Industrial sector energy consumption

Overview

The world's industries make up a diverse sector that includes manufacturing industries (food, paper, chemicals, refining, iron and steel, nonferrous metals, and nonmetallic minerals, among others) and nonmanufacturing industries (agriculture, mining, and construction). Chemicals, iron and steel, nonmetallic minerals, paper, and nonferrous metal manufacturing account for the majority of all industrial energy consumption and thus are the main focus of this chapter. Industrial energy demand varies across regions and countries, depending on the level and mix of economic activity and technological development, among other factors. Energy is consumed in the industrial sector for a wide range of activities, such as processing and assembly, space conditioning, and lighting. Industrial energy use also includes natural gas and petroleum products (naphtha and natural gas liquids) used as feedstocks to produce non-energy products, such as plastics. In aggregate, the industrial sector uses more energy than any other end-use sector, consuming about one-half of the world's total delivered energy.

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Over the projection period, worldwide industrial energy consumption grows from 191 quadrillion Btu in 2008 to 288 quadrillion Btu in 2035 (Table 14). In the IEO2011 Reference case, world industrial energy demand increases by an average of 1.5 percent per year through 2035. The industrial sector accounts for a majority of the reduction in energy use in 2009 caused by the global economic recession that began in 2008 and deepened in 2009 (Figure 87), primarily because the impact of substantial cutbacks in manufacturing is more pronounced than the impact of marginal reductions in energy use in other sectors. In the long term, national economic growth rates and energy consumption patterns return to historical trends (Figure 88).

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Most of the long-term growth in industrial sector energy demand occurs in non-OECD nations. Currently, non-OECD economies consume 62 percent of global delivered energy in the industrial sector. From 2008 to 2035, industrial energy use in non-OECD countries grows by an average of 2.0 percent per year, compared with 0.5 percent per year in OECD countries (Figure 89). Thus, 89 percent of the growth in industrial energy use from 2008 to 2035 in the IEO2011 Reference case occurs in non-OECD countries, and non-OECD nations consume 71 percent of total delivered energy in the world's industrial sector in 2035.

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Fuel prices shape the mix of fuel consumption in the industrial sector, as industrial enterprises choose the cheapest fuels available to them, subject to process constraints. Because liquids are more expensive than other primary fuels, the use of liquids in the world industrial sector increases at an average rate of only 0.8 percent per year (Figure 90), and the share of liquid fuels in the industrial fuel mix declines. Electricity can be generated from a wide variety of sources and used in a wide variety of industrial activities, and world industrial electricity use grows by an average of 2.3 percent per year from 2008 to 2035.

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At present, the overall industrial fuel mix differs between OECD and non-OECD countries. In 2008, liquids made up 38 percent of industrial energy use in OECD countries, compared with 23 percent in non-OECD countries, and coal represented 13 percent of OECD industrial energy use, as compared with 34 percent of non-OECD industrial energy use.

Over the projection horizon, there are significant shifts in the industrial fuel mix in both OECD and non-OECD regions (Figures 91 and 92). From 2008 to 2035, as liquid prices continue to be sustained at relatively high levels, industrial liquids use in OECD countries stagnates and is displaced by growing industrial demand for natural gas, electricity, and especially renewables. As a result, the liquids share of OECD delivered industrial energy consumption falls from 38 percent in 2008 to 33 percent in 2035, while the natural gas share increases from 26 percent to 29 percent, the electricity share increases from 16 percent to 17 percent; and the renewable share increases from 7 percent to 10 percent. In non-OECD countries, there is a shift away from liquids and coal use in the industrial sector, but it is electricity that gains the largest portion of the fuel mix, increasing from 14 percent in 2008 to 18 percent in 2035.

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In 2008, the industrial sector worldwide consumed 14 quadrillion Btu of energy from renewables for non-electricity uses, or about 7 percent of the sector's total delivered energy use [319]. From 2008 to 2035, renewable energy use in the industrial sector grows by an average of 1.8 percent per year. Biomass currently provides the vast majority of renewable energy consumed in the industrial sector and continues to do so throughout the projection period.

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Industrial energy consumption in each region is a function of total industrial output and the energy intensity of the industrial sector, measured as energy consumed per unit of output. Energy-intensive industries consume about half the energy used in the industrial sector. For years, the energy-intensive industries have focused on reducing energy consumption, which represents a large portion of their costs [320]. Enterprises can reduce energy use in a number of ways. For example, industrial processes can be improved to reduce energy waste and recover energy, often process heat, which would otherwise be lost; and recycling of materials and fuel inputs can also improve efficiency.

