Results - Energy-Intensive Industries
To achieve the goals of the Paris Agreement the deep decarbonisation of energy intensive industries (EIIs) by mid-century is essential. However, their transition is hampered by several crucial economic and political barriers, such as limited availability of mitigation technologies, high capital investment needs and long lifecycles, and strong global competition. Global governance and sector specific initiatives offer great potential to address these barriers and accelerate EII decarbonisation globally – a potential that has so far remained underexploited. Here we identify and assess options of global governance for closing governance gaps and advancing the decarbonisation of the main EIIs (i.e., steel, cement and concrete, chemicals, and aluminium).
In the report “Global Governance for the Decarbonisation of Energy-Intensive Industries: Exploring Sectoral Options”, we identified and analysed institutional options to advance the global governance of the decarbonisation of EIIs by addressing remaining global governance gaps. To do so, we first determined the theoretical potential of international cooperation to address barriers and challenges to the decarbonisation of EIIs along six governance functions, i.e. signal and guidance, rule setting, transparency and accountability, means of implementation, knowledge and learning, and orchestration and coordination. We then identify existing gaps in the global governance of decarbonising EIIs, by comparing the theoretical potential of global governance with the existing supply of global governance across the six functions. We then proceed to identify and assess concrete options for enhancing the global climate governance of EIIs to address the gaps identified and drive forward the transition. Finally, the analysis provides priorities and ‘feasible’ steps towards a better exploitation of the potential of global governance for the decarbonisation of EIIs that can drive forward the sector's transition to climate neutrality.
We find that the supply of global governance has increased significantly across all functions with particularly noteworthy developments on demand-side policies (rules function) as well as means of implementation including targeted financing for technology development. Additionally, several new international institutions that focus specifically on the decarbonisation of EIIs have emerged over the past years.
Significant key governance gaps remain. These include the need to harmonise existing standards and methodologies for near-zero emission basic materials, a lack of international demand side policies and a lack of international policies or rules to address carbon leakage as well as further enhance the supply of means of implementation. Additionally, we observe strong differences across the global governance on the different EIIs, with much focus on steel and cement and little attention on chemicals and aluminium. Reforming existing institutions hold some potential to address these key barriers and advance global governance, in particular regarding the implementation of supply-side policies as well as cooperation on technology development and diffusion.
However, existing institutions lack the necessary legitimacy and membership to address barriers related to the harmonisation of standards and global competitiveness and carbon leakage. Addressing this issue hence requires the creation of a new institution, which can also help to advance governance on the other gaps. To fully exploit the potential of global governance, we therefore suggest the creation of a new institution focused on advancing international cooperation on decarbonising EIIs. Such an institution could primarily focus on high-level orchestration of existing activities as well as on the harmonisation of standards, demand-side policies, enhancing the provision of means of implementation and addressing competitiveness and carbon leakage. Such a new institution can build on the G7 Climate Club proposal but should go beyond that towards more inclusivity and an initial focus on ‘softer’ governance activities. The provision of finance for the development and diffusion of breakthrough technologies, access to lead markets as well as the ability to drive the global transition of EIIs can comprise the key incentives for countries to join. Given their already strong involvement in the sectoral governance landscape the key (emerging) EII producers India, South Africa, Indonesia and Brazil could potentially be convinced to join the creation of the new institution, next to the G7 members.