Carbon-free transition in sectors still faces enough obstacles

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Within many of the economic sectors of the Dutch economy, the transition to low or zero carbon is well underway. But some sectors still face a heavy emission reduction path, while for a small number of others, the emission reduction pathway toward 2030 is a viable option. The sectors responsible for most greenhouse gas (GHG) emissions face a major challenge to decarbonise their processes and products. The transition is often complex and also faces many obstacles.

Decarbonisation-curve 2030

Decarbonisation is a term used for removing or reducing emissions of carbon dioxide (CO2) in particular. Decarbonisation of processes and activities applies to almost all sectors in the Dutch economy. To gain emissions sector insight into how the Dutch economy, we created a decarbonisation curve. The decarbonisation curve not only shows how much CO2 an individual sector is responsible for (horizontal axis in the figure below), but also shows the minimum amount of CO2 that must still be reduced until 2030 by those sectors, compared to the current level (vertical axis in the figure below).

In some sectors, separate sector agreements have been made on the emission reduction path toward 2030 and 2050. For the sake of simplicity and comparability, in this analysis we have taken into account a GHG reduction of 60% of 1990 levels (here referred to as the 2030 target). This is in line with the ambitions and climate goal of Cabinet Rutte IV. Because ultimately the entire Dutch economy should aim for this level, we have therefore given all economic sectors this same reduction target.

The figure reveals a few striking things. For example, four major subsectors are responsible for the largest share of GHG emissions. These are successively: energy supply, agriculture, industry and transportation. Private households also contribute significantly with about 15% of total GHG emissions. Furthermore, about three sectors have already more than reached the 2030 target and about five sectors only need to reduce less than 25% of the current level of GHG emissions until 2030. This seems like a viable option, but may still prove to be quite a complex process at times. Furthermore, most sectors (>60%) still face the immense task of reducing more than 50% of the current level of GHG emissions.

In the 2019 Climate Accord, five different climate sectors are distinguished, capturing the total GHG emissions of the Netherlands. The climate sectors are successively (with the share in total GHG emissions in brackets): industry (32%), electricity (19%), mobility (18%, including domestic traffic and transport), agriculture (16%) and built environment (15%, due to natural gas consumption).

In industry, three subsectors have a significant share: the chemical industry, the petroleum (or oil) industry and the base metals industry. These three subsectors collectively account for over 65% of total industrial emissions in 2021 (according to IPCC data). Total industry still needs to reduce about 35% of the current level of GHG emissions until 2030. This is about 4% per year. At first glance, this does not seem like a nearly impossible task. On balance, however, in some cases it is still complex to make a good business case for emissions reductions. Accurate data on lead times, the necessary investments (both private and public), maintenance and operational costs, payback periods and possible subsidy schemes are indispensable in building a sound business case.

In the built environment, from the 2021 level of GHG emissions, some 51% minimum reductions must be achieved to reach the 2030 target. In the total emissions of the built environment, homes have a share of about 70%. Public and commercial services account for 30%. Virtually every energy-saving measure in the built environment affects every sector of the Dutch economy. The bulk of the emission reduction must be achieved with climate-neutral measures in existing buildings, and this makes the transition to low-carbon buildings slow. The challenge here is mainly to convince existing building owners, users and occupants of the need for more energy efficiency.

Agriculture also has yet to reduce 51% of the 2021 level of GHG emissions. It is the sector most exposed to and directly affected by climate change. This primary production sector is highly dependent on the natural environment with its activities. Changes in average temperature and precipitation patterns, as well as more intense and extreme weather events, pose a major challenge to the sector. In agriculture, the bulk of GHG emissions come from gas consumption and fermentation. Natural gas consumption accounts for 32% of agricultural GHG emissions (mainly CO2), with greenhouse heating accounting for a relatively high share in particular. Fermentation mainly involves methane emissions, which come mainly from the digestion process of grass in cows. Agriculture is becoming more sustainable. Currently, the sector is already a leader in the deployment of techniques for sustainable energy production such as solar panels, geothermal energy, biomass plants, windmills, residual heat utilization and manure digesters on a larger scale.

The mobility sector has the longest way to go in emissions reductions until 2030. In this emission reduction path, gasoline cars and cargo vehicles have a large share. Targeted government policies will shape this transition. For example, from 2030, all new passenger cars must be zero-emission vehicles. With this, investing in a covering charging infrastructure (battery or fuel cell) on roads and in ports will become crucial in the coming years.

So until 2050, the Dutch economy still has a long GHG-reduction road ahead. Currently, many decarbonisation techniques are widely available in many sectors (see also our publication with decarbonisation techniques). Some of these techniques require a lot of investment. Not only in the technique itself, but also in the infrastructure. For example, a good connection to the electricity network with sufficient capacity is a precondition. Here the government has an important role.

Decarbonising processes and activities generally have four benefits (after Changwoo Chung et al, in Energy Research & Social Science, February 2023). It brings energy and carbon savings (1) while also bringing cost savings (2). In addition, decarbonisation brings other environmental benefits (3) and decarbonisation in one sector has positive impacts on other sectors (4). For example, an energy efficiency measure can reduce the energy and fuel consumption of many processes. It often provides cost and financial savings. In addition, many decarbonisation options can provide other positive environmental benefits, such as water conservation, raw material and resource savings, and improved air quality. Finally, low-carbon ambitions in one sector impact other sectors. For example, ammonia - made in the chemical industry - is widely used to produce fertilizers that are in turn used by agriculture. Thus, decarbonising the production of ammonia has in part also a positive impact decarbonizing agriculture.

Decarbonisation can be achieved in several ways, and the best practice decarbonisation technique varies greatly by sector. For companies in one sector, switching to renewable energy sources or fuel substitution is most promising, while companies in other sectors achieve more ecological gains through electrification and efficiency measures. Using the "Technical Readiness Level," we gain insight into which technologies are still in the concept phase and which have reached maturity. The scales in the TRL system represent the stage that a new decarbonisation or emission reduction technique is in. Here, stage 1 represents the start of development and discovery. And stage 9 represents the commercial readiness of the technology. Interestingly, the commercially deployable phase has ample techniques plotted, while the pipeline of new techniques from phase 1 is little filled. The bottom line is that the decarbonisation challenge can only be met with enough efficiency gains in sectors, sufficient innovativeness and stimulating government policies.

This article is part of the SustainaWeekly of 30 January 2023