Decarbonisation Pathways for Industries

Abstract

The decarbonisation pathways for the industry sectors are derived. The energy-intensive chemical industry, the steel and aluminium industries, and the cement industry are briefly outlined. The assumptions for future market development used for the scenario calculations are documented, and the assumed development of the energy intensities for product manufacture is presented. An overview of the calculated energy consumption and the resulting CO₂ intensities is given, with the assumed generation mix. The textile and leather industry is also included in this chapter because of its strong ties to the chemical industry and meat production (part of the service sector).

The global gross domestic product (GDP) in 2019 was US$87.8 trillion, 3% of which came from agriculture, 26% from industry, 15% from manufacturing, and the remaining 65% from services (World Bank, 2021). The aluminium, steel, and cement industries each had a 1% direct share of the global industry GDP value, and the chemical industry’s share was 17%, although the indirect effects of those industries on the GDP were significantly higher. The materials produced by these four industries are essential for the manufacturing and service industries, which generate over 80% of the global GDP. In the next section, the status quo of the aluminium, steel, cement, and chemical industries, and that of the textile and leather industry, is briefly described. Their current production processes and energy intensities (by product unit or GDP value) and their efficiency potentials are documented. The assumptions made for the energy demand of the industry sectors if they are to achieve the OECM 1.5 °C pathways and their energy-related CO₂ emissions are also presented.

The section discusses the development of the energy demand for the industry sector, as defined in the International Energy Agency (IEA) World Energy Balances (IEA, 2020a). The section focuses on the materials group (1510) in terms of the Global Industry Classification Standard (GICS) classification, plus the textile and leather industry, which is included in the IEA industry statistics, but is classified as consumer discretionary—textiles (2520 3030) (see Chap. 4, Sects. 4.1 and 4.2).

1 Global Chemical Industry: Overview

The chemical industry is an important intermediate industry, engaged in the conversion of raw materials, such as fossil fuels, minerals, metals, and water, into a variety of chemical products used in other industrial sectors, including pharmaceuticals, fertilisers, pesticides, plastics, dyes, paints, and consumer products. Close overlaps exist between chemical and plastic industries, and many chemical producers are also involved in the manufacture of plastics. Revenue from the global chemical industry increased by 48% to US$3.9 trillion between 2005 and 2019 (Garside, 2020; ACC, 2021). Pharmaceuticals had the largest share in the segment-wise breakdown of the global chemical shipments in 2019 at 26.4%, followed by bulk petrochemicals and intermediates (16.4%), specialty chemicals (16%), plastic resins (12.2%), agricultural chemicals (8.6%), consumer products (8.3%), inorganic chemicals (7.1%), manufactured fibres (4%), and synthetic rubbers (1%). Together, the world’s 100 leading chemical companies generated US$1.05 trillion in revenue in 2019 (ACC, 2020).

Basic organic and inorganic chemicals account for the highest shares of production and consumption (by volume) in the global chemical industry (UNEP, 2019):

• Basic chemicals, also known as ‘commodity chemicals’, consist of both organic and inorganic chemicals that are used as feedstock materials for a variety of downstream chemicals. Some of the most frequently used basic chemicals are methanol, olefins (such as ethylene and propylene), and aromatics (such as xylene, benzene, and toluene). Basic chemical production processes are well established, with high capital and energy demands. Among these basic chemicals, petrochemicals and their derivatives, such as organic intermediates, plastic resins, and synthetic fibres, are strongly traded commodities, and the ethylene, propylene, and methanol production capacities account for a vast share of petrochemical production globally.

• Inorganic chemicals include acids and bases, salts, industrial gases, and elements such as halogens. Inorganic chemicals are used as intermediate inputs in the manufacture of many specialty chemicals, such as solvents, coatings, surfactants, electronic chemicals, and agricultural chemicals. Nitrogen compounds account for the largest share of inorganic chemical production globally. With the current increases in glass and paper production, the demands for soda ash and caustic soda are increasing rapidly, coupled to the high demand for inorganic chemicals in the food and cosmetics industries.

1.1 Major Chemical Industry Companies and Countries

BASF (headquarters [HQ] in Germany), Dow (HQ USA), and Sinopec (HQ China) were some of the world’s largest chemical-producing companies (based on sales) in 2018. Each of these three leaders exceeded US$65,000 million in chemical sales. Eighteen countries were represented in the list of the top 50 chemical companies in 2019, and more than 50% of them were headquartered in the USA (10), Japan (8), and Germany (5) (ACS, 2019). German companies BASF, Bayer, and Linde are the foremost international producers. BASF, for example, owns global operations in the chemical industry and is active across the entire value chain, spanning the manufacture of chemicals, plastics, performance products, functional and agricultural solutions, oil, and natural gas. Bayer is a well-known pharmaceutical and chemical manufacturer, and the Linde group owns large industrial gas and engineering facilities, which produce various gas products, including atmospheric oxygen, nitrogen, and argon.

1.2 Chemical Manufacturing and Energy Intensity

The chemical industry uses raw materials from natural gas, ethane, oil-refining by-products (including propylene), and salt to manufacture bulk chemicals, such as sulphuric acid, ammonia, chlorine, industrial gases, and basic polymers, including polyethylene and polypropylene. The manufacturing activity within the chemical industry can be divided into two main categories: basic chemicals and chemical products.

Basic chemicals are those chemicals that feed into the manufacture of other complex chemicals. Petroleum and coal products can be considered basic chemicals because they are used in the manufacture of a variety of polymers, fibres, and other chemicals. The manufacturing processes for basic chemicals, including inorganic chemicals, organic chemicals (such as ethylene and propylene), and agricultural chemicals, are considered energy-intensive industries and require large production facilities.

The second category involves the manufacture of ammonia, polyethylene, and other chemical products. Ammonia production is an energy-intensive process and is considered to be an important contributor to the chemical industry’s energy and emission footprints. Ammonium nitrate is used as an agricultural fertiliser and as a blasting explosive in the mining industry. Polyethylene, a by-product of the petrochemical industry, is produced from ethane feedstock and has a variety of uses in the plastic industry. All other chemical products, such as pharmaceuticals, cleaning products and detergents, cosmetics, paints, pesticides and herbicides, fertilisers, and plastic and rubber products, mainly require non-energy-intensive manufacturing processes (USEIA, 2016). Production facilities range from small to large enterprises, with energy supplied by either gas or electricity.

1.3 Chemical Industry: Sub-sectors Chosen for the OECM Analysis

To prepare the decarbonisation pathways, we have broken down the chemical industry into the following sub-sectors. These sub-sector classifications are based on the main applications for chemical feedstocks and follow the categorisation based on the American Chemistry Council (ACC, 2020).

• 1. Pharmaceutical industry

• 2. Agricultural chemicals

• 3. Inorganic chemicals and consumer products

• 4. Manufactured fibres and synthetic rubber

• 5. Bulk petrochemicals and intermediates, plastic resins

The most important raw materials and chemical products of those five chemical industry subgroups are described below. The division into these subgroups was based on the available economic data required for market projections. An assessment of market development on the basis of the material flow would be more precise but was beyond the scope of this research because of the large variety of products produced by the chemical industry. The analysis focuses on the development of the chemical industry’s energy requirements.

1.3.1 Sub-sector 1: Pharmaceuticals

Products and materials

There are two key stages in pharmaceutical production: (i) the manufacture of the active pharmaceutical ingredient (API) and (ii) the production of the formulation. An API is the part of the drug that generates its effect. The production of APIs is usually chemically intensive, involving reactors specific for the manufacture of specific drug substances. Formulation production is a physical process, in which substances known as ‘excipients’ are combined with APIs to create consumable products (tablets, liquids, capsules, creams, ointments, and injectables).

Production and processes

The world’s largest pharmaceutical companies are headquartered in the USA and Europe, although production activities are centred in Asia. Some of the biggest pharmaceutical companies are Pfizer (USA), Roche, Novartis (Switzerland), Merck (USA), and GlaxoSmithKline (UK). Until the mid-1990s, the USA, Europe, and Japan supplied 90% of the world’s demand for APIs. However, China’s low-cost manufacturing sector and weak environmental regulations have meant that a significant proportion of API production has now shifted, with almost 40% of all APIs currently supplied by China. Together, China and India supply almost 75% of the API demand of pharmaceutical manufacturers in the USA. China’s dominance in API production is balanced by India’s leadership in global formulation production and its biotechnology sector. India is also the third largest producer of pharmaceuticals, by volume, supplying most of Africa’s demand. India hosts the highest number of United States Food and Drug Administration (US FDA)-sanctioned production facilities outside the USA and supplies 40% of the US generic drug market. Despite India’s vast pharmaceutical manufacturing industry, the country still imports 70% of its API demand from China.

Uses and applications

Pharmaceutical products primarily service the health-care sector, with prescription and over-the-counter drugs, vaccines, and other pharmaceutical applications for human and veterinary use. The biotechnological production of crop seeds, value-added grains, and enzymes is a rapidly growing segment of the industry.

