WEF: $13.5 trn investment needed in key sectors to accelerate decarbonization

Investments in clean energy, hydrogen infrastructure are crucial
WEF: $13.5 trn investment needed in key sectors to accelerate decarbonization
Insights from new WEF report (Photo Credit: United Nations)

According to a new report by the World Economic Forum (WEF), a transition to a sustainable and carbon-neutral future will require $13.5 trillion in investments by 2050. This investment is particularly crucial for the production, energy, and transport sectors. The report, titled Net-Zero Industry Tracker 2023 and developed in collaboration with Accenture, assesses the progress towards achieving net-zero emissions in eight industries: steel, cement, aluminum, ammonia (excluding other chemicals), oil and gas, aviation, shipping, and trucking. These industries heavily rely on fossil fuels for 90 percent of their energy demand and face significant technological and capital-intensive challenges in decarbonization.

The report, released during the same week as the United Nations’ call for “dramatic climate action” at COP28, presents pathways to expedite the decarbonization of emission-intensive production, energy, and transport sectors. While the approach to achieve net-zero emissions will vary based on specific sectoral and regional factors, investments in clean power, clean hydrogen, and infrastructure for carbon capture, utilization, and storage (CCUS) will be crucial to accelerate industrial decarbonization across most sectors.

Read more: WEF highlights key macroeconomic conditions for H2 2023

Decarbonization is essential

“Decarbonizing these industrial and transport sectors, which emit 40 percent 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.”

Average clean power generation costs

The report highlights that the $13.5 trillion investment requirement is based on the average costs of clean power generation, including solar, offshore and onshore wind, nuclear, and geothermal energy. It also includes the costs of electrolyzers for clean hydrogen production and carbon transport, as well as storage expenses.

The Net-Zero Industry Tracker introduces a comprehensive framework that measures progress and identifies gaps in emissions reduction. It includes scorecards for each industry and identifies opportunities for collaboration across sectors. This updated edition of the report expands its scope to include the transportation sectors and applies the framework to develop strategies for achieving net-zero emissions in industrial transformation.

The findings of the report emphasize the urgent need to establish a robust enabling environment. This includes the development of low-emissions technologies, infrastructure, demand for green products, and favorable policies and investments. Alongside increasing capital expenditures to decarbonize existing industrial and transport assets, additional investment is necessary to construct a clean-energy infrastructure.

Share of global GHG emissions for heavy industrial and transport sectors

Collaborative approaches will be essential for researching, developing, and scaling the technologies required to achieve net-zero emissions. Most of these technologies are anticipated to reach commercial maturity after 2030. This underscores the importance of initiatives that involve replacing legacy technologies with low-emission alternatives, enhancing process and machinery efficiency, promoting electrification, and driving circularity. By working together, stakeholders can accelerate the adoption and implementation of these transformative solutions.

“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 percent 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.

“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.”

The report acknowledges the positive impact of recent policy developments in driving the net-zero transformation in the industrial sector. While advanced economies are implementing significant policy measures, emerging economies, which will account for a larger share of future industrial product demand and transportation services, require support in accessing low-emission technologies and solutions.

Five key areas

The report highlights five key areas on which industrial sectors should focus, providing specific actions for each sector through individual scorecards:

  • Technology: Prioritize the adoption of clean power technologies across most sectors, scale up commercially viable carbon capture, utilization, and storage (CCUS) in cement production, and enhance technology development to reduce costs associated with clean hydrogen.
  • Infrastructure: Promote the development of shared infrastructure, such as industrial hubs and clusters, to facilitate collaboration and efficiency in decarbonization efforts.
  • Demand: Establish a standardized framework for low-emission products, implement a simple emissions-intensity calculator, and introduce an auditable carbon-footprint assessment process to enhance consumer transparency and encourage sustainable choices.
  • Policy: Globally align on emissions reduction requirements while customizing policies to suit the specific needs of individual countries. Enhance market transparency to increase visibility of emission intensity and facilitate informed decision-making.
  • Capital: Improve transparency regarding low-emission and low-carbon alternatives, strengthen demand signals for sustainable investments, and reduce capital expenditures through the development of shared infrastructure.

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