PATHWAYS TO SUSTAINABLE INDUSTRIES

Transcription

1 PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation Research & Innovation Projects for Policy Research and Innovation

2 PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation European Commission Directorate-General for Research and Innovation Directorate D Industrial Technologies Unit D.2 Advanced Manufacturing Systems and Biotechnologies. Contacts Nicolas SEGEBARTH Carmine MARZANO s Nicolas.Segebarth@ec.europa.eu Carmine.Marzano@ec.europa.eu RTD-PUBLICATIONS@ec.europa.eu European Commission B-1049 Brussels Manuscript completed in January Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of the following information. More information on the European Union is available on the internet ( Luxembourg: Publications Office of the European Union, 2018 Print ISBN doi: / KI-AZ EN-C PDF ISBN doi: /74667 KI-AZ EN-N European Union, 2018 Reuse is authorised provided the source is acknowledged. The reuse policy of European Commission documents is regulated by Decision 2011/833/EU (OJ L 330, , p. 39). For any use or reproduction of photos or other material that is not under the EU copyright, permission must be sought directly from the copyright holders.

3 European Commission PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation Research & Innovation Projects for Policy 2018 Directorate-General for Research and Innovation

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5 TABLE OF CONTENTS EXECUTIVE SUMMARY 4 INTRODUCTION 6 POLICY CONTEXT climate policy targets 8 2. Investments and investment gaps in research and innovation in Europe 8 3. Energy efficiency first 9 4. Circular economy and CO 2 utilisation 9 PORTFOLIO OF EU-FUNDED R&I PROJECTS Programme areas contributing to energy efficiency and carbon capture and utilisation Portfolio of beneficiaries Portfolio of research topics covered 14 IMPACT OF R&I FUNDING ON EU POLICY GOALS R&I achievements supporting policy challenges Added value of EU-level R&I investment Impact for policies 21 POLICY RECOMMENDATIONS 23 PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation 3

6 EXECUTIVE SUMMARY Projects for Policy (P4P) is a European Commission initiative that aims to use research and innovation (R&I) project results to shape policymaking through evidence-based policy recommendations. This report belongs to this initiative. It provides an overview of the policy context and challenges relating to enabling a low carbon economy. It highlights the specific efforts that need to be pursued by process industries, providing recommendations for policy on the basis of an EU funded project portfolio analysis supported by relevant literature in the field. The policy context is clear. The EU has committed to act to keep global warming below 2 C. To this end, it has set ambitious targets in terms of Greenhouse Gas emissions, with a minimum reduction of 80 % by The achievement of such targets will require a wide range of policy initiatives, in particular aimed at increasing investments in research and innovation to foster the deployment of clean technologies. The report focuses on energy efficiency and on carbon dioxide (CO 2 ) utilisation, from a circular economy perspective. This study analyses a portfolio of 559 research and innovation (R&I) projects funded by the EU over the last decade, addressing specifically energy efficiency and CO 2 utilisation (CCU), two different pathways showing diverse technological maturity, to gather evidence concerning the impact of EU funded R&I for these two areas. The portfolio analysis shows that, projects reported sizeable emissions savings, at 22 % on average, compared to state of the art practices at the start of the project, with significant energy savings and a decrease in operating costs. However, especially for some CCU projects, the availability of abundant and cheap low carbon electricity is a necessary condition to realise the claimed environmental benefits and build a business case. As renewable energy is still a precious and limited resource for the foreseeable future, suitable policies and tools should be designed to ensure its best use, considering all possible pathways and accounting for the efficient use of limited resources (efficiency in the sense of climate impact reductions per kilowatt hour), while considering all the relevant aspects (environmental, economic, strategic, political). The report also demonstrates the impacts of R&I funding on the speeding up of technology development and deployment, with an average technology readiness level (TRL) increase of 2.3 during the project lifetime, and a reduction in time to market of months. European R&I projects enable community building and efficient resource coordination, bringing together players from different sectors and different countries to achieve an enhanced impact. Based on the project analysis and on additional information gathered from projects through a survey, the report proposes five policy recommendations to foster the transition to a cleaner industry, each support by proposal for concrete actions and measures. 4 Research & Innovation Projects for Policy

7 FIVE KEY POLICY RECOMMENDATIONS INDUSTRIAL STRATEGY AND REDUCTION OF GHG EMISSIONS Build investor confidence in disruptive low carbon technologies through efficient funding of demonstration projects and easier access to finance. Introduce standardised metrics to enhance R&I funding and decision making processes for low carbon technologies. ENERGY EFFICIENCY FIRST CO 2 UTILISATION AND CIRCULAR ECONOMY Extend the scope of energy audits to foster the deployment of cutting edge energy efficiency technologies, including support for capacity building of auditors. Realise the full potential of CO 2 utilisation, beyond greehouse gas (GHG) mitigation, through targeted regulatory and market measures, supported by harmonised life-cycle sustainability assessment. Remove regulatory and knowledge barriers to Industrial Symbiosis so as to unlock the unexploited potential of industrial waste streams and enhance circular utilisation of resources. PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation 5