1.3.2 Sub-sector 2: Agricultural Chemicals

Products and materials

Agricultural chemicals are a type of specialty chemical, and the term refers to a broad variety of pesticide chemicals, including insecticides, herbicides, fungicides, and nematicides (used to kill round worms). Agrichemicals can also include synthetic fertilisers, hormones, and other chemical growth agents, as well as concentrated varieties of raw animal manure (Speight, 2017). The main raw materials for nitrogen fertilisers are natural gas, naphtha, fuel oil, and coal, whereas phosphate fertilisers are based on naturally occurring phosphate rocks or synthetic ammonia.

Production and processes

Some of the large agrichemical chemical producers are Syngenta, Bayer Crop Science, BASF, Dow AgroSciences, Monsanto, and DuPont. The fertiliser industry is structured around a few producers who supply the base chemicals to downstream manufacturers. The production facilities usually specialise in single-nutrient or high-nutrient fertiliser products and are located in close proximity to raw material suppliers (petrochemical producers) or agricultural regions (Roy, 2012).

Uses and applications

Unsurprisingly, large-scale farming, also referred to as ‘industrialised agriculture’, is one of the primary users of agrichemicals. In 2010–2011, the global demand for primary plant nutrients was 178 megatonnes (Mt). China (57 Mt), the USA (20 Mt), and India (28 Mt) were the highest consumers.

1.3.3 Sub-sector 3: Inorganic Chemicals and Consumer Products

Products and materials

Inorganic chemicals are materials derived from metallic and non-metallic minerals, such as ores or elements extracted from the earth (e.g. phosphate, sulphur, potash), air (e.g. nitrogen, oxygen), and water (e.g. chlorine). Other examples include aluminium sulphate, lime, soda ash (sodium carbonate), and sodium bicarbonate. The outputs of the chemical industry are used in the manufacture of consumer products, such as soaps, detergents, bleach, toothpaste and other oral hygiene products, and personal care products, such as hair care, skin care, cosmetics, and perfumes.

Production and processes

Basic chemicals are typically produced in large-scale capital-intensive facilities with high-energy demands. Industrial gases, which are also products of the inorganic chemical industry, are heavily used in the production processes associated with steel, other chemicals, electronics, and health-care products. Many global factors influence the production of industrial gases. These factors include high capital intensity, increased consolidation of operations and geographic concentration, service orientation, and innovations in key technologies, such as membrane separation. The chemical conversion processes for consumer products are basic, and the key raw materials include fats, oils, surfactants, emulsifiers, other additives, and basic chemicals. Consumer products are usually formulated in batch-type operations, which involve equipment for mixing, dispersing, and filling (ACC, 2020).

Uses and applications

The applications of inorganic chemicals are diverse. For example, chlorine is an important ingredient used to bleach paper pulp and purify drinking water and is used in oil-refining and the steel industry, and caustic soda is used in the production of soaps and detergents. These consumer products are heavily dependent upon vast distribution channels and product segmentation. Therefore, the supply chain and marketing costs are important determinants of the product price, which is also increased by the need for ongoing product development.

1.3.4 Sub-sector 4: Manufactured Fibres and Synthetic Rubber

Products and materials

Manufactured fibres, also referred to as ‘synthetic fibres’, consist of cellulosic fibres, such as acetate and rayon, and petrochemical-derived polymeric fibres, such as acrylics, nylon, polyesters, and polyolefins. There are several types of synthetic rubber, including butyl rubber, ethylene-propylene-diene monomer terpolymers, neoprene, nitrile rubber, styrene-butadiene rubber, and specialty elastomers (ACC, 2020).

Production and processes

Synthetic or artificial fibres are derived from polymer industries using processes such as wet spinning (rayon), dry spinning (acetate and triacetate), and melt spinning (nylons and polyesters). Synthetic rubbers have highly flexible material characteristics, and the process of ‘vulcanisation’ is used to cross-link elastomer molecules.

Uses and applications

Plastics, synthetic rubber, and manufactured fibres account for the second highest share (30%) of the total energy consumed by the chemical industry in the USA, preceded by petrochemicals and other basic chemicals, which have a 49% share (ACC, 2020). Synthetic fibres are heavily used in apparel, home furnishings, and automotive and construction industries. Similarly, synthetic rubber is in high demand in automotive manufacturing, construction, and consumer products. Synthetic fibres are increasingly used in textile manufacture because of their durability and abundance and their ability to be processed into long fibres or to be batched and cut for processing. Natural fibres, such as wool, silk, and leather, are most frequently used for high-quality and long-lasting garments, whereas synthetic fibres are popular in the manufacture of fast fashion garments and accessories (ILO, 2021).

1.3.5 Sub-sector 5: Petrochemicals

Products and materials

Petrochemicals are chemical products derived from petroleum-refining and from other fossil fuels, such as natural gas and coal. The two main classes of petrochemicals are olefins and aromatics. Ethylene, propylene, and butadiene are examples of olefins—ethylene and propylene are used in the manufacture of industrial chemicals and plastic products, whereas butadiene is used to manufacture synthetic rubber. Olefins also form the base compounds in the manufacture of the polymers and oligomers used in plastics, resins, fibres, elastomers, lubricants, and gels.

Benzene, toluene, and xylene isomers are examples of aromatic compounds and are primarily produced from naphtha derived from petroleum-refining. Benzene is used as a raw material in the manufacture of dyes and synthetic detergents, whereas xylene is used to manufacture plastic products and synthetic fibres.

Apart from olefins and aromatics, other chemical products of the petrochemical industry include synthetic gases used to make ammonia and methanol (in steam-reforming plants), methane, ethane, propane, and butanes (in natural gas-processing plants), methanol, and formaldehyde. Ammonia is also used in the manufacture of the fertiliser urea, whereas methanol is used as a solvent and chemical intermediate.

Globally, 190 million tonnes (Mt) of ethylene, 120 Mt of propylene, and approximately 70 Mt of aromatics were produced in 2019.

Production and processes

The USA and Western Europe are home to the world’s largest petrochemical producers. Some of the most notable petrochemical-manufacturing locations are in the industrial cities of Jubail and Yanbu in Saudi Arabia, Texas and Louisiana in the USA, Teesside in the UK, Rotterdam in the Netherlands, and Jamnagar and Dahej in India. The Middle East and Asia are witnessing increasing investment in new production capacities for petrochemical plants, and a vast majority of the global demand is expected to be met from these regions in the coming decade (Cetinkaya et al., 2018). Some of the fastest-growing petrochemical companies in terms of capacity are PetroChina, Reliance, SABIC, Sinopec, and Wanhua. Both olefins and aromatics can be produced during oil-refining by the fluid catalytic cracking of petroleum fractions or with chemical processes. In chemical plants, the process of steam cracking is used to produce olefins from natural gas liquids, such as ethane and propane. A naphtha catalysis process is used to produce aromatics.

Uses and applications

The petrochemical sector supplies materials for the vast majority of chemical industry applications, such as the manufacture of petrochemical derivatives, aromatics from bulk petrochemicals, olefins, and methanol. Seven petrochemicals supply more than 90% of all organic chemicals: benzene, toluene, and xylene (aromatics); ethylene, propylene, and butadiene (olefins); and methanol (ACC, 2020). Bulk petrochemicals are also transformed into intermediate products and downstream derivatives, such as plastic resins, synthetic rubbers, manufactured fibres, surfactants, dyes, pigments, and inks. The end-user industries for petrochemical products are the chemical industry, automotive industry, building and construction, consumer products, electronics, furniture, and packaging.

1.4 GDP Projections for the Global Chemical Industry

The economic development of the global chemical industry is significantly more complex than that of the aluminium and steel industries. The product range of the chemical industry is diverse, and the material flow approach used for aluminium and steel is very data-intensive and is therefore beyond the scope of this research. The chemical industry produces materials for almost all parts of the economy—from mining to services—and it is therefore intrinsically connected to overall economic development. Consequently, a GDP-based approach has been used to develop the energy demand projections for the chemical industry over the next three decades.

Table 5.1 provides an overview of the projected economic development of the chemical industry and its five sub-sectors. It is assumed that the chemical industry will follow the trajectory of the global GDP growth and that the chemical industry’s share of the global GDP will remain constant until 2050. The sub-sectors are assumed to grow at the same rate as the overall chemical industry, and the market value share of each sub-sector will also remain stable. For example, the pharmaceutical industry had a 26% share of the global chemical industry GDP, just over US$1 billion, in 2019. With this approach, we assume that this share of 26% will remain constant until 2050 and that the growth rate of each sub-sector will develop in line with the global GDP projections. This is a simplification, and the actual development trajectories may vary across all sectors. However, a more nuanced projection of the development of the chemical industry is beyond the scope of this research.

