Decarbonization – what is it and how does it work?

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

Climate change and the related regulations require companies to take actions aimed at reducing greenhouse gas emissions. Energy-intensive industries such as cement, steel, or chemical are among the largest emitters of CO₂. Implementing a decarbonization strategy helps not only reduce environmental impact but also brings business benefits – from lowering operational costs, through regulatory compliance, to meeting the expectations of investors and customers who increasingly choose eco-friendly products and services.

The European Union, under the European Green Deal, has set a goal of achieving climate neutrality by 2050. To achieve this, member states must significantly reduce CO₂ emissions. For this purpose, the EU Emissions Trading System (EU ETS) is in place, which imposes greenhouse gas emission limits on companies. The RED II (Renewable Energy Directive) supports the development of renewable energy sources, while the upcoming Corporate Sustainability Reporting Directive (CSRD) requires detailed ESG reporting, including actions related to decarbonization.

• steel industry – companies like ArcelorMittal invest in steel production technologies that do not use coking coal, for example, by developing hydrogen technologies that replace traditional production methods.
• transport – automotive giants such as Volvo and Mercedes-Benz aim to decarbonize their fleets by developing electric vehicles and investing in renewable energy to power their factories. At the same time, they require their suppliers to meet emissions reduction targets.
• energy sector – PGE Group invests in renewable energy sources, developing wind and photovoltaic farms to reduce coal dependency and lower CO₂ emissions. RWE plans a long-term lease of land in Ustka for an offshore wind power base.
• chemical industry – companies are implementing new technologies that transform production processes, and they invest in heat recovery and optimization of combined energy production.

Decarbonization requires continuous technological development. Innovative solutions are gaining importance, such as energy storage technologies that help stabilize supply from renewable sources, and carbon capture and storage (CCS) technologies that can significantly reduce CO₂ emissions in hard-to-abate sectors such as cement or chemical industries. Additionally, nuclear energy is attracting increasing attention as a zero-emission source, especially in the context of new generations of small modular reactors (SMRs), which may play a vital role in the future energy mix.

• lower operational costs – the adoption of renewable energy sources and improvements in energy efficiency lead to reduced energy consumption, which results in lower costs.
• access to new financial markets – investors are increasingly favoring companies with clearly defined decarbonization strategies and adherence to ESG principles, increasing their chances of securing capital.
• regulatory compliance – companies that fail to take decarbonization actions may face high financial penalties and difficulties accessing European markets.
• reputation improvement – eco-friendly initiatives like decarbonization strengthen consumer trust and positively impact a company’s reputation.

Decarbonization is not limited to internal company activities. To effectively reduce emissions at all stages, active cooperation with raw material suppliers, logistics partners, and end customers across the entire supply chain is essential. Building sustainable supply chains can accelerate the decarbonization process while improving business relationships and building trust among customers and investors.

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

Decarbonization has become a necessity, especially for energy-intensive industries. It is a key to sustainable development, offering both environmental and financial benefits. Investing in decarbonization strategies now allows companies not only to survive but to thrive in increasingly demanding regulatory and market conditions.