Opportunities for Enhanced Near-term U.S.-China Climate Action: Industrial Decarbonization
- Good evening and good morning to all of our participants and thank you for joining us today for this discussion focused on industrial decarbonization opportunities in the US and China. I'm Jen Perron with the California-China Climate Institute and will be serving as the moderator for today's discussion. We're so pleased that you all could join us and we're looking forward to the conversation today.
So before we begin, I'd like to offer just a few quick housekeeping remarks. We are simultaneously translating this event, so at the base of your screen you'll see a globe icon and you can select the language that you would like to listen in, either English or Mandarin Chinese. In addition, throughout the course of today's discussion, if you would like to ask a question of any of our panelists, you are welcome to enter that in the Q&A function at the base of the screen. The chat function is disabled, but the Q&A function should be working for the audience. So feel free to enter your questions there at any time throughout our discussion and we'll engage in the interactive portion of our discussion toward the end. And finally, we are recording this event.
It will later be available on the California-China Climate Institute's website and YouTube channels. So, let's go ahead and get started. So today's program is one of a broader series that we've been working on here at the California-China Climate Institute, really focusing in on opportunities for the US and for China to take accelerated climate action within this current decade, within the 2020s based on the sectoral topics that were agreed at in the Glasgow Declaration at COP26.
And so in relation to that, we've launched an 11 paper series. Perhaps my colleague can put the link in the chat that really focuses in on a variety of different sectoral opportunities for the US and China. So to help foster this accelerated climate action, we convened a wide suite of issue experts focused on the different thematic and sectoral focal areas from the power sector to buildings to methane to deforestation and low carbon transportation, other topics as well to really identify both progress to date and challenges and opportunities for the US and China to to move forward within this current decade. So today we're gonna focus in on one of those sector areas, industrial decarbonization and a related report that focuses in on the industrial decarbonization opportunities for the US and China. We have a variety of issue experts here with us today to further explore this option and then we'll engage in kinda an interactive discussion.
So to begin, I'm very pleased to introduce our first presenter, who is Julia Thayne, who is a senior principal at the Rocky Mountain Institute and is going to focus on some opportunities here in the United States. Julia leads a new global program at the Rocky Mountain Institute working with cities to reduce transportation emissions and investing in equitable mobility options, as well as building affordable and accessible new housing. So her team uses data informed research to help cities target key policies for impact, develop and implement transformational projects and build stakeholder support. So over to you, Julia, for your remarks.
- Fantastic. Well, Jennifer, thank you so much for having me here today and thanks to my fellow panelists. I'm very excited about this discussion. So, Jennifer and audience, just to take a step back before taking a step forward, as Jennifer mentioned, my name is Julia Thayne. I'm a senior principal now with our Climate Aligned Industries program at Rocky Mountain Institute. And at Rocky Mountain Institute focus on our work on clean industrial hubs.
So just to take a step back, Rocky Mountain Institute is a 40 year old sustainability nonprofit that has focused on accelerating the clean and energy transition for all. We partner with another organization called the Mission Possible Partnership, which is a coalition of 400 plus organizations that span public and private sectors, policy makers, supply demand, community engagement and finance who are all committed to industrial decarbonization. And what I wanna talk to you about today is how we're thinking about doing this in the US and how the Inflation Reduction Act has changed that.
So you all know, and the reason you're here is because of the size of the problem, In globally industrial activity is 30% of current global greenhouse gas emissions. It's the same in the US. And if we are going to manage to reach our 2030 targets and maintain alignment with 1.5 degrees, sometimes you have to dig into the hard to abate sectors.
So the way in which we're thinking about doing this with Rocky Mountain Institute and with the Mission Possible partnership is by actually digging in to each of the hard to abate sectors, so all seven of them. And thinking about how investments need to shift in order to reduce emissions. One of the first things that we did as a team with RMI and Mission Possible partnership was establish what we call sector transition strategies. So we looked at aviation, at shipping, at trucking, steel, chemicals, aluminum and cement concrete and started to figure out what do we have today on the ground in terms of industrial facilities, in terms of vessels, in terms of aircrafts, in terms of vehicles, and what do we need by 2030? And what we realize is probably something that you all know, which is we don't have nearly enough of everything we need in order to reach the size of the problem. So for example, in aviation we have just 70 SAF or sustainable aviation fuels plants globally operational or in the pipeline and that about 300 plants that we need to get to. So, what do we do about that? What do we do about the size of the problem? And that's where we think these regional clusters will come in.
