THE BASIC INDUSTRY – AN ENERGY AND CO 2 CHALLENGE FOR SWEDEN The Swedish Association for Energy Economics (SAEE) Conference 2016 August 23-24, 2016, Luleå Johan Rootzén Energiteknik Chalmers
BACKGROUND 100 90 2010 80 SWEDISH CO 2 Historical 2050 Targets 70 EMISSIONS Other 60 HISTORICAL TRENDS MtCO 2 / year AND FUTURE TARGETS Transport 50 Industry 40 30 Power and heat 20 10 0 1850 1900 1950 2000 2050 Data sources: [Boden et al., 2010; EC-JRC/PBL, 2009; European Commission 2011; EEA, 2015] 2 (14)
THE CARBON-INTENSIVE INDUSTRY IRON AND STEEL MANUFACTURING OF SWEDISH EMISSIONS ~5 MtCO 2 /year from 2 plants CO 2 >15% CEMENT PRODUCTION ~2.2 MtCO 2 /year from 3 plants PETROLEUM REFINING ~3 MtCO 2 /year from 5 plants 3 (14)
QUESTIONS ADRESSED How far can existing abatement measures take us? What is the potential role for CCS and other emerging low-CO 2 processes? How can we finance the development and implementation new alternative production processes? 4 (14)
How far can existing abatement measures take us? What is the potential role for CCS and other emerging low-CO 2 processes? How to finance the development and implementation new alternative production processes? 5 (14)
PREVIOUS RESULTS Carbon-intensive industry in the Nordic countries (without CCS) Reduced activity level refineries 30 25 Biomass in iron and steel and cement industries 20 MtCO 2 /year 15 Reduced fraction of clinker in cement 10 BAT replacing 5 existing process technology 0 2010 2020 2030 2040 2050 Existing measures NOT sufficient if to meet 2050 GHG emission targets 6 (14)
PREVIOUS RESULTS Carbon-intensive industry in the Nordic countries (with CCS) 30 25 Large-scale introduction could 20 come at a high price in MtCO 2 /year terms of energy use 15 10 Large volumes of CO 2 5 to handle 0 2010 2020 2030 2040 2050 With CCS total potential: 85% reduction in Year 2050 relative to 2010 7 (14)
How far can existing abatement measures take us? What is the potential role for CCS and other emerging low-CO 2 processes? How to finance the development and implementation new alternative production processes? 8 (14)
PERSPECTIVES ON ABATEMENT COSTS X € /t steel Y € /tCO 2 Added costs with a carbon price of 100 € /tCO 2 MACC Sweden - Industry 600 200 CCS – Cement 150 500 CCS – Refineries 100 Production costs ( € /t HRC) Reduction cost ( € /tCO 2 ) 400 50 0 0 2 4 6 8 300 CCS – Iron and steel -50 CO 2 transport and storage costs -100 Added production costs 200 Purchased allowances Efficient -150 buildnings 100 Efficient -200 motors -250 0 Reduction potential (MtCO 2 -eq) Ref S0 S1 S2 9 (14)
IRON & STEEL MAKING HOT STRIP MILL FABRICATION Vehicles Cars Trucks Other transport Industrial equipment By-products Machinery Hot rolled coil/sheet Steel slab Electrical Cold rolled coil/sheet COLD ROLLING Construction Coated coil/sheet Infrastructure Heavy plate Buildings Steel slabs Fabrication scrap Metal goods Packaging Appliances Other PLATE MILL 10 (14)
MATERIAL AND VALUE FLOW ANALYSIS Steel/concrete Other materials Selling price of steel/concrete containing product All other costs 11 (14)
ANALYSIS APPROACH COMPONENTS CAR CAR STEEL MANUFACTURING MANUFACTURING SALES PRODUCTION Profit Profit Vehicle tax The sales price Overhead costs Overhead costs Dealer profit depends on the: Direct manufacturing costs Direct manufacturing costs Sales, transport and marketing (excl. steel) (excl. purchased components) setup of the production process carbon price Amount and mix of steels required depends on the: material R compositions of E the passenger cars T considered A I L P R I C E 12 (14)
RESULTS: STEEL TO PASSENGER CAR With investments in BAT/CCS at the steel plant and with the price of CO 2 at 100 € /t 35 30 Relative cost increase (%) ~100 – 125 € /car 25 20 15 +25% 10 5 +0.5% 0 1 6 Selling price of Car retail price steel 13 (14)
RESULTS: CEMENT/CONCRETE TO RESIDENTIAL BUILDING With investments in BAT/CCS at the cement plant and with the price of CO 2 at 100 € /t 100 80 Relative cost increase (%) ~5 € /m 2 60 40 +70% 20 +0.5% 0 1 7 Selling price of Building cement production costs 14 (14)
CONCLUSIONS • While covering the costs of investing in new low-CO 2 steel- and cement-making processes would require substantial increases in the selling prices of steel and cement • Our results suggest that such price increases would neither significantly alter the cost structure nor dramatically increase the price to be paid by a car buyer or a procurer of a building or an infrastructure project. 15 (14)
THE WAY FORWARD New perspectives on how to support innovation in the basic materials industries. Examples of such policies innovation support mechanisms includes: to include the consumption of cement and other CO 2 -intensive commodities in the EU ETS the use of sustainable procurement as a tool to create niche markets and to guarantee an outlet for low-carbon cement and steel; and, innovative business models that create and capture value for the actors involved in the production, refinement and use of materials like steel and cement. 16 (14)
THANK YOU! johan.rootzen@chalmers.se
INTEGRATED IRON AND STEEL BASICS Reducing agent & Heat Fe 2 O 3 Fe Specific thermal energy use Integrated steel GJ/t crude steel 17 – 23 Existing capacity BAT 16.5 18 (22)
CEMENT MANUFACTURING BASICS FUEL COMBUSTION CALCINATION CaCO 3 + Heat → CaO + CO 2 900 ° C 60% 40% CLINKERISATION Calcium oxide (CaO) reacts 1450 ° C Specific thermal energy use and agglomerates with additives, forming cement Cement manufacturing GJ/t cement clinker clinker 3.6 – 5.7 Existing capacity BAT 3 19 (22)
PETROLEUM REFINING BASICS CO 2 DISTILLATION Heat, CONVERSION steam and AND CRACKING electricity TREATMENT Specific thermal energy use Petroleum refining GJ/t throughput 1.7 – 2.8 Simple 2.8 – 3.7 Complex 20 (22)
SCENARIO ANALYSIS Baseline ” Buiness-as-usual ” 600 500 400 MtCO 2 /year 300 200 ”Cap” Targeted emission 100 reductions 0 2010 2020 2030 2040 2050 21 (22)
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