IN­DUS­TRY’S TOLL ON THE EN­VI­RON­MENT

CEO Magazine North America - - AT THE FRONT — MCKINSEY & COMPANY - BY MCKIN­SEY

Cut­ting in­dus­try’s car­bon emis­sions will re­quire sig­nif­i­cant in­vest­ment, as well as a co­or­di­nated ef­fort by busi­nesses, govern­ments, and other stake­hold­ers.

The in­dus­trial sec­tor is a vi­tal source of wealth, pros­per­ity, and so­cial value on a global scale. In­dus­trial com­pa­nies pro­duce about one-quar­ter of global GDP and em­ploy­ment, and they make prod­ucts and ma­te­ri­als that are in­te­gral to our daily lives. Yet their ac­tiv­i­ties, like those of most busi­nesses, also take a toll on the en­vi­ron­ment. Roughly 28% of global green­house-gas (GHG) emis­sions came from in­dus­try in 2014. Un­less in­dus­try can lower its emis­sions, the world will strug­gle to reach the GHG re­duc­tion tar­gets of 80% to 95% that govern­ments set un­der the Paris Agree­ment of 2015. Low­er­ing in­dus­trial GHG emis­sions won’t be easy, but it is pos­si­ble. A new re­port from McKin­sey, De­car­boniza­tion of in­dus­trial sec­tors: The next fron­tier, finds that am­mo­nia, ce­ment, eth­yl­ene, and steel com­pa­nies can re­duce their car­bon-diox­ide (CO2) emis­sions to al­most zero with en­ergy-ef­fi­ciency im­prove­ments, the elec­tric pro­duc­tion of heat, the use of hy­dro­gen and biomass as feed­stock or fuel, and car­bon cap­ture. The de­car­boniza­tion of th­ese sec­tors will cost be­tween $11 tril­lion and $21 tril­lion through 2050 and will re­quire ac­cel­er­at­ing the build-out of re­new­able-en­ergy ca­pac­ity, to pro­vide four to nine times as much clean power as in­dus­try would need in the ab­sence of any ef­fort to re­duce emis­sions.

THE CHAL­LENGE OF CO2 EMIS­SIONS

The vast ma­jor­ity of in­dus­try’s GHG emis­sions (some 90%) con­sists of CO2. Half of in­dus­try’s CO2 emis­sions re­sult from the man­u­fac­ture of the four in­dus­trial com­modi­ties—am­mo­nia, ce­ment, eth­yl­ene, and steel—that are the

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