Industrial sectors account for nearly 40% of global energy consumption1 and more than 30% of global greenhouse gas emissions2. The transformation of these sectors is pivotal to reaching net-zero emissions by 2050. This report by the World Economic Forum, in collaboration with Accenture and supported by expert input from over 40 organizations, establishes a new framework to monitor and support the progress of heavy industries towards net-zero.
The challenges associated with industrial decarbonization are typically more complex than those of other carbon-intensive sectors (e.g. power, transportation, buildings, etc.). But they are also relatively less well understood. Gaps in data and discrepancies in key terminologies, definitions, and industry and emission boundaries contribute to a lack of visibility on progress. This tracking initiative aims to provide companies, policy-makers and consumers with the necessary transparency to ensure that action and investments are targeted and balanced.
The framework follows a holistic approach and is designed to concurrently track industries’ “net-zero performance” and “net-zero readiness”. It identifies a set of standard metrics to assess emissions reduction and energy efficiency to evaluate performance. It proposes emission intensity targets to inform sectoral net-zero transition strategies and highlights information gaps to improve transparency further. While industries differ in products, processes and business models, their transformation will rely on the evolution of common enablers that are often beyond the control of any single industry. The framework assesses sectoral readiness for net-zero by evaluating key enablers such as the readiness of technology, access to the enabling infrastructure, the robustness of supporting policy frameworks, the strength of demand signals for low-emission products and the availability of capital for investments in low-emission assets. Efforts to improve industries’ net-zero readiness across these dimensions are critical to progress industries’ net-zero performance.
The report acknowledges that there are efforts under way. Net-zero commitments, decarbonization strategies, technology partnerships, low-carbon pilot projects, and discussions around green products and premiums have emerged. Despite this, no industry is anywhere near where it needs to be by 2050, and the gap is considerable. Fundamentally, massive and complex challenges within and across the industries remain. The report highlights sector-specific accelerators and priorities for six industries (steel, cement, aluminium, oil, natural gas and ammonia) and outlines seven cross-sectoral recommendations for immediate action.
1. Industries’ net-zero transformations require a new level of ambition in multistakeholder collaboration. Breakthrough solutions are seldom found within a single firm or even industry. That’s why industrial ecosystems need to join forces beyond traditional partnerships. Three archetypal partnerships, detailed in the recently released Fostering Effective Energy Transition 2022 report3, should be built upon and replicated: collaboration between customers and suppliers (e.g. offtake agreements); collaboration among industry and cross-industry peers (e.g. CO2 handling infrastructure); and collaboration across the broader ecosystem of industrial stakeholders, including governments, policymakers, financiers, researchers and NGOs.
2. Common standards for “low-emission” production thresholds need to be established for industrial companies to calibrate the transformation of their key production processes. Net-zero targets are necessary but insufficient to drive the year-on-year progress required. Emission intensity trajectories at a product level (e.g. steel, cement) are essential to guide consistent and timely progress. Industry standards (e.g. Aluminium Stewardship Initiative4 or Responsible Steel5), multistakeholder collaboration (e.g. Achieving Net-Zero Heavy Industry Sectors in G7 Members report6)and product certification systems will be essential to define such trajectories.
3. More full-scale demonstration projects need to be developed to accelerate the commercial readiness of low-emission technologies. Many low-emission production technologies have already reached large prototype and even demonstration phases, and can drastically reduce emissions (e.g., -82% for natural gas, -95% for cement and steel, and -100% for ammonia). However, at the current pace, these technologies won’t be commercially ready for industry adoption before the second half of the decade (e.g. 2025 for steel7, and 2030 or beyond for cement8 and aluminium9).To accelerate the commercialization of these solutions and drive costs down, industrial firms need to double down on their efforts to develop full-scale demonstration or early commercial projects.
4. Broad adoption of low-emission technologies will be at risk if the pace of investments in enabling infrastructures does not pick up drastically. Most industry decarbonization pathways rely on low-carbon power, clean hydrogen (blue and green) and carbon capture. To meet the projected needs of the six focus sectors by 2050, capacities of global CO2 storage and clean hydrogen production infrastructures need to grow 64-fold and 8-fold, respectively, from where they are today. Nearly 1700 gigawatts (GW) of clean power will need to be added. This will require approximately $4.2 trillion in infrastructure investments over the next 30 years.
