Industrial Sector

Why Focus on the Industrial Sector?

The industrial sector is the third largest source of greenhouse gas (GHG) emissions in the United States, accounting for 22% of emissions in 2017.[1] The sector encompasses a range of different industries, including construction, mining, refining, and manufacturing, where manufacturing includes the production of cement, steel, aluminum, paper, glass, and chemicals. Reducing industrial sector emissions is particularly challenging because the sector is made up of a very diverse set of emission sources, and cost-effective technologies and alternative fuels are not currently commercially available that could decarbonize many types of industrial facilities. For this reason, there tends to be a greater focus on the power generation and transportation sectors for GHG emission reductions.

By convention, Industrial Sector emissions include only what is emitted directly at industrial facilities.  Emissions from utility electric generators that provide electricity used by industry are included in the Electricity Sector.

What Makes the Industrial Sector Different in Terms of Reducing Carbon Emissions?

Some unique features of this sector add to the challenges of industrial decarbonization:

Industrial heat: Cost-effective, low-carbon substitutes for fossil fuels that could create the kind of long-duration, high-temperature heat required for some industrial processes are not widely available.[1]  Moreover, industrial processes vary widely. As a result, there is no one-size-fits-all solution for industrial heat needs. Innovation is needed to explore a range of potential low-carbon heat sources including renewable natural gas (natural gas derived from organic waste material), hydrogen, electricity, biodiesel, and fossil fuel combustion with carbon capture, utilization and storage (CCUS).

Emissions from chemical reactions: Some industrial processes generate carbon dioxide emissions as a direct byproduct of chemical reactions, rather than as a result of fossil fuel combustion. For example, in the traditional blast furnace production of steel, iron oxide is directly reduced with coke.[2] Since these emissions are not energy-related and therefore cannot be avoided by switching away from fossil fuels, technologies for capturing these emissions once they have been created—rather than eliminating the emissions altogether —will likely be necessary to decarbonize certain industrial subsectors. CCUS technology exists today, but costs will need to fall further to support wide-scale adoption. Additionally, applied R&D for key product types can help commercialize new industrial processes with fewer emissions. For example, direct electrochemical reduction could be employed to reduce iron ore in a process similar to how aluminum is made today.[3] Provided that low-carbon electricity is being used, this process would yield a decarbonized steel.

Competitiveness: Many industries operate in highly competitive global markets. This makes them highly sensitive to changes in production costs, including costs incurred to meet environmental requirements. One concern raised is that decarbonization policies, if they imposed costs on domestic industries, could cause producers to shut down and move overseas. Of course, competitiveness considerations can also be a driver for updating equipment and increasing its efficiency, which can also reduce emissions. Technology and business innovation are needed to address these challenges and bring new solutions to market that could drive down the cost of emissions reductions in the industrial sector.

Industrial emissions depend on the interplay of technology innovation, market forces, human behavior and public policy, and public policy happens at the federal, state and local level. A variety of federal policies could help spur the innovation needed to reduce industrial sector GHG emissions, incentivize widespread deployment of low- and zero-carbon technologies, and  protect trade-exposed businesses in this sector.

[1] U.S. Environmental Protection Agency, Sources of Greenhouse Gas Emissions (www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions) (Aug. 8, 2019).

[2] https://energypolicy.columbia.edu/research/report/low-carbon-heat-solutions-heavy-industry-sources-options-and-costs-today

[3] 3 2Fe2O3 + 3C -> 4Fe + 3CO2

[4] 2Fe2O3 + electricity -> 4Fe + 3O2

Adapted from https://bipartisanpolicy.org/wp-content/uploads/2020/03/BPC_Energy_Industrial_Sector_RV3-1.pdf.

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