"Challenges and best practices in financing to accelerate industry decarbonisation", OECD Series of Webinars on low carbon hydrogen and industry decarbonisation, 14 June 2023

1. Daniel Duma – Research Fellow
Stockholm Environment Institute
Key questions on financing
industrial decarbonization

2. Three types of investments to reduce industrial emissions
Increase efficiency of
existing processes
Increase circularity (reuse,
recycle)
Green primary production –
breakthrough technologies

3. First set of questions
To what extent are investments in efficiency leading to lock-in
effects?
How much priority should be given to shorter-term emissions
reductions in existing industrial processes ?
Does the answer differ in developing regions?

4. The business case for each type in developing countries
Type of investment Business case Finance
Efficiency in current
processes
Viable in high energy
prices scenario
Where an issue, blended
finance most suitable
Circularity
improvements
Already commercial for
steel / regulation needed
for others
Commercial finance for
steel– policy needed for
others
Breakthrough
technologies
Cost disadvantage plus
unproven technologies
R&D/demonstration
finance

5. RE versus ID – business case challenges & solutions
Renewable energy (RE) Industrial
decarbonization
Solutions to explore
PPAs secure revenue side. Risk
based on credit & policy, covered
through guarantees and PRI
Global competitive market, risk
goes beyond a single country /
counterparty
Commitments from ‘corporate
climate leaders’, public
procurement, CCfDs
Bankable RE - low return/low
risk – attractive for long term
investors
Riskier even w/o
decarbonization. Unproven tech
– high risk for conventional
finance
Gov & DFI leading role then
investors seeking exposure to
low-carbon assets
Mature tech and declining costs,
competitive with fossil
Unproven tech, higher
production costs expected
Like RE, combo ↑rev ↓cost ↑cost
of alternatives (CCFDs).

6. Second set of questions
How do we create stronger off-take signals for green industrial
products in developing regions?
How can the risk profile be brought down to levels where
financial risk mitigation becomes relevant?
What sources of capital would be willing to take on the risks for
first-of-a-kind low-emissions production in developing countries?

7. Lessons from Swedish case
Sweden hosts advanced green hydrogen-based steel pilots
They are close to reaching agreements on financing expansion to
commercial scale
Useful to explore what made them possible

8. Enabling factors for green steel in Sweden
Policy
Net-zero by 2045
Fossil-free Sweden – roadmapping
Expectation of cheap clean power in
North
ETS (end free allocation) + CBAM
Support at project level
Govt. + EU grants
Loan guarantees for industry
Demand signals based on net zero
commitments
Offtake agreements with vehicle
makers

9. Third set of questions
How can similar enabling conditions for industry transitions be
stimulated in developing regions?
What are the realistic first steps and where are the hardest gaps
to overcome?
What is the role of climate finance in providing support to first
movers and what are the most important modalities of that
support?

10. Thank you!