Shearman & Sterling LLP 43 | A Deeper Look at the Global Framework Principles for Decarbonizing Heavy Industry
During the height of the COVID-19 pandemic, many
corporations, governments and non-governmental
organizations began formulating their post-pandemic,
sustainability-focused economic recovery plans, eager
to capitalize on the momentum of globally accelerating
energy transition ideologies. As part of this effort, multiple
international entities, including the International Energy
Agency and the international non-profit Climate Group,
along with Mighty Earth (a global climate advocacy
organization), have come out with broad frameworks for
decarbonizing heavy industry, seen as one of the key pillars
in the drive towards emissions reductions.
1
This article aims
to explore the common themes of these two frameworks,
to review these principles in greater detail and to investigate
the extent to which any progress has been made over the
past few months.
WHY HEAVY INDUSTRY DECARBONIZATION MATTERS
Heavy industry is a term that encompasses various
industrial processes, including the production of steel,
cement and chemicals, as well as the extraction and refining
of oil, gas and coal. The heavy industry sector is estimated
to consume approximately one-third of all energy produced,
and accounts for about 35-40% of all global greenhouse
gas emissions.
2
With approximately 86% of the S&P 500 filing sustainability
reports, there is a strong drive towards decarbonizing the
industrial sector. Within the industrial sector, two sub-sectors
— steel and cement — collectively account for approximately
14% of total global carbon dioxide emissions, 34% of total
global methane emissions and 47% of heavy industry's
carbon dioxide emissions.
3
In fact, every ton of steel
produced in 2018 emitted on average 1.85 tons of
carbon dioxide, equating to about 8% of global carbon
dioxide emissions.
4
Companies manufacturing in these two areas can
significantly reduce their greenhouse gas emissions
through implementing a wide range of energy-efficiency
improvements, replacing feedstocks and fuels with
hydrogen, and employing point-source carbon capture
initiatives. These wide-ranging measures are necessary
to mitigate emissions both from the industrial/manufacturing
processes, as well as from fossil fuel-based power
generation. Fully implementing these measures is expected
to take decades and is projected to cost between
$11 trillion and $21 trillion through 2050 to fully implement
at a net-zero level.
5
Furthermore, implementation will
necessitate investing in, and accelerating the development
of renewable-energy capacity to provide an estimated
four to nine times more clean power input than would be
required in the absence of any concerted effort to reduce
emissions in this sector. Viable decarbonization pathways
already exist for the electricity and transportation sectors;
however, for heavy industry, the current decarbonization
routes are not cheap and have not begun scaling
to cost-efficient levels. Therefore, high impact, high risk
and high reward makes the industrial sector a prime target
for decarbonization innovation considering the potential
emissions reduction opportunities that exist.
1
See Victoria Masterson, "10 Ways to Decarbonize Heavy Industry,"
World Economic Forum https://www.weforum.org/agenda/2022/06/heavy-
industry-net-zero-carbon-emissions (June 14 2022).
2
See IEA, "Greenhouse Gas Emissions from Energy: Overview,"
https://www.iea.org/reports/greenhouse-gas-emissions-from-energy-
overview (August 2021).
3
See Mekala Krishnan and Jonathan Woetzel, "Infrastructure for a net-zero
economy: Transformation ahead," McKinsey, https://www.mckinsey.com/
capabilities/operations/our-insights/global-infrastructure-initiative/voices/
infrastructure-for-a-net-zero-economy-transformation-ahead
(April 6, 2022).
4
See Christian Hoffmann, Michel Van Hoey, and Benedikt Zeumer,
"Decarbonization challenge for steel," McKinsey, https://www.mckinsey.
com/industries/metals-and-mining/our-insights/decarbonization-challenge-
for-steel (June 3, 2020).
5
See Arnout de Pee, Dickon Pinner, Occo Roelofsen, Ken Somers, Eveline
Speelman, and Maaike Witteveen, "How industry can move toward a
low-carbon future," McKinsey, https://www.mckinsey.com/~/media/
mckinsey/business%20functions/sustainability/our%20insights/how%20
industry%20can%20move%20toward%20a%20low%20carbon%20future/
how-industry-can-move-toward-a-low-carbon-future.pdf (July 2018).
A Deeper Look at the Global
Framework Principles for
Decarbonizing Heavy Industry
Omar Samji, Dan Feldman, Gabriel Salinas and Humzah Yazdani
Insights
20 YEARS
