EXECUTIVE SUMMARY

Industrial sector emissions of greenhouse gases (GHGs) include carbon dioxide (CO₂) from energy use, from non-energy uses of fossil fuels and from non-fossil fuel sources (e.g., cement manufacture); as well as non-CO₂ gases.

• Energy-related CO₂ emissions (including emissions from electricity use) from the industrial sector grew from 6.0 GtCO₂ (1.6 GtC) in 1971 to 9.9 GtCO₂ (2.7 GtC) in 2004. Direct CO₂ emissions totalled 5.1 Gt (1.4 GtC), the balance being indirect emissions associated with the generation of electricity and other energy carriers. However, since energy use in other sectors grew faster, the industrial sector’s share of global primary energy use declined from 40% in 1971 to 37% in 2004. In 2004, developed nations accounted for 35%; transition economies 11%; and developing nations 53% of industrial sector energy-related CO₂ emissions.
• CO₂ emissions from non-energy uses of fossil fuels and from non-fossil fuel sources were estimated at 1.7 Gt (0.46 GtC) in 2000.
• Non-CO₂ GHGs include: HFC-23 from HCFC-22 manufacture, PFCs from aluminium smelting and semiconductor processing, SF₆ from use in electrical switchgear and magnesium processing and CH₄ and N₂O from the chemical and food industries. Total emissions from these sources (excluding the food industry, due to lack of data) decreased from 470 MtCO₂-eq (130 MtC-eq) in 1990 to 430 MtCO₂-eq (120 MtC-eq) in 2000.

Direct GHG emissions from the industrial sector are currently about 7.2 GtCO₂-eq (2.0 GtC-eq), and total emissions, including indirect emissions, are about 12 GtCO₂-eq (3.3 GtC-eq) (high agreement, much evidence).

Approximately 85% of the industrial sector’s energy use in 2004 was in the energy-intensive industries: iron and steel, non-ferrous metals, chemicals and fertilizers, petroleum refining, minerals (cement, lime, glass and ceramics) and pulp and paper. In 2003, developing countries accounted for 42% of iron and steel production, 57% of nitrogen fertilizer production, 78% of cement manufacture and about 50% of primary aluminium production. Many industrial facilities in developing nations are new and include the latest technology with the lowest specific energy use. However, many older, inefficient facilities remain in both industrialized and developing countries. In developing countries, there continues to be a huge demand for technology transfer to upgrade industrial facilities to improve energy efficiency and reduce emissions (high agreement, much evidence).

Many options exist for mitigating GHG emissions from the industrial sector (high agreement, much evidence). These options can be divided into three categories:

• Sector-wide options, for example more efficient electric motors and motor-driven systems; high efficiency boilers and process heaters; fuel switching, including the use of waste materials; and recycling.
• Process-specific options, for example the use of the bio-energy contained in food and pulp and paper industry wastes, turbines to recover the energy contained in pressurized blast furnace gas, and control strategies to minimize PFC emissions from aluminium manufacture.
• Operating procedures, for example control of steam and compressed air leaks, reduction of air leaks into furnaces, optimum use of insulation, and optimization of equipment size to ensure high capacity utilization.

Mitigation potential and cost in 2030 have been estimated through an industry-by-industry assessment for energy-intensive industries and an overall assessment for other industries. The approach yielded mitigation potentials at a cost of <100 US$/tCO₂-eq (<370 US$/tC-eq) of 2.0 to 5.1 GtCO₂-eq/yr (0.6 to 1.4 GtC-eq/yr) under the B2 scenario^[1]. The largest mitigation potentials are located in the steel, cement, and pulp and paper industries and in the control of non-CO₂ gases. Much of the potential is available at <50 US$/tCO₂-eq (<180 US$/tC-eq). Application of carbon capture and storage (CCS) technology offers a large additional potential, albeit at higher cost (medium agreement, medium evidence).

Key uncertainties in the projection of mitigation potential and cost in 2030 are the rate of technology development and diffusion, the cost of future technology, future energy and carbon prices, the level of industry activity in 2030, and climate and non-climate policy drivers. Key gaps in knowledge are the base case energy intensity for specific industries, especially in economies-in-transition, and consumer preferences.

Full use of available mitigation options is not being made in either industrialized or developing nations. In many areas of the world, GHG mitigation is not demanded by either the market or government regulations. In these areas, companies will invest in GHG mitigation if other factors provide a return on their investment. This return can be economic, for example energy efficiency projects that provide an economic payout, or it can be in terms of achieving larger corporate goals, for example a commitment to sustainable development. The slow rate of capital stock turnover is also a barrier in many industries, as is the lack of the financial and technical resources needed to implement mitigation options, and limitations in the ability of industrial firms to access and absorb technological information about available options (high agreement, much evidence).

Industry GHG investment decisions, many of which have long-term consequences, will continue to be driven by consumer preferences, costs, competitiveness and government regulation. A policy environment that encourages the implementation of existing and new mitigation technologies could lead to lower GHG emissions. Policy portfolios that reduce the barriers to the adoption of cost-effective, low-GHG-emission technology can be effective (medium agreement, medium evidence).

Achieving sustainable development will require the implementation of cleaner production processes without compromising employment potential. Large companies have greater resources, and usually more incentives, to factor environmental and social considerations into their operations than small and medium enterprises (SMEs), but SMEs provide the bulk of employment and manufacturing capacity in many developing countries. Integrating SME development strategy into the broader national strategies for development is consistent with sustainable development objectives (high agreement, much evidence).

Industry is vulnerable to the impacts of climate change, particularly to the impacts of extreme weather. Companies can adapt to these potential impacts by designing facilities that are resistant to projected changes in weather and climate, relocating plants to less vulnerable locations, and diversifying raw material sources, especially agricultural or forestry inputs. Industry is also vulnerable to the impacts of changes in consumer preference and government regulation in response to the threat of climate change. Companies can respond to these by mitigating their own emissions and developing lower-emission products (high agreement, much evidence).

While existing technologies can significantly reduce industrial GHG emissions, new and lower-cost technologies will be needed to meet long-term mitigation objectives. Examples of new technologies include: development of an inert electrode to eliminate process emissions from aluminium manufacture; use of carbon capture and storage in the ammonia, cement and steel industries; and use of hydrogen to reduce iron and non-ferrous metal ores (medium agreement, medium evidence).

Both the public and the private sectors have important roles in the development of low-GHG-emission technologies that will be needed to meet long-term mitigation objectives. Governments are often more willing than companies to fund the higher risk, earlier stages of the R&D process, while companies should assume the risks associated with actual commercialisation. The Kyoto Protocol’s Clean Development Mechanism (CDM) and Joint Implementation (JI), and a variety of bilateral and multilateral programmes, have the deployment, transfer and diffusion of mitigation technology as one of their goals (high agreement, much evidence).

Voluntary agreements between industry and government to reduce energy use and GHG emissions have been used since the early 1990s. Well-designed agreements, which set realistic targets, include sufficient government support, often as part of a larger environmental policy package, and include a real threat of increased government regulation or energy/GHG taxes if targets are not achieved, can provide more than business-as-usual energy savings or emission reductions. Some voluntary actions by industry, which involve commitments by individual companies or groups of companies, have achieved substantial emission reductions. Both voluntary agreements and actions also serve to change attitudes, increase awareness, lower barriers to innovation and technology adoption, and facilitate co-operation with stakeholders (medium agreement, much evidence).