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Fostering Effective

Energy Transition

2022 Edition

INSIGHT REPORT

MAY 2022

In collaboration

with Accenture

Contents

Foreword

Executive summary

1 The energy transition under pressure

1.1 Economic development and growth

1.2 Energy security and access

1.3 Environmental sustainability

1.4 Transition readiness enablers

2 Unlocking the net-zero transformation of industries

2.1 No net zero by 2050 without industries

2.2 Net-zero choke points: A call for multistakeholder collaboration

2.3 Clearing the path to net zero with “next generation” partnerships

2.4 Net-zero collaboration between customers and suppliers

2.5 Net-zero collaboration between industry and cross-industry peers

2.6 Net-zero collaboration between wider ecosystem stakeholders

3 Conclusion

Appendix

Contributors

Endnotes

Images: Getty Images, Unsplash, Pexels

Disclaimer

This document is published by the World Economic Forum

as a contribution to a project, insight area or interaction.

The ﬁndings, interpretations and conclusions expressed

herein are a result of a collaborative process facilitated and

endorsed by the World Economic Forum but whose results

do not necessarily represent the views of the World Economic

Forum, nor the entirety of its Members, Partners or other

stakeholders.

this publication may be reproduced or transmitted in any form

or by any means, including photocopying and recording, or by

any information storage and retrieval system.

Fostering Effective Energy Transition 2022 Edition 2

Foreword

The Energy Transition Index (ETI) has benchmarked

the progress of countries’ energy transition for

a decade on the three dimensions of the energy

triangle – economic development and growth,

energy security and access, and environmental

sustainability – and on the enabling environment

for transition. In view of the current volatile

macroeconomic and geopolitical environment,

however, a trend analysis from historical energy

data can currently provide only limited insights.

Hence, instead of the annual country energy

transition benchmarking report, this special 2022

edition builds on the ETI trends observed in recent

years to provide a perspective on the current

challenges affecting the transition, and highlights

priorities to supercharge it.

The urgency for transformative measures to

mitigate climate change has intensiﬁed. The latest

assessments by the Intergovernmental Panel on

Climate Change (IPCC) emphasize the need for

global greenhouse gas (GHG) emissions to peak by

2025 and for emissions to decline rapidly thereafter.

However, a series of systemic shocks over the

past three years and their implications on the

energy system highlight the challenges in pursuing

long-term targets while responding to short-term

emergencies. The ETI framework underscores

the need to help advance energy affordability,

security and access, and sustainability. The current

environment poses simultaneous constraints on

these three fronts.

Many countries have demonstrated resilience

to the pandemic and exceptional economic

recovery. However, the faster-than-expected

rebound coupled with low investments in parts of

the energy system have put stress on the energy

supply, leading to very high energy prices and

severely impacting households and businesses.

Supply-demand imbalances can recur through

the transition as energy systems reconﬁgure, yet

the transition cannot progress at pace if it leads to

expensive energy or exacerbates inequalities.

The war in Ukraine has led many countries to

rethink their energy security paradigm and what

it means for their energy transition. A review of

the best performing countries in terms of energy

security in the past ETI editions reveals the beneﬁts

of dual diversiﬁcation: energy mix diversiﬁcation

and fuel import diversiﬁcation. The war has forced

several countries to consider the trade-offs between

energy security and sustainability to secure energy

supply in the short term. However, in the long term,

we expect the energy transition will offer win-win

opportunities, aligning security and sustainability

imperatives through investments in renewables and

other clean energy sources, as well as demand-side

measures like energy efﬁciency.

We believe this is the time for governments,

companies and consumers to intensify efforts

to reduce their dependence on fossil fuels.

Governments can invest in domestic decarbonized

energy systems that will secure affordable and

reliable energy, and companies have opportunities

to adopt low-carbon technologies and energy-

efﬁcient processes. The decrease in GHG emissions

observed during the pandemic due to the reduction

in energy demand demonstrates the opportunities

offered by demand management. Considering

the critical role of energy-intensive industries in

achieving demand-side emission reductions, this

report includes a focus on the energy transition

within the industrial sector. As the largest

contributor of anthropogenic emissions, industries

are regarded as the last frontier of decarbonization.

We examine the multiple choke points that industrial

ﬁrms encounter on their journey to net zero, and

show how a new generation of collaboration

models, coupled with new levels of ambition at the

industry, country and global levels can help these

companies break through their bottlenecks and

accelerate the transition.

There are glimmers of hope, but also caveats. A

few countries, for example, are linking COVID-19

recovery packages with enhanced sustainability

solutions to “build back better”. But many are not.

And several large investment agendas are not yet

fully approved. Also, we welcome the additional

commitments made at COP26 at the end of

2021. However, action has fallen short in several

key areas that will need to be addressed in the

future. Overall, we remain cautiously optimistic. But

success will depend on countries carefully striking

the balance between energy affordability, availability

and sustainability, and further strengthening their

commitment to climate action.

