STUDYGlobalCarbonRestructuringPlanHowtodecarbonizethe1,000mostCO2-intensiveassetsMANAGEMENTSUMMARYGlobalCarbonRestructuringPlanHowtodecarbonizethe1,000mostCO2-intensiveassetsThelikelihoodofcomplyingwiththeParisAgreementandCostisnottheonlykeyfactortoconsider.Assetownerslimitingglobalwarmingto1.5°Ccurrentlystandsatjustneeddecarbonizationsolutionstodeliverasufficient14%.1Onlyaquantumleapforwardinglobalsustainabilityandsecuresupplyofenergyaswellasprofitability:effortscansignificantlyimprovetheseoddsandputtherenewables,nuclear,andgasallfitthebill.ButCCSworldontrackforamoresustainablefuture.requiresamorewidelyimplementedCO2pricingschemewithsufficientpricelevelsbeforeitcanbeprofitable.Todothis,wemustidentifyandimplementthemostimpactfulsolutionsasquicklyaspossible.ByOurstudyalsoanalyzesthefinanceabilityofdecarbonizingthe1,000assetsthatemitthemostdecarbonizationsolutions.Onagloballevel,theownersCO2,ourresearchshowswecanreduceglobalcarbonofthetop1,000assetshaveenoughheadroomtofundemissionsby8.2gigatons(Gt).Thisisathirdofthe24GtgasandCCSinvestmentcosts,butnotrenewablesorreductioninCO2requiredby2030ifwearetomaintainnuclear.Someregionsaremorestronglypositionedourslimhopesofhittingthe1.5°Ctarget.The1,000thanothers,withChinaandIndiafacingseriousassetsareapowerfulsourceofmomentum.financialchallengesacrossallfoursolutions.Sowhataretheseassets?Unsurprisingly,coal-Accordingtoourcalculations,renewableenergyfiredpowerplantsdominate,contributing76%ofCO2sourcesarecurrentlythemostsuitablesolutionforemissionsamongour1,000assets.Ironandsteelplantsassetsinthepowersector.Theycanfullyeliminatearethesecond-biggestcontributor(18%).MorethanhalfCO2emissionsatthelowesttotalcostandarereadilythe1,000assetsareinChina,withIndiahometo13%andfinanceablebyexistingheadroomacrossmostregions.theUnitedStates10%.Crucially,ownershipofthe1,000assetsisconcentratedamong406companies.Indeed,Themessageisclear:Deploymentofrenewablejust40companiesownassetsthatproducehalfthe8.2GtenergymustbeacceleratedacrossallassetsinallofCO2emissions.Decisiveactionfromasmallnumberofregions.Thisshouldbecomplementedbyaregionalbusinessescoulddrasticallyimproveclimateprotection.emphasisonthenextbestlocalsolution.OurGlobalCarbonRestructuringPlan(GCRP)Achievingtherequiredquantumleapinsustainabilityoutlineshowtoachievethissignificantimpactbywillnotbeeasy;therearestillmanytechnologicalandtargetingthe1,000mostCO2-intensiveassets.Itoutlinesfinancialhurdles.Overcomingtheserequiresanewfourpotentialsolutionsfordecarbonization:renewableformofcollaborationbetweenregions,governments,energy,gas,nuclear,andcarboncaptureandstoragecompanies,andfinanciers.Webelievecollectively(CCS).WecalculatethateachapproachwillcostembracingthestepsoutlinedinthisGlobalCarbonbetweenUSD7.5trillion(renewables)andUSD10.5RestructuringPlanrepresentsasignificantmoveinthetrillion(nuclearandCCS)overthecourseof26yearsrightdirection.Thejourneytodecarbonizationmaybe(2025-2050).Thisequatestolessthan20%oftheworld'slonganddaunting,but,assetbyasset,wecangenerateannualmilitaryorR&Dspending.momentumtochangetheenergysystem,realizeimpactthatmatters–andcreatealegacythatendures.2RolandBerger1EmissionsGapReport2023ContentsP41/It'stimetoclosetheemissionsgapP6P102/The1,000mostCO2-intensiveassetsP162.1/The1,000assetsbysectorP222.2/The1,000assetsbyregion2.3/The1,000assetsbyowner3/Puttingapriceondecarbonizationofthe1,000assets3.1/Foursolutionsfordecarbonization3.2/Thecostofdecarbonization3.3/Howachievableisthecostofdecarbonization?4/Assessingthewayforward4.1/Whereisprogressalreadybeingmade?4.2/Keycriteriaforselectingdecarbonizationsolutions4.3/Whichdecarbonizationpathwaysmakemostsense?5/What'snext?CoverPatrizioMartorana/GettyImagesGlobalCarbonRestructuringPlan3It'stimetoclosetheemissionsgapAttheheartofthecomplextopicofclimatechangeimpactfulactionssobothpublicandprivatesectorsisacomparativelysimplequestion:Canwecanchanneltheireffortsandresourcesaseffectivelyaslimitglobalwarmingto1.5°CasoutlinedintheParispossible.Addressingthemostcarbon-intensiveassets–Agreement?Basedoncurrenttrajectories,theanswerisfromcoal-fueledpowerplantstoironandsteelfactories,aresounding"No."AccordingtotheUN'sEmissionsGapamongothers–isalogicalplacetostart.Report2023,thereisjusta14%chanceofhittingthistargetconsideringthepoliciesinplacetoday.PledgesandAccordingtoourresearch,decarbonizingthe1,000incrementalchangeswillnotbeenoughtosufficientlyassetsthatemitthemostCO2canreducecarbonemissionsimprovetheseodds.Onlyaquantumleapforwardinourby8.2Gt.Tobeontracktolimitglobalwarmingto1.5°C,decarbonizationeffortscanputtheworldontherighttheworldmusteliminate24GtofCO2emissionsby2030.trackforamoresustainablefuture.AThismeansreachingathirdofthisgoalcouldbeachievedbydecarbonizingaverysmallgroupofassets–anextremelyTomakethisleap,wemustfirstidentifythemostpowerfullevertocombatclimatechange.AMindthegapCurrent3.0ºCPotentialglobalwarmingunderdifferentscenariospolicies2.9ºC1.5ºCGlobalGHGemissionsgap[GtCO2e]NDCs1605024Gt40CO2302010Netzero02020202520302035204020452050Warmingpotential2015in21001UnconditionalNationallyDeterminedContributions(NDCs)aredisplayedSource:EmissionsGapReport2023,GlobalCarbonProject,IPCC,NationalOceanicandAtmosphericAdministration,RolandBergerGlobalCarbonRestructuringPlan5The1,000mostCO2-intensiveassetsThe1,000assetsformthebasisofourGlobalCarbondifferentowners.AssetownersmayhavemultipleassetsinRestructuringPlan(GCRP),whichcontributesatheirportfolio.Ourstudybreaksdownthetop1,000assetsfreshviewpointtothedecarbonizationdiscussion.Bybysectorandregionaswellasanalyzingtheownershiplookingattheworld'slargestindividualcarbonemitters,structureofeachasset.theGCRPincludesthemostpowerfulinternationalleverstoaccelerateglobaldecarbonization.Andbylayingoutan2.1THE1,000ASSETSBYSECTORasset-specificrestructuringplan,itconsiderstheowners'Unsurprisingly,power-relatedfacilitiesdominateourperspectiveonhowtomodifyorreplacetheseassets.1,000-assetlist,emphasizingtheimportanceofmovingawayfromfossilfuels.Thepowerindustrycontributes77%oftheBeforeexploringthesolutionsandcostsbehindtotalCO2emissionsproducedbythe1,000assets.Almostdecarbonization,wemustfirstlookmorecloselyatthealltheseemissionscomefromcoal-basedpowerplants,assetsthemselves,whichcoverarangeofindustrieswhichemitapproximately0.9tonsofCO2permegawatthouracrosstheglobe.(MWh)–twiceasmuchasgas-fueledpowerplants.Inthisstudy,wedefineanassetasasingle-pointemitterAmongthenon-powersectors,ironandsteelcontributes–onepowerplant,forinstance,oroneironandsteel18%ofCO2emissions,whileoilandgasmakesup3.5%,plant.Alargeindustrialcomplexmaythereforecomprisecementassetscontribute1%,andchemicalassets0.2%.Bnumerousindividualplants,orassets,whichbelongtoBIndustrybreakdown1%0%1,000mostCO2-intensiveassetsbyindustryCementChemicals1,000assets'CO2emissions4%[GtCO2,2021]Oil&gas8.23618%Iron&steelINDUSTRIESTotal77%Source:RolandBergerPowerGlobalCarbonRestructuringPlan72.2THE1,000ASSETSBYREGIONotherwords,40companies"own"halftheemissionsFromageographicperspective,Asiadominatesour1,000addressedinthisstudy,or11%oftheworld'sfossil-basedassets.Chinaishometo54%ofthem,followedbyagroupCO2emissions(38Gtfossil-fuelbasedCO2emissionsofcountriesdefinedas"Restoftheworld"(RoW)with20%,worldwidein2021).2Almosthalfthese40companiesarewhichincludesJapan,SouthKorea,ChinaTaiwan,basedinChina(48%),withaquartercomingunderRoW.Indonesia,andAustralia,amongothers.Indiahosts13%TheUnitedStates,India,andEuropeeachaccountforjustofthe1,000assets.IntheglobalWest,theUnitedStatesunder10%.accountsfor10%ofemissionsandEuropefor3%,whichincludestheEUcountriesplustheUnitedKingdom(6%ofStrengtheningthedecarbonizationeffortsofamereEurope'semissions).C40companies,then,couldreduceglobalCO2emissionsby4.1Gtofthe24Gtneededby2030torestrictwarming2.3THE1,000ASSETSBYOWNERto1.5°C.Expandingthescope,it'sworthmentioningthatTheownershipofmajorcarbonemittersisconcentrated160companieshavetheopportunitytostartdecarbonizingamongarelativelysmallnumberofcompanies:406firms80%ofthecarbonemissionsanalyzedhere.Thisfurtherownthe1,000assetsonourlist.Digalittledeeperandthisemphasizestheconcentrationofownershipamongbecomesevenmoreapparent:ofthese,just40companiesemission-heavyassets.Dareresponsibleforassetsthatproduce4.1GtofCO2.In2EDGAR-EmissionsDatabaseforGlobalAtmosphericResearch,2021CRegionalbreakdown3%1,000mostCO2-intensiveassetsbyregionEurope1,000assets'CO2emissions10%[GtCO2,2021]US8.23613%IndiaREGIONS20%54%RestofWorldChinaTotalSource:RolandBerger8RolandBergerDConcentratedassetownershipJust40companiescandecarbonize11%ofworldwidefossil-fuelbasedCO2emissions1,000assets'CO2emissionsatconsolidatedassetownerlevel[GtCO2]CO2emissions[Gt]9880%7c.160assetowners6550%c.40assetowners4325%c.10assetowners210Assetowners[#]50%ofemissionsarederivedfrom40parentcompanies,thereof48%Chinese,25%fromRoWandc.10%eachfromtheUS,India,andEurope–StrengtheningtheirdecarbonizationeffortscanreduceglobalCO2emissionsbyabout11%,particularlyinChinaandIndia.About400companiesholdalloftheassetsanalyzed–however,only160assetownerstogetheraccountforc.80%ofallemissions,revealingahighdegreeofconcentrationbetweenownershipandhighCO2intensitiesand/ornumberofassetsowned.Source:RolandBergerGlobalCarbonRestructuringPlan9Puttingapriceondecarbonizationofthe1,000assetsThepathtosustainabilityrequiresseriousForthisreport,wealsoincludedaminimumassetsizeofinfrastructuralchangesandmajorinvestment.Our700MWfornucleartobeconsideredaviablealternativeGlobalCarbonRestructuringPlan(GCRP)laysouttheoption–acknowledgingthemomentumbutcurrentlackpotentialdecarbonizationcostsfortheownersofthetopofmarketplacementforsmallmodularreactors(SMR).1,000assets.•CarboncaptureandstoragecouldtheoreticallybeTheGCRPincludescostsforfourdifferentsolutions:retrofittedtoallassettypes.Carbontransportationandrenewableenergysources(RES),gas,nuclear,andstoragecostsareincludedasaglobalaveragecostcarboncaptureandstorage(CCS).Theresultistailoredcomponent.decarbonizationpathwaysonanindividualassetlevel.3.1FOURSOLUTIONSFORDECARBONIZATIONSomesolutionsaremoreeffectivethanothers.BothRESandNotallsolutionscanbeappliedtoeachsector.WhileournuclearcancutCO2emissionsby100%,whileCCShastherestructuringplancoversallfoursolutionsforassetsinthepotentialtoreduceemissionsbyanaverageof90%,powersector,itonlycoversCCSfornon-powerassets–fordependingonwhereitisused.Gasisbestusedasaninterimnow.Thereare,ofcourse,furthersolutionssuchas(green)solutionasitcanonlyreducecarbonemissionsby50%.Ehydrogenwithseriousdecarbonizationpotentialinkeyindustries,butthesearenotcoveredinthisiterationoftheEComparingsolutionsstudy.Sowhatdoeseachsolutioncomprise?Effectivenessofdecarbonizationoptions[averageCO2reductionin%]•RenewableenergysourcescoversthereplacementofelectricitygeneratedfromfossilfuelsourceswithRewewableNuclearCarbonGaselectricityfromphotovoltaicsaswellasonshoreandenergycaptureoffshorewind.Theratioofeachspecificenergysourcesources&storagewillvarydependingonanasset'slocation.Incertain(RES)cases,RESwasexcludedasaviablesolutiondueto(CCS)geographiccharacteristics(HongKongandSingapore,forinstance,havealackofland).•Gascanbeusedtoreplacepowergenerationfromnon-50%renewableslikecoaloroil.Forgreenfieldpowerplants,retrofittingforgreenhydrogenand/orbiogasatalater100%100%90%stageisnowincludedintheplanningandshouldbeeasiertoimplementcomparedtoretrofittingolder,gas-Source:RolandBergerfiredpowerplants.•Nuclearpowerplantscanprovideassetswithcleanpower,howeverthesolutioncanonlybeappliedincountriesthathavenotannouncedanuclearphase-out.GlobalCarbonRestructuringPlan11OneoftheGCRP'skeyassumptionsisthelike-for-AtUSD7.5trillion,renewablesare,bysomedistance,likeexchangeofpowergenerationcapabilities.Thisthecheapestdecarbonizationsolutionforthe1,000approachensuressecurityofsupplyforallenergyassetsassets.Almost40%moreexpensivethanRESisgasatUSDandcorrespondingdecarbonizationsolutionsforpower10.3trillion.Themostexpensivesolutionsarenucleargeneration,whetherRES,nuclear,orgas.andCCS,whicheachcostUSD10.5trillion.AllofthesecostsincludeUSD2.2trillioneachtocoverCCSfornon-Forthis,weconsiderboththeutilizationofthecurrentpowerassets.Fsolution(s)andtheefficiencyofthereplacement(s).Afterestablishingthefullloadhoursofaspecificasset,wecanThechiefdriversofthesecostsareCapEx,OpEx,andcalculatehowtoreplaceitwithanequivalentamountoffuelcosts,althoughtheextentvariesacrosseachoftheenergyderivedfromthefullloadhoursofaRES,nuclear,foursolutions.ProductionandinstallationcostsforRESorgassolution.arehigh,meaningCapExmakesup70%oftotalcosts.Ontheflipside,operationandmaintenancecostsareTocalculatethecostofdecarbonization,wethenworklow,whilefuelcostsnothing.ForCCS,OpExmakesupoutwhatitwouldcosttoreplaceexistingassetswithnewly64-71%ofthetotal(lowerfornon-powerassets),largelybuilt,cleanerassetsoraddCCStoexistingassets.Ourduetothecostoftransportandstorage.Forgas,fuelcostsmodelcalculatesallcostsassociatedwiththebuildingmakeupalmosttwothirdsofthetotal(63%).Thecostandrunningofthesenewassetsfor26years,betweenallocationfornuclearisalittlemoreevenlyspread,with2025and2050.CapExtotaling45%andOpEx28%.Uraniumfuelcostscontribute24%.GItiscrucialtonotethattheGCRPlooksatdecarbonizationfromanasset-ownerperspective.Asaresult,ourcalculationsarebasedonthefollowingformula:CostofCAPEX+OPEX+FuelcostsAssetCostofresidualdecarbonizationwrite-offsCO2abatementFormoredetailonthesecalculations,pleaserefertothe"TheGCRPaimstoidentifymethodologysection.andpullthebiggestleversfirsttocreatemaximummomentumon3.2THECOSTOFDECARBONIZATIONglobaldecarbonizationefforts-There'snoescapingtheimportanceofthebottomlineinacrosscountrybordersandfromsustainability,makingaclearpictureoncostessential.anassetowner'sperspective."Dependingonthesolutionchosen,itwouldcostbetweenUSD7.5trillionandUSD10.5trilliontodecarbonizetheMartinHoyer1,000mostCO2-intensiveassetsoveratimeframeof26SeniorPartneryears.Thisincludesallcostsassociatedwithwritingoffanexistingassetandbuildingandrunningthealternativebetween2025and2050.12RolandBergerFThebottomlineNon-powerassetsCostsfordecarbonizationsolutions[USDtn,2025-2050]Powerassets2.2[USDtn,2025-2050]CSSRewewableenergy5.3sources(RES)Gas8.08.2Nuclear8.2Carboncapture&storage(CCS)Source:RolandBergerThecostsofassetwrite-offsandCO2abatementarestringentregulationsonnuclearpowergenerationarelesssignificant.Around40%ofpowerassetsareyettoalsoafactor.reachtheendofatypical20-yeardepreciationperiod.MostoftheseareinChina(65%),followedbyIndia3.3HOWACHIEVABLEISTHECOSTOF(22%)andRoW(10%).Asaresult,assetwrite-offcostsDECARBONIZATION?amountto2-4%ofglobalcostsofdecarbonizationinHavingestablishedanapproximatebudgetofUSD10thesethreeregions.CO2abatementmostlyappliestotrilliontodecarbonizethe1,000assets,weneedtoaddthegassolution,whichonlyreducesCO2emissionstoansomecontext:Whatdoesthisreallymean?Isthisfinanciallyaverageof50%.CostsforresidualCO2amounttoaboutviable?15%oftotalcosts.Spreadacrossa26-yeartimeframe,decarbonizingtheVaryingpricesforaspectslikerawmaterialsandlabor1,000assetswouldcostUSD0.3-0.4trillioneachyear.Formeancostallocationsvarybyregion.WhileCO2abatementcomparison,thisislessthan20%ofwhatwasspentonforgasaccountsfor56%oftotalcostsinEurope,itonlymilitaryequipment(USD2.1trillion),R&D(USD2.3trillion),makesup9-16%inChina,India,andRoW,and22%fortheorevenCovidrelief(alsoUSD2.1trillion)in2021.ComparedUS.Varyinggaspriceshaveasimilareffectonfuelcosts,tocurrentspendingonclimatechangemitigation(USD1.3withthelowestpricescurrentlyintheUS.trillion),thepercentagerisesto30-40%.Fornuclear,CapExislowestinChina,India,andRoWInshort,thecostrequiredtocloseonethirdoftheduetothelowercostofnuclearmaterialandlabor.Lesscurrentemissionsgapiseminentlyfeasible.GlobalCarbonRestructuringPlan13GWherethemoneygoesDetailedanalysisofcostspersolutionBreakdownofcostcomponentsperdecarbonizationsolution,2025-2050[%,USDtn]PowerassetsCostRESGasNuclearCCS,CCS,powernon-powercomponentsCapEx70%12%45%11%12%3.81.03.70.90.326%8%28%77%64%1.40.62.3OpEx16.31.4Fuelcosts63%24%10%22%5.02.00.80.596%83%98%98%98%5.16.7Totalcosts8.08.02.2Assetwrite-offs4%2%2%0.20.20.2CO2abatementcosts15%2%2%1.20.20.0Costof100%100%100%100%100%decarbonization5.38.08.28.22.21Incl.OpExofsolutionand,inthecaseofCCS,additionalOpExfortheexistingassetSource:RolandBergerAtanationalandregionallevel,however,thepictureworksoutatjust2-5%oftheirrespectiveGDPs.doesaltersomewhat.DecarbonizationwillcostChinaandCertainsolutionswillbemorecompetitiveinsomeIndiacomparativelymorethanWesternareassuchastheUSandEurope.Takenasone-offexpenses,decarbonizingareasthanothers.Lowpricesmakegasamoreviablethetop1,000assetswillcostChina23-32%ofitsGDPandoptionintheUSthanelsewhere,forinstance.Overall,willcost18-31%ofGDPinIndia.FortheRoWcluster,ithowever,renewablesarethemostfinanciallycompetitivecomesto9-10%,butforEuropeandtheUnitedStates,itsolutionineachregion.H14RolandBergerHGeographymattersRegionaldecarbonizationcostspersolutionCostsofdecarbonizationperregionasaone-off,2025-2050[%shareofGDP]32%30%31%30%27%28%23%18%10%10%9%9%5%5%3%3%3%2%2%2%ChinaRestofWorldIndiaUSEuropeRESGasNuclearCCSSource:RolandBergerGlobalCarbonRestructuringPlan15Assessingthewayforward4.1WHEREISPROGRESSALREADYBEINGmoreaboutthedecisionsfacingeachassetownerwhenMADE?consideringdecarbonization.Thedriveforchangeinevitablycomesfromavarietyofsources,bothinternalandexternal.Inthebestandmost4.2KEYCRITERIAFORSELECTINGeconomicallysoundcase,currentassetownerswillpushDECARBONIZATIONSOLUTIONSchangefortheirownassets.ThegoodnewsisthataroundWebelieveassetownerslookatthreedistinctaspectswhen20%ofassetownershavealreadystartedtodecarbonizeatdecidingonthemostapplicabledecarbonizationpathwayleastoneoftheirassetsincludedinthisstudy.Asimilarfortheirassets.percentageofownershavealsobegunimplementing•Securityofenergysupply:Reliableandstableenergydecommissioningplansfortheirassetsinourtop1,000list.Companiesinregionswiththemostambitiousgenerationtomatchdemandandgridrequirements.decarbonizationplansleadthewayhere,highlightingthe•Profitability:Economicviabilityofthedecarbonizationimportanceofregulatorypressure.solution(s)thatpaysoffforassetownersandstakeholders.Thecommitmenttochangevariesbysectorandsome•Financeability:Affordableandfinanceabledecarboni-areasstillhaveconsiderableroomforimprovement.Just11%ofthepowerassetsidentifiedinthisstudyarealreadyzationpathwaysforcompanies,communities,andcoveredbydecarbonizationplans.Europeshowsthemostcountries.progresshere,withhalfofitsanalyzedpowerassetshavingAsmentionedpreviously,ensuringsecurityofenergysupplyplansinplace.ItisfollowedbyRoW(35%)andtheUS(29%).isafundamentalprincipleoftheGCRP.Consequently,we'llTherearefivedecarbonizationplansinplaceforChina-onlylookatprofitabilityandfinanceabilityinmoredepthbasedassets,whileIndianassetscurrentlyhavenone.here.Amongnon-powerassets,ironandsteelcompaniesProfitabilityofthesolutionsaremakingmostprogress:82%oftheirEuropeanassetsForthethreepower-segmentsolutions,weusetheprovenhavedecarbonizationplansinplace.IntheUnitedStatesconceptoflevelizedcostofelectricity(LCOE),differentiatedandRoW,oilandgascompaniesdisplayahighlevelofbycountry,whichgivestheaveragenetcostofelectricityavailabilityofdecarbonizationplans,closelyfollowedbyoveranasset'slifetime.Onagloballevel,renewablestheironandsteelindustry.producethelowestLCOEatUSD43perMWh,followedbygas(USD57perMWh),andnuclear(USD69perMWh).IMorethanathird(39%)oftheassetswithdecarbonizationplanshavealsoalreadyestablisheddecommissioningBasedonthesefigures,eachenergysolutionshouldbeplans.Intotal,143ofthe1,000assetshavelinedupprofitableinmostmarkets,dependingonregionalpowerdecommissioningprograms.Thevastmajorityoftheseprices.Renewablesofferparticularlylowcostsacrossall(88%)areforpowerassetsduetoplanstophaseoutcoalinregions,whilenuclearcanprovideenhancedprofitabilitynumerouscountries.Non-powerassetsaremorelikelytowhenelectricitypricesforthebaseloadcontributionaremodernizeorswitchtorenewablesorhydrogen.high.Gasmayfindchallengestoitsprofitabilitydependingonfluctuatinggaspricescomparedtocoal,aswellaslocalWhiledecarbonizationislikelytobeontheradarofvariableslikeregulations.everyassetowner,theseresultsshowthereisstillplentyofworktodointermsofimplementingconcreteactionplans.ToassesstheprofitabilityofCCS,weusethecostofToacceleratethisprocess,itisimportanttounderstanddecarbonizationpertonofCO2(tCO2).Forpowerassets,thisisUSD71pertCO2;fornon-powerassets,thecostisGlobalCarbonRestructuringPlan17IMixedresultsProfitabilityofdecarbonizationoptionsLevelizedcostofelectricity(LCOE)CostofdecarbonizationpertCO2[USD/MWh][USD/tCO2]Rewewableenergy43CCS,power71sources(RES)Gas57CCS,non-power74Nuclear69ProfitableinmostmarketsProfitableonlywithCO2pricesSource:RolandBergerslightlyhigheratUSD74pertCO2.Giventhesecosts,CCSthatownthe1,000assets.Datawasavailableforjustoverisnotyetaviable,large-scaleoptionundercurrentCO2halftheassetownersonagloballevel.Toassessthepriceschemesandlevels.financeabilityoftherequiredinvestmentcosts,weusedthemetricofcompanyheadroom–theavailabilityofadditionalChangingthisrequiresanadequate,widelyimplementeddebtbeforenetdebtratioreachesanuntenablelevel.CO2pricingscheme.Currently,onlycountriesproducingaroundaquarterofglobalCO2emissionshavesomesortFormoredetailonthesecalculations,pleaserefertotheofCO2taxortradingschemeinplace.Expandingthiswillmethodologysection.helpmakeCCSprofitableandsupportthedevelopmentoffurthertechnologiesthatreduceemissions.Basedonouranalysis,the406assetownerscurrentlyhaveaheadroomofUSD2.2trillion.AlmosthalfthislieswithFinanceabilityofthesolutionsRoWcompanies,particularlythoseintheoilandgassector.HavingestablishedthecostandprofitabilityoftheChinesecompaniesaccountfor21%oftheavailabledecarbonizationsolutions,weneedtoknowifthecurrentheadroomandUSfirms20%.CompaniesinEuropeassetownerscanprovideenoughinitialinvestmenttoaccountfor9%oftheheadroom,withjust3%coveredbyimplementthem.Indianfirms.Muchliketheassetownershipitself,thereisWecarriedoutafinancialanalysisofthe406companies18RolandBergeralsosignificantconcentration:approximately80%ofthesuitedtowhichregionand,thus,whichasset.headroomlieswithjust10assetowners.JChinaandespeciallyIndiafaceseriouschallengesThekeyquestionis:IsthisUSD2.2trillionheadroomacrossallfoursolutions.ForEuropeandtheUS,onlygoingenough?Dependingonthesolution,yes.CCSrequiresUSD100%nuclearwouldposeafinancialobstacle.Companies1.2trillionworthofCapEx,whilegasneedsUSD1.3trillion;inRoWcouldfullyfinanceallfoursolutions.Lbothsolutionscouldbecovered,withmoneytospareforfurtherinvestments.4.3WHICHDECARBONIZATIONPATHWAYSMAKEMOSTSENSE?RESandnuclearshowadifferentpicture.EachsolutionWiththecost,viability,andeffectivenessofeachsolutionrequiresapproximatelyUSD4trillioninCapEx–almostvarying,thereisnoone-size-fits-allapproachtotwicetheamountavailableinheadroom.Asaresult,decarbonization.Thatsaid,ourfindingsclearlyshowthatfurtherfinancingofalmostUSD2trillion,eitherpublicrenewablesaretypicallythemostsuitablesolutionformanyand/orprivate,wouldberequired.Kassetsinthepowersector.TheycanfullyeliminateCO2emissionsatthelowesttotalcost,aregenerallyprofitableFinanceabilitydoesn'tjustvarydependingontheacrossallregions,andarereadilyfinanceablebyexistingsolution:someregionsaremorestronglypositionedthanheadroomacrossmostregions,exceptChinaandIndia.othersintermsofavailableheadroom.ThisaddsanextrafactortoconsiderwhenassessingwhichsolutionisbestJCantheyaffordit?…byregion[%]3%FinancialheadroomamongassetownersIndia9%Headroom,2019-2022[USDtn]Europe21%Rest20%USDUSUSD47%Restof2.2tn2.2tnWorld79%21%Top10assetChinaownersGlobalCarbonRestructuringPlan19Source:RolandBergerKFurtherfinancingrequired?SharecoveredFinancialheadroomofassetownersvs.solutioninvestmentcostbyheadroomCapExshare[USDtn,%]55%Rewewableenergy4.0(53%)47%7.5>100%sources(RES)56%1.3(12%)>100%Gas88%10.3Nuclear4.0(38%)62%10.5CCS11.2(11%)89%10.51Includingcarboncapture&storagefornon-powerassetsLContrastingfortunesRegionalfinanceabilitypersolutionCapExcoveragebyassetowners'headroom[%]100%100%100%100%100%100%100%100%100%100%82%87%76%53%57%57%27%21%21%20%ChinaRestofWorldIndiaUSEuropeRESGasNuclearCCSSource:RolandBerger20RolandBergerEachoftheotherthreesolutionsfacesmultiple•ForChinaandIndia,thismeansemployingCCSforhurdles,withfinanceabilityinChinaandIndiaanissuetheirhighproportionofyoungcoal-andgas-firedpoweracrosstheboard.GasonlyreducesCO2emissionsby50%,plants.whilehighpriceschallengeitsprofitabilityinEurope.Nuclearwouldrequireadditionalfinancinginmost•IntheUS,switchingfromcoal-togas-firedpowerplantsregionsexcepttheRoWcluster.Meanwhile,CCSstillwithCCSmakessenseduetothelownaturalgasprices.facesmajorprofitabilityhurdlesineveryregionduetoinsufficientCO2pricing.M•EuropeshouldstriveforthedeploymentofCCSand(re-)considernuclearasazero-emissiontechnologythatcanThemessageisclear:Asthemostviablesolution,replacebaseloadenergysupply.deploymentofRESshouldbeacceleratedacrossassetsinallregions.Atthesametime,eachregionshouldplay•LikeChinaandIndia,countriesintheRoWclustertoitsstrengthsbycomplementingthiswiththenextbestshouldfocusonwidespreadincorporationofCCSforlocalsolution.carbon-intensiveassets.MWhyrenewablesleadthewaySummaryofregionalchallengespersolutionChinaRestofWorldIndiaUSEuropeRESGasNuclearCCSChallengein…ProfitabilityFinanceabilityEffectivenessinCO2reductionSource:RolandBergerGlobalCarbonRestructuringPlan21What'snext?WecreatedtheGlobalCarbonRestructuringPlanindustrialproduction.Thenumbersspeakloudlyinfavorofwithsomethingofa"Pareto'smindset"–torenewables,notjustasacost-effectivesolutionbutastheidentifyasmallnumberofleversthatcouldachievemajorcatalystfortransformativechange.Ourstudyshowsthatimpact.Ouranalysisshowsthat,indeed,decarbonizingainvestingindecarbonizingthetop1,000emittersisnotselectednumberofthelargestCO2emitterswouldmakemerelyaneconomicchoice,butalsoaprofoundinvestmentasignificantcontributiontoaddressingclimatechange.inamoresustainableworldforgenerationstocome.WebelievethatstartingwiththeseassetscankickstartmomentumforfundamentalchangeandacceleratetheThereispowerincollaborationbeyondthebordersofadaptationofourenergysystemstomeetfutureneeds.anindividualcompany.Embarkingonatransformationjourneyofanykindisnosmallfeat;alteringanentireDecarbonizingtheworld's1,000mostCO2-intensivebusinessmodelisanincrediblechallenge.However,newassetswon'tbeeasy.Therearestillnumeroustechnologicalcollaborationmodelscanhelpfindtherightsolutions,andfinancialhurdlestoovercome.Noindividualactorpartners,andfinancingtomakeitachievable.cansolvethesechallengesalone:webelieveanewformofcollaborationiscrucial.Collectively,wecanredefineourcurrenttrajectory.Asbusinesses,governments,andasasociety,wecanembrace•RegionsandgovernmentsmustworktogethertotheGlobalCarbonRestructuringPlanasanopportunityimplementregulationsthatsupportdecarbonizationtosafeguardourenvironmentandcreateacleaner–andsuchasCO2pricingschemes.Theyshouldalsorethinkfinanciallysound–future.assetallocationtoprovideasuitabledistributionofresourceswithsufficientenergysecuritywhereneeded.Recentevents,suchastheCOP28pledgetotransitionawayfromfossilfuels,offeraclearinvitationtoaction.The•Companiesmustcooperatemorecloselytotransferjourneytodecarbonizationmaybelonganddaunting,but,bestpractices,exchangeontechnology,andcollaborateassetbyasset,startingwherethebiggestimpactlies,wecanonR&Dtocreateinnovativenewsolutions.createmaximummomentum,impactthatmatters–andalegacythatendures.•Companies,financiers,andgovernmentsneedtomakefundingavailable,createtherightfinancialNIdentifiedcollaborationneedsinstrumentssuchasCapEx-orOpEx-orientedsubsidies,andensureinvestmentsecurityviacreditguarantees,forBetweenregionsandCO2prices,instance.NgovernmentsassetallocationFocusingtheseeffortsonthe1,000assetscoveredinthisBetweencompaniesBestpractices,studycouldmakeafundamentaldifferenceinlimitingthetechnologytransfers,negativeeffectsofclimatechange.RestrictingglobalBetweencompanies/R&Dcollaborationwarmingto1.5°Crequiresa24GtreductioninCO2financiers/governmentsemissionsby2030–decarbonizingthetop1,000emittingSource:RolandBergerFunds,financialassetswouldcontributeathirdofthis.instruments,guaranteesAswestandattheintersectionofeconomicgrowthandsocialresponsibility,thepathforwardisclear:atransitiontowarddecarbonizedenergygenerationandzero-emissionGlobalCarbonRestructuringPlan23MethodologyExplanationofkeycalculationsandassumptionsfortheGlobalCarbonRestructuringPlan.TIMEHORIZON:2025-2050Wechosetobeginthetimeframein2025toallowtimeforpreparation.2050servesastheenddatefornetzerotargetsinboththeEUandUSaswellasmostglobaldecarbonizationstrategies.COSTOFDECARBONIZATIONThetotalcostsofdecarbonizationarecalculatedbyaddingCapEx(totalfixedcapitalcostsdistributedacrosstheassumed26-yearmodelduration),OpEx(variableoperationandmaintenancecosts)andfuelcosts(suchasgas,uranium,etc.)toestimatedassetwrite-offcosts(forpowerassetsyoungerthan20yearsinthecaseoffullreplacementbyRES,nuclearorgas)aswellasestimatedcostsforresidualCO2abatementfor2025-2050,primarilyinthecaseofgas.Thecostsareadjustedfornationalinflationanddiscountedwiththelocalinterestrateto2023basis.CapExismultipliedbyavaryinginternalrateofreturn(IRR)accordingtothechosensolutiontoaccountforfinancingcostsandthendistributedequallyacrossthemodel'stimespanof26years.Othercostsareimplementedonayearlybasis.TocalculatetheUSDpricepertonofCO2,wedividethetotalcostsofdecarbonizationbythediscountedannualCO2emissionsaccumulatedover26years.CostofCAPEX+OPEX+FuelcostsAssetCostofresidualdecarbonizationwrite-offsCO2abatementINTERESTRATESCostcomponentsarediscountedto2023basisbyaregionalinterestratethatisbasedonthenational10-yeargovernmentbond(fromOxfordEconomics).FINANCINGCOSTSToaccountforfinancingcosts,theCapExismultipliedbyaninternalrateofreturn(IRR)thatvariesdependingonthechosensolution.TheIRRisbasedoncommonlyreferencedliteraturevalues:5.0%forRES,8.0%forgas,12.0%fornuclear,and8.0%forCCS.INFLATIONRegionalannualinflationratesareaccountedforinallcostcomponents.FiguresaresourcedfromtheInternationalMonetaryFund(dataavailableuntil2028).Anaverageof2%p.a.isincorporatedbeyond2029.24RolandBergerGASANDCO2PRICEFORECASTSFiguresarederivedfromtheEuropeanRolandBergerforecastbasedontheenervispowerpricemodel(eMP),adjustedforanevenpricedevelopment.AsimilargaspricedevelopmentisassumedforallregionsexceptChina,whichremainsunchangedupto2030,beforefollowingasimilarpatterntootherregions.Thegaspriceforecastusesmarketdatafrom