Table 5.1 Projected economic development of the chemical industry (ACC, 2020; World Bank, 2021)

1.5 Energy Flows for the Chemical Industry

Natural gas and petroleum products are important energy sources for the chemical industry. Globally, the chemical industry is responsible for 11% of the primary demand for oil and 8% of the primary demand for natural gas (Levi & Pales, 2018). The chemical industry in the USA consumes almost 9% of all petroleum products as feedstock for fuel and power use, natural gas liquids (or liquefied petroleum gases), and heavy liquids (naphtha and gas oil) (ACC, 2020).

Petrochemical feedstocks, such as olefins and aromatics, are extracted from hydrocarbons produced with cracking processes. These feedstocks are used in plastics, pharmaceuticals, electronics, and fertiliser industries. Methanol is directly converted from methane in natural gas and does not undergo the cracking process. In the USA, natural gas liquids are used in the production of 90% of olefins, whereas naphtha is the main source (70%) of petrochemical production in Europe and Asia.

The IEA (2018a) mapped the flows of fuel feedstocks in the chemical and petrochemical industries in 2015. Most of the oil feedstock was converted to high-value chemicals, and a large proportion of raw materials for the chemical industry were directly supplied by oil refineries. Ammonia and methanol, both chemicals in high demand, require natural gas as the raw material. China also uses coal in the production of ammonia and methanol. Petrochemical production occurs in very large-scale facilities, and a number of related products can be produced at a single petrochemical facility. This differs from the set-ups for commodity chemicals, where specialty chemicals and fine chemicals are manufactured in discrete batch processes. Historically, the accelerating demand for chemical products in these end-use industries has had an inevitable impact on the energy demand and resultant CO₂ emissions of the upstream and overall chemical industry. Together, base chemicals supply the intermediate raw materials for the majority of aforementioned demand industries (IEA, 2018a; Levi & Pales, 2018).

The energy demand in the pharmaceutical industry is largely driven by the critical environmental requirements for temperature, humidity, room pressurisation, cleanliness, and containment. The manufacturing and R&D phases consume a high proportion of the energy demand (>65%), followed by the formulation, packaging, and filling phases (15%). Overall, heating, ventilation, and air conditioning are the highest energy end uses in the industry (>65%), because of the nature of the products manufactured (Centrica, 2021). Another energy-consuming system is the production of compressed air, which has multiple applications and is one of the least energy-efficient functions in a pharmaceutical production facility. There are opportunities for energy and cost savings in this area (Centrica, 2021). In the production of agrochemicals, the energy demand is spread across manufacturing, packaging, and transportation, and the majority of raw materials are derived from the petrochemical industry. The production of nitrogen fertilisers is energy-intensive because the process that converts the fossil-fuel raw materials used to manufacture the usable fertilisers is energy-intensive. In terms of material throughput, 1 tonne of nitrogen fertiliser output consumes 1.5 tonnes of petrol equivalents (Ziesemer, 2007).

1.6 Projection of the Chemical Industry Energy Intensity

This brief overview of the energy usage for the sub-sectors analysed has shown that the chemical industry consists of a highly energy-intensive part, which produces the primary feedstock (basic chemicals) and a secondary product manufacturing part, with a relatively low energy intensity, similar to those of other manufacturing industries with energy intensities of < 10 MJ per $GDP.

The energy demands for the five sub-sectors—pharmaceuticals, agricultural chemicals, inorganic chemicals and consumer products, manufactured fibres and synthetic rubber, and petrochemical industry—were calculated with the energy intensities provided in Table 5.2, which are based on the IEA Energy Efficiency extended database (IEA, 2021a) and our own research. The energy intensities for primary feedstock were also considered in estimating the efficiency trajectories of the different sub-sectors. An increase in the efficiency of primary feedstock production of 1% per year over the entire modelling period is required to achieve the assumed efficiency gains for all sub-sectors. However, inadequate data are available for the specific energy intensities of the chemical industry, and no detailed breakdown of the electricity and process heat temperature levels is available in public databases. Therefore, our estimates should be seen as approximate values, and more research, in co-operation with the chemical industry, is required. However, the energy requirements of the entire chemical industry are precisely known and were taken from the IEA statistics Advanced Energy Balances (IEA, 2020a)

Table 5.2 Assumed energy intensities for sub-sectors of the chemical industry

The energy requirements of the sub-sectors were determined on the basis of market shares and GDP and in discussions with representatives of the chemical industry—specifically members of the Net-Zero Asset Owner Alliance and the Strategic Approach to International Chemicals Management of the United Nations Environment Programme (SAICM UNEP).

Table 5.2 shows the assumed energy intensities per $GDP for the analysed sub-sectors of the chemical industry. The production of primary feedstock is significantly higher than other chemicals owing to the process feedstock used in end products. The share of primary feedstock within a certain production process informs the level of energy efficiency potential. Because no detailed published data are available, the efficiency across all sub-sectors of the industry was assumed to be 1% per year. However, more research and greater access to data are required to allow a more detailed bottom-up energy demand analysis of the chemical industry.

1.7 Projection of the Energy Demand and CO₂ Emissions of the Chemical Industry

The projections of the economic development and energy intensities of an industry yield the overall global energy demand projection for that industry. In another step, the share of electricity required to generate thermal process heat has been estimated. Table 5.3 shows the calculated electricity demand and Table 5.4 the process heat demand by temperature level for the chemical industry sub-sectors.

Table 5.3 Projected electricity and process heat demand for the chemical industry to 2050

Table 5.4 Process and energy-related CO₂ emissions—chemical industry

Finally, energy-related CO₂ emissions have been calculated on the basis of the 1.5 °C energy supply pathway, which is documented in Chap. 12.

2 Global Cement Industry

Cement is the second most consumed substance in the world after water and is a central component of the built environment—from civil infrastructure projects and power generation plants to residential houses. Typically made from raw materials such as limestone, sand, clay, shale, and chalk, cement acts as a binder between aggregates in the formation of concrete. Cement manufacture is a resource- and emission-intensive process and is associated with around 7% of the total global CO₂ emissions, according to the Intergovernmental Panel on Climate Change (IPCC; Fischedick et al., 2014, p. 750).

The economic value of the global cement industry was estimated to be US$450 billion in 2015 (McKinsey, 2015). In 2012, the US cement industry’s shipment (to support construction projects) was estimated to be US$7.5 billion (Portland Cement Association, 2019), equivalent to 1.6% of the global revenue. In the EU, the cement manufacturing industry’s turnover was estimated to be €15.2 billion in 2015, with €4.8 billion in value added (European Commission, 2018).

Beyond the mining of the raw materials, there are five main steps in the cement production process:

• 1. Raw material preparation—This stage involves the crushing or grinding, classification, mixing, and storage of raw materials and additives. This is an electricity-intensive production step requiring between 25 and 35 kilowatt hours (kWh) per tonne of raw material (shown in Fig. 5.1 as steps 2–3).

• 2. Fuel preparation—This phase involves optimising the size and moisture content of the fuel for the pyroprocessing system of the kiln (shown in Fig. 5.1 as steps 4–5).

• 3. Clinker production—The production of clinker involves the transformation of raw materials (predominantly limestone) into clinker (lime), the basic component of cement, as shown in Fig. 5.1 (step 6). This is achieved by heating the raw materials to temperatures >1450 °C in large rotary kilns. Clinker production is the most energy-intensive stage of the cement manufacturing process, accounting for >90% of the total energy used in the cement industry.

• 4. Clinker cooling—After the clinker is discharged from the kiln, it is cooled rapidly (Fig. 5.1, step 7).

• 5. Finish grinding—After cooling, the clinker is crushed and mixed with other materials (gypsum, fly ash, ground-granulated blast-furnace slag, and fine limestone) to produce the final product, cement (see Fig. 5.1, steps 8–10).

Fig. 5.1

Steps in cement production, from mining to product. (Source: IEA, 2021a)

The literature distinguishes between the energy consumed to produce the intermediary product clinker (in the form of small rocklike nodules) and the energy consumed for cement production, which is based on clinker.

2.1 Major Cement Industry Companies and Countries

Early estimates from the United States Geological Survey (2020) and IEA (2021a) suggest that global cement production reached 4.1 gigatonnes (Gt) in 2019. Over the past decade, global production has averaged close to 4.0 Gt a year, reaching a high of almost 4.2 Gt in 2014 (United States Geological Survey, 2020).

China has become the largest cement producer worldwide, accounting for around 55% of the total global production in 2019 (IEA, 2020b). The second largest producer was India (8%), followed by the USA, Vietnam, Indonesia, and Egypt, with 2% each, and six countries (Iran, Brazil, Russia, Japan, South Korea, and Turkey) each contributed 1% of the global cement production (IEA, 2021b). The remaining 22% of the global production was distributed across all other countries, with production shares of <1% of the global production.

Swiss company LafargeHolcim is the largest single cement producer in the world (responsible for 9% of the global production). Overall, Chinese-owned companies, including the Taiwan Cement Corporation, together account for 13% of the global cement production.

Cement producers in OECD Europe (Switzerland, Germany, and Italy) and OECD America (Mexico) have headquarters in OCED regions but operate cement plants in 50–60 countries worldwide, so cement production-related CO₂ emissions are spread across various countries. It is important to note that the figures on cement production by company are a combination of annual production and production capacity data. Therefore, it is likely that there are discrepancies in the production values (Mt cement per year), because plants often do not meet the plant capacity. The ten largest cement companies produce 32% of the global production (Table 5.5).