Countries' development trajectories play a major role in industrial energy consumption. When economies initially begin to develop, industrial energy use rises as manufacturing output begins to take up a larger portion of GDP, as has occurred already in many non-OECD economies—most notably, China. When developing countries achieve higher levels of economic development, their economies tend to become more service-oriented, and their industrial energy use begins to level off, as can be seen currently in most OECD countries.

The following section describes patterns of energy use in the world's most energy-intensive industries. Subsequent sections examine specific patterns of industrial energy use in the major OECD and non-OECD regions.

Energy-intensive industries

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Five industries account for more than 60 percent of all energy used in the industrial sector (Figure 93): chemicals (33 percent), iron and steel (14 percent), nonmetallic minerals (7 percent), pulp and paper (4 percent), and nonferrous metals (3 percent). Consequently, the quantity and fuel mix of future industrial energy consumption will be determined largely by energy use in those five industries. In addition, the same industries emit large quantities of carbon dioxide, related to both their energy use and their production processes.

The largest industrial consumer of energy is the chemical sector, which accounted for 22 percent of total world industrial energy consumption in 2008. Energy represents 60 percent of the industry's operating costs and an even higher percentage in the petrochemical subsector, which uses energy products as feedstocks. Petrochemical feedstocks account for 60 percent of the energy consumed in the chemicals sector. Intermediate petrochemical products, or "building blocks," which go into products such as plastics, require a fixed amount of hydrocarbon feedstock as input. In other words, for any given amount of chemical output, depending on the fundamental chemical process of production, a fixed amount of feedstock is required, which greatly reduces opportunities for decreasing fuel use [321].

By volume, the most important "building block" in the petrochemical sector is ethylene, which can be produced by various chemical processes. In Europe and Asia, ethylene is produced primarily from naphtha, which is refined from crude oil. In North America and the Middle East, where domestic supplies of natural gas are more abundant, ethylene is produced from ethane, which typically is obtained from natural gas reservoirs. Because petrochemical feedstocks represent such a large share of industrial energy use, patterns of feedstock use play a substantial role in determining the industrial fuel mix in each region.

In recent years, most of the expansion of petrochemical production and consumption has taken place in non-OECD Asia. The combination of high energy prices in 2008 and the global recession in 2009 that reduced demand in client industries, such as construction, had a significant impact on the chemical industry, although demand for petrochemicals bounced back sharply in 2009 when oil prices declined significantly from their 2008 highs. Overall, with the exception of Japan, petrochemical production is projected to continue steady growth over the next few years [322]. Production growth in North America and Europe largely remains the same, whereas Asian, Middle Eastern, and Latin American markets largely outperform the global trend over the next five years. Capital expenditures in the chemical sector of the Asia-Pacific region have outpaced those in North America and Europe combined since 2005, and the trend is likely to continue through 2014 [323]. This growth is led by China, where the petrochemical operations of domestic firms, such as Sinopec and PetroChina, have expanded rapidly, and there has been an influx of petrochemical sector investment from multinational firms, such as ExxonMobil.

The next-largest industrial user of energy is iron and steel, which accounts for about 14 percent of industrial energy consumption. Across the iron and steel sector as a whole, energy represents roughly 15 percent of production costs [324]. The amount of energy used in the production of steel depends on the process used. In the blast furnace process, super-heated oxygen is blown into a furnace containing iron ore and coke. The iron ore is reduced (meaning that oxygen molecules in the ore bond with the carbon), leaving molten iron and carbon dioxide [325]. Coal use and heat generation make this process tremendously energy-intensive. In addition, it requires metallurgical coal, or coking coal, which is more costly than steam coal because of its lower ash and sulfur content.

Electric arc furnaces, the other major type of steel production process, produce steel by melting scrap metal using an electric current. The process is more energy-efficient and produces less carbon dioxide than the blast furnace process, but it depends on a reliable supply of scrap steel. Currently, two-thirds of global steel production uses the blast furnace process. The only major steel producers that make a majority of their steel with the electric arc furnace process are the United States (62 percent in 2009) and India (60 percent) [326]. More than 90 percent of steel production in China—by far the world's largest producer—employs the blast furnace method; and 78 percent of production in Japan, the world's second-largest steel producer, comes from blast furnaces [327].