2020asastartingpointtoallowforcomparabilitytotypicalvaluesinpublishedstudies.FortheCO2priceforecast,weakerpriceincreasesareassumedforotherregionscomparedtoEurope:50%forChina(onaverage)andIndia,75%forUSandRoW.LEARNINGRATEBasedonaliteraturereviewofstudiesfromtheInternationalRenewableEnergyAgencyandFraunhoferInstitute,alearningrateisappliedtoOpExforRES,asscaleeffectsinthecomingyearswillenablereductionsinoperationandmaintenancecosts(includingreplacementcosts).WeassumethepricedecreasewillbestrongerinthenearfutureduetotheaccelerationofRESdeployment,beforeflatteningafter2030astechnologicalandscalingmilestonesarereached.Thismeansadeclineof-3.2%p.a.isassumedupto2030and-0.8%p.a.beyond2030.ASSETWRITE-OFFDepreciationisincludedforpowerassets,wheretheexistingassetisreplacedbyanewplant(allsolutionsexceptforCCS).Lineardepreciationoveraperiodof20yearsisgenerallyassumedforpowerassets(basedoncoalandgasplants,usingUSNationalRenewableEnergyLaboratorydata).Withthesolutionsstartingin2025,plantswithacommercialoperationdateafter2005areaffected(317of771powerassets,thereof65%inChina).Theresultingresidualassetvaluein2025(20-1year)isfullydepreciatedin2025,assumingaconservative"maximumpossibleloss"approach.COMPANYHEADROOMHeadroomisdefinedastheavailableadditionalindebtednessbeforethenetdebtratioreachesanimplausiblelevel.ThenetdebtratioisfurthercalculatedbydividingnetdebtbyEBITDA–ahealthy,crediblenetdebtratioliesbelow3.5.Forathoroughanalysis,thepastfouryears,2019to2022,areconsidered.Fromthis,anaverageheadroomiscalculatedoverallfouryearstobalanceouttheeffectsofindividualyears.S&PCapitalIQisusedasthesourceforthefinancialdata.Onaregionallevel,companiesinChinaandIndiahadthelowestdataavailability;atasectorlevel,ironandsteelfirmspublishedtheleastdata.GlobalCarbonRestructuringPlan25SourcesAllfiguresreferencedandusedasthebasisforcalculationsinthisreportarefrom2021.KeyCO2datawastakenfromtheEUEmissionsTradingSchemeforEurope,theEnvironmentalProtectionAgencyfortheUS,andClimateTraceforChina,India,andRoW.CapacitiesforpowerassetsweresourcedfromGEMWiki.Ifavailableandreasonable,CO2dataandenergygenerationforpowerassetsweretakenfromthesesources.Inthecaseoflowdataavailabilityorunreliabledata,CO2emissionswerecalculatedbasedonassetcapacityandlocalassumptionsonfullloadhoursandCO2intensity.SourcesforassumptionsandlocalvariablesincludetheInternationalEnergyAgency,InternationalRenewableEnergyAgency,NationalRenewableEnergyLaboratory,andvariousothernationalandinternationalinstitutes.GLOBALKEYEXPENDITUREFIGURES•AnnualR&Dspending:AccordingtotheUNESCOInstituteforStatisticsandR&DWORLD•Covidreliefspending:AllowedamountofFederalReserveActionsaccordingtotheCovidMoneyTracker,annualizedfrom2020-2023data•Annualmilitaryspending:AccordingtotheStockholmInternationalPeaceResearchInstitute•Annualclimatefinance:Annualaveragefor'21/'22accordingtotheClimatePolicyInitiative26RolandBergerCreditsAUTHORSFURTHERREADINGMartinHoyerTHEROARING'30S‑ACLEANHYDROGENSeniorPartner+49160744-4300ACCELERATIONSTORYmartin.hoyer@rolandberger.comDECARBONIZINGSTEELPRODUCTIONKarinKemetzhoferSeniorProjectManager‑IT'STIMEFORSTEELMAKERSTOREDUCE+43664409-6659EMISSIONSkarin.kemetzhofer@rolandberger.comACCELERATINGDECARBONIZATIONLeaPlischukConsultant+49160744-8562lea.plischuk@rolandberger.com01.2024Thispublicationhasbeenpreparedforgeneralguidanceonly.ROLANDBERGER.COMThereadershouldnotactaccordingtoanyinformationprovidedinthispublicationwithoutreceivingspecificprofessionaladvice.RolandBergerGmbHshallnotbeliableforanydamagesresultingfromanyuseoftheinformationcontainedinthepublication.©2024ROLANDBERGERGMBH.ALLRIGHTSRESERVED.ROLANDBERGERistheonlymanagementconsultancyof23_2262_STUEuropeanheritagewithastronginternationalfootprint.Asanindependentfirm,solelyownedbyourPartners,weoperate51officesinallmajormarkets.Our3000employeesofferauniquecombinationofananalyticalapproachandanempathicattitude.Drivenbyourvaluesofentrepreneurship,excellenceandempathy,weatRolandBergerareconvincedthattheworldneedsanewsustainableparadigmthattakestheentirevaluecycleintoaccount.Workingincross-competenceteamsacrossallrelevantindustriesandbusinessfunctions,weprovidethebestexpertisetomeettheprofoundchallengesoftodayandtomorrow.PublisherRolandBergerGmbHSederanger180538MunichGermany+49899230-0
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