So industrial decarbonization, our hypothesis is that it's gonna have have to happen in what we call these clean industrial hubs. So with Mission Possible partnership, we looked globally and actually mapped out where we thought the potential supply hubs might be of hydrogen, of low carbon fuels, of renewable electricities, where the potential demand hubs might be for those seven hard to abate sectors. And then where both supply and demands lived together, so places like Los Angeles and Houston. And the idea here is that with clean industrial hubs or with these regional clusters, really the supply of the energy needs to be matched with the demand for the energy. Both need to be supported by an underlying foundation of policy, of finance, of community engagement. And that with a combination of these things and the sort of interstitial links between the various projects, that's how you'll really get this sort of industrial decarbonization to scale.
So the work that I'm leading at RMI actually is through the Bezos Earth Fund. And what it allows us to do is to catalyze industrial decarbonization in two geographies, so in Houston and in Los Angeles. And what we're doing there is first mapping out where the industrial facilities and emissions are in the Gulf Coast and also in California and also what types of emissions we should be going after.
So we're finding even within the US just the size of the problem is so much different. In the Gulf Coast for example, you have roughly, you know, two-thirds as many or two-thirds more rather industrial facilities than you do in California. emitting about twice as much of the emissions. In California, the emissions are coming much more from aviation, shipping and trucking for example.
So I could talk a little bit about it later in terms of the types of work we're doing. But what we're finding as we work on the ground in California, in Texas, in order to support what we call these first mover projects, so investments that are a hundred million or more in industrial decarbonization, is that many of these are considered almost too risky for investors to invest in that they are still looking at the economics of hydrogen production and the different colors of hydrogen production and trying to figure out how much of their portfolio they're really interested in investing in. That same thing is true with low carbon fuels, although maybe the risk tolerance is a little bit different. Midstream infrastructure is something that has yet to be planned for, especially as we think about transitioning to different types of fuels, whether it's drop in low carbon fuels or whether it's clean hydrogen that might require retrofitting of pipelines or different mechanisms of delivery by a truck or train. And certainly then when it comes to pulling together the users and off-takers of the different types of fuels, these are markets that have yet to be made, and so there's quite a bit of work to be done in terms of bringing these market actors together.
But what I'll say is just to conclude some of the remarks around what's happening in the US. Certainly the Inflation Reduction Act has almost completely changed the calculus of how we're thinking about industrial decarbonization. And it's not really hyperbole to say that it has just probably moved us 10 years into the future in terms of what we're going to be able to do in the country and with regards to both supply and demand. This side just shows how the funding is starting to shake out across the Department of Energy, the US Environmental Protection Agency and the Department of the Treasury.
With the Department of Energy having roughly $316 billion worth of financing and grants that it is dispersing over the next few years with the US EPA around 32 billion. And then the sort of big treasure chest of the Inflation Reduction Act is actually all the tax credits that the Department of Treasury is starting to put out guidance for. And some of our work is really working with companies to figure out how, what we call the 45s, so all of these different tax credits from the treasury are really going to change again, the economics of whether hydrogen makes sense for example, or SAF makes sense, for example, to transition to and transition to faster. And so I think in addition to the Inflation Reduction Act, just the fact that we've had the Infrastructure Investment and Jobs Act providing billions of dollars for the purchase, upgrade and installation of low carbon technology and these are just a few of the programs that are related to industrial decarbonization has made, again the US be able to fast forward its progress in terms of industrial decarbonization. So very much looking forward to this conversation. I think again in the US it's like basically right now industrial decarbonization is so much about how the Inflation Reduction Act and the Infrastructure and Investment in Jobs Act are gonna change the economics of facility upgrades or of energy production.
And certainly what our main hypothesis is is that we're not, you know, gonna see this sort of like scattershot across the country, but more so focused in these regional clusters that are gonna be able to pull together supply, demand with the underlying policy and finance, and community engagement. So I'll go ahead and stop there and turn it back over to you, Jennifer. - Thanks so much, Julia, for those remarks. I really appreciate some of those practical perspectives and examples that you offered are about how, you know, new federal legislation is playing out here domestically in the US. And so now we're gonna turn a bit to the Chinese context, so we have some additional colleagues here who can help us better understand that.
