process emissions that result from chemical or physical reactions and the need for high-temperature heat. A portfolio of technologies and approaches will be needed to address the decarbonisation challenge while supporting sustainable and competitive industries. Carbon capture, utilisation and storage CCUS is expected to play a critical role in this sustainable transation. For some industrial and fuel transation processes, CCUS is one of the most cost-effective solutions available for large-scale emissions reductions. In the IEA Clean Technology Scenario CTS, which sets out a pathway consistent with the Paris Agreement climate ambition, CCUS contributes almost one-fifth of the emissions reductions needed across the industry sector. More than 28 gigatonnes of carbon dioxide GtCO2 is captured from industrial processes in the period to 2060, the majority of it from the cement, steel and chemical subsectors. A strengthened and tailored policy response will be needed to support the transation of industry consistent with climate goals while preserving competitiveness. The development of CO2transport and storage networks for industrial CCUS hubs can reduce unit costs through economies of scale and facilitate investment in CO2capture facilities. Establishing markets for premium lower-carbon materials – such as cement, steel and chemicals – through public and private procurement can also accelerate the adoption of CCUS and other lower-carbon industrial processes. Title of the Report Highlights PAGE | 2 Highlights Industrial production must be transed to meet global climate goals. Industry today accounts for one-quarter of CO2emissions from energy and industrial processes and 40 of global energy demand. Demand for cement, steel and chemicals will remain strong to support a growing and increasingly urbanised global population. The future production of these materials must be more efficient and emit much less CO2if climate goals are to be met. Emissions from cement, iron and steel, and chemical production are among the most challenging to abate. One-third of industry energy demand is for high-temperature heat, for which there are few mature alternatives to the direct use of fossil fuels. Process emissions, which result from chemical reactions and therefore cannot be avoided by switching to alternative fuels, account for one-quarter almost 2 gigatonnes of carbon dioxide [GtCO2] of industrial emissions. Industrial facilities are also long-lived assets, leading to potential “lock-in” of CO2emissions. Carbon capture, utilisation and storage CCUS is a critical part of the industrial technology portfolio. In the Clean Technology Scenario CTS, which sets out an energy system pathway consistent with the Paris Agreement, more than 28 GtCO2is captured from industrial facilities in the period to 2060. CCUS delivers 38 of the emissions reductions needed in the chemical subsector and 15 in both cement and iron and steel. CCUS reduces the cost and complexity of industry sector transation. CCUS is already a competitive decarbonisation solution for some industrial processes, such as ammonia production, which produce a relatively pure stream of CO2. Limiting CO2storage deployment would require a shift to nascent technology options and result in a doubling of the marginal abatement cost for industry in 2060. Developing CCUS hubs can support new investment opportunities. Investing in shared CO2transport and storage infrastructure can reduce unit costs through economies of scale as well as enable – and attract – investment in CO2capture for existing and new industrial facilities. The long timeframes associated with developing this infrastructure requires urgent action. Establishing a market for premium lower-carbon materials can minimise competitiveness impacts. Public and private procurement for lower-carbon cement, steel and chemicals can accelerate the adoption of CCUS and other lower-carbon processes. The large size of contracts for these materials could help establish significant and sustainable markets worldwide. Transing Industry through CCUS Table of contents PAGE | 3 Table of contents cutive summary 5 Findings and recommendations 7 Policy recommendations . 7 CCUS can support sustainable and competitive industry 7 Industry drives economic growth and development . 8 One-quarter of CO2emissions are from industry 9 Industry emissions are among the most challenging to mitigate 10 Without action, industry emissions could derail climate goals 11 CCUS is central to the industry decarbonisation portfolio. 12 CO₂ management becomes integral to industrial production . 14 CCUS cuts the cost and complexity of industry transation 15 References 15 A spotlight on the industry sector . 16 Industry central to economic growth and development . 16 Industrial emissions and energy demand . 