Decarbonizing Industry (Sterner, Hetzner, Großmann, de Chammard, Hartel) | DLD 24

So first off from my side, a hearty welcome. We don't have much time and we have an extraordinarily complex subject, so I want to dive right into it. Perhaps just to start, we've talked a lot at this conference about AI. While that's a very important issue for all of us, I think we all have a moral imperative to ensure there's a generation coming after us to enjoy the fruits of AI. And on that front, I can't say we're doing terribly well. Earlier this week, the EU's climate satellite service Copernicus presented data showing that for every single day of last year, we exceeded the 1-degree target, which was the first time since 1850. They already expect that over this year, we will go over 1.5 degrees. So it's incredibly important that we take care of this right now. We can no longer waste any time. With that, I'd like to introduce Michelle just to give a brief overview of the situation.

Hi and welcome from my side as well. After the last presenter, it's quite hard to challenge, but I will try. I'll explain in three minutes how to do the energy transition easily. I wrote a bestseller on that. Thanks to Infineon, we will translate it into English. As you said, it's a huge problem with climate change. We have to tackle this, or we will get swept away from this planet. That's where the Paris climate goals come in, and we must put every effort into meeting them. How can we solve the climate issue? You have to look at where the emissions come from. For Germany and most of the Global North, 90% of emissions come from energy use in electricity, heating, buildings, manufacturing, industry, and cars. That's the issue. Every one of us has maybe 200 kilograms of waste, but we put 9 tons of CO2 into the atmosphere, 50 times more. So there is huge responsibility. The good news is that no matter who is in charge, the world will shift towards 100% renewables because wind and solar are the cheapest sources, widely available, and use the least land. It's wind and solar. But they have intermittency. How to store it? Everything will be connected to electricity: heat pumps, industry (which can't use only electricity but also hydrogen and derivatives), electromobility, buses, trucks, trains, airplanes needing e-fuels. And AI can't run without electricity, and electricity only works if you have storage. Ask AI what it fears: being unplugged. So you can forget about that if you can't store it. I'm one of the inventors of Power-to-Gas, which copies photosynthesis. We use sunlight to split water into hydrogen and oxygen, then add CO2 to produce stored chemical energy with high energy density. That was my dissertation 15 years ago. Now it's called Power-to-X and is very important for industry. This is how much energy industry needs and how much welfare they get. We have steel, paper, chemicals, non-ferrous metals, glass—our energy-intensive industry that you cannot throw away, or you have no machines, cars, or manufacturing. We need to keep our industry and get it green. I calculated how much hydrogen we need: a huge amount. That's why we developed instruments like H2 Global for global hydrogen trade. We need it for electricity, heat, transport everywhere. In Germany, we presented our Hydrogen Atlas. The take-home for today: all technology is there, just get it done. Let's just do it. Thank you.

And I was looking at the stage piano because I also have some music, if you like. Thank you. Many, many thanks. That was a great overview. As far as Siemens Energy is concerned, before I get to one of the projects your company is involved in, could you give us your impression as someone directly responsible for transforming industry? Where do our esteemed panelists already stand when it comes to achieving this goal, and what are you doing to support them?

No, so thank you for the question, Stephie. She did a great job. We actually have two of the most polluting or hard-to-abate sectors with us, so I'm sure we'll have tons of concrete examples of how you guys decarbonize. Industry accounts for 30% of global CO2 emissions. This is huge, so we cannot talk about becoming energy neutral or combating climate change without tackling industry. How do you do that? There are four levers, and as Michelle said, all the technologies are there. First: energy efficiency. The less you consume, the better. For example, a lot of industry produces waste heat, and you can reuse that heat and convert it back into electricity. Second lever: electrification. Most of the huge process industries rely heavily on fossil fuels, so we must completely electrify the processes using heat pumps and similar. Where you cannot electrify, you need hydrogen. You take water, take renewable energy, put it through an electrolyzer, and produce green hydrogen that can replace fuel. But there are other hard-to-abate sectors like cement where CO2 is part of the process. There, the fourth lever is carbon capture. You capture CO2 from pulp and paper, from everywhere. You can even combine it with green hydrogen to produce e-fuels—green fuels exactly like fossil fuels, but made synthetically. That gives you ethanol for shipping, e-gasoline for cars, etc. So these are the four levers to decarbonize industry. Why isn't it happening? Because today it's not at scale and it's too expensive. To scale, you need faster permitting, especially in Europe; we're very bad at that. And you need the right financing—the right subsidies, taking into account the price of CO2 emitted when using fossil fuels versus green fuels. Finally, you need to control the whole supply chain. The issue with renewables is that 90% of the raw metals and materials are controlled by China. If we don't do something about it, the whole energy security problem we had with gas will be the same with raw materials. So these are the three challenges to overcome to grow fast at scale and decarbonize industry. Thank you.

