Economic impacts of industrial energy transition: An evaluation of Austrian climate neutrality pathways

Background In the effort of limiting global warming below 2°C and implementing EU climate targets, Austria set itself the goal of reaching climate neutrality by 2040 [1]. With 23 MT of CO ₂ -eq emissions per year (34% of total), Austrian manufacturing industry is a major contributor. Its transition to climate neutrality can be achieved by various options, and all are associated with specific costs and macroeconomic impacts. We deviate from the usual method of modelling most likely scenarios, but work with four extreme scenarios, spanning a probability space of pathways. These four scenarios are: Renewable Gases where the transition is enabled by greening the upstream energy supply sector, Circular Economy where we project the effects of maximal recycling and material efficiencies, Innovation where electrification of manufacturing industries is in focus, and Sector Coupling where synergies between companies are utilized. From the extreme scenarios, we derive the most likely pathways and emphasize economic no-regret options and macroeconomic advantages. Results We present technology-centric pathways for all industry sectors and derive respective energy demands. These are presented as trajectories in terms of energy carrier mix, total energy and import demands. We elaborate each scenario’s investment and running costs. In 2040, electric demand will almost double to 35–47 TWh, the use of (renewable) gases rises to 45–73 TWh, and biomass and industrial heat recovery remain at 10–20 and 5–21 TWh, respectively. Total capital expenditure of companies is 17–24 billion EUR, of which one third is actual production plants/equipment, while two thirds are construction costs. All scenarios show a positive impact on gross domestic product, which are maximized by effectively utilizing domestic energy resources and reducing primary energy demand via electrification, waste-heat utilization, and secondary production. Conclusions Like now, future resource demand will not be met domestically. Today’s imports of fossil fuels will shift to expensive imports of hydrogen and renewable hydrocarbons. As the imported inputs will have higher value (having the same energy content but renewable) and therefore higher prices, maximizing domestic resource efficiency is an important factor in maintaining competitiveness.