Transforming Industry through CCUS

Industrial production must be transformed to meet global climate goals. Industry today accounts for one-quarter of CO_2 emissions from energy and industrial processes and 40% of global energy demand. Demand for cement, steel and chemicals will remain strong to support a growing and increasingly urbanised global population. The future production of these materials must be more efficient and emit much less CO₂ if climate goals are to be met. 

Emissions from cement, iron and steel, and chemical production are among the most challenging to abate. One-third of industry energy demand is for high-temperature heat, for which there are few mature alternatives to the direct use of fossil fuels. Process emissions, which result from chemical reactions and therefore cannot be avoided by switching to alternative fuels, account for one-quarter (almost 2 gigatonnes of carbon dioxide [GtCO₂]) of industrial emissions. Industrial facilities are also long-lived assets, leading to potential “lock-in” of CO_2 emissions.

Carbon capture, utilisation and storage (CCUS) is a critical part of the industrial technology portfolio. In the Clean Technology Scenario (CTS), which sets out an energy system pathway consistent with the Paris Agreement, more than 28 GtCO₂ is captured from industrial facilities in the period to 2060. CCUS delivers 38% of the emissions reductions needed in the chemical subsector and 15% in both cement and iron and steel.

CCUS reduces the cost and complexity of industry sector transformation. CCUS is already a competitive decarbonisation solution for some industrial processes, such as ammonia production, which produce a relatively pure stream of CO₂. Limiting CO_2 storage deployment would require a shift to nascent technology options and result in a doubling of the marginal abatement cost for industry in 2060.

Developing CCUS hubs can support new investment opportunities. Investing in shared CO₂ transport and storage infrastructure can reduce unit costs through economies of scale as well as enable – and attract – investment in CO_2 capture for existing and new industrial facilities. The long timeframes associated with developing this infrastructure requires urgent action.

Establishing a market for premium lower-carbon materials can minimise competitiveness impacts. Public and private procurement for lower-carbon cement, steel and chemicals can accelerate the adoption of CCUS and other lower-carbon processes. The large size of contracts for these materials could help establish significant and sustainable markets worldwide.

• Support the development and deployment of carbon capture, utilisation and storage (CCUS) in industry as part of a least-cost portfolio of technologies needed to achieve climate and energy goals.
• Identify and prioritise competitive and lower-cost CCUS investment opportunities in industry to provide learnings and support infrastructure development.
• Facilitate the development of CCUS “hubs” in industrial areas with shared transport and storage infrastructure to reduce costs for facilities incorporating carbon capture into production processes.
• Implement policy frameworks that support significant emissions reductions across industrial facilities while addressing possible competitiveness impacts.
• Establish a market for low-carbon materials, including steel and cement, through public and private procurement measures.

Carbon capture, utilisation and storage (CCUS) technologies are expected to play a critical role in the sustainable transformation of the industry sector. Today, 16 large-scale CCUS applications at industrial facilities are capturing more than 30 million tonnes (Mt) of CO₂ emissions each year from fertiliser (ammonia), steel and hydrogen production, and from natural gas processing.

CCUS is one of the most cost-effective solutions available to reduce emissions from some industrial and fuel transformation processes – especially those that inherently produce a relatively pure stream of CO₂, such as natural gas and coal-to-liquids processing, hydrogen production from fossil fuels and ammonia production. CCUS can be applied to these facilities at a cost as low as USD 15-25 (United States dollars) per tonne of CO₂ in some cases, and provides an opportunity to reduce CO₂ emissions by avoiding the current practice of venting CO₂ to the atmosphere.

CCUS can also play a key role in reducing emissions from the hardest-to-abate industry subsectors, particularly cement, iron and steel, and chemicals. Alongside energy efficiency, electrification (including electrolytic hydrogen) and the increased direct use of renewable energy, CCUS is part of a portfolio of technologies and measures that can deliver deep emissions reductions at least cost in these subsectors.

In the International Energy Agency (IEA) Clean Technology Scenario (CTS), which maps out a pathway consistent with the Paris Agreement climate ambition, CCUS contributes almost one-fifth of the emissions reductions needed across the industry sector. More than 28 gigatonnes of carbon dioxide (GtCO₂) is captured from industrial processes by 2060, mostly from the cement, iron and steel and chemical subsectors (Figure 1). A further 31 GtCO₂ is captured from fuel transformation, and 56 GtCO₂ from the power sector.

