Carbon-neutral Hungary | The automotive world

Prolonged heat waves, frequent droughts, heavy rains: these are just some of the effects experienced by Hungary and the rest of the European Union as a result of climate change. To prevent the worsening effects of global warming – damage to infrastructure, biodiversity loss and public health problems, among others – Hungary seeks to reduce man-made greenhouse gases (GHGs) that cause climate change. To that end, Hungary has passed a law in 2020 that requires a reduction in carbon emissions of at least 40 percent by 2030 compared to 1990 levels and the conversion of carbon neutral by 2050.

The actual process of decarbonisation depends on the unique economic and social context of each EU country. Given these factors, this report outlines the most effective way in which Hungary can achieve 55-60 percent emission reductions by 2030 and zero carbon emissions by 2050. It identifies actions in each major sector of the economy, assesses the relevant costs and benefits, and examines how the transition to zero contributes to economic competitiveness and energy security.

Hungarian emissions in context

Among the 27 EU countries, Hungary is the fifth country with the lowest emissions per capita and the ninth largest in terms of emissions relative to GDP.

Emissions of CO2-equivalent (CO2e) in Hungary in the 20th century increased by 2.4% annually (CAGR), leading to an increase of almost tenfold. Emissions began to decline in the mid-1980s, as Hungary shifted from centralized planning and exports of heavy industry to a more market- and service-oriented economy. By 2019, emissions were reduced to 64 metric tons (MT) 2 CO2e from 95 tons CO2e in 1990, leading to an average annual decline of 1.4 percent over the period. At the same time, Hungary has experienced annual GDP growth of 1.7 percent, demonstrating the potential for significant economic growth without increasing carbon emissions (Guide 1).

Exhibit 1

The path to pure zero with seven sectors

In Hungary, as in Europe, all greenhouse gas emissions fall into seven sectors: electricity, industry, transport, buildings, agriculture, waste, land use and forestry (collectively called LULUCF for land use, land use change and forestry). LULUCF are natural emission reduction mechanisms. To achieve cost-optimal decarbonisation by 2050, each sector will need to use new and existing technologies in a specific and consistent process. Our report outlines this process, demonstrating that Hungary can reduce its carbon emissions by 55-60 percent by 2030 and reach net zero by 2050 in a cost-effective and cost-effective way (Handout 2).

Exhibit 2

Of course, the road ahead will be both difficult and expensive. We estimate that Hungary will need capital investment ranging from € 150 billion to € 200 billion from now until 2050, with a quarter of the investment expected by 2030.

The good news is that our study shows that Hungary can not only achieve these ambitions, but will also reap long-term economic benefits. These include annual GDP growth of 2-2.5 percent; increasing the competitiveness of sectors that make up about 30 percent of the economy; reduction of operating costs throughout the economy; and the creation of 80,000 to 100,000 new jobs. In addition, decarbonisation can increase Hungary’s energy security by increasing the share of domestic primary energy from 27 to 76 percent by 2050.

Below are some of the highlights of Hungary’s optimal path forward, by sector.

Industry

Industry accounts for 33 percent of total carbon emissions, which is the largest source of carbon emissions in Hungary. This sector will be one of the most difficult to decarbonize because of its complexity. Most of the mechanisms needed to reduce industrial emissions in Hungary are unavailable or unavailable on a large scale, and we expect this to be the case by the 2030s.

Meanwhile, the industry could achieve a 30 percent reduction in emissions by 2030 with improved energy efficiency in heavy industry. And it could offset some industrial emissions that are difficult to reduce, through carbon sequestration, use and storage. Any residual emissions will be offset outside the sector, for example in natural carbon sinks such as forests.

Transport

Hungary’s transport sector is the second largest source of carbon emissions in the country, with a total of 22 percent, with the majority coming from road transport.

Electrification of passenger transport and wider use of Hungary’s already extensive public transport network will lead to significant reductions in emissions over a decade. Falling battery costs and accelerating the use of rechargeable electric vehicles (BEVs) on a scale will make BEVs competitive compared to traditional vehicles with internal combustion engines in the 2020s.