8 INTRODUCTION Energy intensive industries, like the chemicals, cement and steel sectors, are responsible for 20 % of CO 2 emissions. Drastically lowering these emissions is crucial to reach the agreed EU 2050 Greenhouse Gas Emission reduction objective of at least 80 %. Decoupling production from the utilisation of fossil resources (75 million tonnes of oil equivalent are used today in Europe as raw material feedstock by the chemical industry) is an additional necessary step towards achieving a more sustainable society. Electrification, based on non-fossil fuel energy, and the use of biomass, which is put forward in the EU Bioeconomy Strategy, is seen as an obvious solution to decrease dependency on fossil resources. However, biomass resources are limited and have many existing uses, including for food and feed, as well as energy. Their use may also have negative environmental impacts. Therefore, a broader set of technologies must be developed to reduce the dependency of European industry on fossil resources, while making it cleaner and more sustainable. In this context, research, innovation, and investment efforts are necessary to keep European industry competitive at global level, saving jobs from moving to other areas in the world. The report is not limited to presenting a mere analysis of the EU R&I project portfolios, but sets out the policy context, including the relevant legal instruments, putting foreward policy recommendations and actions to the European Commission, Member States and industry. This publication builds on a study 1 carried out by independent experts, Professor André Bardow from Germany and Mr Damien Green from the United Kingdom. The study analysed a wide portfolio of EU research projects (559 in total) addressing energy efficiency and CCU (which stands for carbon capture and utilisation ), complemented by consultation of a wide range of stakeholders via a survey and a validation workshop held on 6 November The study outcomes and policy recommendations are based on quantitative and qualitative data analysis, of both the R&I portfolio and relevant literature, as well as on survey responses and feedback obtained from a validation workshop. 1 Low-Carbon Process Industries Through Energy Efficiency and Carbon Dioxide Utilisation, A Bardow and D. Green, 6 Research & Innovation Projects for Policy

9 POLICY CONTEXT

10 CLIMATE POLICY TARGETS Global engagements to combat climate change and adapt to its effects have been taken in the Paris Agreement reached at COP 21 in December 2015, in an effort to limit global warming below 2 C this century 2. This is considered the only way to avoid major climate related catastrophes in the years to come. In the context of this global political drive to achieve a sustainable society, the EU will have to review its current 2050 targets on GHG emissions 3 reduction and milestones to allow for their achievement. The targets are currently as follows: > 20 % reduction in emissions by 2020 (compared to 1990). > 40 % reduction in emissions by 2030 (compared to 1990). > 80 % reduction in emissions by 2050 (compared to 1990). Industry brings significant wealth to society, but industry is also a significant contributor to GHG emissions. In particular, process industries (e.g. steel, chemicals, cement, oil refineries, non-ferrous metals and minerals, glass or pulp and paper) are resource and energy intensive and represent 20 % of the global GHG emissions: significant GHG emission reductions from these sectors will be essential to achieving the Paris Agreement goals (the 2011 roadmap sets a EU industry trajectory of 43 % reduction in direct emissions by 2030, compared to While most industrial emissions are linked to Investments in research and innovation to build the technological base and to develop energy efficient, clean and low-carbon technologies and support to the wide market deployment of the most efficient technologies are central elements of the overall strategy to meet global climate policy targets. The EU has invested significantly over the years in energy efficiency through its research framework programmes, including the launch of the contractual Pubthe use of energy, and can be decarbonised through electrification and the decarbonisation of the power supply sector, some industries such as steel and cement production generate greenhouse gas emissions through their processes, and the chemical/petrochemical sector products being based on fossil carbon feedstocks generate further emissions as their products arrive at their end-of-life. Considering the variety of sectors and processes involved, a significant decrease in GHG emissions from the process industries cannot be delivered by a single set of technologies. In this respect, the two topics addressed in this study energy efficiency (EE) and, to a lesser extent, CCU approaches can provide a significant contribution to the achievement of GHG targets. They will need to be complemented by a broader spectrum of technological approaches and breakthroughs spanning over multiple domains (e.g. bio-based, CCS, renewable energy, clean steel making, etc.). In terms of regulation and limitation of GHG emissions, the EU has a well established legislative framework, with the EU Emission Trading System (EU-ETS) Directive (for which an agreement has been reached November 2017 on its revision for the fourth phase) being a substantial element of this framework. The EU-ETS represents the cornerstone of the EU s policy to combat climate change and is a key tool for reducing emission intensity from high GHG emitting industrial sectors, such as process industries and the power sector. 2. INVESTMENTS AND INVESTMENT GAPS IN RESEARCH AND INNOVATION IN EUROPE lic Private Partnership on Sustainable Process Industry through Resource and Energy efficiency (SPIRE cppp) in Horizon 2020 and dedicated Energy Research Programmes. In addition to the direct funding to research projects, the EU coordinates national research efforts in its strategic energy technology plan (SET plan), in particular Action 6 for energy efficiency and Action 9 also addressing CCU. The ETS directive includes a funding Emissions = CO 2, CH 4, N 2 O, PFCs, SF 6, and NF 3 measured in CO 2 equivalents. 8 Research & Innovation Projects for Policy

