Big bets for heavy (green) industries
Yesterday, the United Nations Secretary-general convened a climate action summit urging world leaders to increase ambitions to ensure net zero emissions by 2050. India co-chaired the industry transition track with Sweden. India aims to become a $5 trillion economy by 2024. Manufacturing share of GDP reached an all-time high in 1995 (18 per cent). When China was at our current size in 2006, manufacturing contributed a third of its GDP. Manufacturing is also responsible for a quarter of India’s greenhouse gas emissions, rising to more than a third by 2040.
Can Indian manufacturing remain competitive, add to national income and create jobs, despite environmental constraints imposing hard choices on patterns of industrial development?
Four industries — iron and steel, cement, ammonia, and petrochemicals — contribute 27 per cent of industrial value, 23 per cent of formal sector manufacturing jobs but a whopping three-quarters of emissions. Even best-in-class energy efficiency will not keep the planet within the carbon budget consistent with limiting temperature rise to under 2°C by 2100. In order to retain or gain an edge, India must consider emerging technologies.
Iron and steel (32 per cent of emissions) will witness three-fold increase in production capacity by 2030. Most plants today use blast furnace technology. Lack of high-grade coking coal has forced firms to increasingly rely on imports. Some plants have shifted to direct reduced iron technology, which uses locally available low-grade non-coking coal, but input costs are very high. Average emissions intensity of steel production in India is twice the global level.
Alternatives are under development. TATA Steel’s plant in Ijmuiden, Netherlands, has successfully piloted the Hlsarna process, with half the carbon intensity of its Jamshedpur plant. But this approach would increase import dependency of low-ash noncoking coal. The Circored process uses natural gas to produce hydrogen and substitute for coal. Swapping the steam methane reformer with an electrolyser, which uses renewable electricity to produce hydrogen, eliminates emissions.
Today, green hydrogen-based steel is 20-30 per cent costlier but could become competitive in India with a carbon tax of $40 per tonne of C02. It could meet strong domestic demand and provide for 4 million direct jobs by 2050, creating another 1.6 million jobs along the hydrogen supply chain.
Cement production adds 30 per cent of manufacturing emissions. With growing demand, limestone imports have increased 18-fold since 2000. Reducing clinker slows down import dependency for high-grade limestone and reduces emissions. But clinker substitution has reduced emissions intensity by only 5 per cent since 2010. Average clinker factor of Indian cement still remains at 0.71 (global average: 0.66).
In collaboration with EPFL (Switzerland), researchers from various IITS are piloting and testing Limestone Calcined Clay Cement (LC3). Early results indicate that LC3 can be as strong as Portland cements while replacing half the clinker and using low-grade limestone abundantly available in India. A transition towards low-carbon cement could support 540,000 jobs in 2050.
Ammonia, primarily used to make urea, is critical to food security. Despite being the world’s second largest urea producer, India’s urea imports have grown 30-fold since 2000. Globally, energy needed to manufacture a tonne of ammonia has dropped two-thirds but Indian plants have lower energy efficiency.
One alternative is to use syngas from coal and coalbed methane. India’s first coal gasification project to produce urea is under construction in Odisha. Another Cbm-based urea plant in West Bengal will start commercial production by end-2019.
Other attempts, in Oxford and Fukushima, are aiming for zero-carbon ammonia, by combining renewables-derived hydrogen with nitrogen captured from air. A seven-fold drop in electrolyser costs and cheaper renewable electricity have nudged Australia, France, Japan, the Netherlands, Norway, Singapore and South Korea to announce plans for a hydrogen economy.
Green ammonia would reduce India’s dependence on natural gas, freeing it up for other sectors. By 2050, about 200,000 jobs could be created along the hydrogen supply chain replacing 20,000 jobs in the natural gas supply chain.
India has built huge petrochemicals refining capacity. Since 2000, imports dropped from 39,300 tonnes to just 24. The thermal energy needed to crack crude is responsible for maximum emissions. Today’s steam cracking furnaces are operating at peak efficiency. Reliance Industries’ Refiner y Off- Gas Cracker facility (the world’s largest) uses refinery gases (and gasified petcoke) as feedstock, making it the most energy efficient producer in the world.
But India still remains import dependent for oil feedstock. An alternative is green methanol. Renewables-derived hydrogen and CO2 captured from air produces syngas, feeding green methanol production with zero carbon emissions. CEEW and the International Energy Agency find that by 2030 green methanol could be cheaper than using natural gas and coal-based processes in India, reducing both import dependency and emissions footprint. It could create an additional 160,000 jobs along the hydrogen supply chain.
Green steel, low-carbon cement, green ammonia and green methanol for petrochemicals promise lower emissions, lower imports and more jobs, while helping India respond to technological shifts. Dedicated efforts are needed to reduce costs and increase adoption: R&D and innovation partnerships; regulatory nudges by making clean energy more affordable and by taxing environmental externalities; and creating a domestic market for green products and processes (with financial incentives, consumer awareness and leveraging supply chains).
India could reap benefits from new approaches to heavy industrial manufacturing. Or it could get trapped in older technologies and fuel dependence. Big bets on the essential trinity of growth, jobs and sustainability are needed urgently.