Table 5.5 Top ten global cement producers, their headquarters, annual production (Mt), and number of operational cement plants

2.2 Impact of COVID-19 on Global Cement Production

The global cement demand decreased by 3% in 2020, but this decline varied significantly by region. The largest impacts on the cement industry occurred in Southeast Asia (−10%), Western Europe (−8%), Australia and the Middle East including North Africa (−7% each), and Latin America (−6%) (International Finance Corporation, 2020). The reduction in cement demand due to COVID-19 resulted in a decline in global emissions from the cement industry, estimated at −7–8% globally relative to those in 2019. However, future emission reduction targets for 2025 and beyond are based on 2019 emissions, and it is assumed that the demand for cement will increase to pre-COVID-19 levels by 2022 and 2023. Therefore, the emission targets are based on planned construction projects estimated before the pandemic (International Finance Corporation, 2020).

2.3 Energy Efficiency Standards and Energy Intensities for the Cement Sector

2.3.1 Thermal Efficiency of Cement Production

In cement manufacturing, a theoretical minimum energy demand of 1850–2800 MJ/t of clinker is determined by the chemical and mineralogical reactions and drying (European Cement Research Academy and Cement Sustainability Initiative, 2017). This demand includes:

• An energy demand of 1650–1800 MJ/t of clinker to heat the raw materials to the required temperature (up to 1450 °C) for the formation of stable clinker phases

• An energy demand of 200–1000 MJ/t of clinker for drying the raw materials

The average global thermal energy intensity of clinker production (grey clinker, excluding the drying of fuels) reduced from 4254 MJ/t clinker in 1990 to 3472 MJ/t clinker in 2017 (GNR, 2021). Table 5.6 (GNR, 2021) shows the average regional thermal intensity of clinker production (MJ/t clinker). The thermal intensity of clinker production is highest in the Commonwealth of Independent States (CIS; regional intergovernmental organisation in Eastern Europe and Asia), followed by OECD North America and Africa. The average global thermal intensities by kiln type are shown in Table 5.7 (GNR, 2021).

Table 5.6 Selected regional average thermal energy intensities for grey clinker production—excluding drying of fuels (MJ/t clinker)

Table 5.7 Average thermal energy intensity by kiln type—excluding drying of fuels (MJ/t clinker)

All data in Sect. 5.2.3 are drawn from the ‘Getting the Numbers Right (GNR)’ database, an independent database of energy performance and CO₂ information for the cement industry. Managed by the Global Cement and Concrete Association (GCCA), GNR compiles uniform data from 877 cement production facilities, which accounted for 19% of the global cement production in 2017.

2.3.2 Thermal Efficiency by Kiln Type

There are considerable variations in the thermal efficiency of kiln types, and the best-performing kilns (which dry with preheating and pre-calcining) achieved a weighted average thermal energy intensity of 3350 MJ/t clinker in 2017 and the least-efficient kiln (wet/shaft kiln) a thermal energy intensity of 5900 MJ/t clinker. These data are shown in Table 5.7 (GNR, 2021).

2.4 Global Cement Industry: Process- and Energy-Related Emissions

The cement industry is a major source of global CO₂ emissions. However, the data required to estimate the emissions from global cement production are not well documented (Andrew, 2018). Consequently, there is considerable variation between different global estimates. Two main aspects of cement production lead to direct CO₂ emissions:

• 1. Energy-related emissions: Energy is required for the calcination process during clinker production. The combustion of fuels to heat the raw ingredients to >1600 °C in this process accounts for 30–40% of the total emissions associated with cement production. These emissions are commonly referred to as fuel emissions.

• 2. Process-related emissions: The calcination of calcium carbonate to calcium oxide is the chemical reaction that takes place when the raw materials (notably limestone) are exposed to high temperatures. The remaining 60–70% of CO₂ emissions from cement production derive from calcination. These emissions are commonly referred to as process emissions.

Globally, energy-related (fuel) emissions made up 35% of cement emissions (0.8 GtCO₂/yr), and process emissions amounted to 65% (1.5 GtCO₂/yr) in 2019 (IEA, 2020c). The energy-related emissions from the cement industry amount to 7% of the global energy emissions in that year (IEA, 2020c). The average emissions associated with the total cement manufacturing process are shown in Fig. 5.2 (McKinsey, 2021).

Fig. 5.2

Current average energy (MJ/t cement) and emissions (CO₂/t cement) in cement manufacture (Source: McKinsey, 2021)

A comprehensive analysis of the global process emissions from cement production revealed a wide variety of existing datasets (Andrew, 2018). The total global process emissions was 1.5 GtCO₂ in 2018 (Andrew, 2018). Table 5.8 outlines the global process emissions (GtCO₂) from cement production between 2000 and 2018 (Andrew, 2018).

Table 5.8 Global process emissions from cement production in 2000–2018, in GtCO₂

2.4.1 Reduction of the Clinker/Cement Ratio

The process CO₂ emissions released during the production of clinker can be reduced by integrating alternative cement constituents that reduce the clinker/cement ratio. A global clinker/cement ratio of 0.60 is achieved by 2050 under the IEA’s 2DS scenario (IEA, 2018b). This represents a fall from 0.65 in 2014, which translates into a reduction in the process CO₂ intensity of cement by 30% over that period (the global average carbon intensity for process emissions is projected to reach 0.24 tCO₂/t cement by 2050, which will lead to a saving of 364 million tonnes of CO₂ (MtCO₂) emissions (IEA, 2018b). The OneEarth Climate Model (OECM) also assumes this estimate of the possible decline in process emissions.

Carbonation occurs when CO₂ diffuses into the pores of cement-based materials and reacts with hydrated products in the presence of pore water. Carbonation starts at the surface of the concrete or mortar and moves progressively inwards. In contrast to the instantaneous emission of CO₂ during the manufacture of cement, carbonation is a slow process that takes place throughout the entire life cycle of cement-based materials (Xi et al., 2016).

Xi et al. (2016) reported that the carbonation of cement materials over their life cycles represents a large and growing net sink of CO₂, increasing from 0.10 GtC/yr in 1998 to 0.25 GtC/yr in 2013. In total, they estimated that roughly 43% of the cumulative cement process emissions of CO₂ produced between 1930 and 2013 have been reabsorbed by carbonating cement materials. They propose that an average of 44% of the cement process emissions produced each year between 1980 and 2013 has been offset by the annual cement carbonation sink. Moreover, between 1990 and 2013, the annual carbon uptake increased by 5.8% per year on average, slightly faster than the 5.4% per year increase in process cement emissions over the same period (Xi et al., 2016).

2.4.2 New Technologies to Reduce Process Emissions in the Cement Industry

The decarbonisation of cement production-related process emissions is being tested and is in various stages of development. These new processes and technologies include clinker displacement by optimising the combination of calcined clay and ground limestone as the cement constituents (European Cement Research Academy and Cement Sustainability Initiative, 2017) and the use of alternative binding materials. Alternative binding materials offer potential opportunities for reducing process CO₂ emissions and involve t mixes of raw materials or alternatives from those used in Portland clinker, although the commercial availability and applicability of the alternatives differ widely.

2.4.3 Post-combustion Carbon Capture Technologies

Chemical absorption is the most advanced post-combustion capture technology and allows up to 95% optimum capture yields (European Cement Research Academy and Cement Sustainability Initiative, 2017). A plant began operation in Texas in 2015 to chemically capture and transform 75 ktCO₂/yr from a cement plant into sodium bicarbonate, bleach, and hydrochloric acid, which could be sold, so that the sorbents, once saturated, need not be regenerated (IEA, 2018b). The use of membranes as a CO₂ separation technique is another proposed technology, which could theoretically produce a yield of more than 80%. However, membranes have only been proven at small or laboratory scales, at which recovery yields of up to 60–70% were achieved (European Cement Research Academy and Cement Sustainability Initiative, 2017).

None of the technologies currently under development are assumed for the OECM 1.5 °C pathway because the time of possible commercialisation is yet to be determined.

2.5 Global Cement Production and Energy Intensity Projections

Table 5.9 summarises the assumptions of the 1.5 °C OECM cement industry pathway in terms of the projected volume of global cement production, the development of energy intensities for the relevant processes, and the process emissions per tonne of clinker produced. These assumptions are similar, to a large extent, to those made for the IEA Technology Roadmap—Low-Carbon Transition in the Cement Industry projections (IEA, 2018b).

Table 5.9 Assumed global cement market development and production energy intensities

2.6 Projections of the Cement Industry Energy Demand and CO2 Emissions

Table 5.10 shows the calculated electricity and process heat demand developments based on the documented assumptions. The breakdown by temperature level is based on the five cement production steps required and their shares of the overall energy demand. No detailed statistical documentation of the exact breakdown of the process heat demand by temperature level and quantity is available. Table 5.11 shows the energy-related CO₂ emissions—based on the 1.5 °C energy generation pathway—and the expected process emissions.