Over the past decade, there has been a major expansion of steel consumption in non-OECD economies, with a corresponding increase in global production. Fueled by demand from the construction and manufacturing sectors, China has become the world's largest steel producer, with more steel output than the seven next-largest steel-producing nations combined (Figure 94). China's rapidly growing construction industry helped stabilize the steel industry throughout the economic downturn. Beginning in 2011, however, growth in construction slows as the government stimulus ends, and efforts are made to reduce energy use and rein in the pace of GDP growth to ensure that the nation's economy does not "overheat" and that inflation remains in check. In the medium term, world demand for steel grows steadily, spurred by infrastructure projects in non-OECD nations, with corresponding growth in energy use for steel production. Over the long term, however, the growth of energy use in the steel industry slows moderately, as increasing inventories of scrap iron drive down the price of inputs for the electric arc process, and the fuel mix shifts from coal to electricity.

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The third-largest energy-consuming industry is nonmetallic minerals, which includes cement, glass, brick, and ceramics. Production of those materials requires a substantial amount of heat and accounts for 7 percent of global industrial energy use. The most significant nonmetallic minerals industry is cement production, which accounts for 85 percent of energy use in the nonmetallic minerals sector. Although the cement industry has improved energy efficiency over the years by switching from the "wet kiln" production process to the "dry kiln" process, which requires less heat, energy costs still constitute between 20 and 40 percent of the total cost of cement production.

The demand base for cement—the vast majority of which is used for construction—is less diversified than that for steel. Consequently, the impact of the 2008-2009 economic downturn on the cement industry was severe. Prices are expected to bottom out in early 2011, however, and to begin increasing at an annual rate of 1 to 2 percent [328]. The most significant growth in cement production over the next few years is expected to occur in non-OECD countries. Because the production of cement generates carbon dioxide directly, the industry has responded to pressure to address climate change impacts by focusing considerable attention on reducing fossil fuel use and improving energy efficiency. In the future, the energy efficiency of cement production is likely to improve as a result of continued improvements in kiln technology, the use of recycled materials and waste for heating fuels (known as "co-processing"), and increased use of additives to reduce the amount of clinker (the primary ingredient in marketed cement) needed to produce a given amount of cement [329].

Pulp and paper production accounts for 4 percent of global industrial energy use. Paper manufacturing is an energy-intensive process, but paper mills typically generate about one-half of the energy they use through cogeneration, primarily with black liquor and biomass from wood waste. In some cases, integrated paper mills generate more electricity than they need and are able to sell their excess power back to the grid. As is the case in other industries, recycling significantly reduces the energy intensity of production in the paper sector. The production of recycled paper produces more carbon dioxide, however, because the energy used in the process comes from fossil fuels rather than biomass³² [330].

Many observers have suggested that electronic media and digital file storage will cause global demand for paper to contract over time. To date, such a trend is observable only in North America, where reduced demand for newsprint and an aging capital stock have led the industry to reduce capacity [331]. In the rest of the world, output from the paper industry expands steadily in the Reference case projection. Support for renewable energy in OECD countries could alter the cost structure of the paper sector in the future, however, if mandates for biomass use cause wood prices to escalate [332].

Production of nonferrous metals, which include aluminum, copper, lead, and zinc, consumed 3 percent of industrial delivered energy in 2008, mostly for aluminum production. Although aluminum is one of the most widely recycled materials on the planet, two-thirds of the aluminum industry's output still comes from primary production [333]. Energy accounts for about 30 percent of the total cost of primary aluminum manufacturing and is the second most expensive input after alumina ore. The impact of the 2008-2009 recession on client sectors, such as construction and automobile manufacturing, curtailed aluminum demand globally, but the trend was far less severe in non-OECD countries. Although some analysts expect a greater portion of OECD aluminum production to be exported to non-OECD countries in the future [334], non-OECD countries still are expected to increase their market share of global aluminum production.

To guard against electricity outages and fluctuations in electric power prices, many aluminum producers have turned to hydropower, going so far as to locate plants in areas where they can operate captive hydroelectric facilities. For example, Norway, which has considerable hydroelectric resources, hosts seven aluminum smelters. Today, more than one-half of the electricity used in primary aluminum production comes from hydropower [335].

