Until recently it was considered very difficult to decarbonize steel production, an essential material for many basic needs: infrastructure, vehicles, housing.
Since the Paris Agreement on climate was struck in 2015, industry leaders have identified at least five means to dramatically reduce the sector’s emissions as facilities come up for renovation.
More than ten near-zero emissions commercial steel works have been announced to be operating by 2025-30, powered by cheap wind and solar, plus a few others helped by a fresh and realistic look at carbon capture and storage technologies that work today.
These new technologies allow new intermediate trade flows and business models by geographically splitting the steelmaking value chain while maximizing the use of local steel recycling. Once these technologies are established, we could see very substantial reductions (80%+) from the emissions expected from the sector by 2050 (about 7-10% of global emissions) along with job opportunities in industrial hubs.
Encouraging sectoral developments like these are not reflected in the national short-term commitments submitted under the Paris Agreement, known as nationally determined contributions (NDCs). This is not necessarily wrong: NDCs focus on the economy-wide picture and emission targets; they are heavily negotiated binding commitments at government-level; and finally, emission reductions derived from developments like in the steel industry above are only to be expected after 2030.
As a report coordinated by IDDRI explains, assessing the state of ambition based solely on the NDCs is misleading – we are missing critical pieces of the puzzle. It is not sufficient to understand the ambition gap, and most critically, insufficient to discuss opportunities for increased action and ambition.
The developments in the steel industry are a clear example that some individuals and organisations are acting now with a long-term perspective on the transformations required to realistically get to net zero emissions.
In the case of steel, it is technological and market changes enabling the transition. In other cases it is economic, political, social or governance factors that can unlock progress.
There is industrial innovation, particularly around hydrogen technologies, in Chile and Spain; a push to specialise in electric vehicle manufacturing in Poland and economic diversification in Nigeria. In Peru, climate policy is being institutionalised, while France is establishing new mechanisms to engage citizens in the transition.
Many of these actions are critical structural enablers of the required transformation towards global carbon neutrality, even if they cannot be quantified in NDC terms and ambition gap assessments derived from these commitments. The IDDRI-led report aims to put a spotlight on some of these missing puzzle pieces, illuminating sectoral trends across borders and value chains and national realities.
For all these positive developments, it is indisputable that there is a large gap between international climate goals and announced policies, and that therefore ambition needs to be ratcheted up. Since the Paris Agreement, narratives, institutions, governance mechanisms, and concrete plans and commitments have not adapted to guide the short-term transition towards carbon neutrality in most countries and sectors.
The report identifies, country-by-country and sector-by-sector, key international enablers that could change this picture. For example, the Indian chapter identifies the need for a lower cost of capital to finance the energy transition, whereas the emphasis in South Africa, with economically competitive projects at hand, is on finance and market access. Mexico and Italy, among others, point to the political economy challenges with redirecting investments away from fossil fuel technologies, including with strengthened international governance.
We will fail our climate and development objectives if we do not put more effort into understanding this gap and the actual pace of the transition. The main mechanism of the Paris Agreement to ratchet up ambition, the global stocktake, will start this November at Cop26 in Glasgow, UK with an information collection phase. It will continue throughout 2022 to assess and discuss the latest knowledge on climate change, and it will finish with a synthesis report and a high-level moment at the UN climate summit in 2023 to consider the conclusions.
Some details of the process are still up for negotiation. There is an opportunity for countries to shape the detailed design of this ambition mechanism. They should find a way to capture the dynamism and inertia of systemic changes, innovation, behaviour and trade, as well as government policies.
For the global stocktake to deliver what decisionmakers need to update and enhance their climate commitments, action and support, it must look beyond emission numbers.
Chris Bataille, Anna Pérez Català, Marta Torres Gunfaus and Henri Waisman are researchers at IDDRI.