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Regional variability and its impact on the decarbonization of emissions-intensive, trade-exposed industries (1st October 2024)

By Mark Jaccard and Chris Bataille

Emissions-intensive, trade-exposed (EITE) industries account for a large portion of global industrial emissions and are responsible for many of the primary products and materials we use daily. Demand for these products is expected to persist and even grow alongside the global economy, even with future improvements in material efficiency. Although there is consensus on the need to achieve deep decarbonization of EITE industries to meet a net-zero by 2050 target, many technological and political hurdles remain.

EITE industries are characterized by long-lived, carbon-reliant assets, industrial heterogeneity, and competitiveness concerns driven by global demand for their products. Furthermore, many of the low emissions technologies available to these industries are either cost-prohibitive or still under development. As a result, policymakers have historically prioritized protecting EITE industries over transforming their production processes to achieve deep decarbonization.

A growing number of industrial climate policies have been legislated globally. Two landmark examples include the European Union’s Green New Deal and Emissions trading system border carbon adjustment mechanism, which began phase-in in 2023 with measurement protocols, and the United States' Inflation Reduction Act, passed in 2022. Although these policies were entirely different approaches, both were deemed boons for industrial decarbonization. Industrial climate policy in Canada has also continued to grow, with both federal and provincial governments combining carbon pricing mechanisms with incentives and funding to support the development and deployment of clean technologies.

Despite more political will to tackle industrial decarbonization in Canada and globally, industrial emissions reductions have been modest. Much of the literature on EITE decarbonization has focused on reviewing technology and policy, demonstrating the technical feasibility of reaching net-zero emissions, without fully addressing the level of policy stringency required to support the transition. Furthermore, studies have focused on industry-specific decarbonization pathways and have not addressed the potential for regional strategies to identify economic opportunities and challenges like resource availability.

Canada, though a relatively small trading nation, provides an interesting case study for EITE industrial decarbonization due to its industrial heterogeneity, regional resource variability, and current climate policy landscape. We conducted a study to assess how regional variability influences the adoption of low emissions technologies in EITE industries at different levels of policy stringency. Our goal was twofold: first, to explore the potential for EITE decarbonization under different policy stringencies, and second, to evaluate major decarbonization pathways and their costs based on regional circumstances.

We found that Canada’s current policy stringency would need to increase significantly to encourage deep decarbonization. In a scenario where we assumed global climate action, a carbon price of $430 USD per ton was necessary to achieve an 80% reduction in EITE industrial emissions by 2050. In another scenario, where the rest of the world lagged on climate action—a reflection of our current reality—we found that achieving deep decarbonization of EITE industries in Canada would be highly unlikely due to international competition and the risk of industrial shutdown. These results highlight the need for further policy mechanisms to aid the EITE industry decarbonization in a world without global consensus on climate policy. First, policymakers can introduce support mechanisms that encourage the uptake of low carbon technologies, such as investments in R&D, subsidies, and infrastructure build-out. Second, they can address international competition directly by penalizing climate laggards through trade mechanisms such as the formation of climate clubs and BCAs.

Canada’s regional resource availability and industrial mix also significantly influenced the decarbonization pathways for EITE industries. Of the near-commercial and emerging technology options for decarbonizing industrial processes, most rely on three key resources: low carbon electricity, biomass, and geological capacity for carbon sequestration. Canada has access to all three but with significant regional variability. Our study found that the cost of carbon capture and storage and low carbon electricity varied widely by region and that regions with relatively low-cost resources readily adopted them to decarbonize their EITE industries. Regions without relative resource advantages relied on a greater mix of decarbonization pathways.  

Although this study focused on Canada, regional variability should be considered globally for EITE industry decarbonization. Regions with access to ready geology for CO2 storage or access to low-cost and low carbon electricity should develop decarbonization strategies that harness these resources. Policymakers can use relative regional advantages and disadvantages to design support mechanisms, like subsidies and infrastructure build-out, to ensure EITE industry decarbonization can be achieved at least cost to the EITE sector.

