Corporate Demand Takes the Lead
Many businesses are now setting and progressing voluntary emissions reduction targets to reduce risk, maintain market share and remain competitive against peers. Over 8,000 companies have made commitments to net zero under the U.N.’s “Race to Zero” campaign.
These companies are not only motivated by their own decarbonization goals, but by the growing understanding that they are now competing on the carbon content of their products. Moreover, the U.S. Securities and Exchange Commission will soon require corporates to disclose the carbon emissions across their entire value chains.6 This means that their ability to secure financing and attract customers will increasingly depend on their ability to meet their emissions targets.
When it comes to sustainable solutions, demand will be closely tied to an important step along the path to net zero: decarbonizing hard-to-abate manufacturing processes. Industrial companies—which represent approximately 15% of total GHG emissions—are increasingly seeking large-scale capital investment in new production assets and a range of decarbonization solutions.
For instance, in the automotive and construction industries, some of the leading companies and largest purchasers of raw materials have made commitments to decarbonize their supply chain. Volvo has committed to using 100% green steel in its manufacturing process by 2050 as part of the industry-led SteelZero initiative. Ford has pledged to use 10% green steel by 2030 as part of the World Economic Forum’s First Mover coalition. And building manufacturing company Velux is targeting a 50% reduction across the value chain (scope 3 emissions) by 2030.7
Steelmakers are also moving in the right direction to meet this corporate demand. ArcelorMittal is transforming a plant in Ontario, Canada to reduce the carbon footprint and remove coal from the ironmaking process. “The new 2.5 million tonne capacity DRI [direct reduced iron] furnace will initially operate on natural gas but will be constructed ‘hydrogen ready’ so it can be transitioned to utilize green hydrogen as a clean energy input as and when a sufficient, cost-effective supply of green hydrogen becomes available,” according to the company.
ArcelorMittal is also leveraging carbon recycling technology from LanzaTech, a Brookfield portfolio company, to build a carbon capture and utilization facility in Ghent, Belgium. The “Steelanol” facility is a first of its kind for the European steel industry, and is designed to capture carbon-rich waste gases from steelmaking and biologically convert them into advanced ethanol. Brookfield’s partnership with Lanzatech will help provide these types of carbon capture and transition solutions to multiple corporations.
In the chemical industry, decarbonizing existing ammonia plants will require the use of carbon capture and storage. Ammonia is widely used in fertilizers and is responsible for approximately 1.8% of the world’s carbon dioxide emissions.8 Blue ammonia production is powered by fossil fuels, but the carbon is captured and either stored or repurposed for other uses. CF Industries plans to invest $198.5 million to construct a carbon dioxide compression and dehydration unit at its Ascension Parish plant in Louisiana. The project will reduce carbon emissions at what CF says is the largest ammonia production facility in the world.9
Given the ongoing emissions of heavy industrial operations, and the fact that 2050 is only a single investment cycle away, sustainable solutions need to scale quickly to allow emitters to reach their net-zero targets.