MPP’s CEO Matt Rogers outlines why the time for climate action is right now.
With war in Europe, energy markets in turmoil and international supply chains under stress, looking to the long-term has rarely been so challenging. But even amid uncertainty, it is clear that business leaders must act decisively now to drive the process of significant industrial decarbonization – and the current crisis could provide a following wind.
The Intergovernmental Panel on Climate Change warned that we have a “brief and rapidly closing window of opportunity” to ensure a liveable future for humanity. Yet, in a world with high and volatile energy prices, low- or zero-carbon industrial products are increasingly cheaper and lower risk than traditional supplies in many markets around the world. New industrial decarbonization innovations are reaching scale. And, most importantly, the technologies exist today to start driving down industrial emissions significantly before 2030. The time is now.
Addressing the global climate emergency will take everyone: governments, individuals, investors, and the business community. At the Mission Possible Partnership, we are focusing on seven hard-to-abate industry sectors. These sectors – concrete and cement, steel, aluminum, chemicals, trucking, shipping and aviation – account for around 30% of total carbon emissions. As other parts of the economy, notably power generation, shift away from fossil fuels, these seven sectors could consume 60% of the global carbon budget unless we take action soon.
Crucially, these sectors will also dictate the ability of the wider economy to continue to support economic growth and decarbonize. The construction sector needs zero-carbon concrete and cement; auto makers need net-zero steel and aluminum; the entire global economy needs to be able to move goods and people at low cost without impacting the climate.
The best news is that the business community is already taking action – ambitious business leaders are leading the way. Companies are responding to their customers’ demands and their shareholders expectations with speed and agility, defining detailed, operational decarbonization plans.
But those key stakeholders are less interested in long-term commitments on paper, and more in near-term action. Today, business demand for low- or zero-carbon inputs greatly outpaces supply in several sectors. Investors are looking for evidence of near-term project commitments that matches long-term corporate targets – and that evidence remains too limited.
So what does this mean in practice?
One of our roles at the Mission Possible Partnership is to map out sectoral decarbonization pathways that set out industry-specific, operationally relevant, short- and medium-term emission trajectories, and describe the technological innovation, project deployment, regulatory interventions and investment needed to take action and put companies on a tangible path to deliver.
Thus far, the partnership has facilitated transition strategies for the steel, aviation trucking, and shipping sectors. Strategies are due to be unveiled for the other three sectors and the cross-cutting insights on power, hydrogen, carbon capture, and biofuels, before the next UN climate conference in November.
Crucially, these strategies detail what needs to be in place in the next several years if companies are to have any chance of reaching net-zero by 2050. For example, the carbon cost scenario envisages the sector consuming 22 million tons of hydrogen and 180 million tons of carbon captured and stored annually by 2030. By that year, the aviation industry needs to be meeting 10-20% of its energy demand with sustainable aviation fuel (SAF). For the shipping sector to successfully transition, ships built today must be ready to use scalable zero-emission fuels or must be able to be easily retrofitted.
In practical terms, that means action needs to be taken now. Ground needs to be broken on sustainable aviation fuel production facilities. Green hydrogen production needs to scale. Carbon capture and storage projects need to be started in the next 18 months to have a shot at coming on stream by 2025.
Investment needs to be mobilized. We estimate that the sector transition strategies across our seven focus sectors will require capital in the region of $150-200 billion/year, every year between now and 2030.
Global strategies and ambitions need to be translated into place-based investments. Early steps in the net-zero transition will involve identifying and investing in specific industrial hubs, e.g., ports that commit to net-zero shipping, industrial clusters that bring together hydrogen production, renewables, carbon capture and manufacturing capacity.
These early investments will also need commitment from and action by policymakers. In an ideal world, they would embrace macro tools, such as carbon pricing. But there are many micro policies and regulations, many of which come at no cost to the taxpayer, that would make an enormous difference. Streamlining permitting and siting decisions, for example, could significantly accelerate the build-out of vital infrastructure.
The current crisis triggered by Russia’s invasion of Ukraine will undoubtedly complicate industrial decarbonization. It brings unwelcome uncertainty, distracts decisionmakers and risks triggering recession. But it also has the potential to supercharge the net-zero transition. Dependency on fossil fuels is now considered a threat to countries’ national security and to companies’ bottom lines, as well as a threat to the climate. Political leaders in the west are doubling down on clean energy goals, increasing stability and resilience, rather than rowing them back.
Fully decarbonizing the seven sectors that the Mission Possible Partnership is focused on will be the work of several decades. But that work needs to begin now if the longer-term goal is to be met.