Towards a green economy Aluminium

Share in GHG emissions

0.8% of global emissions and 4% of manufacturing industries’ emissions

Steel 3.2% of all global emissions and

an estimated 4.1% of global CO2 emissions; approx 15% of all manufacturing emissions – with 70% of emissions from direct fuel use and 30% emissions indirectly from electricity and heat

Concentration of actors

Twelve countries represent 82% global production; China, Russia, the EU, Canada and the US account for 61% of total production; ten leading companies (mostly multinationals) produce 55% of world’s aluminum

Around 90% of total steel-making GHG emissions is produced by nine countries or regions. The top 25 steel-making companies col- lectively accounted for approx 43% of global production in 2006

Cement

to double in next 40 years, most of the increase in developing countries; 18% of all manufactur- ing emissions, emitted at various points in the production process

4 % of global emissions (process emissions and energy use) and 5% global CO2

– this is expected

Relatively low concentration, with the 16 largest companies ac- counting for around 25% of global output. About 81% of production takes place in 12 countries; China alone produces around half of the world’s cement

Table 6: Greenhouse gas emissions and structure of major manufacturing industries Source: UNEP (2009); WRI (2007)

of economic instruments for integrated water resource management (IWRM) in Canada has shown that the use of economic instruments can reduce monitoring costs, but designing them properly and setting them at appropriate levels requires that federal and provincial environmental regulators use economic analysis (such as cost-benefit or cost-effectiveness analysis).

In regulating acid-rain emissions, the US was a pioneer in introducing an emission-trading scheme to reduce SO2 and NOx emissions (1990 Clean Air Act), whilst the EU introduced a regulatory approach through its Large Combustion Plant

Directive (1989). In 2005, the EU

activated the first region-wide emissions trading scheme (a cap-and-trade system) to meet its Kyoto commitments under the climate change convention (UNFCCC). The scheme has shown the complications regulators face in introducing emission trading schemes through either “grandfathering”

(free allocation based on existing

emissions by industries) or auctioning. Whilst initial over-allocation in the EU ETS resulted in a zero-carbon price, allocation rather than auctioning would tend to be preferred by heavy industries such as aluminum and steel that face direct international competition. Compared to command-and-control instruments such as licensing and technology standards, emissions trading can perform better in terms of criteria such as cost-effectiveness, long-term effects and dynamic efficiency, i.e. promoting ongoing improvement. Experience in the climate field has shown that the cost-effectiveness of trading systems can be determined by the visibility and robustness of the goal and the system, the effectiveness of the carbon price and the effectiveness of the constraint (Buchner et al. 2009).

Manufacturing industries based in developing countries can be introduced to credit and trading schemes through industry sector initiatives and project-based activities such as the Clean Development Mechanism (CDM) under

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Sectoral approaches to climate action have received considerable attention as second best option (as opposed to global cap and trade) for introducing economic instruments and policies to reduce GHG emissions, in particular implying manufacturing industries world- wide. Economic factors to consider in the introduction of sector approaches in developing countries include the following (UNEP 2009):

■ Nature of the adjustment costs associated with reducing emissions;

■ Potential for avoiding capital lock-in;

■ Nature of technical capacity within specific sectors and countries; and

■ Availability of access to appropriate data and technology.

Some have argued (Bodansky 2007) that a few industry sectors stand out as ideal candidates for climate initiatives – being large, homogenous, highly concentrated and highly competitive (Table 6). These include aluminum, steel, cement, transport and power generation. The

the UNFCCC. Provided that procedures under the CDM or similar type mechanisms are streamlined to reduce transaction costs, it can provide a promising avenue for greening manufacturing in developing countries. By 2010, many CDM projects involved investment in renewable energy technologies but a much smaller number involved investment in energy efficiency and fuel switching. These are important areas for transformative investments in manufacturing; these are areas where real opportunities can be taken, if technology standards are to be applied with reference not only to individual projects but also industry sector-wide best practice.

Chemicals

5% of global emissions. and 23% of emissions associated with manufacturing and construction industries

Highly concentrated geographically – the EU, US, Japan and China account for 75% of global chemical production. Diversity of products means that overall there is a low concentration of actors in this subsector; small and medium-sized enterprises are common