Sectors requiring significant energy and their associated CO2 emissions face a €20 billion reduction
Italy is taking significant steps towards achieving net-zero emissions, focusing on various strategies such as electrification, green fuels, CCUS projects, digitalization, energy efficiency, and the circular economy. The decarbonization path is crucial for Italian industry to remain competitive, preserving jobs and GDP.
One of the key sectors under the spotlight is the hard-to-abate (Hta) sectors, including ceramics, chemicals, cement, integrated steel, electric arc furnace steel, paper, glass, and foundries. These sectors, due to their high energy intensity, have the most challenging decarbonization process.
The Italian government is supporting several hydrogen projects, but demand stimulation, particularly in the industrial sector, is crucial. Currently, Hta sectors absorb around 64% of total direct Scope 1 emissions (those generated by companies) and about 18% if Scope 2 emissions (indirect emissions like electricity consumption) are also considered.
Acceleration is needed in Italy for CCUS, CCUS projects, and the production of direct reduced iron to align with European counterparts. Reducing emissions in line with European targets (-55% by 2030 from 1990 levels and net-zero by 2050) is the only viable path to create a new innovation paradigm.
The green transition in Hta sectors is estimated to cost approximately 20 billion euros by 2030, an upward revision from previous estimates due to inflationary push and increased energy prices. While a precise standalone cost for Italy's hard-to-abate sectors alone is not explicitly isolated, the magnitude aligns with the large-scale deployment of clean energy infrastructure and carbon capture initiatives planned.
Companies adhering to the status quo could face an annual cost of approximately 3.5 billion euros due to lost sales, carbon dioxide certificate purchases, and increased CO2 certificate prices by 2030. On the other hand, potential benefits of decarbonizing these sectors include cost savings through demand reduction, carbon price reduction, economic and job creation, and enhanced energy security.
The new Pniec, Italy's National Integrated Energy and Climate Plan, outlines a path to 2030 with more challenging targets than in 2019, focusing on renewable energy, biomethane, hydrogen, CCUS, and energy efficiency. Regulation in Italy could be improved with an incentive system for the use of alternative energy sources and fuels, reducing operational costs, particularly for the industrial sector.
Italy has made strides in supporting the development of biomethane, with new funds totaling 1.99 billion euros allocated recently. Additional support for the development of new technologies, particularly CCUS projects and direct reduced iron production in Taranto, is needed for Italy's decarbonization.
While comprehensive decarbonization involves substantial upfront investments, these costs are mitigated by savings through demand reductions, carbon pricing benefits, job creation, and reduced fossil fuel dependency. Conversely, failure to decarbonize risks higher costs, emission penalties, and lost economic opportunities.
- To maintain competitiveness, Italy is focusing on decarbonizing its hard-to-abate sectors, such as ceramics, chemicals, and steel, which account for the majority of direct and indirect emissions in the industry.
- Accelerating CCUS projects, green hydrogen production, and direct reduced iron production are essential for Italy to align with the EU's emission targets and create a new innovation paradigm.
- The green transition in Italy's hard-to-abate sectors is projected to cost approximately 20 billion euros by 2030, with potential benefits including cost savings, job creation, and energy security.
- Regulation in Italy could be strengthened by implementing an incentive system for the use of alternative energy sources and fuels, particularly in the industrial sector, to reduce operational costs and promote business growth.
