Editing IPCC:AR6/WGIII/Chapter-11 (section)

=== 11.4.3 Cross-sectoral Interactions and Societal Pressure on Industry ===

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Mitigation involves greater integration and coupling between sectors. This is widely recognised, for example, in the case of electrification of transport (Sections 6.6.2 and 10.3.1), but it has been less explored for industrial decarbonisation. Industry is a complex web of subsectors and intersectoral interaction and dependence, with associated mitigation opportunities and co-benefits and costs ( [[#OECD--2019b|OECD 2019b]] ; [[#Mendez-Alva--2021|Mendez-Alva et al. 2021]] ). Implementation of the mitigation options assessed in [[#11.3|Section 11.3]] will result in new sectoral couplings, value chains, and business models but also in the phasing out of old ones. Notably, electrification in industry, hydrogen and sourcing of non-fossil carbon involves profound changes to how industry interacts with electricity systems and how industrial subsectors interact. For example, the chemicals and forestry industries will become much more coupled if various forms of biogenic carbon become an important feedstock for plastics ( [[#_idTextAnchor025|Figure 11.10]] ). Clinker substitution with blast furnace slag in the cement industry is a well-established way of reducing CO 2 emissions ( [[#Fechner--2012|Fechner and Kray 2012]] ), but this slag will no longer be available if blast furnaces are phased out. Furthermore, additional material demand resulting from mitigation in other sectors, as well as adaptation and the importance of material efficiency improvements, are issues that have attracted increasing attention since AR5 ( [[#IEA--2019b|IEA 2019b]] ; [[#Bleischwitz--2020|Bleischwitz 2020]] ; [[#Hertwich--2020|Hertwich et al. 2020]] ). How future material will be affected under different climate scenarios is underexplored and typically not accounted for in modelling ( [[#Bataille--2021a|Bataille et al. 2021a]] ).

Using industrial waste heat for space heating, via district heating, is an established practice that still has a large potential with large quantities of low-grade heat being wasted ( [[#Fang--2015|Fang et al. 2015]] ). For Denmark it is estimated that 5.1% of district heating demand could be met with waste heat ( [[#Bühler--2017|Bühler et al. 2017]] ) and for four towns studied in Austria 3–35% of total heat demand could be met ( [[#Karner--2016|Karner et al. 2016]] ). A European study shows that temporal heat demand flexibility could allow for up to 100% utilisation of excess heat from industry ( [[#Karner--2018|Karner et al. 2018]] ). A study of a Swedish chemicals complex estimated that 30–50% of excess heat generated on-site could be recovered with payback periods below three years ( [[#Eriksson--2018|Eriksson et al. 2018]] ).

A European study found that most of the industrial symbiosis or clustering synergies today are in the chemicals sector with shared streams of energy, water, and carbon dioxide ( [[#Mendez-Alva--2021|Mendez-Alva et al. 2021]] ). For future mitigation, the [[#UKCCC--2019b|UKCCC (2019b)]] finds that industrial clustering may be essential for achieving the necessary efficiencies of scale and to build the infrastructure needed for industrial electrification; carbon capture, transport and disposal; hydrogen production and storage; heat cascading between industries and to other potential heat users (e.g., residential and commercial buildings).

With increasing shares of renewable electricity production there is a growing interest in industrial demand response, storage and hybrid solutions with on-site PV and combined heat and power (CHP) ( [[#Shoreh--2016|Shoreh et al. 2016]] ; [[#Scheubel--2017|Scheubel et al. 2017]] ; [[#Schriever--2018|Schriever and Halstrup 2018]] ). With future industrial electrification, and in particular with hydrogen used as reduction agent in iron-making or as feedstock in the chemicals industry, the level of interaction between industry and power systems becomes very high. Large amounts of coking coal, or oil and gas as petrochemical energy and feedstock, are then replaced by electricity. For example, [[#Meys--2021|Meys et al. (2021)]] estimates a staggering future electricity demand of 10,000 TWh in a scenario for a net zero emissions plastics production of 1100 Mt in 2050 (see Section [[#_idTextAnchor014|11.3.5]] for other estimates of electricity demand). Much of this electricity is used to produce hydrogen to allow for CCU and this provides a very large potential flexible demand if electrolysers are combined with hydrogen storage. [[#Vogl--2018|Vogl et al. (2018)]] describe how hydrogen DRI and EAF steel plants can be highly flexible in their electricity demand by storing hydrogen or hot-briquetted iron and increasing the share of scrap in EAF. The [[#IEA--2019f|IEA (2019f)]] Future of Hydrogen report suggests that hydrogen production and storage networks could be in locations with already existing hydrogen production and storage, for example, chemical industries, and that these could be ideal for system load balancing and demand response, and in the case of district heating systems – for heat cascading.

The climate awareness that investors, shareholders, and customers demand from companies has been increasing steadily. It is reflected in the growing number of environmental management, carbon footprint accounting, benchmarking and reporting schemes (e.g., the Carbon Disclosure Project, Task Force on Climate-Related Financial Disclosures, Environmental Product Declarations, and others, e.g., [[#Qian--2018|Qian et al. 2018]] ) requiring companies to disclose both direct and indirect GHG emissions, and creating explicit (for regulatory schemes) as well as implicit GHG liabilities. This requires harmonised and widely accepted methods for environmental and carbon footprint accounting ( [[#Bashmakov--2021b|Bashmakov et al. 2021b]] ). From an investor perspective there are both physical risks (e.g., potential damages from climate change to business) and transition risks (e.g., premature devaluation of assets driven by new policies and technologies deployment and changes in public and private consumer preferences ( [[#NGFS--2019a|NGFS 2019a]] )). Accompanied by reputational risks this leads to increased attention to Sustainable and Responsible Investment (SRI) principles and increased demands from investors, consumers and governments on climate and sustainability reporting and disclosure ( [[#NGFS--2019b|NGFS 2019b]] ). For example, Japan’s Keidanren promotes a scheme by different industries to reduce GHG through the global value chain, including material procurement, product-use stages, and disposal, regardless of geographical origin, with provided quantitative visualisation ( [[#Keidanren%20(Japan%20Business%20Federation)--2018|Keidanren (Japan Business Federation) 2018]] ). The EU adopted a non-financial disclosure directive in 2014 ( [[#Kinderman--2020|Kinderman 2020]] ) and a Taxonomy for Sustainable Finance in 2019 ( [[IPCC:Wg3:Chapter:Chapter-15#15.6.1|Section 15.6.1]] ).

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