Figure 1. CCUS emissions reductions by subsector in the CTS, 2017-60

As ambition increases in the pursuit of net-zero energy system emissions, the role of CCUS becomes even more pronounced 1. Wider deployment of CCUS is especially important to decarbonise industry and support the generation of negative emissions through bioenergy with CCS (BECCS).

In recommending that the United Kingdom (UK) adopt a target of net-zero greenhouse gas (GHG) emissions by 2050, the UK Climate Change Committee recognised that “CCS is a necessity, not an option”, and noted that early action to meet international demand for low-carbon materials could give UK firms a competitive advantage 2. Furthermore, early development of CO₂ transport and storage infrastructure could attract new industry investments while maintaining existing facilities in an increasingly climate constrained world.

Industry is the basis for prospering societies, central to economic development and the source of about one-quarter of global gross domestic product (GDP) and employment. The materials and goods produced by industrial sectors make up the buildings, infrastructure, equipment and goods that enable businesses and people to carry out their daily activities.

Increasing demand for cement, steel and plastics has historically coincided with economic and population growth. Since 1971, global demand for steel has increased by a factor of three, cement by nearly seven, primary aluminium by nearly six and plastics by over ten. At the same time, the global population has doubled and GDP has grown nearly fivefold (Figure 2).

Figure 2. Global trends in the production of major industrial products, GDP and population over the previous four decades

Global population expansion, increased urbanisation, and economic and social development will underpin continued strong demand for these key materials. Advanced economies currently use up to 20 times more plastic and 10 times more fertiliser per capita than developing economies 3, and global demand for cement is expected to increase 12-23% by 2050 4.

Industry is the second-largest source of CO₂ emissions from energy and industrial processes (equal with transport) after the power sector (Figure 3). It accounted for nearly 40% of total final energy consumption and nearly one-quarter (8 GtCO₂) of direct CO₂ emissions in 2017. If indirect emissions (i.e. emissions resulting from industrial power and heat demand) are also taken into account, the sector is responsible for nearly 40% of CO₂ emissions.

Steel and cement are the two highest-emitting industry subsectors. Together they accounted for 12% of total direct global CO₂ emissions in 2017: 2.2 GtCO₂ from cement and 2.1 GtCO₂ from iron and steel. The chemical subsector was the third-largest emitter at 1.1 GtCO₂.

Figure 3. Direct CO₂ emissions by sector, 2017

Industry sector emissions are among the hardest to abate in the energy system, from both a technical and financial perspective.

Many industrial processes require high-temperature heat, which accounts for one third of the sector’s final energy consumption. Switching from fossil to alternative fuels for processes that require temperatures as high as 1 600 degrees Celsius (°C) is difficult and costly, necessitating facility modifications and electricity requirements that may be prohibitively expensive.

Almost one-quarter of industrial emissions are process emissions that result from chemical or physical reactions and therefore cannot be avoided by switching to alternative fuels. Process emissions are a particular feature of cement production, accounting for 65% of emissions, but they are also significant in iron and steel, aluminium and ammonia production (Figure 4).

Figure 4. Process emissions from selected industry subsectors

Industrial facilities are long-lived assets – of up to 50 years – and these assets have the potential to “lock in” emissions for decades. The global production capacity of both clinker (the main component of cement) and steel has doubled since 2000, suggesting that at least half of the current production capacity is less than 20 years old. The World Energy Outlook 2018 analysis shows that emissions from existing industrial infrastructure alone could account for some 25% of the carbon emissions allowable in a pathway compatible with the Paris Agreement until 2040 (Figure 5). The lock-in effect from the industry sector lasts longer than those from power generation, transport and building sectors.

Figure 5. Lock-in of current infrastructure

Beyond the technical challenges for industry decarbonisation, highly competitive, low-margin commodity markets for key industrial products can provide limited room for facilities to invest in innovation or low-carbon production routes where this increases costs. Except for cement, products are traded globally and are price-takers in international markets; companies that increase production costs by adopting low-carbon processes and technologies will therefore be at an economic disadvantage. This is especially the case where there is no carbon price or CO₂ emissions are not regulated.