Table 5.10 Projected electricity and process heat demand for the cement industry

Table 5.11 Process- and energy-related CO₂ emissions—cement industry

3 Aluminium Industry: Overview

Aluminium is among the most important building and construction materials globally. To understand the opportunities and challenges facing the industry, the global flow of aluminium metal must be considered. Since 1880, an estimated 1.5 billion tonnes of aluminium have been produced worldwide (IAI, 2018a), and about 75% of the aluminium produced is in productive use (IAI, 2018b). In 2019, 36% of aluminium was located in buildings, 25% in electrical cables and machinery, and 30% in transport applications. Aluminium can be recycled, but the availability of scrap is limited by the high proportion of aluminium in use (IAI, 2018a).

3.1 Bauxite Production

Primary aluminium production requires bauxite. Bauxite ore occurs in the top soils of tropical and subtropical regions, such as Africa, the Caribbean, South America, and Australia. The largest producers/miners of bauxite include Australia, China, and Guinea. Australia supplies 30% of global bauxite production (M’Calley, 1894). Table 5.12 shows the global distribution of bauxite mine production, aluminium refineries, and production.

Table 5.12 Aluminium resources, bauxite mines, alumina refineries, and aluminium production (in thousand tonnes) by country

3.2 Aluminium Production

Globally, 63.7 million tonnes of primary aluminium were produced in 2019 (IAI, 2021a). About 32 million tonnes of aluminium is recycled every year (IAI, 2021b). Global primary aluminium production accounts for two-thirds of the total production. However, not all bauxite-rich countries are among the main aluminium-producing nations. China dominates global aluminium production. Overall, nine conglomerates are responsible for global aluminium production (31.5 million tonnes/year), and of those, four have their headquarters in China (Statista, 2021): Chalco, Hongqiao Group, Xinfa, and SPIC Aluminum & Power Investment Co. Ltd. (Statista, 2021). As a result, Chinese aluminium companies produce 17.8 million tonnes per year or 57% of the volume produced by the nine major companies (Statista, 2021). Russian aluminium manufacturer Rusal produces 3.8 million tonnes annually, which is 12% of the amount produced by the nine largest companies. Like China, Russia also owns an aluminium refinery in Guinea (Human Rights Watch, 2018). The Australian/UK mining giant Rio Tinto produces 3.2 million tonnes per year, equivalent to 10.2% of the aluminium produced by the main producers; the UAE aluminium producer EGA produces 2.6 million tonnes per year (8%), the US-owned company Alcoa produces 2.5 million tonnes per year (6.9%), and Norwegian Norsk Hydro produces two million tonnes per year, which is equivalent to 6% of the aluminium produced by the nine top companies (Statista, 2021). Another 1.9 million tonnes per year is produced by other companies.

The proportion of recycled or ‘secondary’ aluminium production is a key consideration in determining decarbonisation pathways because secondary aluminium production is up to 95% less energy-intensive than its primary production from bauxite (IAI, 2020). The aluminium sector distinguishes between new aluminium scrap (offcuts generated during the manufacture of aluminium) and old scrap (used, discarded, and collected aluminium products). The proportion of aluminium that is recycled can be measured by quantifying the input rate and the efficiency rate:

• The recycling input rate describes the proportion of new and old scrap fed into aluminium production.

• The recycling efficiency rate is the proportion of aluminium available that is recovered from a region.

Once collected, the metal losses from recycling processes are usually <2%, so the net metal yield is >98% (IAI, 2018c; based on a 2005 study). The global recycling input rate has remained constant, at around 32%, since 2000 (IAI, 2020). The most recent data show a global recycling input rate of 32% in 2020, whereas in 2018, the global recycling input rate was 33%, and old scrap accounted for 60% of this.

Globally, up to 30 Mt. of primary aluminium was recycled in 2020, equivalent to a recycling rate of 76% (IAI, 2020):

• Europe has the highest aluminium recycling efficiency rate worldwide, and 81% of scrap available in the region is recovered (IAI, 2020).

• The USA has the highest recycling input rate, at 57%.

• China is the largest producer and consumer of recycled aluminium; it produces ten million tonnes of secondary aluminium from scrap annually or 33% of the global volume (IAI, 2020).

3.3 Aluminium Production Processes

An analysis of current and future aluminium production processes is required to understand the decarbonisation opportunities within each process.

Primary aluminium production involves the following processes (excluding mining):

• 1. Refining bauxite to produce alumina (Bayer chemical process): Bauxite contains ores other than aluminium, including silica, various iron oxides, and titanium dioxide (The Aluminum Association, 2021). Alumina, an aluminium oxide compound, is chemically extracted with the Bayer process (Scarsella et al., 2015), in which bauxite ore is ground and then digested with highly caustic solutions at elevated temperatures. Approximately 70% of the global bauxite production is refined to alumina with the Bayer process (The Aluminum Association, 2021).

• 2. Smelting: It is the process of refining alumina to pure aluminium metal (Hall–Héroult electrolytic process). Alumina is dissolved at 950 °C (1,750 °F) in a molten electrolyte composed of aluminium, sodium, and fluorine, to lower its melting point, allowing easier electrolysis. An electrical reduction line is formed by connecting several electrolysis cells in series (Haraldsson & Johansson, 2018). Electrolysis separates alumina into aluminium metal at the cathode and oxygen gas at the anode (M’Calley, 1894).

In the secondary production of aluminium (aluminium recycling process), the process of refining the raw material (bauxite) to alumina is not required. Instead, scrap aluminium is re-melted and refined. Therefore, the energy consumption for this process is much lower than for its primary production (Haraldsson & Johansson, 2018; IAI, 2020).

3.4 Aluminium Industry: Energy Demand and Energy Intensities

The amount of energy used to generate a unit of GDP is referred to as the ‘energy intensity of the economy’ (IEA, 2020d). The IEA analyses the energy intensity for different sectors of the economy per GDP, based on US currency. The energy intensities of primary and secondary aluminium production are reported under the sub-sector basic metals. In 2018, the production of basic metals was responsible for 27% of the energy consumption in the manufacturing sector. The sub-sector basic metals includes ferrous metals (22% of energy consumption) and non-ferrous metals, such as aluminium, nickel, lead, tin, brass, silver, and zinc, and accounts for 5% of the manufacturing sector’s energy consumption (IEA, 2020d). Table 5.13 shows the energy intensities of the total basic metal and non-ferrous metal sub-sectors by region.

Table 5.13 Energy intensities (energy consumption per value added) in the manufacturing industry sub-sectors basic metals and non-ferrous metals, by region (2018 data; MJ per GDP in USD 2015)

Compared with aluminium production processes, the energy demand for bauxite mining is relatively small. Bauxite mining requires <1.5 kg of fuel oil (diesel) and < 5 kWh of electricity per tonne of bauxite extracted (IAI, 2018a).

Refining/smelting

The global average energy use for the electrolysis cell is 13.4 kWh per kg of aluminium produced. If rectifiers and other cell auxiliaries, such as pollution control equipment, are included, the global average increases to 14.2 kWh per kg of aluminium produced (Haraldsson & Johansson, 2018; IAI data).

Process heat

The Bayer process is the most energy-intensive process in primary aluminium production. The energy consumed by the Bayer process varies at 7–21 GJ/tonne (Scarsella et al., 2015). However, the aluminium industry is moving towards more energy-efficient primary production methods. A study of Columbian aluminium-producing companies showed that this energy intensity can be reduced by changing the core elements of the process, including the size, processes, and temperature of the furnaces (Carabalí et al., 2018). That study suggested that energy consumption could be reduced by 32% by installing an oxy-combustion technology, which preheats the combustion air. The costs related to thermal energy could be reduced by 50.5% per tonne of aluminium. However, the investment cost (purchase) of the technology is high, which hinders its widespread application (Carabalí et al., 2018).

3.5 Global Aluminium Production and Energy Intensity Projections

The projections for the overall increase in global aluminium production are driven by technology shifts, including in lightweight vehicles and mounting and framing equipment used for solar photovoltaic (PV) panels and large reflectors for concentrated solar power plants (IEA, 2020e). The assumed ratio of primary/secondary aluminium is vital for the calculation of the energy demand, because secondary aluminium production is significantly less energy-intensive than primary production.

The projection of the global energy demand for the aluminium industry until 2050 is based on the projected volume of aluminium production, recycling rates, and energy intensities of the different steps of aluminium production, from bauxite mining to the raw product (aluminium). The IEA Sustainable Development Scenario projects an annual growth rate of around 1.2% until 2030 and 15% overall growth in production between 2018 and 2030 (IEA, 2020e). This is a projected overall increase in global aluminium production from the current 85 million tonnes per year to just under 150 million tonnes per year.

