Nov 11, 2022
The Climate Investment Funds (CIF) announced today the Industry Decarbonization Program to take on the challenge of reducing the carbon footprint of high-emitting industries such as iron and steel, cement, chemicals and petrochemicals, aluminum, and pulp and paper. This program aims to facilitate the shift of the industrial sector to more sustainable business practices and unlock the investments needed to embrace a low-carbon, climate-resilient pathway. It is the world’s first multilateral investment program tackling this goal.
The Industry Decarbonization Program was launched during COP27’s Decarbonization Day, at the Breakthrough Agenda – One Year On event. The Breakthrough Agenda was launched at COP26 and commits countries to work together to make clean technologies and sustainable solutions the most affordable, accessible and attractive option in each emitting sector globally before 2030. CIF’s Industry Decarbonization Program is aligned with this Agenda and British Secretary of State for Business, Energy and Industrial Strategy, Grant Shapps, announced a commitment of GBP65 million to this new CIF program. Sweden has also pledged to contribute.
The task at hand is massive. Today, industry accounts for a quarter of all global CO2 emissions. It is the second-largest source of CO2 emissions after the power sector. The situation is getting worse, and by 2030, industrial greenhouse gas emissions are projected to represent the greatest share of total emissions. The relative contribution of middle-income countries is rapidly increasing. A large share of global steel and cement production already comes from the developing world, and countries are growing their industrial footprint as they develop their economies.
This situation is unsustainable, both from the perspective of climate change and global security, as highlighted by U.N. Secretary-General António Guterres, “as current events make all too clear, our continued reliance on fossil fuels makes the global economy and energy security vulnerable to geopolitical shocks and crises.” If we want to stay on track to a 1.5°C future, we simply cannot afford inefficient and carbon emitting technologies to get locked-in. Under the International Energy Agency’s Net Zero roadmap, carbon emissions from heavy industry must decline by 20 percent by 2030 and by 93 percent before 2050.
Financing at scale now to support this indispensable transition is the only option to avoid more costly investments down the road. The Climate Investment Funds has an unrivaled track record in climate finance mobilization to transform sectors for a better climate future in developing nations. For example, CIF’s Clean Technology Fund (CTF) reported in 2022 a trend of 28.9 MtCO2 emissions reduced or avoided annually. CTF concessional funding helped pilot and scale new technologies, such as solar or geothermal power, that can now attract traditional investors.
Drawing on these lessons learned, the Industry Decarbonization Program will provide concessional and risk bearing support through a combination of technical assistance and investment. The Program will drive collaboration and private-sector participation in achieving national climate targets, develop specific roadmaps across industries, providing unified leadership and setting meaningful sector targets, and help developing nations and their governments scale up ambition and climate plans.
Specifically, the program will work across multiple levels — industrial facility, technology, corporate, sectoral, and national. Activities will be implemented under three components:
- at corporate and sector levels, supporting climate governance and strategies through policy dialogues, capacity building, and technical assistance;
- at national or regional levels, facilitating discussions on climate-resilient pathways and implementation of policy considerations, such as energy-efficient regulation and climate-governance standards for financing; and
- in the areas of monitoring, reporting, and verification, focusing on improving current practices and organizing sector participation in national and internal policies, including through accessing green financial markets, as well as internal domestic and international climate markets.
“None of it will be easy or come cheap. But it is far more cost-effective in the long run,” said CIF CEO Mafalda Duarte in a recent blog reflecting on hard-to-abate industries. “It is a crucial step to solve our climate crisis and save our future.”