A trajectory following current trends for emissions reductions in the industry sector falls far short of the cuts needed to address the climate change challenge. Without substantial action soon, the share of emissions from industry will rise significantly and would absorb 45% of the cumulative CO₂ emissions allowable in the CTS to 2060. By 2060, industry sector emissions would be greater than total annual emissions in the CTS, which keeps CO₂ emissions within a pathway consistent with the Paris Agreement (Figure 6).

Figure 6. Industry emissions pathway in the RTS compared with overall CTS emissions

A portfolio of technologies is deployed in the CTS to reduce emissions from the cement, iron and steel, and chemical subsectors. CCUS is the third most-important lever for emissions reductions in these subsectors, contributing a cumulative 27% (21 GtCO₂) of emissions reductions by 2060 relative to the RTS (Figure 7).

Figure 7. Emissions reductions for key industry subsectors (cement, iron and steel, chemicals) by mitigation strategy, CTS compared with RTS, 2017-60

The quantity of CO₂ captured with CCUS and its relative contribution to abatement varies for each industry subsector (Figure 8).

Cement: CCUS contributes 18% to emissions reductions between 2017 and 2060, capturing 5 GtCO₂ by 2060.

Iron and steel: While the relative contribution of CCUS to emissions reductions is slightly lower in the iron and steel subsector (15%), cumulative capture of 10 GtCO₂ by 2060 is nearly double that for cement.

Chemicals: CCUS is the most important contributor to chemical sector decarbonisation, accounting for 38% of overall emissions reductions. CO₂ capture in chemicals is also the highest (14 GtCO₂) owing to several production processes that yield relatively pure streams of CO₂ that are relatively inexpensive to capture.

Figure 8. Global cumulative direct CO₂ emissions reductions in cement, iron and steel, and chemicals in the CTS, 2017-60

The need for deep emissions reductions in the CTS results in large volumes of CO₂ being captured from industrial production and transported for use or storage (Figure 9). The chemicals subsector already has significant CO₂ capture today, with more than 0.1 GtCO₂ annually captured from ammonia production for use as a raw material in fertiliser manufacture. In the CTS, CO₂ capture from chemical production would triple to nearly 0.5 GtCO₂ by 2060, with most of the additional CO₂ permanently stored. Iron and steel sees significant implementation of CCUS by 2030, with deployment accelerating after 2030 as CCUS becomes an increasingly competitive and important decarbonisation option for the sector.

In the cement sector, implementation of strong material efficiency measures in the CTS leads to a 5% reduction in global cement demand in 2030 compared to RTS levels, which contributes to relatively slow CCUS uptake over the coming decade. However, a rapid increase in CO₂ capture levels occurs from 2030, to reach 0.4 GtCO₂ by 2060. This future scale-up in the cement sector is dependent on significant investment in CO₂ capture demonstration projects and infrastructure development prior to 2030.

Effective management of large volumes of CO₂ from industrial production will require planning and development of CO₂ transport and storage infrastructure in the near term. These investments can have lead-times of several years, particularly for pipelines and for greenfield CO₂ storage sites, and could become a limiting factor for CCUS uptake without timely action.

Figure 9. CO₂ capture in cement, iron and steel and chemical subsectors in the RTS and CTS, today through 2060

The importance and value of CCUS to the industry sector is revealed in IEA scenario analysis that considers the implications of a failure to develop CO₂ storage at scale (the Limited CO₂ Storage scenario variant, or LCS). In the LCS, CO₂ storage availability across the whole energy system is assumed to be restricted to 10 GtCO₂ in the period to 2060, compared with 107 GtCO₂ of storage in the CTS 5.

For industry, limiting the availability of CCUS as a mitigation option would require a shift to alternative strategies and novel technologies that often are at an earlier stage of development and in some cases have yet to be tested at scale. In the cement sector in particular, the paucity of alternatives to address emissions means that it would not be able to reduce its emissions at the scale of the CTS, even though it would secure almost half of the available CO₂ storage capacity that is assumed to be available in LCS.

In the LCS, the limited availability of CO₂ storage would result in a doubling of the marginal CO₂ abatement cost by 2060 relative to the CTS where CCUS is widely available.