The research article “Regional variability and its impact on the decarbonization of emissions-intensive, trade-exposed industries in Canada” can be read and downloaded here

Decarbonising plastics - By Ellen Palm (6th June 2024)

The issues and complexities of plastics caught my attention long before I started the PhD position. Before my work life was centred around plastics decarbonisation, sailing was my main occupation. Living on small boats and crossing large, vast expanses of water is somewhat like a simulation of human life on Earth. Issues of democratic decision-making and food and water availability are at the centre of everything. The waste management procedures also become more evident than in a land-based life. Everything we bring on board must be dealt with. What can be thrown into the ocean, and what must be separated, cleaned, dried, and stored in a sanitary way in the limited space and tropical heat on board until we next reach port, perhaps weeks away? Every little piece of paper, metal, glass, and, of course, plastics requires a decision and procedure.

Initially, I must admit that I did not see the point of us having to go through all the hassle. What difference does a few people’s litter make? My grandfather used to say that the oceans are so immense that we can never contaminate them. Perhaps I had that same feeling while living isolated with the shifts in wind and daylight as the main source of influence. However, after reaching one of the most remote atolls in the Pacific Ocean and seeing the sand on the windward side mixed with a large proportion of plastics, my mind started to wander. If plastics had managed to reach all the way here and pollute this pristine area, the issue with plastics must be both massive and global. The immediate thought was that if plastics pollute and poison nature even in these isolated locations, something needs to be drastically changed. 

What I couldn’t get my head around was that the boat I lived on mostly consisted of plastics. The hull kept me dry and safe from both the raging storms and burning sun and made it possible to move through the water much more smoothly than the historical wooden vessels I had previously sailed. However, it was not just the hull, but also the sails, ropes, electric system, clothing, and, of course, the food packaging that consisted of plastics. Without food packaging our supplies would have run out within a week or so, but largely thanks to the beneficial properties of plastics, we could sail on for a month at sea without suffering from hunger. It turned out that plastics have both valuable and troublesome aspects. This complexity and the overwhelming presence of plastics fascinated me and made me want to know more about it. Wishing to better understand plastics, I applied to become an environmental engineer to learn more about the chemical composition, material properties and environmental impact of plastics. Little did I know then that this journey would take me into sciences way beyond my imagination and that, instead of solving issues and digging deep into the chemistry behind polymers, I would become interested in posing questions and argue for the need for multiple perspectives on plastics decarbonisation.

By unpacking how EU policymakers understand issues concerning plastics, the thesis exposes how they are mainly conceptualised as a waste issue. This narrow framing of the issues concerning plastics neglects their complexities and systemic nature. The explicit downplaying of climate impact is especially noteworthy. If policymakers do not recognise the connection between plastics and climate change, it is not likely that they will introduce policy measures to address it. 

In a first-of-a-kind study, the thesis shows that, from a technological perspective, European plastics production could decarbonise via the pathway of carbon capture and utilisation. However, producing plastics from water and carbon dioxide is extremely energy-intensive and therefore very costly. Even if this perspective neglects all the social, political and institutional considerations, it serves as a thought experiment that plastics production could decarbonise. 

How expectations of carbon capture and utilisation, and the larger imaginary of circular carbon, are articulated can shape and limit how and whether they are enacted. The thesis maps and analyses such framings in two cases: firstly, within the scientific carbon capture and utilisation community, and secondly within the plastics and petrochemical industry. The material shows that the scale of production (growth) is not discussed, and strategies to decarbonise via low-tech pathways are often neglected. 

If supporting the technological development surrounding plastics decarbonisation, all these aspects must be recognised. Failure to do so risks resulting in delayed decarbonisation efforts. In conclusion, the thesis advocates for a pluralistic approach to plastics decarbonisation and emphasises the importance of considering both high- and low-tech mitigation pathways, since one perspective or technology is insufficient to address the complexities of plastics decarbonisation.

The PhD thesis “Decarbonising plastics – On the technologies and framings of carbon capture and utilisation” can be read and downloaded here.

Industry decarbonisation: looking beyond technological solutions - by Timo Gerres (March 25th, 2024)

Clean alternatives in energy and emission-intensive industries are not competitive. The main barriers are higher operational and energy costs. Renewable electricity remains very expensive for high-temperature heat generation compared to fossil fuels such as natural gas, fuel oil or coal. Equally, biomass alternatives, such as biomethane or potentially hydrogen, could replace fossil-fuel sources for heat generation only if cost-competitive.

Support is needed to overcome the operational cost barriers preventing the industry from investing beyond energy efficiency. Only then can we reach ambitious domestic and global emission reduction targets to limit global warming.

