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17.11.2022 · Stefan Lechtenböhmer

Science based targets and sectoral climate clubs to trigger industrial transformation - What can they contribute & how can we accelerate their uptake?

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On 10 November 2022, Wuppertal Institut, University of Technology Sydney, Ecologic Institute, Climate Analytics and WISE Europa organised a side event on industrial transformation at COP 27. Stefan Lechtenböhmer and Sven Teske presented the scientific work by the organising consortium and discussed it with a very distinguished panel (Malte Bornkamm, Federal Republic of Germany, Ministry for Economy and Climate, Åsa Ekdahl, World Steel Association, Sanjiv Paul, TATA Steel and a very active and competent audience).

Heavy industries are among the so-called hard to abate sectors. Due to their very high relevance for global carbon emissions, they need a strong focus on mitigation activities, as the presentations by the organizers pointed out. E.g. the steel industry should comply with a global carbon budget of less than 20 Gt CO2 (i.e. roughly 8 years of current CO2 emissions by the sector) if the world wants to achieve the 1.5°C target. Despite many activities already ongoing, such a tough target – which would mean a complete reinvestment of all current industries assets basically over the next two decades – requires much stronger internationally coordinated policy action, specifically targeted at the needs of the steel sector. Other hard-to-abate sectors would probably require similar treatment.

Science-based targets and sectoral climate clubs might be a trigger for such action. A steel climate club e.g. could link existing international activities together and particularly focus on the infrastructure and investment challenge. As the discussants highlighted, industry needs a business case and a stable framework to be capable to invest in such a transition.

As Sanjiv Paul from TATA Steel put it as an impressive example, the Indian steel industry is expected to triple or quadruple over the coming 25 years. If this massive expansion was achieved with the conventional fossil blast furnace technology, it would risk to become stranded assets due to ever stricter emission reduction needs very soon.

Malte Bornkamm from the German Ministry for Economy and Climate added what his government is doing to overcome the “chicken and egg” problem of investment in infrastructures, e.g. for green energy and companies investing in clean steel-making facilities. He also hinted that Germany is further pursuing its proposal of an inclusive climate club in which sectoral perspectives should plan an important role.

Sven Teske shared his insights from working with investors and finance industries, which need bankable projects to invest in – which might be supported by governments and companies formulating clear sectoral decarbonisation roadmaps as a basis.

Åsa Ekdahl from World Steel Association agreed that the idea of a sectoral climate club could be appealing to industry and might create a positive incentive for industry. However, she, like others, also added that further research, as well as policy development, would be important to make sectoral climate clubs happen.

Stefan Lechtenböhmer is Director of the Division Future Energy and Industry Systems at the Wuppertal Institute for Climate, Environment and Energy.(profile page)