What is Decarbonization?

Decarbonization refers to the planned and permanent reduction of carbon emissions produced during the activities of an economy or an organization. To put it in simple terms, it is the process of reducing greenhouse gas (GHG) emissions produced during the generation of energy, and production, transportation, heating and consuming products. And usually carbon dioxide (CO₂) is at the center of this process. Because when fossil fuels, such as coal, oil, and natural gas, are burned, CO₂ emerges as the biggest emission source. However, decarbonization is limited to CO₂. Other GHGs, such as methane and nitrous oxide, are also part of this transformation due to their effects on climate.

The main objective of decarbonization is decreasing the pressure of human activities on the climate system. This is not a narrow objective such as less pollution. It requires a deeper transformation. Energy generation must transition away from fossil fuels, productivity needs to be enhanced, production methods should be modernized, and dependency on fossil fuels should be diminished.

Please check out our blog post titled What is Energy Efficiency? for further details.

Decarbonization is not something that can be achieved in a single day; rather, it is a transformation that unfolds over several years. However, it is not something that can be gradually progressed by stating, 'we will consider it later’ either. Because emissions are cumulative by nature. Each delayed year can lead to stricter and more expensive steps that should be taken in the following years.

Decarbonization is usually mentioned together with the net zero target. Net zero refers to reducing total emissions as much as possible and the remaining small part coming close to zero emission through various offsetting measures. In other terms, decarbonization serves as the cornerstone for achieving the net zero target. This method is dealt with the same logic in energy scenarios and climate road maps acknowledged across the globe.

For further details on Net Zero goal, please click here.

Another reason for decarbonization to be so visible today is that the issue of emissions is not only an environmental policy anymore. Decarbonization is a matter of economic resilience. If you ask why, it is because it determines energy costs, influences competitive power in exportation, changes access to financing, and transforms customer expectations. Therefore, decarbonization is not only a limited area for sustainability teams now; rather, it has become a set of decisions on the strategic agendas of the companies.

1.     Climate crisis is an economic risk now

The main reason for decarbonization to become so prominent these days is the climate crisis. Because climate crisis is not experienced as an environmental problem anymore; rather, it directly intersects with the economy: Extreme hot weathers decrease the productivity of workforce, drought puts pressure on agriculture, sudden precipitations damage infrastructure. All of these factors influence food prices, insurance costs, and public expenses. In other terms, lowering emissions extends beyond merely safeguarding the environment. It means reducing economic fragility. IPCC reports clearly show that these risks are growing and their effects are accelerating.

Please check out our blog post regarding climate crisis here.

2.     Targets clarified, calendar accelerated with the Paris Agreement

The second reason is the countries binding climate targets to official commitments. The Paris Agreement aims to work towards keeping global temperature rise below 2°C and limiting it to 1.5°C, if at all possible. These objectives do not stay on paper. They have a direct impact on energy policies, industrial investments, and urban planning. Because the target of 1.5°C is only possible by a significant reduction in emissions. Therefore, decarbonization is not a delayable item on the agenda.

3.     Energy security becomes a critical issue

Another driving force of decarbonization is energy security. Economies dependent on fossil fuels are more vulnerable in the face of external shocks. Costs immediately rise when prices fluctuate. This creates an impact on industrial production. Uninterrupted access to energy becomes more fragile. Thus, decarbonization is not only limited with emission reduction anymore; it is now being considered as a strategy to build a more predictable and more resilient energy system. The net zero road map of IEA details how this transformation will rebuild the energy system.

4.     Carbon in trade becomes competitive condition (CBAM effect)

Today, the issue of carbon is also part of exportation. In certain markets, the inquiry into a product's "carbon footprint" is as prevalent as that regarding its "price." The European Union’s CBAM is the symbol of this change. Carbon Border Adjustment Mechanism mainly gives the following message: Carbon-intensive production can become more expensive in trade. This is especially relevant for emission-intensive sectors, such as cement, iron-steel, and aluminum. In other words, decarbonization is not only a sustainability target, but also a matter of market access and competitive advantage.

5.     Financing and investment language changed

The last but not least reason is the finance dimension. The banks and investors do not consider climate risk as an uncertainty of the future anymore. They consider it a financial risk. Therefore, low-carbon projects are able to find funds with more advantageous terms. And financing in high-risk sectors can become more expensive or access to funds can become more challenging. What this means for companies is this: Reduction of emissions is not only a responsibility, but also a matter of access to capital and cost management.

