The Payback Paradox: When Cheaper, Cleaner Steam Heat Pumps Lose to Short-Term Thinking

The Payback Paradox: When Cheaper, Cleaner Steam Heat Pumps Lose to Short-Term Thinking

Author: Ali Hasanbeigi, Ph.D.

Across multiple industrial sectors, we keep seeing the same pattern. In studies we have conducted in textile, food and beverage, and other steam-intensive industries, steam heat pumps often deliver significantly lower levelized cost of heating over the technology lifetime (e.g., 20 years) compared to coal or gas boilers (find our studies here). On a lifetime cost basis, they are clearly more cost-efficient and cheaper. Yet in real investment committees and company boardrooms, these projects frequently stall because the simple payback period is often above five years. The internal thresholds for payback period in most industrial firms is less than 3 years. The result is a structural gap between long-term energy productivity and short-term financial liquidity. Unless this gap is addressed, electrified heat will remain technically sound but financially sidelined.

This is not a technology problem. It is a capital allocation problem.

Figure 1: Levelized cost of heat (LCOH) for steam generation for different technologies and electricity supply scenarios for a typical textile wet-processing facility in China (Hasanbeigi et al. 2025)
Note: Error bars represent energy price sensitivities of +/- 30%

Figure 2: Levelized cost of heat (LCOH) for steam production for different technologies and electricity supply scenarios in EU27 (Hasanbeigi et al. 2024)
Note: Error bars represent energy price sensitivities of +/- 30%

Lifecycle cost metric vs liquidity metric

The tension begins with how value is measured. Levelized cost of heating is a lifecycle metric. It spreads capital cost across the asset’s lifetime and combines it with operating cost, maintenance, and financing assumptions. It answers a long-term question: what does heat truly cost over 15 or 20 years?

Simple payback is a liquidity metric. It answers a much narrower question: how many years until I recover my upfront investment?

A steam heat pump may cost three million dollars installed, compared to one million dollars for a fossil boiler of similar capacity. That threefold capital difference dominates early-year cash flow. But once operating, the heat pump uses electricity multiplied by a coefficient of performance (COP) of 2.0 - 3.0 (aka 200-300% efficeincy)for steam-generating heat pumps, delivering multiple units of thermal energy per unit of input compared to conventional fossil fuel boilers with 70%-80% efficiency. Over time, those operating savings accumulate. In many of our sector studies, that dynamic leads to a substantially lower LCOH relative to coal or gas.

LCOH rewards what happens over a decade or two. Payback only sees the first few years.

The cost of inaction: fossil heat is becoming a liability

In 2026, coal and even natural gas are no longer just energy inputs. They are risk exposures. Carbon pricing mechanisms are expanding across jurisdictions. Border carbon measures are emerging. Investor scrutiny of industrial emissions is increasing. Insurance and financing conditions are shifting in response to climate risk.

In sectors such as food and beverage, chemicals, pulp and paper, and textiles, thermal energy is often a large share of total emissions. Continuing to invest in fossil-based heat may appear safe because it aligns with traditional payback rules. But from a transition risk perspective, it increases exposure to future carbon costs, policy tightening, and customer/buyer pressure. Fossil-fired boilers are stranded assets in the age of scope 3 and supply chain decarbonization.

The much lower LCOH advantage of electrified heat is not just an efficiency story. It is increasingly a risk management story.

The decision gap in practical terms

In many facilities we have assessed, the comparison looks similar across sectors. The fossil boiler has a lower upfront cost and familiar technology. The steam heat pump has a higher upfront cost but lower operating cost and lower emissions. Over 20 years, the heat pump delivers substantially lower cost per unit of heat. Yet in boardrooms, the fossil option is labeled safe because it meets a two- or three-year payback rule, while the electrified option is labeled risky because it does not.

The paradox is that the asset with lower lifetime cost and lower regulatory exposure is often rejected because it challenges the company’s internal capital allocation norms.

Figure 3: Illustrative comparison of cumulative lifecycle costs and payback period for a steam heat pump vs. a fossil fuel boiler

The financing reality inside industrial firms

Most industrial firms, especially small and mid-sized manufacturers, operate under tight capital constraints. Even larger corporations apply internal hurdle rates and short payback thresholds. Capital is scarce and must compete across many priorities.

A plant manager with three million dollars available does not only compare a steam heat pump with a boiler. That capital competes with production expansion, digitalization, new product lines, or automation upgrades that may deliver faster returns. Decarbonization is competing with growth.

Even if a steam heat pump delivers a strong internal rate of return over 20 years, it may lose to projects that recover capital faster. This is an opportunity cost problem. The technology may be economically superior over its lifetime, but it fails under short-term liquidity criteria.

Bridging the payback gap

Closing this gap requires reshaping cash flow rather than re-proving thermodynamics. Several levers can make a real difference.

• Carbon pricing can shorten payback. As carbon costs increase, the effective cost of fossil heat rises, boosting annual savings from electrification.

• Engineering optimization also matters. Improving heat source stability and system integration to increase COP can substantially increase HP’s operating savings.

• Capital structure innovation is also helpful. Grants, concessional loans, or blended finance structures that absorb 20 to 40 percent of heat pumps CAPEX can reduce payback from seven years to three or four. The lifetime LCOH advantage remains, but the liquidity barrier is lowered.

• Heat-as-a-service (HaaS) models go further. In these structures, a third party owns and operates the heat pump and sells heat under a long-term contract. The industrial facility avoids upfront CAPEX and pays for heat as an operating expense. This approach aligns particularly well with capital-constrained facilities and reduces internal resistance tied to payback thresholds. In addition, HaaS shifts the Performance Risk. In many boardrooms, the fear isn't just the payback; it's the fear that the HP won't hit the projected COP. HaaS places that risk on the provider, which is a massive selling point.

What this means for corporate leaders

If companies are serious about industrial decarbonization, they need to rethink how they evaluate long-lived assets. Applying two-year payback rules to 20-year major capital expenditure systematically disadvantages electrified heat. Internal rate of return (IRR), lifecycle cost (e.g., LCOH), and exposure to carbon risk should carry more weight in decision-making.

For companies with science-based targets or net-zero commitments, continuing to prioritize short-term payback over long-term resilience creates a structural conflict between strategy and capital allocation.

It’s really difficult to adopt deep decarbonization technologies using a 2-year payback period threshold.

What this means for financiers and policymakers

For financiers and policymakers, the leverage point is financial architecture. Supporting electrified heat with targeted CAPEX grants, concessional finance, or performance-based incentives can unlock projects that are already efficient on a lifecycle (LCOH) basis. Aggregation models and standardized contracts can reduce transaction costs and accelerate adoption across multiple sites.

Steam heat pumps and other electrified heat solutions are not failing because they lack technical merit. In many sectors, they already deliver lower lifetime cost than fossil alternatives. They are stalling because we are evaluating long-term industrial infrastructure with short-term liquidity metrics.

If we want industrial decarbonization to scale across industries (e.g., food and beverage, textiles, chemicals, and other steam-intensive industries), we need to align financial frameworks with engineering reality. The efficiency is already there. The question is whether our capital allocation models are ready to recognize it.

To learn more about industrial electrification, you can find our reports for different countries and industry sectors from this link.

Why in China, Melting Scrap in BOFs Cuts More CO₂ than in EAFs

Why in China, Melting Scrap in BOFs Cuts More CO₂ than in EAFs

Author: Ali Hasanbeigi, Ph.D.

I often hear comments about China falling short of its goal of reaching a 15% share of steel production from electric arc furnaces (EAFs) by 2025. But looking only at that target gives a distorted picture of what’s really happening. A more meaningful metric is the total amount of scrap steel being consumed in China, and that number has been climbing steadily.

The reason the EAF share hasn’t grown is not a lack of scrap, but the way the system is set up. Many Chinese EAFs have historically relied on large amounts of hot metal (sometimes as much as 40% of the charge), so when scrap availability grows, it often replaces pig iron in those EAFs rather than showing up as a higher EAF share in total steel production. On the BOF side, converters can handle up to around 30% scrap in the charge. Given that most of China’s BOF fleet is relatively new and still has many years of useful life, it makes sense to keep them running while increasing scrap input rather than rushing into new EAF capacity in the near term. This explains why EAF share has been flat even as scrap use climbs, and why tracking total scrap use is a better measure of progress than looking only at EAF output.

In fact, putting scrap into BOFs cuts more CO2 emissions than putting the same scrap into EAFs. And the reason has everything to do with how carbon-intensive China’s electricity (both grid electricity and coal-based captive power generation) still is.

Note: The BOF emission intensity in this article refers only to the converter stage and does not include blast furnace emissions, since in this context we are comparing the emissions from melting scrap in a BOF versus an EAF.