Perfect. An-Marie, as far as the steel industry is concerned, I've seen estimates that it's responsible for up to 7% or even more of global emissions, which is frankly a crazy number for one industry. Could you explain what efforts the steel industry is undertaking? And perhaps for our listeners, briefly, how steel is made and why it's such a major emitter?

The steel industry is one of the largest contributors to carbon emissions in the world; some say up to 10%. That means all steel producers have a huge responsibility to tackle those emissions. Producing one ton of steel takes about two times the amount of carbon pulled into the air per produced ton. There are different ways to produce steel. One is the blast furnace way, the traditional method of melting iron ore with natural gas. Another way is using electric arc furnaces, which is one of the pillars of electrification. As a family-owned company, we produce steel by melting down scrap materials. That results in only 20% of the carbon emissions per ton compared to the traditional method. So we are already far ahead in producing green steel. However, you can only use already produced steel to make scrap. There is still large demand to decarbonize the traditional way. In Europe, we've seen in Germany how heavily we rely on cutting down emissions from industry. But if we manage to decarbonize industry in Germany and Europe, we have a huge lever to become better. That means those industries need to stay in Germany and Europe. The key for that is cheap and green energy. Unfortunately, with all the electrification and green hydrogen production, we have huge future demands on already strained energy markets. So we must not only consider decarbonization efforts but also how to transform the energy system and markets very fast within Germany and Europe to produce competitively. Otherwise, those industries will move away, and emissions will happen elsewhere out of our control.

I want to get to that briefly, but first, also from your side and the chemical industry. You mentioned cheap, green energy. One reason your industry is such a major emitter is because you have to tear apart molecules and break chemical bonds, which is very energy intensive. What steps are you taking to achieve decarbonization in this hard-to-abate sector and meet your targets?

So maybe just on that note, you had spoken earlier about storage. One thing we're going to need with intermittent renewable energy is storage. Electricity needs to be immediately consumed as it's produced, traditionally speaking, unless we store it. Is the answer then commercially scaled storage projects like massive battery plants that make sure we have energy whenever we need it?

It's definitely all there. Batteries are really ramping up exponentially globally. In Germany, we have 1 million home storage systems, and many on our power plants. That's for short-term intermittency. For long-term, you use the gas grid, because the pipelines, gas infrastructure, and storage sites are all there. We are in Munich; one of the gas storage sites could fill so many liters of beer that you could celebrate 700 years of Oktoberfest. Imagine! We have hundreds of these storage sites in Germany and around the globe. So the storage problem is technically solved, full stop. We have to transport that message to society. No more blackouts if we go 100% wind and solar. Then we can also transform the industry, which desperately needs this green energy for green products and green AI. So please, can you join me: who believes technology is the solution? Raise your hand. Thank you. There could be a few more—it's an important subject. But oh, they are on their cell phones.

A question for our representatives from the industry. I had spoken earlier to Christian about the carbon border tax here in Europe. For many of you who might not know, for the first time, the steel industry that imports—when China sells us steel to Europe—we will have to start reporting their CO2 footprint, and later, once we know the figures, we can start taxing them for their CO2 footprint to create a level playing field. That's the concept to avoid carbon leakage. We don't want to see emissions simply move from Europe to China or Latin America, where we lose industry, jobs, and our economy suffers while emissions actually go up. Christian, you said you weren't a particular fan of it. Could you explain why, and then I'd love to ask the two ladies on the panel as well.

