The Net Zero Industry Tracker highlights the key steps that the industries must take to further progress towards their respective emission reduction goals across five key dimensions of the readiness framework – technology, infrastructure, demand, capital and policy. Each dimension has a readiness score based on a set of metrics. Technology readiness scores have improved this year due to improved economics and adoption; however, nearly half of the required emissions reductions need to be achieved through technologies that are not commercially viable.
The adoption of methane abatement, electric transport and industrial processes, and energy efficiency technologies has increased. However, deep emission reduction in hard to-abate sectors relies heavily on disruptive technologies that are not economically viable today. Investments in R&D need to be ramped up in carbon capture, utilization and storage (CCUS), new production pathways for materials, and hydrogen and its derivatives. Infrastructure development has been slow; the sectors covered in this report are forecast to represent nearly 70% and 55% of the total hydrogen and CCUS capacity required by 2050, respectively. While infrastructure development for low-carbon power has been encouraging, hydrogen and CCUS infrastructure currently address less than 1% of sector requirements. Clean power, hydrogen and CCUS infrastructure need to be developed faster in countries with large heavy industry and heavy transport sectors. Demand readiness scores have shown limited progress due to the conditions not being met for scaling demand for low-emission products.
Major barriers for scaling clean demand include high green premiums, lack of clarity on customer willingness to pay the premium, and limited industry-wide adoption of carbon threshold standards for green products. Current estimates suggest a 40-70% increase Standardized carbon thresholds need industry wide adoption, and businesses need to enhance product-level reporting. Capital readiness scores have remained stagnant due to lack of material flow of capital to decarbonize the sectors in scope, driven by the challenge of generating returns on clean investments. This report estimates that the $30 trillion additional capital required by 2030 across the sectors in scope is split 43% ($13 trillion) directly by these sectors and 57% ($17 trillion) for clean energy infrastructure. The sectors must generate returns to raise investments on energy transition initiatives, which represent an 80% increase in investment relative to today’s levels. Sectors should increase investments in retrofitting existing assets and building new climate compatible assets, while energy suppliers need to build the enabling infrastructure. Policy support has been fragmented and lacking cross-regional collaboration.
As of 2024, there are 75 carbon-pricing instruments in operation worldwide, covering 24% of global emissions.6 However, increased protectionism through tariffs on green products add an incremental cost on green premiums. Moreover, there are insufficient incentive-based policies to drive focus on low-emission production. Policy makers should create stronger incentives that align with the goals of hard-to-abate sectors, energy suppliers and consumers. The sectors in this report face a gridlock as businesses, policy-makers, consumers, energy suppliers and financiers hesitate, each waiting for others to commit to investments and measures that can significantly reduce emissions. Hence, there is a need to shift from a point-solutions approach to a system-wide, partnership-based approach, to simultaneously solve several problems, align supply and demand, and overcome cost and risk hurdles.
The 2030 milestone of the Paris Agreement is fast approaching, and while substantial progress has been made, hard-to-abate sectors remain among the most difficult sectors to reduce emissions. This is owed to the difficulty of reducing emissions in processes that rely on high-temperature heat or specialized or energy dense fuel.
There have been encouraging developments in renewable energy, electric vehicles (EVs) and battery technology. Global renewable energy capacity is projected to expand by 2.7 times by 2030,7 exceeding current national targets by 25% and nearing the COP28 goal to triple capacity, mainly driven by improving economics, climate and energy security policies. Battery technology has also experienced significant advancement. The deployment of battery storage systems within the power sector more than doubled in 2023, making clean power supply less intermittent. This progress across various technologies has primarily been driven by substantial investments, supportive policy frameworks and a continued decline in costs. Other technologies that are essential for industry emission reduction, such as certain types of clean fuels and carbon capture, utilization and storage (CCUS), have not reached the scale-up phase. Their widespread deployment will require further maturation, scalability and cost reduction before they can be used in industrial applications.
For instance, global hydrogen growth projections have seen a downward revision by 10-25% compared to earlier estimates, due to a 20-40% increase in green hydrogen costs and continued uncertainty around regulations.
The global CCUS capacity grew by only 4% in the last two years,9 and future growth is uncertain. Rising geopolitical tensions are also impacting the global path towards net-zero emissions. Energy security was already tested by the Ukraine-Russia conflict, and ongoing conflict in the Middle East risks further strain on global supply chains. Energy prices saw an uptick due to supply constraints driven by these events, caused some major companies, to scale back their net zero targets. While inflation is seeing a decline, interest rates have remained elevated despite recent cuts.
This negatively impacts the ability of hard-to-abate sectors to invest towards reducing emissions, especially in emerging and developing countries where the weighted average cost of capital (WACC) is higher than in advanced economies. Recent f luctuations in commodity prices, such as the drop in steel prices, have also placed strain on these industries and directed their focus towards maintaining profitability at the expense of investing in the energy transition.
Due to years of shock, including the COVID-19 pandemic and changing geopolitical dynamics, some countries are re-evaluating their trade partnerships and becoming more self-reliant to promote domestic production, through protectionist policies including trade tariffs. For instance, a rise in US tariffs on imports from China, such as a 100% duty on the import of Chinese EVs, and the EU’s carbon border tax are expected to reduce the volume of imports. As per the International Monetary Fund (IMF), new trade restrictions have more than tripled since 2019. Thus, global trade is becoming increasingly fragmented, and this is leading to higher costs due to the erosion of economies of scale. Advancements in generative artificial intelligence (AI) are driving transformative changes in businesses globally by enhancing productivity, streamlining operations and reducing costs.
