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1、Net zero or growth?How Belgium can have bothJune 2023McKinsey&CompanyMcKinsey&Company is a global management consulting firm deeply committed to helping institutions in the private,public,and social sectors achieve lasting success.For more than 90years,our primary objective has been to serve as our
2、clients most trusted external adviser.With consultants in more than 100 cities and in more than 60 markets across industries and functions,we bring unparalleled expertise to clients all over the world.We work closely with teams at all levels of an organization to shape winning strategies,mobilize fo
3、r change,build capabilities,and drive successful execution.Cover image Mischa Keijser/Getty Images.iiNet zero or growth?How Belgium can have bothContents1Executive summary 24Five actions on the net-zero pathway14A Belgian pathway to net-zero emissions 36Seizing opportunities for green growth iiiNet
4、zero or growth?How Belgium can have bothExecutive summaryThrough the Paris Agreement,Belgium has committed to achieve net-zero emissions of greenhouse gases by 2050,but the country faces substantial challenges along that road.Because of its dense population and industrialized economy,Belgiums emissi
5、ons per capita are among the most intensive in Europe(ranked seventh in terms of CO2 per capita out of 27 EU countries).This report examines the actions and significant investments that would be needed across sectors for Belgium to address and overcome these challenges.At the same time,it looks at t
6、he significant business opportunities that the global net-zero transition could create for Belgian companies and the economy more broadly.The benefits offered by an orderly transition over time include an increase in energy security,as well as clear growth opportunities in Belgium and beyond.These b
7、enefits come on top of mitigating environmental challenges such as pollution(such as nitric oxide,sulfur oxide,and particulate matter),deteriorating water quality,and a sharp decline in biodiversity.1 However,a disorderly transition could entail risks that include waning competitiveness(with subsequ
8、ent risks to economic growth and jobs)and the broader issue for the global economy of failing to reduce emissions.Belgium can build on its current momentum:while quadrupling acceleration of the rate of decarbonization compared with that of 1990 to 2019 is required in the coming decades,Belgium has a
9、lready been accelerating across sectors in recent years.For instance,between 2021 and 1 For an example,see“Nature in the balance:What companies can do to restore natural capital,”McKinsey,December 5,2022.2 Eurostat data;Marleen Vanhecke,“Belgiums 2022 electricity mix:the increase in renewable energy
10、 and availability of nuclear power plants kept exports high,”Elia Group,January 6,2023;“Twice as many homes with an A label in 4 years,”De Standaard,May 30,2023;“Vehicle stock,”Statbel,September 15,2022.3 For more,see“The net-zero transition:What it would cost,what it could bring,”McKinsey Global In
11、stitute,January 2022;and“The energy transition:A region-by-region agenda for near-term action,”McKinsey,December 15,2022.4 The net-zero pathway we have modeled relies on technologies that we are relatively confident will become commercially scalable by 2030.However,while most known green technologie
12、s are proven,about 10 percent of the modeled abatement depends on technologies still in research and development.2022,the percentage of renewable-energy production from solar and wind in Belgium rose by 15 percent,while adoption of electric vehicles(EVs)increased by 75 percent.The number of building
13、s with the best energy performance certification doubled since 2019,in large part because of energy-efficient new builds.2The analysis in this report is based on a net-zero pathway that builds on previous McKinsey research and for which we created a bottom-up model of different economic sectors in B
14、elgium and what it would take for them to decarbonize(see sidebar,“The net-zero pathway modeled for this report”).3 This pathway,which considers known technologies,existing regulatory boundaries,and realistic assumptions about behavioral changes,aims to illustrate the requirements,trade-offs,and imp
15、lications for achieving net-zero goals.4Today,Belgiums energy mix relies heavily on fossil fuels.The transition to lower-carbon alternatives and other actions to meet emission-reduction targets,such as greater energy efficiency and recycling,will affect all sectorsfrom power,industry,and transportat
16、ion to residential housing and commercial buildings.Our analysis shows that this transition will require around 415 billion in incremental cumulative investments by 2050,the equivalent of about 2 to 3 percent of Belgiums 2022 GDP every year,of which more than half would go to decarbonizing the build
17、ing stock(mainly households).Belgium has core strengths it can leverage as it seeks to reorient its economy to become more Frederic VandenbergheFrank BekaertTom ClauwaertKen SomersNicolas DenisTim VromanMatthias DosscheMorgane Janssens 1Net zero or growth?How Belgium can have bothsustainable.Our res
18、earch has identified five specific(albeit nonexhaustive)opportunities that the country may consider to generate new green growth:establish Belgium as a European green gateway,provide cleantech solutions for solar,wind,and hydrogen;scale already-strong capabilities in materials recycling;develop serv
19、ice models for deep energy retrofits for buildings;and become a leader in agriculture and food technology through innovation in biotech.Speed is of the essence to meet decarbonization deadlines according to the Paris Agreement.Key decisions on issues related to funding,resource allocation,infrastruc
20、ture,long-term energy-supply mix,and regulation will need to be made soon,and the effects of these decisions will be felt for decades to come.5 Primary energy refers to energy sources before they are transformed into use.For example,coal can be converted to synthetic gas,which can be converted to el
21、ectricity;in this example,coal is primary energy,synthetic gas is secondary energy,and electricity is tertiary energy.A Belgian pathway to net-zero emissionsThe pathway we model and detail here highlights the far-reaching changes Belgium may make to reach net-zero emissions by 2050.Among the most si
22、gnificant changes would be a full-scale energy transition:primary energy demand would fall by more than 50 percent,mainly through energy-efficiency measures and electrification,while electricity demand would double by 2050.5 Belgium could experience a significant reduction in energy dependency from
23、foreign countries:today,Belgium supplies only 5 percent of its domestic energy needs but could become up to 50 percent self-sufficient if it were to follow the net-zero pathway we modeled as the use of renewable energy sources grows through a maximized build out of solar and wind production capacity
24、 and new energy-efficiency measures are The net-zero pathway modeled for this reportThe analyses in this report are derived from McKinseys Decarbonization Scenario Explorer(DSE),a McKinsey proprietary tool that allows us to model net-zero pathway scenarios built on underlying activity levels across
25、sectors(for example,transportation levels or metric tons of cement used)that contribute to the countrys emissions over the projected time horizon.The model offers a granular perspective on decarbonization trajectories for more than 50 sectors and subsectors across the economy,evaluating the business
26、 case for 800 or more clean technologies and decarbonization options for 15 or more fuels.Through the bottom-up modeling of energy consumption,capital expenditures,operating expenditures,and emission factors,the tool quantifies the greenhouse-gas abatement,investments,savings,and energy system impli
27、cations of each scenario.The DSE has been used to produce decarbonization pathways for more than 45 countries and regions.It evaluates immediate implications across dimensions such as emission levels,final energy consumption,investment requirements and costs,and electricity supply and capacity.Pathw
28、ays are optimized across environmental,socioeconomic,technological,and other variables.The scenario presented in this report is only representative of a single pathway that we modeled to illustrate the undertaking but is not meant to advocate for one specific pathway to achieving net zero and will e
29、volve over time.Moreover,the model is subject to certain limitations stemming from its initial assumptions.It does not consider the actions taken by neighboring countries,nor does it account for the potential system-level consequences and interdependencies that these actions may entail.Furthermore,t
30、he model does not encompass the entire range of individual company actions that have been announced or are currently under consideration.Rather,the pathway outlined in the model concentrates on the most relevant actions within each sector and assumes a constant output.2Net zero or growth?How Belgium
31、 can have bothimplemented.6 Building out a renewable-power system to meet electricity demand would require balancing loads,building out sufficient thermal and electric storage capacity,and strengthening grids and interconnections,among other actions.Furthermore,we explored additional measures relate
32、d to supply and demand which could enhance Belgiums energy self-sufficiency performance.Long-term green financing will need to be available to address the feasibility of some measures for households and industry alikefor example,the retrofitting of housing with insulation and energy-efficient techno
33、logies.7Under the net-zero pathway we modeled,this transition would have significant implications for a range of economic sectors(Exhibit E1):The power sector would need to phase out most traditional fossil power sources and build up locally produced and imported green electricity to replace them.Lo
34、cal production capacity for solar and wind energy would need to increase at least tenfold by 2050 if Belgium would be willing and able to fulfill all local demandassuming the currently planned phaseout of nuclear energy sources is implemented.This would reduce Belgian energy imports from around 98 p
35、ercent in 2019 to approximately 55 percent by 2050.A fully renewable system would require more and longer connections and smart flexibility,including the ability to adapt consumption to production levels.Thermal and electrical storage,as well as(synthetic)biomethane,would need to be added,while exis
36、ting gas-fired boilers and heat and power assets would be kept as backups.Electrification would require a clear view of the grid requirements of the future at both the transmission and distribution levels,and large capex decision 6 See“A Belgian pathway to net-zero emissions”(page 14)for more detail
37、s.7 For a detailed breakdown of these requirements and the challenges on the path to net zero,see“Solving the net-zero equation:Nine requirements for a more orderly transition,”McKinsey,October 27,2021;and“The energy transition,”December 15,2022.8 The total includes residential dwellings,such as det
38、ached and semidetached houses or apartments,and nonresidential buildings such as commercial,offices,health,education,and other public buildings.A-label energy performance certification entails reaching energy consumption that is equal to or below 100 kilowatt-hours per square meter.will require a st
39、able outlook on energy mix,access,and price.Industry would need to phase out fossil fuels as a heat source,switching to electrification,thermal storage,and biofuel.Together with doubling down on energy-efficiency measures,this is one of the main contributions to cutting primary energy demand in Belg
40、ium as a whole by about 50 percent.Our large industrial hubs would need to harness and implement nascent technologies such as thermal storage,direct electrification,high temperature lift heat pumps,or carbon capture and storage(CCS)in addition to new technologies such as geothermal looping for steam
41、 or direct reduction of iron for the steel industry.Electrification,CCS,hydrogen,and green molecules will in turn require new large-scale infrastructure.In transportation,EVs would entirely replace internal-combustion-engine(ICE)passenger vehicles,and trucks would shift to electric and fuel-cell tec
42、hnology by 2050.Public transport would need to be further developed,with a modal shift including an increase in train usage and a reduction of passenger vehicle kilometers driven.Again,this implies the need for significant infrastructure.For buildings,to achieve net zero,new buildings and nearly all
43、 existing building units(5.5 million out of a total 5.7 million)will need to evolve toward an A-label energy performance certification.8 This would require a combination of deep energy retrofits,rebuilds,and new builds.Deep energy retrofits result in a reduction of energy consumption of more than 60