Aluminum production from recycled materials uses only one-twentieth the energy of primary production [336]. Although aluminum recycling is encouraged both by the aluminum industry and by many governments, it is unlikely that the share of aluminum made from recycled product will increase much in the future, because most aluminum is used in the construction and manufacturing sectors and remains in place for long periods of time. Indeed, three-fourths of the aluminum ever produced still is in use [337]. Thus, it is expected that the aluminum industry will continue to consume large amounts of electricity.

Regional industrial energy outlooks

OECD countries

OECD countries have been transitioning in recent decades from manufacturing to more service-oriented economies. As a result, in the IEO2011 Reference case, industrial energy use in OECD countries grows at an average annual rate of only 0.5 percent from 2008 to 2035, as compared with a rate of 0.8 percent per year for commercial energy use. In addition to the shift away from industry, slow growth in OECD industrial energy consumption can be attributed to relatively slow growth in overall economic output. With the OECD economies projected to grow by 2.1 percent per year on average from 2008 to 2035 in the IEO2011 Reference case, their 65-percent share of global economic output in 2008 (as measured in purchasing power parity terms) falls to about 40 percent in 2035.
Rising oil prices in the Reference case lead to changes in industrial fuel mix for the OECD nations. OECD liquids use in the industrial sector stays constant, reducing the share of liquids in industrial energy use from 38 percent in 2008 to 33 percent in 2035. Coal use in the industrial sector also declines, and coal's share of OECD delivered industrial energy use falls from 13 percent to 11 percent, as industrial uses of natural gas, electricity, and renewables expand. Industrial consumption of renewables in OECD countries grows faster than the use of any other fuel, from 5.3 quadrillion Btu in 2008 to 8.0 quadrillion Btu in 2035. In the coming decades, patterns of industrial fuel use and trends in energy intensity in OECD countries are expected to be determined as much by policies regulating energy use as by economic and technological developments.

OECD Americas

Currently, the U.S. industrial sector consumes more energy than that in any other OECD country, a position that is maintained through 2035 in the IEO2011 Reference case. The overall increase in U.S. industrial energy use is minimal, however, from 25 quadrillion Btu in 2008 to 29 quadrillion Btu in 2035, or an average of 0.6 percent per year. The industrial share of total U.S. delivered energy consumption remains at approximately one-quarter through 2035. In contrast, U.S. commercial energy use increases 62 percent more rapidly, reflecting the continued U.S. transition to a service economy.

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With oil prices rising steadily in the IEO2011 Reference case, liquids consumption in the U.S. industrial sector remains flat throughout the projection, whereas the use of renewable fuels, such as waste and biomass, in the U.S. industrial sector grows faster than the use of any other energy source in the Reference case (Figure 95). Accordingly, the renewable share of U.S. industrial energy consumption rises from 10 percent in 2008 to 16 percent in 2035.

Growth in U.S. industrial energy also is expected to be moderated by legislation aimed at reducing the energy intensity of industrial processes. For example, the U.S. Department of Energy supports reductions in energy use through its Industrial Technologies Program, guided by the Energy Policy Act of 2005, which is working toward a 25-percent reduction in the energy intensity of U.S. industrial production by 2017 [338]. The Energy Independence and Security Act of 2007 also addresses energy-intensive industries, providing incentive programs for industries to recover additional waste heat and supporting research, development, and demonstration for efficiency-increasing technologies [339].

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Industrial energy use in Canada grows by an average of 1.0 percent per year in the Reference case, continuing to constitute just under one-half of Canada's total delivered energy consumption. With world oil prices returning to sustained high levels, liquids use in Canada's industrial sector does not increase from current levels, while natural gas use increases by 1.7 percent per year (Figure 96). As a result, the share of liquids in the industrial fuel mix falls from 31 percent in 2008 to 25 percent in 2035, and the natural gas share increases from 38 percent to 46 percent. Increased production of unconventional liquids (oil sands) in western Canada, which requires large amounts of natural gas, contributes to the projected increase in industrial natural gas use.