Scrap always displaces blast furnace hot metal

The starting point is the same for both steelmaking routes. Any time you use scrap, you are avoiding the need to produce the same amount of hot metal in a blast furnace. That is where the bulk of the emissions come from, and in China, it typically amounts to close to 1.9-2 tons of CO2 per ton of hot metal. So whether that scrap ends up in a BOF or an EAF, you have already avoided a big block of emissions. The real question then becomes: once you have the scrap in hand, which furnace option adds fewer additional emissions to melt and refine it?

Scrap in BOFs adds very little to CO2 emissions

The marginal emissions of melting scrap in a BOF are extremely small. The converter itself mainly involves oxygen blowing, fluxes, and slag formation, which together emit 0.03 - 0.05 tons of CO₂ per ton of steel. This is essentially the energy cost of processing the scrap once it is in the BOF. In practice, this amount is almost negligible compared with the 2 tons of CO₂ avoided by not producing hot metal in BF. That is why, under current conditions, the most climate-efficient use of scrap in China is to push it into BOFs wherever possible. It delivers almost all of the benefits of avoiding hot metal with very little new emissions added.

Scrap in EAFs depends on the electricity mix

The EAF route is different because it relies heavily on electricity. And in China, this is where the challenge lies. The average emissions factor of the national power grid in China is over 0.6 tons of CO₂ per MWh, which is much higher than in most advanced economies. Melting one ton of scrap in an EAF requires around 450 kWh of electricity. That alone generates about 0.27 tons of CO₂. On top of that, EAFs use fuels and oxygen on-site which add another 0.05 tons of CO₂ per ton of steel. Together, the total comes to roughly 0.32 tons of CO₂ per ton of scrap melted in an EAF in China. If captive coal power generation is used to supply electricity to EAFs, which is common in China, then the EAF emissions would be even higher.

Comparing the two routes

Putting those numbers side by side makes the trade-off clear. Scrap in a BOF adds only about 0.03 - 0.05 tons of CO₂, while scrap in an EAF adds around 0.32 tons. That makes the EAF about 6 to 10 times more carbon-intensive than the BOF for melting steel scrap under Chinese conditions. Both routes avoid the high BF emissions, but the EAF adds a much larger overhead. This is the main reason why shifting scrap from BOFs to EAFs today does not deliver additional climate benefit in China. In fact, it can lead to higher emissions per ton of scrap used.

The limits of BOF scrap use

Of course, there is only so much scrap you can put into a BOF before running into operational limits. The practical ceiling is about 25 to 30 percent of the charge. Beyond this point, temperature control and endpoint chemistry become difficult. So while BOFs should be the first choice for scrap in the near term, they cannot absorb all the scrap China is generating. Once that ceiling is reached, the additional scrap must flow into EAFs. That does not negate the value of scrap, but it does mean that EAFs carry a higher carbon penalty until the grid becomes cleaner.

When EAFs make more sense

The emissions of scrap use shift once the grid itself decarbonizes. If the emissions factor were to fall to close to zero tons CO₂ per MWh, then the EAF would begin to look as good as, or better than, the BOF for processing scrap. In that world, the electricity overhead becomes small enough that the flexibility and scalability of EAFs make them the preferred option. The transition in the power sector is the key enabler for EAFs to become genuinely low-carbon in China.

A sensible sequence for China

Taken together, I suggest a practical sequence for China’s scrap strategy. First, maximize scrap use in BOFs up to the 25–30% limit. Based on my rough calculation, BOFs in China are currently running at about a 15% scrap charge. That means the existing BOF fleet could still take in an additional 80–100 million tons of scrap beyond what they are using today.

Second, direct the remaining available scrap into existing EAFs, even if their marginal emissions are higher than BOFs under current grid conditions.

Third, only once both BOF and EAF scrap utilization are close to their technical ceilings should China shift more aggressively toward building new EAF capacity. That point is most likely to come in the 2030s, when the power grid is expected to be much cleaner. Until then, the most effective approach is to extract the maximum climate benefit from existing assets rather than rushing into new EAF capacity that cannot yet deliver the emissions savings often assumed.

Increasing scrap use in BOFs is also one of the most realistic near-term levers to cut emissions from China’s steel sector. Many of the country’s BF-BOF plants are still relatively new, and in practice most will remain in operation for at least another reline cycle, extending their lives by 15–20 years. While the long-term goal must be to phase out coal-based BF-BOF steelmaking, the immediate priority is to reduce the amount of hot metal existing BFs produce. Maximizing scrap in BOFs allows China to lower emissions quickly, while the country builds out the clean power and hydrogen and has substantially more scrap in the medium- and long-term needed for a full transition away from BF-BOF to scrap-EAF and H2-DRI.

Interested in data and decarbonization studies on the global steel industry? Check out our list of steel industry publications on this page.

The Race to Net Zero: Who Will Have the First Zero-Carbon Textile Plant?

Authors: Ali Hasanbeigi and Cecilia Springer

The Urgent Need to Decarbonize the Textile Industry

The textile and apparel industry, a cornerstone of global manufacturing, is under increasing pressure to decarbonize. Accounting for approximately 2% of global greenhouse gas emissions annually, the sector’s reliance on fossil fuel-based thermal energy for processes like steam production and thermal oil heating is a significant contributor to its carbon footprint. As demand for sustainable apparel surges, the race is on to establish the world’s first zero-carbon emissions textile plant. A key contributor to this race is electrification, with technologies like electric boilers and heat pumps offering a viable, immediate path to decarbonization. Drawing from the insights of the Low-Carbon Thermal Energy Roadmap for the Textile Industry by Global Efficiency Intelligence and Apparel Impact Institute, this blog explores how these technologies, available today, can transform textile manufacturing into a zero-emissions operation, especially when paired with renewable energy procurement.

Who Will Have the First Zero-Carbon Wet-Processing Textile Plant? Finished fabric production is energy-intensive, with steam and hot oil heating accounting for 50-60% and 30-40% of fuel use in a typical wet-processing plant (with pre-treatment, dyeing, and finishing processes for fabric), respectively. Traditionally, these processes rely on coal, natural gas, or other fossil fuels, which release significant amounts of CO₂ emissions. The Low-Carbon Thermal Energy Roadmap underscores that as global apparel demand grows, the industry must shift away from these carbon-heavy sources to meet climate goals. Electrification, supported by renewable energy (RE), emerges as the most promising long-term solution, offering both environmental and economic benefits when evaluated through a levelized cost of heating (LCOH) approach that accounts for all capital (CAPEX) and operational (OPEX) expenditures over the technology’s lifetime.

Electrification Technologies: Ready Today

The good news? The tools to decarbonize textile plants are not futuristic technologies—they’re here now. The roadmap highlights two electrification technologies ready for immediate adoption:

• Electric Boilers: With efficiencies up to 99% and widespread commercial availability, electric boilers can replace fossil fuel-fired systems seamlessly. When powered by renewable electricity, they slash CO₂ emissions dramatically. Their low capital expenditure (CAPEX) makes them an accessible entry point for manufacturers.

• Heat Pumps: Steam-generating heat pumps, capable of reaching temperatures up to 170°C, offer even greater efficiency gains. Their high coefficient of performance (or COP) means they can reduce energy use substantially in a typical plant compared to conventional boilers. Even with carbon-intensive grids, their efficiency delivers emissions reductions, making them a game-changer.

The report’s techno-economic modeling reveals that these technologies are not just environmentally sound, they are also economically competitive. Using the LCOH metric, which factors in capital, energy, and operating costs over a technology’s lifetime, heat pumps consistently outperform fossil fuel-fired boilers in countries like China and India. Electric boilers, while facing higher near-term energy costs due to electricity prices, become cost-competitive by 2035 in many regions as renewable energy becomes cheaper and carbon pricing penalizes fossil fuels. This lifetime cost approach demonstrates that electrification isn’t a distant dream—it’s a practical, adoptable strategy today.

Sweet Spots for Electrification: Where the Race is Heating Up

While electrification can work globally, certain regions are poised to lead the charge due to advanced corporate renewable energy procurement mechanisms like Power Purchase Agreements (PPAs). In Asia, India, China, and Vietnam stand out as sweet spots. China’s abundant renewable energy supply and supportive policies, India’s expanding RE market, and Vietnam’s recent regulatory push to establish corporate RE procurement create growing opportunities for textile plants to go zero-carbon. In Europe, Germany, Italy, and Spain are frontrunners, leveraging mature PPA frameworks and ambitious decarbonization targets. These countries exemplify how access to stable, low-cost renewable electricity can accelerate the shift from fossil-based steam generation to electrified systems.

The roadmap’s projections are striking: all studied countries can achieve emissions reductions with electrification in the near future, especially with industrial heat pumps.

