Industrial Transition Accelerator: COP must deliver $1tn investment
1.5C global warming is within reach according to a new analysis, but the 29th UN Climate Summit must deliver targeted policies that can unlock demand and finance.
According to the Industrial Transition Accelerator [ITA] and Mission Possible Partnership Assessment [MPPA], there are currently around 700 major planned industrial facilities within the highest polluting and emitting sectors – – aluminium, steel, chemicals, cement, aviation, shipping – which would enable net zero by 2050. However, insufficient incentives exist to realise many in practice, with sluggish demand and funding falling short.
The analysis, published this morning, Thursday 14th November, shows that 20% of those projects are operational or have the necessary backing to get off the ground. 561 are considered to be ‘in the pipeline’, but 300 of these have been waiting two years or more for a decision on finance.
In 2024, just eight have been green lit and are now being developed, and of 46 announced in the financial year since April 24 will be located in emerging markets and developing economies if they go ahead. These include Brazil, India, South-East Asia, Vietnam, Malaysia, Morocco and Namibia.
Now more than 40 global business leaders and 700 financial institutions are putting their weight behind the ITA with an open letter issued to governments. Signatories want to see proven policy measures that stimulate demand for green products implemented as a priority at a global level, bringing the cost of equipment and infrastructure in line with high-carbon, lower cost alternatives.
Together, support comes from more than 1,000 companies and lenders worldwide. Among other things, green ammonia, green steel, cement and sustainable aviation fuel are considered priority areas for policy-driven growth by the lobbyists, who also point to the global economic downturn as another contributing factor to the lacklustre demand.
Advocates point to the impact of EU Sustainable Aviation Fuel blending mandates, and the UK’s incoming equivalent as good examples of how government regulation has stimulated growth. If all available and viable policies were rolled out, it is believed this could unlock some $1trillion in investment, helping bring a further 500 green industrial plants online. If this happens, the emissions reductions needed from the highest emitting sectors to reach net zero could be achieved.
In particular, the ITA, Glasgow Finance Alliance for Net Zero, and open letter coalition are calling for:
- Supporting global carbon pricing and fuel standard measures in sectors where these are on the horizon (e.g. the mechanisms currently under development at the International Maritime Organization) and implementing such policies domestically where they are not (e.g. in heavy industry).
- Setting and enforcing mandatory quotas for low- and near-zero-carbon fuels and products that become stricter over time, such as clean hydrogen, ammonia, methanol and SAF.
- Setting mandatory targets for low- and near-zero-carbon materials in public procurement, especially for cement, concrete and steel.
- Setting stringent and progressively tightening limits on whole life carbon (including embodied carbon) in key product standards (e.g. automotives, white goods) and in building standards.
- Implementing mechanisms that help bridge the remaining gap between the price of green commodities and the willingness to pay of potential buyers for the next wave of projects.
‘To meet climate targets for heavy industry and transport, we need to bring more projects online, faster,’ said Simon Stiell, Executive Secretary of UN Climate Change. ‘We now need stronger and clear policy statements from governments to further drive green demand at scale and unlock capital flow to technologies that can accelerate decarbonization. The next round of national climate plans need to cover all sectors of economies, and so we need as many countries as possible to set more ambitious industrial targets in these revised NDCs next year.’
Alongside the open letter, the ITA has published a Green Demand Policy Playbook setting out the range of evidence-based policy measures available to governments to increase demand for low- and near-zero-carbon materials, chemicals and fuels – such as green ammonia, green steel and cement, and sustainable aviation fuels – so as to unlock supply. Key measures highlighted in the playbook include:
- Carbon pricing, which is critical to level the playing field between green and carbon-intensive commodities, and is most effective when it provides market predictability, reaches a sufficient level to make low- and near-zero-carbon materials competitive, and addresses risks of carbon leakage.
- Mandatory mechanisms, such as mandatory quotas and fuel mandates, and embodied carbon intensity limits on industrial products like automotives and on buildings, which have proven powerful tools to create certainty of market scale-up, for example, in aviation in Europe.
- Government procurement, in particular green public procurement of green cement and steel.
- Financial support mechanisms and government backed intermediaries that help bridge the remaining gap between the price of green commodities and the willingness to pay of potential buyers (especially in value chains that can be sensitive from a social perspective like fertilizers for agriculture), such as subsidies, contracts for difference, and state-backed intermediaries.
The Industrial Transition Accelerator is bringing together business, finance, and government leaders committed to increasing investment for clean energy projects,’ added Michael R. Bloomberg, UN Secretary-General’s Special Envoy on Climate Ambition and Solutions, Founder of Bloomberg L.P. and Bloomberg Philanthropies, and ITA Co-Chair. ‘To deliver on the promises of the Paris Agreement while supporting growth and jobs, it’s critical that we all move faster to help bring these projects to life.’
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Image: İltun Huseynli via Unsplash