Heavy Industries Must Do The Heavy Lifting To Slow Climate Change

The industry sector produces the building blocks of modern life – like cement, steel, iron, and chemicals – but also accounts for nearly 40% of global CO₂ emissions every year.

Because of the extremely high temperatures and chemical processes required to create heavy industry products, fossil fuels are an integral, and often unavoidable, part of their creation. Demand is only expected to increase for these goods as emerging economies launch ambitious infrastructure projects. In fact, cement is already the most used substance in the world after water. 

Much of the conversation around climate solutions has focused on renewable energy and electric vehicles. The attention there is warranted –  the power and transportation sectors account for more than 50% of the nation’s CO₂ emissions.

Paradoxically, the scaling up of the green economy compounds the issue of emissions from heavy industry. Wind turbines, electric vehicle parts, and carbon capture equipment will require a substantial amount of steel and cement, among other industrial products. As a result, industry-related emissions are on pace to become the largest source of emissions from the U.S. within the next 10 years.

This makes achieving a net-zero economy by 2050 virtually impossible unless the U.S. urgently invests in innovative solutions now to reduce emissions from heavy industries.

To get ahead of this, policymakers in the U.S. should take a three-track approach.

First, the U.S. should implement a national Buy Clean program. Buy Clean policies mandate carbon disclosures and emission standard requirements in order to build publicly funded construction projects. Nearly half of all cement and a fifth of steel in the U.S. are purchased with tax dollars, giving federal, state, and local governments immense leverage to incentivize contractors to use lower carbon construction materials.

California was the first state to pass a Buy Clean policy in 2017 and serves as a model for the federal government to create an environment where adoption of greener technologies like alternative cements and electric arc furnace (EAF) “minimills” to make steel can and must be adopted more quickly.

Second, the U.S. should incentivize installation of carbon capture and storage (CCS) technology at industrial plants by expanding existing tax credits. CCS technology prevents CO₂ from being emitted into the atmosphere by capturing emissions in the smokestack and injecting them deep into a rock formation underground for permanent storage. The Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA) found that CCS was the only technology capable of bringing industry emissions towards net-zero. The major barrier is cost.

Enacted in 2008, Section 45Q of the IRS tax code provides a tax credit based on the metric tons of carbon dioxide captured and stored using CCS. To further drive down the cost for industry to install CCS equipment, the U.S. should increase the monetary amount of the tax credit beyond $50 per metric ton of CO₂  as well as expand the definition of CCS to include Direct Air Capture (DAC) technology which extracts CO₂  directly from the atmosphere. In addition, the U.S. should provide an option to receive cash payment in lieu of a tax credit which will more effectively enable industry developers to finance decarbonization projects without the added complexity of tax liability management. 

Lastly, the U.S. should engage with multilateral institutions like the World Bank and World Trade Organization to establish carbon border adjustments, like a carbon tax. Much of the demand for heavy products over the next few decades will come from developing nations who are rapidly industrializing and planning new highways, bridges, and homes. For example, between 2011 to 2013, China used more cement than the U.S. did in the entire 20th century At the same time, China is the world’s largest producer of steel, followed by India. A carbon tax at the border will make it more expensive for developing countries to import and export industrial goods in a dirty way and incentivize global adoption of CCS and cleaner alternatives.

Industry is at the core of a green economy. Not only is it responsible for producing the building blocks of the clean energy transition, it represents arguably the most important sector to decarbonize in the world. If the U.S. does not take action to curb emissions from heavy industries it will simply not be possible to keep the planet from warming above 2°C no matter what else we do.

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