Industry sector model
For the purposes of the industry model, the industrial sector includes International Standard Industrial Classification (ISIC) Divisions 7, 8, 10-18, 20-32 and 41-43, and Group 099, covering mining and quarrying (excluding mining and extraction of fuels), construction, and manufacturing. Petrochemical feedstock use and blast furnace and coke oven energy use are also included within the boundaries of industry.
Industry is modelled using TIMES-based linear optimisation models for five energy-intensive sectors (iron and steel, chemicals and petrochemicals, cement, pulp and paper, and aluminium). These five sub-models characterise the energy performance of process technologies from each of the energy-intensive subsectors, covering 39 countries and regions. Typically, raw material production is not included within the boundaries of the TIMES models, with the exception of the iron and steel sector, in which energy use for coke ovens and blast furnaces is covered. Due to the complexity of the chemicals and petrochemicals sector, the technology detail of the sub-model focuses on five products that represent about 46%3 of sector’s energy use: ethylene, propylene, BTX (benzene, toluene and xylene), ammonia and methanol. The remaining industrial final energy consumption is accounted for in a simulation model that estimates energy consumption based on activity level.
Demand for materials for the duration of the model time horizon is an exogenous input to the model, estimated on the basis of country- or regional-level data for gross domestic product (GDP), disposable income, short-term industrial capacity, current materials consumption, regional demand saturation levels derived from historical demand intensity curves, and resource endowments (Figure A.4). Total production is simulated by factors such as process, age structure (vintage) of plants and stock turnover rates. The 2DS considers improvements in recycling in several sectors, leading to reduced primary chemicals demand for plastics, and a shift toward secondary production of metals and pulp. The B2DS considers additional material efficiency strategies that affect overall production levels for certain materials. For example, improvements in production yields reduce overall demand for crude steel in the B2DS compared with the other scenarios4. Table 4.1 describes the material efficiency strategies considered in each scenario, and Figure 4.5 gives a high-level view of global material production levels.
Figure A.4 - Structure of ETP industry model
Key Point: Based on socio-economic assumptions, historical trends, expert views and statistical information, exogenous material demand projections are used to determine the final energy consumption and direct CO2 emissions of the sector, depending on the energy performance of process technologies and technology choice within each of the available production routes.
Each industry sub-model is designed to account for sector-specific production routes for which relevant process technologies are modelled. Industrial energy use and technology portfolios for each country or region are characterised in the base year using relevant energy use and material production statistics for each energy-intensive industrial subsector. Changes in the technology and fuel mix, as well as efficiency improvements, are driven by exogenous assumptions on the penetration and energy performance of best available technologies (BATs), constraints on the availability of raw materials, techno-economic characteristics of the available technologies and process routes, and assumed progress on demonstrating innovative technologies at commercial scale. Thus the results are sensitive to assumptions on how quickly physical capital is turned over, on relative costs of the various technology options and fuels, and on incentives for the use of BATs for new capacity. Fuel costs are based on outputs from the ETP conversion sector model.
The industry model allows analysis of different technology and fuel switching pathways in the sector to meet projected material demands within a given related CO2 emissions envelope in the modelling horizon, and in least-cost fashion.
3. Including energy use as petrochemical feedstock.
4. Descriptions of ETP 2017 2°C Scenario (2DS), Beyond 2°C Scenario (B2DS) and Reference Technology Scenario (RTS) is available in the Global outlook chapter.