More than £10.6trillion worth of investment will be required if the world is to hit net zero by 2050, according to major new report.
The World Economic Forum has placed the huge price tag on the energy transition after publishing an extensive study examining 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.
These sectors pose some of the most technological and capital-intensive decarbonisation challenges.
The Net-Zero Industry Tracker 2023 outlines pathways to accelerate the decarbonisation of emission-intensive production, energy and transport industries.
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, utilisation and storage (CCUS) will be needed to accelerate industrial decarbonisation across most sectors, according to the report.
Roberto Bocca, Head of Centre for Energy and Materials at the World Economic Forum, said: "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.
“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 $13.5trillion in investments is derived from average clean power generation costs of solar, offshore and onshore wind, nuclear and geothermal, electrolyser costs for clean hydrogen and carbon transport, as well as storage costs.
The report’s findings underline 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 decarbonise 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. 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.
Click here to read the full report.