Net Zero Industry Tracker 2024

–Auditability: There is a lack of clear verification for carbon footprint calculations, which affects trust in these methods and slows down demand for low-carbon products. –Willingness to pay premium: The layered costs of using multiple low-carbon materials in products can add up significantly, especially in business-to-business (B2B) markets, making adoption costly and limiting demand. –Offtake agreements: The critical mass needed for offtake agreements in most sectors has not been established yet. Additionally, the non-binding nature of most offtake agreements limits pace. Way forward: Hard-to-abate sectors face a gridlock in decarbonization due to systemic inability to effectively distribute the costs along the value chain. Breaking through would require unparalleled collaboration and realization that the costs of decarbonization need to be shared among the industry players and society. Sectors have started addressing barriers to standardizing carbon content measurement through various initiatives. For example, IATA’s TrackZero provides a comprehensive methodology for aviation. The Industrial Transition Accelerator (ITA) is collaborating with standard-setters to promote standards in key sectors like aviation fuel, ammonia, aluminium, cement and steel.65 Companies must enhance transparency in carbon accounting and collaborate across value chains with policy-makers and industry bodies to align sector-wide standards, methodologies and definitions, ensuring consistent implementation for decarbonization progress. The First Movers Coalition (FMC), accounting for over 100 corporate members, has established ambitious purchasing commitments for low- carbon and near-zero industrial products across several sectors. For example, regarding steel, FMC members have set a target for at least 10% of their steel purchases to be on near-zero emissions steel by 2030. The coalition helps in resolving the “first mover disadvantage” challenge by establishing a strong demand signal to encourage suppliers and investors to break the gridlock. The sectors must reduce the currently high B2B green premiums to align consumer expectations with willingness to pay. For example, for the shipping sector, biofuels and hydrogen-based synthetic fuels are 1.5 to 4 times and 2 to 6 times the cost of conventional bunkering fuel, respectively. Having clear price points on consumer willingness to pay for different products would incentivize suppliers to target cost reduction innovation and build economies of scale. Hard-to-abate sectors face a gridlock in decarbonization due to systemic inability to effectively distribute the costs along the value chain. Key industry standards, green premium and the percentage of low-emission products TABLE 2 SectorExamples of notable industry standardsPercentage of low- emission productsB2B green premium*B2C green premium* Aviation –IATA TrackZero (2021): Framework for companies to report on their individual progress on performance metrics such as fuel efficiency, carbon intensity and SAF share –Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) (2019): Framework for airlines to report their emissions annually Less than 1% of current aviation energy consumption comes from low-emissions sources.300-400% per litre of fuel3-12% per ticket Shipping –IMO Data Collection System (2019): Framework for ships to report fuel oil consumption to guide future IMO measures for reducing GHG emissions –Sea Cargo Charter (2019): A framework for assessing and disclosing the climate alignment of ship chartering activities worldwide –5% current LNG usage in total fuel consumption –Less than 1% of low- emission fuels, such as methanol, in total fuel usage30-80% per shipment1-2% per product unit TruckingGlobal Logistics Emissions Council Framework (2016): Establishes comprehensive global standardized frameworks to measure GHG emissions from private and public sector operations, including the trucking sectorLess than 1% of the battery and fuel cell electric trucks needed by 2050 are available.33-133% per vehicle1-3% per item Net-Zero Industry Tracker: 2024 Edition 31