Table 5.14 shows the projected global aluminium production for the OECM 1.5 °C pathway. The global recycling rate is projected to increase from 32% in 2019 to 45% in 2050 (IAI, 2021c). The increased recycling rate will lead to a significant decoupling of global bauxite and alumina production from global aluminium production. The efficiency ratio of bauxite to alumina is projected to increase from 40% to 45%, which will lead to a reduction in the energy demand.

Table 5.14 Assumed development of the global aluminium market

Secondary aluminium production occurs through recycling schemes, after which the aluminium is re-melted and refined. The energy consumption involved is much lower than for the primary production of aluminium (Haraldsson & Johansson, 2018). The aluminium sector distinguishes between new or pre-consumer scrap and old or post-consumer scrap (discarded aluminium products). Of the 33 million tonnes of aluminium recycled in 2019, 20 million tonnes was from old scrap, and 14 million tonnes was from new scrap, and the share of new scrap is expected to reach 24 million tonnes in 2050 (IAI, 2021d).

The projected energy intensities for bauxite mining and aluminium production are shown in Table 5.15. The fuel demand per tonne of mined bauxite mainly comprises the fuel consumed by mining vehicles. The projections for the electricity and process heat demand for primary and secondary aluminium reflect the improvements in the industry’s efficiency in the past decade and assume incremental improvements based on the efficiency assumptions and opportunities noted above, but with no disruptive new production technologies.

Table 5.15 Assumed energy intensities for bauxite mining and aluminium production processes

The IEA (2020a) has reported improvements in the energy efficiency (−3% annually) of alumina refining and aluminium smelting between 2010 and 2018. These were due to the highly energy-efficient production in China. Further reductions in global energy intensity (1.2% annually) are required under the IEA Sustainable Development Scenario, which can be achieved through a shift towards increasing rates of aluminium recycling (Table 5.15). Secondary production must reach 40% by 2030, with a minimum proportion from old scrap of 70% (IEA, 2020e). The IAI projection to 2050, with maximum recycling rates, is 43% secondary production, but material recycled from old scrap will not exceed 70% (IAI, 2021c).

The production and energy intensity data for the aluminium sector were used to calculate the sectorial decarbonisation pathway presented in the following section (5.3.6).

3.6 Projection of the Aluminium Industry Energy Demand and CO2 Emissions

Due to the assumed increase in the share of recycled aluminium in global production and the reduced energy intensity per tonne of aluminium produced, a decoupling of the increases in production and energy demand is possible. Between 2019 and 2050, global aluminium production is projected to increase by 75%, whereas the overall energy demand will increase by only 12% (Table 5.16). Due to the already high electrification rates in the aluminium industry—which are projected to increase further—and the decarbonisation of the electricity supply based on renewable power generation, the aluminium industry can halve its specific CO₂ emissions by 2035 (Table 5.17).

Table 5.16 Projected electricity and process heat demands for the aluminium industry to 2050

Table 5.17 Process- and energy-related CO₂ emissions—aluminium industry

4 Global Steel Industry: Overview

Steel is an important material for engineering and the construction sector worldwide, and it is also used for everyday appliances at the domestic and industrial levels. About 52% of steel usage is for buildings and infrastructure: 16% is used for mechanical equipment, such as construction cranes and heavy machinery; 12% is used for automotives (road transport); 10% is used for metal products, including tools; 5% is used for other means of transport, including cargo ships, aeroplanes, and two-wheeler vehicles; 3% is used for electrical equipment; and 2% is used for domestic appliances, such as white goods (World Steel Association, 2020a).

This section provides an overview of global steel production. Table 5.18 shows the data for global crude steel production. The World Steel Association (2020a) production data published in 2020 World Steel in Figures is not complete for all countries, but is complete for North America (119.2 Mt) and the EU 28 (150.2 Mt) (note: Bulgaria, Croatia, and Slovenia are not included in the report).

Table 5.18 Global crude steel production data by country (million tonnes per year)

4.1 Primary and Secondary Steel Production

Steel is produced by various routes. Crude or primary steel is produced from iron ore and secondary steel is produced from recycled steel. These two routes use different technologies and different energy sources. The share of secondary steel production increased by 25% globally in 2013 and by 28% in 2018 (IEA, 2020f).

Secondary steel production is limited by the availability of scrap. Currently, the total global scrap steel collection rate is 85% (IEA, 2020f), i.e. on average, 85% of steel consumed or utilised will be collected and recycled (Gauffin & Pistorius, 2018). However, the scrap collection rate varies for different steel applications: for structural reinforcement, it is as low as 50%, whereas for industrial equipment, it is as high as 97% (IEA, 2020f). Secondary steel production is up to 74% less energy-intensive than making steel from iron ore (primary production) (ISRI, 2019). Altogether, scrap input accounts for about 35% of the total primary steel production.

By 2030, this share should increase to 40% under the IEA Sustainable Development Scenario (IEA, 2020f). The share of scrap in primary steel production varies among countries and from year to year (Table 5.19):

• In EU-28, the proportion of recycled steel in crude steel production was 55.9% in 2018.

• In the USA, the proportion of steel scrap in crude steel production was 69.4% in 2018.

Table 5.19 Share of scrap (%) in crude steel production, by region, 2018

Global steel production is highly concentrated, and 12 companies are responsible for >50% of the global steel production. Steel companies with headquarters in China dominate the sector (Fig. 5.3). Seven corporations based in China are responsible for 30% of the global steel production. European steel manufacturers produce 9% of the global steel, Japanese companies 7%, South Korean companies 4%, and Indian steel manufacturers 3%.

Fig. 5.3

Largest steel manufacturing companies and shares of global production, 2019

Regional age profiles show that production capacity (manufacturing plants) in the steel sector differs among world regions. The average age profile of steel plants in the Asia Pacific region, including China, is among the youngest (IEA, 2020g); as a result, energy efficiency improvement is significant. Considering this region is responsible for one-third of the global production, energy efficiency improvement had an effect at the global scale.

Impact of COVID-19 on global steel production

Global crude steel production decreased by 1.4% in the first 3 months of 2020 compared with that in the same period of the previous year, and in March, a reduction of 6% was reported (World Steel Association, 2020b). The largest declines in steel production in the first quarter of the year (Q1) occurred in the EU (−10%), Japan (−9.7%), South Korea (−7.9%), and North America (−4%) (World Steel Association, 2020a). The long-term consequences of COVID-19 for the steel sector are unclear. During the Global Financial Crisis (GFC) in 2009, steel production in Europe alone dropped by 30% compared with that in previous years.

4.2 Technological Overview of Steel Production

On average, 20 GJ of energy is consumed to produce 1 tonne of crude steel globally (World Steel Association, 2021). The IEA’s Tracking Industry Report (, 2020c) showed a gradual decline in energy intensity between 2009 and 2018. The largest year-to-year fall was in 2017–2018, when energy intensity declined by 3.6%. As mentioned earlier, there are two routes by which steel is produced (Table 5.20). Primary or crude steel is produced by the coal- or natural gas-based blast-furnace-basic oxygen furnace (BF-BOF) route, in which iron ore is reduced at very high temperatures in a blast furnace. The iron ore is melted to a liquefied form (pig iron or direct reduced iron [DRI]) and then oxidised and rolled (Table 5.21). Coal or natural gas is required to generate high temperatures of up to 1650 °C. In the secondary production route, scrap steel is melted in electric arc furnaces (EAFs). The EAF route has the lowest emission intensities. In the EAF (gas-fuelled) process, scrap is usually blended at a rate of about 10% with DRI. A more energy-efficient pathway for primary production is to use scrap steel with ore-based inputs in BF-BOF production, usually at a rate of 15–20% scrap (IEA, 2020f).

Table 5.20 Steel production—main processes

Table 5.21 Steel production—main processes and energy requirements

Emission benchmarks for the steel industry

Table 5.22 shows the emission values allowed for the manufacture of steel under the emission trading scheme of the EU (EU-ETS). The manufacture of secondary steel with EAFs is significantly less carbon-intensive—in tonnes of CO₂ per tonne of steel (tCO₂/tonne)—than the production of primary steel by the iron ore-based route, in which hot metal is produced in blast furnaces (BF-BOF route).

Table 5.22 EU-ETS benchmark values for iron and steel manufacture, as of February 2020

4.3 Projections for the Global Steel Industry: Production and Energy Intensity

To calculate the future energy demand for the global steel industry requires a range of assumptions—from the actual market volume to the recycling rates and energy intensities, to the actual production process itself. Unlike the aluminium industry, steel manufacturing involves GHG emissions that are not related to energy generation but to the process itself. The emission intensity of the steel sector, specifically steel plants, depends upon the production route (BF-BOF or EAF) and the energy source (Table 5.23). Both routes can, for example, be fuelled by natural gas (IEA, 2020f). The actual process emissions per tonne product for each of the production process options are assumed to remain at current levels.

Table 5.23 Assumed market and energy intensity developments for the global steel industry according to the production process

Table 5.23 shows the assumed development of global iron ore and steel production in million tonnes per year and the shares of primary and secondary steel production for the 1.5 °C OECM steel pathway. All assumed energy intensities, which are dependent on the production technologies used and process emissions that are used for the energy demand projections, are provided.

