Blueprint for the deployment of capital-intensive technologies for the decarbonisation of energy-intensive industries

Licentiate thesis, 2024

Emissions associated with industrial processes account for approximately one-fourth of the territorial greenhouse gas (GHG) emissions in the European Union (EU). A broad portfolio of mitigation measures is needed to meet the EU’s climate target of net-zero GHG emissions in Year 2050. On the supply side, transformative mitigation options, such as carbon capture and storage (CCS) and hydrogen direct reduction (H-DR), are necessary for mitigating carbon emissions from energy-intensive industries that produce basic materials. Yet, there are currently no full-scale, fully operational plants producing iron and steel, cement or chemicals with near-zero emissions anywhere in the world. Thus, this work focuses on the large-scale implementation of capital-intensive technologies, using as examples the application of CCS in various basic materials industries and indirect electrification of the steel-making process via H-DR.

This work explores the implementation of capital-intensive technologies through a techno-economic assessment using a value chain perspective that extends from basic materials to end-products. A novel approach, the Value Chain Transition Fund (VCTF), is proposed to finance the investments required to accelerate the transition towards zero-emissions practices. This study also considers the policy and infrastructure aspects outside the plant boundaries that are necessary for the deployment of these technologies.

The results show that while low-carbon basic materials face market barriers, due to being significantly more expensive and having to compete with cheaper carbon-intensive-materials, the incremental cost increase for related end-products is small. By leveraging this principle, the VCTF can help to address market and investment barriers. Furthermore, while the EU ETS is a key policy instrument driving the transition, relying solely on carbon pricing will not guarantee a successful and timely transition. It is concluded that complementary measures, such as the VCTF, are needed to mitigate the financial risk associated with decarbonising capital-intensive industries. This work also illustrates the importance of having complementary policy measures and a technology-specific regulatory framework in place to enable the transition.