So first I'm gonna turn to Hongyou Lu, who is an energy and environment technology researcher at Lawrence Berkeley National Laboratory where she focuses on the decarbonization of energy intensive industries such as cement and iron and steel and the petrochemical sector. So over to you, Hongyou to share some of your recent work, including on this recent report that we'll put a link in the chat. - Thank you, Jen. Thank you for the warm introduction. Hello, everyone, my name's Hongyou from the Berkeley Lab. I'm really glad to have today's, to join today's webinar with so many experts on the panel and participants. I see so many familiar names, so thank you for joining and glad to talk about the opportunities for enhanced near term US-China climate action and focusing on industrial decarbonization.
As Julia mentioned, the industry sector is really important for both China and United States. As you know, the industry accounted for about 60% of China's total greenhouse gas emissions and about 30% of that for the US emissions. And if we take one step closer and look into the China side, we see that the five heavy industries accounted for 87% of total manufacturing energy use in China in 2020. And these are the familiar sectors that we all know about, the steel, the cement, the chemicals.
And I also like to point out that the light industries are responsible for about 13%, the rest of that goes to the light industries is about 13%. And another interesting thing to know, and I think we are aware of that as well, the China's industrial sector's energy supply is heavily dependent on fossil fuels. As you can see here, actually 70% of the industrial energy use comes from fossil fuels.
And actually 50% of that of the total industrial final energy use come from coal and coal-related products like coke, so it's a very energy and carbon intensive sector. And given there are so many different industrial sectors and are so different from each other and they're so heavily dominated by use of fossil fuels and we have to look at a variety of different technologies and measures. And today I would like to highlight on two sets of strategies. And one is on the energy supply side and focusing on electrification. And another one is on the material demand side and focusing on material efficiency. Let's look at electrification and we'll start here.
We see that there's several interesting things going on. While the light industries as mentioned earlier, only accounted for 13% of the total industrial energy use in China, it's a relatively small share, but given the size of China's industrial sector, even a small percentage is still is a lot. And reducing fossil fuel consumption in the light industries represents a significant opportunity.
And if we look into the light industries, we see there's three things that are interesting. One is showing on the left that you see that several of the electricity already play a quite dominant role in several of the light industries. As for example, in 2018 you see that the electricity already accounted for almost 80% of the final energy use in electronic sector and about 64% in machinery manufacturing. But there's some other sectors like textiles and food and beverage processing and tobacco industries have a relatively small share of electricity use. So, that's number one.
Number two, we see that the light industries have a relatively low temperature process heat requirement. And showing here on your right that you see the textiles, medicine production and manufacturing of metal products. Sorry, metal products, almost all of their thermal energy demand has a temperature need that's below 150 degrees Celsius. And for other industries such as food and beverage and tobacco, about 80% of their thermal energy demand is 150 degrees Celsius or below. So this really represents an opportunity for something that we can do right now.
And the third interesting thing for the light industries is that these industries energy demand is not as complex, not as heavily integrated as, say, comparing to a petrochemical facility, a petroleum refining facility, so they're much more straightforward, less complicated, and easier to implement electrification technologies. And if we look at the list of commercialized and emerging electro technologies on the market or in the labs we see there's several like electric boilers, hybrid boilers, industrial heat pumps listing on the top of the table. They're already commercialized and we can procure them, we can buy them, we can implement them in the facilities today, right? We're talking about near term things we can do right now. That's why we think the lighting industries may be an interesting target for us to look into that. And as you know, switching from onsite fossil fuel heat production to electrification technologies such as switching to coal-fired boiler or switching from coal-fired boilers to industrial heat pumps can also bring us other benefits such as improved energy efficiency, reduced cost in terms of maintenance and insurance, improved productivity, reduced air pollution.