Industrial energy efficiency in Canada has been increasing at an average rate of about 1.5 percent per year in recent decades, largely reflecting provisions in Canada's Energy Efficiency Act of 1992 [340]. The government increased those efforts in 2007, releasing its Regulatory Framework for Industrial Greenhouse Gas Emissions, which calls for a 20-percent reduction in greenhouse gas emissions by 2020. The plan stipulates that industrial enterprises must reduce the emissions intensity of their production by 18 percent between 2006 and 2010 and by 2 percent per year thereafter. The proposal exempts "fixed process emissions" from industrial processes in which carbon dioxide is a basic chemical byproduct of production. Therefore, most of the abatement will have to come from increased energy efficiency and fuel switching [341].

Mexico and Chile's combined GDP grows by 3.7 percent per year from 2008 to 2035 in the Reference case, which is the highest economic growth rate among all the OECD nations. Mexico and Chile also have the highest average annual rate of growth in industrial energy use, at 2.0 percent per year, to 5.6 quadrillion Btu in 2035 from 3.3 quadrillion Btu in 2008.

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Chile, a new addition to the OECD in 2010, is the world's largest producer of copper, and the mining industry accounts for 16 percent of total fuel consumption within the country's industrial sector. In the mining industry, electricity accounts for 50 percent of energy use and oil 46 percent. In 2005, Chile's National Energy Efficiency Programme was passed. Together with the Chilean Economic Development Agency, the National Energy Efficiency Programme created an Energy Efficiency Pre-investment Programme, which allows large companies to hire consultants or conduct audits to develop plans for improving energy efficiency [342].

Mexico's industrial sector continues to use oil and natural gas for most of its energy needs. In December 2009, the Mexican government introduced its Special Climate Change Program 2009-2012. The plan entails many industrial-sector initiatives, such as increasing the use of cogeneration and improving the operational efficiency of Petróleos Mexicanos (the state-owned oil company) and other Mexican industrial enterprises [343].

OECD Europe

In the IEO2011 Reference case, OECD Europe continues its transition to a service economy, as its commercial sector energy use grows by 0.7 percent per year while industrial energy use grows by 0.1 percent per year. Climate change policy is expected to affect the mix of fuels consumed in OECD Europe's industrial sector, with coal use contracting at an average rate of 0.9 percent per year, while the use of renewables increases (Figure 97). The use of electric power in OECD Europe's industrial sector, increasingly generated from low-carbon sources, also rises.

Energy and environmental policies are significant factors behind the trends in industrial energy use in OECD Europe. In December 2008, the European Parliament passed the "20-20-20" plan, which stipulates a 20-percent reduction in greenhouse gas emissions, a 20-percent improvement in energy efficiency, and a 20-percent share for renewables in the fuel mix of European Union member countries by 2020 [344]. In debates on the plan, representatives of energy-intensive industries voiced concern about the price of carbon allocations. They argued that fully auctioning carbon dioxide permits to heavy industrial enterprises exposed to global competition would simply drive industrial production from Europe and slow carbon abatement efforts at the global level [345]. The resulting compromise was an agreement that 100 percent of carbon allowances would be given free of charge to industries that are exposed to such "carbon leakage," provided that they adhere to efficiency benchmarks [346]. As a result, the impact of the 20-20-20 plan on European Union industrial sector emissions may be somewhat limited relative to its original intention.

OECD Asia

The overall forecast for OECD Asia (Japan, South Korea, Australia, and New Zealand) is likely to be tempered in the future by the recent tragedy unfolding in Japan. Japan is the largest economy among the OECD Asian nations and the region's largest industrial energy consumer. The devastating earthquake and tsunami of 2011 have added enormous uncertainty to the country's short- and mid-term outlook, and as the events continue to unfold it is impossible to anticipate the timing and strength of the country's recovery. In the long term, the country is likely to recover to a normal economic growth path, but the projections presented here were made before the event and thus do not reflect its economic impact.

Along with slow economic growth, a major factor behind Japan's slowing industrial energy use is increasing efficiency. Already, the energy intensity of Japan's industrial production is among the lowest in the world. Since 1970, Japan has reduced the energy intensity of its manufacturing sector by 50 percent, mostly through efficiency improvements, along with a structural shift toward lighter manufacturing [347]. An amended version of Japan's Energy Conservation Law went into effect in April 2009, introducing sectoral efficiency benchmarks for energy-intensive sectors, including cement and steel [348].