11 scheme to support and large-scale demonstration of technologies aimed at lowering emissions (currently the NER300 and the upcoming Innovation Fund). In its renewed EU industrial policy strategy 4, the European Commission reiterated the role, and increasing coordination, of the European Fund for Strategic Investments (EFSI), of the European Investment Bank (EIB), and of the European Structural and Investment Fund (ESIF) to close the investment gaps. In addition, the instrument on Important Projects of Common European Interest (IPCEI) has been designed to facilitate joint and coordinated efforts and investments by Member States and industries in strategic projects. These instruments can represent significant sources of support to research and innovation in clean technologies. However, it is clear that significant efforts are still needed to establish a more favourable framework to translate research and innovation concrete uptakes by markets. A 2015 report from the Energy Efficiency Financial Institutions Group (EEFIG) 5, for instance, has suggested that just in the field of energy efficiency the EU s 2050 decarbonisation target will require EUR 4.25 trillion additional investment (across all sectors) compared to the current business-as-usual pathway. Bridging this investment gap is a key challenge for policymakers to address policy goals. The EU-ETS Directive will be instrumental in strengthening the carbon price signal and in accelerating low-carbon investments. 3. ENERGY EFFICIENCY FIRST To date, only 17 % of our energy comes from renewable energy sources. Fossil resources represent the major share in the energy mix in the EU and will continue to do so for the foreseeable future 6, while all sectors (heat, transport, etc.) will move towards electrification. As a consequence, energy consumption is directly related to GHG emissions. This is why energy efficiency is considered one of the key approaches to decrease GHG emissions in all sectors, including in the process industry. Major EU policies highlight the importance of energy efficiency; it is for example one of the central areas identified in the Energy Union, with the Energy Efficiency First principle. The EU has established precise targets with respect to energy efficiency improvements, including a 20 % improvement by On 30 November 2016, the European Commission presented a new package of measures with the goal of providing the stable legislative framework needed to facilitate the clean energy transition and thereby taking a significant step towards the creation of the Energy Union. This package, named Clean Energy for All Europeans, stresses further the importance of energy efficiency, proposing a binding 30 % improvement target by These policies include several measures to support energy efficiency, in particular under the Energy Efficiency Directive (EED). The Clean Energy for All Europeans package also stresses the importance of research and innovation and the business opportunities which could result for the European industry. Therefore, great care must be taken to ensure that EU policy and legislation is coherent and favours these business opportunities. 4. CIRCULAR ECONOMY AND CO 2 UTILISATION In its circular economy package 8, the EU has set clear objectives and proposed a broad set of measures to move towards the establishment of a circular economy for Europe. Moving to a circular economy is the societal answer to the current unsustainable exploitation of limited natural resources. A circular economy is multifaceted and will require novel production and consumption systems to enable a shift towards more sustainable 4 Communication on a renewed EU industrial policy strategy (COM(2017) 479) EU countries agreed on a renewable energy target of at least 27 % of final energy consumption in the EU as a whole by The proposed 30 % target in Energy Efficiency by 2030 will achieve a 23 % cut in energy consumption compared to 2005 levels. 8 PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation 9

12 utilisation and re-utilisation of scarce resources, such as fossil fuels (e.g. oil and gas). The transition to a circular economy will deeply affect industries which will need investment substantially in advanced manufacturing, in people s skills and talents, as well as in tangible and intangible assets like research and innovation. Novel business models will facilitate the circular utilisation of resources to enable this transition. Industrial symbiosis, which includes recovering, recycling, reusing and redirecting energy and material streams across multiple industrial sectors, holds the potential to enhance the model of circular economy in industry. It needs to be further developed and promoted. In light of establishing a circular economy, CCU may play a role, if CO 2 is used as an alternative feedstock (since it includes the re-use of emitted CO 2 sources), instead of being released into the atmosphere. This CO 2 re-utilisation for one or more cycles may reduce the use of fossil-based resources. This potential has to be thoroughly evaluated through appropriate Life-Cycle Assessment methodologies. The term CCU includes a very broad set of technologies and approaches, which can provide flexibility in transforming CO 2 from waste streams, or even air, into a wide array of added value products ranging from fuels, to chemicals and minerals. In addition to potential environmental and GHG emission reduction benefits, CCU may represent a longterm business opportunity for industry, transforming waste (CO 2 emissions) into value (new products). Deployment of CCU technologies and approaches could also be a driver for wider use of renewable energy sources (e.g. wind, solar) because it can provide a route to chemical energy storage, allowing the dealing with inherent limitations of fluctuating energy sources (e.g. for grid stabilisation). The role of CCU to support policy targets is currently under discussion. In this respect, the Scientific Advisory Mechanism (SAM) has been invited by the Commission to provide advice on the climate mitigation potential of CCU technologies by April Research & Innovation Projects for Policy