Policymakers are realising that the transition towards clean energy consumption in industry is not a question of subsidising investments but a matter of long-term affordable energy supply. The United States Inflation Reduction Act provides strong incentives for low-cost hydrogen production. In the European context, Contracts for Difference (CfDs) to safeguard low electricity prices for the industry are being explored. Carbon Contracts for Differences (CCfDs) shall either levy the production premium with low-emission technologies compared to conventional processes, as is the case for the German “Klimaschutzverträge”, or support for carbon storage facilities (the Netherlands) and hydrogen production (France).

Many such public support programs are in their early implementation phase, and their effectiveness and impact remain uncertain. Even if proven successful in accelerating the development and implementation of clean energy technologies in industry, they can only be the first step for an industrial transition towards clean energy use.

Industry is global, and companies compete directly or indirectly with businesses worldwide. Hence, the road towards a clean industry must also be global and should not lead to domestic industrial transitions that fully rely on energy price subsidies. Enabling a fair industrial transition and moving towards a decarbonised industry is one of the key challenges that lie ahead.

This small opinion piece is, first of all, the summary of our latest report, “Perspectives for Industrial Transformation towards a Green Economy” (available in English and Spanish), which is a great holistic overview of many technical, economic and regulatory challenges for all industries. It also summarises much of the work I have done over the last 7 years at the IIT, Universidad Pontificia Comillas. However, for RENEW-Industry, it is also a partial goodbye message. In October 2023, I left my full-time dedication to academia and research to assume my new role as Energy Policy Coordinator at Enagás to work proactively on making the hydrogen transition a reality. I will always remain passionately dedicated to the biggest endeavour our industry faces. Hence, it's more of a “see you” than a “farewell”. Many thanks, Johan, Holger, Matilda, Catelyn and Leo, for four great years RENEW. You rock! 

The industry in the world: EU farmer protests - by Léonard Lefranc (March 25th, 2024)

Over the past three months, the European Union has been rocked by farmer protests. As the most intense moments seem to be subsiding, let’s take stock of what these protests and, more importantly, their policy implications mean for the subject that interests us here at RENEW Industry: industry’s decarbonisation.

The farmer demonstrations spanned most of the European Union with demands revolving around tax burden, the rising costs of inputs (fuels, fertilisers), low food product prices, the perceived stringent environmental requirements, administrative burden in combination with the unfair competition of cheap imports. Carbon Debrief concluded that, while many of these demands were related to environmental issues, such as climate change or nature conservation, others were rather directed at economic challenges not directly related to environmental policy.

If we take a look in the rear-view mirror, climate policy aside, most of the agricultural sector’s grievances are not new. The demand for more protection from foreign imports by the primary sector can even be traced back to the infancy of modern industry. From 1815 to 1846, under the Corn Laws, cereal grain imports in the United Kingdom suffered hefty import tariffs to favour domestic grain production. This situation hampered the development of the nascent manufacturing industry in the birthplace of the First Industrial Revolution, primarily by making labour inputs more expensive through food price inflation [1]. The repeal of the Corn Laws in 1846 would mark the victory of the rising industry. 

Interestingly, this date also marks the starting point of an acute issue in our present day: climate change. In terms of greenhouse gas (GHG) emissions, EU agriculture has seen its non-CO2 emissions reduced by very little (about 5%) since 2005, according to a new report by the European Scientific Advisory Board on Climate Change. While this report welcomes the EU’s Farm to Fork Strategy as a path forward to EU agriculture’s climate neutrality, it also underlines its mixed results and proposes a series of recommendations on the supply side (for instance, less emission-intensive crop production) and on the demand side (e.g., a shift to more plant-based diets) to achieve the EU’s emission reduction targets by 2030 and 2050.

An optimistic take could be that, contrary to 19th century Great Britain, the agriculture and industry sectors would be potential allies  in their respective transitions to climate neutrality. The Farm to Fork Strategy could be interpreted as a demand-side industrial decarbonisation policy. Its objectives of reducing fertiliser use by 20% and halving chemical pesticides consumption by 2030, all the while transitioning at least a quarter of EU agricultural land to organic farming by the same year, lower the demand for mineral fertilisers and other agricultural chemicals. This entails a faster emissions reduction for the petrochemicals industry by facilitating the transition to low-carbon processes, as they would reduce strain on critical renewable electricity and hydrogen infrastructures.

