Derek Handley: Heavy industry must be decarbonised to reach emission goals

Heavy industry makes up 40 per cent of global CO2 emissions. Photo / 123RF

Opinion

OPINION:

It's encouraging to see the number of events lined up for the inaugural Auckland Climate Festival in October. Modelled off the highly successful London Climate Action Week, the goal is to accelerate much-needed climate action across the country.

On the surface, it may look like New Zealand is taking steps in the right direction to address the climate crisis. We've banned single use plastic bags, subsidised electric vehicles and are building energy efficient buildings.

These are positive steps forward but the problem of greenhouse gas emissions goes far deeper than how we run the world and right to the heart of how we make the world. How the plastic is created, how an EV's steel chassis is manufactured and how much carbon is emitted constructing the concrete for the "environmentally friendly" building count just as much if not more.

Heavy industry makes up 40 per cent of global CO2 emissions. Steel, cement and chemicals are the highest emitters of carbon due to the intense amount of fossil fuels needed to produce them, as well as direct CO2 emissions from industrial processes. There's no genuine way to meet corporate, national or global emissions targets without radical innovation to decarbonise this space.

New entrants are developing solutions that will rival the incumbent heavy industrialists still largely relying on fossil fuels. If we're lucky, they'll find the keys to decarbonising the sector, which is expected to reach US$5.7 trillion ($8.1t) globally by 2025.

The road to greener chemical production

Chemicals like ammonia, ethylene,and hydrogen peroxide are used to manufacture everything from cleaning products and plastics to fertiliser, textiles and paint. The combustion of fossil fuels and the production of harmful feedstocks are two major sources of GHG emissions that occur during their creation.

One startup that's leading the charge to transform chemicals is Solugen, which Aera VC invested in four years ago as a two-person startup. The Texas-based synthetic biology chemicals company uses proprietary engineered enzymes and biobased feedstocks to create chemicals at scale. In other words, Solugen makes chemicals from plants and air, not fossil fuels.

They have figured out a scalable method to make a whole slate of chemicals in a way that's carbon negative. Earlier this month, the company announced $500 million in Series C funding had been raised at a $2.5 billion valuation. It's entirely possible that new billion-dollar companies (or unicorns as they are known), like Solugen will rival the Dow Chemicals and BASF giants of the world, which built empires over the last century on oil.

Securing investment of such scale from Singapore's Temasek and the Government of Singapore Investment Corporation (GIC) is not only an impressive feat for such a young startup, but it is also a signal that Singapore might be a world leader in shaping the future of green industry and a signal that these technologies are going to scale a lot faster than people might think.

Can cement capture carbon?

Cement production currently makes up at least 7 per cent of global GHG emissions, and the global market size is projected to grow from US$327b in 2021 to US$459b in 2028. A Kiwi new-build home of 200 square meters represents about 60 tonnes of emitted carbon over its life, 11 of which come down just to the concrete used in the foundation and floors.

Policy is a changemaker, but as we know, so is technology. Prominent investors like Amazon's Climate Pledge Fund, Bill Gates' Breakthrough Energy, and VC John Doerr of Kleiner Perkins have been investing in low-carbon cement lately, including companies that are seeking ways to use cement to store carbon dioxide so that it doesn't get released into the environment.

Cement production currently makes up at least 7 per cent of global GHG emissions. Photo / 123RF

Canadian startup CarbonCure injects CO2 at the point of mixing the cement with water and sand to create concrete, which permanently stores CO2 and makes the concrete even stronger.

In July, major local manufacturer Stevenson announced they were the partner to deliver this breakthrough to New Zealand, estimating a CO2 equivalent reduction of six Auckland to Christchurch flights for every house built using it. Even better, the clever technology captures CO2 emitted from the Marsden Point petroleum refinery to recycle and inject into the fresh concrete.

Green steel is a thing

Demand for steel, which is already responsible for 9 per cent of global emissions, is expected to increase 5.8 per cent this year. There's not yet a clear path to keep up with demand while reducing carbon.

However, green steel production is starting to ramp up, albeit slowly. This year, a Swedish startup called H2 Green Steel revealed plans to raise around 2.5 billion Euros in funding to build the world's biggest hydrogen electrolyser which will produce the alloy material for steel starting in 2024.

Moves are being made, but there's still a long way to go, and we'll need all the financing and bright minds to get there.

The modelling outlined in the recent Climate Change Commission reports assumes certain emissions from hard to abate sectors (such as cement and steel) will remain "unchanged" in the future.

But we will be building significantly more houses, skyscrapers and highways between now and 2050, and with the breakthrough technologies continuing to arrive it doesn't necessarily have to be that way.

In fact Government policy could consider significantly incentivising the early adoption of carbon-negative innovations, particularly for infrastructure projects they are the major funders of or for the huge house-building effort required by the nation.

Heavy industry will produce many more unicorns

At Aera VC, we have been actively betting on startups making radical attempts at reversing climate change since 2017, including those driving the transformation of heavy industry.

The big winners have yet to be determined as everyone is in the wings, and the promise of scale for those who are currently shaping the game is huge.

We have seen with Rocket Labs and more recently Dawn Aerospace, that New Zealand is as good a place as any to be inventing the future.

Hopefully the Climate Festival inspires the increasing droves of young entrepreneurs to consider building a climate tech start-up over perhaps the next consumer app or SaaS play. The founders who crack these problems fastest will not only have a massive impact on climate change, but will also be starting the world's most important and most valuable, unicorns.

- Derek Handley is a co-founder of Aera VC, an early-growth fund investing in climate and deep tech ventures that accelerate the world toward a sustainable future. Aera is co-hosting an event during Auckland Climate Festival with Outset Ventures: 'Building a Climate Tech Venture to Save the World'.