13 PORTFOLIO OF EU-FUNDED R&I PROJECTS

14 1. PROGRAMME AREAS CONTRIBUTING TO ENERGY EFFICIENCY AND CARBON CAPTURE AND UTILISATION FIGURE 1 EU financial contribution to projects addressing energy efficiency in process industries since 2007 by programme H m (173) RFCS 111m (101) IEE 35m (28) Energy efficiency is a central objective of the Sustainable Process Industries through Resource and Energy Efficiency contractual Public-Private Partnership (SPIRE cppp). Most of the projects funded in this context expect gains in energy efficiency. Energy efficiency has however been a long-standing driving principle both for EU policymakers, who have regularly endorsed the principle of efficiency first, as a means to reduce energy consumption and to reduce GHG emissions, but also for industries, who see in energy efficiency an effective way to enhance their competitiveness. As such, energy efficiency has been core to several EU research programmes: the energy and industrial research programmes (projects funded under FP7 and Horizon 2020, the research for coal and steel programme (RFCS) and the intelligent energy Europe programme (IEE, under the competitiveness and innovation programme, aiming mainly at SMEs). The analysis of the complete portfolio of projects funded under these four programmes after 2007 identified 488 different projects addressing energy efficiency for process industries, representing a total EU public investment of EUR 1.36 billion, spread fairly homogeneously over (see Figure 1). On average, annual funding for energy efficiency projects has increased by 20 % in Horizon 2020 compared to FP7. A total of 61 projects on CCU technologies have benefited so far from a smaller, albeit still very significant, EU funding of over EUR 243 million, from both FP7 and Horizon Relevant projects have also been funded under the RFCS programme, although their focus was mostly on carbon capture rather than on CO 2 conversion. As can be seen in Figure 2, the funding for these technologies has been growing steadily in recent years, reaching EUR 50 million in 2017, since the very first FET and ERC projects from With regard to the funding programmes, projects are funded mainly through the Energy and the NMPB thematic areas under LEIT (Leadership in Enabling and Industrial Technologies) and Societal Challenges pillars of FP7 and Horizon 2020, but also notably from the ERC and the FET, which are fully bottom-up programmes, reflecting the high interest of the academic community and the early development stages for some of the CCU technologies (lower TRLs, requiring still significant development and validation work at lab scale). FP7 695m (183) 12 Research & Innovation Projects for Policy

15 FIGURE 2 EU financial contribution to projects addressing carbon capture and utilisation since 2007 by programme and by year H m (29) FP7 103m (32) 60 H2020 FP PORTFOLIO OF BENEFICIARIES The analysis of the energy efficiency and CCU portfolios shows similar trends in terms of beneficiaries. A total of 46 countries participated in energy efficiency projects, involving, for FP7 and Horizon 2020, over unique participants (3 554 participations), with a balanced representation between research or higher education organisations (19 % each) and private forprofit organisations (56 %), of which no less than 32 % (of the total participations) were SMEs. In terms of budget distribution, as can be seen from Figure 3, nonprofit and profit organisations have an equal share (SMEs receiving 27 % in total). This indicates the high interest of industrial partners in this field, as well as the effective open innovation framework offered by the research programmes. From the geographic point of view, the distribution of funding over countries reflects the EU industrial landscape, with the top six countries receiving most funding being Germany, Spain, the United Kingdom, Italy, the Netherlands and France. Germany on its own received about 20 % of the funding, double the amount Spain received, in second position. In the CCU projects, we observed the participation of 26 countries, involving 341 different participants (475 participations). Private for-profit organisations are slightly less present than in the energy efficiency portfolio but still represent 42 % of the participants and 35 % of the funding, reflecting again the high interest of commercial entities for this domain of activities, but also in general a lower technological development level with a larger share of the funding going to research organisations (and confirmed by the TRL analysis in section three). PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation 13

16 FIGURE 3 Share of the financial contribution going to different types of organisation [HES = Higher Education; PRC = private for profit (excluding education); REC = research organisation; OTH = others; PUB = public body (excluding research and education)] Energy Efficiency Projects CCU Projects HES 281m OTH 31m PUB 7m PRC 586m REC 67m OTH 2m HES 87m REC 317m PRC 86m 3. PORTFOLIO OF RESEARCH TOPICS COVERED Energy efficiency projects are addressing innovation in all key areas (Figure 4): process design (which covers catalysis and advanced materials, process modification, as well as monitoring and control); resource and energy efficiency; process heat efficiency; process electricity efficiency; and industrial symbiosis. Although not a new concept per se, cross-sectoral industrial symbiosis is still limited to a relatively small number of examples in Europe, an issue which funded projects aim to unlock through digitisation approaches, blueprints and data-sharing (EPOS, Sharebox), but also with systems analysis (SCALER). A number of projects, mainly funded by the IEE and the energy programme, also address capacity building, i.e. projects that promote efficiency networks, energy auditing, energy management systems, training and benchmarking, knowledge transfer, and specifically address the issue of barriers to energy efficiency and effective policymaking. CO 2 may be transformed into a wide range of products, for various applications, through different technologies and processes (Figure 5). CO 2 utilisation projects have identified and further developed a broad range of process con- cepts to sustainably introduce CO 2 into the chemical value chain. Given the early stage of research activities, all catalytic concepts have been addressed, ranging from chemo-catalysis to electro-catalysis, photo-catalysis and bio-catalysis, the latter with an emphasis on algae-based conversion of CO 2. Some projects focused on catalysis aspects or CO 2 capture, while other projects considered the entire value chain from feedstock supply to the final product. The CO 2 -based products investigated in the EU-funded projects include chemicals (e.g. syngas, ethane, propane, oxygenates and alkenes, polymers, and carboxylic acid) and fuels (e.g. methanol and kerosene). The chemicals mainly address bulk chemicals, which could sometimes even be used as fuels, but also polymers (plastics such as PU). In order to provide a net decrease in CO 2 emissions, most of these approaches rely on the availability of electricity with a low, or very low, carbon footprint. The mineralisation route to solid inorganic carbonates, which offers possibilities for long term storage of carbon while also being exothermic, is the least tackled approach, followed only by a few projects. 14 Research & Innovation Projects for Policy

