Managing carbon-intensive materials in a decarbonizing world without a global price on carbon

Abstract

Emissions from the production of iron and steel could constitute a significant share of a 2°C global emissions budget (around 19% under the IEA 2DS scenario). They need to be reduced, and this could be difficult under nationally based climate policy approaches. We compare a new set of nationally based modelling (the Deep Decarbonization Pathways Project) with best practice and technical limit benchmarks for iron and steel and cement emissions. We find that 2050 emissions from iron and steel and cement production represent an average 0.28 tCO₂ per capita in nationally based modelling results, very close to the technical limit benchmark of 0.21 tCO₂ per capita, and over 2.5 times lower than the best practice benchmark of 0.72 tCO₂ per capita. This suggests that national projections may be overly optimistic about achievable emissions reductions in the absence of global carbon pricing and an international research and development effort to develop low emissions technologies for emissions-intensive products. We also find that equal per capita emissions targets, often the basis of proposals for how global emissions budgets should be allocated, would be inadequate without global emissions trading. These results show that a nationally based global climate policy framework, as has been confirmed in the Paris Agreement, could lead to risks of overshooting global emissions targets for some countries and carbon leakage. Tailored approaches such as border taxes, sectoral emissions trading or carbon taxes, and consumption-based carbon pricing can help, but each faces difficulties. Ultimately, global efforts are needed to improve technology and material efficiency in emissions-intensive commodities manufacturing and use. Those efforts could be supported by technology standards and a globally coordinated R&D effort, and strengthened by the adoption of global emissions budgets for emissions-intensive traded goods.

Policy relevance

This article presents new empirical findings on global iron and steel and cement production in a low-carbon world economy, demonstrates the risks associated with a nationally based global climate policy framework as has been confirmed in the Paris Agreement, and analyses policy options to deal with those risks.

Keywords:

• carbon accounting
• CO₂ allowances
• cement industry emissions
• GHG reductions
• governance
• industrial emissions

Acknowledgements

This article has benefitted from advice from Hilton Trollip, Alison Hughes, and Dave Griggs. In addition, we are grateful to the DDPP teams who provided data for this analysis.

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplemental data

Supplemental data for this article can be accessed at http://dx.doi.org/10.1080/14693062.2016.1176008.

ORCID

Chris Bataille http://orcid.org/0000-0001-9539-2489

Frank Jotzo http://orcid.org/0000-0002-2856-847X

Notes

1. In this article, ‘iron and steel’ refers to the integrated manufacturing of iron and steel, which produces crude steel from iron ore. It corresponds to ISIC 241 in the International Standard Industrial Classification of All Economic Activities (UNSD, 2008).

2. after taking account of other policies and exemptions.

3. The DDPP is an international initiative to understand how the world’s largest emitters can transition to a low-carbon economy in line with keeping global warming below 2°C. Country-based research teams used their own models and analytical approaches to model their country pathways, within a common framework guided by common technology assumptions and aimed to be compatible with the 2°C target (DDPP, 2015, 2016). Our analysis uses data from 12 country studies under the DDPP: Australia, Brazil, Canada, China, Indonesia, Italy, Japan, Mexico, South Africa, South Korea, Russia and the United States. Together, they represented 74% of global steel production (WSA, 2015a) and 68% of global cement production in 2010 (USGS, 2015).

4. The best practice benchmark is based on most commonly referenced analyses such as the IEA 2DS scenarios (2014–2015), while the technical limit benchmark is based on high-end estimates of achievable emissions reduction potential from the literature. Details of references are provided throughout the article.

5. 6DS is an extension of current trends, projected to lead to an average global temperature rise of 5.5 degrees in the long term (IEA, 2016).

6. See technical appendix A for detail.

7. See technical appendix B for detail.

8. See technical appendix B for detail.

9. Calculated by applying a 40% reduction in demand to the best practice benchmark.

10. See technical appendix C for detail.

11. The exclusion of non-energy CO₂ emissions is considered to be an underestimation of emissions rather than a difference in scope of analysis, given that DDPP modelling results are all benchmarked against total CO₂ emissions budgets and targets.

12. The ‘downward attractor’ was not prescriptive, but rather used as a guide by countries to assess the depth of the decarbonization pathway achieved.

Additional information

Funding

Funding was provided by the ‘Agence Nationale de la Recherche’ under the ‘Investissements d’avenir [ANR-10-LABX-14-01]’ programme.