Energy-intensive Sectors Research Articles

Carbon Leakage and Competitiveness of Cement and Steel Industries Under the EU ETS: Much Ado About Nothing

In a world of uneven climate policies, concerns about carbon leakage and competitiveness for heavy industries are the main arguments against the implementation of ambitious climate policies. In this paper we investigate a potential competitiveness-driven operational carbon leakage due to the European Union Emissions Trading scheme (EU ETS). We focus on two energy-intensive sectors, cement and steel, and phases I and II of the EU ETS. From a simple analytical model, we derive an equation linking net imports of cement and steel to local and foreign demand along with carbon price. We then econometrically estimate this relation both with ARIMA regression and Prais-Winsten estimation, finding that local and foreign demand are robust drivers of trade flows. We find no significant effect of the carbon price on net imports of steel and cement. We conclude that there is no evidence of carbon leakage in these sectors, at least in the short run.

Limited trading of emissions permits as a climate cooperation mechanism? US–China and EU–China examples

Recent multilateral climate negotiations have underlined the importance of international cooperation and the need for support from developed to developing countries to address climate change. This raises the question of whether carbon market linkages could be used as a cooperation mechanism. Policy discussions surrounding such linkages have indicated that, should they operate, a limit would be set on the amount of carbon permits that could be imported by developed regions from developing countries. This paper analyzes the impact of limited carbon trading between an ETS in the EU or the US and a carbon market covering Chinese electricity and energy intensive sectors using a global economy-wide model. We find that the limit results in different carbon prices between China and Europe or the US. Although the impact on low-carbon technologies in China is moderate, global emission reductions are deeper than in the absence of international trading due to reduced carbon leakage. If China captures the rents associated with limited permit trading, we show that it is possible to find a limit threshold that makes both regions better off relative to carbon markets operating in isolation.

Demand Side Management in Small Power Systems – The Estonian Case Study

The increasing amount of stochastic power generation connected to power system increases the need for additional ancillary reserves. Most of today’s electricity consumers are relatively flexible and easily controllable, providing an already existing supplement for traditional power system ancillary services. The flexibility of loads depends on the number, type and size of consumers. In small power systems utilizing loads for power system services pose different challenges for the system operator than in larger systems. The main challenge lies in developing a business case and incentives for the customers to participate in such services. This paper discusses and analyses the Estonian three most energy intensive economic sectors potential for demand side response from a small power system point of view. Generally it is determined that demand side flexibility provides incentives not only for the power system operator but also for the customer who is able optimize its processes to gain higher economic and energy efficiency and at the same time provide flexibility for the system operator.DOI: http://dx.doi.org/10.5755/j01.eie.22.3.15308

A critical analysis of energy efficiency improvement potentials in Taiwan's cement industry

The cement industry is the second most energy-intensive sector in Taiwan, which underlines the need to understand its potential for energy efficiency improvement. A bottom-up model-based assessment is utilized to conduct a scenario analysis of energy saving opportunities up to the year 2035. The analysis is supported by detailed expert interviews in all cement plants of Taiwan. The simulation results reveal that by 2035, eighteen energy efficient technologies could result in 25% savings for electricity and 9% savings for fuels under the technical diffusion scenario. This potential totally amounts to about 5000 TJ/year, of which 91% can be implemented cost-effectively assuming a discount rate of 10%. Policy makers should support a fast diffusion of these technologies. Additionally, policy makers can tap further saving potentials. First, by decreasing the clinker share, which is currently regulated to a minimum of 95%. Second, by extending the prohibition to build new cement plants by allowing for replacement of existing capacity with new innovative plants in the coming years. Third, by supporting the use of alternative fuels, which is currently still a niche in Taiwan.

The Political Economy of Energy Innovation

This paper empirically investigates the effects of environmental policy, institutions, political orientation, and lobbying on energy innovation and finds that they significantly affect the incentives to innovate and create cleaner energy efficient technologies. We conclude that political economy factors may act as barriers even in the presence of stringent environmental policy, implying that, to move towards a greener economy, countries should combine environmental policy with a general strengthening of institutional quality, consider the influence of government’s political orientation on environmental policies, and the implications of the size of energy intensive sectors in the economy.

Comparing the statistical distributions of energy efficiency in manufacturing: meta-analysis of 24 Case studies to develop industry-specific energy performance indicators (EPI)

There is growing interest among policy makers and others regarding the role that industrial energy efficiency can play in mitigation of climate change. For over 10 years, the US Environmental Protection Agency (EPA) has supported the development of sector-specific industrial energy efficiency case studies using statistical analysis of plant level on energy use, controlling for a variety of plant production activities and characteristics. These case studies are the basis for the ENERGY STAR® Energy Performance Indicators (EPIs). These case studies fill an important gap by estimating the distribution of efficiency using detailed, sector-specific, plant-level data. These estimated distributions allow Energy Star to create “energy-efficient plant benchmarks” in a variety of industries using the upper quartile of the estimated efficiency distribution. Case studies have been conducted for 14 broad industries, 2 dozen sectors, and many more detailed product types. This paper is a meta-analysis of the approach that has been used in this research and the general findings regarding the estimated distribution of performance within and across industries. We find that there are few sectors that are well represented by a simple “energy per widget” benchmark that less energy-intensive sectors tend to exhibit a wider range of within-industry efficiency than energy-intensive sectors, but changes over time in the level and range of energy efficiency do not reveal any single pattern.

A model for mapping the energy consumption of buildings, transport and outdoor lighting of neighbourhoods

Energy consumption of urban areas is a relevant theme for sustainable spatial planning. Through the integration of energy and urban planning issues, it can be identified a suitable strategy to face climate change. This study aims to evaluate overall energy demand of existing urban neighbourhoods, considering the most energy intensive sectors within a city. Using GIS software, the method provides energy mapping of neighbourhoods, allowing to improve the insight of energy demand of cities and to develop a preliminary assessment for future scenarios. The method has been applied to a neighbourhood of the municipality of Catania in southern Italy. Methodology and earliest results are discussed in this paper.

Structural decomposition analysis of energy-related CO2 emissions in China from 1997 to 2010

The energy-related CO2 emissions in China have increased dramatically from 3384 to 8333 × 106 t during the last decade. To interpret these drastic changes, we undertake a structural decomposition analysis to decompose the changes in CO2 emissions from 1997 to 2010 into the following six driving forces: emission coefficient, energy intensity, Leontief, sectoral structure, demand allocation (the shares of consumption, investments, and exports in final demand), and final demand effects. The results show that declines in energy intensity had a decrease impact on CO2 emissions during the studied period. Changes in the relative importance of intermediate production in total output (the Leontief effect) contributed to decrease CO2 emissions in the 2000–2002 period and to increase emissions in the other periods. The most important driver behind the steady increase in CO2 emissions is the large increase in final demand. A further analysis at the sectoral level revealed differences and fluctuations between sectors. Energy intensity fell most strongly in the electric power sector and the coking, gas, and petroleum production sector (two energy-intensive sectors). The shift toward exports and investment increased CO2 emissions (demand allocation effect). Part of the increases in CO2 emissions thus stem from production activities for consumption activities elsewhere.

Carbon emissions reductions and technology gaps in the world's factory, 1990–2012

China's manufacturing industries are traditionally energy-intensive sectors and are responsible for over half of the country's total CO2 emissions. In this paper, we propose a global meta-frontier non-radial directional distance function approach to measure the CO2 emissions performance of Chinese manufacturing sectors during the period of 1990–2012. This approach allows us to simultaneously consider technological heterogeneity in manufacturing, non-radial slacks, and undesirable outputs. The global level of environmental technology is incorporated into the efficiency model to improve discriminating power and comparability. The results indicate significant differences in CO2-emissions-reduction performance among five broad groups of Chinese manufacturing industries. The “global technologies/ innovators group” is the most efficient under meta-frontier technologies, with the smallest technology gap. Meanwhile, the “energy-/resource-intensive commodities group” is, on average, the least efficient. Therefore, the Chinese government should implement targeted policies that encourage firms in the global technologies/innovators group to increase market share while supporting those in the energy-/resource-intensive commodities group to upgrade their technologies.

Decomposing Industrial Energy-Related CO2 Emissions in Yunnan Province, China: Switching to Low-Carbon Economic Growth

As a less-developed province that has been chosen to be part of a low-carbon pilot project, Yunnan faces the challenge of maintaining rapid economic growth while reducing CO2 emissions. Understanding the drivers behind CO2 emission changes can help decouple economic growth from CO2 emissions. However, previous studies on the drivers of CO2 emissions in less-developed regions that focus on both production and final demand have been seldom conducted. In this study, a structural decomposition analysis-logarithmic mean Divisia index (SDA-LMDI) model was developed to find the drivers behind the CO2 emission changes during 1997–2012 in Yunnan, based on times series energy consumption and input-output data. The results demonstrated that the sharp rise in exports of high-carbon products from the metal processing and electricity sectors increased CO2 emissions, during 2002–2007. Although increased investments in the construction sector also increased CO2 emissions, during 2007–2012, the carbon intensity of Yunnan’s economy decreased substantially because the province vigorously developed hydropower and improved energy efficiency in energy-intensive sectors. Construction investments not only carbonized the GDP composition, but also formed a carbon-intensive production structure because of high-carbon supply chains. To further mitigate CO2 emissions in Yunnan, measures should promote the development and application of clean energy and the formation of consumption-based economic growth.

A Climate Stress-Test of the Financial System

We propose a novel methodological framework to assess the exposure of the financial system to climate policy risks. We extend the notion of climate policy risk scenarios in order to go beyond the mere fossil fuel production sector and encompass the indirect effects through key economic sectors such as energy-intensive sectors, housing and finance. Our methodology can be applied both bottom-up using micro-economic data and top-down using aggregate macro-economic sectoral data. As an illustration, we conduct and assessment of the exposures of European financial institutions through their portfolio of European and US equity holdings and loans. We find that the direct exposure to fossil fuel production sector and energy-intensive sectors, while limited overall, is important for investment funds. In turn, banks and pension funds have important exposures to investment funds, and thus bear important indirect exposure to fossil fuel. Further, the housing sector can potentially act as a trigger of a shock which then amplifies through the financial system.

Trends in energy intensity of the Polish economy

The aim of the paper is to determine trends in energy intensity of the Polish economy at the mezoeconomic level in the years 1996—2012 with particular emphasis on energy intensity of global production, final production and induced energy intensity. In the analyzed period a decrease of energy intensity level in whole economy was observed. The most energy-intensive sectors were identified and average pace of changes of mentioned ratios was calculated. The World Input-Output Database (WIOD) is the data core and includes unified energy balances, according to PKD 2004 classification.

India’s initiatives on Improving Energy Efficiency in Aluminium Industries

India is an important player in the aluminium, especially because of its abundant bauxite reserves and low-cost skilled manpower. The sector has a significant importance in the growth of Indian economy since the aluminium consumption follows GDP growth curve. Indian aluminium sector is observed as one of the energy intensive sectors with ample scope for improvements in energy efficiency as compared to world standards. The aluminium industries are upgrading themselves by adapting state-of-art technologies, which are more energy-efficient and sustainable in a highly competitive market. These initiatives are further accelerated and motivated by an innovative incentivization scheme (called Perform, Achieve and Trade) of Govt. of India. Currently, the first phase (2012-15) is under implementation, and an unexpected movement towards energy efficiency is envisaged as a result that will ultimately lead towards production of low carbon aluminium for the society.

Regional analysis across Colombian departments: a non-parametric study of energy use

The analysis of energy use is important in emerging economies and especially in the manufacturing industries, as energy is a key factor of sustainable development. This research analyses and evaluates the features of regional energy use and efficiency across Colombian departments in the manufacturing industries for the period between 2005 and 2013 by applying two Malmquist data envelopment analysis models. The results indicate significant difference in energy use and efficiency across Colombian departments in the manufacturing industries. The results of the Malmquist indexes determine that various manufacturing industries across Colombian departments have a high potential to increase energy efficiency. Several manufacturing industries across Colombian departments have experienced gains in productivity, a growth in efficiency, an improvement in the relationship between inputs and outputs and scale production and advances in innovation through new technologies. This technique allows to make comparisons and improves energy policies to increase energy efficiency and decrease CO2 emissions. The application of panel data models indicate that increases in energy prices, exports and productivity lead to better energy use, while a higher presence of energy intensive sectors and small and medium enterprises across Colombian departments reduce energy efficiency. The methods selected in this research generated consistent, robust and reliable estimates related to energy use and CO2 emissions for regional studies. The findings of this study indicate that diverse energy policies should implement in the industrial sector across Colombian departments and that they should contribute to improvements in energy use, especially in small and medium companies and energy intensive sectors.

Energy Saving Potential in Existing Volumetric Rotary Compressors

The issues of energy and Carbon saving in energy intensive sectors, along with that of energy generation from renewable sources, have been recently receiving a growing awareness, as they are perceived as the most effective ways to deal with global sustainability commitments. The Compressed Air Sector (CAS) accounts for a 10% worldwide electricity consumption, and thus is being re-thought as an area offering great opportunities for improvement. Considering that the compression is responsible for a 10-15% consumption, it is vital to pay attention to machines performances. An overview of present compressor technology is given and saving directions for Screw and Sliding Vanes machines are analyzed: interesting source of information was the Compressed Air and Gas Institute (CAGI), whose data have been processed, in order to obtain consistency with fixed reference pressures, and organized as a function of main operating parameters. The overall efficiency has been split and all different sub-terms (adiabatic, volumetric, mechanical, electrical, organic) considered separately. This has allowed a term-by-term evaluation of the margin for improvement. The heat recovery from the oil into mechanical energy via an Organic Rankine Cycle (ORC), together with the thermodynamic improvement during compression phase opens the way to a step change concerning the specific energy consumption.

Potential Consequences of the Energiewende for the Manufacturing Sector in Germany

Abstract2 The abandonment of nuclear power and new focus on renewable energy sources represents a fundamental change in the structure of Germany’s electricity supply. In the wake of this change in energy policy (which is widely referred to as an energy turnaround), prices started to rise immediately and further increases are to be expected in the years ahead. For the manufacturing sector, this cost burden has been mitigated by exempting energy-intensive sectors from additional costs. However, this causes high levels of uncertainty for large electricity consumers as their current exceptional status may be called into question at some point in the future. Moreover, the price and cost effects of the German energy policy are not only restricted to energy-intensive enterprises. The metal production, parts of the chemical industry and other industries closely linked to electricity consumers in a complex value chain face higher price and cost risks, as do large segments of the manufacturing sector, which work closely with energy-intensive companies. These dense networks are critical in the joint development of innovations, one of the German industry’s main competitive advantages. This strength of the German economy may turn into a risk if the future of electricity-intensive industries is hampered by rising national energy prices. A potential relocation of energy-intensive companies to other countries would also weaken the competitiveness of other areas of German industry. Such risks need to be compared with new market opportunities provided by the energy turnaround. The industry seeks those opportunities especially in renewable energies and techniques for improving energy efficiency.

Energy pricing impact on domestic economy under recent climate action

This article analyzes the adverse competitive effect of climate policy on domestic supply using industry-level data from forty countries. In accordance with the theoretical literature, we define the competitive effect as the difference between the energy price elasticities of demand and supply; the magnitude of the competitive effect is captured by estimating the supply and demand functions. We find adverse competitive effects for certain country–industry pairs; however, these impacts are small. Additional simulation analysis shows potential for substitution between an imported product and a domestic good in less energy-intensive sectors. The results indicate the importance of considering industrial characteristics when formulating and implementing a climate policy.

Identifying the industrial sectors at risk of carbon leakage in China

China is gradually establishing an Emissions Trading Scheme (ETS) to implement its plan to peak energy-related carbon emissions by 2030. A central debate on ETS design involves addressing the carbon leakage concern. In this study, a detailed quantitative assessment is conducted to identify the industrial sectors at risk of carbon leakage in China. The identification process is undertaken at the four-digit sector level according to the National Economic Industries Classification. Results show that the majority of emissions quotas must be allocated to several energy-intensive sectors. The criterion that focuses on maximum value at stake filters out 27 four-digit sectors, whereas the dual criterion of carbon and trade intensity highlights 17 four-digit sectors that are considered at actual risk of carbon leakage. Quantitative analysis results indicate that allocating 9% of emission quotas for free is sufficient to compensate these vulnerable sectors. The risk of exposure to carbon leakage can vary significantly due to the different levels of data disaggregation, as per the findings from the comparison of carbon intensity data obtained from four-digit sectors belonging to one two-digit sector in the Standard Industry Classification. Therefore, the importance of using high-quality disaggregated data is highlighted in this research. Official criteria for assessing the key indicators of industrial sectors must be designed to accurately evaluate the sectors at risk of carbon leakage.Policy relevanceChina is gradually establishing a nationwide Emissions Trading Scheme (ETS). The design of this scheme could significantly influence the economic profits and trade situation of industrial sectors. A central debate on the design of China's ETS involves how to address carbon leakage concerns; this question remains unanswered thus far. The evaluation of the extent to which the competitiveness of industrial sectors is affected by the ETS and the identification of sectors at risk of carbon leakage are certainly of practical significance to the design of an applicable range and an appropriate free quota allocation regime for China's ETS.

Asymmetric industrial energy prices and international trade

This paper measures the response of bilateral trade flows to differences in industrial energy prices across countries. Using a rich panel dataset with 42 countries, 62 manufacturing sectors over 16 years (1996–2011) and covering 60% of global merchandise trade, we estimate the short-run effects of sector-level energy price asymmetry on trade. We find that changes in relative energy prices have a statistically significant but very small impact on imports. On average, a 10% increase in the energy price difference between two country-sectors increases imports by 0.2%. The impact is larger for energy-intensive sectors. Even in these sectors, however, the magnitude of the effect is such that changes in energy price differences across time explain less than 0.01% of the variation in trade flows. Simulations based on our model predict that a €40–65/tCO2 price of carbon in the EU ETS would increase Europe's imports from the rest of the world by less than 0.05% and decrease exports by 0.2%.

Quantifying the co-benefits of decarbonisation in China’s steel sector: An integrated assessment approach

The rapid growth of energy consumption in China has led to increased emissions of CO2. As a response, the Chinese government has proposed a series of carbon mitigation strategies, such as switching the production structure and implementing energy-saving and emission–reduction technologies in energy-intensive sectors. In this paper, an integrated assessment approach was developed by combining the Stock-based model, the China-TIMES model and the co-benefits analysis model. The approach was applied to China’s steel sector to simulate the trends of energy consumption and air emissions (CO2, SO2, NOx, and PM10) during 2010–2050, under a reference scenario and three alternative carbon mitigation scenarios. The model quantified the air emission reductions, water conservation, and associated co-benefits during the study period. The modeling results show that by switching the production structure and implementing energy-saving and emission–reduction technologies, China’s steel sector can achieve significant co-benefits of carbon mitigation, water conservation, averted mortality and averted morbidity. Despite certain limitations and uncertainties associated with the elements of the integrated assessment approach, the results demonstrate that substantial social benefits and health effects could be realized through carbon mitigation strategies in China’s steel sector.