17 EU funding has not only supported the technological development of the field, but also the development of an understanding of the potential of CCU for policy challenges. In this regard, information-oriented projects like SCOT provided techno-economic and environmental assessments, and proposed policy action plans. Energy efficiency and CCU projects have been funded at all stages of development, supporting their technological progression and creating a pipeline for commercialisation. The TRL of energy efficiency products averaged 5.3, while CCU projects only 3.8, which is in line with the generally lower technological maturities of these approaches. In this regard, EU funding has followed the technology maturity curve. For CCU, EU project funding has been particularly important to provide critical mass for early stage research. FIGURE 4.A Distribution of EE projects in key innovation areas (based on a classification of 176 EE projects) Process Design / Performance Resource-Energy Efficiency FIGURE 4.B Distribution of innovations within Process Design key area Process Modification / Refinement 50 (46 %) Catalysts & Advanced Materials 14 (13 %) Process Heat Efficiency Information / Capacity Building Process Electricity Efficiency Industrial Symbiosis Monitoring & Process Control 44 (41 %) PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation 15

18 FIGURE 5 CO 2 Use (adapted from Bui, Bardow, Mac Dowell et al., Energy Env. Sci., submitted) ECOSPHERE TECHNOSPHERE Power plants, industry Direct use Biomass CO2 Conversion Chemicals, fuels End-of-life Solid inorganic carbonates Air capture FIGURE 6 TRL Spread (all EE and CCU projects were asked to report the starting TRL of their innovations. Each project may address more than one innovation, with different starting TRL; 202 projects provided answers for 414 starting TRLs) TRL 1 9 (4.5 %) TRL 2 16 (7.9 %) TRL 3 53 (26.2 %) TRL 4 TRL 5 TRL 6 72 (35.6 %) 68 (33.7 %) 84 (41.6 %) TRL 7 47 (23.3 %) TRL 8 TRL 9 N/A 22 (10.9 %) 22 (10.9 %) 21 (10.4 %) Number of projects (202 responses) 16 Research & Innovation Projects for Policy

19 IMPACT OF R&I FUNDING ON EU POLICY GOALS

20 1. R&I ACHIEVEMENTS SUPPORTING POLICY CHALLENGES The impacts and results of EU-funded projects on energy efficiency and CO 2 utilisation for policies have been assessed based on project reports and on the 2016 SPIRE cppp progress monitoring report, as well as on a survey of all projects identified and conducted specifically for this study 10. SUPPORTING GHG ABATEMENT AND INDUSTRIAL EFFICIENCY GOALS The project portfolio assessment and the survey show that the CCU and energy efficiency projects have a significant potential to improve energy efficiency and to reduce GHG emissions in the EU. On average, the projects reported a GHG saving of 22 %, compared to current practices (e.g. conventional fossil based process), with some projects claiming GHG reductions of over 40 %. Interestingly, CCU projects reported on average the largest emissions saving potential (32 %), but this might well be linked to the lower TRL (and consequent higher optimism) of these technologies, as well as to the use of different benchmarks and system boundaries (e.g. replacement of fossil-based energy with a low carbon alternative). With regard to their energy saving potential, 59 % of the projects providing estimates claimed gains of over 10 % and up to over 30 % for almost quarter of them. Some projects reported more modest savings, of less than 10 %. However, those often address the most emissions-intensive sectors, such as steel and cement, where small percentage improvements could result in large absolute savings in GHG emissions. The average GHG saving reported by the projects may appear relatively modest compared to the EU s 80 % (and foreseeable 95 %) reduction objective envisaged by However, it must be considered that this target uses a 1990 baseline, while the projects responses refer to current practices (meaning from 2007 onwards, based on the project start). If a 1990 state-of-the-art benchmark was used, much higher figures for GHG savings would be obtained. For instance, applying the 22 % to the 61 % savings already achieved by the chemical sector between 1990 and 2016, would result in GHG reductions of about 70 %. Furthermore, it must also be considered that projects address often only part of the operations within a certain industrial sector (e.g. downstream processing, reactor, and furnace). Therefore, the results of several projects could potentially jointly be applied leading to higher potential emission savings than those reported by a single project responses (37 % answer rate). 18 Research & Innovation Projects for Policy

