Industrial Decarbonization in Pennsylvania

Transportation and electricity production are the top sources of U.S. greenhouse gas (GHG) emissions, with the industrial sector close behind in third place. But that could soon change.

A 2023 analysis by the Rhodium Group found that, despite challenges like accelerating EV adoption, the buildout of new transmission, and electricity management reform, the top two sectors will see decarbonization progress thanks to continued steep declines in the cost of renewable energy and the impacts of the Inflation Reduction Act.

Progress in the industrial sector; however, is slower. Heavy industry is on track (with sectoral growth factored in) to emit the same amount of GHG in 2035 as it does today. It will then become the nation’s biggest source of GHG emissions, accounting for one-third of the U.S. total.

Pennsylvania—the fourth-largest GHG-emitting state in the nation—is already there. The largest share of the state’s current emissions, at one-third, comes from the industrial sector. Projections in Pennsylvania’s Climate Action Plan suggest that industrial emissions will remain steady or perhaps even increase through 2050.

The industrial decarbonization challenge—in scale, complexity, and cost—is daunting, requiring sustained regulatory and fiscal actions at both federal and state levels. The Biden administration continues to lead the way, recently awarding $6 billion for 33 large scale heavy industry demonstration projects, one of them at Cleveland-Cliffs Butler Works in Lyndora, Pennsylvania.

Capitalizing on the Biden administration’s leadership, the Commonwealth has applied for $500 million from the Environmental Protection Agency’s Climate Pollution Reduction Grants (CPRG) program to fund a state grant program to start reducing industrial GHG emissions.

How big is Pennsylvania’s industrial decarbonization challenge? Where and how should public funding be targeted?

A comprehensive analysis prepared for the Ohio River Valley Institute aims to answer both questions.

A Roadmap for Industrial Decarbonization in Pennsylvania prepared by Strategen explores the role of five major decarbonization levers: energy efficiency, material efficiency, electrification, fuel switching, and carbon capture and storage (CCS). Fuel switching here means replacing fossil fuels with, primarily, clean hydrogen; not fuel switching among fossil fuels; e.g. coal to natural gas.

Strategen’s analysis estimates both the immensity of the state’s challenge and its possibilities. It finds that by applying these levers, Pennsylvania’s industrial emissions can be reduced by 21% in 2030 and 84% in 2050—at a cost of $30-35 billion.

Strategen points out that industrial decarbonization can create significant job growth and major public health and equity improvements. It can also help to maintain the competitiveness of Pennsylvania industries—to the extent that environmental, social, and governance (ESG) factors continue to be valued in the marketplace.

Unlike some recently proposed regional decarbonization plans (identified in the report) that prioritize the role of hydrogen and CCS (and not coincidentally the natural gas industry), Strategen finds that electrification enables about half (48%) of the total emissions reductions of the roadmap. (Their analysis assumes that the grid will decarbonize linearly by 2050.) Energy efficiency (14%), CCS (7%), and fuel switching (9%) account for most of the rest.

Strategen makes recommendations on how Pennsylvania can optimally invest potential CPRG funds. Based on cost effectiveness, job creation, and cumulative emissions reductions, they identified energy efficiency and electrification as the highest-priority decarbonization levers for the industrial sector. Technology upgrades and clean hydrogen fall into a second tier, with CCS and material efficiency evaluated as low priority investments.

Importantly, Strategen cautions that public grant funds should not pay for projects/investments that are required to comply with Federal or state regulations. The best example of this is methane emissions reduction in the oil and gas sector. Since Pennsylvania heavily subsidizes natural gas—to the tune of about $2 billion annually—that caution about program design is merited.

A Pennsylvania industrial decarbonization grant program and adjacent policies would do well to incorporate the roadmap’s methodology and project evaluation criteria. In starting to chip away at a $35 billion challenge, the Commonwealth should seek to leverage the maximum amount of private investment for every dollar of public funding.

John Quigley

Senior Fellow, Kleinman Center

John Quigley is a senior fellow at the Kleinman Center and previously served on the Center’s Advisory Board. He served as Secretary of the PA Department of Environmental Protection and of the PA Department of Conservation and Natural Resources.