South Korea, which experienced rapid industrial development during the later decades of the 20th century, is also beginning to make a transition to a service-oriented economy. In the IEO2011 Reference case, South Korea's GDP grows at an average annual rate of 2.9 percent. South Korea is currently the sixth-largest steel producer in the world. A large portion of its steel (57 percent in 2009) is produced by electric arc furnaces [349], and that portion is projected to grow as inventories of discarded steel build up. As a result, coal consumption in South Korea's industrial sector increases slowly in the Reference case, and electricity is the fastest-growing source of energy for industrial uses. The largest consumer of industrial energy in South Korea is the chemical sector, and it is expected to remain in that position through 2035. Liquid fuel consumption, primarily for feedstock use, maintains a majority share of South Korea's industrial fuel mix through 2035.

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In Australia and New Zealand, industrial delivered energy consumption grows by 1.1 percent per year in the Reference case, from 2.4 quadrillion Btu in 2008 to 3.3 quadrillion Btu in 2035. Industry's share of delivered energy consumption increases from 51 percent in 2008 to 54 percent in 2035. With liquids consumption in the industrial sector projected to remain flat throughout the projection period, natural gas and coal fuel much of the growth in industrial sector energy use (Figure 98). The natural gas share of industrial energy use in Australia and New Zealand rises from 33 percent in 2008 to 35 percent in 2035, and the coal share rises from 17 percent to 21 percent.

Non-OECD countries

Non-OECD industrial energy consumption grows at an average annual rate of 2.1 percent in the IEO2011 Reference case—almost 10 times the average for OECD countries. The industrial sector accounted for about 45 percent of total non-OECD delivered energy use in 2008, and it continues to consume close to that share through 2035. With non-OECD economies expanding at an average annual rate of 4.5 percent in the Reference case, their share of global output increases from 35 percent in 2008 to 65 percent in 2035.

The key engines of non-OECD growth are the so-called "BRIC" countries (Brazil, Russia, India, and China). The four nations have accounted for 42 percent of global economic growth since 2007, and their share of growth is projected to continue unabated through 2035. Given the predominant role that heavy industry and manufacturing play in their dynamic economies, the BRIC countries account for more than 60 percent of non-OECD industrial energy use, and over two thirds of the growth in non-OECD industrial energy use from 2008 to 2035.

Non-OECD Asia

Non-OECD Asia is expected to be a major center of global economic growth in the coming decades. In the Reference case, the economies of non-OECD Asia, led by China, expand by an average of 5.3 percent per year, and industrial energy consumption increases across the region. China's industrial energy use nearly doubles from 2008 to 2035, averaging 2.4-percent annual growth over the period, and its growth rate is higher than the rate for any other major economy except India.

The industrial sector accounted for 74 percent of China's total delivered energy consumption in 2008, and its share remains above two-thirds through 2035. Since the beginning of economic reform in 1979, China's GDP growth has averaged 9.8 percent per year through 2007 [350]. Strong economic growth is anticipated through 2015 and beyond, and China still is expected to account for more than one-fourth of total global GDP growth from 2008 to 2035.

In addition to the impact of strong economic growth, continued rapid increases in industrial demand can be explained in part by the structure of the Chinese economy. Although the energy intensity of production in individual industries has improved over time, heavy industry still constitutes a major portion of China's total output. Patterns of energy use in China reflect its economy: iron and steel, nonmetallic minerals, and chemicals together account for about 60 percent of the country's industrial energy consumption. These sectors provide inputs to China's massive export and construction sectors, which continue to flourish in the IEO2011 projection.

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China's industrial fuel mix changes somewhat over the projection period. Despite its abundant coal reserves, direct use of coal in China's industrial sector grows by an average of only 1.9 percent per year in the Reference case, while industrial use of electricity (most of which is coal-fired) grows by 3.7 percent per year (Figure 99). As a result, coal's share in the industrial fuel mix falls from 63 percent in 2008 to 55 percent in 2035, while electricity's share increases from 18 percent to 26 percent due to increases in light manufacturing. At 4.1 percent per year, natural gas use is projected to grow faster than the use of any other fuel; however, it represents only 5.3 percent of China's industrial fuel mix in 2035.

In addition to its primary focus on economic development, the Chinese government also has introduced policy initiatives aimed at improving industrial energy efficiency. Its 12th Five Year Economic Plan, approved by China's National People's Congress on March 14, 2011 [351], included a goal of reducing energy intensity by 16 percent and carbon emissions per unit of GDP by 17 percent between 2011 and 2015. In addition, the government plans to target a slower, 7-percent rate of economic growth and a larger share of nonfossil fuels in its primary energy consumption (11.4 percent), opening up a market for clean technologies in China [352].