44、 percent or contribute to achieving A-label certification.This could be achieved through better insulation and by switching from fossil-energy sources to heat pump technology and district heating.This is a major undertaking 3Net zero or growth?How Belgium can have bothExhibit E1Web Exhibit of McKins
45、ey&CompanyIllustrated pathway:3.7 MtCOe p.a.to be abated in 201950(x4 speed vs 0.9 MtCOe p.a.in 19902019)Note:Decarbonization total depends on the weight of each sector in terms of emissions.1Million metric tons of CO equivalent per annum.2Including waste management and other emissions.3Commercial a
46、nd residential.4Land use,land-use change,and forestry.Achieving net-zero emissions in Belgium will require sustained eforts across sectors.SectorsPowerIndustry45%96%19%100%30%100%43%100%34%60%+95%+550%45%97%TransportBuildingsTotalMain drivers for 2030 reduction(not exhaustive)Decarbonization vs 2019
47、20302050AgricultureReduction in size of livestock herds by 25%and implementation of modern farming techniques40%electrifcation of greenhouse heating(through heat pumps)and farming equipmentLULUCFGrasslands covered by leguminous plants capturing 0.5 MtCOe p.a.Croplands covered by cover crops capturin
48、g 0.7 MtCOe p.a.30+%of building units highly insulated20%of buildings equipped with a heat pump50%penetration rate of battery electric vehicle(BEV)passenger cars and vans 15%penetration rate of BEV trucks with a minor uptake in fuel cell trucks30-gigawatt(GW)increase in renewable electricity product
49、ion(3.5x times vs 2019):23 GW from solar and 8 GW from wind,contributing to 35 TWh of renewable energy annually90%electrifcation of low-and medium-temperature heat25%reduction in barrels of oil producedMain decarbonization realized in steel,ethylene,and cement20202025203020352040204520505
50、0607080901001101204Net zero or growth?How Belgium can have bothbecause Belgian buildings tend to be larger,older,and less insulated than the stock of buildings in some other European countries,and its dense,historical city centers add to the complexity of this undertaking.9 The total energy retrofit
51、 market could double in size,while the pace of the deep energy retrofits needed to achieve an A-label certification would have to increase 25-fold by 2030,from about 10,000 building units per year today to 250,000.This would lead to a massive increase in demand for building materials and human resou
52、rces.Moreover,innovation would be required to develop greener,more-productive,less-invasive,and more-affordable materials and construction methods.Training and education will also need to be adapted as of today.Our analysis estimates that incremental cumulative investments of approximately 210 billi
53、on could be needed to decarbonize buildings.Given the size of the incremental investment needed in buildings,including residential housing,about 45 percent of the total incremental spending would be borne by households;consumers would also carry some of the investment cost of the power and transport
54、ation transitions.Businesses would carry about 40 percent of the investment across sectors.And investments by central infrastructure providers in power,transport,and industry would make up the remaining 15 percent.For agriculture,land use,and forestry,changes would include technology shifts for feed
55、 mix,fertilizer use,and electrification;reductions in the size of livestock herds;and optimized use of available land.Based on the pathway modeled,the total cumulative incremental capital expenditure needed to enable this transition by 2050 is about 415 billionor the equivalent of about 2 to 3 perce
56、nt of Belgiums 2022 GDP annually until 2050(Exhibit E2).About 210 billion would 9 Analysis based on Eurostat database of distribution of dwellings by period of construction and national averages,2021.10 Capital expenditure has been calculated conservatively to account for a small part of hydrogen in
57、 heating,which is cheaper than electricity for selected industrial use cases.11“Fit for 55:Council adopts key pieces of legislation delivering on 2030 climate targets,”Council of the EU,April 25,2023.be required for building retrofits,with another 110 billion necessary for switching to a zero-emissi
58、on power sector,according to this analysis.Incremental cumulative capital expenditure for industry is estimated between 30 billion and 45 billion,largely concentrated in a few industrial clusters that play in a global market.10 For these players,global competitiveness is key,and large capital expend
59、iture spending and asset reconfiguration decisions therefore require a stable energy mix and price outlook to ensure costs can be predicted and kept competitive.They would also again need access to the required infrastructure in a stable and competitive way that fosters investments.Moreover,based on
60、 our pathway,up to 40 percent of these incremental investments would be required before 2030 to meet the European Unions Fit for 55 objectives.11In the long term,the decarbonization and energy transition would most likely result in lower operating costs for much of society,mostly because of the redu
61、ction in demand for primary energy of about 50 percent.In the short term,the effect on operational costs will likely differ by sector:hard-to-abate sectors could face a cost increase,making business cases and investment decisions challenging(as mentioned,for large industrial companies competing glob
62、ally,this implies a clear need for a stable outlook on energy mix,access,and cost in the short,medium,and long term);in other sectors,such as personal mobility,EVs are already drawing close to parity with ICE vehicles in terms of the total cost of ownership;and retrofitting buildings would result in
63、 direct operational cost savings,though the challenge here would be affordability.Industry players that electrify their high-temperature heating energy may need a full rebuild of the equipment,but they could benefit from designs that would be cheaper to operate and would provide fuel flexibility,ena
64、bling them to arbitrage based on cost.Low-cost renewables,green molecules,and green hydrogen in sufficient 5Net zero or growth?How Belgium can have bothamounts,coupled with efficient CCS,could reinforce the long-term competitiveness of the largest industrial plants and clusters.Five actions on the n
65、et-zero pathwayPutting in motion these large-scale changes on an accelerated timeline will be challenging.Here we focus on five of the most pressing aspects:Safeguarding the competitiveness of Belgian industry.Rapid and bold energy-efficiency and electrification measures and a continued push on R&D
66、for new climate technologies would be needed to achieve net-zero commitments,and the competitive context within and beyond Europes borders would also play a role.This is especially important given differences in CO2 and energy price levels and supporting mechanisms by country and region.Large indust
67、rial clusters that compete on a global scale would need to be certain about future green-feedstock availability,energy mixes,access,and costs to make business cases work and hold in the global competitive landscape.Defining the long-term electricity supply mix to meet Belgian electricity demand and
68、manage intermittency.The net-zero pathway we modeled could result in decreased energy imports from about 98 percent in 2019 to Exhibit E2Cumulative incremental investment vs BAU1 to reach net zero,including infrastructure capital expenditures,2 201950Note:Figures may not sum,because of rounding.1Bus
69、iness as usual.2Cumulative CAPEX 201950 includes infrastructure capex for grid,H,carbon,district heating,EV charging and excludes power balancing;additional power capital expenditures in these sectors(split based on 2050 electricity demand)equal 64 billion in industry,19 billion in transport,and 30
70、billion in buildings.3Million metric tons of CO2 equivalent.4Land use,land-use change,and forestry.5Not all sectors are shown.Source:McKinsey Decarbonization Scenario ExplorerReaching net zero will require cumulative incremental investment of about 415 billion,mostly to decarbonize buildings and pow
71、er.McKinsey&CompanyIndustryTransportBuildingsPowerAgricultureLULUCF4Total54526254826701,85010,00011,2004303,3003,7001,000Total abatement 2019 vs 2050,MtCOe per yearIncremental investment,2 cumulative,billionAbatement investment,2 million per MtCOe per yearOperational expenditur
72、e impact of the net-zero pathway versus BAU1 scenario,share of projects100%Lower OPEXNeutral OPEXHigher OPEXIndustryTransportBuildings6430196Net zero or growth?How Belgium can have bothabout 55 percent in 2050.If we maximize the build-out of renewable electricity in Belgium within the boundaries set
73、 today(for example,available space to build renewables),we see that 40 to 50 terawatt-hours(TWh)of electricity demand cannot be covered through local production.Covering this difference will require a combination of supply or demand side measures(Exhibit E3).A difference of 30 to 40 TWh is already e
74、xpected(before taking supply or demand side measures)by 2030.Added to this is the variability of a renewables-based system,meaning the size of this difference will vary,with energy being exported and stored during times of excess and imported and released from storage when production levels of renew
75、able sources are low,thereby requiring a combination of increased interconnectivity,energy carrier arbitrage,storage,and demand flexibility.Transitioning Belgian households to energy-efficient and lower-emissions buildings in an affordable and feasible way.The challenge here is twofold:first,the ext
76、ent of the necessary retrofitting,rebuilding,and new building(Exhibit E4);and second,the very substantial household investment associated with this retrofitting and rebuilding or new building.Various tools could help set this transition into motion,including commercializing new technologies,such as
77、heat pumps,at an affordable price;providing long-term green loans for rebuilds and energy-efficient retrofits,including adding insulation;and supporting strong regulatory mechanisms and incentives to ensure rapid and comprehensive rebuilds,as well as retrofitting that is affordable for Belgian house
78、holds.Contractor capacity would also have to increase,implying a massive HR and training challenge.Accelerating the rollout of open-access infrastructure for power,CO2,hydrogen,and green molecules to allow decarbonization of existing assets and attract new greenfield investments.Publicprivate task f
79、orces and accelerated permitting processes would be required to speed up the transition,and this would need to happen soon given the large lead times,especially for industrial reconfiguration.Speeding up sectoral shifts to meet Fit for 55 goals by 2030.Emission-reduction targets that the European Un
80、ion has set for 2030 are an interim step to achieving the 2050 goals.They represent a massive challenge for all stakeholders,requiring them to take rapid action and commit to intense acceleration in the next seven years,regardless of the chosen pathway.To meet this target,an estimated 165 billion(or
81、 40 percent of total incremental cumulative investments)could be required before 2030.Seizing opportunities for green growthThe global sustainability transition offers green growth opportunities,including for Belgian players.While the scale of Belgiums sustainability transition may seem daunting,the
82、 country also has the potential to tap new sources of green growth.The report concludes by outlining five such potential opportunities that would play to Belgiums strengths and allow it to access new value pools,including through exports.This list is not meant to be exhaustive,and Belgium will have
83、other opportunities.Establishing Belgium as a European green gateway.The net-zero transition will give rise to new global trade flows of hydrogen and derivatives,green and blue ammonia,green methanol and ethanol,recycled plastics,synthetic fuels,hot briquetted iron for green steel,CO2,and electricit
84、y,among others.These new trade flows would require import and transit hubs.Belgium could position itself as such a hub,given its geographical location in the heart of Europe,its seaports,and its industrial backbone,including a strong petrochemical cluster in Antwerp,which could be leveraged to creat
85、e new processing facilities.Our analysis suggests three potential opportunities for Belgium as this trading accelerates:first,to become a transit hub for hydrogen and derivatives,green feedstock,7Net zero or growth?How Belgium can have bothExhibit E3Web Exhibit of McKinsey&Company1Assuming current t
86、echnology and permitting regulations.Already incorporating power factor for diferent technologies(eg 10%for solar).2Assuming perfect balancing.Source:“How much renewable electricity can be generated in Belgium?(Dynamic Energy Atlas),”EMIS VITO,November 24,2021;McKinsey Decarbonization Scenario Explo
87、rer;McKinsey analysisAn estimated 40 to 50 terawatt-hour diference between possible local production and local need in 2050 will require supply and demand measures.Illustrated pathway2050 potential local electricity supply with current constraints,TWh Existing capacityNew capacityElectricity demand(
