By Heather Douglas
“Maintaining a maximum increase in global temperature of 1.5 to 2.0 degrees Celsius will involve halving current global greenhouse gas (GHG) emissions by 2050 and reducing them to net zero by 2075, while still allowing for the production of materials needed to support global development. Much of the global climate policy effort has been on the decarbonization of electricity and transport, however, and even a net-zero carbon future firms and households will continue to need the material ‘stuff’ of modern life. This includes traditional commodities like pulp and paper, mined minerals, iron, steel, chemicals, lime and cement, as well as potential new bulk commodities like biogases and liquids, hydrogen, and synthetic hydrocarbon gases and liquids.” Dr. Chris Bataille, Noel Melton, and Seton Stiebert, The Potential to Decarbonize Canadian Heavy Industry, (published August 19, 2016).
During the past two decades, many Canadian heavy industry companies have moved from relying on fossil fuel combustion to using lower intensity fossil fuels or renewable fuels. These include the pulp and paper industry which moved from using only oil and gas (100 per cent) to using only 25 per cent fossil (mainly gas) and the rest of the combustion coming from biomass. The petrochemical sector switched from oil, as primary feedstock, to natural gas, giving it a competitive advantage over its international rivals who continue to use oil. The nickel mining industry has done a similar thing and it too has achieved an economic advantage over its global challengers.
“Many older facilities face the challenge of capital stock turnover in a highly competitive marketplace,” report Bataille, Melton, and Stiebert in their white paper, The Potential to Decarbonize Canadian Heavy Industry. “Notwithstanding the short-term competitive issues that need to be recognized and managed, in the long run when the world eventually puts a price on carbon, Canadian producers could have a significant competitive advantage due to large biomass feedstocks and existing and potential supply of decarbonized electricity (and hence hydrogen or synthetic hydrocarbon sourced net-zero emission liquids and gases) via hydropower, wind, and solar, and a very large potential for geologic carbon capture and storage. This makes it an opportune place for decarbonized heavy industry.”
The authors urge the federal and provincial governments to identify and accept the economic benefit of having a viable heavy industry sector in a zero-carbon world. They recommend the bureaucrats create and negotiate a policy framework that helps companies “manage the transition to non-emitting operations without stranding assets or losing competitiveness.”
The authors are afraid that without a positive framework, resource production will move away from Canada and its stringent environmental regulations and provincial carbon taxes, to jurisdictions lacking regulatory oversight. This would result in significant lost employment and tax revenues, and, even worse, “will in many cases lead to carbon leakage and may thus be counted an economic and climate policy failure.”
If the governments take heed, the authors believe there is potential to decarbonize this country’s heavy industry. Firstly, they say the technology exists today to remove carbon from many sectors including: cement, glass, iron and steel, metal processing, mining, refineries, chemicals, and pulp and paper within one to two capital investment cycles. Secondly, they consider what has “economically feasible potential will need higher granularity and more in-depth understanding of the current technology and capital stock in-place, and the relative cost in Canada versus competitors in other countries.”
The following recommendations were made by the authors to assist government bureaucrats and industry policy advisors when they sit down to create a workable framework:
- “Make development of economically appropriate decarbonized heavy industry an explicit national and provincial priority.
- Implement a consistent policy and especially carbon pricing signal to industry to reduce GHG emissions to net-zero within one to two capital investment cycles without unduly hurting competitiveness for existing facilities (e.g. avoiding sunk costs and stranded assets, and the associated unemployment, and social trauma).
- Participate closely and carefully in international negotiations related to trade in GHG intense goods. Ensure they send a clear signal for decarbonization of new stock while fairly protecting existing stock through the end of its life.
- Gather and harness the capacity of all the interested actors (industry, federal and provincial policy-makers, academia, civil society, ENGos) to develop a granular vision for long-term decarbonization that takes advantage of the research capability in Canada, reflects appropriate capital investment cycles, and identifies policy options to implement this vision.
- Participate in global R&D efforts for key industries not generally supported and find partners with similar challenges abroad (e.g. Australia and Russia).
- Identify economic and feasible decarbonization pathways for heavy industry based on regionally specific circumstances (e.g. reflecting access to decarbonized electricity and geological storage for carbon dioxide).
- Establish provincial and federal institutions to coordinate and direct publish research, technology dissemination, commercialization, and associated labour-force training.”#Heavy Industry
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