Reaching net-zero industry through public-private partnerships

Industry accounts for roughly 30% of global CO2 emissions and these emissions have been growing significantly as many countries around the world seek to industrialize. This places a significant imperative on industrial actors globally to reduce emissions sharply for the world to limit global warming well below 2°C, as required by the Paris Agreement.

Global momentum for industry transition is building, with public and private stakeholders across the world taking steps to decarbonize the sector. Among many nations, industry transition is becoming a top priority, and countries are putting in place roadmaps in the form of visions, pathways and action plans to provide advanced decision support for policymakers. Meanwhile, companies such as FLSmidth and HYBRIT are setting net-zero targets and promoting ultra-low-carbon technologies.

Recent years have also seen the development of a much-needed international collaboration to catalyse industry transition. Countries and companies are increasingly working together to set up policy frameworks and incentives. One example of this is the Leadership Group for Industry Transition (LeadIT), a collaborative initiative which gathers countries and companies that aim to achieve net-zero carbon emissions by 2050. It was launched by the governments of Sweden and India at the UN Climate Action Summit in September 2019 and is supported by the World Economic Forum.  LeadIT provides an arena for public-private collaboration, and for sectoral and cross-sectoral learning, for example on innovation opportunities and new technologies.

Despite growing momentum and the development of low-carbon alternatives, decarbonizing the so-called hard-to-abate sectors – including steel, cement, aluminium, chemicals, plastics, metals and mining, aviation, and heavy-duty transport – will not be easy. Major systemic shifts are needed to reduce emissions for heavy industries, including:

• increasing recycling and circularity
• reducing demand through material efficiency
• increasing energy efficiency along the whole value chain, and
• reducing both the combustion and the process emissions from both primary and secondary production routes.

These major shifts call for large public support and the strong participation of private stakeholders. Governments can support the decarbonization of hard-to-abate industries through subsidies, high carbon prices, and robust public-private sector partnerships.

In this briefing, we review some public-private partnerships and policy mixes that are receiving a lot of attention, including green public procurement, carbon contracts for difference, carbon border adjustment, industrial clusters, and climate partnerships. We also examine how collective action among countries can send a stronger signal to businesses and investors. We provide case examples from South Korea (hereafter Korea), Denmark and Sweden and share experiences of the EU, Canada, and the UK in implementing some of the key measures.