Can Technology and Market Forces Drive Decarbonization?

27/05/2023

An analysis of the impact of human activity on carbon dioxide emissions, shows that transportation and electricity generation are by far the two main culprits, making up 27% and 25% respectively. The electrification of transportation and the transition to renewable energies, which are also the cheapest form of electricity production, are essential to curbing the climate emergency, which is the main threat to life on the planet.

After transportation and electricity production, the third culprit is industry, which contributes 24%. Within industry, two intrinsically human activities leave a huge footprint: metallurgy, specifically the production of iron and steel, with 10%, and building materials such as cement and concrete, with 8%. These are also hugely significant and growing contributions, whose emissions we must also reduce, but which in themselves represent a major challenge.

Recently, a number of companies have launched initiatives to achieve this. In cement and building materials in general, Switzerland seems to be taking a leading role, but there are companies, from startups to traditional players, with some interesting ideas. In metallurgy, the use of electricity or hydrogen in blast furnaces offers promising results, while some other companies are working on reusing carbon dioxide generated from coal burning they say could reduce the total carbon footprint by 90% through a process that can be used in traditional furnaces.

After centuries of doing things one way, generally based on what is usually called incremental innovation, technology is once again offering driving disruptive innovation through new ways to decarbonize processes, but the vagaries of the market mean we’re losing precious time in terms of reducing emissions. Cement was used by the Greeks and Romans, who learned to mix volcanic ash with lime to create substances that maintained their strength for a long time; but the developments since since then have been merely incremental and based, in essence, on the same processes.

It’s the same story with steel: metallurgy dates back 5,000 years, and the processes, although much improved in both the properties of the final product and its efficiency, have not changed much. Now, companies are beginning to emerge that are aiming to use electric or hydrogen furnaces to produce so-called “green steel”, although to be truly green it has not only to be supplied with electricity or hydrogen, but also to ensure that both come from renewable sources (the vast majority of hydrogen on the market comes from the refining process of coal or natural gas).

What happens when an industry like cement or metallurgy innovate enough to do things differently and decarbonize production processes? Not only can it continue to produce without exacerbating the climate emergency, it can also reduce costs, bearing in mind that by decarbonizing, it no longer has to pay carbon credits for its emissions, which benefit companies that reduce emissions to the detriment of those that don’t bother to.

Through more efficient production processes, companies that manufacture green cement or steel should end up replacing those who continue using highly polluting traditional methods. Technological progress is now aligned with our goal of reducing the climate emergency. But what is happening? This takes a very long time to occur, and the transition is managed by governments, which subsidize certain industries to protect jobs and markets.

We’ve known for years that the cheapest electricity is produced from solar or wind energy, and yet we continue not only to keep coal, fuel oil and combined cycle power plants open around the world, but in some countries, to open new ones.

It is these delays, not the lack of available technology, that put us at risk. Just as the oil companies knew in the 1970s what was going to happen and decided, in a mind-boggling exercise in risk analysis, that it was better to cover up the issue, deny everything and carry on as usual, a policy that should have seen their CEOs jailed, we now have another problem: very few governments are prepared to bear the short-term costs of decarbonization.

Two centuries of heavy industry has largely created a climate emergency, but the good news is that we can tackle it if we want to. The bad news is that nobody really wants to, at least until there is no perceived financial cost. In short, until we see the future of humanity as a bigger issue than each nation’s particular interests, we won’t make any progress in reducing carbon emissions.

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