88、excl H)SolarOnshore windOfshore wind60800406500.52030344050160170 5253040459095Other(bio,renewable waste)Local supplyLocal demandAgricultureTransportBuildingsIndustryDiference18xvs 20197xvs 20194xvs 2019Capacityfactor,%Installedcapacity,gigawattpeak(GWp)2050 local el
89、ectricity demand,TWh 85(2019 supplyand demand)Belgiums share of primary energy imports would fall from 98%in 2019 to a base import of maximum 55%by 2050.8Net zero or growth?How Belgium can have bothExhibit E420302040205001,0002,0003,0004,0005,0006,000150(2%)877(16%)3,389(60%)5,650(100%)Share of tota
90、l building units with A-label EPCs(xx%)Cumulative number of building units with A-label energy performance certifcates(EPCs)in 2022,thousand building unitsNumber of building units requiring deep energy retrofts or rebuilds,thousand building unitsSource:ING Think;Recticel;McKinsey analysisAcceleratin
91、g deep energy retrofts by 25 times is needed to ensure the total building stock achieves A-label energy performance certifcates by 2050.McKinsey&Company050020302040205025xStable run rate202220229Net zero or growth?How Belgium can have bothgreen molecules,and CO212;second,to serve as an el
92、ectricity trading hub for Europe;and third,to be a processing hub for green molecules(Exhibit E5).The storage and transportation services,channeling 15 to 30 percent of the European Unions import of hydrogen and green molecules through Belgium could create a 4 billion value pool with a growing trans
93、it,trading,and processing hub,according to our analysis.12 Green feedstock includes biomass,vegetable oil,recycled plastic(assuming its based on bio feedstock),green ethanol,and green CO2.Green molecules(resulting from hydrogen and derivatives and the green feedstock)include green CO2,green alkanes,
94、green ethylene,and bio-based naphtha.Providing cleantech solutions for wind,solar,and hydrogen.The need for equipment and engineering,procurement,and construction(EPC)services for the scale-up of onshore and offshore wind,solar,and hydrogen value chains is growing and is expected to reach 1.1 trilli
95、on per year globally by 2040.Belgium could capture a share of this opportunity given its capabilities,expertise,and current activitiesfor example,in Exhibit E5Biogenic CO2Gray CO2ElectricityGreen molecules4Direction of fowsGreen chemistry valleyHydrogen and derivatives2Green feedstockTransport and p
96、rocessingGreen molecules processing hubFlows of hydrogen and derivatives,green molecules,CO2,and electricity in and out of Belgium by 20501Mode of transport dependent on timeline,product,destination,and strategy.2Hydrogen and derivatives include hydrogen,ammonia,methanol,and hot briquetted iron.3Gre
97、en feedstock includes biomass,vegetable oil,recycled plastic(assuming its based on bio feedstock),green ethanol,and green CO.4Green molecules(result from hydrogen and derivatives and the green feedstock)include green C,green alkanes,green ethylene,and bio-based naphtha.Source:“Belgian federal hydrog
98、en strategy,”Federal Public Service Economy,accessed May 19,2023;Flanders Investment and Trade;International Energy Agency;De Tijd;McKinsey Hydrogen Insights;McKinsey analysisBelgium has an opportunity to become a green gateway to Europe as a transit,trading,and processing hub.McKinsey&Companyle-de-
99、France,Auvergne-Rhne-Alpes,Grand Est,Hauts-de-France,etc1Dudelange,etc1Antwerp petrochemical industryGeleen,the Ruhr area,Ludwigshafen,etc1Port of Antwerp-Bruges and North Sea PortThe NetherlandsGermanyHydrogen(H2)Green ammonia(NH3)Green methane(CH4)Biogenic CO2ElectricityBiomassRecycled plasticOthe
100、rGreen methanol(CH3OH)Green ethanol(C2H5OH)Green ethylene(C2H4)Green alkanes(eg,sustainable aviation fuel)Bio-olefn(CnH2n)OtherNorthwest England,the Humber,etc110Net zero or growth?How Belgium can have bothoffshore wind,where Belgian companies have a strong track record installing offshore windmills
101、 and cables.13 The countrys geographic location,which could help it become an important energy hub,and existing infrastructure could serve as another differentiator.With the proper developments,Belgian players positioned across this value chain could potentially capture a value pool of 4 billion thr
102、ough,for example,integrated offerings in hydrogen and green-molecule supply chains from EPC companies for renewable energy projects,including offshore wind projects.14 If Belgian players were able to sustain a 20 percent share of the electrolyzer market by 2030,they could potentially capture a value
103、 pool of about 900 million;to do so would imply a fivefold increase in electrolyzer production capacity.Moreover,implementing efficiency measures in the electrolysis production in Belgium could result in cost savings of as much as 16 billion across Europe.Scaling already-strong materials-recycling c
104、apabilities.Belgium is home to players with leading recycling expertise and strong technological capabilities in complex recycling.The country also has a high share of current European recycling capacity,including,for example,about 40 percent of battery recycling and 20 percent each of copper and st
105、ainless-steel recycling.Belgium also already functions as a trade hub for EU metal scrap.For nine materials assessed,the European value pool could grow to 25 billion to 35 billion by 2040.Keeping market share for most materials15 would result in a Belgian recycling value pool between 1 billion and 2
106、 billion16 by 2040,twice the size of todays value pools.Developing service models for deep energy retrofits of buildings.Buildings in other European countries,not just Belgium,will also need to 13 See,for example,“Factbox:The worlds biggest dredging companies,”Reuters,March 29,2010.14 Based on a glo
107、bal revenue pool of about 500 billion along the value chain,assuming 5 percent market share and 15 percent profit margin.15 This assumes a 20 percent market share of EU battery recycling.Belgium currently has a share of about 40 percent of this market.16 In 2022 real prices.17 For example,Belgian bi
108、otech companies had a market value of 42 billion in 2022,or about one-quarter of the total stock market value of biotech companies in the EU.See“Flanders is European biotech leader for 3rd year in a row,”Flanders Investment and Trade,accessed May 25,2023.undergo major retrofitting,rebuilding,or new
109、building to achieve net-zero targets,raising the prospect of a new growth sector specializing in buildings retrofits and rebuilds.In Belgium alone,the retrofit potential under the net-zero pathway represents a cumulative 400 billion investment pool between 2023 and 2050(of which 210 billion is incre
110、mental)about 16 billion annually from 2030 to 2050.This represents an opportunity for companies,especially early movers,to develop service offerings that address these new market needs.Becoming a leader in agriculture and food technology through innovation in biotechnologies.Belgium already has a le
111、ading pharmaceutical biotech R&D position in Europe and numerous specialized research institutions and universities.17 It also has a diverse and sizable agriculture and agro-processing industry.Opportunities in sustainable agricultural inputs,alternative proteins,and waste reduction in food include
112、the growing market for specialty crop nutrition and biologicals and more-sustainable ways to produce animal protein through precision fermentation for alternative proteins,which is expected to see annual growth of approximately 40 percent by 2030.Together,these represent a global estimated market of
113、 up to 560 billion by 2030,albeit with considerable uncertainty about the range of opportunities.Each of these opportunities will require a bold vision and action by stakeholders for the opportunities to be seized.This includes building out appropriate infrastructure,adopting a regulatory and policy
114、 approach that fosters green innovation,and implementing steps to overcome bottlenecks such as lengthy permitting and construction times and a limited supply of some strategic materials.In some cases,11Net zero or growth?How Belgium can have bothincluding for housing retrofits and large industrial c
115、apital expenditure decisions,high financing requirements may run up against issues of affordability.For industry,operating expenditure implications can be made clearer,including with greater certainty on future green feedstock,energy mix,cost,and availability.Yet the upside of taking these actions a
116、nd seizing the opportunities is considerable:the greener future that beckons will ultimately benefit Belgiumand the planet.In a rapidly shifting job market globally,a greener future could present significant employment opportunities.Much is at stake,and key decisions will need to be made.Speed is of
117、 the essence:moving rapidly will be essential to ensure Belgium meets its national and European commitments and potentially secures a competitive advantage in the process.This report is not a playbook or a road map but rather a source of new insights,facts,and data to drive decisions to reach the ne
118、t-zero objective.It is based on the in-depth analysis of one possible pathway that was in turn based on realistic assumptions and modeled to illustrate the challenges and requirements for a timely transition.Nonetheless,the conclusion remains the same:Belgium could reach its net-zero ambition,but ac
119、hieving this will require coordinated action.On top of that,Belgium can be ambitious and tap into various value pools that the transition offers globally.12Net zero or growth?How Belgium can have both Monty Rakusen/Getty Images13Net zero or growth?How Belgium can have bothA Belgian pathway to net-ze
120、ro emissionsBelgiums annual carbon emissions in 2019 amounted to 116 million metric tons of CO2 equivalent(MtCO2e),excluding international bunkering,1 the seventh highest in Europe on a per capita basis and ninth highest in GDP terms.2 To meet the net-zero commitments the country has made under the
121、2015 Paris Agreement,it will need to sharply accelerate the rate of its decarbonizationby a factor of four compared with its decarbonization efforts between 1990 and 2019.It will have to move even faster to meet the goals that the European Union has set for 2030:the Fit for 55 package calls for a 55
122、 percent reduction in greenhouse-gas(GHG)emissions by then,compared with 1990 levels,or a fivefold acceleration.31 Includes aviation and shipping.2 Including non-CO2 emissions converted into carbon dioxide equivalents according to their 100-year global warming potential.Emissions include methane(abo
123、ut 7 percent),nitrous oxide(5 percent),and other greenhouse gases(primarily F-gases 2 to 3 percent,which are low-volume,highly potent emissions such as hydrofluorocarbons and chlorofluorocarbons).Excludes international bunkering(aviation and marine).3 The reduction necessary to meet the European Uni
124、ons Fit for 55 targets amounts to 4.6 MtCO2e per annum.This compares to actual reductions of about 0.9 MtCO2e per year from 1990 to 2019.4 In accordance with the United Nations Framework Convention on Climate Change(UNFCCC)guidelines,emissions from international air and maritime transport are not in
125、cluded in national emissions.5“National inventory submissions 2021,”United Nations Climate Change,accessed May 25,2023.6“Recovery and resilience plan ratified by the Council,”Thomas Dermine press release,July 13,2021;“The Green Deal Industrial Plan:Putting Europes net-zero industry in the lead,”Euro
126、pean Commission,February 1,2023.To put the challenge that these reductions represent into perspective,we created a baseline that maps Belgiums GHG emissions across several key sectors4:industry;power;transport;buildings;agriculture;and land use,land-use change,and forestry.Industry is the biggest co
127、ntributor to emissions at 39 percent of the total,followed by transportation(22 percent)and buildings(18 percent)(Exhibit 1).Compared with European peers,Belgium has one of the highest shares of hard-to-abate emissions,such as those from steel(9 percent),cement(3 percent),and lime production(1 perce
128、nt).5 Belgium translated its commitment to the Fit for 55 program into a National Energy and Climate Plan(NECP)for 202130 and the European Green Deal Industrial Plan.6 14Net zero or growth?How Belgium can have bothExhibit 1McKinsey&CompanyIndustryTransportationBuildingsAgricultureTotalMtCOe%of total
129、Wasteand otherPower2263945910Other industryPassenger carsResidentalCommercial166TrucksVansBusesOtherOtherSwineDairyBeefCropsHorti-cultureandmachinesIron and steelOther chemicalsPetroleum refningCementEthyleneLime14122331MtCOe,2019Note:Numbers may not sum,because of rounding.Lan
130、d use,land-use change,and forestry(LULUCF)efect is not displayed here but has a negative emission absorption of 0.5 metric tons of CO.1Million metric tons of CO equivalent.Excluding international bunkering(32.5 MtCO per annum).Source:Belgium.National Inventory Report,UN Climate Change,April 14,2021;