National governments and the European Commission have backtracked in the face of the farmers’ opposition. Euractiv compiled the concessions obtained by the EU farmers nationally. France paused its Ecophyto plan to halve pesticide use by 2030, and the Greek government committed to reduce the VAT on fertilisers. The European Commission scrapped its own pesticides reduction plan in early February. A move followed by an additional watering down in mid-March of environmental requirements in the conditionalities for farmers to access Common Agricultural Policy (CAP) funding. One of the proposed measures is to eliminate the mandatory requirement to dedicate part of the land to fallow. A step that would increase the consumption of fertilisers and pesticides, as less arable land would be dedicated to non-productive purposes. An important point in this mid-March review is the exemption of small farms (under 10 hectares) from controls and penalties if they do not comply with the environmental requirements, that is to say 65% of CAP beneficiaries find themselves exempt. By doing so, the transition to a farming model less intensive in fertiliser and chemical pesticide use could become more remote in the short term.

Another significant concession from many national governments is the continuation of tax exemptions on agricultural fuel as recorded by Euractiv. This policy is incoherent with the necessary climate policy of fossil fuel subsidy phase-out underlined by the European Scientific Advisory Board on Climate Change’s report. In terms of industrial decarbonisation, such a policy sends the signal of continued and sustained demand for fossil fuels to the petrochemicals industry.

The next months, and especially the European elections in June, will tell us if the EU will be able to articulate an ambitious climate policy with placating the social unrest in the agricultural sector. If successful in resolving this conundrum, the implementation of ambitious climate policies in the agricultural sector will ripple beneficially to industry’s own stride to decarbonise, especially in the petrochemicals sector.

[1]  Heilbroner, R. L. (1999). The Worldly Philosophers. The Lives, Times, and Ideas of the Great Economic Thinkers (Updated Seventh Edition). Simon & Schuster.

Time to get real on green steel: Technological advances can help bring down emissions for heavy industry, but clearer rules are needed to define what constitutes ‘green’ in the sector - by Caitlin Swalec, Global Energy Monitor (July 11th, 2022)

When G7 leaders met this week in Germany, steelmaking didn’t grab the headlines.

However, the outsized industry that plays a vital role in everything from construction to medicine was squarely on the agenda of the rich nations club. Steelmaking contributes significantly to climate change, but it is a challenging sector to reduce emissions from.

The good news is that options for cutting the carbon footprint of steelmaking exist, with governments and consumers like the auto sector demanding lower emissions steel.

The bad news is that action to decarbonize the sector is nowhere near the level we need to avoid the very worst impacts of climate breakdown.

Steel is essential for a decarbonized energy system. It is used to build solar panels, wind turbines, and transmission towers.

At the same time, the global iron and steel industry is currently responsible for eleven percent of global carbon dioxide emissions and up to nine percent of global greenhouse gas emissions.

This is because the majority of operating steelmaking capacity relies on coal-based processes. With hundreds of new and expanding steel plants under development, an opportunity exists to cut emissions by exchanging coal-based tech for lower emissions processes.

At present, however, coal-based steel production is only slated to fall about 1% under current development plans.

Steelmaking’s contribution to climate change may also be vastly understated. Not all emissions produced during the steelmaking process are accounted for.

For instance, Global Energy Monitor has estimated that when methane – a much more potent warming gas than carbon dioxide – is released during the mining of metallurgical coal, the steelmaking footprint could increase by as much 27% over current industry estimates.

These extra emissions underscore the importance of moving away from coal-based steelmaking to lower-emissions technologies, like recycling scrap steel in electric arc furnaces and ‘net-zero’ technologies.

While a range of net-zero steel technologies exist, the most promising is green hydrogen-based steel production.

This process uses renewable energy to make hydrogen that replaces fossil fuels as a reactant. Through this process coal can essentially be eliminated as a raw material and reduce carbon emissions in steel production to zero.

However, some of these technologies do raise steel production costs beyond what plant operators can afford. In order to level the playing field, the higher cost of green steel must be justified by demand.

This can only happen with clearer guidance for steel and policymakers about what is actually meant by products labelled as “green” steel when they enter the market.