Decarbonization is not an issue only for a single sector. Emissions are everywhere. They are produced in every area of our life, in generating electricity, producing products, heating homes as well as in the process of transportation and food production. Therefore, decarbonization becomes a process that simultaneously transforms the main veins of the economy.

Energy industry: The biggest leverage point of decarbonization is energy production. It is difficult to achieve a real transformation in other areas without first making electricity eco-friendly. Electrification of transportation, more efficient heating for buildings, electrification of the industry can only make sense with low-carbon electricity.

Industry: Emissions are very high in sectors such as cement, iron-steel, and chemicals industry. Furthermore, a portion of these emissions is generated during the production process itself, rather than solely from energy consumption. Consequently, the decarbonization of the industrial sector represents a transformation that is more difficult, more expensive, and requires a longer time frame.

Transportation: What comes first to mind about decarbonization of transportation is electric vehicles. But the real issue is more comprehensive. Public transportation, efficiency of logistics, and the design of urban transportation also determine emissions. In other words, how the system is built is as important as the technology itself.

Buildings and cities: Buildings consume substantial amounts of energy, especially due to heating and cooling systems. Insulation, energy-efficient systems, and appropriate urban planning strategies contribute to lowering both expenses and emissions. The transformation in this area typically yields the quickest outcomes.

Please click here to read our blog post on What is a Green Building? to find out more about the issue.

Agriculture and food: In agriculture and food systems, other GHGs such as methane are as significant as CO₂. Moreover, food waste is one of the most invisible but significant factors that increase the total carbon foot print. It is for this reason that productivity in agriculture and reduction of loss are important parts of decarbonization.

There is not one single way to make decarbonization happen. However, strategies in good working order usually follow the same sequence. Initially, the quickest reduction is executed at the minimal costs. Later, bigger transformations come into play. As such, decarbonization is actually a matter of taking the right steps following the right sequence.

The first and most practical step in decarbonization is energy efficiency. Attaining equivalent production levels with reduced energy consumption would lead to a decrease in both expenses and emissions. Utilization of efficiency equipment in factories, insulation and correct heating-cooling systems in buildings, and better planning in logistics would yield outcomes in a short amount of time. Therefore, energy efficiency is considered as the area of the quickest gain in many scenarios.

The second step is electrification. That means doing the works, which were previously done by using fossil fuels, by using electricity. Electric vehicles are among the most known examples of this. Using electricity for some processes in the industry and solutions such as heat pumps in buildings are considered in this category. The critical point is this: The impact of electrification depends on how clean the production of electricity is. It is for this reason that the transformation falls short without cleaning up the production of electricity.

At this point, transitioning to renewable energy is the backbone of decarbonization. Permanent and large-scale reduction of emissions requires getting away from fossil fuels. Resources, such as sunlight and wind, are at the center of this transition. Other matters, such as network infrastructure and storage, are also among the invisible but necessary parts of this transformation.

The job becomes more challenging in some sectors. In areas such as cement and iron-steel, the source of emissions is not only energy; emissions are produced by the production process itself. It is for this reason that a transformation of fuel and process is required. In this category, various options, such as green hydrogen, are considered. These solutions, however, usually require longer-term investments and infrastructure. They cannot be implemented at the same speed everywhere.

Finally, another important pillar of decarbonization is circularity. Using less raw material, designing products with longer economic life, promoting reusing and recycling significantly reduce the total emissions. Since each stage of production represents energy and emissions. As the circle is established, the system starts to operate with less carbon.

Click here to check out our blog post titled ‘What is Circular Economy?’

Decarbonization has transitioned from being an optional sustainability initiative to a mandatory undertaking for companies. This transformation directly influences the cost, competitive strength, and future prospects of the works. Since inefficiency becomes more of a burden as energy becomes more expensive. Carbon-intensive production becomes more riskier as the rules of trade change. The world of finance requires transparency while immeasurable emissions lead to the loss of trust. In this context, decarbonization serves as a safeguard against unpredictability and also acts as a gateway to new markets. It is a necessity because regulations and customer expectations are driving this change. It is an opportunity because, by taking the right steps, companies ensure safe and uninterrupted access to energy, build stronger brand trust, and gain a more advantageous ground in the low-carbon economy.