131、McKinsey analysisIndustry,transportation,and buildings are the major contributors to Belgiums baseline annual emissions of 116 million metric tons of CO equivalent.15Net zero or growth?How Belgium can have bothSustained efforts across sectors will be needed to achieve net-zero goalsReducing Belgiums
132、 emissions to net zero by 2050 and meeting interim targets based on Fit for 55 will require sustained efforts across sectors.The energy transition that is at the heart of these efforts could be achieved in various ways,all of which would require significant change.For this report,we developed one ex
133、ample scenario that leads Belgium to net-zero emissions by 2050.The objective of this report is not to advocate a single preferred pathway;rather,the pathway we modeled illustrates the requirements,trade-offs,and implications of the large-scale emission-reduction efforts.Based on this pathway model,
134、Exhibit 2 shows the speed at which each sector would reach its net-zero goals.The scenario will likely evolve in a time of uncertainty for the global energy markets and as technological innovation accelerates.We anticipate the effort will require the following actions,by sector,on the path to 2050:I
135、n the power sector,phasing out carbon-based power generation and increasing renewables capacity tenfold by 2050,compared with 2019.As we discuss in depth in the energy supply section of the next chapter,Belgium will need to substantially change its energy mix.This assumes the phaseout of nuclear ene
136、rgy in accordance with a governmental decision7 and the reduction of fossil-fuel-based energy as a share of total supply.At the same time,demand for electricity will increase,driven by the growth in electrification.In industry,ramping up energy efficiency programs and shifting to new technologies th
137、at enable a more circular economy.The modeled net-zero pathway assumes a reduction in demand for primary energy together with a 15 percent energy reduction through more efficient operations by 2050;a technological shift,notably away from coal;and a growing dependence on renewable-energy sources.This
138、 would be supplemented by efforts such as electrifying industrial heating(100 percent electrification for low-and medium-temperature heat and 60 percent for high-temperature heat by 2050,including heat storage for arbitrage);shifting 7“Amendment of the nuclear phase-out law,”Council of Ministers,Apr
139、il 1,2022.to carbon-free fuels for the remaining high-temperature heat requirements;implementing new technologies in hard-to-abate sectors(such as techniques for the direct reduction of iron in steelmaking and calcined claybased cement production);moving to renewable feedstocks and circular-driven c
140、lusters in the petrochemical industry;and transporting and storing CO2e from remaining process emissions by 2050.To date,more than 15 carbon capture projects have been announced,for a combined capacity of almost 20 million metric tons per annum(Mtpa)by 2030.Assuming 60 percent of these materialize i
141、n time,this would result in a reduction of 12 Mtpa of CO2e by 2030,which is in line with modeled remaining process emissions.In transportation,transitioning to electric vehicles.All Belgian passenger cars and vans would be electric by 2050,based on the pathway we modeled.Heavy-duty trucks will also
142、be electrified,with 45 percent shifting to fuel cell technology and about 55 percent becoming electric.The pathway also assumes a shift to low-emissions public transport,including an increase in train usage and a reduction in the number of passenger vehicle kilometers driven.In buildings,shifting to
143、 better energy performance.Nearly all existing buildings will need to evolve toward an A-label energy performance certification,requiring deep energy retrofits or rebuilds of 5.5 million building units.Belgian buildings would need to reduce their heating energy needs by more than 60 percent and shif
144、t to renewable heating sources.The pathway also assumes a transition to heat electrification via heat pump technology for 80 percent of buildings by 2050,with the remaining buildings using district heating or biofuels.In agriculture,using carbon absorption to compensate for emissions.The agriculture
145、 sector is the only sector that would not achieve net-zero emissions by 2050 under the pathway we modeled,creating a need for offsetting mechanisms.Nonetheless,more than 50 percent of the current agricultural baseline emissions could be reduced by a combination of efficiency measures(including recon
146、figured feed mix,feed additives,precision fertilization,and enhanced 16Net zero or growth?How Belgium can have bothExhibit 2McKinsey&CompanyIllustrated pathway:3.7 MtCOe p.a.to be abated in 201950(x4 speed vs 0.9 MtCOe p.a.in 19902019)Note:Decarbonization total depends on the weight of each sector i
147、n terms of emissions.1Million metric tons of CO equivalent per annum.2Including waste management and other emissions.3Commercial and residential.4Land use,land-use change,and forestry.Achieving net-zero emissions in Belgium will require sustained eforts across sectors.SectorsPowerIndustry45%96%19%10
148、0%30%100%43%100%34%60%+95%+550%45%97%TransportBuildingsTotalMain drivers for 2030 reduction(not exhaustive)Decarbonization vs 201920302050AgricultureReduction in size of livestock herds by 25%and implementation of modern farming techniques40%electrifcation of greenhouse heating(through heat pumps)an
149、d farming equipmentLULUCFGrasslands covered by leguminous plants capturing 0.5 MtCOe p.a.Croplands covered by cover crops capturing 0.7 MtCOe p.a.30+%of building units highly insulated20%of buildings equipped with a heat pump50%penetration rate of battery electric vehicle(BEV)passenger cars and vans
150、 15%penetration rate of BEV trucks with a minor uptake in fuel cell trucks30-gigawatt(GW)increase in renewable electricity production(3.5x times vs 2019):23 GW from solar and 8 GW from wind,contributing to 35 TWh of renewable energy annually90%electrifcation of low-and medium-temperature heat25%redu
151、ction in barrels of oil producedMain decarbonization realized in steel,ethylene,and cement20202025203020352040204520505060708090Net zero or growth?How Belgium can have bothfertilizers),reduction in the size of livestock herds,and electrification of energy use.In land use,land-u
152、se change,and forestry,focusing on reforestation.Biological sequestration via forests and grasslands or CO2e absorption technologies that are still in the early R&D phase could be used to compensate for continued emissions in agriculture.A significant revision of existing land use to focus on refore
153、station could potentially lead to an increase in natural carbon absorption,thereby increasing tenfold by 2050 the 0.5 Mtpa of CO2e(or 0.4 percent of total emissions in 2019)that were absorbed by land in 2019.The pathway to net zero would require 415 billion in incremental investment by 2050,while op
154、erating-cost impact would vary by sector Compared with a business-as-usual scenario,in which Belgium would not target net zero by 2050,the pathway modeled finds that about 415 billion in cumulative incremental capital expenditure investment on top of business as usual would be needed to finance the
155、countrys sector-specific decarbonization and the supporting central infrastructure(Exhibit 3).This estimate is based on a detailed bottom-up analysis of Belgiums economy and what it would take for each sector to decarbonize.Some of Exhibit 3Cumulative incremental investment vs BAU1 to reach net zero
156、,including infrastructure capital expenditures,2 201950Note:Figures may not sum,because of rounding.1Business as usual.2Cumulative CAPEX 201950 includes infrastructure capex for grid,H,carbon,district heating,EV charging and excludes power balancing;additional power capital expenditures in these sec
157、tors(split based on 2050 electricity demand)equal 64 billion in industry,19 billion in transport,and 30 billion in buildings.3Million metric tons of CO2 equivalent.4Land use,land-use change,and forestry.5Not all sectors are shown.Source:McKinsey Decarbonization Scenario ExplorerReaching net zero wil
158、l require cumulative incremental investment of about 415 billion,mostly to decarbonize buildings and power.McKinsey&CompanyIndustryTransportBuildingsPowerAgricultureLULUCF4Total54526254826701,85010,00011,2004303,3003,7001,000Total abatement 2019 vs 2050,MtCOe per yearIncrementa
159、l investment,2 cumulative,billionAbatement investment,2 million per MtCOe per yearOperational expenditure impact of the net-zero pathway versus BAU1 scenario,share of projects100%Lower OPEXNeutral OPEXHigher OPEXIndustryTransportBuildings64301918Net zero or growth?How Belgium can have boththe increa
160、se in spending will be to move from high-emission assets to lower-emission assets,while other increases will go toward novel cleaner technologies,such as carbon capture and storage(CCS).Businesses and households would bear the largest share of the coststhe latter largely because of the requirements
161、to energy retrofit and rebuild buildings(Exhibit 4).The investment required is one part of the overall net-zero equation.The other part is the operating-cost impact.In the long term,the energy transition will most likely reduce operating costs for society as demand for primary energy falls.There may
162、 also be savings from new technologies and greater energy efficiency.Nonetheless,our analysis suggests that operating expenditures Exhibit 4McKinsey&CompanyIllustrated pathway(based on principle that asset owner invests and not including any subsidies),cumulative incremental investment through 2050,
163、billion Note:Costs are mentioned as a range,but the upper limit is used in this analysis.1Land use,land-use change,and forestry.2Including real estate portfolio of government.3Power balancing excluded given the high uncertainty of the technology to be used along with its cost.44,500 per solar system
164、,assuming 5.1 million additional solar systems installed in Belgium by 2050,cumulatively results in 23 billion.52,000 per unit of electric-vehicle infrastructure,assuming 5 million units and new cars,cumulatively results in 10 billion.6Carbon capture,utilization,and storage.Source:BSI;EMIS VITO;Euro
165、stat;McKinsey Center for Future Mobility;McKinsey Decarbonization Scenario Explorer;McKinsey analysisBusinesses and households will bear most of the required incremental investment for Belgium to achieve its net-zero goals.25523494032Total investmentKey incremental investment i
166、nsights and fgures,by categoryHouseholdsBusinessesCentral infrastructure providersBy investment categoryShare oftotal,%HouseholdsBusinessesCentralinfrastructureproviders451540310IndustryTransportBuildingsPowerAgricultureLULUCFBuildings:Installation and other services,heat pumps and ventil
167、ation,windows and doors(156 billion total)Power:4,500 solar system(23 billion total)Transport:2,000 electric-vehicle infrastructure and new cars(10 billion)Industry:Process updates and equipment(25 billion35 billion)Transport:Fleet decarbonization and charging(34 billion)Buildings:Decarbonization of
168、 ofce spaces(52 billion)Agriculture:Equipment and machines(3 billion)Power:Wind and solar(49 billion)LULUCF:(10 billion)Power:Power grid(40 billion)Transport:Public charging for cars,vans,buses,and trucks(4 billion)Industry:Hydrogen(2 billion)and CCUS transport(3 billion)Buildings:District heating n
169、etwork set up(3 billion)Average investmentcorresponds to 23%ofGDP yearly(based onbaseline year 2019)19Net zero or growth?How Belgium can have bothunder the modeled pathway will vary widely by sector.Hard-to-abate sectors,such as cement,steel,and the petrochemical industry,would face a cost increase
170、that makes business cases challenging.In other sectors,there may be longer-term payoffs from the investments.The operating-cost impact will depend on each sectors energy efficiency potential,the chosen energy source(such as electrification,green molecules,and district heating),and the corresponding
171、price of energy and electricity,as well as on the costs for decarbonization.Thus,for buildings,the outlook based on our analysis is for high capital expenditure but with longer-term operating cost savings,assuming the key issue of affordability can be successfully tackled.For industry,by comparison,
172、the capital expenditure needs may not be as high,but certain sectors,especially those that are hard to abate,may have operating expenditure costs rather than savings,making the business case potentially more complex.On the capital expenditure side,the decarbonization of buildings and the power secto
173、r would require the highest incremental investment per metric ton of CO2e abated yearly.About 50 percent of the total investmentapproximately 210 billionwould be needed for buildings,mainly to finance insulation and heat pump technology.About one-fourth of the total investment,or about 112 billion,w
174、ould go toward decarbonizing Belgiums power generation.Transportation would account for about 12 percent of the total(48 billion),and 35 billion to 45 billion would be needed for the industrial sector to electrify industrial heaters,install carbon capture equipment,and invest in new infrastructure f
175、or green molecules,such as hydrogen.The incremental investment for the industry sector is relatively lower than that for buildings or power because phasing out use of fossil-fuel energy in industry would already sharply curtail emissions.The incremental investment for industry includes only investme
176、nts to upgrade or retrofit factories;the total does not include,for example,the incremental investments to decarbonize logistics nor investments for green-electricity production,which are attributed to the transportation and power sectors,respectively.At the same time,8“5GDHC in short,”Interreg Nort
177、h-West Europe,accessed May 15,2023.industrial capital spending is concentrated on a limited number of large plants and clusters that would need funding support and operating-cost certainty,especially with respect to future energy availability and cost.On the operating-cost side,sectors that rely hea
178、vily on electrification of kinetic energy,such as the transportation sector,and electrification of low-and mid-temperature heating energy,such as the buildings and industrial sectors,often show business cases that have a positive net present value(NPV)today,according to our estimates.In the shift fr
179、om gray to green electricity,these business cases are expected to become more attractive by 2050 if electricity prices decline,as widely expected.Industrial players that are considering electrifying their high-temperature heating energy might need to fully rebuild the equipment.They could benefit fr
180、om designs that would be cheaper to operate and that have further cost reduction potential via elements such as fuel flexibility(which could enable them to arbitrage based on cost)and thermal storage.The overall picture will be highly dependent on how the electrical grid and its tariff structure evo
181、lve.Changing the rules to allow industries to arbitrage and play the role of“battery”would benefit industries as well as the renewable-energy build-out.Renewable-based electricity generation will show more volatility and,in general,requires more capacity to be built to ensure“firm”demandin other wor
182、ds,to ensure that baseload demand can be met in a stable manner.Industry can use thermal storage to extract value from the excess generated.At times when little or no energy can be generated through wind or solar powerperiods known as dunkelflauteindustry can use the existing gas-based infrastructur
183、e to reduce electrical-power demand.As such,industry can play the role of virtual,low-cost battery,benefiting from lower operating costs and,at the same time,stabilizing the grid and increasing its robustness.Additionally,the development of fifth-generation city grid heating8 allows cities to use th
184、e low-grade heat that today is being discarded in cooling towers.This could generate additional 20Net zero or growth?How Belgium can have bothincome for industry,cheaper heat for families,and less strain on the electrical grid.Sectors that rely on green molecules as input,including industrial feedst
185、ock,clean aviation fuel,and clean bunker fuel,would require investment in infrastructure to import,transport,create,and transform these molecules.Investments for importing and transportation include storage tanks,cross-border pipelines,and electrical transmission.Creation and transformation investme
186、nts include provision of land and access to grids,water,and logistics to build new green-molecule production units or reconvert existing assets.For hard-to-abate sectors,decarbonizing process emissions will typically require additional systems such as carbon capture,thereby incurring higher costs.Ra
187、dical redesign of equipment could avoid some of the costs related to carbon capture but would require industrial players to incur other capital costs.It could also create dependency on new raw materials,energy inputs,and CO2 storage abroad.These processes are often part of a complex network of mater
188、ial and energy flows,and decisions on decarbonization can have cascading effects across these networks.It will therefore be critical to understand these dependencies in detail to create consistent strategies that support these industries in their transition,while also being ready to yield parts of t
189、he network where long-term competitiveness cannot be obtained.The stakes are very high for Belgium to ensure that the transition of its economy to net zero is as smooth and successful as possible,since both the challenges and risks are so substantial:the competitiveness of Belgian industryand,by ext
190、ension,the economy more broadly and millions of jobscould be affected.Yet,as we explore in the next two chapters,Belgium can take some actions that could not only address these challenges and risks but also potentially turn them into opportunities for new green growth.The stakes are very high for Be
191、lgium to ensure that the transition of its economy to net zero is as smooth and successful as possible.21Net zero or growth?How Belgium can have both Westend61/Getty Images22Net zero or growth?How Belgium can have both Eloi_Omella/Getty Images23Net zero or growth?How Belgium can have bothImmediate a
192、ction and decision making will be required to address the most significant changes to achieve net-zero emissions,regardless of the pathway chosen.For specific sectors such as industry,power,and buildings,achieving an orderly decarbonization will be challenging because of the complexity of the stakeh
193、older landscape(including regulators,businesses,and households)and the requirement for them to decide quickly about changes needed and to invest in new technologies.Across all sectors,a massive acceleration will be required to reach the European Unions ambitious 2030 goals.In this chapter,we focus o
194、n five of the most significant actions that will be needed:safeguarding Belgiums industrial competitiveness,defining the long-term electricity supply mix to meet demand,transitioning Belgian households to energy-efficient and lower-emission buildings,accelerating infrastructure build-out,and speedin
195、g up sectoral shifts to meet the European Unions Fit for 55 targets by 2030.Safeguarding Belgiums industrial competitivenessGiven the countrys relatively high costs for labor and energy,Belgian industry has had to improve labor productivity and energy efficiency and achieve technological advancement
196、s to reach a competitive global position in steel,chemicals,recycling,and other sectors;as a result of years of efficiency and productivity improvements,some of the best industrial plants globally are in Belgium today.However,the recent geopolitical 9 Following the US announcement of the Inflation R
197、eduction Act,the European Union has responded with a combination of multiple support programs,such as the Green Deal Industrial Plan(to enhance the competitiveness of Europes net-zero industry and support the fast transition to climate neutrality),the Net Zero Industry Act(which seeks to establish a
198、 framework of measures for strengthening Europes manufacturing ecosystem for net-zero technology products),and the Critical Raw Materials Act(which seeks to ensure the European Unions access to a secure,diversified,affordable,and sustainable supply of critical raw materials).These programs would com
199、mit 250 billion(of which 186 billion would go to manufacturing industries),further supplemented by member states and other EU funds,thereby aiming to match or exceed US support.See also“The Inflation Reduction Act:Heres whats in it,”McKinsey,October 24,2022.context has led to regional differences in
200、 energy prices that may potentially jeopardize Belgiums international competitiveness.Moreover,there are different support mechanisms within and beyond Europe.For example,the United States has moved rapidly to provide federal funding for domestic climate efforts,earmarking$370 billion for energy sec
201、urity and climate change initiatives under the US Inflation Reduction Act.That in turn has prompted announcements in Europe about new European support programs.9 The European Union is also enacting more stringent CO2 taxation mechanisms,thereby increasing costs for EU-based industrial players with a
202、 carbon footprint.As a result,EU-based players are pushed to remain competitive.As illustrated in Exhibit 5,various flat-steel producers in the European Union(including those based in Belgium)have undergone a shift in the global cost curve since 2019,becoming less competitive in the global landscape
203、 as energy prices in Belgium have risen higher than the industry average.Competitiveness will be further influenced as industry shifts toward carbon-neutral energy sources.Specific industries,such as steel and chemicals,would need to entirely rebuild assets.Such industries would also have to manage
204、the complexities of stopping and restarting production and filling gaps in workforce skills.Decisions on structural investment would need to be made quicklywithin the next two years or sogiven the lag between the decision to build capacity and the start of operations.Five actions on the net-zero pat
205、hway24Net zero or growth?How Belgium can have bothExhibit 5McKinsey&CompanyFactors afecting relative competitiveness of EU assetsElectricity price increase,201922,%Global slab cost curve,$/metric ton slab20192022Natural-gas price increase,201922,%2022 CO costs,$/metric ton CO1Including production an
206、d carbon costs;not including capital expenditures.2Excluding secondary producers in China with total capacity of about 100 kilotons per year.3Middle East and North Africa.Source:Eurostat;International Energy Agency;UN Nations Principles for Responsible Investment;World Bank;McKinsey MineSpansHigher
207、costs for energy,raw materials,and carbon add pressure to the cost competitiveness of the European Unions steel industry.97.014.010.0IndiaChinaMENAEuropeIndiaChinaMENANorthAmericaDevelopingAsiaNorthAmericaDevelopingAsiaNorthAmericaDevelopingAsiaEuropeIndiaChinaMENAEuropeCarbon costEuropean producers
208、 ex-works costCapacity,MtCapacity,2 million metric tons(Mt)1.81.005531201012929.015.07.010.010.007008009004000600200300500008001,0007008009004000600200300500001,00080025Net zero or growth?How Belgium can have bothThe operating expenditure implications are cloudy.While many heat
209、 electrification projects indicate positive paybacks using more-novel technologies such as high-temperature heat pumps,mechanical vapor recompression,or thermal storage(within reasonable electricity price ranges),many potential investments have a highly unpredictable business case because of uncerta
210、inty about the future availability,mix,and price of electricity and decarbonized hydrogen.In steel and chemicals,for example,a hydrogen price increase of 30 per megawatt-hour(MWh)or 1 per kilogram can push the cost of operations up by 10 to 15 percent.10Three conditions could help Belgium stay compe
211、titive through the transition:First is a stable regulatory context within the European Union.One example of this is the subsidy for sustainable energy production and climate transition(SDE+)in the Netherlands11;another is the European Unions Carbon Border Adjustment Mechanism.Industrial players can
212、benefit from a reliable outlook for electricity and H2 volumes,mixes,and prices coupled with ways to guarantee a stable or excess supply in order to make necessary long-term decisions in the near term.Given industrys structurally long investment and ramp-up timelines,making changes by 2030 would imp
213、ly that decisions are made in the next two years.This also implies a large revision of grid capacity tariffs to be more aligned with a market where supply will be highly variable.One option would be to do this through capacity auctions when firm capacity has been secured and 10 All heating values in
214、 this report refer to low-value heating unless otherwise stated.11 Under the SDE+scheme,companies can apply for an operating subsidy to generate renewable energy or to reduce carbon dioxide.See“Features SDE+,”Netherlands Enterprise Agency,accessed May 2023.additional grid capacity is still available
215、 for spot consumption.Second is an accelerated pace of green investments by industrial players,with the aim of decreasing reliance on expensive gray-energy sources and feedstocks.These investments could be in areas such as electrifying heat,expanding thermal storage,implementing technology shifts,an
216、d reconfiguring assets.Many of these investments would likely happen if funding support,such as subsidies or other incentives,were available and if industry stakeholders were confident that green investments would ultimately result in a stable long-term energy environment and longer-term cost compet
217、itiveness.Third is a broader spectrum of possible solutions,such as allowing,enabling,and providing funding for blue hydrogen or CCS,where Belgium could be competitive given its North Sea access.This in turn would require rapid build-out of the required CO2 transportation and sinking infrastructure.
