Why decarbonizing industry is a team sport

  • We already have the tools to tackle global emissions, but we need to find the political will to deploy them quickly by building teams in industry, government and finance.
  • For these technology solutions to be deployed globally by 2050, they must be commercialized and deployed on a scale sufficient to trigger cost reductions by 2030.
  • Industry and government must jointly develop the game plan, determining how to achieve net zero emissions in each sector by mid-century. Playing solo is not an option!

The best of human effort, excellence and solidarity are currently on display at the Tokyo Olympics. In the face of the challenges posed by the COVID-19 pandemic, the Games bring the world together in sporting prowess and teamwork. Humanity will need to find the same level of solidarity and teamwork if we are to work together successfully to tackle climate change.

Like all sportsmen in Tokyo, we know what to do. We have the tools we need to fight global emissions; you just need to find the political will to deploy them quickly. We must come together to form the teams – in industry, government and finance – to ensure decarbonization.

In the seven sectors on which we focus our activity – aviation, maritime transport, heavy road transport, steel, aluminum, concrete and chemicals – low and zero carbon alternatives already exist. Whether relying on hydrogen, ammonia, biochemicals or advanced biofuels, new technologies and production processes can, in theory, be deployed to reduce emissions to zero by the middle of this century.

The challenge is that in almost all cases these alternatives are not yet commercially available and are therefore even more expensive than conventional options, often significantly (20% to 200% more). This “green premium”, as identified by Bill Gates, makes it difficult for many companies to invest today, although it could give them a competitive advantage over their rivals as the net zero economy emerges over the next few years. decades.

The good news, however, is that while important at the business-to-business level, this green premium would have a low impact on consumer prices (less than 1%) when passed down the entire value chain. Indeed, this figure will fall further with the effects of scale and learning curve.

We are now in a race against time: for these technological solutions to be deployed globally and become the “new normal” by 2050, they must be commercialized and deployed on an initial scale sufficient to trigger reductions in energy consumption. costs before 2030.

Fortunately, we have a successful case study of how to do just that in the context of the dramatic growth in renewables over the past three decades. Over the past 10 years, wind and solar have grown rapidly (quadruple and more than 17 times respectively) while their costs have fallen sharply. According to figures from the investment bank Lazard, the cost of wind has fallen by 71% between 2009 and 2020, and that of large-scale solar by 90%.

Image: Lazard

The reason is simple. Using auctions, tax breaks, production subsidies, and green certificate programs, governments initially subscribed to the clean energy green premium, allowing more expensive wind and solar power. compete with energy from coal, nuclear and natural gas generators.

By subsidizing early renewable electricity markets and ensuring income stability, governments have encouraged massive investments in clean energy technologies and large-scale manufacturing. In many jurisdictions, it is now cheaper to install new solar farms than to operate existing coal-fired power plants.

It is an extraordinary achievement. But it didn’t happen overnight. Denmark first introduced subsidies for wind farms in 1981, while Germany’s feed-in tariff program dates back to 1991. We cannot afford to spend three decades cutting the cost of generation green hydrogen, ammonia for the maritime transport sector or biochemical and synthetic products. fuels. Neither do we have to, because we have learned to use political tools to accelerate such transitions.

However, these policy tools will need to be adapted to the realities of carbon-intensive industries. Two key differences make the story of sectors harder to reduce less straightforward:

1. Unlike renewable energies and electricity generation, there is no miracle solution to decarbonize these sectors: in heavy industry, several low-carbon technological options will coexist, as their cost competitiveness will vary from region to region. and even depending on the factories. In the mobility sectors, different technologies are likely to respond to different journey lengths, with shorter journeys being electrified and longer journeys continuing to depend on liquid fuels. The multiplicity of solutions makes the development of political tools that will meet all needs more complex.

2. These sectors operate across national borders. A tightening of national objectives and obligations, even supported by subsidy mechanisms, will probably still lead to an increase in carbon costs for companies in these sectors, which could penalize them vis-à-vis their international competitors. This issue of carbon leakage calls for innovative forms of international cooperation.

This is why decarbonization is a team sport. Industry, finance and government must team up to beat climate change. Industry and government need to jointly develop the game plan, define how to achieve net zero emissions in each sector by mid-century, and agree on the best technology and business model solutions (or, most likely, a portfolio of solutions) to continue. Then they must play together to create the end markets that the private sector will need to justify investments in innovation, manufacturing and deployment.

It does not require anything less than:

  • Unprecedented public-private partnerships to reduce the risks of private investment through regulation and mobilization of public finances;
  • Innovative public-public cooperation (groups of sectoral governments agreeing on common action, collaborating on R&D and progressing towards a level playing field at the global level, as well as vertical cooperation between federal and decentralized governments);
  • New forms of private-private cooperation along the entire value chain, from energy suppliers to consumer goods companies, to demonstrate the feasibility of green value chains, and sometimes even between competitors to speak of a single voice to governments and financial institutions.

In the race against climate change, playing solo is not an option!

As other sectors decarbonize, the aviation sector could account for a much higher share of global greenhouse gas emissions by mid-century than its current share of 2-3%.

Sustainable Aviation Fuels (SAFs) can reduce the aviation fuel lifecycle carbon footprint by up to 80%, but they currently represent less than 0.1% of total aviation fuel consumption. Enabling the switch from fossil fuels to AFS will require a significant increase in production, which is a costly investment.

The Forum’s Clean Skies for Tomorrow (CST) Coalition is a global initiative leading the transition to sustainable aviation fuels as part of the aviation industry’s ambitious efforts to achieve carbon neutral flight.

The coalition brings together government leaders, climate experts and CEOs from aviation, energy, finance and other sectors who agree on the urgent need to help the aviation industry to achieve net zero carbon emissions by 2050.

The coalition aims to advance the commercial scale of the viable production of low-carbon, sustainable aviation fuels (bio and synthetic) for wide adoption in industry by 2030. The initiatives include a mechanism for aggregation of demand for carbon neutral flights, a vehicle for co-investment and geographically specific value chain industry plans.

Learn more about the impact of the Clean Skies for Tomorrow Coalition and contact us to find out how you can get involved.

The shipping industry provides an example of how such a team can work together. More than 150 companies have joined the Getting To Zero coalition, pledging to bring zero-emission shipping on the high seas on a commercial basis by 2030. They come from all corners of the world and represent shippers , freight forwarders, shipbuilders, fuel and bunkering service providers, cargo owners, financial institutions and governments of countries with significant maritime industries.

They are currently developing a net zero transition strategy, which will outline the solutions and fuels to be used to reduce emissions faster than the targets of the International Maritime Organization currently suggest. At the same time, they are working together to sail the very first zero emission ships over the next few years, creating consortia with fuel suppliers, port authorities and shippers, bringing together cargo owners willing to pay a premium. for ecological maritime transport, and by securing public transport and private financing.

This is a business beyond the reach of even the largest shipping giant – and, indeed, the shipping industry as a whole. It takes collaboration with the energy sector, but also with the many sectors that ship goods around the world. And, in the short to medium term, government support will be needed to accelerate R&D, reduce the risk of investment in the fuel supply chain, new port infrastructure, new ships and engines, and stimulate transport demand. ecological maritime through regulations and mandates.

All of this can be done by adding less than 1% to the consumer prices of goods shipped around the world. We as consumers have to be prepared to pay this small price. The maritime team need us to make this pass to score against climate change.

Source link

Previous ESG integration in companies will help create long-term value: EY India
Next US proposes to track digital money and tax it to pay for, you know, roads and the like • The Register