In August 2010, the Chinese government announced that 2,087 steel mills, cement works, and other energy-intensive factories would be required to close by September 30 solely to meet its energy intensity reduction goal. Though the closure of these factories did not have a large effect on the industrial energy consumption, in that many of the targeted factories were older and inefficient, it may have a positive long-term effect on China's goals to update its factories and become less energy intensive [353]. The government is seeking further reductions in energy, between 40 and 45 percent by 2020 relative to 2005. In the IEO2011 Reference case, China achieves a 39-percent improvement in energy intensity from 2005 to 2020. Over the projection period, China's energy intensity declines by an average of 2.5 percent per year from 2008 to 2035.

India has the world's second-highest rate of GDP growth among the IEO2011 regions, averaging 5.5 percent per year from 2008 to 2035, contributing to a 2.6-percent average annual increase in delivered energy to the industrial sector. Although India's 2008-2035 economic growth rate is slightly slower than China's, its levels of GDP and energy consumption continue to be dwarfed by those of China throughout the projection. India's economic growth over the next 27 years is expected to derive more from light manufacturing and services than from heavy industry. As a result, the industrial share of total energy consumption in India falls from 48 percent in 2008 to 41 percent in 2035, and its commercial energy use grows more than twice as fast as its industrial energy use. Those changes are accompanied by shifts in India's industrial fuel mix: electricity use grows more rapidly than coal use, and natural gas use triples.

India has been successful in reducing the energy intensity of its industrial production over the past 20 years. A majority of its steel production comes from electric arc furnaces, and most of its cement production uses dry kiln technology [354]. A major reason for the intensity reductions is India's public policy, which provides subsidized fuel to citizens and farmers but requires industry to pay higher prices for fuel. In part because these market interventions have spurred industry to reduce energy costs, India is now one of the world's lowest cost producers of both aluminum and steel [355]. India is also the world's largest producer of pig iron, which can be used in place of scrap metal in the electric arc process [356].

The quality of India's indigenous coal supplies also has contributed to the steel industry's efforts to reduce its energy use. India's metallurgical coal is low in quality, forcing steel producers to import supplies [357]. As a result, producers have invested heavily in improving the efficiency of their capital stock to lower the amount of relatively expensive imported coal used in the production process.

The Indian government has facilitated further reductions in industrial energy use over the past decade by mandating industrial energy audits in the Energy Conservation Act of 2001 and by mandating specific consumption decreases for heavy industry as part of the 2008 National Action Plan on Climate Change. The new plan also calls for fiscal and tax incentives to promote efficiency, an energy-efficiency financing platform, and a trading market for energy savings certificates, wherein firms that have exceeded their required savings levels will be able to sell the certificates to firms that have not [358]. Those measures contribute to a reduction in the energy intensity of India's GDP, which declines by an average of 2.6 percent per year from 2008 to 2035 in the Reference case.

GDP growth in the other nations of non-OECD Asia is slower than in China and India, averaging 4.5 percent per year, and their industrial energy demand as a group grows from 13 quadrillion Btu in 2008 to 24 quadrillion Btu in 2035. The largest single energy-consuming industry in non-OECD Asia outside of China and India is the chemical sector, which accounts for more than 20 percent of industrial delivered energy use for the group. Malaysia, Taiwan, Singapore, and Indonesia account for the vast majority of the countries' chemical sector output. The most significant steel producer in the group is Taiwan, which produced about 16 million metric tons in 2009 [359].

Patterns of industrial energy use in the individual countries of non-OECD Asia follow diverse trajectories in the IEO2011 Reference case projection. Mature economies, such as Taiwan, Hong Kong, and Singapore, follow patterns similar to those in OECD countries—transitioning away from energy-intensive industries to activities with higher added value. Much of the growth in commercial energy use occurs in those countries. Other regional economies, notably Vietnam, can be expected to expand manufacturing and increase industrial sector energy use.