218、Defining the long-term electricity supply mix to meet demandThe transition to net-zero emissions will cause a significant decrease in overall energy import dependence.The energy imports into Belgium would fall from approximately 98 percent in 2019 to about 55 percent by 2050.At the same time,the pat
219、hway used in this report suggests it will also result in an increase in power demand created by electrification and the need to replace existing fossil fuelbased sources for Decisions on structural investment will need to be made quicklywithin the next two years or sogiven the lag between the decisi
220、on to build capacity and the start of operations.26Net zero or growth?How Belgium can have bothpower generation.12 This increased pressure on both demand and supply could prompt a power supply challenge that underscores the need for a proactive,comprehensive,and long-term vision of Belgiums future p
221、ower supply mix.Under the pathway to net zero modeled,the primary energy demand for Belgium would fall by almost 25 percent by 2030 and by more than 50 percent by 2050,driven by strong efficiency gains(Exhibit 6).Electricity generation would shift from fossil fuels and nuclear power to renewable-ele
222、ctricity generation and imports.Energy efficiency measures throughout sectors of the economy,including use of new technologies,would reduce demand.In the modeled pathway,the power supply mix relies solely on the maximization of local solar and wind production capacity build-out within the 12“The ene
223、rgy transition,”McKinsey,December 15,2022.boundaries set today in Belgium(combined with existing bio-and waste-based power capacity),which will be able to provide 120 terawatt-hours(TWh)per annum to local supply(assuming maximal use of all land and water allocated for the build-out of renewable ener
224、gies,as per todays regulation).According to this pathway,there is 40 to 50 TWh of electricity demand which could not be covered through local production by 2050the equivalent of about 25 to 30 percent of total projected energy demand(Exhibit 7).Covering this difference will require the implementatio
225、n of more energy-efficient innovations and a combination of supply or demand side measures.A difference of 30 to 40 TWh is already expected,before any mitigating actions,by 2030,partially because of the planned phaseout of nuclear power.To meet the expected electricity demand outlined in this pathwa
226、y,Belgium would need to Exhibit 6McKinsey&CompanyIllustrated pathwayTotal primary energy demand,%Imports,%of totalNote:Figures may not sum,because of rounding.1Fossil includes coal,oil,natural gas,nonrenewable waste,and other.2Renewable-energy sources.Includes solar photovoltaics,solar thermal,wind
227、power,and hydro power.Assumes 100%efciency for renewable electricity sources from primary energy demand produced to fnal energy consumed.3Excluding feedstock.4Percentage points.Source:Belgium.National Inventory Report,UN Climate Change,April 15,2019;Federal Public Service Economy;McKinsey Decarboniz
228、ation Scenario Explorer;McKinsey historical fuel consumption data;Statistics Belgium Under a net-zero pathway,primary energy demand in Belgium would drop sharply and reliance on energy imports would fall.BioFossilRESUraniumElectricity importHydrogen import20117171381,988 petajo
229、ules(PJ)(550 TWh)916 PJ(250 TWh)Reduction indemand mostly dueto electrifcationDecrease in energy dependency due to increased local electricity production and lower primary energy demand98%55%20502019205054%43 p.p.27Net zero or growth?How Belgium can have bothExhibit 7Web Exhibit of McKinsey&Company1
230、Assuming current technology and permitting regulations.Already incorporating power factor for diferent technologies(eg 10%for solar).2Assuming perfect balancing.Source:“How much renewable electricity can be generated in Belgium?(Dynamic Energy Atlas),”EMIS VITO,November 24,2021;McKinsey Decarbonizat
231、ion Scenario Explorer;McKinsey analysisAn estimated 40 to 50 terawatt-hour diference between possible local production and local need in 2050 will require supply and demand measures.Illustrated pathway2050 potential local electricity supply with current constraints,TWh Existing capacityNew capacityE
232、lectricity demand(excl H)SolarOnshore windOfshore wind60800406500.52030344050160170 5253040459095Other(bio,renewable waste)Local supplyLocal demandAgricultureTransportBuildingsIndustryDiference18xvs 20197xvs 20194xvs 2019Capacityfactor,%Installedcapacity,gigawattpeak
233、(GWp)2050 local electricity demand,TWh 85(2019 supplyand demand)Belgiums share of primary energy imports would fall from 98%in 2019 to a base import of maximum 55%by 2050.28Net zero or growth?How Belgium can have bothimplement various mitigation strategies,including importing electricity and impleme
234、nting supply or demand measures to bridge the local production gap and ensure adequate electricity supply.Accounting for the intermittencies of Belgiums future power supply,this remaining supply need may be even bigger for peak demand,assuming perfect power balancing.The modeled pathway to net zero
235、assumes that most traditional power generation will be phased out by 2050.The renewable-energy sources that would replace it have a highly fluctuating power generation profile,making the availability of instantaneous power supply highly intermittent.Periods of excess electricity supply will increase
236、 over the year,resulting in close to zero marginal electricity prices,as illustrated in Exhibit 8.Companies that are able to arbitrage on the demand side or store energy could benefit in the future market.For example,our recent work on decarbonization of heat highlights the role of thermal storage a
237、nd how it is already ten times cheaper today than batteries and is also starting to be installed across industrial sites.13 Technologies like this will become even more important for mitigating variable electricity supply in the future,given that they can help the market adapt to new and increased d
238、emands for electricity.Such outcomes would give users access to cheaper energy while providing suppliers with a market and price floor.Strong coordination is required between electricity suppliers,offtakers,and governments to jointly develop the most economical solutions.Belgium today is dependent o
239、n fossil-fuel imports,but that would change under the net-zero pathway used in this report.By phasing out traditional power generation,this dependency on energy imports would decline significantly through self-sufficient renewable-energy production,and the remaining energy import dependency would ma
240、inly lie in electricity imports from EU countries.However,the shift to renewable energy may create new dependencies on imports of materials and equipment to build the windmills,solar panels,and other infrastructure that will make up the new renewables capacity.Belgium could subsequently 13 “Net zero
241、 power:Long-duration energy storage for a renewable grid,”McKinsey,November 22,2021.recycle this equipment at the end of its lifetime and reduce import dependencies in the future.Several solutions could address Belgiums difference in renewable-energy production capacity and the unmet demand,requirin
242、g additional investments.Here,we outline three options.Each would require significant investment and construction of new infrastructure,as well as adaptation of the current regulatory framework.Given the lead times required to set these solutions in motion,decisions would need to be made promptly.Im
243、porting green electricity.Imports could address the local power need but would require the country to drastically strengthen its interconnections with European countries.Belgium today can import or export at a capacity of about 10.0 gigawatts(GW)per year(8.8 TWh per year).To cover the difference bet
244、ween local electricity production and demand,the country could explore building more connections to increase import capacityand,in particular,build new interconnections with countries that arent direct neighbors.Belgium has a variety of options to optimize its resulting strategic dependence.These co
245、uld potentially include establishing trade agreements with countries that have an excess electricity supply,such as solar power in Southern European countries and wind in Northern European countriestwo regions that also have substantial hydro power,adding to the overall stability.We look at such opt
246、ions in more detail in the following chapter in the discussion of Belgiums opportunity to become a green gateway in Europe.Increasing domestic power generation.Belgium has made the decision to close its existing nuclear plants.But the country still has options for increasing domestic power generatio
247、n through expanding the limits of carbon-neutral power sources,such as using gas-powered plants and capturing CO2,using gas-powered plants with(synthetic)biogas,building new nuclear plants under the existing regulatory framework,or increasing the local capacity of renewable-energy sources by allocat
248、ing more land for alternative uses.29Net zero or growth?How Belgium can have bothDecreasing domestic power demand.This could be done by opting for non-electrification-based abatement options.These could include alternative industrial heat based on hydrogen or fossil fuels with CCS,waste heat from in
249、dustry,14 One example of next-generation geothermal is the Eavor-Loop,which in March 2023 received a 92 million grant.See“Eavors next-generation geothermal project awarded 91,6 million grant from the European Innovation Fund,”Eavor,March 13,2023.biomass,or deep geothermal(such as the Eavor-Loop14).A
250、lternatively,the country could consider a more significant modal shift for transportation,which would lower the power needs for electric vehicles(EVs),or an increase in the insulation of Exhibit 8Illustrative marginal price setting,levelized cost of energy(LCOE),%of year this price applies1Combined-
251、cycle gas turbine.Assumption for CCGT is a price of natural gas of 25 per MWh and 90 per ton of CO2e.Source:World energy outlook 2022,International Energy Agency,November 2022;“Levelized costs of new generation resources in the Annual Energy Outlook 2022,”US Energy Information Administration(EIA),Ma
252、rch 2022;“Lazards levelized cost of energy analysisversion 15.1,”Lazard,October 2021;J.Doyne Farmer et al.,“Empirically grounded technology forecasts and the energy transition,”Joule,September 2022,Volume 6,Number 9;“Nuclear power expected to be EUs cheapest source of electricity in 2030,”Voices of
253、Nuclear,November 30,2018;“Levelised Cost of Electricity Calculator,”Nuclear Energy Agency,OECD,accessed May 26,2023;McKinsey analysisGrowing reliance on renewable energy in Belgium is expected to lower the average cost of electricity.McKinsey&CompanyCurrentLCOE,per MWhMarginal price,per MWh100125500
254、10Average price100135 Nuclear(new)7580Ofshore Wind85105CCGT14045Onshore Wind3045Solar2530Depreciated nuclear203040LCOE,per MWhMarginal price,per MWh07525201070Average price100115 CCGT190120Nuclear(new)2535Onshore Wind2535Ofshore Wind2530SolarPeriod when solar and wind assets ar
255、e mainly operatingTime share of the year,%Time share of the year,%30Net zero or growth?How Belgium can have bothbuildings,which would improve energy efficiency.Each of these demand measures would require targeted actions and a rapid build-out of central infrastructure,such as a more developed public
256、-transport system,district heating networks,green feedstock imports,and open-access transport infrastructure.Transitioning Belgian households to energy-efficient and lower-emission buildingsDecarbonizing Belgiums buildings will require high investments that raise important questions about affordabil