First-Mover Advantages: Why Acting Now Pays Off

Textile facilities and apparel brands that lead the charge in electrifying heating stand to reap significant benefits, positioning themselves as pioneers in a rapidly evolving industry. The Low-Carbon Thermal Energy Roadmap and industry trends highlight several compelling advantages for first movers:

• Market Leadership and Brand Differentiation: Creating the first zero-carbon garment or being the first zero-carbon textile plant or brand to adopt electrified heating creates a powerful narrative. Consumers increasingly prioritize sustainability, with studies showing that many consumers are willing to pay more for eco-friendly products. First movers can capture this growing market, enhancing brand loyalty and attracting premium retailers.

• Cost Savings Over Time: While initial investments in electric boilers or heat pumps may require upfront capital, their lower operating costs, especially for heat pumps when paired with renewable energy PPAs, yield long-term savings. The roadmap’s LCOH analysis shows heat pumps can save up to 20% on energy costs compared to fossil fuel systems by 2030 in key regions. Early adopters lock in these savings before competitors.

• Regulatory and Carbon Price Advantage: As governments impose stricter carbon regulations and pricing, such as the EU’s Carbon Border Adjustment Mechanism or China’s National Emissions Trading System, electrified plants avoid penalties and compliance costs. First movers future-proof their operations, gaining a competitive edge as fossil fuel-based competitors face rising costs.

• Access to Green Financing: Financial institutions are increasingly offering green loans and bonds for sustainable projects. Facilities that electrify early can tap into these funds, reducing CAPEX burdens and improving cash flow. For example, programs like the IFC’s green financing initiatives prioritize low-carbon industrial upgrades.

  • Supply Chain Influence: Apparel brands that partner with electrified plants can drive sustainability across their supply chains, meeting Scope 3 emissions targets. Early-adopting textile plants gain leverage to negotiate favorable terms with global brands that prioritize low-carbon suppliers.

By acting now, first movers not only contribute to global climate goals but also secure a strategic advantage in an industry where sustainability is becoming a core competitive factor.

Voices from the Field: Insights from Experts

The potential of electrification isn’t just theoretical, and it’s gaining traction among industry leaders. In a recent Forbes interview, Dr. Ali Hasanbeigi and Dr. Cecilia Springer emphasized that heat pumps are ready for adoption now, urging the fashion industry to embrace its “heat pump era” to cut emissions and costs. Similarly, in a Q&A with Action Speaks Louder, they outlined a practical roadmap for low-carbon textile manufacturing, highlighting electrification’s role as the cornerstone of a net-zero future. These insights reinforce that the technology and knowledge exist—it’s a matter of action.

A Global Call to Action

While the Low-Carbon Thermal Energy Roadmap focuses on five key countries (China, India, Vietnam, Bangladesh, and Indonesia), its findings are a blueprint for the world. Electrification’s competitiveness hinges on renewable energy access, making corporate RE procurement a critical enabler. Mechanisms like PPAs, green tariffs, and onsite generation provide textile plants with the tools to secure low-emission electricity at competitive and stable costs, leveling the playing field against fossil fuels. Beyond the sweet spots, any region with a decarbonizing grid or supportive policies can join the race.

The roadmap also offers a phased approach: pilot projects by 2030, deployment by 2035, and full-scale electrification by 2040. Textile manufacturers can start small by swapping out aging coal boilers for electric ones, while apparel brands fund pilots and advocate for RE policies. Policymakers, meanwhile, must modernize grids and incentivize clean energy adoption.

Crossing the Finish Line

The race to the first zero-carbon emissions textile plant is not just about technology—it’s about vision and execution. Electric boilers and heat pumps, available and adoptable today, offer a clear path forward. Their competitiveness with fossil-based systems, proven through levelized cost analysis, makes them a smart investment for the future. Whether it’s a facility in India, China, Vietnam, Spain, Germany, or Italy, the winner will be the one that pairs these technologies with renewable energy and bold action.

The clock is ticking. Who will cross the finish line first? The answer lies in the hands of those willing to act boldly and act now.

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Interested in information and decarbonization studies on the global textile and apparel industry? Check out our list of textile industry publications and tools on the Textile Sustainability Hub.

Infographic: What is Green Steel?

Author: Ali Hasanbeigi, Ph.D. and Adam Sibal

Iron and steel manufacturing is one of the most energy-and carbon-intensive industries worldwide. The global steel industry emitted around 3.6 billion tons of carbon dioxide (CO2) in 2019. This accounts for around 7% of global greenhouse gas (GHG) emissions and 11% of global CO2 emissions.

In decarbonizing the global steel industry, standards, protocols, initiatives, and government policies have a significant role to play. In recent years, major growth has been seen in the number of standards, protocols, initiatives, and policies focused on decreasing the emissions from iron and steel production.

Recently, we published a report, “What is Green Steel?”, that aims to bring together a summary of 26 major standards, protocols, initiatives, and government policies focused on reaching the goal of green/low-carbon steel production and decarbonization of this sector.

The infographic below highlights some of the key aspects of the study and its recommendations.

To read the full report and see complete results and analysis of this new study, Download the full report from this link.

You can watch the recording of the webinar from this link.

Don't forget to Follow us on LinkedIn, Facebook, and Twitter to get the latest about our new blog posts, projects, and publications.

Cleanest and Dirtiest Countries for Primary Aluminum Production

Author: Ali Hasanbeigi, Ph.D.

See our more recent report, “Aluminum Climate Impact 2025”, for more updated intensities and ranking.

Aluminum production accounts for 2% of global carbon dioxide (CO2) emissions. World aluminum production has more than doubled between 2000 and 2020. Much of this growth in production came from China, which accounted for 57 percent of global aluminum production in 2020. The energy use and greenhouse gas (GHG) emissions of the aluminum industry are likely to continue increasing because the increased demand for aluminum, particularly in developing countries, is outpacing the incremental decreases in energy and CO2 emissions intensity of aluminum production that are happening under the current policy and technology regime.

Last month we published a report titled “Aluminum Climate Impact - An International Benchmarking of Energy and CO2 Intensities”. In this report, we conducted a benchmarking analysis for energy and energy-related CO2 emissions intensity of the aluminum industry among the largest aluminum-producing countries. We focused on the two phases of the aluminum production value chain responsible for the vast majority of energy use and associated CO2 emissions: alumina production and the electrolysis process to produce aluminum.

Figure 1 shows the energy-related CO2 emissions intensities for aluminum production in the countries/region studied, based on our system boundary of the alumina production and electrolysis phases. Our results show that India, China, and Australia have the highest and Iceland, Norway, and Canada have the lowest energy-related CO2 emissions intensities among the countries/region studied (Figure 1).

Figure 1: Final energy-related CO2 intensity of aluminum production in 2019
(Note: Both smelters and alumina production processes are included. The CO2 emissions from both electricity and fuel use are included.)

Because electricity makes up a large share of the energy used in primary aluminum production, the CO2 emissions associated with aluminum production vary widely based on the fuel mix used for electricity generation in a given country or region (Figure 2). It should be noted that in our analysis we did take into account the captive power and hydro power used in aluminum industry in different countries.

Figure 2. Electricity grid CO2 emissions factor the countries/regions studied

The following factors can influence the primary aluminum production’s energy and CO2 emissions intensity values across countries:

• The fuel mix used for alumina production

• The electricity grid CO2 emissions factor

• The source of alumina used for aluminum production

• The share and type of captive power used for aluminum production

• The level of penetration of energy-efficient technologies

• The aluminum product mix in each country

• The age of aluminum manufacturing facilities in each country

• Environmental regulations

• Cost and quality inputs

• Boundary definition for the aluminum industry

To read the full report and see complete results and analysis of this new study, Download the full report from this link.

Don't forget to Follow us on LinkedIn , Facebook and Twitter to get the latest about our new blog posts, projects, and publications.

Saving Natural Gas in a Hurry in Industry

Author: Ali Hasanbeigi, Ph.D.

The tragic and unjust war in Ukraine has caused an energy crisis in Europe and around the world. The prices of oil and natural gas are skyrocketing within a short period of time putting pressure on consumers in different sectors of the economy. Even before the invasion of Ukraine by Russia, the energy prices in Europe were in steep upward trends. The Dutch TTF Gas (a leading European benchmark price) is up by 10 folds compared to the same time in 2021. With increasing energy prices and uncertainly over the war in Ukraine, policymakers especially in Europe are struggling to reduce the burden of higher natural gas prices for people and businesses.