18 China leads the industrial growth story 20 The CO2emissions abatement challenge . 22 Rising to the challenge The role of CCUS 25 References 29 Towards a sustainable and competitive industrial transation 31 Without action, industrial emissions will exceed total emissions in the CTS . 31 Targeting industrial emissions in the CTS. 34 Decarbonising industry the role of CCUS in the CTS 35 The implications of limiting CCUS in industry . 46 Lower-cost opportunities for CCUS Fuel transation . 47 Prospects for hydrogen in industry 48 Carbon capture and utilisation 50 References 51 Conclusions and policy recommendations 53 Accelerating technological and business innovations for CCUS 53 References 57 Acknowledgements, contributors and credits 58 List of figures CCUS emissions reductions by subsector in the CTS, 2017-60 . 8 Figure 1.Global trends in the production of major industrial products, GDP and population over the previous Figure 2.four decades 9 Direct CO2emissions by sector, 2017 10 Figure 3.Process emissions from selected industry subsectors . 10 Figure 4.Lock-in of current infrastructure 11 Figure 5.Industry emissions pathway in the RTS compared with overall CTS emissions 12 Figure 6.Emissions reductions for key industry subsectors cement, iron and steel, chemicals by mitigation Figure 7.strategy, CTS compared with RTS, 2017-60 13 Transing Industry through CCUS Table of contents PAGE | 4 Global cumulative direct CO2emissions reductions in cement, iron and steel, and chemicals in the Figure 8.CTS, 2017-60 . 13 CO₂ capture in cement, iron and steel and chemical subsectors in the RTS and CTS, today through Figure 9.2060 14 Global trends in the production of major industrial products, GDP and population over the previous Figure 10.four decades 17 Apparent per-capita material consumption and per-capita GDP for selected countries, 2000-17 . 17 Figure 11.CO2emissions by sector, 2017 19 Figure 12.Industry subsector final energy demand and direct CO2emissions, 1990-2017 19 Figure 13.Fossil fuels in global industrial final energy demand, 1990-2017 left, and final energy demand by fuel Figure 14.for selected industry subsectors, 2017 right 20 Industry subsector final energy consumption and direct CO2emissions by region, 2017 21 Figure 15.China’s production of iron and steel, cement and selected petrochemicals, 2017 21 Figure 16.Industry fuel use in selected regions, 2017 22 Figure 17.Process emissions from selected industry subsectors . 23 Figure 18.Heat demand by industry and temperature level 23 Figure 19.Lock-in of current infrastructure 24 Figure 20.Large-scale CCUS projects worldwide 25 Figure 21.CO2captured at large-scale CCUS facilities globally by sector 26 Figure 22.CO2emissions in the RTS and CTS by sector 32 Figure 23.Global final energy use and CO2emissions in industry in the RTS, 2017-60 . 32 Figure 24.Industry emissions pathway in the RTS compared with overall CTS emissions 33 Figure 25.Global direct CO2emissions by industry subsector in the CTS, 2017-60 . 34 Figure 26.Share of global direct CO2emissions by industry subsector, today left, and emissions reductions for Figure 27.the three focus subsectors by mitigation strategy, CTS compared with RTS, 2017-60 right 35 CCUS contribution to emissions reductions by sector, 2017-60 . 36 Figure 28.CO₂ capture in cement, iron and steel and chemical subsectors in the RTS and CTS, today through Figure 29.2060 37 Captured CO2in industry by region in the CTS, 2025-60 . 38 Figure 30.Global cumulative CO2emissions reductions in cement production by abatement option from RTS to Figure 31.CTS, 2017-60 . 39 CO2capture in cement production under the CTS by technology 40 Figure 32.Global cumulative direct CO2emissions reductions in iron and steel under the CTS, 2017-60 43 Figure 33.Global cumulative direct CO2emissions reductions in the chemical subsector in the CTS, 2017-60 45 Figure 34.CCUS deployment in the chemical subsector in the CTS and RTS, 2017-60 . 46 Figure 35.Captured CO2for storage by industry sub-sector and for utilisation by scenario 47 Figure 36.Direct CO2emissions reductions for fuel production and transation sectors by mitigation Figure 37.strategy, CTS compared with RTS, 2017-60 48 Simplified levelised cost of ammonia via various pathways 49 Figure 38.Break-even costs for CO2capture and storage by application . 55 Figure 39.List of boxes Box 1. Categorising industrial CO2emissions 18 Box 2. Industrial CCUS hubs in the United Kingdom, Australia and the Netherlands 28 Box 3. Scenarios discussed in this analysis 33 Box 4. Carbon capture technology options . 36 Box 5. Cement production and CCUS An introduction . 41 Box 6. Status of CCUS in iron and steel . 