Greening of industrial activity still lacks a good pace
By 2022, the climate sector Industry was the largest consumer of energy with a 32% share of total final energy consumption. Still the energy mix of the climate sector Industry is dominated by fossil fuels, especially natural gas and oil. So far, the pace in the transition to more renewable energy is still slow; this is actually also true for the overall greening of the sector but sustainable steps have been taken.
By 2022, the Climate sector Industry was the largest consumer of energy with a 32% share of total final energy consumption
Still the energy mix of the climate sector industry is dominated by fossil fuels, especially natural gas and oil
So far, the pace in the transition to more renewable energy is still slow; this is actually also true for the overall greening of the sector but sustainable steps have been taken
The so-called ‘Climate sector Industry’ – which consists of several subsectors with various types of industrial activity – accounts for the largest share of greenhouse gas emissions and, at the same time, a great responsibility to reduce them. To give momentum to the reduction of greenhouse gases in the coming years, climate policy will be tightened and legal regulations are expected to become stricter. In addition, public pressure will also only increase. This means that industrial companies will increasingly transform themselves towards carbon neutrality. The pace of this transition is all-important. In this analysis, we will use various indicators to see whether the Climate sector Industry is indeed keeping up the pace in reducing greenhouse gases and becoming more sustainable.
Climate sector Industry in indicators
There is a total of five so-called ‘Climate sectors’ in the Netherlands: Industry, Electricity, Mobility, Agriculture and Built environment. Adding the emissions from these Climate sectors together gives the total GHG emissions in the Netherlands. Of these five, the ‘Climate sector Industry’ has the highest greenhouse gas (GHG, CO2-eq) emissions, accounting for 31% of the total emissions. That’s why it is important to continuously monitor sustainability trends and follow the progress made with decarbonisation in this specific Climate sector closely.
The Climate sector Industry itself consists of four subsectors with industrial activity, namely: mining & quarrying, manufacturing, water companies & waste management and construction. Of these four subsectors, manufacturing has a substantial share within the Climate sector Industry, both in terms of added value (GDP) and by GHG emissions. See the left-hand figure below for this. Manufacturing is followed by construction in terms of share in GDP and followed in terms of GHG by water companies & waste management. Mining & quarrying plays only a minor role in both cases.
To track the progress of decarbonisation, several indicators are available. The table above shows some of these indicators. The trend in labour productivity (APT) is also part of this and can be interpreted in several ways. On the one hand, an increase in productivity could just be at the expense of sustainability. After all, more production and more use of raw materials have a negative impact on the environment the moment the (energy) efficiency of the production process remains the same or decreases. But when the (energy) efficiency improves and the efficiency of resource utilisation also increases, the increase in productivity drives decarbonisation.
From the table above, we can see that the trend in productivity growth in the manufacturing and construction sectors has improved over the period 2015-2021, while the trend in energy intensity has decreased. With the decrease in energy intensity, we can conclude that (energy) efficiency increased in these sectors. The opposite is true for the mining & quarrying and water & waste management sectors. In particular, the trends in these indicators, but also in GHG intensity and the share of energy costs, are very negative for the mining & quarrying sector in relation to sustainability. For companies in the Climate sector Industry, it is therefore permanently important to look for and invest in production solutions that make final products more (energy-) efficient, in order to further optimise production processes while also minimising waste. Some studies show, for example, that manufacturing companies often invest in digital technologies. This enables them to make more efficiency gains, realising productivity gains and product improvements, as well as producing less waste.
What further stands out from the table is that in the manufacturing sector, the share of fossil fuels in the energy mix increases by 1.3%-points over the period 2015-2021. This is in contrast to the other three sectors within the Climate sector Industry, where this share decreases over the same period. In particular, the share of energy costs in production costs is relatively high in manufacturing (especially heavy industry) and in water companies & waste management. In such a case, companies automatically have a motivation to keep those costs low or reduce them further, which succeeded in the period 2015-2021. This shows that investing in energy-efficient (and low-carbon) technologies can be interesting. To maintain this positive momentum, financial incentives from the government help. For instance, there is the scheme Stimulating Sustainable Energy Production and Climate Transition (SDE++) in the Netherlands. This is a subsidy for companies and also non-profit organisations that focuses on roll-out of techniques that reduce carbon dioxide (CO₂) emissions. But there are .
