Decarbonization Pathways for the German Chemical and Steel Industry

Currently Germany is failing to reach its set emission targets. To achieve the envisioned carbon neutrality until 2050 fundamental changes will have to be implemented in all productive and non-productive sectors in the coming decades. Especially the transformation of the industry is of interest, as Germany’s economy relies heavily on the large industrial sector. This paper focusses on the transition of the two largest industrial sectors, the chemical and steel industry. The needed emission reduction in the industries will be mainly enabled by the implementation of innovative decarbonization technologies. Based on a thorough analysis of the developments of the technological and economic characteristics of the current production technologies and alternative decarbonized production technologies, this paper proposes detailed technology roadmaps for the decarbonization of the two industries until 2050. For developing the roadmaps two scenarios are defined: An economic potential scenario which aims at minimum cost of the transition and a technological potential scenario which aims at maximum emission reduction. In addition to the costs and emissions of the decarbonization technologies, the pathways of the industry transformation are defined by the reinvestment cycles of the existent production facilities and the market entry points of decarbonization technologies. The analysis of the modelled decarbonization pathways shows that the envisioned emission reduction target cannot be achieved based on the assessed decarbonization technologies, as either their remaining emissions are not low enough or their use is limited by external factors. The most promising technologies to achieve full decarbonization are based on hydrogen. The maximum achievable emission reduction is 84%, the economic potential scenario achieves only 75%. A sensitivity analysis of the emission reduction in the economic potential scenario against financial incentives shows a limited and sometimes even negative impact of external price reductions. The strongest positive effect is achieved by an increase of the price rise of CO2 price with a final price in 2050 in the range of 140 to 300 EUR/tCO2. Concerning the production cost the assessment reveals that, assuming a CO2 prices of 200 EUR/tCO2 in 2050, the production cost of most decarbonization technologies already drops below the cost of the current production technologies after 2030. This allows the general conclusion that the transition to a low carbon production will be profitable