ADEME's Transitions 2050 scenarios: focus on industry

In a report entitled "Transitions 2050", ADEME explores possible scenarios for getting onto the trajectory of the National Low Carbon Strategy. This comprehensive study of all sectors shows that reducing our emissions is still feasible, provided we take drastic decisions. In this report, Lemon Energy has deciphered the key issues facing the industry to make this transition a success

Industry, 4th largest GHG emitting sector in France

ADEME refers to the industrial sector as " economic activities that produce material goods by transforming and using raw materials ". In particular, " heavy " industry consists of transforming a " natural " raw material into a raw material. Excluded from this definition of industry are energy production (including refining), civil engineering and construction.

Although it accounts for 13% of French GDP, industry is responsible for 17% of direct GHG emissions, making it the fourth largest emitting sector. Industry accounts for 22% of French final energy consumption. Fuels account for two-thirds of this consumption, mainly to power furnaces. The remaining third corresponds to electrical consumption, mainly powering motors (e.g. pumps, ventilation).

In addition to emissions, the industrial sector is also a major emitter of greenhouse gases.

Beyond GHG emissions, industry has other environmental impacts :

• Material withdrawals, linked to resource availability issues.
• Water withdrawals : industries, notably chemical, food and paper-cardboard, represent water withdrawals comparable to those for irrigation.
• Atmospheric and aquatic discharges of heavy metals, suspended solids and particles.
• Waste production : industry produces 8% (around 26Mt) of waste generated in France, but 25% (2.8 Mt) of hazardous waste.
• Soil pollution : industrial and commercial zones occupy just 0.3% of the French territory, but nearly a third of industrial sites were recorded as polluted or potentially polluted in 2015, particularly those carrying out extractive activities.

Impact unevenly between heavy industry and other industrial sectors

Heavy industry accounts for two-thirds of industrial GHG emissions. Nine heavy industry sectors are to be decarbonized as a priority: steel (steel), cement (clinker and cement), ethylene, ammonia and chlorine chemical industries, paper mills (paper and cardboard), sugar, glass and aluminum production. These sectors have in common that they are energy-intensive, concentrating 60% of industrial energy consumption.

Heavy industries provide a large proportion of the inputs for the rest of the industrial fabric, with lower emissions but key socio-economic stakes. Headcount in heavy industry fell by 12.5% between 2009 and 2019, with 140,000 direct jobs in 2019 spread across 1,800 establishments. These salaried employees represent around 5% of the manufacturing industry total and 1% of establishments. The rest of the industrial fabric, on the other hand, concentrates 95% of the workforce and 92% of added value.

Still insufficient efforts

Industrial emissions fell sharply between 1990 and 2018 (-47%), but this decline is mainly due to regulations on NO2 use, decarbonization of the energy mix (replacement of petroleum products by natural gas), and crises. Imported products generate emissions outside France. The deindustrialization that France underwent between 1995 and 2015 involved a drop in direct French emissions of 4.5 MtCO2eq, offset by a rise in imported emissions of 6.8 MtCO2eq.

This decarbonization of industry has been slowing down since 2011 : -1.3% / year, while the SNBC expects -4.6% between 2015 and 2050.

Recent awareness of the carbon cost of transporting raw materials has highlighted the vulnerability of certain sectors in the face of supply difficulties for certain raw materials and/or semi-finished products.

Such a context makes it possible to envisage relocations, i.e. the repatriation to France of activities previously located abroad. What's more, reindustrialization with growth in industrial employment is conceivable for sectors linked to renewable energies, circular economy activities or hydrogen production.

A growing pressure on the French economy is leading to an increase in the number of industrial jobs.

Growing pressure from French policy and European regulations

Hitherto driven by considerations around competitiveness rather than decarbonization, taxation is increasingly being affected by energy costs. To this end, France has launched the Plan de Décarbonation de l'Industrie. At European level, the European Commission aims to reduce GHG emissions by at least 55% by 2030.