The industrial and construction sectors may show a positive trend in (energy) efficiency, but this is not the case for the trend in GHG emissions. Both sectors show an increase in GHG emissions over the period 2015-2021, unlike the mining & quarrying and water companies & waste management sectors. In the latter two sectors, GHG emissions actually decreased significantly over the past six years. But despite the increase in GHG emissions in manufacturing and construction, the GHG intensity of these sectors is significantly lower. In short, growth in value added (in constant prices) was higher than growth in GHG emissions between 2015-2021.
The GHG emission intensity of the Climate sector Industry decreased by 11% over the period 2015-2021, mainly due to the sharp decrease in this indicator in manufacturing, water companies & waste management and construction. In mining & quarrying, this intensity increased by as much as 121% over the period 2015-2021, despite GHG emissions falling by 24% over the same period. The increase in intensity is because in this sector, value added (in constant prices) fell even more sharply than the fall in GHG emissions.
In 2022, the Climate sector Industry was the largest consumer of energy, accounting for 32% of total final energy consumption. The sector is followed by domestic transport (24% share) and residential (22% share). Agriculture has an 8% share. In all sectors, final energy consumption decreased over the period 2015-2022, by 10% on average. However, the decline in final energy consumption was weakest in the Climate sector Industry at 8%.
Energy mix
Every year, many sectors are consuming more and more energy from renewable sources. This is a positive trend, but still the Climate sector Industry's energy mix is dominated by fossil fuels, especially natural gas and oil (raw materials and products). The vast majority of GHG emissions come from burning these fossil fuels. Reducing (or decarbonising) GHG emissions requires shifting the energy mix from fossil fuels to low-carbon energy sources. The challenge to achieve this is great, as the current energy mix of the Climate sector Industry shows. It is clear from the following left-hand figure that the share of renewable energy - despite strong growth in this in recent years - is still low.
The flipside of the low share of renewable energy is the burden of a very high share of fossil fuels. However, clear differences can be seen in this by subsector. For the construction sector, the share of fossil fuels is 87% on average, with little variation in this share since 2015. Incidentally, this applies to almost every subsector under the Climate sector Industry. The fossil fuel share in manufacturing itself is 57% on average. Here, too, the variation in the share is marginal. In water companies & waste management and in mining & quarrying, the share of fossil fuels in the energy mix decreased somewhat more over the period 2015-2021. But here, too, the pace has proved slow.
With all available techniques to reduce emissions, the energy mix in many sectors is going to change significantly in the coming decades, in favour of lower-carbon energy carriers. So far, the pace of this transition to more renewable energy carriers is slow. In fact, this also applies to the general greening of the sector. This is not only visible from the table with sustainable indicators presented earlier, but also from structure over time in the energy mix. Since 2010, the fossil energy consumption decreased (coal -8%, oil -8% and gas -16%), while renewable energy increased (+14%). But these changes effected the total energy mix marginally.
To gain some momentum here, some more coercive government policy may help. An example of this is to make it mandatory from 2030 that any new capacity expansions (especially in industry) should only take place with net-zero emission technologies. It could be a similar trajectory as in the built environment. There, from 2026, necessary replacement of central heating boilers can only be done with the installation of a sustainable alternative (such as a heat pump). Such a coercive policy measure is able to bring more momentum to the transition. Furthermore, electrification is at the top of the list in terms of growth potential in the coming years. In recent years, the share of renewable electricity has increased sharply, but this greening is not yet really visible in the energy mix. A major amount of the decarbonisation potential will also depend on the speed with which electricity generation switches from fossil fuels to renewables and the rollout of the distribution network. Eventually, the consumption of natural gas and oil will gradually decline over the next few years, while more use will be made of renewable energy. As such, the sector would slowly but steadily moving towards the set 2050 climate neutral target. However, due to the current slow pace, it is most likely that this target ultimately will not be met.