Decarbonization – what is it and what does it involve?

What is decarbonization?

Decarbonization is the process of reducing carbon dioxide (CO2) and other greenhouse gas (GHG) emissions into the atmosphere, with the aim of limiting the negative impact of economic activity on the environment. It is a key element of global efforts to combat climate change. For companies, especially in energy-intensive sectors, it means implementing technologies and processes that reduce emissions, such as switching to renewable energy sources, improving energy efficiency, and optimizing production.

Why does decarbonization matter?

Climate change and related regulations require companies to take action to reduce their greenhouse gas emissions. Energy-intensive industries such as cement, steel, and chemicals are among the largest CO2 emitters. Implementing a decarbonization strategy not only helps reduce environmental impact but also brings business benefits—from lower operating costs and compliance with regulations to meeting the expectations of investors and customers who are increasingly choosing green products and services. 

Decarbonization regulations and directives

The European Union, as part of the Green Deal, has set itself the goal of achieving climate neutrality by 2050. To achieve this, Member States must significantly reduce CO2 emissions. To this end, the EU Emissions Trading System (EU ETS) is in place, which imposes greenhouse gas emission limits for companies. The Renewable Energy Directive (RED II) supports the development of renewable energy sources, while the upcoming Corporate Sustainability Reporting Directive (CSRD) requires detailed reporting of ESG activities, including those related to decarbonization.

Examples of decarbonization in various industries

• Steel industry – Companies such as ArcelorMittal are investing in steel production technologies without the use of coking coal, for example, by developing hydrogen technologies that replace traditional production methods.
• Transport – Automotive companies such as Volvo and Mercedes-Benz are working to decarbonize their fleets by developing electric vehicles and investing in renewable energy sources to power factories. At the same time, they are requiring their suppliers to meet emission reduction targets.
• Energy – PGE Group is investing in renewable energy sources, developing wind and photovoltaic farms to reduce dependence on coal and lower CO2 emissions. RWE is planning a long-term lease of land in Ustka for an offshore wind energy base.
• Chemical industry – Companies are implementing new technologies that are changing production processes, as well as investing in heat recovery and optimization of combined energy production.

Modern technologies supporting decarbonization

Decarbonization requires continuous technological development. Innovative solutions are gaining key importance, such as energy storage technologies, which help stabilize supplies from renewable energy sources, and carbon capture and storage (CCS) technologies, which can significantly reduce CO2 emissions in sectors that are difficult to decarbonize, such as the cement or chemical industry. In addition, nuclear energy is attracting increasing attention as a zero-emission source, especially in the context of new generations of smaller nuclear reactors, such as SMRs (Small Modular Reactors), which can play an important role in the future energy mix.

What does decarbonization provide?

• Reduction of operating costs – The introduction of renewable energy sources and improved energy efficiency leads to reduced energy consumption, which results in lower costs.
• Access to new financial markets – Investors increasingly prefer companies that have clearly defined decarbonization strategies and adhere to ESG principles, which increases their chances of raising capital.
• Compliance with regulations – Companies that do not take decarbonization actions may expose themselves to high financial penalties and difficulties in accessing European markets.
• Improved image – Pro-ecological initiatives, such as decarbonization, strengthen consumer trust and have a positive impact on the company's reputation.

Collaboration across the supply chain

Decarbonization is not limited to internal operations. To effectively reduce emissions at all stages, active collaboration with raw material suppliers, logistics partners, and end-users across the supply chain is essential. Creating sustainable supply chains can accelerate the decarbonization process while improving business relationships and building trust with customers and investors.

Challenges of decarbonization

Despite the numerous benefits, companies face many challenges related to decarbonization. High upfront costs of investing in new technologies and modernizing infrastructure are a significant barrier, especially for companies dependent on fossil fuels. Additionally, changing regulations and differences in regulations between countries can make it difficult to develop long-term strategies. Limited availability of raw materials needed for the production of low-emission technologies, such as rare metals for batteries or solar panels, significantly affects the pace of decarbonization implementation.

Decarbonization has become a necessity, especially for companies in energy-intensive sectors. It is the key to sustainable development, bringing ecological and financial benefits. Investing in decarbonization strategies now enables companies to not only survive but thrive in an increasingly challenging regulatory and market environment.