The global steel market is estimated to grow by 1–1.5% throughout the entire modelling period. The recycling rates are assumed to increase so that the share of secondary steel will grow from 35% in 2019 to 48% in 2050. The shares of electricity for primary and secondary steel in the overall production process are projected to remain at the current levels. Secondary steel production is, to a large extent, based on electricity, whereas primary steel production is 98% dependent upon process heat for the melting processes. The energy and electricity intensities per tonne of manufactured volume for both secondary and primary steel production are based on IEA projections (IEA, 2020f). Table 5.23 shows all the assumed market and energy intensity developments for the global steel industry according to the production process.

4.4 Projection of the Steel Industry Energy Demand and CO2 Emissions

The assumed division between primary and secondary production rates and the assumed production process technologies are key to the energy demand projections. Whereas secondary steel production requires significantly more electricity per tonne, its demand for high-temperature process heat is significantly lower (Table 5.24). Furthermore, as the share of primary steel will be reduced, demand for iron ore mining (volumes) that is required will decrease with higher recycling rates.

Table 5.24 Projected electricity and process heat demands for the steel industry to 2050

The energy-related CO₂ emissions and estimated process emissions are shown in Table 5.25. Whereas the energy-related emissions are projected to be phased out by 2050, the process-related emissions are not, although they will be significantly reduced due to the predominant use of EAF ovens and the phase-out of high-emitting BOF ovens.

Table 5.25 Process- and energy-related CO₂ for the steel industry

5 Textile and Leather Industry: Overview

The international fashion industry is estimated to be worth US$2.4 trillion, and the textile and leather industry constitutes a large proportion of it (valued at US$818.19 billion in 2020) (SC, 2019; GNW 2021). ‘Textiles’ refer to natural and synthetic materials used in the manufacture of clothing (including finished garments and ready-to-wear clothing), furniture and furnishings, automotive accessories, and decorative items. Therefore, the textile industry spans activities related to the design, manufacture, distribution, and sale of yarn, cloth, and clothing. We refer to the textile and leather industry and the fashion industry interchangeably, because some data are available for the fashion industry as a whole, to which textiles and leather contribute almost 35% (SC, 2019; GNW, 2021).

The textile and leather industry has close links with the agricultural and chemical industries. Agricultural output provides the raw materials for the textile industry in the form of natural fibres; similarly, the chemical industry outputs are used as synthetic raw materials in the textile industry. Chemical industry products are also used in the processing of fibres into textiles, especially during dyeing processes. Some of the commonest chemical products used in textile production include spinning oils, lubricants, solvents, adhesives, binders, detergents, bleaches, acids, dyes, pigments, and resins (ChemSec, 2021).

Over 60% of textiles are used in the manufacture of apparel. Natural fibre crops, such as cotton, jute, kenaf, industrial hemp, sun hemp, and flax, are used in the manufacture of yarn for textiles, paper, and rope. Natural fibres can also be extracted from animals (sheep, goats, rabbits, and silkworms) and minerals (asbestos). Synthetic fibres are increasingly used in textile manufacture because of their durability and abundance and as by-products of the chemical and petrochemical industries.

Cotton is the most commonly grown natural fibre. The main processes involved include cultivation and harvesting, spinning (yarn), weaving (fabric), and finishing (textiles). Most natural fibres are short (only few centimetres) and generally have a rough surface. In contrast, synthetic fibres have the ability to be processed as long fibres or batched and cut to be processed like natural fibres. Synthetic or artificial fibres are derived from polymer industries using processes such as wet spinning (rayon), dry spinning (acetate and triacetate), and melt spinning (nylons and polyesters). Natural fibres such as wool, silk, and leather most often result in high-quality and long-lasting garments, whereas synthetic fibres are popular in the manufacture of fast fashion garments and accessories (ILO, 2021).

The fashion industry’s vast scale has raised international alarm about the environmental effects and social equity of many offshore production facilities. In addition to glaring issues like child labour, unsafe working conditions, and inequitable wages, the industry’s increasing dependence on energy, non-renewable synthetic fibres, and water is an issue of global concern. Estimates suggest that textile dyeing and treatment processes are responsible for almost 20% of all water pollution from industrial effluent (Ellen MacArthur Foundation, 2017). The fashion industry’s environmental impact is spread across the value chain, although the manufacturing process is the most energy-, water-, and chemical-intensive, with high volumes of toxic chemical effluent and wastewater ending up in marine systems. Some of the estimated environmental impacts of the industry are:

• The consumption of 79 trillion litres of water.

• An 8–10% share of global emissions.

• 20% of water pollution from industry is from textile treatment and dyeing.

• The generation of 92 million tonnes (Mt) of waste.

• 35% (190,000 tonnes) of all oceanic primary microplastic pollution.

Note: All estimates are calculated annually.

(Kant, 2012; GFA, 2017; Quantis, 2018; UNFCCC, 2018; Niinimäki et al., 2020)

The International Labour Organization (ILO, 2021) noted that the stages of yarn and fabric production in textile manufacture consume significant quantities of water, chemicals, and energy. These stages are also responsible for a large share of GHG emissions from the textile industry. In the leather value chain, 63–68% of emissions are generated during the manufacture of products such as footwear, whereas the production of raw materials accounts for only 20–29% of emissions (Cheah et al., 2013; Quantis, 2018). The United Nations Framework Convention on Climate Change (UNFCCC) Fashion Industry Charter for Climate Action (2018) aims to achieve a 30% reduction in GHG emissions by 2030.

Although the use of recycled fibres in new textiles is gaining momentum, Dahlbo et al. (2017) have cautioned that more research and empirical evidence is required to determine the impact of recycled fibres on the replacement of virgin fibres in the textile value chain and the rebound effects of the reuse and resale of textiles on the demand for new production. However, the present analysis focuses on the energy demand and supply of the industry and the resulting GHG emissions.

5.1 Global Textile and Leather Production: Major Companies and Countries

The textile, clothing, leather, and footwear (TCLF) industry is characterised by geographically dispersed production and high volatility to factors external to the market, driven by rising fuel and material prices, low agricultural yields of natural fibres, escalating geopolitical tensions around offshore manufacturing, and higher costs of labour and capital in erstwhile havens for textile manufacturing, such as China, Sri Lanka, and Bangladesh. Niinimäki et al. (2020) mapped the environmental impacts of the fashion industry (energy demand, chemical use, water demand, waste output) across various value chain activities and the countries that lead in each stage of the value chain (Fig. 5.4). It is evident that the different stages of yarn and textile manufacture have environmental impacts across all categories (other than GHG emissions). Despite the fashion industry’s global footprint, a vast proportion of fibre production and garment manufacture occurs in developing countries (Niinimäki et al., 2020).

Fig. 5.4

Environmental impacts of global fashion industry across the value chain. (Source: Niinimäki et al., 2020)

In terms of consumer spending, the Asia Pacific region accounted for 37% of the global sales of apparel and footwear in 2018. China had the largest share of demand at US$380 billion, followed by the USA at US$370 billion (Lissaman, 2019). Despite the fashion industry’s highly fragmented production and sales operations, it is reported that just 20 multinational companies own 138% of the sector’s profits. In 2018, fashion brands such as Nike, Adidas, H&M, Uniqlo, Zara, Levi’s, Old Navy, and Ralph Lauren owned 8% of the global sales. Given the highly competitive industry dynamics and the low-profit margins in most of the upstream value chain activities, the industry is faced with mounting international pressure to incorporate sustainable resource management practices. Compounded by the impact of COVID-19, triggering closures and retail degrowth, the industry is struggling, because of its global labour- and resource-intensive operations.

5.1.1 Volume of Global Textile Production

In terms of the raw material demand of the textile industry, cotton had the highest value in 2019 (US$378.6 billion). However, in terms of volume, polyester recorded a 28% share of the textile demand, as a result of the diversity of its applications in textiles and apparel. Unsurprisingly, China leads global textile production and exports of both raw textiles and finished garments. Within Asia, the Indian textile industry constitutes 6.9% of the global textile production, valued at US$150 billion. India is the second largest textile producer, after China, in terms of production volume, and the textile industry contributed 15% to India’s export earnings in 2018–2019. The USA leads global production and exports for raw cotton and is also a strong importer of raw textiles and finished garments (BV, 2020). It is also the third largest textile producer, with its industry valued at US$76.8 billion in 2018.

5.2 Impact of COVID-19 on Global Textile Production

Global textile and apparel exports were valued at US$750 billion in 2017 and were projected to grow at a compound annual growth rate of 18.7% to US$971—38 billion by 2021, before COVID-19. Most of this growth is still expected in Asia, although it will be dependent on the recovery of individual economies from the impacts of COVID-19, especially the adversely affected local manufacturing and retail sales industries. Because many countries, especially in Asia and Europe, are still experiencing lockdowns and a slow return to economic resurgence, the TCLF industry’s growth trajectory is expected to take at least a few years to return to pre-COVID levels.

