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

=== 11.5.1 Existing Industry Infrastructures ===

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Countries are at different stages of different economic development paths. Some are already industrialised, while developing and emerging economies are on earlier take-off stages or accelerated growth stages and have yet to build the basic infrastructure needed to allow for basic mobility, housing, sanitation, and other services (Section [[#_idTextAnchor013|11.2.3]] ). The available in-use stock of material per capita and in each country therefore differs significantly, and transition pathways will require a different mix of strategies, depending on each country’s material demand to build, maintain, and operate stock of long-lived assets. Industrialised economies have much greater opportunities for reusing and recycling materials, while emerging economies have greater opportunities to avoid carbon lock-in. The IEA projected that more than 90% of the additional 2050 production of key materials will originate in non-OECD countries ( [[#IEA--2017|IEA 2017]] ). As incomes rise in emerging economies, the industry sector will grow in tandem to meet the increased demand for the manufactured goods and raw materials essential for infrastructure development. The energy and feedstocks needed to support this growth are likely to constitute a large portion of the increase in the emerging economies’ GHG emissions in the future unless new low-carbon pathways are identified and promoted.

Emissions are typically categorised by the territory, subsector or group of technologies from which they emanate. An alternative subdivision is that between existing sources that will continue to generate emissions in the future, and those that are yet to be built ( [[#Erickson--2015|Erickson et al. 2015]] ). The rate of emissions from existing assets will eventually tend to zero, but in a timeframe that is relevant to existing climate and energy goals, the cumulative contribution to emissions from existing infrastructure and equipment is likely to be substantial. Aside from the magnitude of the contribution, the distinction between emissions from existing and forthcoming assets is instructive because of the difference in approach to mitigation that may be necessary or desirable in each instance to avoid getting locked into decades of highly carbon-intensive operations ( [[#Lecocq--2014|Lecocq and Shalizi 2014]] ).

Details of the methodologies to assess ‘carbon lock-in’ or ‘committed emissions’ differ across studies but the core components of the approaches adopted are common to each: an account of the existing level of emissions for the scope being assessed is established; this level is projected forward with a stylised decay function that is informed by assessments of the current age and typical lifetimes of the underlying assets. From this, a cumulative emissions estimate is calculated. The future emissions intensity of the operated assets is usually assumed to remain constant, implying that nothing is done to retrofit with mitigating technologies (e.g., carbon capture) or alter the way in which the plant is operated (e.g., switching to an alternative fuel or feedstock). While the quantities of emissions derived are often referred to as ‘committed’ or ‘locked-in’, their occurrence is of course dependent on a suite of economic, technology and policy developments that are highly uncertain.

Data on the current age profile and typical lifetimes of emissions-intensive industrial equipment are difficult to procure and verify and most of the studies conducted in this area contain little detail on the global industrial sector. Two recent studies are exceptions, both of which cover the global energy system, but contain detailed and novel analysis on the industrial sector ( [[#Tong--2019|Tong et al. 2019]] ; [[#IEA--2020a|IEA 2020a]] ). [[#Tong--2019|Tong et al. (2019)]] use unit-level data from China’s Ministry of Ecology and Environment to obtain a more robust estimate of the age profile of existing capacity in the cement and iron and steel sectors in the country. The [[#IEA--2020a|IEA (2020a)]] uses proprietary global capacity datasets for the iron and steel, cement and chemicals sectors, and historic energy consumption data for the remaining industry sectors as a proxy for the rate of historic capacity build-up.

Both studies come to similar estimates on the average age of cement plants and blast furnaces in China of around 10–12 years old, which are the figures for which they have overlapping coverage. Both studies also use the same assumption of the typical lifetime of assets in these sectors of 40 years, whereas the [[#IEA--2020a|IEA (2020a)]] study uses 30 years for chemical sector assets and 25 years for other industrial sectors. The studies come to differing estimates of cumulative emissions by 2050 from the industry sector; 196 GtCO 2 in the [[#IEA--2020a|IEA (2020a)]] study, and 162 GtCO 2 in the [[#Tong--2019|Tong et al. (2019)]] study. This difference is attributable to a differing scope of emissions, with the [[#IEA--2020a|IEA (2020a)]] study including industrial process emissions (which for the cement sector in particular are substantial) in addition to the energy-related emissions quantities accounted for in the [[#Tong--2019|Tong et al. (2019)]] study. After correcting for this difference in scope, the emissions estimates compare favourably.