Roberto Bocca

Head of Shaping

the Future of Energy,

Materials and Infrastructure,

World Economic Forum

Muqsit Ashraf

Senior Managing Director

and Lead, Energy Industry

Sector, Accenture

Fostering Effective Energy Transition

2022 Edition

May 2022

Fostering Effective Energy Transition 2022 Edition 3

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FosteringEffectiveEnergyTransition2022EditionINSIGHTREPORTMAY2022IncollaborationwithAccentureContentsForewordExecutivesummary1Theenergytransitionunderpressure1.1Economicdevelopmentandgrowth1.2Energysecurityandaccess1.3Environmentalsustainability1.4Transitionreadinessenablers2Unlockingthenet-zerotransformationofindustries2.1Nonetzeroby2050withoutindustries2.2Net-zerochokepoints:Acallformultistakeholdercollaboration2.3Clearingthepathtonetzerowith“nextgeneration”partnerships2.4Net-zerocollaborationbetweencustomersandsuppliers2.5Net-zerocollaborationbetweenindustryandcross-industrypeers2.6Net-zerocollaborationbetweenwiderecosystemstakeholders3ConclusionAppendixContributorsEndnotes34691216192324293335384143444546Images:GettyImages,Unsplash,PexelsDisclaimerThisdocumentispublishedbytheWorldEconomicForumasacontributiontoaproject,insightareaorinteraction.Thefindings,interpretationsandconclusionsexpressedhereinarearesultofacollaborativeprocessfacilitatedandendorsedbytheWorldEconomicForumbutwhoseresultsdonotnecessarilyrepresenttheviewsoftheWorldEconomicForum,northeentiretyofitsMembers,Partnersorotherstakeholders.©2022WorldEconomicForum.Allrightsreserved.Nopartofthispublicationmaybereproducedortransmittedinanyformorbyanymeans,includingphotocopyingandrecording,orbyanyinformationstorageandretrievalsystem.FosteringEffectiveEnergyTransition2022Edition2ForewordTheEnergyTransitionIndex(ETI)hasbenchmarkedtheprogressofcountries’energytransitionforadecadeonthethreedimensionsoftheenergytriangle–economicdevelopmentandgrowth,energysecurityandaccess,andenvironmentalsustainability–andontheenablingenvironmentfortransition.Inviewofthecurrentvolatilemacroeconomicandgeopoliticalenvironment,however,atrendanalysisfromhistoricalenergydatacancurrentlyprovideonlylimitedinsights.Hence,insteadoftheannualcountryenergytransitionbenchmarkingreport,thisspecial2022editionbuildsontheETItrendsobservedinrecentyearstoprovideaperspectiveonthecurrentchallengesaffectingthetransition,andhighlightsprioritiestosuperchargeit.Theurgencyfortransformativemeasurestomitigateclimatechangehasintensified.ThelatestassessmentsbytheIntergovernmentalPanelonClimateChange(IPCC)emphasizetheneedforglobalgreenhousegas(GHG)emissionstopeakby2025andforemissionstodeclinerapidlythereafter.However,aseriesofsystemicshocksoverthepastthreeyearsandtheirimplicationsontheenergysystemhighlightthechallengesinpursuinglong-termtargetswhilerespondingtoshort-termemergencies.TheETIframeworkunderscorestheneedtohelpadvanceenergyaffordability,securityandaccess,andsustainability.Thecurrentenvironmentposessimultaneousconstraintsonthesethreefronts.Manycountrieshavedemonstratedresiliencetothepandemicandexceptionaleconomicrecovery.However,thefaster-than-expectedreboundcoupledwithlowinvestmentsinpartsoftheenergysystemhaveputstressontheenergysupply,leadingtoveryhighenergypricesandseverelyimpactinghouseholdsandbusinesses.Supply-demandimbalancescanrecurthroughthetransitionasenergysystemsreconfigure,yetthetransitioncannotprogressatpaceifitleadstoexpensiveenergyorexacerbatesinequalities.ThewarinUkrainehasledmanycountriestorethinktheirenergysecurityparadigmandwhatitmeansfortheirenergytransition.AreviewofthebestperformingcountriesintermsofenergysecurityinthepastETIeditionsrevealsthebenefitsofdualdiversification:energymixdiversificationandfuelimportdiversification.Thewarhasforcedseveralcountriestoconsiderthetrade-offsbetweenenergysecurityandsustainabilitytosecureenergysupplyintheshortterm.However,inthelongterm,weexpecttheenergytransitionwillofferwin-winopportunities,aligningsecurityandsustainabilityimperativesthroughinvestmentsinrenewablesandothercleanenergysources,aswellasdemand-sidemeasureslikeenergyefficiency.Webelievethisisthetimeforgovernments,companiesandconsumerstointensifyeffortstoreducetheirdependenceonfossilfuels.Governmentscaninvestindomesticdecarbonizedenergysystemsthatwillsecureaffordableandreliableenergy,andcompanieshaveopportunitiestoadoptlow-carbontechnologiesandenergy-efficientprocesses.ThedecreaseinGHGemissionsobservedduringthepandemicduetothereductioninenergydemanddemonstratestheopportunitiesofferedbydemandmanagement.Consideringthecriticalroleofenergy-intensiveindustriesinachievingdemand-sideemissionreductions,thisreportincludesafocusontheenergytransitionwithintheindustrialsector.Asthelargestcontributorofanthropogenicemissions,industriesareregardedasthelastfrontierofdecarbonization.Weexaminethemultiplechokepointsthatindustrialfirmsencounterontheirjourneytonetzero,andshowhowanewgenerationofcollaborationmodels,coupledwithnewlevelsofambitionattheindustry,countryandgloballevelscanhelpthesecompaniesbreakthroughtheirbottlenecksandacceleratethetransition.Thereareglimmersofhope,butalsocaveats.Afewcountries,forexample,arelinkingCOVID-19recoverypackageswithenhancedsustainabilitysolutionsto“buildbackbetter”.Butmanyarenot.Andseverallargeinvestmentagendasarenotyetfullyapproved.Also,wewelcometheadditionalcommitmentsmadeatCOP26attheendof2021.However,actionhasfallenshortinseveralkeyareasthatwillneedtobeaddressedinthefuture.Overall,weremaincautiouslyoptimistic.Butsuccesswilldependoncountriescarefullystrikingthebalancebetweenenergyaffordability,availabilityandsustainability,andfurtherstrengtheningtheircommitmenttoclimateaction.RobertoBoccaHeadofShapingtheFutureofEnergy,MaterialsandInfrastructure,WorldEconomicForumMuqsitAshrafSeniorManagingDirectorandLead,EnergyIndustrySector,AccentureFosteringEffectiveEnergyTransition2022EditionMay2022FosteringEffectiveEnergyTransition2022Edition3Executivesummary1.Theeffectsofmacroeconomicturbulenceandrecentgeopoliticaldevelopmentsontheenergysystemhighlightthecomplexitiesandtrade-offsinherentintheenergytransition,callingforabalancedapproachthatdeliversontheimperativesofsustainability,energyaffordability,andenergysecurityandaccess–inessencedrivingaresilientenergytransition.Thepandemic,thesteepeconomicreboundandthewarinUkrainehavesuccessivelydisruptedenergymarkets,causingsignificantconsequencesforpeople,companiesandeconomiesaroundtheworld.Theconjunctionofdiverseadverseeventshascreatedaperfectstorm,creatingheadwindsonallthreeimperativesoftheenergytriangle:economicdevelopmentandgrowth,energysecurityandaccess,andenvironmentalsustainability.Thissituationdemonstratesthattheenergytransitionisnotimmunetotheimpactsofmajorenvironmental,economicandgeopoliticalevents,andthatthetrade-offsbetweenenergyaffordability,securityandsustainabilityexistandneedtobecarefullyconsidered.Suchanapproachisrequiredtoestablisharesilientenergytransitioncapableofachievinglong-termclimateambitions,regardlessofthechallengesthatmightimpactthejourney.2.Progressontheeconomicdevelopmentandgrowthdimensionoftheenergytransitionhasbeenslowoverthepastdecade.Ensuringaffordableaccesstoenergyforhouseholdsandbusinessesisessentialforeconomicgrowthandajusttransition.Astheenergysystemreconfigurestoalow-carbonfuture,temporarysupply-demandimbalancescanbearecurringphenomenon,withconsequencesforhouseholdsandbusinesses,notonlyintermsofenergypricesbutalsoofthecostofliving(e.g.food,housing,transportation)andcommodities.Theeffectsofenergypricevolatilitiestendtobemoresevereforvulnerableconsumersandsmallbusinesses.Measurestoaddresstheseconcernswillrestonarobustframeworkofdatatransparencytodeterminethemagnitudeandprevalenceofthechallengeatthenationalandlocallevels,definemechanismstoeffectivelytargetvulnerableconsumersforfinancialtransfers,anddesignsupportmeasuresinamannerthatdoesnotreduceincentivesforefficientconsumption.3.Thediversificationoftheenergymixwitharangeoflow-carbonenergysourcescanhelpstrengthenenergysecurity.Countriescanengageindualdiversification:diversifyingtheirfuelimportpartnersintheshorttermandtheirenergymixinthelongterm.Alookatover10yearsofenergysecurityanalysesthroughtheEnergyTransitionIndexshowsthatthedualdiversificationoffuelimportpartnersandofthedomesticenergymixgeneratesimportantbenefits.Renewablesourcesarematureandavailableforaccelerateddeployment,allowingcountriestobuildmorediversified,reliableandsustainableenergysystems.Otherlow-emissionsolutions,suchascleanhydrogenandnuclearenergyinthosecountriesthatacceptsuchprogrammes,mayappearaspathwaystoincreaseenergyindependence.Low-carbonenergysystemscanraisenewenergysecurityconcerns,forexamplefromdisruptionsinthesupplyoftransitionmaterialsorlessflexibilityinthepowersystem,whichmustbemitigatedinadvance.4.Currentenergymarketvolatilityandsecurityconstraintsprovideanopportunitytosuperchargethetransitionbyincreasingcleanenergyinvestmentsatrecordpaceandtransformingconsumers’energyconsumptionhabits.Renewableenergycapacityinstallationssetarecordin2021with290gigawatts(GW)1ofnewwindandsolarcapacityaddedworldwide,yetthisremainswellbelowthe960GWneededannuallyby2030tomeetthe2050net-zerotarget,2andtheInternationalEnergyAgency(IEA)warnscleanenergyinvestmentswouldhavetotripleby2030.3Today,astherisksofhighfossilfuelpricesanduncertaintiesabouttheglobalenergysupplyoutlookincrease,countriescanseizetheopportunitytostrengthentheircommitmentstocleanenergyinvestments.Additionally,thedemand-sidechangeswillbeascriticalasthesupply-sidetransformationtoachievetheenergytransitionobjectivesintherequiredtimeframe.TheIEAindicatesthat“energyefficiencyimprovementwilldrivemorethan40%ofthereductionofenergy-relatedGHGemissionsoverthenext20years”.4Navigatingtheenergytransitionthroughaturbulentphaserequiresabalancedapproach.FosteringEffectiveEnergyTransition2022Edition45.Addressingemissionsfromenergy-intensiveindustriesisessentialtoimproveenergyefficiency.Industrialactivitygeneratesmorethan30%ofanthropogenicemissions,5yetmanyindustriesfaceconsiderablechallengestodecarbonize.Goingforward,“cleandemand”signalscouldbeaturningpointtoaccelerate“cleansupply”.Withglobaldemandforindustrialproductsprojectedtogrowsignificantlyby2050,thedecarbonizationofindustriesisfundamentaltotheglobalenergytransition.Justfiveindustries(cementandconcrete,ironandsteel,oilandgas,chemicals,andcoalmining)togetherareresponsiblefor80%ofindustrialemissions.6However,industrialfirmsfacecomplexchallengesthatactaschokepoints.Today,technology,financingandpoliciesareattheforefrontofcompanies’andgovernments’net-zerostrategiestodecarbonizethesupplyside.Butdemand-sideinitiatives,suchastheFirstMoversCoalition,7designedtocreateastrong“cleandemand”pull(e.g.visibilityonofftakevolumes,acceptanceofgreenpremiums,etc.)arestillisolated.Theymustberapidlyreplicatedtoincentivizeinvestmentsinlow-emissiontechnologiesandproductionassets.6.The“nextgeneration”ofambitiousmultistakeholdercollaborationsbetweensuppliersandcustomers,betweenindustryandcross-industrypeers,andbetweenthewiderindustrialecosystemofstakeholderscanovercomedecarbonizationchokepointsandacceleratetheindustrialtransformationtowardsnetzero.Theremediestoindustrychokepointsareseldomfoundwithinasinglefirmorevenindustry.Newformsofcollaborationatthesector,countryandgloballevelsareneeded.Suchmultistakeholderpartnershipsreflectaheightenedlevelofambition,aclearfocusonemissionreductionandfreshareasofjointaction.Threearchetypalpartnershipshaveemerged:–Collaborationbetweencustomersandsuppliers(e.g.low-emissionproductofftakeagreements,circularsupplynetworks,valuechaindecarbonizationprojects,etc.)–Collaborationbetweenindustryandcross-industrypeers(e.g.CO2infrastructure,low-carbonmanufacturingplants,knowledgesharingfordecarbonization,etc.)–Collaborationbetweenthewiderecosystemofstakeholders,suchasgovernments,policy-makers,financiers,researchersandnon-governmentalorganizations(e.g.emissionmeasurementstandards,integratedresearchforlow-carbontechnologies,public-privatepartnerships,etc.).Movingtheindustrialenergytransitionforwardattherequiredpacewillentailreplicating,scalingandimprovingthesemodelsofcollaboration.7.Thewindowofopportunitytopreventtheworstconsequencesofclimatechangeisclosingfast.Itisessentialtomaketheenergytransitionrobustbybuildingthenecessaryenablersthatwillkeepthetransitiongoingiftheeconomicandenergysecuritycontextdeteriorates.Withtheworldinthemostsevereenergycrisissincethe1970s,itiscriticallyimportanttospeedupactiontoputmankindonthepathtonet-zeroemissionswhileaddressingenergysecurityneeds.Fourkeyactionscanhelpgiveimpetusandsteadylong-termmomentumtotheenergytransitionandmakeitmorelikelytowithstandeconomicdisruptions:–Anchoringclimatecommitmentsinlegallybindingframeworksthatcanendurepoliticalcyclesandenforcethelong-termimplementationofnationaltransitionobjectives–Takingandholdinglong-termdecisionswithregardtothedecarbonizationofthenationalenergysystemstructure(energymix,powergenerationmix,energyefficiency,fossilfueldependency)–Buildinganattractiveinvestmentlandscapeforprivatecapital,bothforeignanddomestic,tofinanceenergytransitionprojects(policyandlegalframeworks,currencyandinstitutionalstability,infrastructurequality,technologyavailability)–Promotingconsumerparticipation(awarenessofclimatechangeandcarbonfootprints,individualresponsibilityforaction,incentivesforconsumerbehaviouralchange)andbuildingthelocalworkforcerequiredforthetransition,payingparticularattentiontothelivelihoodsofvulnerablepopulationsThecurrentenergycrisispresentsagoodopportunitytoincreasethespeedofthetransitionandstrengthenitsresiliencetofuturechallenges.Onlybyeveryoneworkingtogetherwillitbepossibletoadvancethecollectivetransitionjourneyto2050andachievetherelentlessprogresstheworldrequiresanddeserves.Thetimeforactionisnow.FosteringEffectiveEnergyTransition2022Edition5Theenergytransitionunderpressure1Thechallengeiscompoundedbyriskstoenergysecurity,sustainabilityandaffordableaccess.KeyhighlightsLinkedtotheenergytriangle’sthreedimensions,highenergyprices,theriskofenergysupplyshortagesandclimateemergenciesjeopardizetheenergytransitionEnergymixandimportdiversificationcanbringcountriesgreaterenergysecurity,affordabilityandsustainabilityTheextremevolatilityinenergymarketsraisesconcernsaboutenergysecurity,energyaffordabilityandtheenergytransitionNowisthetimetostrengthencommitmentstocleanenergyinvestmentsandanchormoreefficientenergyconsumptionhabitsinsocietyEnergysystems’resiliencetosupplyandenvironmentalshocksisessentialtomaintainenergyaffordabilityforeconomicgrowthandensureajusttransitionTheenergytransitionmustbemaderobustwithadequateenablersandsupportmechanismstomaintainthemomentumdespitethechallenges142536FosteringEffectiveEnergyTransition2022Edition6TheCOVID-19pandemic,thewarinUkraineandcollateralturmoilintheenergymarketsmakecleartheneedfortheglobalenergytransitiontosimultaneouslyaddresstheimperativesofeconomicdevelopmentandgrowth,energysecurityandaccess,andenvironmentalsustainability.Imbalanceswillcontinuetoimpedeeffortstoreachthepacerequiredtolimitwarmingto1.5°C.Theglobalenergytransition,pivotaltoclimatechangemitigationefforts,iswellunderway.Overthepastdecade,theworldhasmadeprogressduringnineofthe10years,asmeasuredbytheEnergyTransitionIndex(ETI).However,thenarrative’surgencycontinuestoincrease.The2021UnitedNationsClimateChangeConference(COP26)warnedtheworldthat“wehavekept1.5degreesalive,butitspulseisweak”,8amidendeavourstoturnthisdecadeintooneofacceleratedclimateactionandsupport.Theearly2020shaveseenaseriesofsystemicshocksthataffecttheenergysystemandmeritcarefulexaminationtosupportthedevelopmentofrobustenergytransitionroadmaps.Followingtheunprecedentedpandemic-inducedenergydemandreductionin2020,theconsumptionofenergyreboundedstronglyin2021.Thisreboundresultedinsubstantialimbalancesinenergymarkets,triggeringsoaringenergypricesaswellassignificantgrowthingreenhousegas(GHG)emissions.ThesituationwasfurthercompoundedbyRussia’sinvasionofUkraine.Theseeventsconstituteaperfectstorm,creatingheadwindsonallthreeimperativesoftheenergytriangle.Highenergypricesposeriskstoeconomicgrowth9andhaveraisedthecostofliving.Progressonenergyaccesshasstalledandcountriesfaceimminentenergysecurityrisks.10Theconsumptionoffossilfuelshasalsoincreasedsubstantially,drivingemissionsuptotheirhighestlevelsinhistory.11Thecurrentcontexthighlightssomeofthetrade-offsinherentintheenergytransition,whicharefurthercomplicatedbytheenergysector’sstructure,socio-economicroleandgeopoliticalsignificance.ThesameETIframeworkpublishedannuallyforthelast10yearsisusedtostructuretheanalysisinthisspecialedition.Theframework(Figure1)strivestoassesstheperformanceofenergysystemsacrossthreefundamentalimperatives:theabilitytosupporteconomicdevelopmentandgrowth,energysecurityandaccess,andenvironmentalsustainability.Balancedprogressforacountry’senergytransitionmeansadvancingalongallthreedimensionsoftheenergytriangle.Giventheinterconnectednessoftheenergysystemacrossthemoderneconomicandsocialfabric,thedriversandimpactsoftheenergytransitionarenotrestrictedtothetraditionalboundariesoftheenergysystem.Rather,abroadsetofsocial,political,regulatory,macroeconomicandinfrastructure-drivenparametersenhanceacountry’stransitionreadiness(Figure1),enablinganeffectiveenergytransition.TheEnergyTransitionIndexframeworkFIGURE1EnergytriangleSystemperformanceimperativesTransitionreadiness:EnablingdimensionsSecurityandaccessEnvironmentalsustainabilityCapitalandinvestmentInfrastructureandinnovativebusinessenvironmentEnergysystemstructureRegulationandpoliticalcommitmentInstitutionsandgovernanceHumancapitalandconsumerparticipationEconomicdevelopmentandgrowthEnablingdimensionsSource:WorldEconomicForum,FosteringEffectiveEnergyTransition:AFact-BasedFrameworktoSupportDecision-Making,2018Thecurrentcontexthighlightstrade-offsinherentintheenergytransition,whicharecomplicatedbytheenergysector’sstructure,socio-economicroleandgeopoliticalsignificance.FosteringEffectiveEnergyTransition2022Edition7SystemperformanceTransitionreadiness201255%60%65%70%50%64.464.364.164.464.665.566.066.465.665.553.353.553.653.953.953.752.252.353.453.8201320142015201620172018201920202021TheETIframeworkhasbeenusedforthepast10yearstoreflectoncountries’energysystemperformanceandthereadinessoftheirenablingenvironmentforaneffectiveenergytransition.Slowbutsteadyprogress(Figure2)wasmadefrom2012to2021onboththesystemperformanceandtransitionreadinessdimensions.Acloserlookattheenergytriangle(systemperformance)revealsthatcountries’progressoverthelastdecadehasnotbeenuniformacrossthethreeimperatives(Figure3).Environmentalsustainabilityimprovedsteadilyatadeliberatepace,andenergysecurityandaccessalsoimprovedlargelyconsistentlyovertime,althoughrecentdevelopmentswarrantafundamentalrethinkonenergysecurity.Thedownwardtrendineconomicdevelopmentandgrowthsince2018showsthatcountriesarefacingchallengestomaintainenergyaffordabilitywhileprogressingontheirenergytransitionpathways.GlobalaverageEnergyTransitionIndexsystemperformanceandtransitionreadinessscores,2012-2021Globalaverageenergytrianglesub-indexscores,2012-2021FIGURE2FIGURE3201258.858.557.958.058.060.160.458.957.861.52013201420152016201720182019202020212012201320142015201620172018201920202021201220132014201520162017201820192020202171.357.857.257.157.858.259.059.059.459.759.971.771.872.072.372.973.575.073.774.1EconomicdevelopmentandgrowthEnergysecurityandaccessEnvironmentalsustainabilitySources:WorldEconomicForum,FosteringEffectiveEnergyTransition:AFact-BasedFrameworktoSupportDecision-Making,2018;AccentureanalysisSources:WorldEconomicForum,FosteringEffectiveEnergyTransition:AFact-BasedFrameworktoSupportDecision-Making,2018;AccentureanalysisFosteringEffectiveEnergyTransition2022Edition8Energysupplyshocksareexpectedtoaccompanytheenergytransitionjourney,withsignificantpass-througheffectsoneconomicgrowthandthecostofliving.Effectivesupportmechanismstoprotectvulnerablepopulationsandbusinessesarenecessary.Steadyenergyaffordabilityisessentialforeconomicgrowthandsocialjustice,andbotharekeytokeeptheenergytransitionmomentumgoing.Thepasttwoyearshavesignificantlychallengednationaleconomiesandenergysystems.In2020,pandemic-relatedrestrictionsresultedinasteepdropinthedemandforenergy12worldwideandreducedCO2emissions,providingaglimpseoftheimpactdemand-sidemeasurescouldhaveonclimatemitigation.Incontrast,2021experiencedafastreboundofdemandforproductsandservicesandwasmarkedbytheglobaleconomy’sstrongandexceptionallyrapidrecoverywithglobalGDPgrowthestimatedat5.9%.13Aseconomicgrowthisstronglycorrelatedwithenergyconsumption,theglobaldemandforelectricity14andoil15promptlysurpassedpre-pandemiclevels,leadingtothehighestpricesexperiencedinyears.NaturalgaspricesalsoclimbedtotheirhighestinadecadeinEurope,theUnitedStatesandmajorAsianmarkets,owingtoacombinationofbothdemand-sideandsupply-sidefactors,16aswellasasuccessionofextremeweatherevents.17Theenergymarketsupply-demandimbalancesof2021werecarriedoverto2022withenergypricessustainingrecord-highlevelsevenpriortoRussia’sinvasionofUkraine.Thesurgeinenergypricesemergedasanadditionalfactor,fuellinginflationontopofseveralotherfactors,suchasstrongconsumerdemand,18restrictedsupplychains,19risingwages,20theincreasingcostofhousing21andfood,22andlowinterestrates.23In15ofthe34economiesthattheInternationalMonetaryFund(IMF)classifiesasadvanced,12-monthinflationthroughDecember2021measuredabove5%.24Asimilartrendwasobservedinemergingmarketsanddevelopingeconomiesas78of109countriestackledinflationofabove5%.25Theabilityofhighoilandgaspricestopercolatetoothersectorshingesontherelativepriceinelasticityofitsdemand.ThesupplyofoilhasbecomemoreelasticinrecentyearswiththeadventofshaleoilproductionintheUnitedStates.26ButoildemandEconomicdevelopmentandgrowth1.1Therisksofhighenergypricesandeconomicheadwindsareexpectedtoflanktheenergytransitionprocess,andincreasedvolatilitycouldbearecurringphenomenon.9FosteringEffectiveEnergyTransition2022EditionEU+countermeasuresenactedtocombathighenergypricesFIGURE4Reducedenergytax/VAT17Retailpriceregulation8Wholesalepriceregulation3Transferstovulnerablegroups22Mandatetostate-ownedﬁrms4Windfallproﬁtstax/regulation5BusinesssupportNumberofcountries6Note:EU+includestheUnitedKingdomandNorway.Source:Sgaravatti,Giovanni,SimoneTagliapietraandGeorgZachmann,“Nationalpoliciestoshieldconsumersfromrisingenergyprices”,BruegelDatasets,21April2022update,https://www.bruegel.org/publications/datasets/national-policies-to-shield-consumers-from-rising-energy-pricesremainsratherinelastic,especiallyintheshortrun.Geopoliticaleventsandsevereweathereventscandisruptsupply.27Becauseenergydemandisquiteunresponsiveduetoitslackofelasticity,therisksofhighenergyprices,inflationarypressureandeconomicheadwindsareexpectedtoflanktheenergytransitionprocess,andincreasedvolatilityislikelytobearecurringphenomenon.Emerginganddevelopingeconomiesaredisproportionatelyaffectedbyspirallinginflation.Althoughthepeakpass-throughofhighretailenergypricesinadvancedeconomiesistwicethatofdevelopingeconomies,28thecumulativeimpactonconsumerpriceindex(CPI)levelsindevelopingeconomiesishigheraspricesstayelevatedforalongerperiodoftime.Higherenergyintensityandlowersubstitutioneffectsmayaccountforthelargerimpactoninflationindevelopingcountries.29Inessence,theimpactofvolatilityinenergymarketsislikelytobemorepronouncedondevelopingeconomies,whichaddstotheconcernsofequityandjusticeoftheenergytransition.Withtheoutlookofpotentiallyrecurringperiodsofsupply-demandimbalanceoftransitionfuelssuchasgas,andrisingtrendsincarbonprices,thecontributionofenergypricestoCPIcouldbewellabovehistoricalnormsinthemediumterm,withpotentiallyfar-reachingconsequencesforhouseholdsandbusinessesalike.30Anincreasingnumberofhouseholds,includinginadvancedeconomiessuchastheEuropeanUnion(EU),31UnitedKingdom32andUnitedStates,33areunabletomeettheirbasicneedforheatingandlightingatanaffordablecost.Theenergycrisishasalsoaffectedcompaniesproducingenergy-intensivematerialslikeammonia,steeloraluminium,withsignificantknock-oneffects,suchasrisingcostsoffertilizers,whichhascompoundedfoodsecurityconcernsworldwide.34Withthepriceofconsumergoodsandservicesalreadyrisingduetoconstrainedglobalsupplychains,asustainedincreaseinenergycostswilllikelyimpactthecostoflivingandconsumerspendingwhileaddinganadditionalcostburdentobusinessesandgovernments.Countrieshavetakenvariousemergencyresponsemeasures(Figure4)inresponsetotheseconcerns.FosteringEffectiveEnergyTransition2022Edition10Inthefaceofeconomicheadwindsalongwiththegeopoliticaluncertainty,governmentshavealsobeentakingmeasurestoaddressenergyaffordabilitychallengesfromthesupplyside.Asalastresorttocounterrecentsky-highgasprices,somecountrieshaveincreasedcoal-basedpowergeneration.IntheUnitedStates,wherecoal-basedgenerationhasbeenindeclinesinceits2007peak,35itincreasedbyapproximately22%36in2021,withcoalproductionexpectedtofurtherincreaseby4%37in2022.Germanyisalsoinvestigatingextendingthelifeofcertainofitscoal-poweredplants38tomaintaincompetitiveenergyaccess.Inaddition,somecountriesarereconsideringtheirnuclearpowergenerationpolicy.Moreover,strategicpetroleumreserves(SPRs)havebeenleveragedandhaveprovenonceagaintobeacriticaltoolforemergencyresponsemeasures39tomitigateenergysupplyshocks.Thesecouldbecrudereserves,petroleumproductreservesorgascaverns.Inthefaceofseveresupplydisruptions,thiscountermeasurecanhelpeconomiesmitigatesomeoftheimmediateeconomicimpactsofasuddensupplyshock.InearlyMarch2022,acoordinatedeffortwasorchestratedbyInternationalEnergyAgency(IEA)membercountries40toaddresssignificantsupplydisruptions.Atthetimeofwriting,theUnitedStatesannouncedthelargestreleaseofoilreservesinhistory,comprising1millionadditionalbarrelsperdayforsixmonths.41SPRscanloweroilpricesinahigh-priceenvironment,therebyhavingastabilizingeffectontheeconomyduringanoilsupplydisruptionscenario.42Theirmajorimpactisbywayofpricerelieforevenalleviatingthephysicalshortageofsupplytoat-riskandstrategicconsumers.43Thesystem,however,focusesonhandlingshort-termdisturbancesandhaslimitedimpactonmedium-tolong-termmarkets.Nouniversaldefinitionofenergypovertyorbasicenergyneedsexists,becauseofsensitivitiesrelatedtoregionalandincome-drivendifferences.44Addressingtheseconcernswillrestonarobustframeworkofdatatransparencytodeterminethemagnitudeandprevalenceofthechallengeatthenationalandlocallevels,mechanismstoeffectivelytargetvulnerableconsumersforfinancialtransfers,andthedesignofsupportmeasuresinamannerthatdoesnotreduceincentivesforefficientconsumption.45However,thesystemicnatureofthechallengecallsforlong-termmeasurestosafeguardvulnerableconsumersandbusinessesfromvolatilitiesresultingfromthetransition.Buildingresilienceintransitioningenergysystemstomitigatetheadverseeffectsofvolatilityonsmallandmedium-sizedenterprises(SMEs),46consumersandthemostvulnerablehouseholdsiskeytohelpadvanceenergyaffordabilityandajustandsociallyacceptedtransition.Inthissense,thepivotaleventsofthepasttwoyearsadvocateforanenergytransitionthathelpsensureenergyaffordabilitywhilepursuingsustainabilitygoals.Developingthenecessarysupportmechanismstocushionenergysupplyshocksuntilthelow-carbonenergysystemsreachthescaleandflexibilityrequiredtoconsigntherisksofamajorfossilenergycrisistohistorywillbeessential.Buildingresiliencewilllikelycomeatapricetocountries,companiesandconsumers,owingtopotentialinefficiencies,redundancy,extracapacityorgreentaxation.However,byminimizingtherisksofdropoutsanddelaysforeconomicreasons,itwillbetheonlyviablepathwaytoachieveclosetoanet-zero47societybymid-century.Developingthenecessarysupportmechanismstocushionenergysupplyshocksuntilthelow-carbonenergysystemsreachthescaleandflexibilityrequiredwillbeessential.FosteringEffectiveEnergyTransition2022Edition11Highenergypricesandnewrisksofenergyshortages,resultingfromthefastCOVID-19economicrecoveryandthewarinUkraine,haveforcedareprioritizationofenergysecurity.Countriescanstrengthenenergysecuritybydiversifyingtheirfuelimportpartnersintheshorttermanddiversifyingtheirenergymixwithlow-carbonalternativesandimprovingenergyefficiencyinthelongterm.AccordingtothelatestevidencefromtheIntergovernmentalPanelonClimateChange(IPCC),globalemissionsneedtopeakby2025tokeepthetargetof1.5°Calive.Thereconfigurationoftheentireenergysystem,includingtheunderpinningfuels,technologies,marketsandgeopolitics,maynotproceedsmoothly.48Theprospectofrobustprogresshingesontheabilitytomanageshort-termshocks,especiallythosethatposeriskstothereliabilityandaffordabilityofenergy.TheIEAdefinesenergysecurityasthe“uninterruptedavailabilityofenergysourcesatanaffordableprice”.49Asmeasurestocombatclimatechangeaccelerate,adequateandaffordableaccesstoenergywillbecriticaltothecontinuedprioritizationofenvironmentalpolicies.Inthelongrun,energysecuritymeanssecuringtheenergysupplyneededforacountry’seconomicdevelopmentandgrowth.Inaworldaimingtoreachnet-zeroemissionsbymid-century,long-termenergysecurityiscloselytied,ifnotconstrained,bynationalsustainabilityambitions.Energymarketvolatilitiesandgeopoliticaleventsoverthepasttwoyearshaveelevatedenergysecurityrisks.Followingaperiodoflowinvestmentinlegacyassets,50afaster-than-expectedeconomicreboundfromtheCOVID-19pandemic51strainedtheenergysupplychain,52leadingtoconcernsabouttheavailabilityofgasforwinterheating,53industrialactivityslowdown54andpressureonthefiscalbudgetsforenergysubsidies.55Indeed,therecord-highenergypricestookcountriesbysurpriseandspotlightedtheirsevererelianceonimportedfossilfuelsaswellasthestronginterdependenceoftheirdomesticelectricitypriceswithglobalgasmarkets.56Highpricescreatedheavyfinancialpressurenotonlyonhouseholdsbutalsoonbusinessesofallsizes,leadingtosocialprotestsandindustrialproductioncutsinseveralcountries.57Additionally,in2021,intensifyingextremeweathereventspushedpowergridstothebreakingpoint,58whichledtosevereblackoutsaffecting4%oftheworld’spopulation.59And,currently,energysecurityconcernsarisingfromthewarinUkraineareforcingafundamentalrethinkofenergyandforeignpolicy,evenincountriesnotreliantonimportedfossilfuelsfromRussia.Bilateralenergytradeamongcountries,globallyintegratedenergymarkets,andtechnologystandardsformid-streamanddownstreaminfrastructureareamongthecorebuildingblocksofthecurrentgeopoliticallandscape.Resourceendowmentsaside,thespatialdistributionofreservesvis-à-visdemandcentresandinfrastructureconsiderationsincludingpipelines,refineryconfigurations,etc.,necessitateevenresource-richcountriestorelyonimports,acaseinpointbeingCanada.60Hence,completeenergyindependencemaynotbefeasibleforcountriesinthenearterm.Whileadecarbonizedfutureenergysystemcanprovideenergysecuritydividendsduetothelocalizedresourceabundanceoflow-carbonenergysources,ensuringenergysecurityandaffordabilitythroughthetransitionwillrequirefossilfuels.Manycountrieseitherdonotbenefitfromnaturalenergyresourceendowmentsrequiredtomeettheirenergyneedsorareunabletoexploitthemfortheirownuseduetopolitical,technologicalorfinancialreasons.Theessenceoftheenergysecuritychallengeinthesecountriesistypicallydual:countries’insufficientdiversificationoftheirenergymixorinsufficientdiversificationofenergyimportpartners,orboth.Asanexample,Europereliesonnaturalgasfor19%61ofitspowergenerationand38-41%62ofitsresidentialheating,and45%oftheEU’sconsumednaturalgasisimportedfromRussia.63Amajorityofcountriescontinuetorelyonahandfuloftradepartnerstomeettheirenergyrequirements(Figure5).Energysecurityandaccess1.2Theprospectofrobustprogresshingesontheabilitytomanageshort-termshocks.FosteringEffectiveEnergyTransition2022Edition12Elevenof34advancedeconomiesarereliantononlythreetradepartnersforover70%oftheireconomy’sfuelimports.Similarly,10inemergingAsia,8inemergingEurope,27inLatinAmericaandtheCaribbeanand26inSub-SaharanAfricaareheavilyreliantonjustthreecountriesforamajorityoftheirfuelimports.Theseareallat-riskcountrieswhoseenergysupplychainscouldpotentiallyexperiencedisruptioninthefaceofadverseclimaticevents,supplyshortagesorgeopoliticalcrises.Thelackofdiversityinimportsresultsinthecountries’energysystemhavinglesscushiontodealwithdisruptionsinsupplyfromagivenpartner,whicheventuallycouldprecipitateintoanationalsecurityconcern.Asnationscontinuetoevolvetheirenergysecurityprioritiesinlightoftherisinguncertainty,governments’roleinensuringenergysecurityisnotstraightforward,ascountrieswithdifferentenergysystemstructuresmayfollowdifferentpathways.Whatdifferentiatestoday’senergycrisisfrompastcrises,though,isthefactthatscalablealternativetechnologiesandrenewableenergysourcesareavailabletoday,whichenablespolicy-makerstofacilitateamoreintegrated,efficientandflexibleenergysystem.Wheneverpossible,countriescanconsiderstrengtheningenergysecuritybydiversifyingtheirfuelimportpartnersintheshorttermaswellasdiversifyingtheirenergymixwiththedevelopmentofdomesticrenewableandotherlow-carbonenergyinthelongterm,drivingdownboththeneedforenergyimportsandstrategicgeopoliticaldependencies.64Therearereasonstobelievethatdiversificationwillremaincriticalinincreasinglydecarbonizedenergysystems,wherehigh-carbonenergysystemspoweredbyfossilfuels,atleastinthecomingdecades,willcontinuetocohabitwithlow-carbonenergysources.Afutureenergymix,dominatedbylow-carbonenergysystems,suchassolar,wind,hydrogenandbiomass,ismorelikelytohaveanationalorregionalfootprint,implyingthataconvergenceofenergysecurityandsustainabilitycouldbepossible.Countriesshiftingtowardsmoredecarbonizeddomesticenergysourcesarelikelytobemoreself-reliantandlessdependentontheglobaltradeofenergy,especiallyifcoupledwithefficiencymeasuresthatreducetheoverallenergyneeds.Anenergymix,dominatedbylow-carbonenergysystems,ismorelikelytohaveanationalorregionalfootprint,implyingaconvergenceofenergysecurityandsustainability.CountryfuelimportdiversificationFIGURE527268121011918342213463012EmerginganddevelopingAsiaEmerginganddevelopingEuropeMiddleEastandNorthernAfricaAdvancedeconomiesCommonwealthofIndependentStatesLatinAmericaandtheCaribbeanSub-SaharanAfricaTotalno.ofcountriesinpeergroupCountrieswithmorethan70%offuelimportedfromtop3tradepartnersNote:Seetheappendixforthepeergroupclassification.Source:UNCTAD,WorldEconomicForumandAccentureanalysisFosteringEffectiveEnergyTransition2022Edition13Theimpendingsurgeofeconomies’electrificationfromtheriseofrenewablesisexpectedtobringinadifferentsetofsecurity-relatedchallenges.Crucialamongthemwouldbeensuringthereliabilityandefficiencyofnationalandcross-borderelectricitygrids.Inparticular,astheshareofwindandsolarincreasesincountries’energymix,electricitygridswillrequiresystemicupgradestoaccommodatethesevariablerenewableenergysources.Butgoingforward,countrieswillalsoneedtothinkstrategicallyaboutthetechnologymixandgeographicalspread,65asidefromupgradingandredesigningtheirgridinfrastructure.Asaresult,gridmodernizationisalsoemergingasakeypriorityforpolicy-makersandisoneofthefocusareasofnewpolicypackages,suchasintheUnitedStates66andEU,67forbothenergysecurityandenergytransitionimperatives.Thetransitiontoadecarbonizedfutureenergysystemlowersthesecurityrisksfromgeopoliticsoffossilfuelsbutcanalsocreatenewpotentialconcerns.Decliningfossilfueldemandmayfurtherconcentratetheremainingsupplyashighercostproducersexitthemarket.Additionally,thetransitiontocleanenergydependsheavilyonaccesstominerals,suchaslithium,cobalt,nickel,copper,etc.,tomanufacturesolarpanels,windturbinesandbatteries.Whilethedemandofthesemineralsisexpectedtogrowsix-foldforatransitiontonetzeroby2050accordingtotheIEA,68theproductionoftransitionminerals,suchascobalt,lithiumandgraphite,ismoreconcentratedthanthatoffossilfuelsoilandgas(Figure6).Whileacompletephase-outoffossilfuelswouldreducecountries’energymixdiversification,anincreasedrelianceonrenewablepower,batterystorageandotherlow-carbonsourcescouldalsoposenewenergysecurityrisks.69Furthermore,asanincreasingnumberofcountries,includingtheUnitedKingdom,70theUnitedStates,71Japan,72India73andChina,74reconsidertheroleofnuclearenergyduetoitslowemissionsandbaseloadoperationalprofile,securityrisksfromdesignspecifications75andnuclearfuelsupplychainscanarise.76Asthetransitionremakestheenergysystem,energysecurityconcernsalsorequireupfrontriskmitigationmeasures.Investmentincontingencymeasures,suchasstrategicreservesforpetroleumandstorageinfrastructurefornaturalgas,canreducetheimpactofdisruptionsinthesupplyofthesefuelsthroughthetransitionperiod.Similarly,consideringthecriticalityoftransitionminerals’supplytosupportthemanufacturingoftherenewableenergycomponentsnecessaryfortheenergytransition,investingsufficientlyinresponsiblemining,diversifyingsourcesofsupplyandstrategicallystockpilingmineralsinsomecasescanensurearesilientmineralssupplychain.77Furthermore,consideringtheenergysecuritypremium,maintainingsomelegacyassetsthroughmarketmechanismsthatsupportreservecapacitymightberequiredtoaddresssupplydemandimbalancesduringthetransition.MarketshareoftopfiveenergycommodityproducingcountriesFIGURE6Top5producersOthers100%90%80%70%60%50%40%30%20%10%0%5456869691OilNaturalgasCobaltLithiumGraphiteSource:bp,StatisticalReviewofWorldEnergy2021,70thedition,2021,https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.htmlFosteringEffectiveEnergyTransition2022Edition14Whilegovernmentsacrosstheglobecontinuetofocusonthecriticalaspectsoftheircountries’energysecurity,itisvitalthattheysustainongoingeffortstoprovideenergyaccesstothoseinneed.Evenbeforethepandemicarrived,theworldwaslagginginprovidinguniversalaccesstoelectricityandcleancookingfuel.78Asof2019,759millionpeopledonothaveaccesstoelectricityandover2.6billionpeopledonothaveaccesstocleancookingfuels.79Therateofprogressrevealsthattheworldisnotontracktoachievethetargetsforuniversalaccess,andtheimpactismoreacuteforthemostvulnerablecountriesthatwerealreadylagging.EmerginganddevelopingeconomiesarelikelytosufferlongerandmoreseverelyfromtheeconomicimpactsoftheCovid-19pandemic,exacerbatinghunger,povertyandinequalityworldwide.80Earlyevidenceindicatesthatthepandemicmightalsohavedismantledsomeofthesteadyprogresstowardsuniversalenergyaccess.In2021,thenumberofpeoplewithoutaccesstoelectricityincreasedby2%to768million.81Thelackofaccesstoenergyisaconstraintindeliveringtimelyandadequatehealthcareandvaccinationprogrammes.Only28%ofhealthcarefacilitiesinSub-SaharanAfricahaveaccesstoreliableelectricity,82makingbasichealthservicesinsomeruralcommunitiesinaccessible.Deliveringuniversalenergyaccessby2030remainsakeyUNSustainableDevelopmentGoal(SDG)withthepotentialtobetterthelivesofmillions.However,theCOVID-19pandemichassignificantlydamagedongoingeffortsascompaniesworkingonprovidingoff-gridsolutionscontinuetosufferfromsupplychaindisruptions.83AchievingtheUN’sseventhSDGalsorequireslargeinvestments,tothetuneof$20billion84annuallyto2030inAfricaalone,yetfiscalimplicationsofeconomicrecoveryprogrammestendtoindicatethatvaluableresourcesareinsteadbeingdivertedfromenergyaccessprogrammesinthecurrentcontext.Maintainingsomelegacyassetsthroughmarketmechanismsthatsupportreservecapacitymightberequiredtoaddresssupplydemandimbalancesduringthetransition.FosteringEffectiveEnergyTransition2022Edition15Energyaffordabilityandsecuritychallengesreinforcetheneedtosuperchargethetransitionbyacceleratinginvestmentsinthe“new”(decarbonized)energysystemandembeddingmoreefficientenergyconsumptionhabitsinpost-pandemicsocieties.Thestrengtheningofgovernments’andcompanies’effortstoreducetheirrelianceonfossilfuelsiskey,butindividuals’“civicduty”towardsenergyusemustalsointensify.Themomentumonenvironmentalsustainabilityhasbeenstrongthroughoutthepastdecade.Enabledbypolicies,investmentsandinnovations,renewableenergytechnologies,suchassolarphotovoltaicsandwindpower,arecostcompetitivewithfossil-fuel-basedpowergenerationalternativesincountriesaroundtheworld.85Althoughlowatabsolutelevels,themarketshareofelectricvehicleshassteadilyincreased,doublingin2021.86Costsofenergystoragesolutions,suchaslithium-ionbatteries,criticalforprovidingflexibilityservicestoadecarbonizedgrid,arerapidlyapproachingcostcompetitiveness.87DespiteCOVID-19pandemicrestrictions,periodsoflockdowns,supplychainbottlenecksandtheincreasingturmoilonenergymarkets,thepasttwoyearsacceleratedtheglobalmomentuminthetransitiontowardsmoresustainableenergysystems,withrecordcapacityexpansionofsolarphotovoltaicsandwindpower.Windandsolarenergycombinednowgenerate10%ofglobalelectricityforthefirsttimeever(Figure7).88Inaddition,low-carbonpowersourcesincludingsolar,wind,hydro,nuclearandbioenergycombinedgenerated38%oftheworld’selectricityin2021,overtakingcoal,withEuropeleadingthewayandChinaandJapanmakingoveratenthoftheirelectricityfromwindandsolarforthefirsttime.89AnanalysisofhistoricaltrendsfromtheETIsupportsthistrend,withtheglobalaveragescoreontheenvironmentalsustainabilitydimensionoftheindexincreasinginsevenofthepast10years(Figure3),withmorethan70%ofcountriesshowinggrowthonthisdimension.EnergysecuritychallengesarisingfromfossilfueldependencyhaveintensifiedduetotheongoingwarinUkraine,strengtheningpoliticalandpopularresolvetoacceleratethepaceofthecleanenergytransition.Environmentalsustainability1.3Shareofglobalelectricitygenerationbysource,2000-2021FIGURE7200020012002200320042005200620072008200920102011201220132014201520162017201820192020202125%30%35%40%45%0%5%10%15%20%Totalcleansources1CoalGasHydroNuclearWindSolarBioenergyNotes:1Totalcleansourcesincludesolar,wind,hydro,nuclearandbioenergy;Thecombinedsolar(3.72%)andwind(6.59%)sharesofglobalelectricitygenerationamountto10.31%.Source:Ember,“GlobalElectricityReview2022”,30March2022,https://ember-climate.org/insights/research/global-electricity-review-2022/#global-trends-1-wind-and-solar-surpass-10FosteringEffectiveEnergyTransition2022Edition16Nevertheless,thegroundtocoverremainsconsiderable.ThelatestIPCCassessmentindicatesthataverageannualGHGemissionsbetween2010and2019werehigherthaninanypreviousdecade.90Emissionreductionsincarbondioxidefromfossilfuelsandindustrialprocesseswereinsufficienttooffsettheincreasefromrisingglobalactivityinindustry,energysupply,transport,agricultureandbuildings.91Whilethedropinenergydemandin2020fromCOVID-19pandemicrestrictionsledtoreducedglobalCO2emissionsbyalmost6%,92emissionssharplyreboundedin2021abovepre-pandemiclevelstotheirhighestlevelinhistoryonaccountoftherapidrestorationandreboundofeconomicandindustrialactivitylevels,andenergymarketvolatilities.Tocontaintheaveragetemperatureincreasetobelow1.5°C,theglobalGHGemissionsmustpeakbefore2025andbereducedby43%by2030.93Atthesametime,methane,thesecondfastestgrowingGHGemissionsbehindCO2,94wouldalsoneedtobereducedbyaboutathirdby2030.AccordingtoIEA’sNetZeroby2050report,annualcapacityadditionsofsolarandwindneedtobehigherthan1,000GW,fourtimestherecordinstallationlevelsachievedinrecentyears.95Additionally,annualsalesofelectricvehicleswouldneedtoscaleupeighteen-foldby2030.Achievingatransformationofthismagnitudeandcomplexitynecessitateslong-termandambitiouspolicies,enablinginfrastructureandinvestments,aswellassupportingconsumptionbehaviourchanges.AtCOP26,governmentsandbusinessesdemonstratedstrongcommitmenttoaddresstheclimateemergency,with197countriessigningtheGlasgowClimatePact,formalizingtheircommitmentsandpledgestonet-zerotargets.96Asoftheendof2021,countriesresponsiblefor90%ofglobalemissionshaveannouncedorareconsideringnet-zerotargets.97Inaddition,over100countrieshavejoinedtheGlobalMethanePledge,whichaimstocutglobalmethaneemissionsby30%by2030.98However,currentambitionsstillfallshortoffulfillingthetargetssetintheParisAgreementonclimatechangein2015.DespitethemomentumatCOP26,analysesbytheIEAandClimateActionTrackershowthatevenifallclimatepledgesaremet,theworldwouldstillnotbeontracktolimitglobalwarmingto1.5°Cbytheendofthiscentury.99,100Additionally,pledgesmustbeturnedintoconcretepoliciesandactionsthatmakeadifferenceonthegroundinthefewremainingyearsto2030;thewideninggapbetweenpledgesandimplementationeffortisagrowingconcern.Thedemandforelectricitygrewatarecordpace101in2021,equivalenttoaddingthedemandofIndiatotheworld’sgrid.102Lackofrequisitenaturalgassupplyledtoarecordincreaseintheuseofcoalinpowergeneration,includinginregionswherecoalhadbeeninstructuraldecline,suchastheUnitedStatesandtheEU.Consideringpotentialenergysecurityimplicationsinthemediumterm,China,India,Indonesia,JapanandVietNamplantobuildmorethan600coalpowerplants,whichaccountsfor80%ofnewcoalpowerinvestment.103AccordingtotheIPCC,unabatedemissionsfromexistingorplannedfossilfuelinfrastructureuntiltheendoftheirlifetimeisequivalenttotheemissionsallowancefromallsectorsinpathwaystolimitglobalwarmingto1.5°C.104Phasingoutcoalrequirestheacceleratedcapacityexpansionofnotjustprovenalternativeslikesolarandwind,butalsoofotherlow-carbonsourcesofenergy,suchashydro,bioenergy,hydrogen-basedgeothermaltechnologiesandinfrastructuretocaptureandstorecarbondioxide.Carboncaptureandsequestration,whileamatureyetcostlyabatementtechnologyforgasprocessingandenhancedoilrecovery,remainsunproveninthepowersector,highlightingtheneedforinvestmentinresearchanddevelopment,andpolicymeasurestosupportdemonstrationsanddeployment.Additionally,cleanenergyinvestmentswouldhavetotripleby2030tomeetdemandinasustainableway,accordingtotheIEA.105Whileinvestmentsinenergytransitionhaveapproximatelydoubledoverthelastdecade,China,theUnitedStatesandtheEUaccountformorethan80%106oftheinvestments.PledgesmustbeturnedintoconcretepoliciesandactionsthatmakeadifferenceonthegroundinthefewremainingFosteringEffectiveEnergyTransition2022Edition17Africa,whichhas39%107ofglobalrenewableenergypotential,attractedonly2%ofglobalinvestmentinrenewableenergyoverthelastdecade.108Geographicaldisparitiesinglobalclimatefinanceaside,investmentsinfossilfuelassetsremainhigherthanlow-carbonassets,alsoreflectingamismatchbetweenpledgesandactions.109Overall,themacroeconomicchallengesthatcamewiththe2021economicrecoveryaswellastheenergyaffordabilityandenergysecurityconcernsformanycountriesexacerbatedbytheRussianinvasionofUkrainereinforcetherationaletosuperchargetheenergytransition.Apartfromsupply-sidemeasures,energyefficiencyisregardedastheworld’s“firstfuel”andisthestrongestleverinthetransitiontonetzero,accordingtotheIEA.110WhiletheenergyintensityofGDPhasbeendeclining,therateofdeclineneedstodoubletomeetthelevelsfornet-zeroemissionsby2050.Giventheenergyfootprintsacrosseconomicsectors,thishighlightstheimportanceofimprovingenergyproductivityofsuchend-consumingsectorsasindustryandtransport,aswellaseconomicdiversificationtodecouplegrowthfromenergyconsumption.AnanalysisofG20countriesindicatesaninverserelationshipbetweentheirlevelofnationaleconomicoutputfromtheindustrialsector(includingenergy-intensivesectorssuchasmanufacturing,mining,constructionandenergyproducingactivities)andtheirscoresontheETI.Fosteringaninnovativebusinessenvironmentandhumancapitaldevelopmentcansupportthegrowthofhighervalueaddedsectors,enablingnecessaryeconomicdiversification.Inadditiontosupportingsustainabilityambitions,integrateddemand-sidemeasurestoimproveenergyefficiencycanalsooffersecuritydividends.Forexample,Japan,amajorenergyimporter,wasabletoreduceitsimportburdenofoilandgasby20%in2016,asaresultofenergyefficiencyimprovementssince2000.111Currentparadigmswithheightenedenergysecurityrisksindicatetheneedtofurtherharnessthesynergisticpotentialofenergyefficiency.Effectivedemand-sidemanagementcanoffsetsupply-sideadditionsaswellastheneedforcarboncaptureandstoragesolutionsforemissionsmanagement.Acombinationoftherightpolicies,infrastructureandefficientend-usetechnologiesfordemand-sidemitigationcanleadtoa40-70%112reductioninGHGemissionsby2050acrossthethreeprimaryend-usesegments:transport,buildingsandindustry.Theexpansionoftransportelectrificationinfrastructurewithincentivestopurchaseelectricvehicles,utilizingremoteworkarrangementstorestrictbusinessairtravel,andprovidingaffordableandreliablepublictransportationwherepossiblecansignificantlyreduceemissionsfromtransportation.Optimizingresidentialenergyconsumptionthroughtheelectrificationofheatingandcooking,andadoptingsimplelifestylechangessuchasshortershowersoradjustingthesetpointforheatingandcoolingonthermostats,coupledwithsustainableurbandesigncanreduceresidentialemissionsbymorethan50%.113Activeconsumerengagementandparticipationarepivotalforeffectivedemand-sidemanagement.Whilebehaviouralandcognitivebarriershavebeenpersistentinenergyefficiencyinitiatives,theexperiencefromtheCOVID-19pandemicdemonstratedthatsocialbehaviouradaptationispossibleintheshortterm.Lessonsfromthemanagementofthepandemichighlighttheimportanceoftransparentinformationdisseminationcampaignsandofthetrustininstitutions.Additionally,asthepandemicrestrictionsdisproportionatelyaffectedlow-incomehouseholds,italsohighlightsthedistributionalconsiderationsoflifestyleandbehaviourchangeprogrammes,emphasizingtheneedforequitymeasurestoenhancesocialacceptance.Currentparadigmswithheightenedenergysecurityrisksindicatetheneedtofurtherharnessthesynergisticpotentialofenergyefficiency.FosteringEffectiveEnergyTransition2022Edition18Thewindowofopportunitytopreventtheworstconsequencesofclimatechangeisclosingfast.Itisessentialtomaketheenergytransitionrobustbybuildingthenecessaryenablersthatwillkeepthetransitiongoingiftheeconomicandenergysecuritycontextdeteriorates.Thisincludesmakinglegallybindingcommitments,designinglong-termvisionsfordomesticenergysystems,buildinganattractiveinvestmentlandscapeforprivatecapitalandpromotingconsumerparticipationaswellasbuildingthelocalworkforcerequiredforthetransition.AsoutlinedintheETIframework,thereadinessofacountrytotransitionitscurrentenergysystemtowardsonethatenablesthedevelopmentofasustainablelow-emissioneconomydependsonamultitudeoffactorsthatcanbemeasuredandanalysedalongacountry’senergysystemstructure,regulationandpoliticalcommitment,investmentclimate,humancapitalandconsumerparticipation,infrastructureandbusinessenvironment,andtherobustnessofinstitutions(Figure1).Progressonthesedimensionsiscriticalforcountriestoincreasetheirsupportoftheenergytransitionandacceleratetheirefforts.However,improvingthesedimensionsisgradualasthepathtoinstitutional,socio-economicandsystemictransformationsdependsonestablishedprocessesandsystems.Giventhedisruptiveenvironmental,macroeconomicandgeopoliticaleventsofthelasttwoyearsandtheirimplicationsfortheenergytransition,thissectionoutlinesfourmeasuresthatcountriescantaketosupporttheirtransitionjourney.1)Anchoringclimatecommitmentsinlegallybindingframeworksthatcanendurepoliticalcyclesandenforcethelong-termimplementationofnationaltransitionobjectivesThelong-termstructuralchangesrequiredfortheenergytransitionwilltakelongerthantheusual4-to5-yearpoliticalcyclesofmanycountriessotheymustbemaderesilienttopoliticalchangesintheexecutive,legislativeandjudicialbranchesofgovernment.Turningclimatecommitmentsintolaws(e.g.Franceattemptedachangeinconstitutionallawin2021114)cansupportthetransitioneffortinthelongrun.Climate-relatedlawsthenoverarchthepoliciestopromoteenergyefficiency,renewableenergyandelectricityaccess,theparticipationininternationalclimatediplomacy,theevolutionofGHGreductiontargets(both2030nationallydeterminedcontributionsandlonger-termnet-zerotargets),aswellasthepolicystabilityrequiredforlong-termenergysystemtransformation.Countries,citiesandbusinesseshavevowedtoachievenet-zeroemissionsinthecomingdecades.In2021,awaveofpledgesweremade,raisingthenumberofcountriescommittedtonet-zerotargets,covering88%115ofglobalemissions.Particularly,priortoCOP26,severalTransitionreadinessenablers1.4FosteringEffectiveEnergyTransition2022Edition19Statusofcountries’net-zerotargets,2021FIGURE8Net-zerotargetstatusShare(%)ofglobaltotalenergysupplyShare(%)ofglobalCOemissionsfromfuelcombustion2Share(%)ofglobaltotalnominalGDP0AchievedInlawInpolicydocumentDeclaration/pledgePurposed/indiscussionUncovered1444215161394421125050122500Note:TheboundariesshowninthismapdonotimplyofficialacceptanceorendorsementbytheWorldEconomicForum.Sources:EnergyandClimateIntelligenceUnit;InternationalEnergyAgency;WorldBanklargeeconomiessubmittedmoreambitious2030emissionreductiontargets,notablyChina,theEUandtheUnitedStates.But,althoughthesenewtargetscanreduceGHGemissionsby7.5%thisdecade,55%isneededby2030toalignwiththeParisAgreementgoalofkeepingtheglobaltemperaturerisebelow1.5°C.116Tohelppoliticalambitionstranslateintoon-the-groundaction,introducingnet-zerocommitmentsintoalegalinstitutionalframeworkandcomplementingthemwithbindingpoliciescouldhelpstrengthentheurgeforactionoffuturegovernmentsregardlessofotherexistingpriorities.Todate,13countrieshavemadetheirnet-zerotargetslegallybindingand33countrieshaveputtheirnet-zerotargetsinpolicydocuments.117Figure8showsthestatusofcountries’net-zerotargetsin2021.The2050climategoalsrequiremorecountriestotransitiontheircommitmentintolegallybindingframeworkstoenforcelong-termon-the-groundclimateaction.2)Takingandholdinglong-termdecisionswithregardtothedecarbonizationofthenationalenergysystemstructureAcountry’sexistingenergysystemstructuresignificantlyinfluencestransitionreadinessasthepathdependsonlegacyinfrastructureandresourceendowments.Technologicallock-in,economiesofscale,thelonglifetimesofcurrentenergyinfrastructureandend-usebehaviourpatternsFosteringEffectiveEnergyTransition2022Edition20createbarrierstoentryfordisruptivetechnologies.Creatinganewenergysystemthatcangraduallycomplementandeventuallysupplantthelegacyinfrastructurerequiresenhancingtheflexibilityofelectricitysystem,improvingend-useefficiencyandincreasingtheshareofrenewableenergyinpowergeneration,amongothermeasures.Asanexample,coalisgenerallythemostpollutingsourceofpowergenerationtoday.ItemitsnearlytwicetheamountofCO2whencombustedcomparedtonaturalgasatmostpowerplantswhereitisused,118yetitstillrepresentsamajorshareofmanycountries’energymix.Long-termcommitmentsforthefutureofthenationalenergysystemstructurecanensurecountriesmakefundamentalandirreversiblechangesinlinewiththeirenergytransitiongoals.Theemergencyreturnstocoalwitnessedinrecentmonthsshouldalsomakecountriesrethinkhowtheycanbuildresilienceandcontingencyplansfortheirenergysystemsthatdonotrelyoncoal.119Multinationalpartnershipscanplayacrucialroleinensuringlong-termvisionsandstructuralchangesareimplemented.Forinstance,theJustEnergyTransitionPartnership120betweenSouthAfricaandFrance,Germany,theUnitedKingdom,theUnitedStatesandtheEUwillprovidesupporttotransformSouthAfrica’seconomyawayfromcoalandtowardsalow-emissionclimateresilienteconomy.3)Buildinganattractiveinvestmentlandscapeforprivatecapital,bothforeignanddomestic,tofinanceenergytransitionprojects,especiallyinemerginganddevelopingcountriesAcountry’sabilitytoattractcapitaldependsonamultitudeoffactors,includingsupportivepolicyandlegalframeworks,stabilityofthecurrencyandexchangerates,asecureandsafeenvironment,thequalityofinfrastructureandtheavailabilityofthelatesttechnologies.Adoptingandpromotingthesefactorscancreatestrongmomentumforcapitaltoflowintothetransformationoftheenergysystem.Whileadvancedeconomiescontinuetoattractcapitalunderfavourableterms,includingforhigher-risknewlow-emissiontechnologyindustrialprojects,developingandemergingcountriesarestillstrugglingtoattractbothforeignanddomesticprivateinvestmentsessentialforthefinancingoflargeenergyprojectsandinfrastructure.Eventhoughthelastdecadesawrecordinvestmentinnewrenewablepowercapacity($2.6trillionglobally121),mostoftheseinvestmentsweremadeincountrieswithstableandfavourableinvestmentlandscapes,suchasChina,theUnitedStates,JapanandGermany(Figure9).Additionally,theeffectsoftheCOVID-19pandemicwerefeltdifferentlyacrossregions,withemerginganddevelopingcountriesfacingacutechallengesgiventhefiscalimpactsofthepandemicontheirnationalbudgets.Owingtothecontinuedreluctanceofanumberoffinancialinstitutionstofundthetransitioninemerginganddevelopingcountries,122itisworthstressingthatclimategoalscannotbereachedwithoutaglobaltransition;solutionsmustbefoundtorallythefinancialsector.Technicalandfinancialsupporttoemerginganddevelopingeconomies,leveragingamixofpublicandprivateinvestmentinstruments,grants,concessionalfinanceandmarket-basedcapitalcouldhelpkeepthetransitionontrack.Internationalcollaboration,notonlyonfinanceflowsbutalsoonpolicies,regulatorypractices,besttechnicalpracticesandnewbusinessmodelsiscritical.Whilegovernmentscontinuetoputinplacethenecessaryenablerstobuildprivateinvestors’confidence,investingentitiessuchasmultilateraldevelopmentbanks,philanthropicfunds,specializedbranchesofsovereignwealthfundsandcommercialbankscanplayaroleinbridgingthegapandinvestincountrieswherehigherfinancialrisksareinvolved.FosteringEffectiveEnergyTransition2022Edition214)Promotingconsumerparticipationandbuildingthelocalworkforcerequiredforthetransition,payingparticularattentiontothelivelihoodsofvulnerablepopulationsConsumerparticipationinvolvesincreasingcustomerawarenessofthestakesofclimatechange,ofcarbonfootprintsandofindividualactionsthatcanbetakentosupportnationalclimatechangeambitions.Theenergytransitionwilllikelycreateasignificantnumberofnewjobsandrequireatrainedworkforcewithverydifferentskillsetsthanacountryhashistoricallydeveloped(e.g.petrotechnicalprofessionalsinoilproducingcountries).Developingtheconsumersandworkersofthefuturecanbeakeyenablerofalong-termsustainableenergytransition.Whenempowered,environmentallyconsciousconsumerscanachievesubstantialemissionreductions,asshownbyarecentstudy123thatresearchedhouseholdpreferencesforreducingGHGemissionsincitiesinFrance,Germany,NorwayandSweden.Theseconsumerscandrivedistributedgridnetworks,applyenergyefficiencymeasuresandreducetheiroverallcarbonfootprint.Policiesraisingtheawarenessofconsumers’energyconsumption,suchasmandatingenergylabelsonproductsandprovidingpeer-to-peercomparativeenergyconsumptionreportstohouseholds,orprovidingmonetaryincentiveslikevariablepowerratesandfeed-intariffscanbeusedtodrivelong-lastingbehaviouralchangesinconsumers.Whilemovingtocleanenergycancreatenewjobsinthecleanenergyindustry,itcanalsoleadtojoblossesinotherindustriesandcanbedetrimentaltothelivelihoodofdependentcommunities.Inaddition,thetransitioncannegativelyaffectlow-incomehouseholds,whichmightstruggletokeepupwiththerisingcostsandconsumptionchangesbroughtaboutbythetransition.Governmentscanpartnerwithprivateinstitutionstoreskill,cross-skillorupskilltheexistingworkforce,particularlywithinjobsatrisk,suchasthoseinthefossilfuelindustries.Theycanalsoadapttheeducationsystemtostayabreastofthetechnologiesintherenewablesanddigitalspace.Similarly,policiesthatdeveloporexpandsocialprotectionbenefitstoaccompanyenergytransitionreformscanbeusedtomitigatethenegativeeffectsonlow-incomehouseholds.Renewableenergycapacityinvestment,top20countries,from2010tofirsthalfof2019($billion)FIGURE9ChinaUnitedStatesJapanGermanyUnitedKingdomIndiaItalyBrazilAustraliaFranceSpainCanadaNetherlandsMexicoBelgiumSwedenSouthAfricaTurkeyChileDenmarkEurope1758698356202179122908255474535332523222020191414Note:1AllEuropeancountries,includingthoselistedbeyondthetop20,plustheUnitedKingdom.Source:UNEP,GlobalTrendsinRenewableEnergyInvestment2019,11September2019,https://www.unep.org/resources/report/global-trends-renewable-energy-investment-2019FosteringEffectiveEnergyTransition2022Edition22Unlockingthenet-zerotransformationofindustries2Aparadigmshiftincollaborationisneededtoincreaseprogress.KeyhighlightsIndustry-heavyeconomiesmayfaceadditionalchallenges,duetothegreatercomplexityoftheindustrialnet-zerotransformationAnewgenerationofcollaborationmodelscouldhelpovercometheindustrydecarbonizationchokepointsFiveindustries–cementandconcrete,ironandsteel,oilandgas,chemicals,andcoalmining–represent80%ofallindustrialemissionsIndustryleadersnowfavourcollaborationandtransparencyovercompetition,andviewdecarbonizationasawin-winsolutionIndustriesneedtoovercomedifficultchokepointswhosesolutionsareseldomfoundwithinasinglecompanyorevenindustryThankstoindustrypioneers,multiplecollaborationmodelshaveemergedthatcouldbereplicatedandexpandedtohelpadvancethejourneytonetzero142536FosteringEffectiveEnergyTransition2022Edition23Industriesgeneratemorethan30%ofanthropogenicemissions124–nonet-zeroeconomyispossiblewithoutthem.Yet,industriesfaceconsiderablechallengestodecarbonize,suchasthelackofcompetitivelow-emissiontechnology,thelimiteddevelopmentofenablinginfrastructureorthescarceavailabilityofcapitaltotransform.Goingforward,“cleandemand”signalscouldbeaturningpointtoaccelerate“cleansupply”.Industriesarethebackboneoftheglobaleconomy,providingtheenergyandmaterialsneededtosustainandgrowmodernsociety.Emissionsfromfuelcombustionandprocessesinindustriescontributetomorethan30%ofglobalGHGemissions125(outofaglobaltotalof51GTofCO2equivalent126);hence,thetransformationofindustriesiscriticaltoanet-zeroworld.Whileencouragingprogresshasbeenmadeinthepastdecadetodecarbonizepowergeneration(therenewablesshareinglobalelectricitygenerationrosefrom20%to29%between2010and2020127),manyindustriesarestilldefiningtheirpathwaystoalow-carbonfuture.Particularly,fiveheavyindustries–cementandconcrete,ironandsteel,oilandgas,chemicals,andcoalmining–whichtogetherrepresent80%ofallindustrialemissions(Figure10),needtomakeamajorshiftby2030tokeepthenet-zero2050objectivewithinreach.128Populationandeconomicgrowthwilllikelycontinuetofueldemandforindustrialproductsbeyond2050,andsowilltheenergytransitionitself.Forinstance,aluminium,steelandmanyminerals129arekeyelementsinthemakingofsolarpanels,windturbines,powergridsandelectricvehicles.Steeldemandisprojectedtoriseby30%,130cementandammoniaby40%131,132andaluminiumby80%133inthecomingthreedecades(Figure11).Inaddition,allbutthemostaggressivedecarbonizationscenariosforecastthatoilandgascouldcontinuetoplayasignificant,thoughdiminished,roleintheenergymixthrough2050andbeyond.134Nonetzeroby2050withoutindustries2.1Industriesarethebackboneoftheglobaleconomy;theirtransformationiscriticaltoanet-zeroworld.Emissionsbysectorvsglobalemissions(51GTCO2e)FIGURE105heavyindustriesrepresent80%ofindustrialemissionsElectricity(27%)Agriculture(19%)Transportation(16%)Buildings(7%)OilandgasSteelChemicalsCoalminingOtherindustries(6%)Cement6%6%6%5%2%Notes:Oilandgasalsoincludesrefining;Steelincludesiron;Cementincludesconcrete.Source:BreakthroughEnergy,SectoralAnalysis,“EmissionsbreakdownforManufacturing,bysubsector”FosteringEffectiveEnergyTransition2022Edition24Globaldemandprojectionsbyindustry,2050FIGURE11+37%+31%+30%+17%+43%+80%AluminiumAmmoniaSteelNaturalgasOil34Cement171MT95MT4.2BT4.2BT185MT253MT228MT1.9BT380Bcf/D88MB/D103MB/D24MB/D169Bcf/D495Bcf/D2.0BT2.5BT6.0BT150MT2050-business-as-usualscenario12050-net-zeroscenario22020Notes:1BasedonIEAStatedPoliciesScenario(STEPS)forallexceptaluminium(InternationalAluminiumInstitute(IAI)Business-as-Usualscenario)andcement(GlobalCementandConcreteAssociation(GCCA)Business-as-Usualscenario);2BasedonIEANet-Zero2050scenarioforallexceptaluminium(IAI2050Net-Zeroscenario);3Demandforaluminiumbasedon2019data;4Ammoniademanddoesnotincludeammoniaasanenergycarrier;Bcf/D:billioncubicfeetperday;BT:billiontonnes;MB/D:millionbarrelsperday;MT:metrictonne.Sources:IEA,NetZeroby2050:ARoadmapfortheGlobalEnergySector,2021;IEA,IronandSteelTechnologyRoadmap:Towardsmoresustainablesteelmaking,2020;GCCA,ConcreteFuture:TheGCCA2050CementandConcreteIndustryRoadmapforNetZeroConcrete,2021;IEA,AmmoniaTechnologyRoadmap:Towardsmoresustainablenitrogenfertiliserproduction,2021;IAI,“AluminiumSectorGreenhouseGasPathwaysto2050”,2021;IEA,WorldEnergyOutlook2021,2021Moreover,viablealternativestotoday’sheavyindustryproductsremainlimited.Newcementchemistriescouldbelesscarbon-intensivebutarelikelytosubstituteonlyasmallshareoftheglobalmarketduetoscarcitiesofresourcesupply(e.g.flyashes,calcinatedclays)andthedifferencesintheresultingcementproperties.Whileothermaterialsprovidealternativestosteel,“itshighstrength,recyclabilityanddurability,theeasewithwhichitcanbeusedtomanufacturegoods,anditsrelativelylowcostmakeitswholesalesubstitutionunlikely”evenby2050.135Intheabsenceofscalablesubstitutes,theonlypotentialwayforwardwouldbeaggressivedecarbonization.Heavyindustries,particularlysteel,cement,chemicalsandaluminium,areoftenreferredtoas“hard-to-abate”sectors,i.e.hardtodecarbonize,duetoanumberofintrinsiccharacteristics:–Thesesectorshaveenergy-intensivecomplexvaluechainsthatsometimesalsogenerateprocessemissions(e.g.60%ofcementemissionscomefromthecalcinationoflimestone;13642%ofoilandgasemissionscomefromventedandfugitivemethane137).–Theyarecapital-intensivesectorswithlonginvestmentcyclesandlowmargins,allofwhichpresentchallengesfortheindustrytochangecourse;opportunitiestosignificantlycutemissions,suchasformajoroverhaul,reliningorplantrebuilding,onlyappearevery2-3decades.138–Theyoperateproductionfacilitiesthatarehistoricallylocatedclosetonaturalresources(e.g.acoalmine,quarry)and/ordemandcentres;theselocationscanbequitedistantfromabundantcleanenergysources(e.g.solar,hydropower).FosteringEffectiveEnergyTransition2022Edition25–Theyarecriticaltodomesticeconomieswhilesupplyingintoglobalmarkets,makingemissionreductionmeasurescomplextointroduceifrequirementsmightleadtoaweakenedcompetitiveposition.–Theyoftenemployalargeworkforceofspecialistsandsustainextensivenetworksoflocalsuppliersandcustomers.Pacingajusttransitionforthesesectorsisapriorityforpublicauthorities.139G20countries,whichproduce85%ofglobalindustrialoutput140andareresponsiblefor75%ofglobalGHGemissions,141canprovideausefullenstoexaminethenexusbetweenenergytransitionandindustrialactivities.Despitesimilarhistoricdevelopmenttrajectories,thelevelofpresent-dayindustrialactivityacrossG20economiesvariesgreatly.Theindustrialsector’scontributiontothetotaleconomyrangesfrom19%to47%ofthetotalvalueaddofgoodsandservicesproduced(grossvalueadded,GVA),accordingtoUnitedNationsConferenceonTradeandDevelopment(UNCTAD).142Acountry’seconomicactivityiscommonlycategorizedintothreesectors:theagriculturesector(consistingofagriculture,livestock,forestryandfishing),theindustrysector(madeupofmanufacturing,mining,constructionandutilitiesprovidingelectricity,gas,water)andtheservicessector(includingadiverserangeofservices,asdistinctfromgoods).Therelativesharesofthesesectorsintotaleconomicactivityevolvesovertimeascountriesdevelopandindustrialize.Typically,ascountriesindustrialized,theshareoftheindustrysectorinoutputandemploymentrose,whilethatoftheagriculturalsectorfell.Afterindustrialization,atanadvancedstageofeconomicdevelopment,theshareoftheindustrysectorinbothoutputandemploymentdiminished,whilethatoftheservicessectorrose.143AnassessmentofenergytransitionprogressinG20countries,asobservedthroughtheETI(2021),indicatesaslowerpaceoftransitioninindustry-heavyeconomies,suggestingthegreatercomplexityforcountriestodecarbonizeenergysystemstiedtoindustrialperformance.Specifically,G20countrieswithalargershareofindustrialactivity(includingmanufacturing,mining,constructionandenergy-producingactivities)scorelowerthantheirG20counterpartswithalowershareofindustry(Figure12).G20overall2021EnergyTransitionIndexscoresvsshareofindustryFIGURE121040455055606570758015Shareofindustrysectorintotalvalueadded(%)CountryETI2021score20253035404550ChinaIndonesiaSaudiArabiaSouthAfricaIndiaRussianFederationTurkeyKorea,Rep.MexicoGermanyAustraliaCanadaFranceUnitedKingdomItalyBrazilUnitedStatesJapanArgentinaEU27SizeofthebubblerepresentsnominalGDP,US$currentSources:WorldEconomicForumETI2021analysis;UNCTADstatistics;WorldBankdataFosteringEffectiveEnergyTransition2022Edition26Theanalysisofcountries’historicalETIsub-indices,dimensionandindicatorsshowafewnoteworthytrends.CountrieswithalargershareofindustrialactivitytendtosufferfrompoorerairqualityandhavehigherCO2intensityofGDPasaresult.Theseeconomiesalsotendtorelymoreonfuelsubsidiestomaketheirindustriesmorecompetitive.Inaddition,G20countrieswithalargershareofindustrialactivityarelikelytofacetransitionreadinesschallengescausedbyapossiblecombinationofindirectfactors.Thesefactorscanincludethelackofavailabilityofskilledlabourandofaninnovativeenvironmenttofostereconomicactivitieswithhighervalueadditionandproductivitylevels.Theseresultsareinlinewiththeviewthatdecarbonizinganeconomywithalargeindustrysectorislikelytobechallengingsinceonemustaddressemissionsnotonlyfromheat,powerandtransportbutalsofromcomplex,energy-intensive,high-emissionindustrialprocesses.Inthisregard,thedecarbonizationofindustry-heavyeconomieswillrequirelargeamountsoftransformativecapitalandaccesstolow-emissiontechnologiesalongwithassociatedinfrastructure,suchaslowemissionpower,hydrogenandcarbonstorage.Ultimately,thepathisstilllongforallindustries,andnotonlythehard-to-abatesectors,astheylooktoimplementdecarbonizationstrategies.IntheIEANetZeroby2050roadmap,whileglobalemissionsareexpectedtodropby81%between2020and2040,industrialemissionsareonlyexpectedtodecreaseby58%,whichwouldaccountforhalfof2040emissions.144G20countries,whicharelikelytohaveconsiderablymoreresourcesathandthanothernations,areoftenconsideredtohaveagreateropportunitytoleadintheemergenceanddiffusionofzeroandlow-emissionsolutionsforglobalindustries.145Thisalignswiththeprioritiessetduringthe16thG20summit,heldinOctober2021inRome.Thesummitresultedinanumberofagreementsonclimatechange,suchasmaintainingthe“goaloflimitingglobalwarmingto1.5°Ccomparedtopre-industriallevelswithinreach”andto“accelerateactionstowardsachievingglobalnet-zeroGHGemissionsorcarbonneutralitybyoraroundmid-century”.146Nevertheless,areflectiononthechallengesaheadforindustrialdecarbonizationandthesignificanteffectsofhigh-impacteventssuchastheCOVID-19pandemicindicatesmorethaneverthatinternationalcooperationmustbeakeyfactortoaccelerateindustrialdecarbonization.ThereferencetoG20countriesbynomeanssuggeststhatothercountriesoutsidetheG20arenotneededtoleadtransitioninitiativesaroundindustry.Theyareinfactessentialtopositivelyimpacttheprogressofthetransition,especiallyasemergingmarketsanddevelopingeconomiesareexpectedtoseethebiggestincreaseinenergygrowththrough2050.147Toenableglobalindustrialdecarbonization,internationalcooperationneedstobestrengthenedthroughtechnologicaltransfersandfinancingsupporttoeconomiesinneed.TheG20countrieshavefocusedonthetheme,RecoverTogether,RecoverStronger,recognizingtheimportanceofcollectiveactionandinclusivecollaborationbetweenmajordevelopedcountriesandemergingeconomiesaroundtheworld,andencouragingallcountriestoworktogethertoachieveanacceleratedandmoresustainablerecovery.148Toenableglobalindustrialdecarbonization,internationalcooperationneedstobestrengthenedthroughtechnologicaltransfersandfinancingsupporttoeconomiesinneed.FosteringEffectiveEnergyTransition2022Edition27AcceleratingtheenergytransitionistheonlyoptionbyArifinTasrif,MinisterofEnergyandMineralResourcesofIndonesiaGUESTPERSPECTIVEThelatestIntergovernmentalPanelonClimateChangereportindicatesthatglobalCO2emissionscontinuetoriseandhavereachedanunprecedentedlevel,creatingmoresevereimpactsonhumanity.Asthekeyfactorofenhancingambitionstoconfrontthissituation,theaccelerationofenergytransitionsisamust.Moreover,intheaccelerationtowardssustainableenergytransitions,weneedtoembedjusttransitions.Asaddressedinthe2030AgendaforSustainableDevelopment,particularlySustainableDevelopmentGoal(SDG7),wemustensureuniversalenergyaccesswhileimplementingenergytransitions,inordertoleavenoonebehind.Inthislight,thecriticalchallengesofenergytransitionsshouldberevisited.First,countrieshavetheiruniquechallengesandneedsintransitioningtheirenergysystems.Theexistingenergystructuresandsystems,frominfrastructuretotheestablishedorganizationalsystems,shouldbecontinuouslytransformedandreadjustedtorespondtoglobalchallengesandsupporttheprocessofenergytransitions.Second,justenergytransitionswillrequiresignificantfinancing.ThischallengehasbeenexacerbatedbytheeffectsoftheCOVID-19pandemic,asaround150millionpeoplehavebeenpushedbelowthepovertyline.Countriestendnottodisadvantagethesocio-economicburdensoftheirpeople,andmeasuresarenecessarytomitigatethedisproportionateimpactsonvulnerablecommunities.Third,justenergytransitionswillrequirechangingandshiftingtechnologies,jobsandothereconomicopportunities.Newskills,capacitiesandexpertiseshouldbedevelopeddomesticallytosupporttheavailability,affordabilityandreliabilityofsustainableenergy,pertainingtothebroaderpublicinterests.Ajustenergytransitionwillcreatenewopportunitiessuchasjobsandotherprospectsandwillsupportglobalrecovery.Inthiscontext,theIEArecommendsfourclustersfor“people-centredenergytransitions”:decentjobsandworkers’protection;socialandeconomicdevelopment;equity,socialinclusionandfairness;andpeopleasactiveparticipants.Wemustunderlinetheseclusterstosetabenchmarktopreparetowardsthecurrentandfuturechallengesofglobalenergytransitions.Intheaccelerationofenergytransitions,innovationsshouldbecontinuouslyexploredandfinancedtosupportexpansion.Thisscale-uprelatestoindustrialdecarbonization,whichiswelladdressedinthisForumreport.Thefocustrulyrevealsthegreatchallengeswearefacinginenhancingemissionreductions.Decarbonizingthehard-to-abateindustrieswillrequirenotonlynewandmorereliabletechnologiesbutalsocompaniestotransformentireproductionprocesses.Thechallengesaremoreevidentinthecontextsofemergingeconomiesanddevelopingcountries,whichneedtofinanceandsupportindustriesforsocio-economicgoalswhileimprovingsustainability.Industriesandenergytransitionsinvolvemulti-SDGsgoalsonindustriesandinfrastructures,sustainableenergy,decentjobs,climateactionsandotherrelatedgoals.Reflectingthesesignificantchallenges,internationalcooperationmustbecomethekeyfactortoenableindustrialdecarbonization.HighlightingtheG20figures,theG20countrieshold80%ofglobalindustrialoutput.ThelandscapeoftheG20isdividedbetweenthecountriesoftheGlobalNorthandGlobalSouth.Theimportanceofcommonbutdifferentiatedresponsibilities,theprincipleofinternationalenvironmentallaw,willcontributetoenhancingjustenergytransitions.Internationalcooperationneedstobestrengthenedwithtechnologicaltransfersandfinancingsupporttoemergingeconomies.Inthiscontext,theG202022IndonesianPresidencyiskeentopromotethethreepillarsthatthePresidencyconsidersmostrelevanttoourcurrentglobalchallenges:globalhealtharchitecture,digitaleconomictransformationandenergytransitions.ThesepillarsareexpectedtoactualizethePresidency’smaintheme,RecoverTogether,RecoverStronger,whichinternationalcommunitiesarecurrentlyworkingtowards.Theenergytransitionspillaraimstostrengthenjustenergytransitionsandacceleratetheirpace,bycollectinginitiativestopreparethepathwaystowardstheacceleration.Theforumonenergytransitionssetsthreemainpriorities:access,technologyandfinancing.Inthepriorityareaontechnology,weseektoaddressissuespertinenttoindustrialdecarbonization,suchastheintegrationofrenewables,expansionofthewidestvarietyoftechnologies,energyefficiency,andthedevelopmentofgreenerandcleanerindustry.Whilehavingnooptionbuttoaccelerateenergytransitions,nosinglestakeholdercancopewiththesetransformationalstagesalone.ThisPresidencyyearwillbecometheopportunitytoattractadditionalgreeninvestments,engagingmultistakeholders,internationalpartnersandglobalforums.FosteringEffectiveEnergyTransition2022Edition28Heavyindustrycompaniesincreasinglyfaceimplementationchokepointswhosesolutionsareseldomfoundwithinasinglefirmorevenindustry.Heavyindustriesarelikelytobethelastfrontierofdecarbonization.Inresponse,anincreasingnumberofheavyindustrycompaniesareestablishingnet-zerotargetsandstrategies.Forexample,theGlobalCementandConcreteAssociation(GCCA),whichrepresentsover40leadingcementcompanies,hasannouncedtheproductionofnet-zeroconcreteby2050.149Themomentumisgrowingacrossindustrialcompaniesandsectoralplayerssuchasbusinessalliances,butalsoacrossalargerecosystemofstakeholders,fromgovernmentstointernationalorganizationsandnon-governmentalorganizations(NGOs).Forexample,theMissionPossiblePartnership(MPP)hasoutlinedroadmapsforfourhard-to-abateindustrialsectors(concrete,steel,aluminium,chemicals)toreachnetzero.150Whilepledgesandroadmapsareessentialtojump-startthenet-zerotransformationandtoprovidealong-termvision,tacklingtheimplementationchallengesfacedbycompaniesiscriticaltoprogressatthenecessarypace.Tenchallengeshavebeenidentifiedas“chokepoints”,orbarriers,thatwilllimitthetransitionunlesssolutionsarefoundoutsideofbusiness-as-usualimprovements:1.Breakthroughtechnologies:Mosttechnologiestodecarbonizeheavyindustrysectorsareeitheryettobeprovenatscaleorexpensivecomparedtocurrentalternatives(e.g.+15-40%forlow-emissionsteel,151+50-85%forlow-emissioncement,152+10-100%forlow-emissionammonia153).Solutionsmustbefoundtoacceleratethetechnologyreadinesslevels(scaleandcost)of“clean”productionprocesses.1542.Infrastructureaccess:Manynet-zerocompatibletechnologiesconsideredbyheavyindustriesinvolvelow-emissionhydrogen(e.g.fordirectreducedironinsteelmaking155),renewablepower(e.g.formechanicalvapourrecompressioninaluminium-making156)orcarboncapture,utilizationandstorage(e.g.cementplants157).SolutionsmustbefoundtoprovidetheinfrastructurerequiredforsupplyingtheseenergysourcesandhandlingcapturedCO2.3.Demandforlow-emissionproducts:Today,low-emissionproductsinheavyindustriesrequireahighsellingpriceforproducerstomaintaineconomicmarginstructures.Solutionsmustbefoundtogeneratereliabledemand-sidesignalsandprovidevisibilityonofftaketoreducerisksforfirstmovers.4.Policiesandregulationsenablement:Publicincentives,includingdirectorindirectcarbonpricing,subsidiesortaxbreaks,productusespecificationsortechnologymandates,stronglyinfluencethebusinesscaseforlow-emissioninvestmentsinheavyindustries.Solutionsmustbefoundtoalignpublic-privateobjectivesNet-zerochokepoints:Acallformultistakeholdercollaboration2.2FosteringEffectiveEnergyTransition2022Edition29whilealsoensuringefficiencyandajusttransformation;lessonsexistfromthegrowthofwindandsolarenergies.5.Scalingcapital:Heavyindustries’low-emissionpilotprojectsrequiresignificantcapitalexpenditurewhileofferinglesscertainorimmediatereturnsthanotherassets.Solutionsmustbefoundtoattractcapitalforinvestmentsinnecessaryhigherrisk,subeconomicprojectsthatcoulddemonstratecommercialscalefeasibility–notonlyinadvancedeconomiesbutalsoinemerginganddevelopingeconomieswherecapitalmarketsarelessdevelopedandthecostofcapitalishigher.6.Transitioncapabilitybuilding:Thetransformationrequiresheavyindustryfirmstointegratenew,oftenverydifferent,capabilities.Justandsustainablesolutionsmustbefoundtorapidlyupskillorreskillcompanies’managementandworkforcestoalignexpertisewithnewstrategiesandactivities.7.Carbonmeasurementandmanagement:Measuring,monitoringorforecastingemissionsdifferentinnatureandscopeiscomplexforheavyindustryfirmswithmyriadindustrialprocesses.Solutionsmustbefoundtohelpcompaniesestablishstandardizedtransparencyforeffectiveaction.8.Supplychaincircularity:Primaryproductiongeneratesmanytimestheemissionsofsecondary/recycledproduction(e.g.4timesforsteel,15830timesforaluminium159).Solutionsmustbefoundtoadaptcompanies’businessmodelsandproductionprocessestocircularity.9.Scope3abatement:Scope3emissions160(e.g.estimatedataround80%ofalloilandgasemissions161and30%ofammoniaemissions162)areparticularlyhardtomeasureandaddress.Solutionsmustbefoundtocreateend-to-endtransparencyandeffectiveabatementsolutionswithsuppliersandcustomers.10.Residualemissionsoffsetting:Forheavyindustries,reachingthenet-zeroendgoalwillrequiresubstantialinvestmentsinGHGavoidanceorremovalprojectstoaddressresidualemissions.Solutionsmustbefoundtoacceleratetheprovisionofqualityoffsetsolutionsatscaleinatransparentandimpact-drivenmanner.Amongthesechokepoints,technology,financingandpoliciesaretypicallyalreadyattheforefrontofcompanies’andgovernments’net-zerostrategies.However,inaddition,itiscriticaltoboostdemand-sideinitiativessuchastheFirstMoversCoalition163andtheCleanEnergyMinisterialIndustrialDeepDecarbonisationInitiative(IDDI)164tocreateastrong“cleandemand”pull(e.g.visibilityonofftakevolumes,acceptanceofgreenpremiums,etc.)forlow-emissionproducts.Demand-sideinitiativescanbeagamechangerforsectorswherelow-emissiontechnologiesalreadyexistbutinvestmentslag,suchassteelandammonia.Today,suchinitiativesarescarce,andglobal,synchronizedeffortsareneededtoreplicateandscalethemandchannelmuchlargerinvestmentsintolow-emissiontechologiesandproductionassets.FosteringEffectiveEnergyTransition2022Edition30FirstMoversCoalitionbyJohnKerry,USSpecialPresidentialEnvoyforClimateGUESTPERSPECTIVETheurgencyoftheclimatecrisisanditsexistentialthreattotheplanetrequireanall-hands-on-deckapproach.Inconcertwithambitiousgovernmentpolicies,privatesectorleadershipthatrecognizesandseizestheenormousopportunitiesinthistransitioniscriticalfortheworldtoswiftlyreachnet-zeroemissions.Thehighest-leverageclimateactionthatcompaniescantakeistodramaticallyacceleratetheenergytransitioninthesectorsoftheglobaleconomythaturgentlyneedcleansolutionstoreachcommercialscale.That’swhylastyearattheCOP26meetinginGlasgow,PresidentBidenandtheWorldEconomicForumlaunchedtheFirstMoversCoalition.Leadingglobalcompaniesaresendingthebiggestdemandsignalinhistoryfortechnologyinnovationacrosstheso-called“hard-to-abate”sectors.Thesesectors,whichincludeheavyindustryandlong-distancetransportation,alreadyrepresentathirdofglobalcarbonemissionstodayandcouldproduceamajoritybymid-century.ThesecompaniesrecognizethatjoiningtheFirstMoversCoalitionrepresentedadualopportunitytotakeactiononclimateandseizecompetitiveadvantageatthesametime.Thirty-fivecompanies,representing$6trillioninmarketvalue,madeambitiouspledgesacrosssteel,aviation,truckingandshipping.Theseareprecisepurchasingcommitmentsthatwillhelpbringemergingcleantechnologiestomarketby2030.Bycreatingearlymarketdemandforthesetechnologies,companiescansecureaccessaheadoftheircompetitorstocleansupplychainsandnextgenerationtechnology.ThetechnologysuccessesthatshapethemodernworldinspiredtheapproachoftheFirstMoversCoalition.NASA’scommitmenttopurchasenextgenerationspacecraftfuelledtheinnovationsthatmadeprivatecommercialspaceflightpossible.Similarly,purchasingcommitmentsbygovernmentsandnon-governmentalactorsalikeacceleratedtheintroductionoflife-savingCOVID-19vaccines.TheFirstMoversCoalitionisbringingthatstrategytothehard-to-abatesectorsoftheenergytransition.TheFoundingMembersoftheFirstMoversCoalitionarealreadycatalysingtechnologyinnovation,fromannouncingpurchaseordersfornewzero-carbonshipstobuyingelectricheavy-dutytrucks.Forexample,FirstMoversCoalitionsteelcommitmentcompaniespledgedthatby2030,10%ofnewpurchaseswillbegreensteelproducedwithvirtuallynocarbonemissions.OnlyoneSwedishplantcurrentlyproduceszero-emissionssteeltoday,usinggreenhydrogeninsteadoffossilfuels.Now,majorautomakersandenergydevelopersareensuringinvestorsandinnovatorscanrelyonthisdemandsignaltobuildadditionalcleansteelplants,knowingtheywillhavereadybuyersfortheiroutput.Thatinnovationisbadlyneeded.Inaviation,forexample,by2030thecompaniesthatmaketheFirstMoversCoalitionaviationcommitmentwilldisplace5%oftheirconventionalfuelwithtechnologiesandfuelsthatreducecarbonemissionsby85%.Thisisunprecedentedintheaviationsector,encouraginginnovatorstoscalepromisingapproachesspanningcleansyntheticfuels,next-generationbiofuelsandzero-emissionpropulsion.Bringingthesenewtechnologiestomarketinthisdecadeisabsolutelycriticaltodrivingdownthesector’semissionstowardszero.ThecompaniesthathavejoinedtheFirstMoversCoalitionrecognizethattheremayinitiallybeapremiumcostfortheseemergingtechnologies.Buttheyalsorecognizethatcreatingearlymarketstoscaleupbreakthroughtechnologiesisbyfarthemostcost-effectivewayforcompaniestospeedtheglobalenergytransition.CompaniesneedonlydevoteasmallfractionoftheirtotalpurchasingpowertomakeacriticalFirstMoversCoalitiondemandcommitment.Asthesetechnologiesgainamarketfoothold,theircostswillplummet,erasingthegreenpremiumandpavingthewayformassiveglobaltechnologydeployment.Thoughtheymaybefirst,thecompaniesthatjointheFirstMoversCoalitionaren’talone.PresidentBiden’sadministrationiscommittedtohelpingreachtheseambitioustechnologygoalsthroughawhole-of-governmentstrategy.Earlierthisyear,thePresidentannouncedthattheDepartmentsofState,EnergyandCommerce,aswellastheU.S.InternationalDevelopmentFinanceCorporation,areallpursuinginitiativestopartnerwiththeFirstMoversCoalition.PresidentBiden’sBipartisanInfrastructureLawwillinvesttensofbillionsofdollarsinsupplyingthecleantechnologiesthatcompanieshavecommittedtobuy,anddepartmentssuchastheEnergyDepartment’sLoanProgramsOfficearelookingtoinvestfurtherbillionsofdollarsincleantechnologyprojectsinhard-to-abatesectors.Outsideofthegovernment,FirstMoversCoalitioncompaniesbenefitfromclosecollaborationwithBillGates’BreakthroughEnergyCatalyst,theprimaryimplementationpartneroftheFirstMoversCoalition,aswellastheWorldEconomicForum,theMissionPossiblePartnership,andmanyotherorganizations.Thisisaremarkableperiodofcleantechnologyinnovation.In2021,climatetechnologiesraisedarecord$147billioninfundingfromventurecapitalists,corporationsandinstitutionalinvestors.Publicpolicyandprivateinvestmentarealigningtospeedthedevelopmentofcriticaltechnologysolutions.CompaniesthatjointheFirstMoversCoalitioncanseizetheopportunitytoridethiswave,demonstrateclimateleadershipandsecureearlyaccesstothecleansupplychainsofthefuture.FosteringEffectiveEnergyTransition2022Edition31Furthermore,itisworthnotingthatthetransitioncapabilitybuildingchokepointunderpinsallotherchokepointsaswellastheprogressrateoftheenergytransitionacrossalleconomicsectors.Thetransformationoftheglobaleconomytowardsnetzeroisstronglychallengingtheboundariesofcompanies’capabilityandexpertise.Thisisparticularlyevidentwhendecarbonizationpathwaysrequirecompaniestoshifttowardscompletelynewproductionprocesses(e.g.fromsteammethanereformingtoelectrolysistomakeammonia).AscenariofromtheInternationalLabourOrganizationestimatesthat25millionnewjobswillbecreatedfromtheenergytransitionby2030.165Preparingthecurrentworkforceandthenewgenerationforthesejobsessentialtothetransitionwillrequire“educationandtrainingstrategies;activelabourmarketmeasurestoprovideadequateemploymentservices;retrainingandrecertificationtogetherwithsocialprotectiontoassistworkersandcommunitiesdependentonfossilfuels”,amongothersolutions.166Thisreconfigurationoftheworkforcealsoprovidesauniqueopportunityforcompaniestoimproveinclusionanddiversity,creatingamoreequalandresilienteconomy.Enablingtheenergytransitionandreachingnet-zero:ThetalentimperativebyJulieSweet,ChairandChiefExecutiveOfficer,AccentureGUESTPERSPECTIVEAcrossindustries,everybusinessmustbeasustainablebusiness,bothbecauseitistherightthingtodoandbecauseitisasourceofcompetitiveadvantage.Tobecometrulysustainable,everypartofeverybusinessmustfindsolutionstodecarbonize.Innovationanddigitaltransformationareessential,buteventhebesttechnologywillnotleadtoourambitionwithouttherightpeople.Asthingsstand,weriskfailingtomeetkeyclimatetargetsduetoskillsshortages.Globally,thetalentshortageexceeded40millionskilledworkersattheendof2020,accordingtoUSLaborStatistics.By2030,organizationsworldwidecouldlose$8.4trillioninrevenuedirectlybecauseofthelackofskilledtalent.Thetalentshortagehasdeepimplicationsfortheenergytransitionanddeliveringonournet-zerocommitments.Theskillsinshortsupplyarethoserequiredtomeetthecomplexchallengesofbuildingacirculareconomy,decarbonizinghard-to-abateindustriesandscalingsustainablefuels.Itistimetoclosethegap.Ascompanies,weneedtoredefineourrelationshipwithtalentandmovefrombeingtalentconsumerstotalentcreators.Thisrequirestakingactionnowtodelivertwomindsetshifts.First,weneedtofocusonskills,notroles.ThisissomethingwearedoingatAccentureandforourglobalclients.Forexample,inearly2020,weknewweneededmorepeoplewithcloudskillsbecausethepandemicacceleratedourclients’needtomovetocloud.WeusedAIalgorithmsagainstourskillsdatabasetoidentifytherightpeopleandthenupskilled100,000peopleinsixmonths,empoweringourpeoplewithopportunityforgrowthwhilealsoaddressingcomplexclientneeds.Thesecondmindsetshiftistothinkaboutpeople’spotentialtolead.Theenergytransitionrequiresstrongleaderswhoactivelyembracenet-zeroambitionsandacttoembedsustainabilityacrosseveryareaofthebusiness.WhenIthinkaboutwhowewillneedtomeetoursustainabilityobjectives,IthinkofAccenture’seightleadershipessentials;thefirstistoalwaysdotherightthing,andtheeighthistocommittoactiveinnovationbothinsideandoutsideofAccenture.WearecontinuouslyredesigningAccenturetobuildtheleadershipbehavioursrequiredfortheenergytransition.Thisisincrediblyimportantaswemovetodeliveronnet-zerogoalsbecausenoneofuscanmakeabigenoughimpact–oncarbonreduction,equalityandequity,oranythingelse–workingalone.Weneedtopartneracrossindustries,andwithgovernments,non-profitsandcommunities,tocreatelastingchange.Weneedtomovebeyondpartneringonprojectsandthinkaboutpartneringforpurpose,sharingeverythingfromdatatotalent.Itisourresponsibility–andourprivilege–asleaderstohelpadvancesustainabilitybypartneringwithandcreatingatalentedglobalworkforcewiththeskillsandleadershipmindsettomoveatspeedandscale.FosteringEffectiveEnergyTransition2022Edition32Theanswersandemergingsolutionstoindustrynet-zerotransformationchokepointsarerarelyfoundwithinasinglefirmorevenindustry.Tosolvethesechallenges,heavyindustrycompanieswillneedtoexplorenewformsofcollaboration.TheMPPnet-zeroroadmapsclearlyshowwhereindustriesneedtobeby2030(e.g.over70commercial-scalelow-emissionsteelplantsproducing240MTby2030)andalsohighlightthatclosingthegapwillrequireanunprecedentedlevelofcollaboration.167Thankfully,heavyindustrycompanies,suppliers,customers,peersfromotherindustries,otherbusinesses,governments,civilsocietyandmanyotherstakeholdersrecognizetheneedtoreduceglobalemissions,includingtheirowncarbonfootprint.Thissharedchallengecreatescommoninterestsacrossorganizationsandestablishesarobustplatformformultistakeholdercollaborationtowardsnetzero.Thefollowingsectionlaysouthowanewgenerationofcollaborationmodelscombinedwithastepchangeinambitionlevelcanaddressthenet-zerotransformationchokepointsforheavyindustries.The“nextgeneration”ofambitiousmultistakeholdercollaborationsbetweensuppliersandcustomers,betweenindustryandcross-industrypeers,andbetweenthewiderindustrialecosystemofstakeholderscanovercomedecarbonizationchokepointsandacceleratetheindustrialtransformationtowardsnetzero.However,actionisneedednowtokeepthenet-zeroby2050goalwithinreach.Anewgenerationofmultistakeholdercollaborationsfocusedondecarbonizationandnet-zeroobjectiveshasgainedmomentumsince2015.These“nextgeneration”collaborationsdifferfrompastpartnershipsduetoastepchangeinambitionlevel,greaterfocusonemissionreductions,newtypesofpartnersandnewareasofemphasis.Thesenseofurgencycombinedwiththesteepnessofthenet-zeropathwayshaveledleadersfromboththepublicandprivatesectorstoviewcollaborationsasakeytransitioncatalyst.Leadersnowfavourcollaborationandtransparencyovercompetition,andincreasinglyconsiderdecarbonizationasawin-winsolutionthatdoesnotnecessarilyentailextracosts.Threearchetypesofcollaborationhaveemerged:collaborationbetweencustomersandsuppliers,collaborationbetweenindustryandcross-industrypeers,andcollaborationbetweenthewiderecosystemofstakeholders(Figure13).Thefollowingsectionoutlinestherationale,benefitsandcollaborationmodelsundereacharchetype,andoffersmorethan35examples.Suchinitiativesarecriticaltopavethewayforsimilarpartnershipsinothergeographiesandindustries,andtoinspireleadersworldwidetomovequicklyfrompilotstoapipelineofcommercial-scaleprojectsby2030.Clearingthepathtonetzerowith“nextgeneration”partnerships2.3Threearchetypesofcollaborationtoacceleratethenet-zerotransformationofindustriesFIGURE13Archetype1Climate-awareendcustomercentricity“Valuechain”asthedecarbonizationunitNewproducts,newsupplychains,circularity,collectiverisksCollaborationbetweencustomersandsuppliersCollaborationbetweenindustryandcross-industrypeersCollaborationbetweenthewiderecosystemofstakeholdersArchetype3System-widesolutionsfornet-zeroindustriesAnyindustry“win”=asociety“win”SolutionsgoingbeyondthetraditionalpartnersandpartnershipsArchetype2Sharedindustryresponsibilitytowardsreinventionanddecarbonization“Industry”asthedecarbonizationunitCollectiveovercompetitivetransformation,requiringnewlevelsoftransparencyandresourcesharingSource:WorldEconomicForumandAccentureFosteringEffectiveEnergyTransition2022Edition33Cross-sectoralcollaborationisessentialforindustrialdecarbonizationbyJanJenisch,ChiefExecutiveOfficer,HolcimGUESTPERSPECTIVEGiventhescaleoftoday’snet-zerochallenges,nosingleorganizationorindustrialsectorcantackledecarbonizationalone.Weneedclosecollaboration:betweengovernmentandindustryaswellasalongourentirevaluechain.Governmentandindustrymustworkaspartnerstomakesurethebusinesscaseofshort-andlong-terminvestmentsinindustrialdecarbonizationissound.AtHolcim,weareseeingthiscollaborationtakeshapeinthedeploymentofnextgenerationtechnologies,suchascarboncapture,useandstorage(CCUS).WeareexploringthepotentialuseofCCUStechnologiesinover30pilotprojectsworldwide,fromrepurposingCO2fromourplantsforuseinverticalfarming,allthewaytoalternativefuelforaviation,therebyalsocreatingnewgrowthopportunitiesforthecompany.Tohelpdeploythesetechnologiesatscale,anumberofourCCUSprojectsarereceivingpublicsupporttoday,fromentitiessuchastheUSDepartmentofEnergytoGermany’sFederalMinistryofEconomicAffairsandEnergy.Furtherpublic-privatecollaborationisessentialtoensureabundantandcleanenergytopowerCCUS,therecognitionoftechnologiessuchasco-processingthatsignificantlyeliminatetheuseoffossilfuels,enablingthecirculareconomythrougheffectivewastemanagement,andefficientcarbonpricingmechanisms.Moreover,actorsfromallsectorsmustcollaboratetostrengthenmarketdemandforlow-carbonandcircularsolutionsacrosstheindustrialvaluechain.Asagloballeaderininnovativeandsustainablebuildingsolutions,Holcimisplayingacentralroletodecarbonizethissector.ThisincludesreducingScope3emissionsfromthetransportofourmaterialsthroughoptimizingroutes,loads,movingloadfromroadtowaterwaysandrail,andreplacingdieselwitheco-friendlyfuelsinfleets.AsafoundingmemberoftheFirstMoversCoalition(FMC),weareambitioustodrivemoregreendemandandlow-carbontechnologiestoadvanceourworld’sclimategoals.Onthegreenprocurementside,wecommittoFMC’struckingambitionofreaching30%ofzero-emissionheavy-dutytruckpurchasesorcontractsby2030.Onthesupplyside,wewillcontinuetoscaleupourgreenbuildingsolutionsandnextgenerationtechnologiesfornet-zeroconstruction,buildingonHolcim’sindustry-first2050net-zerogoals,validatedbytheScienceBasedTargetsinitiative.Leadingbyexample,wehopetoinspirethevirtuouscycleofcollaborationandpartnershipthatisnecessarytoreachnet-zeroinourindustry.Thereisnootherwayforward.FosteringEffectiveEnergyTransition2022Edition34Valuechainemissionsareincreasinglybeingscrutinizedbyprogressiveclimate-consciousendconsumers,particularlytheyoungergenerations.Arecentsurvey168foundthat73%ofGenZconsumers(21-25-year-olds)arewillingtopaymorethaneveryothergenerationforsustainableproducts.Reducingdirectemissionswithinanindustrywillimpacttheindirectemissionsofsuppliersandcustomers(Scope2orScope3emissions),andviceversa.Thiscommongroundstronglyencouragesnewcollaborationsbetweenheavyindustriesandvaluechainstakeholders.Net-zerocollaborationbetweencustomersandsuppliers2.4CollaborationmodeltypesbetweencustomersandsuppliersFIGURE14Source:WorldEconomicForumandAccentureCollaborationwithcustomersthroughofftakeagreementsorpre-commercialpublicprocurement(Figure14)canprovideheavyindustrycompanieswiththevisibilitytheyneedforinvestmentsinlow-emissionsolutions(publicprocurementaccountsfor46%ofUScementconsumption169).Customersinreturncansecurethesupplyoflow-emissionproducts,whichwillinitiallybescarce.Inaddition,heavyindustriescanreducetheiremissionsbyincreasingtheproportionofrecycledversusprimaryfeedstockandmaterial–whatisnowreferredtoasthe“circulareconomy”.Collaborationwithsuppliersandcustomersthroughthedevelopmentofcircularsupplynetworksorcircularproductdevelopmentcansupportthatobjective.Supplierscanengageinnewvalue-addedactivities(e.g.high-resolutionwastesorting)andcustomerscanbenefitfromloweremissionproducts.HeavyindustriesareincreasinglyengagingtolimittheirScope3emissions(estimatedat80%oftotaloilandgasCO2equivalentemissions,17020%ofsteelemissions171and20%ofcementemissions172),whicharedrivenbycompanies’upstreamanddownstreamvaluechainactivities.Collaborationwithsuppliersandcustomersthroughsharedvaluechaindecarbonizationinitiativesorsupplierperformanceprogrammescanhelptackletheseemissions.Supplierscanbenefitfromvisibilityonlow-emissionprocurementstandards,andcustomersfromtheuniqueengineeringandtechnologyexpertiseofanotherindustrytodecarbonize.CollaborationmodelPotentialcollaborationpartnersTargetedchokepointCollaborationbetweencustomersandsuppliersSupplyandofftakeagreementDemandforlowCO2productsPre-commercialpublicprocurementCircularsupplynetworkSupplychaincircularityCircularproductdevelopmentJointvaluechaindecarbonizationScope3abatementSupplierperformanceprogrammeFinanciers(publicandprivate)RegulatorsSinglefirmCross-industrypeersSuppliersResearchersNon-profitandthinktanksStart-upsPublicauthoritiesIndustrypeersOtherbusinessesCustomersFosteringEffectiveEnergyTransition2022Edition35CollaborationmodelShortdescriptionExample(collaborationnamesinbold,whenavailable)SupplyandofftakeagreementSuppliersandcustomerscancreatelong-termvisibilityonlow-emissionproductofftakeanddeliveryforeachotherTheFirstMoversCoalition173isaplatformofover35companiesenabledbytheUSStateDepartmentandtheWorldEconomicForum.TheCoalitionwascreatedthroughapartnershipbetweentheUSStateDepartment’sUSSpecialPresidentialEnvoyforClimateandtheOfficeofGlobalPartnerships,andtheWorldEconomicForum,incollaborationwiththeUSDepartmentsofCommerceandEnergy.Thecoalitionadvocatesforcompaniestoharnesstheirpurchasingpowerandsupplychainstocommittolong-termdemandandsupply,creatingearlymarketsforcleanenergytechnologiestobeaccessibleandscalable,andtobringdowncosts.SSABteamedupwithVolvotounveiltheworld’sfirsttruckmadefrom100%fossil-freesteel.Morevehiclesareexpectedtofollowin2022inadriveforVolvotoachievenet-zerovaluechainGHGemissionsby2040.174Pre-commercialpublicprocurementPublicbuyerscanpre-purchaselow-emissionproductsbeforetheyaremadetoprovidethenecessaryvisibilityforsupplierstoinvestTheCleanEnergyMinisterialIndustrialDeepDecarbonisationInitiative(IDDI)175isaglobalcoalitionofpublicandprivateorganizationscommittingtothepurchaseoflow-carbonmaterials,particularlysteelandcement.CoordinatedbytheUnitedNationsIndustrialDevelopmentOrganization,theinitiativebringstogetherheavyindustriesandmultilateralorganizations,suchastheMissionPossiblePartnership,LeadIT,IRENAandtheWorldBank,aswellaspublicentities,suchastheGovernmentsoftheUnitedKingdom,India,Germany,CanadaandUnitedArabEmirates.CircularsupplynetworkSuppliersandcustomerscanestablishcircularsupplynetworkstomaximizethereuseandrecyclingofmaterialsfromoneanotherinanearclosedloopCentroRottamiissupplyingrecycledaluminiumtoIndinvest’sItalianfoundry.EnabledbyTOMRA’saluminiumscrapsortingtechnologies,thepartnershipguaranteesaconstantsupplyofhighpurityaluminium(85%recycledcontentbillet),essentialtoestablishingtrustwithfoundries.ThiscollaborationcontributestoItaly’srankoffirstinEuropeforrecycledaluminiumproduction,achieving70%recovery.176Novelishasimplementedclosed-loopsystemswithmajorautomakers,includingVolvo,Ford,JaguarandLandRover,workingtogethertotakebackthecarmanufacturers’aluminiumscrapandtransformingitintothesamehigh-qualityproductsindefinitely.Novelisincreasedtheamountofoverallrecycledaluminiuminitsproductsfrom33%in2010toover61%in2019.177CircularproductdevelopmentSuppliersandcustomerscanredesignendproductstogethertomaximizerecycledcontentTheEOCENEindustrialresearchproject,178aconsortiumwithKimitec,Cosentino,Acciona,OmarCoatings,Aerotecnic,ReciclaliaandSUEZ,aimstoadoptacirculareconomyinthecompositesindustrybycreatinganewgenerationofhighlysustainablethermostablecomposites,procuringallcomponents(resin,fillers,fibres)fromrenewablesourcesanddevelopingsustainabletechnologiesforcontrolledrecyclingprocessesandrevaluationofwasteattheendofitslifecycle.TataSteelandBouwenmetStaal(theNetherlands’nationalorganizationforthepromotion,knowledgetransferandresearchofsteelinconstruction)havecollaboratedonaprojectatAmsterdam’sSchipholAirporttodemonstratethereuseofsteelinconstruction.Theyadoptedbuildingpracticesthatpromotehighreuseratesofbetween20%and40%,reducingtheenvironmentalfootprintofthesteelusedintheairportbuildingby18%to36%.179JointvaluechaindecarbonizationSuppliersandcustomerscanleveragetheirrespectivecapabilitiesandexpertisetohelpeachotherdecarbonizeShellleveragesitsleadingcapabilityinsystemlevelmodelling(usedinternallyforyearstodeconstructShellplantsandprocesses)tohelpDalmiaCement,oneofitscustomersandaleadingIndiancementmanufacturer,findpathwaystodecarbonize.180bpandCEMEXagreed“todevelopsolutionstodecarbonizethecementproductionprocessandtransportation”.Thesesolutions“includelow-carbonpower,low-carbontransport,energyefficiency,naturalcarbonoffsets,andcarboncaptureutilizationandstoragetechnologies”.181CollaborationmodelexamplesbetweencustomersandsuppliersTABLE1FosteringEffectiveEnergyTransition2022Edition36Collaborationmodelexamplesbetweencustomersandsuppliers(continued)TABLE1CollaborationmodelShortdescriptionExample(collaborationnamesinbold,whenavailable)SupplierperformanceprogrammeSuppliersandcustomerscanco-designlow-emissionprocurementstandardsandco-developroadmapstoachievenewtargetsovertimeDowisdirectlyengagingwithsupplierstorequestclimate-relatedinformationviatheCarbonDisclosureProject(CDP)supplychainprogramme’splatform.182Thegoalistosupportsuppliersinenvironmentalreportingtotrackclimateimpactsandsupporttheidentificationofcollaborativedecarbonizationopportunities.WithbuildingandconstructionprocessesinSwedenestimatedtogeneratearound10MTCO2eperyear,theSwedishTransportAdministrationhassetatargettoreachclosetonet-zerocarbonemissionsfromroadconstructionby2045.Itisreinforcingcarbonreductionrequirementsintheprocurementofmajorprojectconstruction,materialsusedandfuturemaintenance.183FosteringEffectiveEnergyTransition2022Edition37Acrossheavyindustries,companiesfaceincreasingpressurefromgovernments,investorsandsocietytodecarbonize.Thiscommongroundstronglyencouragesnewcollaborationbetweenpeerswithinandacrossindustries,particularlytoaddresscommonneedsintermsofcapability,energy,infrastructureandcapital.Thetransitionofheavyindustriesisanewandfast-changingdomaininwhichdeepexpertiseisscarcebutcritical.Collaborationwithpeersthroughknowledgesharinginitiatives,eitherforward-looking(e.g.net-zeroroadmaps)orfocusedonexistingtechnologies(e.g.methanemanagement),orthroughupskilling/reskillingprogrammesformanagementandemployees,cancloseanumberofknowledgegapswhilebuildingtheworkforceofthefuture(Figure15).Heavyindustrycompaniesalsotypicallyrequirelargeamountsofcapitaltodeploytheirownorthird-parties’promisingtechnologyatscale.Collaborationwithindustryorcross-industrypeersthroughsharedcommercialprojects/venturesorcross-industryfundingcanbridgecapitalgaps,reducerisksandovercomefinanciers’reluctancetoinvestinsubeconomicorlower-returnprojectsthatareimportanttobreaknewgroundonthepathtonetzero.Manysolutionstodecarbonizeheavyindustriesinvolvetheadoptionoftechnologies184basedonelectrification,low-emissionhydrogen,low-emissionpower,orcarboncapture,utilizationandstorage,allrequiringextensiveinfrastructure.Collaborationwithindustryandcross-industrypeersthroughsharedinfrastructureplanninganddevelopmentcanensurethatcompaniesdeployingnewtechnologieswillnotbeconstrainedbythelackofenablinginfrastructure.Net-zerocollaborationbetweenindustryandcross-industrypeers2.5Collaborationmodeltypesbetweenindustryandcross-industrypeersFIGURE15CollaborationmodelPotentialcollaborationpartnersTargetedchokepointCollaborationbetweenindustryandcross-industrypeersSharedinfrastructuredevelopmentInfrastructureaccessIndustrialclusterinfrastructureplanningSharedcommercialprojectsScalingcapitalCross-industryfundingKnowledgesharingTransitioncapabilitybuildingReskillingtheworkforceSource:WorldEconomicForumandAccentureFinanciers(publicandprivate)RegulatorsSinglefirmCross-industrypeersSuppliersResearchersNon-profitandthinktanksStart-upsPublicauthoritiesIndustrypeersOtherbusinessesCustomersFosteringEffectiveEnergyTransition2022Edition38Collaborationmodelexamplesbetweenindustryandcross-industrypeersTABLE2CollaborationmodelShortdescriptionExample(collaborationnamesinbold,whenavailable)SharedinfrastructuredevelopmentPeerswithinandacrossindustriescanjoinforcestodevelopsharedinfrastructureatlowerriskandcostLongship,185apartnershipprojectbetweentheNorwegianstate,Gassnova,HeidelbergCement,FortumOsloVarme(waste-to-energyplant)andNorthernLightsJV(Equinor,Shell,TotalEnergies)aimstodevelopthefirst-everfull-scalecross-bordercarboncaptureandstoragevaluechainforindustriestotransportCO2fromcapturesitesacrossEuropetoaterminalinNorwayforstorage,beforetransportingforpermanentstorageintheNorthSea.IndustrialclusterinfrastructureplanningCross-industrypeersandpublicauthoritiescanjointlyplaninfrastructuredevelopmentforindustrialclusterstorealizesynergiesandensureallparties’needsaremetTheKwinanaIndustrialArea(KIA)186isthelargestindustrialclusterinWesternAustraliaandexemplifiesindustrialsymbiosiswithmorethan150products,by-productsandutilitiesexchangedbetweenfacilitiesintheregion.KIAproducesindustrial,agriculturalandminingchemicalsandrefinedmaterialsfornationalandinternationalmarkets.bprecentlyrepurposeditsKwinanaRefiningsiteasanintegratedenergyhubthatproducesanddistributesfuelforthefuture,suchastheproductionofgreenhydrogen.Eightprivate-sectororganizationsareworkingonconcretesolutionstoachievecarbonneutralityby2040inthelargestCO2emittingindustrialclusterintheUK,theHumberIndustrialCluster.187Theplanincludesearlyprojectsaimedatacceleratingindustrialcarboncaptureandgreen/bluehydrogenproduction,suchasPhillips66progressingGigastack,agreenhydrogenprojectthatalongwithITMPower,ØrstedandElementEnergyseekstoproducegreenhydrogenandelectricityfromnearbyoffshorewindandelectrolysis.188SharedcommercialprojectsBymergingalargesetofdifferentexpertise,jointcommercialventurescancreatesynergiesandreducerisksandcostsHYBRIT189(HydrogenBreakthroughIronmakingTechnology)isacollaborationbetweenthreemining,steelmanufacturingandelectricitycompanies–LKAB,SSABandVattenfall–tocreatetheworld’sfirstfossil-freesteel.