The Report by the independent Rhodium group was released as the COP28 Climate Summit began in Dubai. It outlines the grim climate outlook for the rest of the century. The authors’ projections are not surprising. They project that the world is on track to surpass the Paris Agreement goal to limit global temperature increases to 2 degrees Celsius over pre-industrial levels by 2100. It’s a little bit of good news that we are making progress in decarbonizing electricity and transportation, but this positive momentum could plateau by the mid-century.
The bad news, however, overshadows the modest progress made in recent years. The report is most alarming because it predicts that the greenhouse gas emissions (GHGs) from the industrial sector, including the production of cement, iron, steel and chemicals, will continue to increase over the next decade and become our greatest unmet challenge in climate mitigation. The Rhodium Group’s probabilistic modelling predicts that, by 2050 GHG emissions will surpass all emissions from the building, power, transportation and cement sectors combined. It’s truly alarming that policymakers haven’t even begun to address industrial GHG emission.
Why are we here? Policymakers have focused a lot of attention on the electric energy generation and transportation sector because these sectors are more susceptible for homogenous solutions. As an example, innovators develop photovoltaics and governments adopt incremental policies to encourage the switch from coal to natural gas generation. California, for example, implemented a Renewable portfolio standard requirement that required investor-owned utilities to adopt a renewable portfolio. It also introduced a Net-metering system which encouraged individual electricity consumers to invest in solar energy. And it also implemented a cap and trade regime designed for taxing emissions from fossil fuel power plants. These policies, taken together, accelerated the growth of rooftop and utility-scale solar. They also led to a threefold increase in power generation using renewables in less than 15-years. On a sunny, mild Sunday afternoon in 2022, California produced for the first ever enough energy from renewable sources to meet its immediate demand.
Tesla’s success in bringing electric vehicles to the market and achieving a high level of consumer demand has also influenced California’s ambitious plans to decarbonize its mobile source fleet. The state expanded its Clean Car Program as Tesla’s electric vehicles became more appealing and available to consumers. California has a goal to reach 100 percent zero emission vehicle sales by the year 2035. Governor Newsom set this goal in 2020. Electric vehicle technology, like solar cells has become cheaper as it has been adopted more widely. In both cases California focused on one solution and implemented policies to encourage adoption.
It is not true that we have overcome all the obstacles to the decarbonization of the energy and transport sectors. Contrary to popular belief, we are on the contrary. We need to fix the bottlenecks in the transmission grid and solve the problems of intermittency with renewables such as solar and wind. Government policies are encouraging the long-term storage, and efforts to streamline interconnection queue. We will continue to face technological challenges in the transportation sector to decarbonize planes, trains and ships. However, progress can be seen on the horizon. Although we are still a long way off, government intervention allowed us to overcome early critical barriers.
The industrial sector is likely to be more difficult to decarbonize, partly due to the heterogeneity of the industry and partially due to the higher demands for heat in many industrial processes. It is not the same to reduce GHGs from iron and steel production than it is to reduce GHGs from plastics, ammonia fertilizer or cement manufacturing. We cannot achieve our goals with a single innovation in technology. The high temperatures required for many manufacturing processes makes electrification a very difficult task. green hydro , carbon sequestration, and “green hydrogen HTML0” may be important pieces to the puzzle. However the science behind these technologies is in its infancy. We cannot expect a government policy that is “one size fits everyone” to get us very far.
This is a very worrying reality. As the Global South develops, the demand for industrial products that are hard to electrify is likely to increase. Inputs from heavy industries such as steel and cement will also be crucial to the deployment of renewable technologies like wind turbines and solar cells at scale. The global demand for cement and steel has doubled since the turn of this century. Plastics production has also increased 90 percent. We must also move quickly to market more environmentally friendly production processes for steel, plastics, and cement.
The history has shown us that in a market fragmentation scenario, it is unlikely that we will see rapid technological development and deployment without policies that reduce uncertainty. The government can set performance standards with deadlines for implementation. These regulations, which impose penalties for non-compliance if they are sufficiently severe and credible, can encourage innovation and market adoption. Where there are multiple touch points that affect emissions or when some aspects of a solution are at an early stage, it will be necessary to add additional policy drivers.
Consider, for instance, Portland cement which is made by baking limestone in high temperatures. The process usually involves burning coal or natural gas to power a kiln. Baking then releases carbon dioxide bound to limestone into the air. The standard cement production process creates atmospheric carbon two ways: by burning fossil fuels to run an extremely hot kiln, and through a thermal reaction which separates the calcium oxide (also known as “clinker”) from the carbon dioxide in the limestone. This carbon dioxide is then vented. Alternative industrial heating, such as green hydrogen or the sequestration and capture of carbon dioxide in the kiln could be used to “green” bake the process. clinker alternatives can theoretically reduce the carbon footprint of the cement production.
Cement manufacturers may not be willing to decarbonize their products if they lack certainty. Producers are also concerned about meeting stringent standards of product strength, hardness and elasticity. In a number of ways, government policies aimed at the cement sector can reduce these uncertainties. For example, they can establish energy efficiency standards based upon the best technologies available to encourage fuel and material switchover.
California’s experience in setting climate-related standards and deadlines is a cautionary tale. Some, such as the Renewable Portfolio Standard have been quite successful. Some, such as the controversial cap and trade program, were not nearly as successful. The former is a regulation mandate that the state has enforced on a limited number of utilities, i.e., restricting the ability of regulated utilities to recover electricity costs from their ratepayers. The second approach relies on market-based approaches, in which the state has not been able to convince buyers of its draconian intentions, alternative compliance mechanisms, such as carbon offsets, are of questionable value and out-of-state emissions have been a problem.
These lessons indicate that policymakers should go the extra mile to design and implement policies that can reduce GHG emissions in heavy industries such as steel, cement and plastics production. California, the fifth-largest economy in the world, is once again well-positioned to play a leading role. The state, for example, could work with cement manufacturers to develop new materials standards that meet performance and reliability concerns, and commit to a program of public procurement that would provide future market certainty for more environmentally friendly products. Any policy intervention may require green product certification requirements as well as border adjustments mechanisms that are legally viable to ensure the integrity and effectiveness of state policy. The rapid growth of the electric car market is a good example of how a state with a large population, such as California, can influence manufacturer decisions.
Rhodium Group modeling shows that without aggressive policy interventions in developed market economies such as the U.S.A. and Europe we won’t be able decarbonize our expanding industrial sector within this century. We risk a resurgence of old, carbon-intensive technologies in the coming decades. Innovation alone won’t get us there, even though technological solutions are slowly surfacing across all industrial sectors. Public policies must be bold to move new solutions beyond the lab and into the real-world. In some key infrastructure-related markets, like those for steel and cement, public procurement commitments could advance the ball considerably. In other markets, such as those for chemicals or fossil-fuel production, different strategies are needed.
It is true that designing policy interventions to address GHG emission from different heavy industries requires hard work, and a firm resolve in the face initial resistance by industry or concerns about consumer costs. We must start. It could literally be the future of Earth’s life.
Deborah A. Sivas is the Luke W. Cole professor of law at Stanford Law School and she directs the Environmental and Natural Resources Law and Policy Program and Environmental Law Clinic.