Figure: Natural Gas EU Dutch TTF (EUR/MWh) – https://tradingeconomics.com - Accessed March 8, 2022

There are many things that can be done in medium and long term to reduce Europe’s dependence on Russian oil and gas and keep the prices under control for the consumers. Many people are already talking about different strategies to do that. But those actions will take time to implement and show their impact. Here in this blog post, I focus on what can be done in a short term (aka in a hurry) to save natural gas and reduce energy costs now. Since my field of expertise is industrial energy efficiency and decarbonization, I will focus on different strategies that can be implemented by industrial companies to save natural gas now.

In Europe, over a quarter of the total energy used in industry is natural gas (Eurostat Energy Balances-2022 edition). The chemical, petroleum refining, iron and steel, non-metallic minerals (e.g. cement and glass), and food and beverage industry are the top five natural gas consuming industries in Europe accounting for around 75% of total natural gas used in industry.

There are different strategies that can help reduce natural gas consumption in industry. But in this blog post we want to focus on options that can be implemented now in a very short period of time and results in natural gas cost savings.

The best solution for saving natural gas in a hurry in industry is Energy Efficiency!

Of course, there are other options such as fuel switching, electrification, material efficiency, alternative materials and alternative processes that can also help to reduce natural gas use in industry. We have also conducted in-depth studies on those options over the years as well. But most of those options will require longer time period to implement and often higher capital for deployment. On the other hand, there are numerous studies that have identified cost-effective energy efficiency opportunities with low payback period in different industry sectors. All energy efficiency measures and technologies are even much more cost-effective now with this staggeringly high energy prices in industry in Europe. So, all industrial companies should re-evaluate their efficiency investment strategy and un-shelve energy efficiency projects that may have not been cost-effective before with lower energy prices.

Industrial companies in Europe that are facing challenges with this high natural gas and energy prices should immediately form an Energy Efficiency Task Force in their companies. Such task force should consist of people from management, engineering, finance and process operation. If companies do not have in-house expertise in energy efficiency, they should seek help from a local energy efficiency consulting firm. An investment in such services in such high energy price environment will have a very favorable rate of return. Government should consider providing financial support especially to SMEs for conducting an energy assessment.

A detailed energy assessment/audit of the industrial plant that can be conducted in 2-3 days should be implemented with a focus on process heating and boiler and steam systems where majority of natural is used. Natural gas saving opportunities should be identified and ranked based on their ease of implementation (how fast they can be implemented) and rate of return. The measures with the best economic rate of return that can be implemented rather quickly should be prioritized and presented to top management for approval and implementation.

There are many energy efficiency and system optimization measures that can be implemented at low cost in short period of time if the industrial plants have in-house expertise to identify and implement these measures. The approval of such projects should not get stuck in bureaucratic process of larger corporates. More capital-intensive energy efficiency projects that can be implemented in relatively short period of time should still be considered especially in such high energy-price environment.  

Below I’ll provide more specific resources that can help industrial plants in their assessment of natural gas saving potential in industrial process heating and industrial boilers and steam systems. These are just a few examples for sources of information available in English. I am sure there are other sources of information available in different languages. If you are not familiar with those resources, just reach out to your local energy department or universities with energy studies and I am sure they’d be happy to help you.

Industrial boilers and steam systems optimization:

Steam is used extensively as a means of delivering energy to industrial processes. Steam holds a significant amount of energy on a unit mass basis that can be extracted as mechanical work through a turbine or as heat for process use. In addition, steam can be used to control temperatures and pressures during processing, strip contaminants from process fluids, dry solid products, and in other miscellaneous applications. Equipment that use steam vary substantially across industries and are generally process- and location-specific.

In most cases, the focus on improvements for industrial steam systems has been mainly on the equipment (primarily boilers) rather than the entire steam system, which includes steam generation, distribution, end uses, and heat recovery systems. Although system optimization might be more difficult than changing a piece of equipment since it requires more holistic knowledge and assessment of the system, it will often yield much greater energy saving compare to replacing a single component with a more efficient one. Besides, the presence of energy efficient components (e.g. boilers), while important, provides no assurance that an industrial steam system will be energy efficient. Misapplication of equipment to demand, mismanagement of the system, and operation below the optimal efficiency in the industrial steam systems are common. Therefore, there is a need for shifting the paradigm to focus attention on steam systems optimization and efficiency as a whole rather than focusing solely on the boiler efficiency.

Some examples of energy efficiency measures that can be implemented on natural gas boilers are:

·       Excess air management: Tune existing positioning control (or simple control)

·       Excess air management: Upgrade from simple control to standard oxygen trim

·       Excess air management: Upgrade from standard oxygen trim to oxygen trim with CO tuning

·       Flue gas thermal energy recovery (Economizer and/or air heater)

·       Optimization of boiler blowdown and recovery of heat from boiler blowdown

·       Optimization of insulation of steam piping, valves, fittings, and vessels

·       Implementation of an effective steam trap maintenance program

·       Optimization of condensate recovery

·       Flash-steam recovery

You can find much more detail information on industrial boiler and steam systems efficiency improvement in US DOE’s steam system optimization guidebook.

There are also many natural gas saving opportunities in industrial heating systems such as cement kilns, steel industry’s furnace, glass melter, chemical industry reactors, etc. However, those opportunities are more sector-specific. The sector-specific energy efficiency guidebooks provided by US EPA (see below) and other institutions such as the ones by Lawrence Berkeley National Lab (see below) provide more in-depth information about natural gas saving opportunities in different industries.

Resources:

U.S. DOE’s Resources for Industry

US DOE has developed and published various guidebooks and tools on energy saving in industrial heating and steam systems. All the materials are available for free from the links below.

• Plant-wide Systems

• Steam Systems

• Combined Heat & Power Systems

• Waste Heat Recovery Systems

• MEASUR Tool: It is an integrated tool suite (MEASUR) to aid manufacturers in improving the efficiency of energy systems and equipment within a plant.

• 50001 Ready Navigator Tool: It is an online guide that can assist you in putting an energy management system in place.

• Energy Performance Indicator LITE (EnPI LITE) Tool: It is an online regression-based calculator for modeling energy performance at the facility level.

• Energy Footprint Tool: It can help manufacturing, commercial and institutional facilities to track their energy consumption, factors related to energy use, and significant energy end-use.

• The Plant Energy Profiler Excel (PEPEx) Tool : It is an excel based software tool to help industrial plant managers identify how energy is being purchased and consumed at their plant and identify potential energy and cost savings.

• Steam System Modeler Tool: The properties and equipment calculators in this tool allow the user to input the metrics of their system, generate a list of detailed steam specific steam properties, and test a variety of adjustments on individual equipment.

• The Process Heating Assessment and Survey Tool (PHAST): It introduces methods to improve thermal efficiency of heating equipment. This tool helps industrial users survey process heating equipment that consumes fuel, steam, or electricity, and identifies the most energy-intensive equipment.

UNIDO’s Industrial Energy Efficiency Accelerator

This platform provides various case-studies and training materials on how to reduce energy use in industrial energy systems including the heating systems.

US EPA’s ENERGY STAR’s Energy Efficiency Guidebooks

These energy efficiency technology-guidebooks provide sector-specific recommendations for energy efficiency improvement opportunities in many different industries including chemical, petroleum refining, iron and steel, non-metallic minerals (e.g. cement and glass), and food and beverage industry, which account for 75% of natural gas use in industry in Europe.

Lawrence Berkeley National Lab’s Industrial Energy Efficiency Guidebooks

Over the years, my former colleagues at LBNL and I developed series of energy efficiency technology-guidebooks for different industries. These guidebooks are available for free from the link above.

Here is a guidebook on industrial energy auditing that I wrote a while ago:

Industrial Energy Audit Guidebook: Guidelines for Conducting an Energy Audit in Industrial Facilities.

You may find some of our publications on energy efficiency opportunities in different industries and industrial energy systems around the world helpful for your energy efficiency journey. You can find my full list of publications from this link. All the reports are available for free from GEI or LBNL or other websites.

Keep in mind that energy efficiency will benefit your organization both in the short-term and long-term. While working on energy efficiency, other medium-and long-term options such as electrification (using renewable electricity) should be considered by industrial companies in order to both increase their energy security and also lower their greenhouse gas emissions.

I hope you find this information helpful. Feel free to contact us if you need additional support in developing energy efficiency strategy for your organization.

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Global Aluminum Industry’s GHG Emissions

Author: Ali Hasanbeigi, Ph.D., Cecilia Springer, Dinah Shi

World aluminum production has more than doubled between 2000 and 2020. Much of this growth in production came from China, which accounted for 57 percent of global aluminum production in 2020.

The energy use and greenhouse gas (GHG) emissions of the aluminum industry are likely to continue increasing because the increased demand for aluminum, particularly in developing countries, is outpacing the incremental decreases in energy and CO2 emissions intensity of aluminum production that are happening under the current policy and technology regime.