First of all, you obviously have retaliation: if we induce a tax, others will do the same. The US does a completely different way—they subsidize clean energy production and give long-term security for investments. I think that is another way of dealing with it. On the other hand, we need to create a market for green products. You don't get that through putting up taxes and borders, but by creating an attractive market. I think it's a shame that in Germany and the EU there is no public green procurement. If we invest taxpayers' money, why don't we have the same requirements on products being purchased as we have in terms of our carbon footprint goals? That is the first start: look after your own money. Then we can think about how to regulate the market. We need a market for green products, but just putting up another bureaucratic burden won't work.

Maybe to add on this: yes, the CO2 taxation is not a solution, because if you produce things in Europe with the CO2 tax, you are not competitive when selling outside Europe where there is no CO2 tax. At the same time, Europe has been too naive these past decades. Take the Chinese example with PV—photovoltaics, solar panels—it was invented in Europe, by Senece in Europe. But it completely disappeared and is now completely Chinese. Why? Because the Chinese government heavily subsidized and created a completely protected market for their companies, allowing them to scale and reduce costs, then flood the rest of the world. It's a super efficient technique. Because in Europe we were too naive about free trade, we got screwed. We need to avoid replicating this with wind and green hydrogen, because these technologies are developed in Europe, and today we are losing them. All the big Western wind technology companies are in big trouble, and the Chinese are flooding the market. So we need to be less naive and create the right market in Europe for green energy. That means, as you were saying, creating procurement facilities so we can say we will only buy or subsidize if it's green. We can't just look at prices today. Otherwise, there will be no green energy technology in Europe in the next decade.

A very impassioned statement. Michelle, you wanted to make a quick comment?

I exactly agree with you. We always think climate action is something for the greens and the environmentalists. No, it's industry strategy and industry policy. If you don't get into that mindset, the industry will move away. So it's essential to have green energy here. Second, I'm also a member of the National Hydrogen Council, and we're putting our thoughts together on how to ramp up and create this new market, which exists for fossil fuels but not for green. It needs market creation and ramp-up. Of course, we also need industry policy measures. But what I want to point out is: first, we have to remove fossil fuel subsidies. As long as we subsidize fossil fuels, we influence the market so that green can't come through. Let me give you a figure: we have 65 billion euros in Germany to subsidize fossil fuel use. If you remove just one for the automotive industry, you could finance a 9-euro ticket for all Germans for public transport per year. So remove the subsidies, and then we have a different game for renewables. Thank you.

An excellent point. It boggles the mind that we are still subsidizing the oil and gas industry globally. With all the floods and catastrophes we see, we still give money publicly for destroying the planet. How ridiculous and stupid is this? Let's stop this right now. Thank you. So there's one thing I definitely would like to touch upon: the Just Transition mechanism. When we try to transform this economy to become carbon neutral by 2050, Europe is playing a leading role in making sure legislation is in place and holding policymakers accountable to the population. Could you briefly give a feeling of what this means for society? We don't want people to feel left behind.

One sentence: we need to have participation of the public in wind and solar. We have a wind power plant at one place, and people are against it. I told him: go there and tell them that if you oppose these wind turbines, you will lose your job because they won't have electricity. So have participation and awareness that this is important. If you benefit monetarily and financially, you also accept it much better.

Brilliant point. I think that's very much what you're discussing. Very true. Christian, I think at the end of the day, that's what I meant in the beginning with the mindset change we all need in society. It is exciting to be part of this transformation, and being part of it means really being part of it. If a small village builds two new wind turbines, people participate in the money, and that's a great story. I think I have a feeling we're going to have to cut it there. I'm sorry. The two of you, it wasn't my fault; the music started playing. In any case, it was a fascinating discussion. All of you were brilliant panelists. Let's go.