IPCC

1. Transformational Mitigation
For Industry Sectors Exposed
To International Competition:
Findings From AR6, and
Towards AR7
I P C C . C H
Christopher Bataille
Adjunct Research Fellow / Associate Researcher,
Columbia University
Center for Global Energy Policy (CGEP) /
IDDRI.org
December 5th, 2023

2. The interlocking strategies for industrial decarbonization, and what will likely & likely not
have competitiveness issues
E.g., using ground limestone and calcined clay replacements for clinker in cement could reduce CO2 emissions 40-
50%, but has minimal cost impacts, and therefore is not a competitiveness issue. Adding CCS for the remaining 50%
will likely have cost and competitiveness impacts.
Low costs, little
chance of leakage,
barriers are
domestic with some
cost structure and
agency issues. Trade
policy NOT needed.
Significant added
costs per unit &
usually traded.
Leakage possible.
Lead/niche markets
& competitiveness
trade policy ARE
needed.
Source: Industry Emissions: Process Changes and Policy Options on the Road to Net Zero https://www.energypolicy.columbia.edu/research/commentary/industry-emissions-process-changes-and-policy-options-road-net-zero

3. Getting investment going in deep mitigation technologies for
industry is not about technology but risk management
• While emerging technology exists to largely decarbonize most industrial processes,
innovation will be slow without policy intervention because:
– of typically very low profit margins
– the first generation of transformative technologies will cost +20-100% more for producers
while adding only 0.5-2% to vehicles, and a few % to building/infrastructure
– these commodities are normally undifferentiated and market share is sensitive to costs
– capital costs are focussed and upfront, and much higher in developing markets where
most new demand will be
– facility lives are long and turnover is slow
– Except for some recent public green procurement & private bilateral offtake agreements,
there are very few markets for more expensive low GHG materials
–A full cycle transformational approach is required

4. A transformational approach for traded & non-traded industry
• A multi-level policy commitment to transition to net-zero GHG industry
• Domestic building code, design & recyclability policies to encourage material
efficiency/circularity
• Sector based transition pathway planning process including all key stakeholders to assess
strategic & tech options, competitive (dis)advantages, infrastructure needs and uncertainties
• Inclusionary Climate Club elements: Accelerated R&D and commercialization; technology
sharing; common MRV & regulatory standards; create pooled lead markets to build economies
of scale w/ green procurement, content regs, supply chain branding, guaranteed pricing &
output subsidies
• Exclusionary Climate Club elements: Eventual exposure of all sectors to GHG pricing with
competitiveness protections, e.g. border carbon adjustments sensitive to emerging economies
• Early retirement may be necessary for long-lived, highly GHG-intense facilities, with a
comprehensive just transition for workforces and communities

5. Looking forward to AR7 & Industry
• Cities report - when all transport & buildings are electrified, the remaining emissions are
materials
• Changing demand patterns. Most new demand for currently GHG intense commodities will
be in middle income (<$14k USD/capita) & developing countries

6. 6
The primary demand for cement is outside the OECD

7. 7
Most Chinese and OECD
demand for steel is
stagnating and falling.
India, Pakistan,
Indonesia, Nigeria+ will
dominate.
One projection of a successful
net-zero transition for steel –
Netzerosteel.org/Netzero
industry.org (2021) Based on
a local requirement to
transition to 1) secondary &
2) green iron production. 90%
of plants could transition.
Update with trade in
progress.
Source: Bataille, C., Stiebert, S., & Li, F. G. N. (2021). Global
facility level net-zero steel pathways: Technical report on
the first scenarios of the Net-zero Steel Project.
IDDRI.org/Global Energy Monitor. https://netzerosteel.org/

8. Looking forward to AR7 & Industry
• Cities report - when all & buildings are electrified, the remaining emissions are materials
• Changing demand patterns. Most new demand for currently GHG intense commodities will
be in middle income (<$14k USD/capita) & developing countries
• There will be more tangible evidence of what does and doesn’t seem to work in industrial
decarbonization policy, e.g., from US and European industrial policy experiments
• National policies for industry decarbonization, and how do they work together and against
each other in the context of trade?
• Trade and energy & material security. The COVID trade breakdown and recent global
tensions have exposed some material security vulnerabilities, e.g., for fertilizer supply.
• Decarbonizing production in the Global South. The capital and operating cost of cleaer
materials will be higher for the foreseeable future. This requires appropriate economic
incentives and regulations across whole value chains from demand to primary production.

9. @IPCC_CH
#IPCReport
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Thank you.
cbataill@gmail.com / cb3794@columbia.edu
Lead Author Chapter 11 Industry
Chris Bataille

10. • Negative, exclusionary climate clubs, the original conception made known by Nordhaus
 A group of nations with strong climate policy join in a group and raise a collective border carbon
tariff to protect their vulnerable industries. The EU has some characteristics like this.
 Carbon pricing works for partial reductions, but transformational shifts require more
• Positive, inclusionary climate clubs (e.g., Hermville et al 2022, Nilsson et al 2022), also EU.
 Differential $/t CO2e effort ok, maybe even global welfare maximizing given different welfare
functions
 Countries work together on a shared GHG accounting and monitoring, reporting & verification
 Countries work together towards technology transformation. Shared R&D, tech intellectual
property, & commercialization costs (e.g., for lead market contracts for difference).
 Non-participants are welcome to export ultra-clean products and even capture lead market
subsidies on parity with domestic producers (Scope 1 & 2 matters here)
The role of risk and relative costs in making decarbonization investments
Is there a role for both negative and positive “climate club” components?

11. Can we think systematically about reducing leakage, reducing risk for clean
production, innovation & commercialization, building economies of scale, and
getting costs to parity without generating a political backlash?
Source: Bataille, C. (2020). Physical and policy pathways to net-zero emissions industry. WIRES Wiley Interdisciplinary Reviews: Climate Change, 11(e633), 1–20.
https://doi.org/10.1002/wcc.633