We have conducted a benchmarking study for energy and CO2 emissions intensity of the aluminum industry among the largest aluminum-producing countries. We focused on the two phases of aluminum production value chain responsible for the vast majority of energy use and associated CO2 emissions: alumina production and the electrolysis process to produce aluminum.

[The full report of this study titled “Aluminum Climate Impact - An International Benchmarking of Energy and CO2 Intensities” will be released in mid-February 2022.]

Based on the final estimated CO2 intensity for the 11 countries covered in this study, we estimate the total CO2 emissions from aluminum production in these countries (Australia, Bahrain, Canada, China, Iceland, India, New Zealand, Norway, Russia, the United Arab Emirates, and the United States). We calculated a production-weighted average emissions intensity for these 11 countries. We find that the aluminum industry in these 11 countries emitted 597 million tonnes (Mt) of CO2 in 2019. This only includes energy-related emissions and not the process-related emissions. These 11 major aluminum-producing countries represented 86 percent of total world aluminum production. Assuming the rest of the world produced aluminum with the average CO2 emissions intensity of the countries in this study, then total global energy-related CO2 emissions from aluminum production in 2019 would be 663 Mt CO2.

We also estimate the total CO2 emissions from each of the countries studied, based on our estimated CO2 intensity by country and the amount of production in each country. Figure 1 shows the results of this analysis, with China standing out as responsible for 67% of estimated global CO2 emissions – more than its production share, due to the high CO2 intensity of aluminum production.

Figure 1. Total Energy-Related CO2 Emissions from Aluminum Production in the Countries Studied and Rest of the World in 2019 (Source: Global Efficiency Intelligence’s analysis)

The global aluminum industry’s total energy-related CO2 emissions was around 663 million tonne CO2 in 2019.

Based on the total aluminum industry emissions presented above and the global CO2 emissions of 33 Gt CO2 in 2019 reported by IEA, the global aluminum industry’s energy-related CO2 emissions account for 2 percent of total global CO2 emissions.

It is worth highlighting that if the global aluminum industry represented a country, it would be the 10th largest emitter of annual energy-related CO2 emissions in the world.

For the 11 countries studied, we also estimate the total amount of emissions from fuel and from electricity (Figure 2). Fuel use is almost entirely consumed during the alumina production phase, which also consumes some electricity. We find that 19% of emissions in the countries studied comes from fuel use, while 81% of emissions come from electricity use. This indicates that decarbonization efforts in these countries should be focused on electricity, but that alumina production should also be oriented towards lower carbon fuels and even carbon capture, given the presence of carbon neutrality goals in many of the countries studied.

The fuel vs. electricity mix also ranges from country to country, because some countries, like Iceland and Norway, use essentially zero-emissions electricity for aluminum production, while other countries, like India, use carbon-intensive fuels both for electricity used in the electrolysis phase and alumina production.

Figure 2. Total Energy-Related CO2 Emissions from Global Aluminum Production (Both Smelters and Alumina Production Processes) by Energy Source in 2019 (Source: Global Efficiency Intelligence’s analysis)

The full report of this study titled “Aluminum Climate Impact - An International Benchmarking of Energy and CO2 Intensities” will be released in mid-February 2022.

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Global Cement Industry’s GHG Emissions

Author: Ali Hasanbeigi, Ph.D.

The cement industry is one of the most energy- and carbon-intensive industries. There are various values in the literature regarding the total GHG emissions of the global cement industry some of which vague and unclear causing confusion among people who read and use these numbers.

In 2019, we published a report on international benchmarking of energy intensity and CO2 emissions intensity of the cement industry in 14 major cement-producing countries. These 14 major cement-producing countries account for over two-third of total world cement production. Therefore, we have a high coverage of global cement production in our study.

We used the weighted average CO2 intensities from our study and the global cement production to calculate total CO2 emissions of the global cement industry. We have considered the important issue related to the differences in clinker to cement ratio across countries and have adjusted our analysis to reflect these differences. Figure below shows the results of our analysis.

Global cement industry emitted around 2.3 gigaton of CO2 (Gt CO2) emissions in 2019.

Of this, 1.4 Gt CO2 is related to the process-related emissions (from chemical reaction during the calcination process), 0.6 Gt CO2 is related to fuel use (also called Direct emissions) and 0.3 Gt CO2 was from electricity use (also called Indirect emissions).

The energy-related emissions from the fuel and electricity use accounts for only 40% of total GHG emissions of the global cement industry. The remaining 60% of emissions is related to the process emissions from calcination.

Based on total cement industry emissions presented above and the global GHG emissions of 52 Gt CO2-e in 2019 (includes non-CO2 GHG emissions as well) reported in UN Emissions Gap Report 2020, the global cement industry accounts for around 4.5% of total global GHG emissions.

Based on the total cement industry emissions presented above and the global CO2 emissions of 33 Gt CO2 in 2019 reported by IEA, the global cement industry accounts for around 7% of total global CO2 emissions.

It is worth highlighting that only the annual GHG emissions of China, U.S. and India are higher than annual GHG emissions of global cement industry.

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Carbon Loophole in Carbon Neutrality Targets

Author: Ali Hasanbeigi, Ph.D.

The carbon loophole refers to the embodied greenhouse gas (GHG) emissions associated with production of goods that are ultimately traded across countries. These emissions are a growing issue for global efforts to decarbonize the world economy. Embodied emissions in trade are not accounted for in current GHG accounting systems. If they were, many promising climate trends would be negated or reversed.

These embodied flows of carbon, which are not accounted for in production-based or territorial emissions accounting are responsible for around 25% of the global carbon emissions (Hasanbeigi et al. 2018).

President Biden announced a new target for the United States to achieve a 50-52 percent reduction from 2005 levels in economy-wide net GHG pollution in 2030. Many other countries have in fact committed to becoming carbon neutral by 2050, including major GHG emitters such as Britain, Japan and South Korea. China which emits more than a quarter of world’s GHG emissions set a 2060 carbon neutrality target.

Most of these commitments are focused on domestic GHG emissions generated within the country (also known as production-based or territorial emissions). When goods are traded, the emissions associated with their production (or embodied emissions) are also traded, and these emissions for imported goods are not counted towards the consumer country’s emissions reporting and GHG reduction targets. Many argue that these accounts should be corrected to account for emissions embodied in imported goods, also called consumption-based accounting.

Recent studies have shown that, when using consumption-based accounting, the apparent progress among developed countries in reducing their emissions is actually negated or reversed due to import of embodied emissions into developing countries. Accordingly, substantial share of the increase in emissions in some developing countries can be attributed to production for export to developed countries. For example, UK and the U.S. are net imported of embodied emissions and China is net exporter of embodied emissions as a whole.

While all these newly announced carbon neutrality targets by countries and corporations are encouraging and a step into a right direction, it is extremely important that accurate “consumption-based” accounting is used by countries to assess their GHG reduction in order to avoid carbon leakage. The carbon leakage refers to the situation when countries or companies simply outsourcing the production of carbon-intensive materials to other countries usually with less strict environmental standards and then importing those goods without accounting for embodied GHG emissions of the imparted products.

If the countries with carbon neutrality targets do not pay attention to the Carbon Loophole and do not use consumption-based accounting, their achievement of carbon reduction goals will have much less actual positive impact than claimed and may even in some cases result in an overall increase in global GHG emissions.

For example, producing one ton of steel in the U.S. emits less than half a carbon emission compared to producing a ton of steel in China (Hasanbeigi and Springer 2019). So, if the U.S. outsources parts of its steel or steel products production to China in the future in order to reduce its domestic GHG emissions, it will actually result in an increase in global GHG emissions.

The same concept discussed above also applies to corporations and their carbon neutrality targets. If corporation do not count the carbon emissions across their value chain and the embodied carbon in materials they use (scope 3 carbon emissions), their carbon neutrality target has far less impact than claimed.

To learn more about the Carbon Loophole see our reports, “The Carbon Loophole in Climate Policy- Quantifying the Embodied Carbon in Traded Products”.

To learn more about the embodied carbon in U.S. manufacturing and trade, see our recent report, “Embodied Carbon In The U.S. Manufacturing And Trade”.

To learn more about the GHG emissions of steel industry across countries, see our report, “How Clean is the U.S. Steel Industry? - An International Benchmarking of Energy and CO2 Intensities”.

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Industrial Heating Profile and Electrification

Author: Ali Hasanbeigi, Ph.D.

The U.S. industrial sector accounts for about a quarter of energy use and greenhouse gas (GHG) emissions in the U.S. The majority of the energy used in U.S. industry is fossil fuels (Figure 1).

