13.4. Challenges in industrial processes on the way towards climate neutrality and opportunities for Nordic collaboration
In Denmark, the major challenge for decarbonising the industrial sector in the long term is cement production. Cement will likely be needed for many years, but increased use of renewables can only mitigate the energy-related emissions from cement (approximately 50%). Thus, CCS is likely to be necessary to mitigate process emissions (calcination). Both fuel switching and CCS are part of the Danish cement plant Aalborg Portland’s 2030 strategy to significantly lower their carbon footprint. The achievement of this transition is in large part conditional on lower CCS costs and/or the incentives provided by the EU ETS and the national carbon tax, as well as, potentially, state aid. This ambition may be supported by the fact that the ETS price is expected to increase towards 2030, significant state aid is already dedicated to CCS and CCS costs, considered broadly, may decrease in the future as basic learning curves and price reductions in the scaling of CCS are enacted.
For Finland, the main challenges in the steel industry are that significant emission-reduction technologies require large investment and are not yet in use on a commercial scale. There is also a significant need for affordable low-carbon electricity. Overall, many of the new technologies required to decarbonise process industries are still at relatively low levels of maturity, carrying both higher costs and risks. While CCS is being considered in many industries, Finland does not have suitable geological formations for permanently storing the carbon and no incentives yet to capture biogenic carbon.
In Iceland, the metals and minerals sector already relies on electricity derived from renewable energy sources. Emissions are therefore process emissions but amount to a significant share of Icelandic emissions. Technological development is still needed to realise mitigation options, for example cost effective capture technology in the aluminum sector and the development of inert cathode materials. To enhance action within the industry, the government needs to sharpen its focus and include the sector formally in its plans and evaluation of future emissions. For example, the Environmental Agency could include expected impact of policy action such as the EU ETS system in its emissions forecasts.
The challenges to ensure effective mitigation from the sector are primarily threefold: i) Maintain competitiveness: in particular, as ambition of the EU ETS system increases and CBAM is implemented. ii) Technological challenges for example, the aluminum industry lacks cost effective scrubbing technologies and technologies for reduced process emissions. iii) Lack of targets and sector-focused strategy to reduce emissions: as the sector is responsible for a large share of national emissions, the government needs to sharpen its focus on the sector beyond its current full reliance on the EU-ETS system.
In Norway, the industry has adopted general long-term targets, but the main challenges for a green industry transformation are the large investments needed, the need for a long-term horizon, an increasing power price, and the risk of reduced competitiveness in international markets.
For Sweden, the tightening of the EU ETS gives industry stronger incentives to reduce their emissions. At the same time, there is a need for supplementary measures to remove remaining obstacles. Several challenges in this sector have been identified. The future need for electricity requiring an unprecedented expansion of Sweden’s fossil-free power production capacity, as well as expansion of transmission capacity. With the current difficulties to get permits for wind power (both on-shore and off-shore), this may delay the needed expansion. Another challenge is the need for competence and labour to settle in northern Sweden where much of the green production is planned. Also, efficient review and permitting processes are required.
In addition to those challenges, timely decarbonisation in the cement industry will be needed. The main cement production company in Sweden, Heidelberg cement, has the ambition and technologies to transform to near zero emissions in 7 years. With EU’s new climate package Fit-for-55 (FF55), the price of emissions allowances has exceeded 100 euros for the first time. This is described by Heidelberg cement as a gamechanger. At these levels it’s beginning to be commercially advantageous to produce cement with no emissions. However, Heidelberg says that to do the transition the Swedish state will have to fund a power transmission line to the site on the island of Gotland.
Across the Nordic countries, the industries may differ but the core challenges are the same. Below, we have focused on two where there is high potential for added Nordic value through increased Nordic collaboration. The two chosen challenges are: