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The Green Industrial Revolution – Investment Pathways to Decarbonize the Industrial Sector in Europe

Author

Listed:
  • Markus Zimmer
  • Patrick Hoffmann

Abstract

The industrial sector is responsible for roughly one quarter of global greenhouse-gas (GHG) emissions. To align sector pathway developments with overarching net-zero transition goals in different industries, governments are required to understand sectoral reduction potentials to efficiently promote industry decarbonization using the instruments at their disposal (e.g. subsidies, carbon taxes). In our analysis we examine the state of various industries and employ different modelling frameworks to study investment pathways consistent with a net zero industry transformation. We find that a mix of measures, including energy efficiency improvements, using hydrogen and biomass as feedstock or fuel, producing heat through electric means and the adopting carbon-capture technologies can reduce a sector’s carbon dioxide emissions to almost zero. Global investment efforts needed for a green transition of the analyzed sectors1 amount to EUR2.7trn until 2050 of which 8% or EUR210bn is invested in the EU. The largest single sector investments for the EU countries are required in the pulp & paper industry with EUR 78.4bn until 2050 - followed by iron & steel (EUR55.4bn) and cement (EUR37.6bn). The achievable emission reduction for the European industrial sector is estimated at 265 MtCO2 (-92%), which yields an average abatement investment of EUR790 per tCO2.

Suggested Citation

  • Markus Zimmer & Patrick Hoffmann, 2023. "The Green Industrial Revolution – Investment Pathways to Decarbonize the Industrial Sector in Europe," CESifo Working Paper Series 10506, CESifo.
    • Handle: RePEc:ces:ceswps:_10506
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    More about this item

    Keywords

    decarbonization; industry sectors; industry investment; net zero;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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