257、ity and timely execution:as noted,operational use of buildings accounts for about 20 percent of Belgiums emissions and 50 percent of the required incremental capital expenditure investments under the net-zero pathway we modeled.This spending would go largely toward increasing insulation and decarbon
258、izing heat because these drastically increase energy efficiency.The business case for this transition,which we describe in the following chapter,is positive for most buildings and could further improve in light of lower interest rates,rising energy costs,and lower production and installation costs f
259、or insulation and green energy systems as the retrofit and rebuilds industry scales and becomes more industrialized.For example,in an average energy price scenario,the payback periods for green energy systems are expected to decrease up to 40 percent by 2030 due to productivity improvements(from 13
260、years to nine years for heat pumps and from nine years to six years for rooftop solar).15 This is assuming a tax shift away from electricity to natural gas will be implemented in Belgium by 2030.Belgium has one of the oldest building stocks in Europe,with more than 60 percent of residential building
261、s built before 1981.16 Heating accounts for almost three-quarters of household energy consumption,the second-highest ratio in Europe.17 Increasing insulation is a prerequisite for decarbonizing Belgian buildings and could reduce the countrys heating needs by more than 2.5 times by 2050,according to
262、our modeling.Shifting from fossil-fuel heating toward 15 See“Refurbishing Europe:Igniting opportunities in the built environment,”McKinsey,February 28,2023.16 Based on analysis of Eurostat database of distribution of dwellings by period of construction and national averages,2011.17 Wouter Thierie,“B
263、elgian property market on the back foot in race to climate neutrality,”Think ING,March 2,2023.electrification,biofuels,and district heating will also be critical for decarbonization.Installing heat pumps would allow Belgium to decarbonize heating and heat buildings more efficiently.The pace of deep
264、energy retrofits of Belgian building units would need to drastically increase(with retrofits doubling overall,but growing by a factor of 25 for deep energy retrofits)for the country to achieve its 2050 net-zero goals.From 2018 to 2022,the pace of these deep energy retrofits was about 10,000 units pe
265、r year.According to the net-zero pathway we modeled,this number would need to grow to about 250,000 units per year as fast as possible to retrofit 5.5 million building units by 2050(Exhibit 9).This requirement presents significant challenges on various fronts,including in the availability of materia
266、ls and equipment and contractor capacity.For Belgium to ramp up its energy retrofit and rebuilds market to the degree needed,key players would need to orchestrate energy retrofit or rebuilding services at scale.This would include addressing the shortage of skilled laborestimated at more than 50,000
267、installersfor example,through on-the-job training and adopting more productive materials and methods.In parallel,affordability would need to be ensuredfor example,through green long-term loans.As the retrofit and rebuilds market scales up,this should drive down production and installation costs of i
268、nsulation and green energy systems.A range of regulatory mechanisms could also potentially promote and enable speed of this transition.Stakeholders may need to commit to proactively building up production capacity,material stocks,and workforces.Financing these energy retrofits and rebuilds would be
269、a major challenge,especially for private homeowners,who represent 60 percent of total market demand.Our model suggests that a typical deep energy retrofit project for a dwelling in Belgium would have a weighted average cost of 56,000 to reach an A-label energy rating.This represents about 23,000 per
270、 apartment and 68,000 for an average house.Even though these projects typically have a positive business case,31Net zero or growth?How Belgium can have bothExhibit 920302040205001,0002,0003,0004,0005,0006,000150(2%)877(16%)3,389(60%)5,650(100%)Share of total building units with A-label EPCs(xx%)Cumu
271、lative number of building units with A-label energy performance certifcates(EPCs)in 2022,thousand building unitsNumber of building units requiring deep energy retrofts or rebuilds,thousand building unitsSource:ING Think;Recticel;McKinsey analysisAccelerating deep energy retrofts by 25 times is neede
272、d to ensure the total building stock achieves A-label energy performance certifcates by 2050.McKinsey&Company050020302040205025xStable run rate2022202232Net zero or growth?How Belgium can have boththe size of the required investment cannot be paid up front by most households that are belo
273、w the weighted average cost of a deep energy retrofit,and 40 percent of households were not able to generate any savings in 2022.18 Many landlords who rent their property(15 percent of market demand)may also be hard-pressed to finance the retrofits and rebuilds.Green loans with attractive interest r
274、ates and longer repayment terms could be a way to address the affordability challenge.Governments,in collaboration with financial institutions,have some options to promote green loans,including potentially lending money to households to allow them to improve the energy efficiency of their homes.Hous
275、eholds would then pay lower energy costs and be able to pay back the loans over an extended period.Belgium could also consider whether to optimize regulatory mechanisms to facilitate and speed this transition,adding to existing targeted measures to support lower-income households and addressing case
276、s where there is no positive business case for a retrofit or rebuild.For example,there is already growing momentum in Belgian legislation,namely in Flanders.They are the first to impose residential retrofit obligations and to implement a rental price indexation cap for low-EPC buildings,and they are
277、 setting up a“construction shift fund”to promote a construction shift away from concrete buildings.19Accelerating infrastructure build-outThe central infrastructure to enable the transition to net zero would need to be developed further at a large and sufficient scale.20 Belgium will likely want to
278、ensure a high level of confidence among key industrial stakeholders as to which infrastructure will be built when.The green transition will require six key types of infrastructure:Power transmission and distribution grid.To further strengthen the grid and increase grid capacity to support a doubling
279、 of electricity demand,a total investment of about 35 billion to 18 See“More than 2 million Belgians at risk of poverty or social exclusion,”Statbel,February 16,2023;“More than 4.5 million Belgians are unable to save,”Statbel,October 14,2021;“Energy Performance of Buildings Directive review:How will
280、 banks be affected?,”Think ING,January 11,2023.19 “No or limited indexation of rental prices for homes with EPC labels D,E and F,”Flanders,accessed June 8,2023;Stefan Grommen,“Millions Fund must keep costs of construction shift within limits for local authorities,”Vrt News,February 23,2022.20 For a
281、detailed look at the requirements for an orderly transition to net zero,including the physical building blocks such as infrastructure,see“The energy transition,”December 15,2022.40 billion will be required by 2050,based on the pathway modeled.Power balancing infrastructure.To mitigate short-term and
282、 long-term fluctuations from renewable-energy sources,Belgium would need to install further power-balancing solutions.Sectorwide initiativessuch as industry thermal storage,maintaining existing gas-fired units as backup,and vehicle-to-grid installationsalong with regulatory incentives may be needed
283、to support this energy balance.Charging infrastructure for EVs.To enable the EV transition,a total investment of about 20 billion to 25 billion would be required to install some 280,000 public and five million semiprivate charging points by 2050 for passenger cars,vans,buses,and trucks.The transitio
284、n could also be strengthened and accelerated by developing financial-incentive mechanisms to build out private and public infrastructure.Transport infrastructure for green molecules.To create import and transport infrastructure such as pipelines or upgraded rail and barge options for green molecules
285、,Belgium would need to invest about 1 billion to 2 billion for pipelines transport alone;this would include about 500 million to connect to other countries and about 1 billion for internal use.CCS infrastructure.Ensuring reliable transport infrastructure for captured carbon(for compression,pipelines
286、 transport,and storage at port)would require cumulative investment of about 2 billion to 3 billion.District heating.Development of transport infrastructure to collect residual heat from local industrials to power nearby buildings would require 2 billion to 3 billion for a pipeline distribution netwo
287、rk alone.Speeding up sectoral shifts to meet Fit for 55 targets by 2030The pathway to net zero for Belgium used in this report has been developed so that Belgium 33Net zero or growth?How Belgium can have bothcontributes positively to the European Unions Fit for 55 targets.As noted,these targets aim
288、to reduce the European Unions greenhouse-gas emissions by at least 55 percent by 2030,compared with 1990 levels.To meet this intermediary milestone on the path to 2050,the country would need to drastically accelerate decarbonization efforts and make immediate investments by 2030,with 165 billion in
289、investmentor 40 percent of the total incremental investment in our pathway modeldue by 2030.In Belgium,a strong momentum has emerged across sectors to expedite decarbonization efforts.This is evidenced by the increase in renewable-energy production(in wind and solar)by 15 percent between 2021 and 20
290、22.Additionally,there has been almost a doubling of EV adoption between 2021 and 2022,along with a doubling in the number of buildings achieving the highest energy-performance certification since 2019.The implications of this acceleration for sectors would be as follows in the illustrated pathway:In
291、dustry.The industrial sector would need to commit to electrifying 90 percent of its low-and medium-temperature heat and turn to hydrogen and bioenergy for high-temperature heat.Moreover,six MtCO2e would need to be captured and stored by 2030,which would mean starting to build the needed infrastructu
292、re in the next two years.Power.To allow the massive shift toward electrification,current power plants are assumed to remain operational as much as possible within the regulatory framework.Even then,additional capacity is required.The pathway we modeled assumes a fourfold increase of renewable-electr
293、icity production(an additional 35 TWh)by 2030 versus 2019 levels.Transportation.The adoption of EVs would need to accelerate.Under the pathway we modeled,EVs would need to reach 50 percent penetration for passenger cars,as compared to 27 percent of EV penetration of total new passenger-vehicle sales
294、 in 2022.21Buildings.The building sector would need to reduce heating needs by 30 percent through better insulation and electrify 20 percent of 21 “Belgium EV profile:Country to remain a regional outperformer in EV adoption,”Fitch Solutions,April 13,2023.building heating by 2030.This would require i
295、ncreasing annual deep energy retrofits by a factor of 25.Agriculture.The agriculture sector would need to electrify up to 40 percent of its heating needs and its farming equipment;reduce 20 percent of its cattle-related emissions through optimization of the feed mix;and take steps toward reducing th