21 FIGURE 7 Mean savings for GHG emissions, energy and operating cost as reported by the projects in the survey. Projects are classified by technology focus MEAN REPORTED SAVINGS 40 % Emission savings Energy savings Operation cost savings 30 % 20 % 10 % 0 % -10 % -20 % -30 % Chemicals Fuels CARBON CAPTURE & UTILISATION Process modification/ refinement Catalysts & advanced materials PROCESS DESIGN/PERFORMANCE Monitoring & process control PROCESS ENERGY & RESOURCE EFFICIENCY CO 2 UTILISATION TECHNOLOGIES IN SUPPORT OF GHG EMISSIONS REDUCTION AND OF THE CIRCULAR CARBON ECONOMY CCU technologies, although limited by the low chemical reactivity of CO 2, are gaining significant momentum. For example, CO 2 could constitute an abundant and recyclable carbon feedstock in the circular economy. This facet of the circular economy has particular relevance in Europe considering that carbon feedstocks for energy and manufacturing purposes are mostly imported. Therefore, CCU technologies and approaches could contribute to reduce Europe s dependence on imports. The poor reactivity of CO 2 poses an intrinsic challenge and thus the potential size of these technologies is unclear today. The interest in these is also linked to the current transition towards renewable energy sources (e.g. wind, solar). They offer the opportunity for chemical energy storage that could help manage fluctuations in energy supply, along with other solutions to stabilise the grid. EU R&I investment has been highly valuable within the field of CCU utilisation in providing funding to early stage technology developments (low TRL), addressing major commodities and markets (e.g. fuels, plastics, fertilisers, etc.) in the chemical industry. Within the analysed portfolio, CCU projects reported the largest potential for GHG savings. However, GHG emission reductions can be achieved in different ways by different CCU technologies. Most projects in the portfolio on CO 2 -use aim at GHG reductions and avoidance via directly replacing fossil-based feedstocks, improving resource efficiency and integrating renewable energy, but not via the route of carbon storage. Such substitution also increases resource security. Some CCU technologies and approaches can offer direct reductions of CO 2 emissions by increasing resource and energy efficiency compared to traditional fossil-based processes (e.g. CO 2 -based polyols). Other concepts rely on the utilisation of low carbon energy in the production process (e.g. CO 2 -based fuels), often in the form of renewable hydrogen. Only if these technologies employ zero-carbon energy and are applied to unavoidable CO 2 emissions, CO 2 emissions from sustainable biomass incineration, CO 2 re-captured at the end-of-life of a CCU product or captured directly from air, would lead to net-zero GHG reductions over the PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation 19

22 full life-cycle. Critically, with some notable exceptions (e.g. mineralisation, CO 2 -based polyols), most CCU concepts require large amounts of cheap (low carbon) energy to be both economically viable and environmentally beneficial. Beyond the technological developments, the EU-funded projects have provided significant input for policy development in this area, by identifying barriers for the largescale implementation of CO 2 utilisation. The major barriers to the deployment of CO 2 utilisation technologies and approaches are the current low prices of fossil feedstocks and low price of CO 2 emissions. These factors, coupled with the capital investment needed to deploy the technology and the often higher operating costs, weigh heavily on the cost of novel CO 2 -based products, making it often impossible for them to compete with established fossil-based alternatives today. In this respect, from the portfolio assessment, it is clear that to be competitive on price terms with fossil based products, CO 2 -based alternatives would often require some sort of subsidy. Several survey responders drew attention to the need for an explicit definition of the role of captured and avoided by CCU utilisation under the EU ETS scheme, in order to clarify the way towards a circular CO 2 feedstock utilisation. 2. ADDED VALUE OF EU-LEVEL R&I INVESTMENT Projects are mostly cross-sectoral and their research activities include, or are directly relevant to, two or three industrial sectors. Interestingly, the most cited sectors are steel and chemicals, which are major European industrial sectors economically, and are the largest energy consuming industries. This shows how European collaborative research is able to connect different sectors and value chains, which is key for cross fertilisation, transfer of best practises, as well as cross-sectoral transfer, market replication and making industrial symbiosis a reality. European projects show significant potential in terms of bringing novel technologies closer to market deployment. Data gathered from projects show an average TRL increase of 2.3 (during the project lifetime) with about 50 % of SPIRE projects expecting full deployment of their concepts within a five year FIGURE 8 Number of EE and CCU projects reporting relevance to different sectors Iron/Steel Chemicals/Pharmaceuticals Engineering/Machining Fuels Water Food/Drink Non-Ferrous metals Transport Electricity Cement Paper/Pulp Minerals Buildings Other Ceramics Glass Research & Innovation Projects for Policy

