Australia has the tools and technologies at its disposal to decarbonise most sectors of its economy.

However, sectors such as heavy industry and heavy-duty transport are sometimes called ‘hard to abate’ (or ‘harder to abate’), because of their high levels of emissions and the relatively high cost of reducing those emissions. 

Hard to abate industries could include steelmaking, mining, the aluminium supply chain, chemicals (such as fertilisers and plastics), cement, oil and gas, aviation, shipping and heavy road transport.

These industries face complex obstacles to reaching net zero emissions. 

There may be a lack of viable low emissions technology, or the needed technology could carry high capital costs. 

But some companies are calling for urgent action and signalling a readiness to work together to tackle the complex challenges that they face. 

The work of the Australian Industry Energy Transitions Initiative (ETI), which was co-convened by Climateworks and Climate-KIC Australia, found potential for deep emissions reduction in heavy industrial supply chains, but that pathways to net zero are challenging. 

With the announcement of the Net Zero Authority, funding for the Hydrogen Headstart program and updates to the safeguard mechanism, this is the right time to ask how much emissions reduction can happen in industry, and what is needed to enable it.

What causes greenhouse gas emissions in heavy industry?

Discussions about greenhouse gas emissions usually divide those emissions into scope 1, 2 and 3.

Scope 1 refers to emissions directly generated by a company’s operations.

Examples for heavy industry might include:

• greenhouse gases being a by-product of production (eg. cement production)
• leakages and venting (eg. during natural gas production)
• burning fossil fuels for heat (eg. alumina refining)
• burning fossil fuels for power (eg. diesel haulage trucks).

Scope 2 refers to the emissions produced in generating the electricity purchased by a company.  These are also considered operational emissions. In some industries, such as aluminium smelting, these emissions are substantial.

Depending on the sector, scope 1 and 2 emissions could be dwarfed by the emissions resulting from the use of the product, or from production of the fuels and equipment needed to make it (scope 3).

For example, scope 1 and 2 emissions from iron ore production might be much lower than its downstream scope 3 emissions from steelmaking. Some examples of sources of upstream emissions might include those generated in the production or manufacture of explosives, equipment, and diesel used at a mine site.

What opportunities are there to reduce heavy industry emissions?

Modelling by Climateworks Centre and CSIRO for the Australian Industry ETI found Australian heavy industries have the potential to reduce operational emissions rapidly, even within the next ten years, with deep emissions reductions possible by 2050. This study investigated scope 1 and 2 emissions in the context of a rapidly decarbonising global economy.

Industry can work with governments, communities, the financial sector and other companies to reduce barriers to decarbonisation. 

Key to reducing emissions in these industries is the nation’s transition to a large-scale, cost-competitive renewable energy system. This includes both electricity generation and zero emissions fuels such as renewable hydrogen. 

Decarbonisation in some industries will be reliant on technological advancements. Some of these transformative technologies require more development and demonstration prior to becoming deployable at scale.

What are the challenges?

As part of the Australian Industry ETI, Climateworks investigated pathways for hard to abate sectors to reduce emissions, including one pathway (‘Coordinated action’) which is in line with limiting global warming to 1.5 degrees Celsius (°C.) We found that the investment required would be substantial.

In the ‘Incremental’ scenario, emissions reductions are partly driven by long-term cost savings associated with low carbon solutions. 

For example, switching from fossil fuel-reliant processes and machinery to electricity-powered technologies could mean lower fuel costs over time. Energy efficiency measures also reduce fuel costs. 

In the other two scenarios, ‘Industry-led’ and ‘Coordinated action’, in which there are stronger economic incentives for decarbonisation, industrial emissions reduce even faster.

To realise the long-term benefits, substantial investment is needed to upgrade industrial technology and to transition the Australian energy system at the scale required. Acting swiftly to take advantage of our renewable energy resources could keep energy costs low long-term.

Not all low carbon solutions would result in long-term cost savings. High ambition and coordination from both companies and governments is needed to deploy some technologies, which could be very costly. However, in many industries, reduction of operational emissions may lead to increased international competitiveness as the world moves towards a net zero global economy. 

Is it impossible to completely reduce emissions?

In all scenarios, there are some residual emissions in 2050. This doesn’t mean that it is technically impossible to totally abate all emissions, but that the model found that there are more affordable options in other sectors. In the future, we may see even greater ambition from industries which leads to lower cost reductions abating all emissions.

Carbon removals (such as through forestry) will need to offset any residual emissions. In the 1.5°C-aligned ‘Coordinated action’ scenario, Australia reaches net zero emissions before 2040 and removes more greenhouse gases that it emits in 2050. But industry’s role is key, with a potential for a total 92 per cent emissions reduction in scope 1 and 2 emissions from 2020 levels by 2050.

New export markets may also open up. With high ambition and a national strategy, Australia could drive scope 3 emissions reduction as well as reducing its own emissions. Australian industry is well-placed to prosper in a net zero world, and reducing emissions in hard to abate sectors will help.