World told energy transition will require $13.5 trillion commitment

Delegates arriving in Dubai for the COP28 summit have been greeted by the news that the World Economic Forum have put a $13 trillion plus price tag on the transition to a more sustainable and carbon-neutral future by 2050.

The WEF’s Net-Zero Industry Tracker 2023, published in collaboration with Accenture, takes stock evaluates progress towards net-zero emissions for eight industries – steel, cement, aluminium, ammonia, excluding other chemicals, oil and gas, aviation, shipping and trucking – which depend on fossil fuels for 90% of their energy demand and pose some of the most technological and capital-intensive decarbonisation challenges.

The report outlines pathways to accelerate the decarbonization of emission-intensive production, energy and transport industries. It added while the pathway to net zero in these sectors will differ based on unique sectoral and regional factors, investments in clean power, clean hydrogen and infrastructure for carbon capture, utilization and storage (CCUS) will be needed to accelerate industrial decarbonization across most sectors.

“Decarbonising these industrial and transport sectors, which emit 40% of global greenhouse gas emissions today, is essential to achieving net zero, especially as demand for industrial products and transport services will continue to be strong,” said Roberto Bocca, head of Centre for Energy and Materials, World Economic Forum. “Significant infrastructure investments are required, complemented by policies and stronger incentives so industries can switch to low-emission technologies while ensuring access to affordable and reliable resources critical for economic growth.”
According to the report, the $13.5 trillion in investments is derived from average clean power generation costs of solar, off-shore and on-shore wind, nuclear and geothermal, electrolyser costs for clean hydrogen and carbon transport, as well as storage costs.

The Net-Zero Industry Tracker proposes a comprehensive framework of emissions drivers and enablers to measure progress and identify gaps, scorecards for each industry, and opportunities for cross-sector collaboration.
The report’s findings underscore the urgency for creating a robust enabling environment, including low-emissions technologies, infrastructure, demand for green products, policies and investments. In addition to increasing capital expenditures to decarbonize existing industrial and transport asset bases, further investment is needed to build a clean-energy infrastructure.

“The majority of the technologies needed to deliver net-zero emissions are expected to reach commercial maturity after 2030, highlighting the need for collaborative approaches to research, develop and scale them,” added the report. “This includes substituting legacy technologies with low-emission alternatives, increasing efficiency of processes and machinery, electrification and driving circularity.”

“It is imperative that action is taken soon to both decarbonize and improve energy efficiency; otherwise, unabated fossil-fuel demand in the key industry sectors, which have grown 8% on average the past three years, will increase very significantly by 2050,” said Bocca. “But industrial leaders can  respond through new collaborative ways of working and innovating, for example within industrial clusters and by fostering best practices, sharing infrastructure in important areas like clean hydrogen and CCUS and building  demand for lower-emissions products.”

According to the report, carbon pricing, tax subsidies, public procurement and development of strong business cases can support in mobilising necessary investments. However, raising capital for high-risk projects with unproven technologies could be challenging in the current macroeconomic environment. Institutional investors and multilateral banks, therefore, can play an important role by providing access to low-cost capital linked to emissions targets; equally vital is adapting financial models to the needs of various industries and regions.

“Collaboration between the public and private sectors is critical to a successful energy transition, and technology can be a key enabler in both managing affordable and reliable access to clean energy and addressing the incremental cost of decarbonization,” said Muqsit Ashraf, who leads Accenture Strategy. “Widespread scaling and adoption of clean power, carbon capture and storage, and energy efficiency technologies across sectors are vital for progress. Additionally, business model innovations can also help stimulate demand and accelerate industrial decarbonization — achieving net-zero objectives and a resilient energy transition.”