What are sources of carbon lock-in in energy-intensive industry? A case study into Dutch chemicals production

Zahra Janipour, Reinier de Nooij, Peter Scholten, Mark A.J. Huijbregts, Heleen de Coninck
2020 Energy Research & Social Science  
A B S T R A C T Keeping global mean temperature rise well below 2°C requires deep emission reductions in all industrial sectors, but several barriers inhibit such transitions. A special type of barrier is carbon lock-in, defined as a process whereby various forms of increasing returns to adoption inhibit innovation and the competitiveness of lowcarbon alternatives, resulting in further path dependency. Here, we explore potential carbon lock-in in the Dutch chemical industry via semi-structured
more » ... nterviews with eleven key actors. We find that carbon lock-in may be the result of (i) technological incompatibility between deep emission reduction options over time, (ii) system integration in chemical clusters, (iii) increasing sunk costs as firms continue to invest in incremental improvements in incumbent installations, (iv) governmental policy inconsistency between targets for energy efficiency and deep emission reductions, and (v) existing safety routines and standards. We also identify barriers that do not have the self-reinforcing character of lock-in, but do inhibit deep emission reductions. Examples include high operating costs of low-carbon options and low risk acceptance by capital providers and shareholders. Rooted in the Dutch policy setting, we discuss policy responses for avoiding carbon lock-in and overcoming barriers based on the interviews, such as transition plans for individual industries and infrastructure subsidies. T to these studies, a combination of various DER measures is required, including novel technologies related to radical options. Those DER options are categorised by IPCC [2] as well as the Dutch Ministry for Economic Affairs and Climate Policy [17] as full electrification and hydrogen, circularity and substitution, bio-based, carbon dioxide capture, utilisation and storage (CCS/CCU), and process and energy efficiency, where the latter one is not considered DER unless combined with one of the other categories. Adoption of several of those options, however, may be inhibited by lock-in. Their uptake depends path-dependency based on historical preferences and development of existing technologies in the system [18] . Arthur [19] argued that existing complex technologies exhibit increasing returns to adoption; the more they are implemented, the more experience is accumulated, and, consequently, the more they are improved. Several studies have identified general barriers that energy-intensive industries face to reach DER, including the lack of end-user demand for low-carbon products due to the business-to-business character of basic industry products, the high capital costs and long investment cycles and payback times, the risk of losing competitive advantage in the global market, and the lack of sufficient prioritisation and policy effort [4, 9, 16] . Carbon lock-in has been investigated in sectors such as energy [30] , transport [31], agriculture and infrastructure [32] . However, potential carbon lock-in in the industry sector, and how to respond to that, has to our knowledge only been characterised in the concrete industry [33] , and largely remains an open question [16] . We hypothesise in this paper that, in addition to general barriers, the DCI is at risk of carbon lock-in, given its existing path-dependent, highly optimised and integrated system that has exhibited strong increasing returns to past adoption. Similarly to other sectors, those increasing returns and the high reversal costs to a new system stimulate firms to try safeguarding their vested interests [34] , hampering implementation of the DER technologies. Failing to deal with carbon lockin in a timely and adequate manner makes a low-carbon transition even more difficult or economically unsustainable for the DCI in the long run. In this paper, we investigate whether such potential carbon lock-in exists for the DCI, and if so, what are the components of such a potential carbon lock-in and what could be possible policy responses. This paper is structured as follows: Section 2 describes the conceptual framework, data collection and the analysis. In Section 3, we present and discuss our results on carbon lock-in and other barriers and compare our findings with carbon lock-in studies in other sectors. In Section 4, our findings on policy responses to avoid such carbon lock-in and barriers will be presented and discussed. Finally, Section 5 provides conclusions, recommendations for future work, and discusses limitations of our research.
doi:10.1016/j.erss.2019.101320 fatcat:ywb37vana5cuxpgvxdo53wrph4