Heavy industry companies increasingly face implementation choke points whose solutions are seldom found within a single firm or even industry.

Heavy industries are likely to be the last frontier of decarbonization. In response, an increasing number of heavy industry companies are establishing net-zero targets and strategies. For example, the Global Cement and Concrete Association (GCCA), which represents over 40 leading cement companies, has announced the production of net zero concrete by 2050.¹⁴⁹¹⁴⁹

The momentum is growing across industrial companies and sectoral players such as business alliances, but also across a larger ecosystem of stakeholders, from governments to international organizations and non-governmental organizations (NGOs). For example, the Mission Possible Partnership (MPP) has outlined roadmaps for four hard-to-abate industrial sectors (concrete, steel, aluminium, chemicals) to reach net zero.^{150 150}

While pledges and roadmaps are essential to jump-start the net zero transformation and to provide a long-term vision, tackling the implementation challenges faced by companies is critical to progress at the necessary pace. Ten challenges have been identified as “choke points”, or barriers, that will limit the transition unless solutions are found outside of business-as-usual improvements:

1. Breakthrough technologies: Most technologies to decarbonize heavy industry sectors are either yet to be proven at scale or expensive compared to current alternatives (e.g. +15-40% for low-emission steel,¹⁵¹¹⁵¹ +50-85% for low-emission cement,¹⁵²¹⁵² +10-100% for low-emission ammonia¹⁵³¹⁵³). Solutions must be found to accelerate the technology readiness levels (scale and cost) of “clean” production processes.¹⁵⁴¹⁵⁴

2. Infrastructure access: Many net-zero compatible technologies considered by heavy industries involve low-emission hydrogen (e.g. for direct reduced iron in steelmaking¹⁵⁵¹⁵⁵), renewable power (e.g. for mechanical vapour recompression in aluminium-making¹⁵⁶¹⁵⁶) or carbon capture, utilization and storage (e.g. cement plants¹⁵⁷¹⁵⁷). Solutions must be found to provide the infrastructure required for supplying these energy sources and handling captured CO2.

3. Demand for low-emission products: Today, low-emission products in heavy industries require a high selling price for producers to maintain economic margin structures. Solutions must be found to generate reliable demand-side signals and provide visibility on offtake to reduce risks for first movers.

4. Policies and regulations enablement: Public incentives, including direct or indirect carbon pricing, subsidies or tax breaks, product use specifications or technology mandates, strongly influence the business case for low-emission investments in heavy industries. Solutions must be found to align public-private objectives while also ensuring efficiency and a just transformation; lessons exist from the growth of wind and solar energies.

5. Scaling capital: Heavy industries’ low-emission pilot projects require significant capital expenditure while offering less certain or immediate returns than other assets. Solutions must be found to attract capital for investments in necessary higher risk, subeconomic projects that could demonstrate commercial scale feasibility – not only in advanced economies but also in emerging and developing economies where capital markets are less developed and the cost of capital is higher.

6. Transition capability building: The transformation requires heavy industry firms to integrate new, often very different, capabilities. Just and sustainable solutions must be found to rapidly upskill or reskill companies’ management and workforces to align expertise with new strategies and activities.

7. Carbon measurement and management: Measuring, monitoring or forecasting emissions different in nature and scope is complex for heavy industry firms with myriad industrial processes. Solutions must be found to help companies establish standardized transparency for effective action.

8. Supply chain circularity: Primary production generates many times the emissions of secondary/recycled production (e.g. 4 times for steel,¹⁵⁸¹⁵⁸ 30 times for aluminium¹⁵⁹¹⁵⁹). Solutions must be found to adapt companies’ business models and production processes to circularity.

9. Scope 3 abatement: Scope 3 emissions¹⁶⁰¹⁶⁰ (e.g. estimated at around 80% of all oil and gas emissions¹⁶¹¹⁶¹ and 30% of ammonia emissions¹⁶²¹⁶²) are particularly hard to measure and address. Solutions must be found to create end-to-end transparency and effective abatement solutions with suppliers and customers.

10. Residual emissions offsetting: For heavy industries, reaching the net zero end goal will require substantial investments in GHG avoidance or removal projects to address residual emissions. Solutions must be found to accelerate the provision of quality offset solutions at scale in a transparent and impact-driven manner.

Among these choke points, technology, financing and policies are typically already at the forefront of companies’ and governments’ net zero strategies. However, in addition, it is critical to boost demand-side initiatives such as the First Movers Coalition¹⁶³¹⁶³ and the Clean Energy Ministerial Industrial Deep Decarbonisation Initiative (IDDI)¹⁶⁴¹⁶⁴ to create a
strong “clean demand” pull (e.g. visibility on offtake volumes, acceptance of green premiums, etc.) for low-emission products. Demand-side initiatives can be a game changer for sectors where low-emission technologies already exist but investments lag, such as steel and ammonia. Today, such initiatives are scarce, and global, synchronized efforts are needed to replicate and scale them and channel much larger investments into low-emission technologies and production assets.

GUEST PERSPECTIVE | First Movers Coalition by John Kerry, US Special Presidential Envoy for Climate

Furthermore, it is worth noting that the transition capability building choke point underpins all other choke points as well as the progress rate of the energy transition across all economic sectors. The transformation of the global economy towards net zero is strongly challenging the boundaries of companies’ capability and expertise. This is particularly evident when decarbonization pathways require companies to shift towards completely new production processes (e.g. from steam methane reforming to electrolysis to make ammonia). A scenario from the International Labour Organization estimates that 25 million new jobs will be created from the energy transition by 2030.¹⁶⁵¹⁶⁵ Preparing the current workforce and the new generation for these jobs essential to the transition will require “education and training strategies; active labour market measures to provide adequate employment services; retraining and recertification together with social protection to assist workers and communities dependent on fossil fuels”, among other solutions.¹⁶⁶¹⁶⁶ This reconfiguration of the workforce also provides a unique opportunity for companies to improve inclusion and diversity, creating a more equal and resilient economy.

GUEST PERSPECTIVE | Enabling the energy transition and reaching net zero: The talent imperative by Julie Sweet, Chair and Chief Executive Officer, Accenture

The answers and emerging solutions to industry net-zero transformation choke points are rarely found within a single firm or even industry. To solve these challenges, heavy industry companies will need to explore new forms of collaboration. The MPP net-zero roadmaps clearly show where industries need to be by 2030 (e.g. over 70 commercial-scale low-emission steel plants producing 240 MT by 2030) and also highlight that closing the gap will require an unprecedented level of collaboration.¹⁶⁷¹⁶⁷ Thankfully, heavy industry companies, suppliers, customers, peers from other industries, other businesses, governments, civil society and many other stakeholders recognize
the need to reduce global emissions, including their own carbon footprint. This shared challenge creates common interests across organizations and establishes a robust platform for multistakeholder collaboration towards net zero.

The following section lays out how a new generation of collaboration models combined with a step change in ambition level can address the net-zero transformation choke points for heavy industries.