Non-OECD Europe and Eurasia

In Russia, industrial energy consumption patterns are shaped largely by the country's role as a major energy producer. Russia's economy grows by 2.6 percent per year on average from 2008 to 2035, with industrial energy demand accounting for about 35 percent of total energy use throughout the period. The energy intensity of Russia's GDP is the highest in the world, and although its energy intensity declines in the Reference case, Russia remains among the world's least energy-efficient economies through 2035. The relative inefficiency of Russian industry can be attributed to Soviet-era capital stock and abundant and inexpensive domestic energy supplies. In the IEO2011 Reference case, natural gas—Russia's most abundant domestic fuel—accounts for almost one-half of its industrial energy use. The share of electricity, most of which is provided by nuclear and natural-gas-fired generation, increases through 2035.

Industrial energy use in other parts of non-OECD Europe and Eurasia stays relatively constant through 2035. The iron and steel sector constitutes the largest single energy-consuming industry in the region, which consists primarily of states that were once part of the Soviet Union. Ukraine is the region's largest—and the world's eighth-largest—steel producer. Almost one-third of Ukraine's steel production uses open hearth furnaces, the least energy-efficient steelmaking process [360]. As in Russia, energy intensity in the remaining countries of non-OECD Europe and Eurasia remains very high, and despite average intensity reductions of 2.1 percent per year, the region remains one of the world's least energy-efficient through 2035.

Central and South America

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Brazil's industrial energy use grows by an average of 3.0 percent per year in the IEO2011 Reference case, as its GDP expands by 4.6 percent per year. Industrial energy use accounted for 46 percent of total energy use in Brazil in 2008 and maintains that share through 2035. Unlike most other regions, more than 40 percent of delivered energy consumption in Brazil's industrial sector comes in the form of renewable energy (Figure 100). Biomass is often the fuel of choice for heat generation in industrial processes. Additionally, many Brazilian steel firms use charcoal (which is a wood-based renewable) instead of coking coal in the production of steel. The Brazilian government plans to support this practice as part of its National Plan on Climate Change [361]. Even with those efforts, however, coal use in the industrial sector—primarily for steelmaking—grows faster than the use of any other fuel.

Economic output in the other countries of Central and South America grows more slowly than in Brazil, averaging 3.0 percent per year, and their industrial energy consumption increases from 5.8 quadrillion Btu in 2008 to 7.2 quadrillion Btu in 2035. Chemicals and refining account for the largest shares of industrial energy use in this hydrocarbon-producing region. In the Reference case, natural gas displaces a large portion of liquids use in the industrial energy mix, fueled by growth in the region's domestic natural gas production. In 2008, liquids and natural gas accounted for 37 percent and 41 percent of industrial energy use, respectively. From 2008 to 2035, industrial sector natural gas consumption increases by an average of 1.9 percent per year, while liquids consumption decreases by 1.0 percent per year. As a result, the natural gas share of the region's industrial energy use increases to 54 percent, while the liquids share falls to 23 percent, in 2035.

Other Non-OECD regions

Industrial energy use in the Middle East grows on average by 2.6 percent per year from 2008 to 2035 in the IEO2011 Reference case. In terms of energy consumption, the largest industry in the Middle East is the chemical sector. Higher world prices for oil and natural gas have spurred new investment in the region's petrochemical industry, where companies can rely on low-cost feedstocks, and the trend is expected to continue despite the current global slump in demand for chemicals. Numerous "mega" petrochemical projects currently are under construction in Saudi Arabia, Qatar, Kuwait, the UAE, and Iran, although many faced considerable delays in construction in 2008 to 2009 as a result of the economic downturn [362]. The Middle East is becoming a major manufacturer of the olefin building blocks that constitute a large share of global petrochemical output. The region's ethylene capacity is projected to double from 2008 to 2012. Liquids and natural gas combined maintain a 95-percent share of the Middle East's industrial fuel mix through 2035.

Although 14 percent of the world's population lives in Africa, the continent's industrial energy use in 2008 was only 5 percent of the world total, and its share does not change in the Reference case. Africa's total industrial energy use grows at an average annual rate of 1.8 percent from 2008 to 2035 in the IEO2011 Reference case. Although GDP for the sub-Saharan Africa region grows by an average of 3.7 percent per year, a substantial portion of the increase comes from primary commodities. Commodity extraction is an energy-intensive process, but it does not support the expansion of industrial energy use on the same scale as the development of a widespread manufacturing base. Without a substantial departure from historical patterns of governance and economic activity, low levels of industrial energy use in Africa are projected to persist.