To this end, the International Energy Agency recently issued 10 key recommendations for decarbonizing the steel sector, which included the development of clear standards and definitions for green steel.

The best way to build markets that support net zero steelmaking is to define green steel as a distinct product from conventional steel.

But simply defining green steel is not enough. Green steel definitions must be based on the emissions intensity of the steel produced, meaning that efforts to mitigate other environmental or social harms cannot cancel out emissions.

Loose criteria or ‘greenwashed’ terms for steel products risk jeopardizing the value of the label. Currently there are no industry standards to distinguish green steels, though some sectors, industry groups, and private companies have developed their own branding for lower emissions steels.

For example, the steel giant ArcelorMittal recently called for emissions-based definitions for steel products.

While this is a promising signal from the industry, ArcelorMittal’s proposed approach to green definitions would initially exclude emissions from upstream activities including coal mining. Favoring coal-based steelmaking in climate-friendly steel definitions is dangerous as we’re still learning how to calculate the full scope of emissions from coal mining.

There are signals of hope that clear definitions for green steel are forthcoming. As these develop, remaining ambitious in setting green standards is an important step to ensure that this sector realizes its low-emissions potential.

Understanding Industrial Decarbonisation … or how my PhD research ended up raising more questions than providing answers  - by Timo Gerres (March 11th, 2022)

It was mid-2017, about 4.5 years before defending my PhD, when my research took the wrong turn. Instead of exploring how the energy-intensive industries could offer flexibility services on liberalised electricity markets by extending existing optimisation models, I decided to ask why these industries are so energy and emission-intensive.

Why was it a wrong turn?

First of all, I lost one of my supervisors on the way. I highly appreciate the conversation I had and still have with him, the feedback he gave me on all the work I did on electricity market design, and he was highly supportive. However, if you look at thesis supervisors as the support pillars of your work, I basically decided to throw away one of my safety nets.

Second, I focussed my thesis on a topic that was not fully aligned with my bread-and-butter projects. My employer, the Institute for Research in Technology (IIT), has a PhD-career path with a partial dedication to public and private sector contract research that finances your thesis work. Ideally, projects are aligned to your thesis topic, so you can benefit from synergies between your scientific and project work as PhD candidate. I love this setup because you never lose contact with the industry, and your day-to-day tasks are highly diverse. However, in my case, it meant that working on my PhD had to compete with a back lock of projects focussing on future electricity market designs.

Consequently, I ended up with a PhD thesis that doesn’t present a fully developed model to study the transition of the basic materials industry and that I haven´t even managed to present in a journal article so far. My thesis, a 240-page tome, doesn´t provide the answers I was looking for and rather raises questions over questions that make it impossible to summarise my results using the 280 characters of a Twitter post. 

However, if given a choice, I would do it again.

A PhD is a project that takes away years of your life. So, it´s crucial to find the question that triggers you to dig deeper and deeper. The transition of the energy-intensive industry towards decarbonisation is what was and still is nagging me for good reasons.

Industrial decarbonisation is a system change that cannot be reduced to the technical innovations that can make emission-intensive industrial processes clean. It requires a profound understanding of the potential business cases of novel steel, cement or chemical plants and their competitiveness compared to conventional production routes. However, political and regulatory changes are needed to create climate-friendly basic material markets. Basic materials are globally traded commodities, and their conventional energy-intensive production processes are highly standardised. Consequently, internationally converging market prices for the likes of steel, aluminium and chemicals cannot be uncoupled from global prices for fossil energy carriers such as coal, crude oil, and natural gas.

Project work on the competitiveness of solar PV and wind on the future electricity market in Spain, a very local energy system, showed me how much future climate-friendly basic material markets depend on specific market design choices. For clean industrial processes to be competitive, markets must remunerate not only their ability to produce basic materials at the lowest cost but also their ability to avoid emissions under consideration of availability constraints.

Changing my topic and focussing on industrial decarbonisation also opened new doors. As a member of the Climate Friendly Materials Platform, I had the chance to actively participate in developing industrial policy options that can help create such markets, studying the role of market-based policies in kick-starting the transition and the importance of standards and product carbon requirements to phase out conventional production.