By the early 2030s, green hydrogen will become a competitive alternative in certain sectors of transport, which will allow the decarbonisation of heavy-duty road transport. The key levers to accelerate the transition will be the successful creation of an infrastructure for charging EVs and targeted incentives for EV users.

Power

Reducing emissions in the energy sector, which accounts for 12 percent of emissions in Hungary, is central to the country’s ability to reach net zero. Decarbonisation itself will help increase electricity demand by 2.8 times by 2050, and the sector needs to meet that demand with carbon-neutral solutions. Our study shows that Hungary needs to increase its installed capacity by about eight to nine times to meet projected demand in 2050.3
Given the growing maturity of solar and wind energy technologies and Hungary’s significant potential, the energy sector could immediately start boosting renewable energy capacity and completely reduce emissions by the mid-2030s. In addition, Hungary could aspire to become a net exporter of electricity from the early 2040s. By 2050, solar and wind resources could account for more than 85 percent of total installed capacity.

However, the growth of solar energy requires a significant increase in the flexibility of sources. For example, gas turbines will remain part of the generation (with potentially new turbines and green hydrogen), but will need to be retrofitted with carbon capture technology; batteries and seasonal storage systems are needed to integrate renewable energy sources into energy supply and account for their variability; and new interconnectors will be needed to help increase cross-border electricity flows.

Buildings

Buildings contribute 15 percent to total carbon emissions in Hungary. Heating and water supply in individual family homes is the largest source of emissions from the construction sector. Our analysis shows that Hungary can reduce emissions from buildings by 34 percent by 2030 and by 99 percent by 2050.

Improving energy efficiency, fast and widespread installation of heat pumps and electric stoves, replacement of gas boilers with hydrogen, as well as the transition to district heating without carbon – these are the main measures needed for Hungary’s construction sector to achieve zero emissions by 2050.

Agriculture

Agriculture accounts for 14 percent of Hungary’s total carbon emissions. Emissions from Hungary’s agricultural sector come from three sources: farm animals, crop production and energy use on farms. Although it is the hardest sector to achieve zero emissions, we expect emissions to be significantly reduced in the 2030s.

Our analysis shows that agriculture can eliminate a quarter of animal-related emissions by 2050 through active measures such as feed changes and anaerobic digestion of manure, in which waste undergoes microbial processes to produce biogas.

As in the transport sector, reducing the cost of BEVs and electric vehicles on fuel cells will stimulate the electrification of agricultural machinery during the 2030s. By the 2040s, 100% of Hungary’s agricultural machinery will be electrified, reducing 24% of current emissions.

Waste

The waste sector accounts for 4 percent of total greenhouse gas emissions in Hungary. As wastewater treatment and disposal together with solid waste disposal are the main sources of emissions in the sector4, Hungary could reduce waste emissions by improving waste management for wastewater as well as solid waste. Methane capture mechanisms can be installed to reduce wastewater emissions to water treatment plants.

Although the internal nature of waste means that it cannot be disposed of, analyzes show that by 2030 the share of industrial waste sent to landfills in Hungary will decrease to zero, and the share of municipal waste sent to landfills may fall to 20 percent in 2030 year. and reach the goal of zero landfill by 2050

Negative emissions

To reach the goal of net zero by 2050, Hungary will need to go beyond measures to reduce carbon emissions – it must take measures that will lead to negative emissions. There are two ways to produce negative emissions: solutions based on nature and technology; both help capture GHGs not directly at the point of release.

Natural resources are a powerful antidote to man-made greenhouse gases. Hungary could increase its natural carbon sequestration through reforestation, active forest management and peatland restoration. These decisions compensate for 8 percent of Hungary’s total carbon emissions, or about 6 tons of CO2-eq.

Solutions based on technologies that compensate for carbon emissions will also be needed by Hungary to reach net zero by 2050. These include existing and scalable bioenergy with carbon capture and storage mechanisms discussed in the full report, as well as new technologies such as direct air capture and storage that Hungary could deploy by the end of the 2030s.

SOURCE: McKinsey