Figure 1. U.S. industrial sector energy use by fuel type, 1950-2019 (US DOE/EIA, 2020)

The top five U.S. manufacturing sectors in terms of energy use are bulk chemicals, petroleum refining, pulp and paper, primary metals, and the food and beverage industry

Thermal processes account for 74% of total manufacturing energy use in the U.S.; process heating accounted for 35%; combined heat and power/cogeneration for 26%; conventional boilers for 13% (US DOE, 2019) (Figure 2).

Figure 2. U.S. manufacturing energy use by end uses- values in Trillion Btu (US DOE, 2019)

Five industries account for more than 80% of all U.S. manufacturing thermal process energy consumption: petroleum refining, chemicals, pulp and paper, iron and steel, and food and beverage (US DOE/EIA, 2017).

Industrial process heating operations include drying, heat treating, curing and forming, calcining, smelting, and other operations (Figure 3).

Figure 3. Energy use for process heating in the U.S. industry by type of process heat (US DOE, 2015)

Process heating technologies can be grouped into four general categories based on the type of energy consumed: direct fuel-firing, steam-based, electric-based, and hybrid systems (which use a combination of energy types). In process heating, material is heated by heat transfer from a heat source such as a flame, steam, hot gas, or an electrical heating element by conduction, convection, or radiation—or some combination of these. In practice, lower-temperature processes tend to use conduction or convection, whereas high-temperature processes rely primarily on radiative heat transfer. Energy use and heat losses from the system depend on process heating process parameters, system design, operating practices, and other factors (ORNL, 2017).

Around 30% of the total U.S. industrial heat demand is required at temperatures below 100°C. Two-thirds of process heat used in U.S. industry are for applications below 300°C (572°F) (Figure 4) (McMillan, 2019). In the food, beverage, and tobacco, transport equipment, machinery, textile, and pulp and paper industries, the share of heat demand at low and medium temperatures is about, or even above, 60% of the total heat demand. With a few exceptions, it is generally easier to electrify low-temperature processes than high-temperature processes. Therefore, there is significant potential for electrification of industrial processes for low or medium heating applications. Figure 5 shows the share of industrial head demand by temperature in selected industries.

Figure 4. Cumulative process heat demand by temperature in 2014 (McMillan, 2019).

Figure 5. Share of industrial head demand by temperature in selected industries (Caludia et al., 2008)

Industry uses a wide variety of processes employing different types and designs of heating equipment. Process heating methods used in manufacturing operations largely depend on the industry, and many companies use multiple operations. For example, steelmaking facilities often employ a combination of smelting, metal melting, and heat-treating processes. Chemical manufacturing facilities may use fluid heating to distill a petroleum feedstock and a curing process to create a final polymer product (ORNL 2017). Table 1 shows the industrial process heating temperature profile for various subsectors. As can be seen from this table, a variety of thermal processing is conducted in each industry under different temperature profiles.

Table 1. Industrial process heating temperature profile for various subsectors (DGA, 2018)

As can be seen, there is a significant opportunity to decarbonize the industrial sector by shifting heat production away from carbon-intensive fossil fuels to electrified technologies where low- or zero-carbon electricity is used.

On January 27, 2021, Global Efficiency Intelligence and David Gardiner and Associates (DGA) released a report on industrial electrification titled “Electrifying U.S. Industry: A Technology and Process-Based Approach to Decarbonization”. The report’s Technical Assessment provides an analysis of the current state of industrial electrification needs, the technologies available, and the potential for electrification in thirteen industrial subsectors. The report also analyzes a separate scenario for electrification of all conventional boilers in the U.S. industrial sector. Besides, the report reviews the major technical, economic, market, institutional, and policy barriers to scaled development and deployment of industrial electrification technologies, as well as proposals that could help to overcome these barriers.

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Reference:

Hasanbeigi, Ali, et al. 2021. Electrifying U.S. Industry: A Technology and Process-Based Approach to Decarbonization.

U.S. Department of Energy (US DOE). (2019). Manufacturing Energy and Carbon Footprint.

U.S. DOE/ Energy Information Administration (US DOE/EIA). (2017). Manufacturing energy consumption survey, 2014. 

U.S. Department of Energy (US DOE). (2015). Technology Assessments: Chapter 6: Innovating Clean Energy Technologies in Advanced Manufacturing. Quadrennial Technology Review 2015.

McMillan. C. 2019. Solar for Industrial Process Heat Analysis. Available at: https://www.nrel.gov/analysis/solar-industrial-process-heat.html

Caludia, V., Battisti, R., & Drigo, S. 2008. Potential for solar heat in industrial processes.

David Gardiner and Associates (DGA). (2018). A Landscape Review of the Global Renewable Heating and Cooling Market.

Oakridge national laboratory (ORNL). 2017. Application of Electrotechnologies in Process Heating Systems—Scoping Document.

Global Steel Industry’s GHG Emissions

Author: Ali Hasanbeigi, Ph.D.

(Update on April 7, 2022)

Iron and steel industry is one of the most energy intensive and largest contributing industries to global greenhouse gas (GHG) emissions. There are various values in the literature regarding the total CO2 emissions of the global steel industry some of which vague and unclear causing confusion among people who read and use these numbers.

In April 2022, Global Efficiency Intelligence published a report titled “Steel Climate Impact - An International Benchmarking of Energy and CO2 Intensities". In this study, we conducted a benchmarking analysis for energy and CO2 emissions intensity of the steel industry among the 15 major steel-producing countries. We also calculated separately the intensities associated with the electric arc furnace (EAF) and blast furnace–basic oxygen furnace (BF-BOF) production routes in each country.

These 15 major steel producing countries account for 87% of total world steel production, 92% of BF-BOF and 75% of EAF steel production. Therefore, we have a high coverage of global steel production in our study.

We used IEA’s world energy statistics 2020 energy use data to estimate total steel industry’s CO2 emissions in 2019 and the weighted average CO2 intensities of BF-BOF and EAF route from countries/region included in this study to estimate total global emissions for each steel production route.

The Global steel industry emitted around 3.6 gigaton of CO2 (Gt CO2) emissions in 2019.

Global BF-BOF steel production emitted around 3.1 Gt CO2 and EAF production emitted around 0.5 Gt CO2 in 2019.

The high CO2 intensities of EAFs in China and India because of their use of large share of pig iron or coal-based direct reduced iron (DRI) as feedstock instead of steel scrap in EAFs causes an increase in global EAF’s CO2 emissions.

Based on total steel industry emissions presented above and the global GHG emissions of 52 Gt CO2-e in 2019 (includes non-CO2 GHG emissions as well) reported in UN Emissions Gap Report 2020, the global steel industry accounts for around 7% of total global GHG emissions.

Based on the total steel industry emissions presented above and the global CO2 emissions of 33 Gt CO2 in 2019 reported by IEA, the global steel industry accounts for around 11% of total global CO2 emissions.

It is worth highlighting that only the annual GHG emissions of China and the U.S. are higher than annual GHG emissions of global steel industry.

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Part 2: Cleanest and Dirtiest Countries for Secondary (EAF) Steel Production

(Updated: April 7, 2022)

Author: Ali Hasanbeigi, Ph.D.

See our more recent report, “Steel Climate Impact 2025” for more updated intensities and ranking.

In the previous blog post, I discussed the results of our benchmarking analysis for primary steel production. In this blog post, I will discuss the results for Electric Arc Furnace (EAF) (or secondary) steel production. The secondary steelmaking is producing steel from mostly scrap in the EAF. In some cases, direct reduced iron (DRI), which is produced from iron ore, will be used as feedstock in EAF. Around 28% of the total steel produced globally is by the EAF steel production route.

Figure 1. The share of EAF from total steel production in the studied countries/region in 2019 (Source: Hasanbeigi 2022)

EAF steel production is less energy and carbon intensive than BF-BOF steel production, especially when most or all of EAF feedstock is recycled steel scrap. (Note: the embodied energy and carbon in recycled steel scrap are usually not included in EAF energy and emissions intensities calculation).

Figure 2 shows the CO2 intensity of EAF steel production in the 16 countries/region studied. Brazil and France have the lowest and India and China have the highest CO2 intensity of EAF steel production. A key reason why the CO2 intensity of EAF steel production in India, China, and Mexico are significantly higher than that in other countries is the type of feedstock used in EAF in these countries. In most countries, steel scrap is the primary feedstock for EAF. In India and Mexico, however, a substantial amount of DRI (around 50% in India and 40% in Mexico) is used as feedstock in EAFs. In China, instead of DRI, a significant amount of pig iron (around 50% of EAF feedstock), which is produced via blast furnace, is used as feedstock in EAFs. Both DRI and pig iron production are highly energy-intensive processes, which result in higher energy and CO2 intensity of EAF steel production when used as feedstock in EAFs. Vietnam’s high CO2 intensity of EAF steelmaking can be mainly attributed to its very high electricity grid CO2 emissions factor.

