The basic materials industry is facing a major challenge: it must make a 25% reduction in emissions by 2030 and achieve near zero emissions by 2050 – but emission levels have remained constant over the last ten years.
Breakthrough innovations are thus needed to enable the climate-neutral production of steel, chemicals and cement. Gradual efficiency improvements remain important, but they are no longer sufficient.
The technologies needed for climate-neutral industry are already available – or are close to market readiness.
Green hydrogen will play a central role in achieving carbon neutrality in the steel and chemical industries. Particularly in the chemicals industry, the closing of material loops will be a core strategy. In the cement industry, new binders and carbon capture and storage (CCS) will be key technologies.
Industry needs a new regulatory framework over the short term, as a major reinvestment phase will occur between 2020 and 2030. Promising political instruments include Carbon Contracts for Difference (CfD), a green hydrogen quota, and a green public procurement commitment by the federal government.
With the right mix of policy instruments, the German government can ensure reliable conditions for investment while also incentivising behaviour at various levels of the supply chain: upstream, midstream and downstream. By contrast, continued investment into conventional technologies risks stranded assets, as new industrial plants have lifespans well beyond 2050.
The future of German industry must be climate-neutral. Germany now has the opportunity to become a technology leader in key low-carbon technologies with a significant potential upside.
By ushering in climate-neutral industry at home, Germany could help to demonstrate the viability of a climate-neutral industry and thereby help to foster a global market for low-carbon technologies worth billions.
The basic materials industry is a cornerstone of Germany’s economic prosperity. In addition to making a major contribution to GDP, it provides over 550,000 high-quality jobs. While this sector of the economy has improved its energy efficiency in recent years, there is an urgent need for far greater emissions cuts, given national and international climate protection targets. But how can the basic materials industry become climate neutral by 2050 without jeopardising its strong competitive position in the global marketplace? This is a pressing question.
Agora Energiewende and the Wuppertal Institute recently explored this issue in a series of workshops held with industry associations, trade unions, government ministries and civil society representatives. The study, which outlines various technology and regulatory design options, is the outcome of this dialogue process. These workshops underscored that industry is ready to proactively tackle the challenge of climate protection.
However, the absence of a conducive regulatory environment in tandem with an insufficient willingness on the part of policymakers to implement innovative policy instruments prevents industry from striking out and taking the lead. It’s high time that changed. Ultimately, every new industrial facility that is constructed in coming years must be compatible with the goal of zero net emissions – as new facilities have lifespans lasting well beyond 2050. The aim of this publication is to encourage industrial investment that abets rather than hinders the attainment of our climate protection goals.
Project Manager Industry