Industrial Sector

Abstract

Carbon mitigation programs face several contradictions as they turn to the industrial sector. While the Intergovernmental Panel on Climate Change (IPCC) points to industry as a high-carbon pollutant end-use sector, it is already efficient in some respects. This is a product of dozens if not hundreds of years of improvement in motors and heat and steam production. Industry plays a declining role in the United States in terms of energy use. Yet industrial carbon emissions reductions must mirror deep decarbonization goals that are set for other sectors in order to hold global average temperature increases within 2°C. And while there are hundreds of cost-effective energy-efficiency measures that manufacturing subsectors such as iron and steel and cement and lime could adopt, firms often ignore them. These challenges demand a diverse array of legal and policy responses. This chapter outlines a suite of legal pathways that must be pursued in concert to achieve massive carbon emissions reductions across key energy-intensive industries in the United States. To stand a chance of meeting IPCC, Deep Decarbonization Pathways Project, and other carbon emissions budgets for 2050 and beyond, we will need to pursue not only process efficiency, fuel switching, and energy supply decarbonization (e.g., low-carbon electricity generation, electricity balancing), but also the efficiency of products and their broader production systems, challenges of material efficiency, carbon management, and industrial symbiosis. Legal pathways for process efficiency improvement and fuel switching require a portfolio of legal innovations that begins with a carbon price. A carbon price can be set through a tax or indirectly through market mechanisms that respond to emissions standards. Emissions standards can be set on an ad hoc or cross-sector basis under sections 111 and 115 of the Clean Air Act (CAA), respectively. I contrast these “sectoral�? and “comprehensive�? approaches as they apply to energy-intensive industry subsectors, including refining and chemicals, iron and steel and other primary metals, cement and lime, pulp and paper, and food processing. Under the sectoral approach, new source performance standards can be set and periodically revised to encourage near- and mid-term process improvements that I outline for each subsector. I point out the limits of a sectoral approach as implemented by federal or state agencies and recommend pursuit of a more comprehensive carbon price through section 115 of the CAA. Carbon trading in response to rulemaking under section 115 should be supplemented by a mix of federal subsidies and private law solutions that increase flexibility in how emissions targets are met. They can also spur greater technology adoption or innovation at different points along the carbon abatement cost curve. I describe programs such as an innovation fund, a sectoral crediting mechanism to address emissions leakage within industry subsectors, and improved motor and boiler minimum efficiency performance standards (MEPS) to limit cross-sector leakage under a section 115-enacted ETS. Because energy efficiency gains will soon approach natural limits in some industry subsectors, I turn to the broader supply chain for additional emissions reduction that can be achieved through product-based measures (such as lightweighting and material substitution) and systems design (such as carbon management and industrial symbiosis). Here again, a variety of legal tools are available, including product standard legislation modeled after the EU’s Eco-Design Directive; amendment or repeal of materially-inefficient MEPS and manufacturing subsidies; updated building standards; green public procurement; federal programs to inventory, subsidize, and standardize recycling, industrial linkage, and co-processing technologies; and facilitated industrial symbiosis agreements that adopt resource synergies within industrial parks and enterprise groups. I close with a discussion of environmental justice concerns that are raised when carbon emissions and their co-pollutants are traded or otherwise redistributed across cities and regions.