Despite progress, many companies face challenges in the effective and transparent collection and reporting of data across their operations – an essential element in their efforts to reduce emissions. A comprehensive data strategy, supported by digital reporting platforms’ power, can streamline carbon accounting and enable detailed product-level emissions reporting.
In addition to the enhancement of companies’ emissions reporting, these innovations have the potential to free up capital, which can be used to invest in clean energy projects and advanced technologies. Accenture estimates $10 trillion in economic value can be unlocked by 2038 by companies adopting gen AI at scale.10 Due to a combination of these technological, economic and political challenges, the eight hard-to abate sectors in scope – which contribute to around 40% of the global Scope 1 and 2 greenhouse gas (GHG) emissions – have seen limited progress towards their net zero goals. These sectors span across production (i.e. steel, cement, aluminium and primary chemicals), energy (i.e. oil and gas) and transport (i.e. aviation, shipping and trucking).
Global GHG emissions (Scope 1 and 2) by sector (FIGURE BELOW)
The Net-Zero Industry Tracker offers stakeholders a framework and methodology to understand the key drivers of industrial emissions, and the key enablers of the transition to net-zero for eight emission-intensive sectors. The tracker provides both quantitative and qualitative scorecards for the sectors in scope to continuously track their progress towards the net-zero goal.
Furthermore, the tracker identifies priority areas for the industries to encourage targeted actions to facilitate progress. Of the eight sectors in scope in the 2024 iteration of the tracker, ammonia has been expanded to primary chemicals (which also includes ethylene, propylene, benzene, toluene, mixed xylenes and methanol), which contribute to 2.5% of global GHG emissions, increasing the overall volume of emissions being tracked.
For the production and energy sectors, the field of analyses covers Scope 1 and 2 emissions, while for transport sectors, the GHG emissions in the fuel supply and operational value chains (well-to-wake emissions) have been covered. While the overarching framework of the tracker remains the same as last year, the quantitative methodology has been updated this year. In addition, numerous cross-cutting themes have been outlined into the five readiness dimensions, distilling some of the key technologies and efforts needed across sectors that deserve elevated attention.
The underlying framework of the tracker combines two complementary lenses to track industries’ progress on the ground – performance and readiness. Performance refers to the drivers of industry net GHG emissions, including industry output, emission and energy intensity, value chain emissions and energy mix. To measure industry readiness for net-zero transformation, a scoring system has been developed across five readiness dimensions:– Technology: Are the technologies needed for net-zero emissions commercially available?– Infrastructure: Is the infrastructure to enable use of low-emission technologies available?– Demand: Can the market support low-emission products, given the green premiums and 2030 project progress?– Capital: Are returns sufficient to drive investments towards low-emission assets?– Policy: Are the supporting policies to enable the growth of low-emission industry in place? Each of the five dimensions is scored by averaging the values of its sub-dimensions, which are scored on a scale of 1 to 5. A detailed methodology can be found in the appendices. Each sub-dimension has specific thresholds.
Dimensions rated at stage 5 demonstrate significant advancements towards net-zero goals, while stage 1 indicates that substantial progress is still required. For instance, in technology readiness levels (TRL), a score of 1-3 indicates that the technology is in the concept stage, 4-6 signifies prototype testing, 7-8 indicates the demonstration phase, 9 represents early adoption and 10-11 indicates a fully developed, mature technology. A detailed methodology can be found in the appendices. The targets in the tracker refer to the 2030 and 2050 emission intensity thresholds based on sector-specific net-zero trajectories used for the analysis.
These trajectories are scenarios based on the analysis of data from the International Energy Agency (IEA) Net Zero by 2050,11 the International Air Transport Association’s (IATA) net-zero roadmaps,12 the International Civil Aviation Organization’s (ICAO) long-term aspirational goal (LTAG),13 the International Maritime Organization’s (IMO) GHG strategy,14 the International Aluminium Institute’s (IAI) GHG pathways,15 and the IEA’s net-zero report on oil and gas.16 Business-as-usual (BAU) trajectories have also been considered based on the International Council on Clean Transportation (ICCT), the IEA’s Stated Policies Scenario17 and Mission Possible Partnership’s (MPP) sector specific trajectories.18 These trajectories have been used for this analysis only and are not a final recommendation for the sectors.
Operational process and energy intensity
Production processes in heavy industry and operations in heavy transport sectors consume large amounts of energy, which contributes to a significant share of their GHG emissions. Efforts are being made across sectors to reduce the energy intensity and bring down energy-related emissions. From 2019 to 2022, the sectors in scope saw a 3.9% decline in energy intensity on average. This decline was mainly driven by primary chemicals, trucking and aluminium, and was partially offset by an increase in energy intensity in steel.
For primary chemicals, energy intensity has reduced due to a shift towards more efficient production processes. For trucking, increasing electrification and fuel efficiency improvements have contributed to this decline. Recycling and reuse of materials have played a major role in reducing energy intensity for aluminium. For steel, the increase in energy intensity is mainly due to increase in production in China, which predominantly uses primary processes, which are more energy intensive than secondary production processes. More recently, from 2021 to 2022, the sectors in scope saw a 3.2% decline in energy intensity on average.
This decline was mainly driven by aviation and trucking and was partially offset by an increase in energy intensity in shipping. By comparison, the global energy intensity – global energy consumed per unit of gross domestic product (GDP) – improved by 2% in the same period,28 which shows that the sectors in scope are moving faster than the global economy in terms of improving their energy efficiency.
Source:
Net-Zero Industry Tracker 2024 | World Economic Forum