In my thesis, all of this leads me to (one of) the conclusion(s) that for the European context we must adjust to the idea that future European basic material markets won´t show the same market dynamics as future global basic material markets. Europe intends to be a forerunner in decarbonising its economy. As such, European climate-friendly basic material markets will have to operate under different market rules by pricing basic material use based on its alignment to EU climate targets without differentiating between domestic and non-EU production.

In relation to this point, the reality is currently overtaking research. The extreme price peaks for fossil fuels, especially natural gas, in Europe due to the Russian invasion in Ukraine make European production with conventional processes completely uncompetitive compared to global market prices. Fossil fuel prices are so high that green hydrogen, for example, as an alternative energy carrier for steel making, could actually be competitive already (see Chapter 4 of my thesis). However, given the EU market and the global market for basic materials are still mostly the same, such situation only leads to the (hopefully only) temporal closure of production facilities in Europe these days.

Developing policies that allow us to create a clean basic material market are therefore without an alternative to achieve the decarbonisation of the EU industry. We need models to understand how these policies impact different industries and advice how market design choices can reduce investment uncertainties for basic material producers and lead us towards low-emission basic material consumption.

Therefore, I hope that you will hear from me with some results soon. We are currently hiring a new PhD candidate or PostDoc at the IIT to develop my model further so that we can share some results with you as soon as possible.

Feel free to contact me if you have any questions, comments or suggestions about my work.

Link to my thesis.

Reflecting on 20 months with RENEW-Industry - by Matilda Axelson (October 8th, 2021 )

The October newsletter marks my farewell as coordinator for RENEW-Industry, as I will be taking up a position in the European Commission. It is a heartfelt farewell for me personally and a great moment for network coordinators and members alike to reflect on where RENEW-Industry has brought the field of industrial decarbonisation to date and where we intend to take the network next.

In fact, this newsletter also marks a little more than one year and a half since the launch of the network. As with all great ideas, it started small. A casual shoutout for references on Twitter (here: LINK) quickly grew to an elaborate email thread filled with thoughts on industrial decarbonisation by many contributors, which is how our little group of coordinators found each other and realized we shared a vision. Excited to exchange ideas on how to advance research on Industrial Decarbonisation, we reasoned that bringing people together would be an important piece in that puzzle and quickly identified the need for a formalized network of experts.

A few weeks later, RENEW-Industry was born.

The first RENEW-Industry Newsletter was published in February 2020 – about the same time the spread of the COVID-19 virus intensified on a global scale. Little did anyone know, then, that this particular period would change our notion of how “networks” operate, reshape our professional relations, and move most of our daily communications to a virtual setting.

Many of us have spent the COVID-19 pandemic at the “home office” with limited social interactions. But how are you supposed to advance your work on industrial decarbonisation – or in any field of research – when all conferences are cancelled, and you are quarantined at home? It turns out that an international network of like-minded can come in handy! Through fantastic collective efforts by the RENEW-Industry network members, we have managed to bring our conferences online, spread the word about virtual gatherings or recent publications through 9 Newsletters and 3 Decarbonisation Flashes (check out our archive), and sparked vivid discussions on Twitter and LinkedIn to fill our daily need for casual coffee break gossip. Many of our active network members, and the team of coordinators included, have never met in person but regard each other as close colleagues (albeit with pixeled features and a sometimes very convenient mute button).

During this same period, we have seen some remarkable developments in the field of industrial decarbonisation. While this substantial progress truly deserves a reflectional column of its own, it is well worth mentioning that many of the key driving experts behind the advance of this field are active contributors within the RENEW-Industry network today. I like to believe that RENEW-Industry has helped bring together some of the brilliant minds and ideas out there to enable this transition and allow a wider interest in industrial decarbonisation to gain ground.

So, whether you are one of the gurus who have been around since the very start, or this is the first newsletter you read, please rest assured – RENEW-Industry has great plans for the future, and the coming months will be filled with exciting developments. I look forward to following the growth of the network and the advancement of the field, albeit no longer as a network coordinator myself. I wish to extend a huge thanks to all of you who have contributed so far to making RENEW-Industry what it is today, in particular my absolutely brilliant co-coordinators Timo, Johan, Holger, Max and Caitlin, who have truly turned our initial vision into reality. And the great thing is that it is never really “farewell” with networks – they are adaptable and remain available, whether you work from home or the office. Let’s all make good use of that over the coming 20 months and onwards, and keep up the great work on industrial decarbonisation.