Figure 2. The CO2 intensity of EAF steel production in the studied countries/region in 2019 (Source: Hasanbeigi 2022)

Another important factor that influences CO2 intensity of EAF steel production is electricity grid CO2 emissions factor (Figure 3). Around half of the energy used in EAF steelmaking (including rolling and finishing) is electricity. The share of electricity from total energy use decreases as the share of DRI used in the EAF steelmaking increases. Therefore, if the emissions factor of the electricity used in the steel industry is lower, it will significantly help to reduce the CO2 intensity of EAF steel production. France, Brazil, and Canada have the lowest electricity grid CO2 emissions factors thanks to large nuclear (in France) and hydro (in Brazil and Canada) power generation. India, Vietnam, and China have the highest electricity grid CO2 emissions factors among studied countries due to large share of coal used in their power generation.

Figure 3. Electricity grid CO2 emissions factors in the studied countries in 2019 (IEA 2021)

The following factors can influence the EAF steel production’s energy and CO2 emissions intensity values across countries:

1. The fuel mix in the iron and steel industry

2. The electricity grid CO2 emissions factor

3. The type of feedstocks in BF-BOF

4. The level of penetration of energy-efficient technologies

5. The steel product mix in each country

6. The age of steel manufacturing facilities in each country

7. Capacity utilization

8. Environmental regulations

9. Cost of energy and raw materials

10. Boundary definition for the steel industry

To read the full report and see complete results and analysis of this new study, Download the full report from this link.

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Part 1: Cleanest and Dirtiest Countries for Primary Steel Production

Author: Ali Hasanbeigi, Ph.D.

(Updated: April 7, 2022)

See our more recent report, “Steel Climate Impact 2025” for more updated intensities and ranking.

The iron and steel industry accounts for around a quarter of greenhouse gas (GHG) emissions from the global industrial sector. Global steel production has more than doubled between 2000 and 2020. China accounted for 53 percent of global steel production in 2020.

The energy use and GHG emissions of the steel industry is likely to continue increasing because the increased demand for steel, particularly in developing countries, is outpacing the incremental decreases in energy and carbon dioxide (CO2) emissions intensity of steel production that are happening under the current policy and technology regime.

Recently, we conducted a benchmarking study for energy and CO2 emissions intensity of the steel industry among the largest steel-producing countries.

In this blog post, I will discuss the results of our benchmarking analysis for primary steel production. In the next blog post, I will discuss the results for Electric Arc Furnace (or secondary) steel production. The primary steelmaking is producing steel from iron ore using Blast Furnace (BF) and Basic Oxygen Furnace (BOF) production route. Over 70% of the total steel produced globally is by primary steel production route (BF-BOF). Over 90% of the steel produced in China is by primary steel production route.

Figure 1 shows the CO2 intensity of BF-BOF steel production in the studied countries in 2019.

Figure 1. The CO2 intensity of BF-BOF steel production in the studied countries/region in 2019 (Source: Hasanbeigi 2022)

Note: Brazil-Charcoal CN refers to when charcoal is considered carbon neutral. Brazil-Charcoal C+ refers to when charcoal is not considered carbon neutral because of questions and concerns regarding the sustainability of biomass used in steel industry in Brazil. See methodology in the report for more information.

Key factors influencing energy and CO2 emissions intensity of the steel industry are explained in our report. It should be noted that no single factor could be used to explain the variations in energy and CO2 intensity among countries. In addition to energy intensity of BF-BOF plants, one key factor affecting CO2 intensity of BF-BOF steel production is the mix of fuel used in BF-BOF plants in each country. Figure 2 shows the weighted average CO2 emissions factors of fuels in the steel industry in the studied countries in 2019. As can be seen U.S., Mexico and Canada have among the lowest and India, Vietnam, and China have among the highest weighted average CO2 emissions factors of fuels in the steel industry. If charcoal is considered carbon neutral, the Brazil have the cleanest fuel mix and if charcoal is not considered carbon neutral, then Brazil have the highest carbon-intensive fuel mix for the steel industry.

Figure 2. Weighted average CO2 emissions factors of fuels in the steel industry in the studied countries/region in 2019 (Source: Hasanbeigi 2022)

Note: Brazil-Charcoal CN refers to when charcoal is considered carbon neutral. Brazil-Charcoal C+ refers to when charcoal is not considered carbon neutral because of questions and concerns regarding the sustainability of biomass used in steel industry in Brazil. See methodology in the report for more information.

The following factors can influence the primary steel production’s energy and CO2 emissions intensity values across countries:

1. The fuel mix in the iron and steel industry

2. The electricity grid CO2 emissions factor

3. The type of feedstocks in BF-BOF

4. The level of penetration of energy-efficient technologies

5. The steel product mix in each country

6. The age of steel manufacturing facilities in each country

7. Capacity utilization

8. Environmental regulations

9. Cost of energy and raw materials

10. Boundary definition for the steel industry

To read the full report and see complete results and analysis of this new study, Download the full report from this link.

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Rushing to Efficiency, We Sacrificed Manufacturing Resiliency

Author: Ali Hasanbeigi, Ph.D.

Everyone knows by now the story of personal protective equipment (PPE) and ventilators and how many countries faced a massive shortage of such equipment without having sufficient domestic production and being overly reliant on imports of these equipment from China.

In a rush to cost-efficiency, the United States and many other nations sacrificed their manufacturing resiliency. This has caused some real pain in the U.S. and other countries during COVID-19.

But this is just one example in a decades-long trend of sacrificing manufacturing resiliency for cost-efficiency. In the past two decades and especially after China joining WTO in 2001, many developed countries have expedited the outsourcing of manufacturing supply chain to China or other developing countries mainly to reduce cost and increase their profit margin.

This is understandable, especially when the average manufacturing labor cost in some of the developing countries where these manufacturing are moving to is 15-20 times lower than that in the U.S. or western Europe. In addition, availability of raw material and suppliers often at lower price, a different regulatory environment, and some other factors have resulted in exodus of manufacturing supply chain from developed to developing countries with a largest move being to China.

While such outsourcing of supply chain can result in cost-efficiency, companies and countries have barely considered the critical vulnerability of supply chain disruption such the one we are witnessing these days with COVID-19. While it is hard to predict the timing of such major disruptive events, it is a given that these events will happen again. Whether it is a pandemic, environmental disaster, political disputes, or other events, we will certainly face such disruption in the supply chain again. What countries and companies can do to better prepare for the next event? Resiliency is the answer.

“Business resilience is the ability an organization has to quickly adapt to disruptions while maintaining continuous business operations and safeguarding people, assets and overall brand equity.”

At the country level, the US government should boost the domestic manufacturing supply chain for vital products such as health care, food, defense, etc. This will increase resiliency of the U.S. that is currently overly reliant on imported vital products such as personal protective equipment (PPE), ventilator, drugs, etc. This is not only to bring back the manufacturing of end products, but also (most of) the upstream supply chain and take action to secure and diversify raw material sourcing. Where onshoring of the manufacturing is not possible, the U.S. companies should take action to diversify their supply chain and have suppliers located in different countries and regions.

The U.S. Government and Congress should design and help to implement policies and program such as investment tax credit for companies that bring back their manufacturing to the U.S., programs for skilled workers training needed for new manufacturing jobs, increased RD&D investment that uses full force of excellent U.S. universities and DOE’s national laboratories research capacity in collaboration with U.S. companies, major increase in funding for smart manufacturing in the U.S. that can help to lower the cost of production and make U.S. companies more competitive, thereby incentivize more onshoring of manufacturing.

This onshoring of U.S. manufacturing will be a clean, energy-efficient, and low carbon transition for the U.S. manufacturing since these new U.S. industrial plants and processes will use state-of-the-art technologies that are most likely more efficient and cleaner than their counterparts in the developing countries. In addition, the average electric grid and fuel mix in the U.S. has lower carbon emissions intensity than in China and some other major manufacturing countries because of large availability and use of natural gas and increased use of renewable energy in the U.S.

Currently, the U.S. is a large net imported of GHG emissions embodied in traded goods and products. (See our report The Carbon Loophole in Climate Policy: Quantifying the Embodied Carbon in Traded Products).

The U.S. government can also take advantage of Green Public Procurement or Buy Clean programs to support cleaner and more environmental friendly domestic production of goods in the U.S. (See our report Curbing Carbon from Consumption: The Role of Green Public Procurement).

Companies also can take action to increase resiliency across their supply chain. Here are some specific, detailed actions in addition to those mentioned above:

• Companies must diversify supply chain and do not be overly reliant on just a few supplier in one or two single country even if such diversification increases the cost.