“TheHYBRITtechnologyinvolvesreplacingtheblastfurnaceprocess,whichusescarbonandcoketoremovetheoxygenfromironore,withadirectreductionprocessusingfossil-freehydrogenproducedfromwaterusingelectricityfromfossil-freeenergysources.”190HolcimexpandscarboncaptureprojectsthroughaconsortiumwithSvante,OxyLowCarbonVenturesandTotalEnergies.191Thepartnershiphascompleteda“studytoassesstheviabilityanddesignofacommercial-scalecarbon-capturefacilityattheHolcimPortlandCementPlant”intheUnitedStates.192WiththeconfirmationoffundingfromtheUSDepartmentofEnergy,“thepartnershiphascommittedtothenextprojectphasetoevaluatethefeasibilityofthefacilitydesignedtocaptureuptotwomilliontonsofCO2peryear”.193Lookingforward,Holcimcontinuestoexpanditscarboncaptureportfoliothroughnewpartnerships,suchasrecentlysigninganagreementwithEnifortheutilizationofCO2.Cross-industryfundingCollaborativefundingcanhelpindustriesmeetthelargedemandforcapital,whileallowingthemproximitytobreakthroughinnovationTotalEnergies,AirLiquideandVINCI“arecombiningforceswithotherlargeinternationalcompaniestosponsorthecreationoftheworld’slargestfundexclusivelydedicatedtocleanhydrogeninfrastructuresolutions.TheCleanHydrogenInfrastructureFundaimstoreach€1.5billionandhasalreadysecuredinitialcommitmentsof€800million.Itsobjectiveistoacceleratethegrowthofthecleanhydrogenecosystembyinvestinginlargestrategicprojectsandleveragingtheallianceofindustrialandfinancialplayers”todoso.194CleanSteelPartnership195wasestablishedin2021bytheEuropeanCommissionandtheEuropeanSteelTechnologyPlatformonbehalfoftheentireEuropeansteelvaluechainforthesustainableproductionofcleansteel.Thepublic-privatepartnershipaimstofacilitatethereductionofCO2emissionsfromsteelproductionthroughthefundingofresearch,developmentandinnovationprojects.Thepartnershipwillinvesttodevelopthetechnologiesnecessaryforindustrialdeployment.FosteringEffectiveEnergyTransition2022Edition39Collaborationmodelexamplesbetweenindustryandcross-industrypeers(continued)TABLE2CollaborationmodelShortdescriptionExample(collaborationnamesinbold,whenavailable)KnowledgesharingKnowledgesharingcanberelevantbetweenpeerssharingsimilarstrategicoroperationaldecarbonizationchallengesTheMissionPossiblePartnership(MPP)196isanalliancecomprisedoftheEnergyTransitionsCommission,RockyMountainInstitute(RMI),WeMeanBusinessCoalitionandtheWorldEconomicForumfocusedonsupportingthedecarbonizationoftheworld’shighest-emittingindustries:thehard-to-abatesectors(steel,cement,chemicals,aluminium,shipping,trackingandaviation).TheMPPhasreleasedsector-specificnet-zeroroadmaps,providingpowerfulandtangibleexamplesofcleartargetsandstrategiestokeepthe1.5°Ctargetalivewithleadingcompaniesandbusinessalliances.TheGlobalMethaneInitiative(GMI)197isan“internationalpublic-privatepartnershipfocusedonreducingbarrierstotherecoveryanduseofmethaneasavaluableenergysource.GMIprovidestechnicalsupporttodeploymethane-to-energyprojectsaroundtheworld…andadvancesmethanemitigationinthreekeysectors:oilandgas,biogas,andcoalmines”.198GMIpartnercountriesaccountforapproximately70%ofglobalman-mademethaneemissions.Tenmajorchemicalsectorcompaniesaroundtheworld–BASF,Dow,DSM,Solvay,Clariant,Covestro,MitsubishiChemical,AirLiquide,SABICandSIBUR–inpartnershipwiththeWorldEconomicForumhaveestablishedtheLow-CarbonEmittingTechnologies(LCET)199initiative,abreakthrough,pre-competitiveknowledgesharingdevelopmentplatformandimplementationvehicletoacceleratenet-zeroclimatetechnologiesinthechemicalsindustry.TheCarbonPricingLeadershipCoalition200promotesthesuccessfulimplementationofcarbonpricinggloballybybringingtogetherleadersfromgovernment,business,civilsocietyandacademiatostrengthenthedevelopmentandimplementationofcarbonpricingpoliciesandenhancethesharingofdata,expertiseandlessonslearnedthroughvarious“readiness”platforms.ReskillingtheworkforcePartneringwithpeers,NGOsandknowledgeinstitutionscanformalizeandacceleratecapabilitybuilding,whilefosteringajusttransitionforemployeesTheWorldEconomicForumlaunchedtheNewGenerationIndustryLeaders(NGIL)201programmeinsupportofdesigninganddrivingaresponsibleindustrytransformation,whilebuildingexcitementaboutitsfuturefrontiersandopportunitiesforyoungergenerations.ThecommunityactivelyengagesintheForum’sworkandagendatosharenewideastotransformandchampiontheindustrytoyoungergenerations.Eni,RedRockPowerandtheUniversityofStrathclydehavesignedamemorandumofunderstandingtodevelopanddeliveraworkforcetransitionprogrammetohelpprofessionalsworkingintheScottishoilandgassectortransfertheirskillstorenewableenergytechnologies.202FosteringEffectiveEnergyTransition2022Edition40Inadditiontosuppliers,customersandpeers,heavyindustrycompaniesalsointeractwithawidernetworkofstakeholders,suchaspublicauthorities(e.g.centralgovernments,regionalandlocalauthorities),regulators(e.g.policy-makers,industryregulatoryagency),financiers(e.g.publicinvestmentfunds,privatefunds,banks),researchers(e.g.academics,publicorprivatelabs)andNGOs(e.g.specialistNGOs,businessalliances,think-tanks).Theseorganizations,classifiedinthisreportas“widerecosystemstakeholders”,canalsoplayprominentrolesinthenet-zerotransformationofindustries.Publicauthoritiesandregulatorscanbeincentivizedbynationalnet-zeroagendas,financiersbyinvestorpressuretodecarbonizeportfolios,andresearchersandNGOsbymandatestofindandsupportnewsustainablesolutions.Thiscommongroundencouragesnewcollaborationsbetweenheavyindustryfirmsandwiderecosystemstakeholders,particularlyrelatedtotechnology,policyandregulation,carbonmanagementandemissionoffsettingchallenges.InadditiontopushingtheirownR&Deffort,heavyindustrycompaniescancollaboratewithtechnologystart-upsandresearchlabsthroughprivateequityinvestments,incubation,researchgrantsandjointfacilitiesandteamstoacceleratethetechnologyreadiness203ofkeysolutions.Whilenotasilverbullet,policiesandregulationscandrasticallyimprovethetransformationbusinesscaseofanindustryandreducefirstmovers’riskbysupportingtechnologyadoption,creatingdemandandenablingaccesstocapital.Collaborationwithpublicauthoritiesandregulatorsthroughpublic-privateadvocacygroupscanhelpcompaniesco-designthepaceandshapeoftheirjourneytonetzero(Figure16).Moreover,significantemissionreductionscouldbeachievedtodayonmanyindustrialsites,providedcompaniesareequippedwithadequatestandards,processesandtoolstomanageemissions.CollaborationwithspecialistNGOsandtechnologyservicecompaniescanhelpheavyindustryfirmsachievestate-of-the-artemissionmeasurementandmonitoringandidentifyimpactfulactionswithtoday’savailabletechnologies.SomeheavyindustrycompaniescanreachzeroScope1and2emissionsbyfullyelectrifyingtheirproductionprocessesandusingrenewablepower(e.g.aluminiumorammoniaindustries).However,wherestructurallong-termoptionsarenotavailable,someproducersmightrelyonoffsettingresidualemissionstoachievenetzeroby2050.CollaborationwithspecialistNGOsandoffsetproviderscanhelpcompaniessecuretherequiredcertifiedoffsetsinthelongrun.Net-zerocollaborationbetweenwiderecosystemstakeholders2.6CollaborationmodeltypesbetweenwiderecosystemstakeholdersFIGURE16CollaborationmodelPotentialcollaborationpartnersTargetedchokepointCollaborationbetweenwiderecosystemstakeholdersPublic-privateadvocacyandcollaborationPoliciesandregulationsenablementIntergovernmentalactionIntegratedresearchandinnovationBreakthroughtechnologyStart-upinvestmentandincubationEmissionmeasurementstandardizationCarbonmeasurementandmanagementEmissiontrackingandmanagementCarbonoffsetsupplyResidualemissionsoffsettingCarbonoffsetqualityFinanciers(publicandprivate)RegulatorsSinglefirmCross-industrypeersSuppliersResearchersNon-profitandthinktanksStart-upsPublicauthoritiesIndustrypeersOtherbusinessesCustomersSource:WorldEconomicForumandAccentureFosteringEffectiveEnergyTransition2022Edition41CollaborationmodelexamplesbetweenwiderecosystemstakeholdersTABLE3CollaborationmodelShortdescriptionExample(collaborationnamesinbold,whenavailable)Public-privateadvocacyandcollaborationFirmscanjoinforcestoensurethatcommonobjectives,roadmapsandneedsareadequatelycommunicatedtoregulators,sothebusinessenvironmentevolvesatapragmaticandjustpaceTheEuropeanCleanHydrogenAlliance“supportsthelarge-scaledeploymentofcleanhydrogentechnologiesby2030bybringingtogetherrenewableandlow-carbonhydrogenproduction,demandinindustry,mobilityandothersectors,andhydrogentransmissionanddistribution.Itaimstopromoteinvestmentandacceleratetheroll-outofcleanhydrogenproductionanduse”inlinewiththeEU’sclimatechangeobjectivestobuildindustrialleadershipandacceleratethedecarbonizationofindustry.204TheCleanEnergyDemandInitiative(CEDI),ledbytheUSDepartmentofState’sBureauofEnergyResources,unitescompaniesandgovernmentstojointlyachievetheircleanenergygoalsbyleveragingcorporatecommitmentsandcatalysinginvestmentandpolicysignals.Corporatedemandforcleanelectricity,throughcorporatepowerpurchaseagreements,havethepotentialtodrivesignificantinvestmentinrenewableenergyandhelptheprivatesectoroffsetitselectricitydemand.Thirty-ninecompaniesfrommajorsectors,includingtechnology,manufacturing,retailandhealth,havesignedlettersofintenttoprocurerenewableenergytooffsettheirelectricitydemand.205IntergovernmentalactionClosecollaborationwithgovernmentalentitiesworkingwithforeigncounterpartscanhelpcompaniesanticipateandco-shapechangeMissionInnovation206is“aglobalinitiativeof22countriesandtheEuropeanCommissiontocatalyseactionandinvestmentinresearch,developmentanddemonstrationtomakecleanenergyaffordable,attractiveandaccessibleforall”by2030.207Itbringstogethergovernments,publicauthorities,corporates,investorsandacademicsandisthemainintergovernmentalplatformaddressingcleanenergyinnovationthroughaction-orientatedcooperationthatseektocreatetippingpointsinthecostandscaleofcleanenergysolutionsinselectareas.GermanyandNamibiahavesignedaJointCommuniqueofIntenttoestablishaGreenHydrogenTechnologyPartnership.TheFederalMinistryofEducationandResearch(BMBF)willfundtheidentificationofsuitablesitesforgreenhydrogenproductioninAfricaandTheFederalResearchMinistrywillprovideupto40millioneurosinfundingtoacceleratecooperationwithinthedevelopedframework.208IntegratedresearchandinnovationIntegratedR&Dandinnovationprogrammesbetweenindustryfirmsandresearchorganizationscanaffectthenet-zerotechnologicalraceTheMassachusettsInstituteofTechnology(MIT)ClimateandSustainabilityConsortiumconvenesinfluentialindustryleadersfromabroadrangeofindustries(including,cementandchemicals)toworkwithMITtoacceleratesharedsolutionstoaddressclimatechange.209AspartofInstitutPolytechniquedeParis’sstrategicpartnershipwithTotalEnergies,theinstitutehas“approvedthecreationofanewcentreforinnovationandresearchintocarbon-freeenergysolutions”.Thenewlydevelopedinnovationparkbringstogether“privateandpublicresearchcentres,thusnourishingtheecosystemofInstitutPolytechniquedeParisandmorebroadlythescienceandtechnologyclusteroftheParis-Saclayregion”.210TheSmartEnergyLab211isagreen“factory”partnershipbringingindustries,academicsanddevelopmentpartnerstogether(e.g.EDPComercial,Accenture,InstitutoSuperiorTécnico,FaculdadedeCiênciasdaLisboa,UniversidadedeCoimbra,INESCTECandINESC-ID)for“neworimprovedproducts,servicesorprocessesthatcontributetoacceleratingenergytransition,reducingtransactioncosts,throughtechnologyanduseradoption”.FosteringEffectiveEnergyTransition2022Edition42Collaborationmodelexamplesbetweenwiderecosystemstakeholders(continued)TABLE3CollaborationmodelShortdescriptionExample(collaborationnamesinbold,whenavailable)Start-upinvestmentandincubationInvestingandincubatingpromisingstart-upscanhelpcompaniessecureearlyaccesstothetechnologiesandsolutionsofthefutureTheOilandGasClimateInitiative(OGCI)212bringscompetitors(ledbyCEOs)togetherto“acceleratetheindustryresponsetoclimatechange”.Itcurrentlyincludes12membercompanies,includingSaudiAramco,Eni,bp,EquinorandPetrobras.TheOGCIClimateInvestmentsteam(witha$1billionfund)bringsindustryexperienceandexpertisetoco-invest,pilotanddeploynewtechnologiesandprojectsthat“acceleratedecarbonizationinoilandgas,industryandcommercialtransport”,andothersectors.OGCIClimateInvestmentsusestheknow-howandglobalfootprintofitsmembersandnetworktosupportcommercialadoptionthroughpilotsandglobalimplementationofinvestments,toachievescaleatanacceleratedpace.EmissionmeasurementstandardizationWorkingjointlywithNGOsandpeerscanacceleratethedevelopmentofthenecessaryemissionsstandardsforeachindustryTheCarbonDisclosureProject(CDP)213isanot-for-profitorganizationthat“runstheglobalemissionsdisclosuresystemforinvestors,companies,cities,statesandregionstomanagetheirenvironmentalimpacts.Theworld’seconomylookstoCDPasthegoldstandardofenvironmentalreportingwiththerichestandmostcomprehensivedatasetoncorporateandcityaction”.214PavilionEnergy,QatarEnergyandChevronjointlylaunchedaGHG“quantificationandreportingmethodologytoproduceastatementofGHGemissionsfordeliveredliquefiednaturalgas(LNG)cargoes”.Thismethodologywillbeappliedtosalesandpurchaseagreementsforwideadoption.Overall,“itaimstocreateacommonstandardforthemeasurement,reportingandverificationoftheGHGemissionsassociatedwithproducinganddeliveringanLNGcargotodrivegreatertransparencyandenablestrongeractiononGHGreductionmeasures”.215EmissiontrackingandmanagementPartneringwithspecializedNGOsandtechnologyservicecompanieshelpstobringemissiontransparencytotherequiredlevelforeffectiveactionTheClimateTRACEglobalcoalition216aims“tomakemeaningfulclimateactionfasterandeasierbyindependentlytrackingGHGemissions”acrossthesupplychainofvarioussectorsusing“satelliteimageryandotherformsofremotesensing,artificialintelligenceandcollectivedatascienceexpertise…Theemissionsinventoryistheworld’sfirstcomprehensiveaccountingofGHGemissionsbasedprimarilyondirect,independentobservation”.Currently,over50organizationsarecollaboratingacross38industriesand10sectors,frompowerplantsandoilrefineriestoricecultivation,cementproductionandshipping.217CarbonoffsetsupplyPartneringearly-onwithoffsetsupplierscanguaranteelong-termsupplyavailability(thecarbonoffsetmarketisexpectedtogrowfrom$1billiontodayto$550billionby2050)218OxyLowCarbonVentures(OLCV)partneredwithCarbonEngineeringtoproducerenewablefuelsinBritishColumbiabycapturingCO2fromtheatmosphereusingDirectAirCapture(DAC)andAirtoFuelstechnologies.TheDACtofuelsfacilityisexpectedtobethefirstcommercial-scaleprojectofitskind.Overall,Oxyispioneeringthewaystoleveragequalityoffsets,deliveringtheworld’sfirstshipmentofcarbon-neutraloiltoIndia’sRelianceIndustries.219CarbonoffsetcertificationPartneringwithNGOsspecializedincarbonoffsetcertificationcanensurecompanies’permanentcarbonremovalisachievedwiththeirinvestmentsVerra220isaglobalnon-profitleaderdevelopingandmanagingstandardsandframeworkstochannelfinancetowardshigh-impactenvironmentactivities,includingcarbonoffsettingprojects.GoldStandard221isaglobalnon-profitleaderthatwasestablishedbyWWFandotherinternationalNGOsto“ensurethatprojectsthatreducecarbonemissionsfeaturethehighestlevelsofenvironmentalintegrityandcontributetosustainabledevelopment”.222FosteringEffectiveEnergyTransition2022Edition43Thechangesrequiredforheavyindustrysectorstoreachnetzeroarevastandwillbetransformativefortheseindustries.Thesechangeswillrequirenotonlynewmodelsofcollaboration,liketheonespresentedinthisreport,butalsoawholenewlevelofcollaborationacrossallstakeholdergroups–astepchangeincollaborativeactivity.Companieswillhavetoenterintonewcollaborationwiththeirsuppliersandcustomers,withtheirindustrypeersandwiththeirwiderecosystem.Indeed,whentrulydisruptivetechnologiesarecreated,therisk-takingandcommitmentrequiredaretoogreatforacompanytobearalone.Industrycompanies’innovativepowerandlongstandingexpertisewillbekeytothedecarbonizationchallenge,buttheywillneedtheirecosystemtocreatetheenablingenvironment,tojump-startdemandandtocreatethefinancialconditionsnecessarytosupportprivate-sectorinnovation.Inaddition,theboundariesofindustriesdonotstopatnationalborders.Internationalcooperation,includingbutnotlimitedtogroupsliketheG20,willbeessentialtopoolrisksandtocreatebiggermarketsforsuccessfulinnovationandcleannewproducts.Internationalcooperationwillalsobeneededtoremoveregulatorybarriers,providecrediblepolicysupportinternationally,andcreatecompatiblestandardsorjointinvestmentdeclarations.Thismustnotonlyhappeninadvancedeconomies;importantly,emerginganddevelopingeconomiespoisedtoseethebiggestincreaseinenergydemandandGHGemissionsareindireneedofinvestments,technologicalsolutionsandinfrastructuretotransitiontheirenergysystems.Collaborationacrossadvancedanddevelopingeconomieswillneedtoplayakeyroletoachievethis.Thesechangescannotandwillnothappenpurely“top-down”throughgovernments’orchestratedtargetsettingorthroughindustries’applyingtherightsolutionsindependently.Public-privatepartnershipswillbecrucial,andthepublicsectorwillhaveanimportantroletoplaytoprovidethefoundationalcapitalorfinancialconditionsnecessarytoencourageprivate-sectorinnovation.Inrecentyears,pioneercompaniesfromtheheavyindustrysectorsandtheirstakeholdershaveputgreateffortintoexploringsolutionstodecarbonizationchokepoints.Thankstothem,manyinspiring“nextgeneration”collaborationmodelsalreadyexisttoday.Otherindustryplayerscanstudy,learnfrom,follow,improve,replicatethesemodelsinothergeographiesorindustries,andinventmoreambitiouscooperationtoprogressthecollectivejourneytonetzero.44FosteringEffectiveEnergyTransition2022EditionConclusionRecentenvironmental,macroeconomicandgeopoliticaleventshaveaffectedtheenergysysteminmultiplewaysandhighlightedthecomplexitiesoftheenergytransition.Inparticular,energymarketdisruptionsandsubsequentvolatilityandknock-oneffectsontheglobaleconomyhavedemonstratedtheneedfortheglobalenergytransitiontostriketherightbalancebetweenenergyaffordability,securityandsustainability.Inessence,whatisneededistocollectivelydrivearesilientenergytransitionthatcankeepthemomentummovingforwardinchallengingtimes.Trade-offsbetweenenergyaffordability,securityandsustainabilityexisttodayandareexpectedtocontinuetoevolve.Countriesmustmanagethemcarefullytokeepthetransitiongoing.Asthegapbetweenclimatepledgesandimplementationcontinuestowiden,itisessentialtoacceleratethetransitionandmitigatetherisksofaslowdown.Earlysignsofthetransition’simplicationsonequityandjusticeindicatetheneedforrobustandwell-targetedmeasurestoprotectvulnerablepopulationsandbusinessesagainsttheimpactofpossiblefuturehighenergyprices.Additionally,asmanycountries’energysecurityconcernsgrow,itiskeytonotethattheenergytransition,whichcanhelpdiversifyenergysupplywithlow-carbonenergysources,canbeasourceofenergysecurity.Countriescanengageinthedualenergysupplydiversificationofimportpartnersintheshorttermandenergymixinthelongterm.Theenergycrisisprovidesanopportunitytosuperchargethetransitionbyincreasingcleanenergyinvestmentsatrecordpaceandtransformingconsumers’energyconsumptionhabits.Itistooearlytotell,however,whethertheworldwillseeatippingpointinthetransition,whichdependsonthecollectiveactionsofgovernments,corporationsandconsumers.Thisspecial2022editionstressestheimportanceoftheindustrialsector’stransformation.Thissectorrepresentsasignificantshareofglobalemissions,facesenormouschallengestodecarbonizeandiswheredemandisexpectedtogrowsignificantlyby2050,partlyduetotheneedsofthetransitionitself.Starkdifferencescanbeobservedbetweencountrieswithlargelyservice-basedeconomiesandcountriesthathavemaintainedrelativelylargesharesofindustrialactivity.TheformertypicallyfarebetterwiththeirenergytransitionsasthehistoricalETItrendsreveal.Progresstodecarbonizeindustrywillbekeyinmanycountries,mostnotablyintheG20economies,whichproduce85%ofglobalindustrialoutput.223However,manyindustriesarestillrefiningtheirpathwaystoalow-carbonfutureandmajorchallengeslikelyremain,particularlyinheavyindustries,whichfacecomplexdecarbonizationchallengesinmultipleareas,includinglow-emissiontechnology,electrification,accesstolow-carbonenergyinfrastructure,demandforlow-emissionproducts,enablingpoliciesandregulations,andaccesstocapital,amongothers.Solutionstoindustrychokepointsareseldomfoundwithinasinglefirmorevenindustryandwillrequireinnovativepartnershipsbetweencustomersandsuppliers,betweenindustryandcross-industrypeersandbetweenthewiderecosystemofindustrystakeholders.Astepchangeincollaborativeactivitycouldbethekeytounlockingthenet-zerotransformationofindustriesandkeepingthenet-zeroby2050goalwithinreach.Advancingtheglobalenergytransitionattherequiredpacewilldependontheworld’sabilitytointensify,replicate,scaleandfurtherimprovethecollaborativeeffortsacrosscountriesandsectors.Workingtogetherwillallowustoachievethestructuralchangenecessarytounderpinourcollectivetransitionjourneyto2050andbeyond.3FosteringEffectiveEnergyTransition2022Edition45AppendixRegionalpeergroupclassiﬁcationAdvancedeconomiesMiddleEast,NorthAfricaandPakistanCommonwealthofIndependentStatesEmerginganddevelopingAsiaLatinAmericaandtheCaribbeanSub-SaharanAfricaEmerginganddevelopingEuropeNote:TheboundariesshowninthismapdonotimplyofficialacceptanceorendorsementbytheWorldEconomicForum.Source:WorldEconomicForumFosteringEffectiveEnergyTransition2022Edition46ContributorsETIdatasourcesbpStatisticalReviewofWorldEnergy,ClimateActionTracker,Ember,Enerdata,EnergyandClimateIntelligenceUnit,FitchRatings,HeritageFoundation,InternationalEnergyAgency,InternationalGasUnion,InternationalMonetaryFund,InternationalRenewableEnergyAgency,Moody’s,PBLNetherlandsEnvironmentalAssessmentAgency,Standard&Poor’s,TransparencyInternational,UNSEforALL,UNStatisticsDivisionandUNCTADstat,WorldBankGroup,WorldHealthOrganization,WorldTradeOrganizationChiefexpertadvisersTheWorldEconomicForumacknowledgesandthankstheindividualsandexpertswithoutwhosesupportthisFosteringEffectiveEnergyTransition:2022editionwouldnothavebeenpossible:MorganBazilianProfessorofPublicPolicy,andDirectorofPayneInstitute,ColoradoSchoolofMines,USADominicEmeryChiefofStaff,bp,UnitedKingdomRabiaFerroukhiDirector,Knowledge,PolicyandFinanceCentre,InternationalRenewableEnergyAgency(IRENA),AbuDhabiLinBoqiangDean,ChinaInstituteforStudiesinEnergyPolicy,XiamenUniversity,People’sRepublicofChinaBertrandMagneSeniorEconomistandEnergySpecialist,InternationalAtomicEnergyAgency(IAEA),ViennaAndreaMercanteGlobalHead,Long-TermStrategy,Eni,ItalyDavidePuglielliHead,ScenarioPlanningandGroupStrategicPositioning,Enel,ItalyJohnScottHead,SustainabilityRisk,ZurichInsuranceGroup,SwitzerlandDavidVictorProfessor,UniversityofCalifornia,SanDiego(UCSD),USARigobertoArielYepez-GarciaChief,EnergyDivision,Inter-AmericanDevelopmentBank,WashingtonDCProjectsponsorsAccentureMuqsitAshrafSeniorManagingDirectorandLead,EnergyIndustrySectorStephanieJamisonSeniorManagingDirectorandStrategy&ConsultingLead,EuropeWorldEconomicForumRobertoBoccaHeadofShapingtheFutureofEnergy,MaterialsandInfrastructure;MemberoftheExecutiveCommitteeProjectteamAccentureMaximeHavardSeniorManager,Strategy&Consulting,EnergyAnaLuisaLageManager,Strategy&Consulting,EnergyDavidRableyManagingDirectorandGlobalEnergyTransitionLead,Oil&GasSudiptoSurManager,Strategy&ConsultingWorldEconomicForumDominiqueHischierProgrammeAnalyst,Energy,MaterialsandInfrastructurePlatformEspenMehlumHeadofEnergy,MaterialsandInfrastructurePlatform,BenchmarkingandRegionalActionHarshVijaySinghManager,EnergyTransitionBenchmarkingProgramme,Energy,MaterialsandInfrastructurePlatformFosteringEffectiveEnergyTransition2022Edition47Endnotes1.InternationalEnergyAgency(IEA),“Renewableelectricitygrowthisacceleratingfasterthaneverworldwide,supportingtheemergenceofthenewglobalenergyeconomy”,PressRelease,1December2021,https://www.iea.org/news/renewable-electricity-growth-is-accelerating-faster-than-ever-worldwide-supporting-the-emergence-of-the-new-global-energy-economy.2.Scully,Jules,“Reachingnetzeromayrequire960GWofannualsolarandwindadditionsby2030,BNEFsays”,CurrentNews,22July2021,https://www.current-news.co.uk/news/reaching-net-zero-may-require-960gw-of-annual-solar-and-wind-additions-by-2030-bnef-says.3.InternationalEnergyAgency(IEA),WorldEnergyOutlook2021,2021,https://www.iea.org/reports/world-energy-outlook-2021.4.Whiting,Kate,“Energyefficiencyistheworld’s‘firstfuel’-andthemainroutetonetzero,saysIEAchief”,WorldEconomicForum,Agenda,25January2022,https://www.weforum.org/agenda/2022/01/iea-energy-efficiency-worlds-first-fuel-net-zero.5.BreakthroughEnergy,SectoralAnalysis,“EmissionsbreakdownforManufacturing,bychallenge”,https://www.breakthroughenergy.org/go-deeper/sectoral-analysis.6.Ibid.,“EmissionsbreakdownforManufacturing,bysubsector”:addingvaluesfromCement(19%),IronandSteel(18%),Chemicals(15%),OilandGasproduction(13%),Refining(7.6%)andCoalMining(6.4%)totals79%,approximatedto80%,givenothermeasurementuncertainties,https://www.breakthroughenergy.org/go-deeper/sectoral-analysis.7.WorldEconomicForum,“FirstMoversCoalition”,https://www.weforum.org/first-movers-coalition.8.UnitedNationsClimateChange,“COP26:TheGlasgowClimatePact”,UNClimateChangeConferenceUK2021,2021,https://ukcop26.org/wp-content/uploads/2021/11/COP26-Presidency-Outcomes-The-Climate-Pact.pdf.9.Sharafedin,Bozorgmehr,StephanieKellyandPatriciaVicenteRua,“Asfuelpricesrisetorecordhighs,governmentslookforsolutions”,Reuters,10March2022,https://www.reuters.com/business/energy/fuel-prices-rise-record-highs-governments-look-solutions-2022-03-10.10.SustainableEnergyforAll,“SEforALLAnalysisofSDG7Progress–2021”,11August2021,https://www.seforall.org/data-stories/seforall-analysis-of-sdg7-progress-2021.11.InternationalEnergyAgency(IEA),“GlobalCO2emissionsreboundedtotheirhighestlevelinhistoryin2021”,PressRelease,8March2022,https://www.iea.org/news/global-co2-emissions-rebounded-to-their-highest-level-in-history-in-2021.12.InternationalEnergyAgency(IEA),GlobalEnergyReview2020,2020,https://www.iea.org/reports/global-energy-review-2020.13.InternationalMonetaryFund(IMF),“WorldEconomicOutlook,Update:RisingCaseloads,ADisruptedRecovery,andHigherInflation”,January2022,https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022.14.Newburger,Emma,“Globalelectricpowerdemandsurgesabovepre-pandemiclevels”,CNBC,25August2021,https://www.cnbc.com/2021/08/25/global-electric-power-demand-surges-above-pre-pandemic-levels-.html#:~:text=Carbon%20dioxide%20emissions%20from%20the,outbreak%2C%20which%20prompted%20worldwide%20lockdowns.15.Perkins,Robert,“Globaloildemandtosurpasspre-pandemiclevelsin2022asomicronfearssubside:IEA”,S&PGlobal,19January2022,https://www.spglobal.com/commodity-insights/en/market-insights/latest-news/energy-transition/011922-global-oil-demand-to-surpass-pre-pandemic-levels-in-2022-as-omicron-fears-subside-iea.16.TheOxfordInstituteforEnergyStudies,“Surging2021EuropeanGasPrices–WhyandHow?”,January2022,https://www.oxfordenergy.org/wpcms/wp-content/uploads/2022/01/Surging-2021-European-Gas-Prices-%E2%80%93-Why-and-How.pdf.17.InternationalEnergyAgency(IEA),GasMarketReport,Q12022,January2022,https://iea.blob.core.windows.net/assets/4298ac47-e19d-4ab0-a8b6-d8652446ddd9/GasMarketReport-Q12022.pdf.18.Harrison,David,“RetailSalesRise,ShowingStrongConsumerDemand,HigherInflation”,TheWallStreetJournal,15October2021update,https://www.wsj.com/articles/us-economy-september-2021-retail-sales-11634246791.19.MorganStanley,“GlobalSupplyChains:Risk,RepairandRestructuring”,17February2022,https://www.morganstanley.com/ideas/supply-chain-disruption-outlook.20.Levanon,Gad,“WhyWagesAreGrowingRapidly—BothNowAndInTheFuture”,Forbes,26July2021,https://www.forbes.com/sites/gadlevanon/2021/07/26/why-wages-are-growing-rapidly-both-now-and-in-the-future/?sh=23791d1bcfe9.21.Goodman,Laurie,“AsHousingPricesContinuetoRise,WhoGetsLeftBehind?”,Barron’s,29July2021,https://www.barrons.com/articles/housing-is-becoming-less-accessible-who-rising-prices-affect-most-and-why-51627508785.22.Marquardt,Andrew,“Upanddownthesupermarketaisle,foodpricesarerisingin2022.Here’swhereyou’llpaymore”,Fortune,29December2021,https://fortune.com/2021/12/29/supermarket-food-prices-inflation-2022-kraft-heinz-modelez-general-mills.FosteringEffectiveEnergyTransition2022Edition4823.Abbas,Nassira,andTobiasAdrian,“LowRealInterestRatesSupportAssetPrices,ButRisksAreRising”,InternationalMonetaryFund,27January2022,https://blogs.imf.org/2022/01/27/low-real-interest-rates-support-asset-prices-but-risks-are-rising.24.Reinhart,Carmen,andClemensGrafVonLuckner,“TheReturnofGlobalInflation”,WorldBank,14February2022,https://blogs.worldbank.org/voices/return-global-inflation.25.Ibid.26.Arezki,Rabah,andPerMagnusNysveen,“Ukraineinvasion:Fromoilsanctionstoacceleratingtheenergytransition”,VoxEU,1April2022,https://voxeu.org/article/ukraine-invasion-oil-sanctions-accelerating-energy-transition.27.USEnergyInformationAdministration(EIA),“Oilandpetroleumproductsexplained”,25February2022update,https://www.eia.gov/energyexplained/oil-and-petroleum-products/prices-and-outlook.php.28.Kpodar,KangniR.,andBoyaLiu,“TheDistributionalImplicationsoftheImpactofFuelPriceIncreasesonInflation”,InternationalMonetaryFund,12November2021,https://www.elibrary.imf.org/view/journals/001/2021/271/article-A001-en.xml.29.Ibid.30.EuropeanCentralBank(ECB),“Lookingthroughhigherenergyprices?Monetarypolicyandthegreentransition”,RemarksbyIsabelSchnabel,MemberoftheExecutiveBoardoftheECB,atapanelon“ClimateandtheFinancialSystem”attheAmericanFinanceAssociation2022VirtualAnnualMeeting,8January2022,https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220108~0425a24eb7.en.html.31.Ibid.32.Levell,Peter,andHeidiKarjalainen,“Thecostoflivingcrisis–whoishitbyrecentpriceincreases?”,InstituteforFiscalStudies,17November2021,https://ifs.org.uk/publications/15834.33.BBC,“RisingfuelandfoodcostspushUSinflationto7.9%”,10March2022,https://www.bbc.com/news/business-60696125.34.Baffes,John,andWeeChianKoh,“Soaringfertilizerpricesaddtoinflationarypressuresandfoodsecurityconcerns”,WorldBank,15November2021,https://blogs.worldbank.org/opendata/soaring-fertilizer-prices-add-inflationary-pressures-and-food-security-concerns.35.USEnergyInformationAdministration(EIA),“CoalDataBrowser”,2021,https://www.eia.gov/coal/data/browser/#/topic/20?agg=0,1&geo=vvvvvvvvvvvvo&sec=vs&freq=A&start=2001&end=2020&ctype=map&ltype=pin&rtype=s&pin=&rse=0&maptype=0.36.USEnergyInformationAdministration(EIA),“AnnualU.S.coal-firedelectricitygenerationwillincreaseforthefirsttimesince2014”,18October2021,https://www.eia.gov/todayinenergy/detail.php?id=49996.37.USEnergyInformationAdministration(EIA),“Short-TermEnergyOutlook”,12April2022,https://www.eia.gov/outlooks/steo/report/coal.php.38.Nasr,Joseph,“Factbox:CanGermanykeepwarmwithoutRussiangas?”,Reuters,8March2022,https://www.reuters.com/business/energy/can-germany-keep-warm-without-russian-gas-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n.149.GlobalCementandConcreteAssociation(GCCA),“GlobalCementandConcreteIndustryAnnouncesRoadmaptoAchieveGroundbreaking‘NetZero’CO2Emissionsby2050”,12October2021,https://gccassociation.org/news/global-cement-and-concrete-industry-announces-roadmap-to-achieve-groundbreaking-net-zero-co2-emissions-by-2050.150.MissionPossiblePartnership,“AboutUs”,https://missionpossiblepartnership.org/about.151.MissionPossiblePartnership,Net-ZeroSteelSectorTransitionStrategy,op.cit.152.Gardarsdottir,StefaniaOsk,etal.,“ComparisonofTechnologiesforCO2CapturefromCementProduction-Part2:CostAnalysis”,Energies,vol.12,no.3,10February2019,https://www.mdpi.com/1996-1073/12/3/542.153.InternationalEnergyAgency(IEA),AmmoniaTechnologyRoadmap,https://iea.blob.core.windows.net/assets/6ee41bb9-8e81-4b64-8701-2acc064ff6e4/AmmoniaTechnologyRoadmap.pdf.154.InternationalEnergyAgency(IEA),“ETPCleanEnergyTechnologyGuide”,4November2021,https://www.iea.org/articles/etp-clean-energy-technology-guide.155.MissionPossiblePartnership,Net-ZeroSteelSectorTransitionStrategy,op.cit.156.WorldEconomicForum,AluminiumforClimate:Exploringpathwaystodecarbonizethealuminiumindustry,CommunityReport,2020,https://www3.weforum.org/docs/WEF_Aluminium_for_Climate_2020.pdf.FosteringEffectiveEnergyTransition2022Edition53157.GlobalCementandConcreteAssociation(GCCA),“Gettingtonewzero”,https://gccassociation.org/concretefuture/getting-to-net-zero.158.MissionPossiblePartnership,Net-ZeroSteelSectorTransitionStrategy,op.cit.159.EuropeanAluminium,CircularAluminiumActionPlan,ExecutiveSummary,2020,https://www.european-aluminium.eu/media/2931/2020-05-13_european-aluminium_circular-aluminium-action-plan_executive-summary.pdf.160.Thefollowingdefinitionof“Scope3emissions”isfromtheUSEnvironmentalProtectionAgency:“Scope3emissionsaretheresultofactivitiesfromassetsnotownedorcontrolledbythereportingorganization,butthattheorganizationindirectlyimpactsinitsvaluechain.Scope3emissionsincludeallsourcesnotwithinanorganization’sscope1and2boundary.Scope3emissions,alsoreferredtoasvaluechainemissions,oftenrepresentthemajorityofanorganization’stotalGHGemissions.”See“GHGInventoryDevelopmentProcessandGuidance”,EPACenterforCorporateClimateLeadership,December2021,https://www.epa.gov/climateleadership/ghg-inventory-development-process-and-guidance.161.WorldEconomicForum,“Howtheoilandgasindustrycantakealifecycleapproachtoreducingemissions”,Agenda,25August2021,https://www.weforum.org/agenda/2021/08/oil-gas-industry-lifecycle-approach-reducing-emissions.162.InternationalEnergyAgency(IEA),AmmoniaTechnologyRoadmap,op.cit.163.WorldEconomicForum,“FirstMoversCoalition”,op.cit.164.UnitedNationsIndustrialDevelopmentOrganization(UNIDO),“IndustrialDeepDecarbonisationInitiative”,https://www.unido.org/IDDI.165.InternationalRenewableEnergyAgency(IRENA),“RenewableEnergyJobsReach12MillionGlobally”,PressRelease,21October2021,https://www.irena.org/newsroom/pressreleases/2021/Oct/Renewable-Energy-Jobs-Reach-12-Million-Globally.166.Ibid.167.MissionPossiblePartnership,“ActionSectors”,https://missionpossiblepartnership.org/action-sectors.168.FirstInsight,TheStateofConsumerSpending:GenZShoppersDemandSustainableRetail,SurveyReport,2020,https://www.firstinsight.com/white-papers-posts/gen-z-shoppers-demand-sustainability.169.CleanEnergyMinisterial,“IndustrialDeepDecarbonisation,LaunchofIndustrialDeepDecarbonisationInitiative(IDDI)”,PressRelease,1June2021,https://www.cleanenergyministerial.org/news-clean-energy-ministerial/press-release-launch-industrial-deep-decarbonisation-initiative-iddi.170.WorldEconomicForum,“Howtheoilandgasindustrycantakealifecycleapproachtoreducingemissions”,op.cit.171.MissionPossiblePartnership,Net-ZeroSteelSectorTransitionStrategy,op.cit.172.Holcim,“OurCO2Footprint”,https://www.holcim.com/our-co2-footprint.173.WorldEconomicForum,“FirstMoversCoalition”,op.cit.174.Volvo,“VolvoLaunchesWorld’sFirstVehicleUsingFossil-FreeSteel”,PressRelease,13October2021,https://www.volvoce.com/global/en/news-and-events/press-releases/2021/volvo-launches-worlds-first-vehicle-using-fossil-free-steel.175.UnitedNationsIndustrialDevelopmentOrganization(UNIDO),“IndustrialDeepDecarbonisationInitiative”,op.cit.176.AluminiumFederation,“CollaborationBetweenCentroRottami,IndinvestLTandTOMRARecyclingBoostsAluminiumRecycling”,8September2021,https://alfed.org.uk/collaboration-between-centro-rottami-indinvest-lt-and-tomra-recycling-boosts-aluminium-recycling.177.LightMetalAge,“NovelisCreatesAutomotiveClosed-LoopRecyclingSystemwithVolvoCars”,31January2020,https://www.lightmetalage.com/news/industry-news/recycling-remelt/novelis-creates-automotive-closed-loop-recycling-system-with-volvo-cars.178.Kimitec,“CosentinoandKimitec,TwoGiantsoftheAlmerianIndustry,TeamUptoPromoteCircularEconomy–EOCENEProject”,26May2021,https://kimitec.com/en/eocene-project-cosentino-and-kimitec-join-forces.179.WorldSteelAssociation,“Demonstratingthepracticalityofreuseinconstruction”,https://worldsteel.org/circulareconomy/case-studies/reuse.180.Sanyal,Suchismita,“Systemlevelmo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a,“MissionInnovation:CatalysingCleanEnergySolutionsforAll”,https://www.nrcan.gc.ca/climate-change/canadas-green-future/mission-innovation/18612.208.BundesministeriumfurBildungundForschung,“Karliczek:GermanyandNamibiaformpartnershipforgreenhydrogen”,PressRelease,25August2021,https://www.bmbf.de/bmbf/shareddocs/pressemitteilungen/de/2021/08/172_namibia_eng.pdf.209.MassachusettsInstituteofTechnology,“MITconvenesinfluentialindustryleadersinthefightagainstclimatechange”,28January2021,https://news.mit.edu/2021/mit-convenes-influential-industry-leaders-fight-climate-change-0128.210.InstitutPolytechniquedeParis,“TotaltobethefirstR&Icenterimplementedininnovationpark”,26June2020,https://www.polytechnique.edu/en/content/total-be-first-ri-center-implemented-innovation-park.211.SmartEnergyLab,https://www.smartenergylab.pt.212.OilandGasClimateInitiative,“Acatalystforchange”,https://www.ogci.com/about-us.213.CarbonDisclosureProject(CDP),https://www.cdp.net/en.214.Euronav,“CDP–theCarbonDisclosureProject”,Glossary,https://www.euronav.com/en/glossary.FosteringEffectiveEnergyTransition2022Edition55215.Bloomberg,“PavilionEnergy,QatarEnergyandChevronLaunchGHGReportingMethodologyforDeliveredLNGCargoes”,17November2021,https://www.bloomberg.com/press-releases/2021-11-17/pavilion-energy-qatarenergy-and-chevron-launch-ghg-reporting-methodology-for-delivered-lng-cargoes.216.CarbonTracker,“NewGlobalCoalitionofTech,ClimateGroupsWillCombineAIandSatellitestoMonitorGHGEmissionsWorldwideinRealTime”,15July2020,https://carbontracker.org/climatetrace.217.ClimateTRACE,“OurMission”,https://www.climatetrace.org/about.218.BloombergNEF,“CarbonOffsetPricesCouldIncreaseFifty-Foldby2050”,10January2022,https://about.bnef.com/blog/carbon-offset-prices-could-increase-fifty-fold-by-2050.219.Europetrole,“OxyLowCarbonVenturesSelectsWorleyforServicesContractonCanadianDirectAirCapture(DAC)-to-FuelsFacility”,12November2021,https://www.euro-petrole.com/oxy-low-carbon-ventures-selects-worley-for-services-contract-on-canadian-direct-air-capture-dac-to-fuels-facility-n-i-22998.220.Verra,“StandardsforaSustainableFuture”,https://verra.org.221.GoldStandard,https://www.goldstandard.org.222.Tavares,Cristina,“FirstGoldStandard-certifiedCarbonProjectregisteredinArgentina”,Ecosecurities,18November2020,https://www.ecosecurities.com/post/first-gold-standard-certified-carbon-project-argentina.223.UNCTAD,WorldEconomicForumandAccentureanalysis;UNCTADstat,“Grossdomesticproduct:GDPbytypeofexpenditure”,op.cit.FosteringEffectiveEnergyTransition2022Edition56WorldEconomicForum91–93routedelaCapiteCH-1223Cologny/GenevaSwitzerlandTel.:+41(0)228691212Fax:+41(0)227862744contact@weforum.orgwww.weforum.orgTheWorldEconomicForum,committedtoimprovingthestateoftheworld,istheInternationalOrganizationforPublic-PrivateCooperation.TheForumengagestheforemostpolitical,businessandotherleadersofsocietytoshapeglobal,regionalandindustryagendas.

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