So there's some other benefits to consider as well, but as you expected, and a big caveat that we need to have is that pursuing this route of decarbonization in industry using electrification technologies need to be supported by, need to be pursued together with a fastly decarbonizing power sector. We need to have both going at the same time. Here I put on some other technologies, renewable heat technologies that's providing heat, not using electricity, but using solar, geothermal and biomass. And you can see that the temperature range they can supply to is about 200 up to 200 degrees Celsius at right now. That's why we think it's an interesting thing for us to look into the light industry. If I may, I'd like to spend, turn your attention to the second set of strategy I mentioned earlier on material efficiency and use cement and concrete as an example.
Traditionally a lot of attention has been focusing on how do we reduce carbon dioxide emissions from clinker production, and how do we use amount of clinker that's needed to make cement. And both areas are super important and we have made great progress in both areas and I think both areas will continue to play a significant role moving forward as well. But thinking one step back and thinking why do we need to make cement and concrete and how are we using cement and we actually open up more options where we can use more different strategies if we look at from the value chain perspective, thinking about what are the measures we could really reduce cement in concrete, what are the measures that we could reduce the use of concrete in buildings and construction projects and can we make more efficient use or reuse of buildings and build construction materials? And this really opened up more strategies and measures and technologies. You see some of them are mentioned here. And some of them, for example, improved building design, use pre-cast components, extending building lifetime.
Some of them are commercialized, we know how to do it, other countries are doing it. But for a number of barriers, market barriers, institutional barriers, we don't see that completely adopted in China. And we see that's an opportunity that we can do something about right now. In fact, at Berkeley Lab, my colleagues and I we've done a study and look into exactly this question of seeing how can we reduce embodied emissions of building materials in China and what are the pathways. And we see that it's possible to achieve near zero emissions by 2060 in China's building material sector.
And we see that material efficiency strategies, as we discussed earlier play one of the most important roles, especially in the near term actually in our estimate counts about 50% of the total CO2 emission reduction by 2030 has that potential to do that. And this roadmap includes not only cement but also steel, aluminum, glass. And we looked into each one of them and applied different but similar material efficiency strategies. Sorry, lastly I would end here in our report that we wrote together. We recommend several things that China and US can collaborate on in including these critical areas such as industrial heat electrification and low carbon building materials. And given the time today, we won't go into the detail of each of these recommendations, but I encourage you to take a look at our report and if you are interested to find out more information about these technologies, about these policy recommendations and it's also translated into Chinese.
Thank you for the opportunity, I look forward to the discussion. - Thank you so much, Hongyou. Great. And thank you for teeing up some of those opportunities for collaboration.
We'll get into some more of those I imagine in the interactive portion of our discussion, so look forward to looping back on those topics. In the meantime, I'll just remind our audience that if you do have any questions at any point for any of our panelists, feel free to start entering those in the Q&A function at the base of your screen. We'll get to that a little bit later in our program today. But first I'm going to introduce Professor Zhang, who is a professor in the department of Thermal engineering at Northeastern University of China. He is the vice president of the Low Carbon Steel Frontier Technology Research Institute at the university and a visiting scholar at Lawrence Berkeley National Lab as well. He has contributed to an expert group focused on low carbon iron and steel and has carried out very significant research focused on industrial systems and carbon peaking pathways.
And it's very extensively published in the academic literature. So over to you, Professor Zhang, for your remarks. - Thank you. Thank you very much. Ladies and gentlemen, good afternoon and good morning. I'm Qi and come from Northeastern University. It's my honor to attend opportunity for enhanced near term US industrial decarbonization.
Thank you all. Thank you for invitation. In order to give expression into my remarks, I will make my presentation in Chinese. Thank you very much. (Professor Zhang speaking in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) - Thank you so much for those remarks and highlighting a wide range of potential approaches, you know, on the production side, the demand side, also technological approaches and including nature-based syncs as well, so thank you so much for those remarks.
I'm now gonna turn to Jackie Wong from the Natural Resources Defense Council to offer some insights and perspectives as well in reaction to kind of what she's heard from her colleagues and her own issue expertise on this topic area. So Jackie leads NRCDs Industrial Hydrogen and Innovation Group, which does focus in on the decarbonization of the industrial sector and also includes deployment of green hydrogen in targeted applications and the development and deployment of emerging technologies. So, Jackie, please share your reflections and thoughts. - Thank you so much, Jen. Good evening and good morning. And first of all, I'd like to thank the California-China Climate Institute for hosting this webinar and to express gratitude to the four authors of this report, including Hongyou Lu, and Professor Zhang.
I thought that the report provided a really informative snapshot of the sources of industrial emissions in both China and the US, and I really liked that it concisely covered decarbonization opportunities throughout the value chain of these industrial materials all the way from material design through reuse and recycling. In particular, many of the strategies, measures, and technologies that Hongyou mentioned at different points throughout the value chain such as material efficiency often don't get enough attention in discussions about industrial decarbonization. Given time constraints, I'd like to focus my commentary on four main points.
The first point is a point of emphasis. I particularly liked the suggestion in the report that China and the US could cooperate on developing and harmonizing greenhouse gas emissions accounting standards on industrial products. As the report notes, accurate emissions accounting and disclosure is a necessary enabler of other policies, whether it be green procurement programs, carbon pricing programs, or greenhouse gas emission standards. However, the emissions accounting raises many methodological questions such as where to define the boundaries for a lifecycle analysis of an industrial product.
Harmonization of accounting standards across geographies, including China and the US will be important to ensure apples to apples comparisons, which will become increasingly important as carbon border adjustments are put in place around the world. The second point is a friendly amendment. The report included a great set of policy recommendations with a particular focus on technologies and policies that are already available or that can be deployed and scaled up within the next 10 years. And we need to take advantage of these opportunities. But I'd also like to echo some of what Julia and Professor Zhang raised, and specifically the importance of taking action now to bring to market highly innovative transformative technologies that will be necessary to deeply decarbonize industry.
In addition, these can't be one-off policy interventions, but rather there must be a targeted and comprehensive suite of policies to ensure that once we get first of a kind demonstration projects off the ground, they're then quickly followed by second, third, and fourth of a kind projects and so on. The third point is a note of caution. As we all know, the industrial sector does not exist in a vacuum and it will be important for us to consider and plan for how various decarbonization levers impact other parts of our energy system and economies. For example, the electrification of industrial heat processes will add significant demands on the electric grid, so we need to be thoughtful about how the grid will need to evolve in order to deliver economically competitive and reliable electricity. In addition, as Professor Zhang said, hydrogen can play an important role in decarbonizing the industrial sector.
However, we need to ensure that the use of zero carbon hydrogen is truly zero carbon. In what is a very active issue in the US right now due to the hydrogen tax credits in the Inflation Reduction Act, there is a risk that if there are not strong guardrails in place, energy intensive electrolyzers could actually increase emissions by resulting in more fossil fuel generation coming online, even if the resulting hydrogen is ostensibly clean. And my final point is an expression of curiosity.
Something that I would like to explore and better understand going forward is the emissions reduction potential of the various decarbonization levers that were suggested in the report. For example, I've seen the World Steel Association mention that it's estimated that we currently recycle more than 85% of all steel products that reach the end of their life. I'd be keen to understand if that's true.
And if so, how difficult and expensive would it be to get the remaining 15%? That's just one example of course. To achieve our climate goals, we're going to need to push on all of the decarbonization levers mentioned in the report and today from the other presenters. But having a more granular sense of the size of the prize relative to the difficulty of getting it would help to inform how and where we collectively focus our efforts. Thank you very much and I look forward to the discussion. - Thanks so much, Jackie for offering those additional perspectives and raising some questions, I think that we can pose those back to some of the report authors that we have here today and start a conversation around it. But first, to remind our audience if you do have questions, feel free to add them in the Q&A.
We're gonna be turning to our interactive portion of the discussion. So I welcome all of the panelists to come on screen now and join us for the Q&A. And I'm curious if Hongyou or Professor Zhang, if either of you want to provide a direct response to any of the questions that Jackie just raised or any reflections that I brought up for either of you? - Thank you, Jackie.
That's a great question and I often wonder about that too, but I know the aluminum and steel that have a fairly high recycling rates in the US for example, but I'm not, actually not so sure about the rate at that high for China. I don't have that number on top of my head. Maybe, Professor Zhang, sorry to pitch that to you, but I don't have that for China, so I cannot say that, but I know in US and in other European countries are relatively high. But to answer your question, I will worry about some of the material contamination in terms of getting the steel out of the recycled products. I will worry about the materials quality of it to produce high strength steel, maybe it's okay for low strength, lower value added products, but how do can we produce very high strengths steel using recycled materials? That's also my own curiosity that I need to figure out. But sorry, Jackie, I ran around and didn't really answer the question.
