Net-zero by 2050 is possible: Success rests on 3 pillars

2020-01-17
davos-2020-1

Net-zero CO2 emissions by 2050: what even a year ago seemed a distant vision is becoming technically realistic or possible.

But while technically possible, the path toward carbon neutrality is far from simple. A mix of approaches will be needed, including electrification, renewable energy and cleaner fossil fuels, depending on such characteristics as geographic situation, level of industrialization and other many societal needs.

A particular challenge will be industry, which makes up 29% of final consumption and 42% of direct CO2 energy-related and process emissions, according to the IEA's 2019 World Energy Outlook. Heavy industries such as steel, cement, and chemical production for products like plastics are considered "hard to abate", because many of their processes cannot be electrified easily, or require fossil fuels as their raw materials.

The technologies to largely decarbonize these sectors theoretically or scientifically exist, but they are at various stages of development. As a result, technology on its own cannot deliver net-zero emissions. Support from policy-makers and incentives to generate demand for low-carbon or zero-carbon products will also be required.

Heavy industry poses a major decarbonization challenge
Heavy industry poses a major decarbonization challenge

Here are three areas that will be crucial.

1. Scaling up technology

Companies around the world are developing solutions to make net-zero emissions possible.

The success of offshore wind, which has costs and electricity-generating capacity now considered to be on a par with gas power plants, shows that renewables can be scaled up to compete with fossil fuels.

Even the issue of intermittency can be addressed, whether through battery storage or conversion to hydrogen – which can then be used as a low-carbon fuel in transport, power generation and industry.

In hard to abate sectors, technologies are also available to lower CO2 emissions. In steelmaking, cleaner electric arc furnaces can decarbonize the recycling of scrap metal. And new low-carbon steel can be produced using natural gas or hydrogen instead of coal in the energy-hungry process of iron-ore reduction.

What remains of carbon-rich waste gases can be converted into synthetic fuels via carbon capture, utilization and storage (CCUS). These can then be used in other carbon-challenged sectors, such as chemicals, to help reduce emissions.

In heating – which accounts for around 50% of total energy consumption – hydrogen could replace natural gas in existing distribution networks. Waste-to-energy applications, such as those that exploit heat produced from manufacturing processes for district heating and electricity, are already established here, and their role is expected to grow further.

Many of these low-carbon solutions, while technically proven, will need to be scaled up to make them more economically viable. And technology companies cannot be left to fight this battle on their own.

2. Policy changes

Policy changes have already been invaluable in helping lower carbon emissions. Renewable energy technologies like wind turbines and solar PV would not have reached their current level of market maturity without global and regional legislative support.

To reach net-zero emissions, similar support for other carbon abatement technologies is needed to aid the development of solutions for the decarbonizing of areas such as heating and industrial processes.

Some progress is being made. Japan, for example, wants to become a "Hydrogen Society", with targets around hydrogen production and usage. Globally, more than 50 countries are developing hydrogen policies and roadmaps.

In the US, tax incentives are encouraging a wave of new CCUS projects, with the majority aiming to capture CO2 emissions in the chemicals sector.

And Europe, which has already reached its targets for renewable energy in the electricity mix, has now set its sights on decarbonizing heating, with a minimum annual target of 1.3% growth in renewable energy heating.

But more must be done. In some of the world's biggest and fastest-growing economies, there needs to be legislative support for switching to lower-carbon energy sources. The Energy Transitions Commission identifies natural gas as a key transition fuel for rapidly reducing the industrial CO2 emissions of China and India.

No single policy solution will work for everyone when it comes to achieving net-zero emissions. And alongside regulatory and financial initiatives, it is also critical to stimulate demand so markets can be scaled and costs reduced.

The cost to consumers of decarbonizing industries will be small
The cost to consumers of decarbonizing industries will be small

3. Generating demand

Energy taxation and carbon pricing – for example through mechanisms like the EU's Emissions Trading System – are becoming more common in some parts of the world. Both make it less attractive to generate greenhouse gases and more appealing to invest in abating technology.

Public procurement also has a role to play by prioritizing low-carbon products in any of its buying decisions to generate demand – as well as setting an example.

At the same time, grassroots demand needs to be nurtured, by encouraging consumption of low-carbon products by the public.

The Energy Transition Commission suggests that decarbonization in hard to abate industries will only have a small impact on end consumer prices. Decarbonized steel would likely add no more than $180 to the price of a car. Zero-emissions plastics would bump up the price of a liter of soft drink by less than $0.01.

Only aviation may see higher increases, with ticket prices predicted to rise by 10% to 20% if the cost of biofuel and synthetic fuel remains higher than conventional jet fuel.

To build scale, the focus should first be on markets where end users will absorb the extra cost.

An analogy might be the success of organic foods. While more expensive, organic produce gained momentum with an audience looking to live more healthily. Similarly, creating a 'low carbon' or 'no carbon' label might encourage consumers who are concerned about climate change to 'trade up'.

Net-zero 2050 is within our grasp – but it will require a concerted effort to get there.

This piece is part of MHI Group @ WEF Davos and first came out on the World Economic Forum.

Shunichi Miyanaga

Shunichi Miyanaga

Shunichi Miyanaga is Chairman of the Board at Mitsubishi Heavy Industries. He served as President and CEO of the company until March 2019.

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