23 period after project completion, speeding up commercialisation by months compared to the time to market for their internal R&D. In terms of scientific impact, projects on CCU utilisation are more oriented towards scientific publications compared to energy efficiency ones. The number of publications from projects is in line with the average for the FP7 cooperation programme (36 publications by EUR 10 million). However, the majority of projects are still running and a significant share of publications is still expected after the end of the projects. The energy efficiency portfolio, on the other hand, shows a lower number of scientific publications, roughly half of the average for FP7, but with double the number of submitted patents (two patents per EUR 10 million funding). This illustrates the lower level of technological maturity of the CCU projects, which seem to still be mostly at an earlier development stage, compared to the energy efficiency portfolio which is more oriented towards near-market research and IP protection for technology exploitation. The assessment of the portfolio shows that beyond merely providing financing, EU R&I support has fostered connections between industries, research institutions, and governments, which are vital to building and structuring an ecosystem to enable the efficient development and commercialisation of innovations. Projects have contributed by taking a value chain approach, including all stakeholders, to ensure rapid technology development and fast deployment. On the other hand, the EU has strongly supported the establishment of broad cross-sectoral platforms such as SPIRE and the Climate-KIC flagship enco 2 re, which are key to connect actors and structure value chains across sectors, Member States and regions, and to promote the dissemination and exploitation of scientific outcomes. 3. IMPACT FOR POLICIES The absence of (harmonised) reporting requirements, tailored specifically to address policy issues, currently makes it very difficult to model the impact of R&I funding on policy goals. In addition, there is a lack of clear benchmarks and models to assess qualitatively and quantitatively the project impacts on specific KPIs (e.g. GHG emission reductions). A survey amongst participants of projects addressed this difficulty. While based on self-assessment, the survey provided very useful policy information, enabled spotting trends and drawing conclusions. With a response rate of 37 %, the survey shows the great reservoir of policy and technology knowledge that can be mobilised through the EU research projects and shows the great availability and willingness of the actors to provide feedback for policy making. SUPPORTING THE TRANSFER OF POLICY-RELEVANT INNOVATIONS TO MARKET The assessment of the project portfolio and the survey results highlighted how EU R&I funding has financed innovations with strong market potential. With the notable exception of the CO 2 -to-fuels projects (because of their large requirement for renewable energy), most of the projects reported potential to reduce operating costs (7 % on average compared to current practice), highlighting the potential competitive advantage that novel technologies in energy efficiency may provide to industry operators. It is vital that these technologies achieve commercialisation if they are to improve the competitiveness of European industry, realise their potential environmental benefits and enable the achievement of the EU s overarching political targets. On this aspect, the survey respondents flagged a number of issues, corroborating the literature findings, which are hindering the full exploitation of the technologies, up to their market deployment. In particular, project stakeholders revealed that a major hurdle to bring their technologies to the market is related to a range of behavioural and knowledge barriers. PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation 21

24 Another major hurdle identified, hindering market deployment, is the scaling up of R&I results, which is considered a major challenge, in particular for expensive large-scale first-of-a-kind demonstrators (FOAK). From the responses to the survey it is clear that significant economic barriers are encountered by private investors when trying to raise the required financing for implementing novel technologies at full scale, in order to bring their project results to the market. Many of the stated breakthroughs, in the CCU portfolio in particular, critically rely on the availability of abundant and cheap low carbon electricity to realise their environmental benefits and build a business case. In this respect, the deployment of these technologies needs to go hand in hand with the increase of the renewable energy share and priority should be given to those who provide the most efficient use of energy. Therefore, tools and methodologies are necessary to compare technologies and identify those that will deliver the most benefit next to their needed economic viability. In environmental terms, LCA methodologies are broadly used to assess the environmental footprint of technologies. Therefore, the availability of harmonised LCA methodologies, for CCU in particular, is needed when comparing the GHG abatement potential and other environmental benefits of different CCU technologies. This would allow better informed decisions on the best technological pathways to achieve the GHG abatement goals, and in principle, once identified as beneficial to deliver policy targets, a certain CCU utilisation technology could then be integrated into relevant EU, national and regional support schemes. From the assessment of the project portfolio, both for CCU and energy efficiency, industrial symbiosis emerges as a way forward. In Europe there are already several cases of industrial symbiosis clusters, but cross-sectoral integration has yet to be achieved on a broader scale. A deeper integration of industrial operations may lead to significant and even breakthrough improvements in resource and energy efficiency, even for very mature technologies where the processes are highly optimised and therefore major gains are difficult to achieve (e.g. cement, steel). The establishment of broader industrial symbiosis in the process industry is one of the major objectives of the SPIRE PPP, where several projects in this direction have already been funded. In addition, industrial symbiosis is crucial to CCU technologies, which are mostly cross sectorial and rely on symbiosis concepts because they generally require the integration of a point source of CO 2 (e.g. often gaseous waste streams from an industrial plant) coupled to a conversion unit of chemical nature. However, from the analysis of the industrial symbiosis projects included in the portfolio, it emerges that non-technological issues are major hurdles to scaling up industrial symbiosis in Europe. For example, this is the case for contracting issues, issues linked to sharing of information among different companies, relevant standards, utility support related to permitting and infrastructure establishment including its management, and regulations linked to utilisation of waste streams (Member State implementation of the waste framework directive in particular). 22 Research & Innovation Projects for Policy

