“Global climate policy and deep decarbonization of energy-intensive industries” – article 5 of 10…

So, here’s another – am now halfway through my reading goal, with 10 days left to read 5 more papers…

Max Åhman, Lars J. Nilsson & Bengt Johansson (2017) Global climate policy and deep decarbonization of energy-intensive industries, Climate Policy, 17:5, 634-649, 

As they say

The aim of this study is to analyse how the global climate framework can be developed in order to support the transition to zero emissions in EIIs. For this purpose, we start with a description of EIIs, followed by a brief assessment of the mitigation options and technology developments required for deep decarbonization and the major barriers to technical change. On the basis of submitted national communications (NCs) from major emitters and literature sources we present an overview of the effects that the global climate regime has had on national policy responses to reduce EII emissions.” (Åhman et al, 2017: 636) 

Energy Intensive Industries (EIIs) are I guess for most intents and purposes the same as ENRIs… Or for my purposes, anyway. A couple of other useful TLAs are BATs (best available technologies) and BCAs (border carbon adjustments).

They haven’t been studied much

Studies exploring the long-term options for deep decarbonization1 have only recently begun to emerge (Ahman, Nikoleris, & Nilsson, 2012; Lechtenbo¨hmer, Nilsson, A˚ hman, & Schneider, 2015; Napp, Gambhir, Hills, Florin, & Fennell, 2014).  (Åhman et al, 2017: 635) 

and they matter because

EIIs produce basic materials such as steel, cement, aluminium, fertilizers and plastics, and account for a large share of global GHG emissions. The best available technologies (BATs) can only reduce emissions by 15–30% in these industries, even if they are applied on a large scale (Fischedick et al., 2014). Reductions beyond this require investments and fundamental changes in the core processes used based on new ‘breakthrough technologies’ that need further development to become both technically and commercially viable  (Åhman et al, 2017: 635) 

International trade in basic materials has increased steadily over the past 20 years as a consequence of continued globalization and the liberalization of trade. Most materials are traded in the commodity markets, based on standard products, large volumes and price competition. There are also some market segments with specialized and differentiated products that have a higher economic value (e.g. specialty steels). The trade intensity differs considerably between EIIs. For steel and aluminium, between 25% and 35% of globally consumed materials are internationally traded. Cement, paper and pulp are mostly sold in national and regional markets due to high transport costs, although marginal volumes are sold in international spot markets, which also makes these sectors susceptible to increasing global price competition.  (Åhman et al, 2017: 637) 

There’s a limited amount you can do-

There are three basic types of technical options: replacing fossil feedstock with biomass, electrification of the process and the use of carbon capture and storage (CCS) (Lechtenbo¨hmer et al., 2015;  (Åhman et al, 2017: 637) 

Lots of other useful insights and historical background, pointers to recent work….

Governing transitions to low-carbon emissions in EIIs will thus require comprehensive and long-term dynamic policy strategies that include the whole innovation chain: from basic research via demonstration programmes, to enabling niche markets for growth and eventually long-term market-pull policies to create a sustainable demand for zero-emission materials. In the transport, building and energy sectors, such ambitious transformative strategies have been managed mainly within national/regional borders. For EIIs, operating on a global and price-competitive market, this approach is more problematic and requires international agreements and/or complementary policies to avoid relocation and carbon leakage or trade conflicts  (Åhman et al, 2017: 639) 

The EU and its member states also have several long-term research programmes that focus on decarbonization in industry (including the Ultra Low Carbon Steel (ULCOS) programme for steel in which CCS and other options are investigated).  (Åhman et al, 2017: 641) 

Several Annex 1 countries have suggested a range of ‘sectoral approaches’ to reduce the divide between Annex 1 and non-Annex 1 countries for the post-Kyoto negotiations, see Baron, 2006 or A˚ hman et al., 2009 for an overview of proposals. The most radical proposal was the Japanese ‘carve-out model’ that gave EIIs separate (from the rest of the economy) emission reduction targets, with little or no differentiation between industries whether located in Annex 1 or in non-Annex 1 countries. The EU suggested a ‘sectoral crediting mechanism’ in which non-Annex 1 countries would accept either a formally binding or informal non-binding target (no-lose target) and thus take on some responsibility for mitigation, typically suggesting a 15–30%deviation from a business-as-usual trajectory. Non-Annex 1 countries preferred even softer policy mechanisms such as the sustainable development policies and measures (SDPAMs) suggested by South Africa (Winkler, Spalding-Fletcher, Mwakason, & Davidsson, 2002), where mitigation actions are seen as part of bottom-up derived development policies with no targets and no issuing of carbon credits but with eligibility for direct financial support. Several variations of these proposals have been discussed, merged with other proposals or discarded; see Tab 

(Åhman et al, 2017: 641) 

Trade measures that are intended to compensate the higher carbon cost for industries in Annex 1 countries by introducing border carbon adjustments (BCAs) could be a means of levelling the playing field. Explicit BCAs have not yet been put forward at any point of the UNFCCC process nor have BCAs been implemented by any party, but the question lingers in the climate policy debate and BCAs have been discussed both in the US and the EU…. There is a major concern that BCAs may be used for unfair protectionism, and not only to level the playing field, potentially spawning a new wave of protectionism and trade conflicts. The legality of BCAs has not yet been tested, but studies indicate that it would be possible to introduce them from a World Trade Organisation (WTO) perspective if properly designed and implemented (Horn & Mavroidis, 2011). However, the UNFCCC states that climate policy responses ‘should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade’ (UNFCCC 1992, Article 3 Paragraph 5). What ‘unjustifiable’ means in this context is not clearly defined, and whether BCAs would be acceptable from a UNFCCC perspective is unclear (Hertel, 2011) and will eventually have to be negotiated.  (Åhman et al, 2017: 643) 

Technology development policies are key to decarbonizing EIIs, not least since the demand for basic materials is expected to continue to grow (IEA, 2015). Unfortunately, investment in R&D is traditionally lower in EIIs than in other industrial sectors. Furthermore, innovation is targeted mainly at product innovation and marginal process improvements, rather than fundamental changes in the processes and feedstocks. Establishing better and more serious reporting requirements on technology development for EIIs within the UNFCCC could facilitate comparisons between countries and motivate countries to take action  (Åhman et al, 2017: 645) 

Reducing subsidies for fossil fuels would have a major impact on EIIs in many countries. However, subsidies for EIIs should be seen in the wider context of industrial policies that also include prioritized access to markets, regulated prices, subsidies on capital and state ownership (Haley & Haley, 2013). Industrial policy and subsidies are today discussed as being of strategic interest for fostering new high-growth industrial clusters, but also in developing countries as ‘industries of national interest’ for promoting industrialization, job opportunities and export incomes  (Åhman et al, 2017: 645) 

References 

˚Ahman, M., & Nilsson, L. J. (2015). Decarbonising industry in the EU – Climate, trade and industrial policy strategies. In C. Dupont, & S. Oberthu¨r (Eds.), Decarbonisation in the EU: Internal policies and external strategies (pp. 92– 114). Basingstoke: Palgrave MacMillan 

Wilson, C., & Grubler, A., (2011). Lessons from the history of technological change for clean energy scenarios and policies. Natural Resources Forum, 35, 165–184. 

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