As part of these regulations, the industry is mobilized :

• Toughening of the ETS directive (carbon quotas)
• Evolution of carbon taxation
• Integration of climate and energy constraints into investment and relocation/reindustrialization decisions
• Investment and innovation opportunities for new decarbonized markets

To achieve these goals, industrial companies are inclined to implement profound transformations.

Structural transformations needed across the industry

Changes will have to take place along multiple axes, in order of priority:

• Adapting to changing production levels. The main determinants of industrial emissions, these levels are linked to both domestic and international demand (and therefore to the sobriety actions implemented). In addition, the development of the agri-food industries is directly linked to the climatic challenges of agricultural production and changing diets. For this reason, the local industrial network needs to be efficient and sized according to needs.
• Improve the energy efficiency of technologies and processes to reduce consumption. Each sector has its own specificities, but there are cross-cutting technologies : utilities (chillers, boilers, heat pumps) and recovery of waste heat.
• Reducing the material footprint. Incorporating recycled material, shifting inputs to resources with a reduced environmental footprint involve technical and organizational transformations.
• Change the energy mix in favor of decarbonized energies, particularly for heat production (steam, hot water), which accounts for 2/3 of consumption. This change in the mix includes renewable thermal energies (biomass, geothermal, solar thermal). These transformations place industry in interaction with the energy system.
• Capture, store and recover CO2. The storage of CO2 remains dependent on the proximity of onshore or offshore capacity, its technical and economic viability, and possible local resistance to the installation.

These necessary transformations are, however, faced with multiple brakes :

• Investment based on short-term profitability, and limited by low margins
• Risk-taking (CAPEX costs, market changes, transformation of production tools, skills upgrading issues)
• Citizen distrust (rejection of citizens wishing to maintain their consumption levels, accentuation of inequalities in the face of potential price rises, job losses or transfers, fears linked to environmental nuisances)

2050 scenarios

ADEME defines 4 prospective scenarios that would enable us to achieve carbon neutrality in France in 2050. A comparison of these scenarios with the trend scenario highlights the technical and organizational decisions that urgently need to be taken in order to comply with the Paris agreements and hope to stabilize the climate below the +2°C threshold.

• Trend scenario : In this scenario, efforts in energy efficiency, material efficiency and the energy mix follow the trend forecast in the National Low Carbon Strategy (SNBC). International trade intensifies, but refocuses on the EU with the introduction of a carbon tax at borders. Production continues to decline, and public authorities continue to support the modernization of industry.
• Scenario 1 - Generation frugal : Through strong citizen involvement, production contracts. Protectionism motivated by a concern for sovereignty and reducing the environmental footprint generates a transfer of activity towards plant-based agri-food and recycled materials channels. These companies are investing in energy efficiency to retain market share, green their image and save on OPEX. Faced with consumer demands, B2C companies are imposing more and more criteria on their suppliers relating to the origin and carbon footprint of their products.
• Scenario 2 - Territorial cooperation : Through strong involvement of local authorities, decentralization and the circular economy are promoted. Re-industrialization and exports are supported by public authorities, with targeted protectionism. Thanks to state support and territorial organization, companies are making a major effort on energy efficiency to retain market share.
• Scenario 3 - Green technologies : Institutions focus on decarbonizing the energy mix, with trade concentrated in Europe. Energy efficiency focuses on international competitiveness and electrification. In this context, the state provides OPEX aid to electrify processes in order to modernize sites.
• Scenario 4 - Pari réparateur : Companies are called upon to innovate and develop CO2 capture and storage technologies, as consumption and globalization intensify. Storage is taking place close to sites whenever possible, and hydrogen is developing strongly.

Overall, the evolution of the scenarios' energy mix shows a clear decline in industrial consumption of coal, gas and petroleum products, in favor of electricity, hydrogen and, for scenarios 1 and 2, biomass.

Scenarios 1 and 2 succeed in containing gross GHG emissions within the target of the National Low Carbon Strategy. Scenario 4 could achieve this if the technological challenge of CO2 capture is met.