Emissions decline in hard-to-reduce sectors, but do not reach zero by 2050, report finds

For the first time since July 2022, there has been a decline in absolute emissions in hard-to-reduce industries, with an absolute decrease of 0.9% between 2022 and 2023.

These data are shown in the third report of the World Economic Forum Net Zero Industry Tracker, published on December 12.

The 8 sectors focused on in the document are responsible for approximately 40% of global greenhouse gas emissions and are considered areas where reducing emissions can be challenging:

• production of steel, aluminum, cement, and primary chemicals;
• oil and gas production
• aviation
• shipping;
• freight transportation.

According to the report's authors, these sectors play a fundamental role in driving global economic activity and connectivity. They believe that finding solutions to reduce emissions in these industries is critical to achieving global net zero emissions goals while ensuring economic prosperity.

Here are the main figures of this document:

• emission intensity decreased by 4.1% in the period from 2019 to 2023;
• last year this decline accelerated by 1.2%;
• 5 out of 8 sectors by volume of emissions have reduced emission intensity over the past year, namely: aluminum and cement production, chemical industry, aviation and freight transport;
• in 2022, energy intensity in the 8 specified sectors decreased by 3.2%, which is 1.6 times more than the global level;
• total global energy-related emissions increased by 1.3%;
• in order to get on the necessary trajectory to reach net zero, these sectors would need approximately $30 trillion in additional capital by 2050 – about 45% of the total additional investment needed to reach net zero by 2050.

Artificial Intelligence: Its Value in Reducing Emissions

Analysts singled out the role of data and artificial intelligence (AI) as powerful tools to support the transition to net zero. Consulting firm Accenture estimates that the use of generative AI could increase capital efficiency by 5-7%, reducing capital requirements for hard-to-cut sectors by $1.5-2 trillion to go net-zero. Additional benefits include:

• asset management and energy efficiency;
• acceleration of research and development works (R&DKR);
• increased transparency through product-level reporting.

However, experts have warned that the wider use of AI could increase demand for electricity, potentially competing with hard-to-cut emissions sectors for access to low-carbon energy.

Key steps for further progress in reducing emissions

Ecopolitics highlighted the following main theses:

1. There is a need to increase investment in research and development in the field of carbon capture, use and storage (CCUS), new ways of producing materials, as well as hydrogen and its derivatives.
2. Clean energy, hydrogen and CCUS infrastructure should be developed primarily in countries with large heavy industries and a large transport sector.
3. Investments in upgrading existing and building new climate-compatible assets should be increased, and energy providers should build appropriate infrastructure.
4. Policymakers should strengthen interregional cooperation and create stronger incentives that match the goals of energy sectors, suppliers, and consumers.

In more detail, the authors of the Net Zero Industry Tracker highlight the following key steps that industries should take to further reduce emissions along 5 key dimensions of readiness:

• technology;
• infrastructure;
• demand;
• capital;
• policy.

1. Analysts noted that this year indicators of technological readinesshave improved due to economic growth and the introduction of technology. However, they noted that nearly half of the required emission reductions would have to be achieved through the use of technologies that are not commercially viable.

Experts noted an increase in the implementation of technologies to combat methane emissions, electric transport and industrial processes, as well as energy-efficient technologies. But they insist on the need to increase investment in research and development in the field of carbon capture, use and storage (CCUS), new ways of producing materials, as well as hydrogen and its derivatives.

2. Development infrastructure, according to experts, is happening slowly. The sectors focused on in this report are projected to account for nearly 70% of the total hydrogen production capacity and 55% of the carbon capture and storage capacity needed by 2050.

"While the development of infrastructure for low-carbon energy is encouraging, currently hydrogen and CCUS infrastructure meets less than 1% of the sector's needs," experts say.

They insist that clean energy, hydrogen and CCUS infrastructure must be developed faster in countries with developed heavy industry and a large transport sector.

3. The main barriers to increase demandthere are high "green" premiums for environmentally friendly products, a lack of clarity about the willingness of consumers to pay such a premium, and limited adoption of industry threshold carbon emissions standards for environmentally friendly products. According to today's experts' estimates, prices for products with zero carbon emissions will increase by 40-70%.

4. Indicators of readiness capitalremain at a low level due to the lack of material capital flows for the decarbonization of the relevant sectors. Such a shortage is due to the problem of obtaining profit from ecologically clean investments.

The Net Zero Industry Tracker estimates that the $30 trillion in additional capital needed by 2030 for all sectors is split between 43% ($13 trillion) directly for these sectors and 57% ($17 trillion) for clean energy infrastructure.

Sectors must generate profits to attract investment in energy transition initiatives, which means an 80% increase in investment compared to today's level. Industries must increase investment in retrofitting existing and building new climate-compatible assets, and energy providers must build appropriate infrastructure.

5. According to the authors of the report, political supportis fragmented and lacks interregional cooperation. As of 2024, there are 75 carbon pricing instruments in place worldwide, covering 24% of global emissions, experts say.

However, increased protectionism due to tariffs on green products increases the cost of green tariffs. In addition, there is not enough incentive policy to focus on low-emission production.

“Policymakers need to create stronger incentives that match the goals of energy sectors, suppliers and consumers that are difficult to reduce emissions. The sectors examined in this report are at an impasse as businesses, politicians, consumers, energy suppliers and financiers hesitate, each waiting for others to commit to investments and measures that can significantly reduce emissions.” – analysts say.

As a conclusion, the authors of the report noted the need to "move from point solutions to a system-wide approach based on partnerships to simultaneously solve multiple problems, align supply and demand, and overcome obstacles related to costs and risks."

Earlier, EcoPolitic reported on the forecasts of scientists, according to which in 2024 global carbon emissions will hit again record.