25 POLICY RECOMMENDATIONS

26 RECOMMENDATIONS IN RELATION TO THE INDUSTRIAL STRATEGY AND TO THE REDUCTION OF GHG Bringing breakthrough technologies to market so as to deliver policy goals in relation to low carbon industries will require very significant financial support and smart R&I policies. Public and private financial resources should be marshalled to ensure that projects of relevance to policy challenges are appropriately supported on their TRL journey and can be proven at scale. Appropriate knowledge transfer is necessary for technological uptake and market replication; additional efforts are needed to communicate successful results. 1. BUILD INVESTOR CONFIDENCE IN DISRUPTIVE LOW CARBON TECHNOLOGIES THROUGH EFFICIENT FUNDING OF DEMONSTRATION PROJECTS AND EASIER ACCESS TO FINANCE Increasing investor confidence is essential for the uptake of novel low carbon technologies with high GHG reduction potential. Large-scale demonstration projects play a critical role in this regard by showing the technical capacity and viability of these new technologies, thus attracting private investment. Their optimum development is currently hindered by suboptimal financing arrangements and this must be remedied. > Public financing instruments already exist to fund such large-scale demonstrators, including in national and EU research programmes, the European Structural and Investment Fund (ESIF) and the Innovfin and Energy Demonstration Projects Facility of the European Investment Bank (EIB). However, these need to be applied more efficiently. In particular, given that the scale of demonstration projects, a single financing source will generally not be sufficient to cover the funding need, and flexibility is needed to allow for financing from different public and private sources to be pooled. In this regard, Member States should look at Important Projects of Common European Interest (IPCEI). In addition, the appropriateness of state aid rules, notably in relation to industrial research aid intensity limits, need to be reviewed in the light of the critical importance of projects aimed at reaching climate targets. > Open Innovation Centres can also have an important role to play and contribute to investor confidence. They provide shared access to equipment and tech- nology services for projects seeking to move from laboratory validation to industrial prototype. The Invite facility in Leverkusen provides a valuable illustration of the way to go in this regard. Initially established under the F 3 FACTORY FP7 project, and set up with regional funding, it operates on a membership basis, allowing industry, including SMEs, and academia to work together under a single roof. The Open Innovation Test Beds concept, as proposed in the NMBP work programme , should be exploited the develop further Open Innovation Centres to support large-scale demonstration projects in relation to CCU and energy efficiency more generally. > Large-scale demonstration projects are medium term in nature so the need to source successive rounds of funding hinders technology progression. To address this obstacle, funding programmes should extend the application of mechanisms such as the ERC Proof of Concept grant to facilitate successive funding of projects in strategic areas such as CCU and energy efficiency. > As well as the non-economic barriers discussed above, there are of course very significant economic barriers to implementing efficiency improvements on the scale required to meet EU policy goals. In particular, the need for de-risking investments, while guaranteeing faster pay-back times and better ROI, seems one of the major obstacles to pulling increased private investments towards novel energy efficiency technologies. A number of institutions are working on these 24 Research & Innovation Projects for Policy

27 issues and provide recommendations to this effect (EC activities on Sustainable Finance 11, the Energy Efficiency Financial Institutions Group, EIB Innovfin 12 ). Standardised risk assessment, bundling of financing propositions, and securitisation vehicles should be further investigated to widen access to cheap capital. 2. INTRODUCE STANDARDISED METRICS TO ENHANCE R&I FUNDING AND THE DECISION-MAKING PROCESS FOR LOW CARBON TECHNOLOGIES Standardised metrics improve funding decision-making by measuring the impact of R&I funding programmes as well as capturing the value of individual project results. Thus, they can guide future funding decisions by enabling European, national and regional authorities to measure the extent to which publicly funded R&I is on track to deliver the expected policy goals. They can also build private investor confidence in the consistency and reliability of public funding decisions. > The Commission should lead the way with standardised metrics by putting in place an official moving baseline of value chain practices in the EU in relation to energy consumption, GHG emissions, etc., based on growth forecasts and business-as-usual assumptions. In parallel, R&I projects should be required to produce standard of Key Performance Indicators to improve transparency and impact assessment. On this basis, Member States and regions could develop similar metrics to support policy-making and funding decisions. > Moreover, such standard metrics could be used by public-private partnerships and in coordination and support actions to connect researchers, projects and industrial communities, as well as communicating success stories and sharing lessons learnt. RECOMMENDATIONS IN RELATION TO THE ENERGY EFFICIENCY FIRST PRINCIPLE There is significant technical potential to improve industrial energy efficiency but also the need to unlock this potential by alleviating non-economic and economic barriers to investment. 3. EXTEND THE SCOPE OF ENERGY AUDITS TO FOSTER THE DEPLOYMENT OF CUTTING-EDGE ENERGY EFFICIENCY TECHNOLOGIES, INCLUDING SUPPORT FOR CAPACITY BUILDING OF AUDITORS > Under Article 8 of the Energy Efficiency Directive, Member States have to ensure large enterprises conduct mandatory energy audits every four years and encourage SMEs to undergo audits and implement their recommendations. In its energy efficiency proposals of the Clean Energy Package of November 2016 (COM/2016/0761 and COM/2016/0765), the Commission focused on a new overall energy efficiency target of 30 % by 2030, and on the energy performance of buildings. Article 8 of the Energy Efficiency Directive remains unchanged. However, to meet the new energy efficiency targets, an appropriate implementation of energy audits will be essential. In the short term, this requires a focus at Member State PATHWAYS TO SUSTAINABLE INDUSTRIES Energy efficiency and CO 2 utilisation 25