296、e size of livestock herdsin line with the Flanders climate and energy plan,including agriculture objectives.These shifts will result in a significant increase in electricity demand(1.5 times the 2019 levels)and demand for EV charging,based on our analysis.To meet these demands,stakeholders,including
297、 governments and public and private companies,could consider rapidly building out central infrastructure by 2030such as strengthening the power grid,initiating interconnections with foreign power grids,and building out public EV-charging infrastructure.Meeting 2030 and 2050 targets will require mass
298、ive efforts across all sectors,which in turn raises significant questions about the competitiveness of industry and the sheer feasibility of making some of the changes in time,including the rapid acceleration of housing retrofits.Regulators can significantly enable efforts by rethinking incentives a
299、cross sectors to activate and accelerate sizable decarbonization efforts,by setting out a direction for the future energy landscape,and by shortening permitting processes.Regulators could also set up publicprivate task forces to build out major central infrastructuresuch as CO2 transportation,green-
300、molecule pipelines,strengthened power grids,and EV charging infrastructureand optimize tax and subsidy schemes to promote green initiatives.Initiatives could potentially include steps to optimize electricity grid fees to promote storage and subsidize the costliest green investments for households an
301、d industries.The 2030 targets are very ambitious,and the deadline is fast approaching.In 2030,the country will mark a turning point during which it can assess its progress and gauge whether it is on track to meet its net-zero goals by 2050.34Net zero or growth?How Belgium can have both Borealis35Net
302、 zero or growth?How Belgium can have bothBelgium has advantages it can leverage to develop green growth opportunities in its path to meeting net-zero goals.In this chapter we explore five such opportunities.The list is not exhaustive but rather provides some illustrations of how addressing the consi
303、derable changes that the net-zero transition would require could also create valueand what Belgium would need to do to seize these opportunities.Belgium has some notable assets it can leverage for each of the opportunities we highlight.First is the countrys geographic location as a gateway to Europe
304、.It has direct access to the North Sea.It is also close to neighboring industrial clusters in Northern France(Dunkirk),the Netherlands(Geleen and Rotterdam),and Germany(the Ruhr area).This could facilitate the storage,export,transportation,and import of materials,hydrogen,green molecules,CO2,and ele
305、ctricity.Second,Belgium can count on a strong base of productive industry,which includes petrochemical clusters around the port of Antwerp-Bruges and a vibrant biotech scene as well as a high concentration of petrol,cement,lime,steel,and chemical clusters that could develop economies of scale to cap
306、ture and store emissions.Several leading Belgian companies are already prominent players in the global sustainability agenda,including with electrolyzer technology,wind energy,and recycling.The countrys large industrial clusters and a broad and diverse landscape of agricultural activities could pote
307、ntially function as a test bed or launchpad to build and scale novel technologies(such as the Qpinch Heat Transformer in Antwerp,pictured above).Third,Belgium has a strong infrastructure backbone.This features interconnected gas and power grids connecting Belgium with 22“Belgian-German energy summit
308、 at Port of Antwerp-Bruges,”Port of Antwerp-Bruges,accessed May 15,2023.23“World university rankings 2023,”Times Higher Education,2023.24 Research centers include Interuniversity Microelectronics Center(IMEC)in Leuven;Vlaamse Instelling voor Technologisch Onderzoek(VITO),a cleantech-focused institut
309、e in Mol;Vlaams Instituut voor Biotechnologie(VIB)in Ghent;and the von Karman Institute for Fluid Dynamics in Sint-Genesius-Rode.other European countries,as well as extensive pipeline infrastructure.The country is home to leading ports(notably Antwerp-Bruges)that are equipped with state-of-the-art i
310、nfrastructure to link maritime and land transport,including connecting specialized seaport terminals to rail,truck,and pipelines.Already,about 15 percent of the European Unions demand for liquefied natural gas(LNG)is imported through Antwerp-Bruges.22Finally,Belgium has a significant knowledge and t
311、alent base thanks to renowned universities with expertise,notably in metallurgy and sustainability topics.These include KU Leuven(as well as its Walloon counterpart,the Universit catholique de Louvain),Ghent University and the University of Antwerp,and the two free universities in Brussels(Universit
312、 Libre de Bruxelles and Vrije Universiteit Brussel),all of which rank among the top 250 universities in the world,according to Times Higher Educations 2023 ranking.23 Belgium also has research institutions and technology centers covering a range of sectors,including biotechnology,agriculture,and ene
313、rgy management,coupled with maritime and logistical experience that can promote sustainable technology innovation.24Based on these assets,we selected five areas in which Belgium has opportunities to develop expertise and create value:establishing Belgium as a European green gateway;providing cleante
314、ch solutions for renewables and hydrogen;scaling already-strong materials-recycling capabilities;developing service models for deep energy retrofits of buildings;and becoming a leader in agriculture and food tech through innovation in biotechnologies.For each of the five,we highlight actions that Be
315、lgium would need to take to seize those opportunities to the fullest extent.Seizing opportunities for green growth36Net zero or growth?How Belgium can have bothOpportunity 1:Establishing Belgium as a green gateway to Europe The net-zero transition will give rise to new global trade flows of hydrogen
316、 and derivatives,green molecules,CO2,and electricity,requiring new import,processing,and transit hubs that connect major production and demand clusters.In the context of these changes,Belgium could act as a green gateway to Europe if it could leverage and build out its infrastructure,including pipel
317、ines and renewable-electricity connections,and repurpose its current strengths in refining and petrochemicals(Exhibit 10).Exhibit 10Biogenic CO2Gray CO2ElectricityGreen molecules4Direction of fowsGreen chemistry valleyHydrogen and derivatives2Green feedstockTransport and processingGreen molecules pr
318、ocessing hubFlows of hydrogen and derivatives,green molecules,CO2,and electricity in and out of Belgium by 20501Mode of transport dependent on timeline,product,destination,and strategy.2Hydrogen and derivatives include hydrogen,ammonia,methanol,and hot briquetted iron.3Green feedstock includes bioma
319、ss,vegetable oil,recycled plastic(assuming its based on bio feedstock),green ethanol,and green CO.4Green molecules(result from hydrogen and derivatives and the green feedstock)include green C,green alkanes,green ethylene,and bio-based naphtha.Source:“Belgian federal hydrogen strategy,”Federal Public
320、 Service Economy,accessed May 19,2023;Flanders Investment and Trade;International Energy Agency;De Tijd;McKinsey Hydrogen Insights;McKinsey analysisBelgium has an opportunity to become a green gateway to Europe as a transit,trading,and processing hub.McKinsey&Companyle-de-France,Auvergne-Rhne-Alpes,
321、Grand Est,Hauts-de-France,etc1Dudelange,etc1Antwerp petrochemical industryGeleen,the Ruhr area,Ludwigshafen,etc1Port of Antwerp-Bruges and North Sea PortThe NetherlandsGermanyHydrogen(H2)Green ammonia(NH3)Green methane(CH4)Biogenic CO2ElectricityBiomassRecycled plasticOtherGreen methanol(CH3OH)Green
322、 ethanol(C2H5OH)Green ethylene(C2H4)Green alkanes(eg,sustainable aviation fuel)Bio-olefn(CnH2n)OtherNorthwest England,the Humber,etc137Net zero or growth?How Belgium can have both37Belgiums starting position as green gatewayToday,Belgium is at a critical juncture:it needs to decide what will happen
323、with the petrochemical industry once fossil fuels recede in importance.Inaction could result in the loss of a petrochemical industry that accounts for more than 85 billion in revenue and more than 100,000 direct and indirect jobs.25 Belgium is at the crossroads of important incoming and outgoing(fut
324、ure)trade flows of hydrogen,green molecules,CO2,and renewable electricity.This,in combination with the knowledge and capacity found in the second-largest port in Europe and Europes largest petrochemical industry cluster,ensures it is well placed to transit and process hydrogen,green molecules,and CO
325、2 to the rest of Europe.Belgium has a reputation as a reliable trade partner for gas and chemicals with solid,existing infrastructure(for example,LNG terminals),capabilities,and expertise around Belgian ports.This includes rapidly growing CO2,hydrogen,and green-molecules infrastructure,including a n
326、ew CO2 network and more than 600 kilometers of hydrogen pipelines in Antwerp and beyond.26The legacy assets and infrastructure of Belgiums petrochemical complex form a starting point to build a new processing hub.In the future world of green chemistry,a variety of green-biogenic-carbon plays are pos
327、sible:for example,imported green CO2 and H2 can be combined to provide green methanol that can be used as a feedstock for green chemistry such as ethylene.Alternatively,imported green ethanol can be used as feedstock for olefin production.Another route would cover green alkanes(sustainable aviation
328、fuel or green naphtha),starting either from plastic waste sourced from the European hinterland or from hydrogenated biogenic oils and fats.Entirely new integrated value chains could potentially grow out of such a selection of precursor molecules.Nonetheless,the competition to become a European gatew
329、ay is already under way,and the costs and practicalities of building out the needed infrastructure could be considerable.25“How Flanders chemical industry sets off a chain reaction of success,”Flanders Investment&Trade,accessed May 15,2023.26“AntwerpC,”Port of Antwerp-Bruges,accessed May 15,2023.27
330、This assumes a cost of 1.5 million to 2.0 million per kilometer.Belgiums opportunity as green gatewayAmong the concrete possible opportunities for Belgium as a green gateway,we focus on three here:its potential to become a transit hub for hydrogen and derivatives,green molecules,and CO2;its potentia
331、l as an electricity trading hub;and its potential to become a processing hub for green molecules.For the firstBelgiums potential as a transit huban important starting point could be the establishment of a new pipeline backbone that would connect Belgian ports(Antwerp,Bruges,and Ghent)with neighborin
332、g Dutch(Geleen and Rotterdam)and German(Ruhr)industrial clusters.This could transport hydrogen and green molecules to purchasers in dense industrial areas and for CO2 arbitrage,breaking potential CO2 storage monopolies to ensure a competitive environment for the Belgian industry.A pipeline backbone
333、would have multiple entries to allow transport of several kinds of gases and liquids.Use cases for industry to make efficient use of the pipeline backbone include green hydrogen,green ammonia,CO2,green ethanol,green methanol,green methane,and synthetic kerosene.Transporting these new global flows through Belgium could generate revenues from local storage and transmission services.By way of example