Real Change in the Real Economy: Decarbonizing Industry

If the global community has been tackling climate change for over 30 years, why is the pace of progress still so slow? Despite early progress towards decarbonization in sectors like power generation, we are failing to bend the global emissions curve downward. This is not because the problem is intractable—we know it is technically and economically possible to reach net-zero emissions by mid-century—but because we have yet to trigger transformational change in the heavy manufacturing and transportation industries that are responsible for the lion’s share of the world’s emissions.

Thanks to a $2 million grant from the Bezos Earth Fund, Rocky Mountain Institute (RMI) and its partners, including the Energy Transitions Commission (ETC), the World Economic Forum (WEF), We Mean Business, and others, are mobilizing efforts to do just that, by working to create a definitive approach to accelerate industrial decarbonization. Through a new effort called the Mission Possible Partnership, we are working to create high-ambition disruption through net-zero industry platforms in some of the world’s most carbon-intensive sectors.

Thinking and Acting Like the Global Economy

The United States exited the Paris Agreement on November 4th, but President-Elect Biden has declared an intention to rejoin it. This is both important and necessary. However, it’s not enough. The Paris Agreement was a monumental achievement of multilateral cooperation that connected climate obligations to national borders. But the economies of China, India, the European Union, and the United States are powered by industries that transcend borders and have a great deal in common, including global supply chains, global markets, competitive business models, overlapping investors, and shared technology pathways.

To decarbonize the global economy, we must think and act like the global economy. The climate action system needs ambitious national pledges under the Paris Agreement and net-zero commitments from global industries that will enable even more ambitious national commitments and unlock the technology and energy transformation necessary to decarbonize the world’s largest emitters.

A Better Approach for a Better Future

Generous funding from the Bezos Earth Fund will enable us to kickstart our efforts to dramatically expand nascent industry working groups established by the Mission Possible Platform, a joint venture between the ETC and WEF.

By expanding the existing platform into a partnership, we will bring together the critical actors needed to influence and enable an industry’s transformation process: leading players from the industry, its customers, its suppliers, its capital providers, and governments. The partnership will leverage the power of organizations currently focused on industrial decarbonization and rank among the world’s most influential in the realms of corporate leadership, industrial decarbonization, finance, and policy development.

Initially, our work will focus on fast-tracking work in three of the most energy-intensive global industries in advance of the UN Climate Action Summit in November 2021 (COP26): shipping, steel, and aviation. But, over time, our work will expand the efforts currently underway in aluminum, cement, chemicals, and heavy road transport. Acting together, these seven sectors can remove 30 percent of global carbon emissions. They are also some of the world’s largest consumers of energy and hold the key to driving a broader transformation of our energy system.

Harnessing Changing Forces for Good

While many industry platforms exist for corporations to discuss the importance and possibilities of the low-carbon transition, these efforts have generally produced more heat than light. Carbon-intensive sectors remain far from any path toward net-zero and their emissions have continued to rise with economic growth. If business continues as usual, by 2030 these global industries will exceed the total amount of carbon the world can emit this century based on a 1.5°C carbon budget.

Industries have been slow to change because they anticipate that decarbonization will increase costs in the short to medium term, stranding existing assets and hindering global competitiveness. On top of that, some critical low-carbon solutions are not yet technologically proven or commercially feasible in many industries. These industries operate under the assumption that business as usual will continue to suffice. This fails to give nations the clarity needed to support the necessary industrial transformation with policy and investment.

However, the momentum is beginning to change. The shift in public discourse to a 1.5°C target appears to have precipitated a corporate awakening. Genuine leadership has emerged among companies as varied as Amazon, Volvo, Alaska Airlines, Maersk, Unilever, Dalmia Cement, and SSAB steel. Customer preferences are changing, with corporate buyers seeking to green their procurement of commodities like power, materials, and transport services.

Global finance is also shifting. Institutional investors are taking more activist approaches to climate via shareholder engagement. Banks are under pressure to green their lending portfolios. Governments are looking to shape their regulatory agendas—as well as their R&D funding—to drive a faster transition to net zero. And citizen movements like Extinction Rebellion and the school strikes for climate are fundamentally shaping the values and preferences of the next generation of customers. We are working to harness these forces into a definitive approach to industrial decarbonization.

Shipping Steams Ahead, Others to Follow

Progress in the maritime shipping sector provides a powerful example of how we will approach this work. In 2018, the shipping industry and nations negotiated a 2050 target of reducing emissions by 50 percent compared with 2008 levels under the auspices of the UN International Maritime Organization.

Maersk, with 21 percent of global market share, announced a bold net-zero emissions target to set an example for its competitors. It also joined with other leading players to create the Getting to Zero Coalition with the objective of operating zero-emissions vessels along deep sea trade routes by 2030. Partnering with banks representing over $140 billion in shipping portfolios, this coalition agreed on a roadmap for ship decarbonization. The Poseidon Principles, defined with the help of RMI, set guidance for asset finance decisions, establishing the first sector-wide, self-governing climate action agreement among financial institutions.

Although the work to drive this sector to net-zero is far from done, over 150 companies and 14 governments have joined the Getting to Zero Coalition to date. The momentum is palpable, and one of the coalition’s members describes it as “the shipping industry’s biggest transformation since sails.” Coalition members are focused on building the infrastructure necessary to achieve their net-zero goal, including blueprints for early-stage commercial-scale projects, product standards for alternative fuels, emissions tracing metrics, and transition finance instruments.

The shipping sector now aims to launch a first wave of commercial-scale zero-emission projects in the next five years. A new blueprint on how to finance and de-risk those projects will be launched later this week. The Mission Possible Partnership will support the sector as it moves beyond commitments toward implementation, paving the way for other carbon-intensive sectors to follow the same path.

Supercharging Industrial Decarbonization

By 2030, we must see entire value chains committing to net-zero emissions, and systems in place to reliably track those commitments. Additionally, the next wave of low-carbon technologies must be brought to market, tested commercially and deployed on a scale that will unlock cost reductions. And finally, industries must stop investing in, and must begin retiring, carbon-intensive assets. It is our mission to make this dream of net-zero sectors a reality and we are grateful for the support from the Bezos Earth Fund to help make it happen.