Heavy industry must be decarbonised to reach emission goals

ON THE surface, it may look like we're taking steps in the right direction to address the climate crisis. We're recycling our single- use plastics, switching to electric vehicles (EVs) and building LEED certified buildings.

These are positive steps forward, but they barely scratch the surface. The problem of greenhouse gas emissions goes far deeper than how we run the world.

To really have an impact on climate change, we need to think about how we make the world - how the plastic is created, how an EV's steel chassis is manufactured and how much carbon is emitted constructing the concrete in an "environmentally friendly" building.

Heavy industry makes up 40 per cent of global CO2 emissions. Steel, cement and chemicals are the highest emitters of carbon due to the intense amount of fossil fuels needed to produce them, as well as direct CO2 emissions from industrial processes. If any corporation, city or country has emissions goals, there's just no way to get there without radical innovation to decarbonise this space.

New entrants are developing solutions that will rival the incumbent heavy industrialists still largely relying on fossil fuels.

If we're lucky, they'll be able to find the keys to decarbonising heavy industry, which is expected to reach over US$5.7 trillion globally by 2025, with steel's market size expected to reach US$1 trillion, chemicals to reach US$4.3 trillion and cement to reach US$680 billion.

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Road to greener chemical production

Chemicals like ammonia, ethylene, propylene, methanol and hydrogen peroxide are used to manufacture everything from cleaning products and plastics to fertiliser, textiles and paint. The combustion of fossil fuels and the production of harmful feedstocks are two major sources of global greenhouse gas (GHG) emissions that occur during the creation of chemicals.

One startup that's leading the charge to transform the chemicals process is Solugen, which Aera VC invested in four years ago when it was a two-person startup. The Texas-based synthetic biology chemicals company uses proprietary engineered enzymes and biobased feedstocks to create chemicals at scale. In other words, Solugen makes chemicals from plants and air, not fossil fuels.

Solugen has figured out how to make "bio peroxide", a hydrogen peroxide replacement, in a way that's carbon negative, and it aims to scale the process for a whole slate of chemicals. The company has just raised over US$350 million in Series C funding at a US$1.8 billion valuation.

Based on the money coming into this industry, it's entirely possible that Solugen will compete with the Dow Chemicals or BASFs of the world, the giants that built empires over the last century on oil.

Securing the investment of Singapore's Temasek and GIC is not only an impressive feat for such a new startup, but it is also a signal that Singapore might be a world leader in shaping the future of green industry.

Green steel needs more funding for R&D

Demand for steel, which is already responsible for 9 per cent of global emissions, is expected to increase 5.8 per cent this year.

There's not yet a clear path to keep up with demand while reducing carbon.

However, green steel production is starting to ramp up, albeit slowly. This year, a Swedish startup called H2 Green Steel revealed plans to raise around 2.5 billion euros in funding to build the world's biggest hydrogen electrolyser which will produce the alloy material for steel starting in 2024.

Boston Metal, a Bill Gates-backed startup, raised US$50 million this year to produce metals directly from a molten state, rather than via extractive metallurgy, which requires a lot more energy.

Moves are being made, but there's still a long way to go, and we'll need all the financing and bright minds to get there.

Can cement capture carbon?

Cement production currently makes up at least 7 per cent of GHG emissions, and the global market size is projected to grow from US$327 billion in 2021 to US$459 billion in 2028.

It's frankly impossible to imagine nations meeting emissions goals as demand for cement increases faster than both innovation in sustainable cement production and government mandates focusing specifically on this industry.

Policy is a changemaker, but as we know, so is technology.

Prominent investors like Amazon's Climate Pledge Fund, Bill Gates' Breakthrough Energy, and VC John Doerr of Kleiner Perkins have been investing in low-carbon cement lately, including companies that are seeking ways to use cement to store carbon dioxide so that it doesn't get released into the environment.

Solidia Technologies, a New Jersey-based company that recently raised US$78 million, is producing concrete paving blocks by curing the material in a chamber of carbon dioxide, which reacts to the cement in a way that means about 3 per cent to 5 per cent of the final product is solid carbon.

Canadian startup CarbonCure injects CO2 at the point of mixing the cement with water and sand to create concrete, which the company says permanently stores CO2 and makes the concrete even stronger.

Heavy industry will produce many more unicorns

At Aera VC, we're actively monitoring startups driving the transformation of heavy industry.

It's an exciting space to watch because the big winners have yet to be determined. Everyone is in the wings, and the promise of scale for those who are currently shaping the game is huge.

We believe the ones who crack these problems fastest will not only have a massive carbon reduction impact, but will also become the world's next, and most important, unicorns.

• The writer is an entrepreneur, investor and co-founder of Singapore-headquartered Aera VC, an early-growth fund investing in climate and deep tech ventures that accelerate the world towards a sustainable future.