I would just say yeah, it will not be so easy. (chuckles) That's my assumption. - Okay. (Professor Zhang speaking in Chinese) (Hongyou speaking in Chinese) (Professor Zhang speaking in Chinese) (Professor Zhang continues to speak in Chinese) Sorry. (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) - Thank you very much. That was very interesting. - [Professor Zhang] Thank you.
- Okay, excellent. I'm curious, you know, for any of our panelists, so, Hongyou, you in particular highlighted, you know, the need to rapidly decarbonize across multiple sectors, and that this, the work in the industrial sector isn't kind of in a vacuum and needs to be in tandem with the power and other sectors as well. And I know in the report you highlighted some kind of more cross-cutting strategies, particularly efficiency gains, but I'm curious if there's any particular strategies you'd like to highlight as having a broad application across a wide range of topic areas.
If there are things that have broader application. I'm curious if you wanna expand on that element of the report. - Yeah, that's a really good question, Jen.
I think several of the concepts, first of all, of several strategies as mentioned by our experts here already material efficiency, energy efficiency and fuel switching using hydrogen and carbon capture and utilization. These technologies are across the board, if I understand the question correctly, and it's not just for one specific industrial sector like electrification, heat pumps. It's not just, actually, it's not just for industry. It can be used for buildings too, right? So these technologies are some of them are not totally to the end users being used due to a number of reasons. Electricity costs and they don't have it, they don't know it's available, they haven't seen somebody use this, they have questions about it. So there's a number of things that are hindering the adoption of these technologies.
But the concepts and the frameworks, I would say that that applies to a number of the industrial sectors, even though industry sectors is so different, from pulp and paper to chemical production. But the concept there and one of the for this report, we say that they are relatively medium to higher level I would say kind of covering the, making the broad, you know, the strokes and say, hey, here's these areas, don't forget them, take a look at them, policymakers, they're there. But in some of our like research work, we dive into the steel industry. We recently finished the steel roadmap for China and we dived into specific applications for steel. On the building material side, we dived into each of the building materials and we do energy deficiency benchmarking for different things. So, we do need to have that big picture, especially for the policy makers.
That's why I think the value chain perspective, it's so important because the cement industry will be very interested in how to reduce clinker or not to, but they may not be interested in how concrete used at all, but for the policy makers they do need to know that. So, I think those things need to be mentioned. Sorry, that's too long probably. - No, that was great. Thank you.
Thanks for that. I also was curious sort of tying together one of the recommendations in the report and the comment that Jackie made. So, in the report one of the recommendations is around first demonstration projects, and so I'm curious if you have any particular examples you'd wanna highlight and then bringing in Jackie's point, you know about not just having one demonstration but replicable models and things that can be scaled up and replicated in other areas. So I'm curious if there are any examples of particular companies or facilities or approaches that you think are worth pointing out or highlighting in some way? That can be for any of the panelists.
- I know that we are quite focused on a few that are specific to industrial sub-sectors, so for example, inert anodes in the aluminum sector, carbon capture and storage in the cement sector and green hydrogen direct reduction of iron in the steel sector. And in the US, part of the Inflation Reduction Act money that Julia mentioned was about $6 billion at the Department of Energy that is going to support industrial demonstration projects. So we think that this is really a ripe opportunity to help stand up some of these first of a kind projects that could be really transformative for these industries. - Yeah, and just to expand on that a bit further, I mean I think Jackie made this comment as well during her remarks and during her feedback on the report, but the range of technologies that can be applied are so wide. I mean they're so wide ranging (chuckles) in that some of them are very much what we would might think of as low hanging fruit like industrial heat pumps, which Hongyou had mentioned and using those to increase energy efficiency of industrial facilities.