5.3 Resource Requirements of the Textile and Leather Industry

Textile production is water-, energy-, and chemical-intensive, and high volumes of liquid effluent are disposed of in natural water systems. Beyond production, the impact of textile and leather products at the end of the value chain is problematic because they generate high volumes of waste and the lifespans of many synthetic materials are short.

Reputable fashion events are increasingly promoting the theme of sustainability, and regenerated materials and accessories are being adopted by leading fashion designers. Whereas such initiatives are mainly targeted at material waste streams, there has also been a conscious effort to stimulate the use of natural and regeneratable materials in fashion. For the fashion industry to reduce its energy and emission intensities, systemic shifts must work in tandem. These shifts range from innovation in product design; the use of regenerative materials; more efficient technologies for processing and manufacture; decentralised production; reduced chemical use and dyeing; water cycling; common effluent treatment, especially in developing countries, which are major producers of fast fashion; and business models that accelerate longer use, reuse, sharing, and recovery.

The water footprint of the textile industry is one of the primary resource challenges for the environmental sustainability of the processing and production phases of this sector. The industry has one of the greatest demands for fresh water in the world, arising from the high water consumption across different stages: farming (especially cotton farming), washing and cleaning, textile processing, printing, dyeing, and finishing (ILO, 2021). The demand for water in the fashion industry is estimated to be 1.5–2.5 trillion gallons annually. In terms of the most polluting processes, textile dyeing accounts for the greatest shares of water use and pollution (SC, 2019).

5.4 Textile and Leather Industry: Energy Intensities and Emissions

Energy consumption in the textile industry is significantly high in the wet processing stages of dyeing and finishing, where it is used to generate steam, heat water, and dry fabrics. Alkaya and Demirer (2014) found that almost 46% of the energy demand was for the conversion of natural gas to steam, most of which is used to heat water for wet processing. The energy demand for the drying process was 30% in the same cotton mill (Alkaya & Demirer, 2014). The ILO (ILO, 2021) reported that energy use was the major contributor to the textile industry’s GHG emissions, other than the emissions associated with agriculture and farming, manufacturing in the chemical industry, and livestock breeding for leather production.

The textile industry’s carbon intensity relies on the type of energy source and production processes used. For example, hard coal and natural gas are the primary sources of industrial heat in India, thus raising the carbon footprint of apparel manufactured in India. China’s textile industry accounts for almost 17% of the industrial sector’s overall energy demand; in Bangladesh, the textile industry’s energy use accounts for 9% of this demand. The type of input material also affects the energy demand over a product’s lifespan. For example, a cotton t-shirt may have a higher-energy demand during the consumption phase than during its production, whereas the energy demand is highest during the production of a viscose garment (Allwood et al., 2006).

The various stages of textile production have different energy intensities, and these also vary significantly across regions. Therefore, the assumptions made about energy intensity must be simplified for any global analysis. Dyeing and finishing processes are most energy-intensive and, because they are currently supplied with predominantly fossil fuels, have the highest energy-related emissions (36%), followed by yarn production (28%), fibre production (15%), and fabric manufacture (12%) (Quantis, 2018). Despite the longevity and reuse characteristics of natural fibres, GFA (GFA, 2017) found that leather, silk, and wool processing generates the highest emissions per kilogram of material. In contrast, synthetic materials, such as polypropylene and acrylic fibres, record the lowest emissions, although post-use issues, such as microplastic pollution and the difficulty in recycling composite fibres, make natural fibres more sustainable.

5.5 Projections for the Global Textile and Leather Industry: Production and Energy Intensities

Table 5.26 shows the assumed economic development and energy intensities for the textile and leather industry used to calculate the 1.5 °C OECM pathway. The energy intensities per product volume (e.g. in tonnes per year) are not available, so the energy demand is calculated as a product of the assumed economic development in $GDP and the average energy units required per dollar. This simplification was necessary because the level of detail in the available energy demand data for the textile and leather industry on the global level did not allow a more exact approach. Textile mills have a significantly higher energy intensity than the clothing industry, which manufactures the clothing in downstream processes. The assumed average energy intensity for both textile and leather sections of the industry is estimated on the basis of the overall energy demand for both industries according to the IEA World Energy Statistics and the GDP shares.

Table 5.26 Projected economic development and energy intensities of the textile and leather industry

5.6 Projection of the Textile and Leather Industry Energy Demand and CO2 Emissions

Analogous to the previous industry energy and emission projections, Tables 5.27 and 5.28 show the results for the textile and leather industry. All values are calculated on the basis of the documented assumptions. Based on the production processes typical of the industry, it is assumed that the process heat demand does not exceed the temperature level of 100 °C. The 1.5 °C OECM pathway requires that the global textile and leather industry decarbonises the required energy demand entirely by 2050, whereas a reduction by almost 50% seems achievable by 2030.

Table 5.27 Projected electricity and process heat demands for the textile and leather industry to 2050

Table 5.28 Process- and energy-related CO₂ emissions for the textile and leather industry

6 Energy Demand Projections for the Five Industry Sectors Analysed

The industry sectors analysed, aluminium, steel, cement, chemical industries, and the textile and leather sector, consume more than half the electricity and process heat demand of the combined industry sectors (Table 5.29). The remaining large energy consumers are in machinery, including the manufacturing industry, food processing, mining, and construction. The aim of this sectorial pathway analysis is to inform the finance industry, which uses industry and service classification systems such as GICS. GICS differs from the IEA in the IEA sectors industry and services, as described in Chap. 4. The energy demand of food processing—a subgroup of the IEA industry sector—in the OECM is part of the demand analysis and projections for the services sector, whereas the IEA industry sector construction is part of the buildings analysis. Furthermore, the transport equipment sector has been analysed as part of the OECM 1.5 °C pathway for global transport.

Table 5.29 Total electricity demand of the industries analysed

Table 5.30 shows that the high-temperature process heat (>500 °C) accounts for two-thirds of the total process heat demand. Consequently, the generation of process heat for specific industries, such as in arc furnace ovens for steel, aluminium smelters, and process heat plants for chemical processes, is key to the decarbonisation of the global industry sector.

Table 5.30 Total process heat demand of the industries analysed

Therefore, the challenge is less the generation of carbon-free renewable power than the implementation of applications and manufacturing equipment especially designed for the cement, steel, and chemical industries. Timely investments in new manufacturing equipment may lead to the early retirement of existing industrial plants. The 1.5 °C global carbon budget of 400 GtCO₂ between 2020 and 2050, identified by the Intergovernmental Panel on Climate Change (IPCC; see Chap. 2), has set a clear and hard limit for future emissions, and industries must be supported by government policies to implement the required transition to decarbonisation.

The five main industry sectors are responsible for about 85% of the energy-related CO₂ emissions of the entire industry sector and for almost 20% of all global energy-related CO₂ emissions (Table 5.31).

Table 5.31 Total energy-related CO₂ emissions of the industries analysed

7 OECM 1.5 °C Pathways for Major Industries: Limitations and Further Research

The development of energy and emission pathways for industry sectors requires an energy model with high technical resolution. Compared with regional and global energy scenarios, sectorial pathways for industries are based on significantly more statistical data and must be developed in close co-operation with industry partners. Furthermore, the estimation of carbon budgets for specific industry sectors (based on GICS) requires a holistic approach, and all sectors must be considered in order to capture the interactions between the different industries and with the energy sector. To estimate a carbon budget based on current emissions for a single sector, such as the aluminium industry, will inevitably lead to inaccurate results because this approach does not consider the possible technical developments in other individual industries. The current discussions of net-zero targets for specific industries are often developed for a single industrial sector in isolation. This means that the total of all sub-concepts for certain industries may exceed the actual CO₂ emitted, and/or the responsibility for the reduction of CO₂ may be shifted to other sectors. In this research, bottom-up projections of the energy demand for the chemical, aluminium, and steel industries formed the basis for the supply scenarios for electricity, process heat, and fuels. The supply of carbon-free electricity is the key to the decarbonisation of all industry sectors. Furthermore, the electricity demand will increase with the electrification of process heat to replace fuels. Therefore, power utilities will play a crucial role in those industries reaching their decarbonisation targets. The decarbonisation of process heat will require changes in specific production processes and is therefore the core responsibility of the industry itself. We found that it is technically possible to decarbonise the energy supply of the analysed industries with available technologies. However, the OECM 1.5 °C pathway is not a prognosis, but a backcasting scenario that shows what must be done to achieve the carbon target. More detailed analyses for specific industry locations, e.g. China or India, are required because our global analysis simplifies processes and calculates energy demand projections on the basis of average global energy intensities. Moreover, energy demand was calculated with energy intensities (e.g. for steel production) derived with a literature search. Energy statistics, especially for the chemical industry, are sparse, and all the energy demand for sub-sectors are based on GDP projections. More research is required for industries in specific GICS classes, in terms of both statistical data and the current and future energy intensities of industry-specific processes. A central database of energy intensities and energy demand for each GICS class would significantly enhance the level of detail available for the calculation of net-zero pathways in the future.