Policy Solutions

Energy & Material Efficiency

Manufacturing Using Less Energy

Efficient manufacturing means it takes less energy to make the same product, reducing GHG emissions on a per-unit basis.

Strategies for increasing efficiency vary across manufacturing sectors but include replacing old equipment with newer, energy-saving models and using intelligent energy management systems to turn equipment down or off when it isn’t needed. A more efficient manufacturing sector will reduce overall costs of decarbonization by requiring less low-GHG fuel or carbon capture deployment.

Market Challenges

  1. Economic Structure

    The economic structure of the manufacturing sector presents a barrier to deeper decarbonization. Manufacturing firms make investment decisions on long time frames, and the equipment they purchase can last for 50 years or more. There is currently very little economic incentive to replace still-functioning equipment within its useful operational life with a more efficient alternative. Even given this long-term investment thinking, manufacturing facilities in the U.S. tend to overlook efficiency improvements with all but the shortest payback periods. Moreover, the largest industrial GHG emitters tend to produce materials that are highly commoditized. In a competitive global market, there are few opportunities to receive a premium for low-carbon products. Fragmentation of product value chains also means the necessary capital for decarbonization investments may not reside at the firms that need to make them.

  2. Access to Capital

    The upfront capital costs associated with replacing existing equipment with new efficient technologies is high, especially if the equipment is still within its useful life. Industrial manufacturers tend to operate with tight profit margins and can get higher investment returns on new production or product development rather than from energy upgrades at existing facilities. Even if the economics are justified over the equipment’s lifetime, securing sufficient capital to make these investments in facility-level retrofits presents a barrier to increasing efficiency in the manufacturing sector.

Technology Innovation Examples

Phases of Technology
Research and Development
Validation and Early Deployment
Large Scale Deployment

The manufacturing sector has a long track record of adopting energy efficiency measures that have helped contribute to the declining carbon intensity of manufacturing over time. As RD&D continues, more energy-efficient technologies and practices can further reduce industrial carbon emissions.

One particularly promising area of research is smart manufacturing: using sensing and data-processing capabilities to optimize industrial processes and reduce energy consumption. In smart manufacturing, advanced sensors are placed at key points through an industrial process, collecting data on production conditions, inputs, and outputs. This data is then processed using advanced computer models and algorithms and applied to the improvement of manufacturing processes. These changes can be made at many stages: in-situ via real-time controls, via changes to human-technology interfaces, or in complete overhauls of existing processes.

Industrial Energy Efficiency
Smart manufacturing can increase energy efficiency and reduce emissions by optimizing industrial processes through the use of sensors and data processing.

A circular economy is a more sustainable alternative to the linear “take-make-dispose” model of consumption. As the world’s population increases, urbanizes, and becomes more affluent, consumption and material intensity will rise accordingly. This will drive up input costs and increase price volatility at a time when access to new resource reserves is becoming more challenging and expensive.

The circular economy—reusing, recovering, and recycling—is less energy-intensive than producing goods from virgin materials. Key materials that can contribute to emissions reductions through recycling are aluminium, steel, plastics, paper, cement, and food. New business models, practices, and technology solutions are in various stages of development and deployment for the way goods are designed, made, and used and for how recyclables are collected, sorted, and recovered.

Circular Economy
A circular economy model, shown here, reduces energy intensity and emissions by retaining the value of goods and materials for as long as possible through improved design, reuse, repair, remanufacture, recovery, and recycling.

Energy & Material Efficiency Policy Recommendations