At the same time though, when we're talking about even things like industrial heat pumps, the size of them is so much larger than what we're used to putting into a different type of building that it, you know, strains the actual process and strains the investment in a different way, and so we also have to kind of wrap our heads around that, that and even to just do something like energy efficiency, the timelines for payback might be longer than they would be in other sectors and it might also require that the government or whoever provide a bit more of a subsidy in order to have some of those investments actually be made and on the timeframe that we need them to be made in order to have emissions reduced. So in California for example, the California Energy Commission through a program called Indigo is actually offering a hundred million worth of funding for industrial decarbonization for things like, you know, industrial grade heat pumps, so that facilities can undergo these sorts of changes. But that's something that we would consider low hanging fruit.
When it comes to some of these more experimental technologies or I shouldn't say experimental technologies, but technologies that are gonna be demonstration for right now and that hopefully will move up to scale. I would say actually even though maybe it's traditionally known more as being a bit conservative, the cement and concrete sector in the US in particular has both bold goals and is starting to investigate I would say the application of these technologies to their facilities. And that's an area in particular where, you know, when you talk about CCCS or CCUS or any combination of the C and C and U and S, I'm actually quite excited 'cause I think it'll be a way of basically reducing the risk for other sectors that are also gonna be looking at CCUS technologies.
- Okay, thank you, both for those responses. We have a question for Professor Zhang who mentioned that in China, 80% of steel manufacturing is from highly polluting blast furnaces, and so there's a question around how strong is the push to convert to more efficient electric arc furnaces and are there governmental incentives or are they more market based? So, Professor Zhang, I wonder if you wanna come in on that question. - Okay, thank you.
It's a good question. (Professor Zhang speaking in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) (Professor Zhang continues to speak in Chinese) - Great, thank you. A few of you have mentioned green hydrogen as a potential opportunity. I'm curious if anyone has perspectives on how the opportunities are similar or different in the US versus China. Are there similar opportunities or do you think, or the context very different? Anyone wanna comment on that? - Ooh, this is a really good and meaty question and it seems like we're all gonna have to answer it in our own way. And I'll be honest, I'm less familiar with the context in China, and so I'll answer more from the perspective of the US.
Ooh and, Jennifer, this is also a tough one too because I think even in the discussion of just hydrogen production overall, we're starting to move away from the colors, right, and towards more what the emissions intensity is gonna be of the hydrogen itself. And I think that's actually a really good direction to be moving in because especially when you talk about electrolytic hydrogen in the near term, and maybe it was Hongyou who said this before, in the near term, you're not always talking about emissions reduction overall. Based on the cleanliness of the grid you might be talking about as some emissions increases. So with that said, I mean again, I think that the hydrogen landscape in the US has very much changed because of what the Inflation Reduction Act is doing to the economics of purchasing the hydrogen and just the cost of the hydrogen making it at cost parity in some cases to some of the fuels that are already being used.
So we don't see the green premium necessarily that we're seeing with other fuel types, including at the moment still with like sustainable aviation fuel. And I think that's gonna be just a driver of investment in hydrogen production in the US. I think what it's also gonna be is a driver of hydrogen exports to other markets, especially other markets where there's not necessarily, you know, the same I would say a combination of political interest and financial logic behind doing hydrogen production domestically. And so you might actually see, you know, especially outta the Gulf Coast, much more in the way of hydrogen exports than might have otherwise been possible without some legislation and some tax credits to help with that. The thing that I think we don't talk about enough is just electrolyzers. (chuckles) The availability of electrolyzers, you know, the price of electrolyzers.
I mean talk about a lack of a transparent market. That's a place where there aren't that many producers of electrolyzers themselves, there's no incentive to drive down the cost of electrolyzers, at least not now. And because there are so few projects, you don't really have the economies of scale.
So I think, you know, what we're seeing in the hydrogen production space right now is a push towards looking at emissions intensity rather than just keeping with this green or nothing mentality. And also starting to tease apart if you are gonna push for green hydrogen or electrolytic hydrogen, then you really have to push on the electrolyzer market and have that, have a pretty steep reduction in costs, not to mention a steep increase in availability. - And, Jen, if I may, I'll just add, Julia that's great, thank you. And thanks to bring up the electrolyzer, so that that's great to hear your perspective on that. I would just like to add from the Chinese, on the China side and from the industry perspective, I see that hydrogen is potentially a very hot commodity that all the sectors, transportation, chemicals, ammonia, and even cement and steel are all kind of interested wanting to get a hand on it.
