Five Things Worth Corporate Attention This Fall
This fall is a pivotal moment for companies positioned to participate in and drive the energy transition. Unprecedented opportunities are emerging spurred on by recent policy support for accelerated regional development and deployment of hydrogen, EV infrastructure, and other critical technologies in the United States; a focus on rapid scale-up of clean energy in the Global South; and the inexorable decline of fossil fuels.
RMI has worked at the forefront of transition planning for years, providing companies with critical, leading-edge insights to navigate each shift in technology, economics, and policy. Here are five key levers of change for corporate actors to have on their radar this quarter:
1. Recent US policy signals domestic commitments to the energy transition
If we needed further assurance of the long-term dominance of clean energy tech, the bi-partisan passage of recent federal legislation provided that and has paved the way for state legislations to follow.
RMI’s US policy experts produced an accessible breakdown of the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the historic climate spending contained in the Inflation Reduction Act. Each piece of legislation embeds an industrial policy perspective that encourages rapid innovation, emphasizing the critical role of certain clean energy industries as well as the importance of localized manufacturing and secure global supply chains. The near-term disruption potential is clear. By 2050, half of our emissions reductions are likely to come from technologies that are only prototypes or demonstration projects today. Hydrogen and direct air capture, for example, will go from prototype to market maturity in the span of a decade with this policy support targeted at accelerating technology adoption.
“The United States now has a massive, unprecedented level of investment to help us build a carbon-free economy,” notes Sarah Ladislaw, director of RMI’s US Program. “Right now is the time to start building the clean energy future we want in this country — one that is healthier, more equitable, secure, and resilient.”
2. International support and funding amplifies hydrogen opportunities
Green hydrogen, produced by splitting water molecules with renewable electricity, is a crucial decarbonization pathway for heavy industry and transport. Europe’s looming energy crisis this winter exacerbated by Putin’s War is a call to action for new solutions. Fortunately, the potential of hydrogen as a future solution is moving at remarkable speed and scale that corporates should pay attention to.
The European Union, the United States, China, and other global industrial powers have recently announced ambitious policy support to develop green hydrogen projects. Industry leaders in the shipping, fertilizer, and steel sectors are leading the charge to incorporate this low-carbon fuel and feedstock into their processes. RMI’s Climate-Aligned Industries team, in partnership with industry first movers, has been working to close the economic gap between green hydrogen producers and off-takers’ requirements in the Green Hydrogen Catapult. We are getting closer and closer to seeing large-scale global deployment as a reality.
RMI’s Industries and US Policy teams have also been working with public and private stakeholders on developing regional clean hydrogen hubs, to which the Department of Energy will be awarding $8 billion dollars. To navigate the sheer pace of innovation anticipated, RMI will host a corporate briefing on US hydrogen hubs in early October, and in collaboration with the Mission Possible Partnership, provide a series of corporate workshops in various US cities on the implications of clean energy and hydrogen for local industry.
3. Meaningful decarbonization progress is happening in the hardest-to-abate sectors, like steel
“Steelmakers around the world reel at the thought of being ‘the climate bad guys,’ but the fact remains that they are one of the largest emitters of environmental pollutants such as greenhouse gases and fine dust,” writes Steel Times International. Several initiatives across Europe are working to reduce emissions from steel production.
RMI recognizes the inflection point for the steel industry, and we are supporting steel companies across several fronts. RMI’s Climate Intelligence Program has released guidance for steel companies to report and reduce the greenhouse gas emissions impact of their products under the Horizon Zero initiative — which makes it possible to understand the emissions impact of what companies are buying and selling.
During New York Climate Week, RMI’s Center for Climate-Aligned Finance is launching the Sustainable STEEL Principles, a first-of-its-kind climate-aligned finance agreement for lenders to the global steel sector, equipping participating banks with a measurement and disclosure framework to assess their own climate progress in line with Net-Zero Banking Alliance guidance.
The Mission Possible Partnership is hosting several forums on US breakthrough steel investments, which continues during Climate Week and the Clean Energy Ministerial in September through November. This work is focused on fostering conversation among industry supply chain partners and unpacking project-level requirements needed to develop low emissions steel in the US.
4. Adoption of electrified transportation will accelerate globally
Public policy is reinforcing the acceleration of technology learning curves in transportation as well. Use cases for electric mobility are becoming economically competitive on a total cost of ownership basis around the world. For instance, the total cost of ownership of an electric two-wheeler in New Delhi, India, is less than a penny per kilometer, while an internal combustion engine alternative costs nearly four times more. Over its lifetime, an electric two-wheeler will save $6,900 compared to an internal combustion engine alternative.
The emerging economic opportunity is not restricted to small vehicles in emerging markets nor scenarios of passenger vehicle ownership. One of the Inflation Reduction Act’s lesser-known components, the Qualified Commercial Clean Vehicle tax credit, provides up to a $40,000 tax credit for electric medium-duty and heavy-duty trucks in the United States. This is significant for commercial, high mileage fleets for businesses of any size. The credit, reinforced by rapid improvements in battery and vehicle technology, makes owning an electric truck cheaper than owning a diesel one in most US use cases, with urban and regional electric trucks becoming cost-superior to diesel ones as soon as 2023. The time horizon for fleets to incorporate these cost savings is immediate.
5. There is increased public recognition that the energy transition needs to be simultaneously global and inclusive to succeed
COP27 rightfully places our focus on climate change equity globally. Here there is the need to de-risk bankable energy investments and deploy capital for building renewable infrastructure. Vikram Singh, RMI’s Director of International Partnerships, affirms that “the energy transition is going to be won or lost in the Global South, given the amount of new energy infrastructure to be built by 2030.” His team is working on opportunities for “radical implementation” of clean energy portfolios centered in regions across Africa, southeast Asia, and the Caribbean.
Conversations at COP27 will also focus on supporting communities and local economic development. It will be essential to provide access to reliable climate finance and demonstrate opportunities for economic growth through local partnership and autonomy. There will be increasing scrutiny on how businesses engage with local leadership in developing renewable energy systems and doing so well provides a market advantage. RMI’s Global South team is developing local capacity for leadership in fossil fuel transitions, workforce training and development, and the administration of climate finance to further enable a just energy transition in emerging markets.
These national and international milestones, the upcoming convenings at New York Climate Week and COP27, and other global events are conspiring to shift business models as the clean energy transition gains momentum. RMI has 40 years of research and insights to support businesses navigating these complex transitions. Our expertise runs beyond the topics highlighted above, always leading back to the cost-benefit of the clean energy transition for society and businesses.
We are not naïve to the challenges that persist: the world is facing armed conflict, economic stress, the long shadows of a pandemic, and ever-increasing climate catastrophes. Yet, we are encouraged by the momentum gathering behind an accelerated flight path toward decarbonization. It is the best trajectory for us to avert the worst consequences of climate change and improve energy security in an uncertain world.