5. Demand signals for low-emission products are emerging but must be strengthened and scaled up. Decarbonizing the six industries could require over $2.1 trillion in capital expenditures in production assets. Such investments can only materialize if green premiums exist to grant producers and investors acceptable returns for their risk. Understanding end consumer demand and public and private buyers’ commitments would help provide producers visibility on low-emission products’ offtake volume and price (e.g. First Movers coalition10). Establishing adequate carbon footprint product labelling standards would help consumers make more informed decisions and advocate for new types of products.
6. Public policy can reinforce all enabling dimensions and support the emergence of differentiated and economically viable low-emission markets for first movers. The trade-exposed nature of commodity markets is particularly challenging to decarbonization. Stable policy frameworks are necessary to level the playing field for first movers that are willing to invest in higher-cost, low-emission production. Potential approaches limiting the risk of carbon leakage include but are not limited to a price on carbon combined with a border-adjustment mechanism, carbon contracts for differences, preferential public procurement (e.g. California Buy Clean Act11), material mandates, or quotas.
7. Adequate risk-sharing mechanisms, supporting taxonomies and public financial support can accelerate the flow of private capital into low-emission industries. Companies’ investments in low-emission assets are riskier due to their dependencies on new technologies and infrastructure. Collaboration across industries and value chains can enable risk-sharing while providing direct market routes. Favourable taxonomies and public funding in the form of grants, low-interest and concessional loans, etc. can also reduce companies’ risk exposure. Multilateral public-private partnerships to finance low-emission projects would help channel the necessary capital into the first commercial-scale assets.
Establishing net-zero roadmaps for industries is essential to keep the 2050 goal within reach. So is appropriately measuring progress and improving transparency along the way. This first edition of the Net-Zero Industry Tracker report sets the World Economic Forum’s ambition to establish a robust tracking platform that supports the emergence of low-carbon industries by the decade’s end. The current energy crisis presents an excellent opportunity to pick up the pace of industrial decarbonization. Now is the time to act.
1. IEA, Tracking Industry 2021, 2021. https://www.iea.org/reports/tracking-industry-2021.
2. Production-related emissions only. “Sectoral Analysis”, Breakthrough Energy, n.d., https://www.breakthroughenergy.org/go-deeper/sectoral-analysis.
3. World Economic Forum, Accenture, Fostering Effective Energy Transition 2022, 11 May 2022.
4. Aluminium Stewardship Initiative, https://aluminium-stewardship.org/.
5. Responsible Steel, https://www.responsiblesteel.org.
6. IEA, Achieving Net-Zero Heavy Industry Sectors in G7 Members, May 2022, https://www.iea.org/reports/achieving-net-zero-heavy-industry-sectors-in-g7-members.
7. MPP, Net-Zero Steel Sector Transition Strategy, October 2021, https://missionpossiblepartnership.org/wp-content/uploads/2021/10/MPP-Steel-Transition-Strategy-Oct-2021.pdf.
8. Global Cement and Concrete Association (GCCA), Concrete Future –GCCA 2050 Cement and Concrete Industry Roadmap for Net-Zero Concrete, October 2021, https://gccassociation.org/concretefuture/.
9. Mission Possible Partnership (MPP), Closing the Gap for Aluminium Emissions: Technologies to Accelerate Depp Decarbonization or Direct Emissions, December 2021, https://missionpossiblepartnership.org/wp-content/uploads/2021/12/Closing-the-Gap-for-Aluminium-Emissions.pdf.
10. World Economic Forum, “First Movers Coalition”, World Economic Forum, n.d., https://www.weforum.org/first-movers-coalition.
11. California Department of General Services, “Buy Clean California Act”, n.d., https://www.dgs.ca.gov/PD/Resources/Page-Content/Procurement-Division-Resources-List-Folder/Buy-Clean-California-Act.