Industry in transition: North Rhine-Westphalia

Reading time: 6 minutes
5 December 2016

The Climate Group’s Energy Transition Platform is an initiative designed to support state and regional governments in developing and implementing innovative clean energy policies. This blog by Dr. Daniel Vallentin of the Wuppertal Institute, is an extract from their Energy Transition Platform briefing about the role of industry in North Rhine-Westphalia and looks at the state government’s policies to incentivize emissions reductions from energy-intensive industries.

The state of North Rhine-Westphalia (NRW) is vital to the success of Germany’s energy transition as it is the traditional center of Germany’s manufacturing and energy-intensive industries. NRW’s long history of energy-intensive industry operations is mainly due to the proximity of black coal and lignite deposits in the Ruhr area and the Rhine mining region. Large coal-fired power generating units located adjacent to the coal mines ensure relatively cheap and stable electricity supply to industrial plants.

Today, NRW’s manufacturing and energy-intensive industry still contributes an important share to the state’s economic gross value production. However, its manufacturing sector and energy-intensive industries have experienced a significant decline in recent years. In 1991, the state had around 3 million people employed in manufacturing. By 2013, the figure had dropped to around 2 million. Over the same period, the number of people employed in the services sector rose from 1.8 million to around 6.8 million.

NRW’s manufacturing and industry sector has managed to bring down CO2 emissions by 27% from 1990 to 2011.
Dr. Daniel Vallentin, Wuppertal Institute

These developments have led to major structural changes in the traditionally industrial parts of the state, and the transformation process is still ongoing. As a result of these structural changes and efficiency improvements, total energy demand of the manufacturing sector and energy-intensive industries was reduced by about 15% between 1990 and 2013. In terms of the state’s total final energy demand, manufacturing and industry represent about 35-40%.

NRW’s manufacturing and industry sector also plays an important role with regard to the state’s greenhouse gas (GHG) emissions. In 2011, manufacturing and industry plants discharged about 141 million metric tons of CO2 with steel and iron production alone representing about 45% of the state’s industrial CO2 emissions. The chemical industry is the second largest industrial producer of CO2, representing 27% of NRW’s industrial CO2 emissions. However, the state’s manufacturing and industry sector has made considerable efforts to reduce energy demand and GHG emissions in the last two decades and has managed to bring down CO2 emissions by 27% from 1990 to 2011.

In order to comply with climate policy targets at the European and state level, a lot remains to be done for NRW’s industry. The state government has adopted the Climate Protection Act, setting legally binding climate targets which mean that by 2025, GHG emissions need to be at least 25% lower than 1990 levels and at least 80% lower by 2050.

Due to the emissions reductions already achieved in the last two decades, the main mitigation challenge for NRW’s manufacturing and industry sector occurs in the period from 2020 until 2050. As most efficiency improvements have already been made, so-called ‘low carbon’ or ‘breakthrough’ technologies would be necessary to achieve further substantial CO2 mitigation in NRW’s energy-intensive industries. Such mitigation strategies would require substantial changes in the current infrastructure and come with significant investment costs.

NRW pursues the vision of an “ecological re-industrialization” to unlock future markets and business fields arising from the green transformation of the energy and industry sector.
Dr. Daniel Vallentin, Wuppertal Institute

Despite – or even because of – the above mentioned challenges, and the economic importance of the manufacturing and industry sector, NRW’s state government has decided to adopt a proactive approach to climate and innovation policy. The state government wants to make industry part of the solution needed for complying with ambitious energy and climate policy targets. It pursues the vision of an “ecological re-industrialization” of NRW to unlock future markets and business fields arising from the green transformation of the energy and industry sector.

The state government has also published an environmental business strategy, which encompasses funding of about €800 million for activities related to business development, innovation and research. It has also initiated comprehensive dialogue processes between stakeholders from the industry sector to understand technological strategies for CO2 mitigation and to develop policy measures to support their development and market deployment.

To complement these approaches, the government is implementing technology-specific funding programs, such as the impulse program for combined heat and power (CHP) which encompasses funds for research and development activities, as well as low-interest loans for installing CHP units at different scales.

These challenges show that it is appropriate to understand climate policy as a policy program for “green markets” and innovation. It is vital that instruments of such a policy program are developed in close dialogue with practitioners from the different industry branches to make sure that they are effective and efficient in supporting industrial companies in this transformation process.

However, preparing energy-intensive industries for a low carbon world in 2050 cannot be managed at the state level alone and requires support of the federal government. Therefore, both policymaking levels should join forces for an “ecological re-industrialization” program in industrial regions such as North Rhine-Westphalia.

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