And for steel for example, since we have Professor Zhang, the steel expert here, I would like just to throw out here there and see what you guys think that I see that the steel plants, steel mills, especially they're integrated mills that they're looking to have another way to produce primary steel, where they are located seem to be would play a big role. How could they have access to renewable electricity based green hydrogen, sorry Julia, I use the color coding. How could they use that lower carbon hydrogen. And if they're closer to some of the hydrogen, sorry, renewable resource areas such as in north Mongolia, such as Xinjiang, such as Southwest where they have hydro, they will have advantage and that would potentially mean they'll have to move to a different location. But I would say that's probably a long term, mid-long term perspective on that. But for steel industry perspective, that's where I say, oh how are they gonna get to have that hydrogen.
So that that's something to, yeah. - And I similarly as Julia don't have much context on China, but in the US you know, hydrogen is really positioned to take off with extremely generous tax credits in the Inflation Reduction Act as well as the hydrogen hubs, and so there's a ton of interest both in the private sector, federal state levels. But at the Natural Resources Defense Council we're really focused on making sure that it is truly clean. And as Hongyou said, hydrogen is often mentioned as the cure-all in many different conversations, but it's relatively inefficient to produce.
So we are advocating for using it in targeted applications where there really are it really difficult to decarbonize applications and not where there are more efficient or cost effective decarbonization options such as buildings. - Okay, thank you so much all for those perspectives, really helpful. We're coming toward the end of our time here, so maybe just one more question and maybe to kind of loop back to where we started. Julia started us off with, you know, some of the financial investments under new federal legislation here in the US.
I'm curious for any of our panelists, if there's anything else on the finance side that our panelists would recommend for the US and China in terms of promoting new technologies or helping drive industrial behavior change. Any recommendations or suggestions you have on kind of financial incentives? Okay, maybe that was a tough one. (chuckles) (Julia laughing) Does anyone wanna come in on that? If not, we can move on. (chuckles) - Yeah, I mean it's a great question.
I just, so it's interesting, so we've hosted a couple of workshops, again in the US context, so with federal policy makers, state policy makers and local policy makers both in Texas and California. And what was really interesting about having those conversations, actually the three levels of government all in a row was that, you know, there are financial incentives available through the federal government. There aren't really at the state and local level, I mean there's grants, so there's money, but there's not loans or other type, you know, tax credits, other types of financing mechanisms on the, at least on the public side that are available. So I would say that is one area where we're seeing gaps, especially in state policy across the US is that we just don't really have, you know, some of those financing mechanisms available. And I wouldn't say right now, although I might be corrected by somebody in the audience or on this panel that really the private sector or private finance, private capital is coming in to sort of bridge the gap.
I think we still need a bit of a push in that direction. But yeah, I mean the reason I was silent is 'cause I can't really actually think of, you know, what the other incentives, financial incentives might be beyond what we're seeing in the federal government. - And, sorry, Jen, that's a hard question. I would just add that when we talk to the experts in China and whether it's on steel and cement, for example, cement and CCUS always came up and the Chinese experts would always say, well, in the US they have 45Q. (chuckles)
And yes, so you know from the industry, the manufacturer perspective, they really would like to see some substantial tangible incentives as always. And right now for the industries in China, it seems like there's more of a, you know, still in the work I would think and used to in the 12th year plan, the 13th five-year plan, there's financial awards on energy efficiency retrofits. So that's a big improve, that's a big incentive and really move the needle on energy efficiency. So I would really like to see something like that to happen in the Chinese industrial sector.
- Okay. Thank you, all for bearing with my questions. Great. So, we are unfortunately coming toward the end of our time. I just wanna thank all of our panelists for their expertise and time and perspectives and for engaging in this discussion as well as thank our audience for joining us. This event is being recorded, and so we'll later have the video up on the website and be able to share it with anyone that may have missed it. We really appreciate your perspectives and engaging in this conversation with us.
Hope that you'll check out the report if you haven't already had a chance to. And thank you, everyone for your time and have a great evening or morning wherever you are. Thank you. - Thank you so much. - [Hongyou] Thank you. Bye - [Jackie] Thank you. - [Professor Zhang] Thank you.