Policy

Engaging policymakers on a 1.5°C future

Ambitious national, regional and international policy are critical to transitioning heavy industry and transport towards a net-zero economy. We work with industry to engage policymakers and together build a solid policy foundation to accelerate and scale sector decarbonisation.

POLICY FRAMEWORK FOR AN ACCELERATED INDUSTRY TRANSITION

“Harder-to-abate” heavy industry and mobility sectors currently contribute to more than 30% of total global carbon emissions. To keep the rise in global temperature as close as possible to 1.5°C, we must rapidly reduce and eventually eliminate emissions from these sectors— starting with bold action this decade. 

Coming out of the UN Climate Conference of the Parties (COP26), national governments and industry leaders should work together to develop net-zero plans for each harder-to-abate sector and co-design the policies that will effectively support the industry transition.

The decarbonisation of these sectors should be on the agenda at multilateral fora in 2022.  But given the urgency of climate change, we cannot solely rely on international efforts. National policies must lead the way in driving emissions reductions in heavy industry and mobility. Early leaders in these efforts can create substantial economic growth opportunities for their countries. 

THE INNOVATION CHALLENGE IS BEING WON – THE KEY ISSUE IS TECHNOLOGY SCALE-UP

In both heavy industry and mobility, the technologies needed to achieve net-zero emissions exist and are either already commercially available today or nearing technological maturity.

  • In steel, production using green hydrogen and electric arc furnaces is expected to be operating at commercial scale by 2025, with other decarbonisation technologies expected by 2030.
  • In cement and concrete, carbon capture, utilisation and storage (CCUS) is a critical part of the solution, as a large share of emissions come from chemical processes in cement making. Other important levers that the industry is already pursuing include clinker substitution, efficiency in design and production and decarbonisation of electricity inputs. Clean hydrogen and kiln electrification will play a role in the medium term.
  • In the chemicals sector, a portfolio of low-carbon emitting technology options – including electrification, alternative hydrogen production, use of biomass and captured carbon, as well as waste processing – all offer pathways for lowering emissions today, with initial investments being made by industry leaders.
  • In aluminium, zero-carbon electricity can help address 60% of the sector’s emissions, while non-carbon anodes are under development to address the remaining 40%.
  • In aviation, sustainable aviation fuels are already being produced and deployed. Current international standards allow for blending of up to 50% with conventional fossil jet fuel.
  • In shipping, the technologies to enable hydrogen or ammonia-powered vessels exist, and first pilots have been announced to test them at scale.
  • In trucking, zero-emission trucks (ZETs) – which can include battery-electric (BET) or fuel cell electric trucks (FCET) – are already being piloted in programmes worldwide, including in the United States, India and Europe.

The key issue facing policy makers now is accelerating technology scale-up, which in turn will bring costs down thanks to economies of scale and learning curve effects. Five policy areas will be critical to ensure that the necessary solutions for these sectors reach critical scale by 2030, on their way to becoming the “new normal” by 2050.

FIVE KEY POLICY AREAS TO UNLOCK INVESTMENT AND TECHNOLOGY SCALE-UP

1. To create demand for low-carbon products and services, governments should:

  • Implement fuel standards – a proven tool to create demand for lower-emissions fuels – in all heavy transport sectors.
  • Use green public procurement to create initial demand for low-emissions materials – in particular in construction – and spur the first wave of clean steel and cement plants.
  • Implement lifecycle carbon product standards for buildings and key consumer goods to accelerate the decarbonisation of energy-intensive supply chains.

2. To support the formation of profitable, differentiated green markets, governments should:

  • Adopt credible methodologies to certify products and services based on their emissions, enabling differentiated markets for lower- or zero-carbon products.
  • Facilitate the establishment of trading platforms for low-carbon commodities – such as a book-and-claim platform for sustainable aviation fuels.

3. To level the playing field between high-carbon and low-carbon technologies, governments should:

  • Implement carbon pricing and other market-based measures that make low-carbon technologies more cost-competitive and ensure legacy technologies bear the cost of the emissions they produce.
  • In the absence of internationally agreed carbon prices, consider implementing reasonable border carbon adjustments (or similar mechanisms) to reduce the risk of “carbon leakage”.

4. To support the first wave of breakthrough projects, governments should:

  • Provide funding not only for public research and public-private collaborative research projects, but also for commercial-scale demonstration projects.
  • Use public finance mechanisms (e.g. reimbursable advances, loan guarantees) to lower financial risks and crowd-in private capital for commercial-scale projects.

5. To ensure clean energy supply at scale to meet the new needs of industry and mobility sectors, governments should:

  • Support investment in renewable-based power systems which will become the primary source of energy for industry and mobility (directly through electrification and indirectly with green hydrogen as a fuel and feedstock).
  • Support development of clean hydrogen production, transportation and storage infrastructure required for clean industry and mobility.
  • Support development of carbon capture, storage and utilisation (CCUS) infrastructure that is required for sectors such as cement and chemicals, which produce carbon in chemical processes during production.
  • Prioritise the use of biomass for those sectors with few viable alternatives – like aviation and chemicals – to stay within the limits of sustainable biomass supply.

Support investment in new recharging and refuelling infrastructure across trucking, shipping and aviation to enable use of battery-electric and hydrogen-based propulsion.

SECTOR-SPECIFIC ENABLERS

For further information on sector decarbonisation pathways and supporting policies, please refer to the action sector pages.

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