Net Zero Industry Tracker 2024

The 2030 milestone of the Paris Agreement is fast approaching, and while substantial progress has been made, hard-to-abate sectors remain among the most difficult sectors to reduce emissions. This is owed to the difficulty of reducing emissions in processes that rely on high-temperature heat or specialized or energy dense fuel. There have been encouraging developments in renewable energy, electric vehicles (EVs) and battery technology. Global renewable energy capacity is projected to expand by 2.7 times by 2030,7 exceeding current national targets by 25% and nearing the COP28 goal to triple capacity, mainly driven by improving economics, climate and energy security policies. Battery technology has also experienced significant advancement. The deployment of battery storage systems within the power sector more than doubled in 2023, making clean power supply less intermittent. This progress across various technologies has primarily been driven by substantial investments, supportive policy frameworks and a continued decline in costs. Other technologies that are essential for industry emission reduction, such as certain types of clean fuels and carbon capture, utilization and storage (CCUS), have not reached the scale-up phase. Their widespread deployment will require further maturation, scalability and cost reduction before they can be used in industrial applications. For instance, global hydrogen growth projections have seen a downward revision by 10-25% compared to earlier estimates, due to a 20-40% increase in green hydrogen costs and continued uncertainty around regulations.8 The global CCUS capacity grew by only 4% in the last two years,9 and future growth is uncertain. Rising geopolitical tensions are also impacting the global path towards net-zero emissions. Energy security was already tested by the Ukraine-Russia conflict, and ongoing conflict in the Middle East risks further strain on global supply chains. Energy prices saw an uptick due to supply constraints driven by these events, caused some major companies, to scale back their net zero targets. While inflation is seeing a decline, interest rates have remained elevated despite recent cuts. This negatively impacts the ability of hard-to-abate sectors to invest towards reducing emissions, especially in emerging and developing countries where the weighted average cost of capital (WACC) is higher than in advanced economies. Recent fluctuations in commodity prices, such as the drop in steel prices, have also placed strain on these industries and directed their focus towards maintaining profitability at the expense of investing in the energy transition. While inflation is seeing a decline, interest rates have remained elevated despite recent cuts. This negatively impacts the ability of hard-to-abate sectors to invest towards reducing emissions. 7 Net-Zero Industry Tracker: 2024 Edition