• Diversified supply chain means higher chance of variability in raw material or intermediate products quality. Companies have to have proper standards and systems in place and take a full advantage of smart manufacturing and integrated product management systems to ensure compatibility and harmonization across value chain. Block chain technology can be a useful tool for secure tracing of products across supply chain.

• Companies need to invest in workforce training across their suppliers globally to ensure high quality and harmonized production.

• Companies should design production processes to have ability to produce a variety of products on a single machine or process. In the event of disruption in market for one product, these companies can retool and produce an alternative product. Overall a more versatile production process that can be retooled and produce variety of products adds to the resiliency of a companies.

• Companies should diversity the supply of raw materials. For example, companies are overly reliant on China for supply of rare-earth metals. One could see a major political issue between US and China could disrupt that flow.

• Companies should conduct integrated risk assessment across their supply chain to assess risk and cost of major disruption and make appropriate changes to reduce risk and increase resiliency.

The answer to these problems is certainly not anti-globalization and reshoring everything. International trade has benefited both developed and developing countries. However, in light of the serious problems caused by the COVID-19 pandemic, there are good reasons to reshore manufacturing of some critical products such health care and other products. Most importantly, even after this pandemic, there are many good reasons for companies to increase their supply chain resiliency, so they can better weather the storm in the event of next major disruption.

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New Report: Use of Industry 4.0 Technologies in Water and Sanitation

Author: Ali Hasanbeigi, Ph.D.

Access to clean water and proper sanitation has been highlighted as one of the most pressing issues by the United Nation’s Agenda 2023, and is one of the Sustainable Development Goals (SDG6). Issues related to water and sanitation affect all aspects of human life across various geographies, with a particular emphasis on least developed countries and marginalized communities. It is estimated that about 36% of the global population live in water-scarce regions, and more than 2 billion people have no choice but to consume contaminated water. Millions die yearly from otherwise preventable diseases, particularly children.

The technological advances in recent years in Industry 4.0 technologies such as: Artificial Intelligence (AI), Big Data, Internet of Things (IoT), Blockchain, Drones, and Virtual and Augmented Reality, have provided new tools to address water issues.

Global Efficiency Intelligence, LLC participated in a study led by Tambourine Innovation Ventures and funded by Inter-American Development Bank to provide an overview of some of the current applications of key Industry 4.0 technologies in the water and sanitation sectors globally as well as recommendations of how to further harness their potential.

To read the full report and see complete results and analysis of this new study, Download the full report from this link.

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New Report: How Clean is the U.S. Steel Industry?

An International Benchmarking of Energy and CO2 Intensities

The iron and steel industry accounts for around a quarter of greenhouse gas (GHG) emissions from the global industrial sector. Global steel production has more than doubled between 2000 and 2018. China accounted for 51 percent of global steel production in 2018. The energy use and GHG emissions of the steel industry is likely to continue increasing because the increased demand for steel, particularly in developing countries, is outpacing the incremental decreases in energy and CO2 emissions intensity of steel production that are happening under the current policy and technology regime.

In this study, which was supported by the BlueGreen Alliance Foundation, we conduct a benchmarking analysis for energy and CO2 emissions intensity of the steel industry among the largest steel-producing countries. Because of the difference in the composition of the steel industry across countries and the variation in the share of electric arc furnace (EAF) steel production, a single intensity value for the overall steel industry is not a good indicator of efficiency of the steel industry in a country. Therefore, in addition to calculating energy and CO2 intensities for the entire steel industry, we also calculated separately the intensities associated with the EAF and blast furnace–basic oxygen furnace (BF-BOF) production routes in each country.

Our results show that when looking at the entire steel industry, Italy and Spain have the lowest and China has the highest energy and CO2 emissions intensities among the countries studied. Among several reasons, this is primarily because of a significantly higher share of scrap-base EAF steel production from total steel production in Italy and Spain and a very low share of EAF steel production in China. The U.S. steel industry’s final energy and CO2 emissions intensities rank 4th lowest among the countries studied.

To read the full report and see complete results and analysis of this new study, Download the full report from this link.

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New Report: Deep Decarbonization Roadmap for California Cement Industry

California’s cement plants are the largest consumers of coal in the state. California is the second-largest cement producing state in the United States after Texas. More than 70 percent of the energy used in California’s cement industry is coal and petroleum coke, which are two of the most air-polluting fossil fuels.

In early 2019, we published a report titled “California’s Cement Industry: Failing the Climate Challenge”. In that report we analyzed the current status of cement and concrete production in California, and benchmarked the energy use and CO2 emissions intensity of the state’s cement industry in comparison to other key cement-producing countries. The study presented in this report is a follow up to that study.

The goal of this study supported by the ClimateWorks Foundation is to develop a roadmap for decarbonization of California’s cement and concrete production. In this study, we develop scenarios up to 2040 to analyze different decarbonization levers that can help to reduce CO2 emissions of cement and concrete production in California. We included four key major decarbonization levers in our analysis, which are: energy efficiency, fuel switching, clinker substitution, and carbon capture, utilization, and storage (CCUS).

Under the business-as-usual (BAU) scenario, the total CO2 emissions from California’s cement industry will increase from 7.9 MtCO2 per year in 2015 to 10.7 MtCO2 per year in 2040, a 36% increase. Under the study’s Advanced Technology and Policy (Advanced) scenario, the total CO2 emissions from California’s cement industry will decrease to about 2.5 MtCO2 per year in 2040, a 68% reduction compared to the 2015 level, while cement production increases by 42% from 9.9 Mt in 2015 to 14.1 Mt in 2040.

To read the full report and see complete results and analysis of this new study, download the report from this link.

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Report: Green Public Procurement for Curbing Carbon from Consumption

Because public entities exercise large-scale purchasing power in contracts for goods, services, and construction of infrastructure, policies prioritizing environmentally and socially responsible purchasing can drive markets in the direction of sustainability. In fact, public procurement accounts for an average of 12 percent of GDP in OECD countries, and up to 30 percent of GDP in many developing countries. Significant GHG emissions are attributable to products and services that are commonly procured by governments, for example, large infrastructure such as roads, buildings and railways; public transport; and energy.

The European Commission defines green public procurement (GPP) as "…a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life cycle when compared to goods, services and works with the same primary function that would otherwise be procured".

A wide range of countries around the world practice some form of GPP to promote products and materials that are more environmentally friendly and have lower energy or carbon footprint.

This report looks at 30 of those programs, 22 of which are countries in Asia, Europe, North and South America, Africa, and Oceania, and five case-studies at the city and regional level, as well as GPP programs of three multi-lateral banks and the UN to promote sustainable production and consumption. Fifteen of the countries we reviewed are among the top 20 GHG-emitting nations. The GPP programs included in this study are at country-, state-, region-, or city- level.

To read the full report and see complete results and analysis, download the report from this link.

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Energy Efficiency in California's Chemical Industry

Author: Ali Hasanbeigi, Ph.D.

The chemical and petrochemical industry is the largest consumer of energy among industrial sectors in California and is one of the top GHG emissions-intensive industries as well. California's chemical industry employs over 80,000 people and its total value of shipment is around US$82 billion. In 2015, this industry emitted 6.0 million tonne of CO2 in California.

Global efficiency Intelligence, LLC has partnered with Lawrence Berkeley National Laboratory to conducted a study for California Energy Commission on energy efficiency in the Chemical industry in the state. The goal of this project is to produce a technical assessment of the chemical industry that will provide a clear understanding of R&D needs to improve the energy efficiency in the chemical industry in California and potential energy saving by adoption of current best available technologies.

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Also read our related blog post:

Infographic: Chemical Industry’s Energy Use and Emissions

Report Release- California’s Cement Industry: Failing the Climate Challenge

Author: Ali Hasanbeigi, Ph.D.

Cement production is one of the most energy-intensive and highest carbon dioxide (CO2) emitting manufacturing processes in the world: On its own, the cement industry accounts for more than 5 percent of global anthropogenic CO2 emissions.

California is the second-largest cement producing state in the United States after Texas. California’s nine cement plants together produced about 10 million metric tonnes (Mt) of cement and emitted 7.9 Mt of GHG emissions in 2015. California’s cement factories are the largest consumers of coal in the state.

Global Efficiency Intelligence, LLC conducted a study supported by the Sierra Club and ClimateWorks Foundation to analyze the current status of cement and concrete production in California, and benchmarks the energy use and GHG emissions of the state’s cement industry in comparison to other key cement-producing countries.

The result of our benchmarking analysis shows that California’s cement industry has the second highest electricity intensity and fuel intensity among 14 countries/regions studied.

To read the full report and see the complete results and analysis, download the report from this link.

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