The [[#IEA--2020a|IEA (2020a)]] study provides supplementary analysis for the industry sector, examining the impact of considering investment cycles alongside the typical lifetimes assumed in its core analysis of emissions from existing industrial assets. For three heavy industry sectors – iron and steel, cement, and chemicals – the decay function applied to emissions from existing assets is re-simulated using a 25-year investment cycle assumption ( [[#_idTextAnchor032|Figure 11.14]] ). This is 15 years shorter than the typical lifetimes assumed for assets in the iron and steel and cement sectors, and five years shorter than that considered for the chemical sector. The shorter timeframe for the investment cycle is a simplified way of representing the intermediate investments that are made to extend the life of a plant, such as the re-lining of a blast furnace, which can occur multiple times during the lifetime of an installation. These investments can often be similar in magnitude to that of replacing the installation, and they represent key points for intervention to reduce emissions. The findings of this supplementary analysis are that around 40%, or 60 GtCO 2 , could be avoided by 2050 if near-zero emissions options are available to replace this capacity, or units are retired, retrofitted or refurbished in a way that significantly mitigates emissions (e.g., retrofitting carbon capture, or fuel or process switching to utilise bioenergy or low-carbon hydrogen).

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[[File:c77205f33b33206645f8eda5cc4d4076 IPCC_AR6_WGIII_Figure_11_14.png]]

'''Figure 11.14 |CO''' 2 '''emissions from existing heavy industrial assets in the NZE.''' Source: International Energy Agency (2021), Net Zero by 2050, IEA, Paris.

As this review was being finalised several papers were released that somewhat contradict the Tong et al. (2010) results ( [[#Bataille--2021b|Bataille et al. 2021b]] ; [[#Vogl--2021b|Vogl et al. 2021b]] ). Broadly speaking, these papers argue that while high-emitting facilities may last for a long time, be difficult to shut down early, and are inherent to local boarder supply chains, individual major processes that are currently highly GHG intense, such as blast furnaces and basic oxygen smelters, could be retired and replaced during major retrofits on much shorter time cycles of 15 to 25 years.

The cost of retrofitting or retiring a plant before the end of its lifetime depends on plant-specific conditions as well as a range of economic, technology and policy developments. For industrial decarbonisation it may be a greater challenge to accelerate the development and deployment of zero-emission technologies and systems than to handle the economic costs of retiring existing assets before end of life. The ‘lock-in’ also goes beyond the lifetime of key process units, such as blast furnaces and crackers, since they are typically part of large integrated plants or clusters with industrial symbiosis, as well as infrastructures with feedstock storage, ports, and pipelines. Individual industrial plants are often just a small part of a complex network of many facilities in an industrial supply chain. In that sense, current assessments of ‘carbon lock-in’ rely on simplifications due to the high the complexity of industry.

Conditions are also subsector and context specific in terms of mitigation options, industry structures, markets, value chains and geographical location. For example, the hydrogen steel-making joint venture in Sweden involves three different companies headquartered in Sweden (in mining, electricity and steel-making, respectively), two of which are state-owned, with a shared vision and access to iron ore, fossil-free electricity and high-end steel markets ( [[#Kushnir--2020|Kushnir et al. 2020]] ). In contrast, chemical clusters may consist of several organisations that are subsidiaries to large multinational corporations with headquarters across the world, that also compete in different markets. Even in the presence of a local vision for sustainability this makes it difficult to engage in formalised collaboration or get support from headquarters ( [[#Bauer--2019|Bauer and Fuenfschilling 2019]] ).

Furthermore, it is relevant to consider also institutional and behavioural lock-in ( [[#Seto--2016|Seto et al. 2016]] ). On one side, existing high-emitting practices may be favoured through formal and informal institutions (e.g., regulations and social norms or expectations, respectively), for example, around building construction and food packaging. On the other side, mitigation options may face corresponding institutional barriers. Examples include how cars are conventionally scrapped (i.e., crushed, leading to copper contamination of steel) rather than being dismantled, or slow permitting procedures for new infrastructure and industrial installations for reducing emissions.

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