Across the globe, eight sectors are responsible for about 40 percent of greenhouse gas emissions: Steel, aluminum, cement, primary chemicals, oil and gas, aviation, shipping, and trucking. The latest Net Zero Industry Tracker by the World Economic Forum (WEF), released in December 2024, showed that these hard-to-abate sectors collectively achieved a modest 0.9 percent reduction in absolute emissions from 2022 to 2023.
Additionally, the report highlighted the need for a staggering $30 trillion worth of investments by 2050 to meet net-zero targets. Of this figure, $13 trillion is expected to come directly from the industries and $17 trillion from the wider ecosystem, such as energy suppliers.
In this interview, Nicholas Wagner, manager, Energy and Industry Transition Intelligence, Centre for Energy and Materials at the World Economic Forum, talks about closing this investment gap and improving collaboration among hard-to-abate sectors, energy suppliers, and policymakers. He also discusses ways to leverage artificial intelligence (AI) and other advanced technologies to meet the scale and pace of the energy transition.
Given the significant investment gap of $30 trillion, what specific financial mechanisms and policy incentives can be implemented to mobilize this level of funding, particularly from private sector investors?
Addressing the $30 trillion investment gap to achieve net-zero emissions by 2050 requires a multifaceted approach involving financial mechanisms, policy incentives, technological innovation, and collaborative efforts across sectors.
In the hard-to-abate sectors, companies can adopt various capital-raising strategies to support emission reduction and energy transition efforts.
Green debt instruments, such as green bonds and sustainability-linked loans (SLLs), provide funding by tying financial terms to sustainability metrics, incentivizing better performance. For instance, Austria-based voestalpine issued a $550 million green bond to finance projects like its low-carbon greentech steel production.
Green securitization enables financing for smaller-scale, low-carbon assets, improving capital access and reducing costs.
Public-private partnerships (PPPs) and development banks also play key roles, with initiatives like the U.S. Department of Energy’s $2.2 billion Hydrogen Hubs and the Climate Investment Funds’ $1 billion Industry Decarbonization Program supporting heavy-emitting sectors in developing countries.
Private equity firms, such as Ara Partners, invest in technologies that replace polluting industrial processes.
Capital recycling – selling or leasing low-risk assets – allows firms to reinvest in decarbonization projects.
How can we maximize AI’s potential to accelerate decarbonization while mitigating risks such as increased energy demand and potential negative impacts on labor markets?
There are various strategies to maximize AI’s potential to accelerate decarbonization. One of which is developing a comprehensive data strategy. Advancements in generative AI are transforming businesses by enhancing productivity, streamlining operations, and reducing costs.
To maximize AI’s potential in decarbonization, companies need a comprehensive data strategy supported by digital reporting platforms for effective carbon accounting and detailed emissions reporting. This not only improves transparency but also frees up capital for clean energy projects and advanced technologies. Additionally, adopting AI at scale could unlock $10 trillion in additional economic value by 2038, according to a report from Accenture.
Generative AI significantly enhances decarbonization efforts by improving asset management and operational processes, optimizing capital allocation, and automating carbon management, thereby helping companies reduce emissions and costs.
To mitigate risks like increased energy demand and labor market disruptions, investments in energy-efficient AI systems and workforce reskilling are also critical.
What specific strategies can be employed to foster stronger collaboration among hard-to-abate sectors, energy suppliers, and policymakers to overcome barriers and accelerate the energy transition?
There’s a need for a multi-stakeholder approach. The forum embraces this multi-stakeholder approach and is working to drive action with leading governmental bodies such as Clean Energy Ministerial and G20, as well as multilateral initiatives such as the First Movers Coalition (FMC), Transforming Industrial Clusters, Mission Possible Partnership (MPP) and the Industrial Transition Accelerator (ITA).
Public-private partnerships (PPPs), in particular, can help raise capital for decarbonization efforts. For instance, the U.S. Department of Energy has allocated $2.2 billion in funding for the Appalachian Hydrogen Hub and the Gulf Coast Hydrogen Hub.
National and regional development banks can enhance private sector investment by mitigating risks and facilitating access to capital, while development finance institutions (DFIs) improve the bankability of green projects through de-risking instruments and technical assistance.
What key policy interventions are needed to create a supportive environment for deploying low-carbon technologies and infrastructure, especially in emerging economies?
Key policy interventions to support the deployment of low-carbon technologies and infrastructure include:
Increasing investment in clean power. Governments should prioritize funding and incentives for clean power projects, particularly for sectors like steel, aluminum, and trucking, which are projected to rely heavily on renewable energy. Clean power is projected to account for 26 percent, 100 percent, and 60 percent of the steel, aluminum, and trucking energy mix by 2050, respectively.
Supporting diverse energy solutions. Policies must encourage the development of renewable fuels (liquid, gaseous, and solid) and other non-electron energy sources critical for industries like chemicals and cement, as indicated by the IEA and IRENA.
Promoting CCUS adoption. Facilitate carbon capture, utilization, and storage (CCUS) through incentives and infrastructure-sharing models, such as CCUS hubs, to reduce costs and encourage collaboration among industries.
Fostering industrial clusters. Foster shared infrastructure models and industrial clusters where companies from various sectors can jointly access clean energy and benefit from economies of scale.
Strengthening carbon offset systems. Establish transparent and standardized systems for carbon offsets to support hard-to-decarbonize sectors like aviation while maintaining credibility and stakeholder trust.
Read: How Siemens Energy powers the UAE’s net-zero journey
How can we accelerate the development and commercialization of critical technologies, such as CCUS, hydrogen, and advanced materials, to meet the scale and pace of the energy transition?
To drive the acceleration of the development and commercialization of critical technologies, several key actions are necessary.
Scale up CCUS by increasing its capacity from less than 1 percent today to 1.2-1.6 Gt annually by 2050. This requires reducing costs through subsidies or incentives to make CCUS products more affordable and creating clear industry roadmaps to guide and standardize its deployment.
For instance, for the cement sector alone there is a need to expand hydrogen and clean power by building 624 GW of clean power and 6 Mt of hydrogen infrastructure by 2050 through combined government and private investment while strengthening carbon pricing and energy efficiency policies to encourage the adoption of clean fuels.
Improve material efficiency by promoting low-carbon alternatives, such as supplementary cementitious materials (SCMs), to reduce reliance on clinker, the most carbon-intensive component of cement.
Increase funding by closing the $51 billion annual investment gap for decarbonization projects, which can be achieved by de-risking investments and improving capital efficiency.