44 Box 7. Beyond electricity Private procurement of low-carbon industrial products 54 List of tables Table 1. Selected CO2 capture cost ranges for industrial production 26 Transing Industry through CCUS cutive summary PAGE | 5 cutive summary Industrial production must be transed to meet climate goals Industry is the basis for prospering societies and central to economic development. The materials produced by the industry sector make up the buildings, infrastructure, equipment and goods that underpin modern lifestyles. Today, industry accounts for almost one-quarter of CO2emissions from the combustion of fossil fuels and industrial processes and 40 of global energy demand. Continued economic growth and urbanisation, particularly in developing economies, will spur strong demand for cement, steel and chemicals. The future production of these materials must be more efficient and emit much less CO2if climate goals are to be met. Emissions from industry are among the most challenging to abate The challenge to reduce CO2emissions is idable. Industry sector emissions are among the hardest to abate in the energy system, from both a technical and financial perspective. One-quarter of industry emissions are non-combustion process emissions that result from chemical or physical reactions, and therefore cannot be avoided by a switch to alternative fuels. This presents a particular challenge for the cement subsector, where 65 of emissions result from the calcination of limestone, a chemical process underlying cement production. Furthermore, one-third of the sector’s energy demand is used to provide high-temperature heat. Switching from fossil to low-carbon fuels or electricity to generate this heat would require facility modifications and substantially increase electricity requirements. Industrial facilities are long-lived assets – of up to 50 years – so have the potential to “lock in” emissions for decades. Exposure to highly competitive, low-margin international commodity markets accentuates the challenges faced by firms and policy makers. Carbon capture, utilisation and storage is critical for industry decarbonisation A portfolio of technologies and approaches will be needed to address the decarbonisation challenge while supporting industry sustainability and competitiveness. Carbon capture, utilisation and storage CCUS technologies can play a critical role in reducing industry sector CO2emissions. Transing Industry through CCUS cutive summary PAGE | 6 For some industrial and fuel transation processes, CCUS is one of the most cost-effective solutions available to reduce emissions; in some cases as low as USD 15-25 United States dollars per tonne of CO2. In the IEA Clean Technology Scenario CTS, which maps out a pathway consistent with the Paris Agreement, CCUS contributes almost one-fifth of the emissions reductions needed across the industry sector. In the CTS, more than 28 gigatonnes of carbon dioxide GtCO2 is captured from industrial processes in the period to 2060, the vast majority of it from the cement, iron and steel and chemical subsectors. CCUS makes significant inroads in these three subsectors in the 2020s, growing to 0.3 GtCO2 captured in 2030, with rapid expansion thereafter to reach almost 1.3 GtCo2 capture in 2060. With increasing ambition in the pursuit of net zero emissions from the energy system, the role of CCUS becomes even more pronounced. In particular, greater deployment of CCUS is required to decarbonise industry and to support negative emissions through bioenergy with CCS. Policy action is urgently needed to advance CCUS and support industry transation It is critical that CCUS application in industry accelerates and that opportunities for increased investment be identified. A strong and tailored policy response is needed, requiring partnerships between and across governments, industry, financial services and stakeholders. This report highlights several key priorities and strategies to support investment in CCUS for industry decarbonisation.  Facilitating the development of CCUS hubs in industrial areas with shared CO2 transport and storage infrastructure reduces costs for facilities incorporating carbon capture into their production processes. This could attract new investments while maintaining existing facilities under increasingly climate-constrained conditions.  Establishing a market for low-carbon materials, including steel and cement, through public and private procurement measures would provide a strong signal for firms to shift to low-carbon production.  Identifying and facilitating early investment in competitive and lower-cost CCUS applications in industry could provide important lessons and support infrastructure development. Transing Industry through CCUS Findings and recommendations PAGE | 7 Findings and recommendations Policy recommendations Support the development and deployment of carbon capture, utilisa