Global Governance for the Decarbonisation of Energy-Intensive Industries: Exploring Sectoral Options

Otto, S., & Oberthür, S. (2022). Global Governance for the Decarbonisation of Energy-Intensive Industries: Exploring Sectoral Options. (Deliverable 6.1a). NDC Aspects Project (Horizon2020).

Executive Summary

To achieve the goals of the Paris Agreement the deep decarbonisation of energy intensive industries (EIIs) by mid-century is essential. However, their transition is hampered by several crucial economic and political barriers, such as limited availability of mitigation technologies, high capital investment needs and long lifecycles, and strong global competition. Global governance and sector specific initiatives offer great potential to address these barriers and accelerate EII decarbonisation globally – a potential that has so far remained underexploited, however. This article identifies and assesses in detail options of global governance for closing existing governance gaps and advancing the decarbonisation of the main EIIs (i.e., steel, cement and concrete, chemicals, and aluminium). To this end, it proceeds in three steps.

It first determines the theoretical potential of international cooperation to address barriers and challenges to the decarbonisation of EIIs along six governance functions, i.e. signal and guidance, rule setting, transparency and accountability, means of implementation, knowledge and learning, and orchestration and coordination. It then identifies existing gaps in the global governance of decarbonising EIIs, by comparing the theoretical potential of global governance with the existing supply of global governance across the six functions. It finds that recently established global sectoral initiatives provide a promising basis for further enhancing governance, in particular regarding the functions of signal and guidance, means of implementation, as well as rule setting.

On this basis, the article proceeds to identifying and assessing concrete options for enhancing the global climate governance of EIIs to address the gaps identified and drive forward the transition. It analyses if and how reforming existing institutions can address the identified governance gaps, before discussing the possible creation of new institutions to address remaining gaps. Existing institutions offer a good starting to advance global governance on many functions, but a new institution can significantly enhance existing efforts and is required to address issues regarding international competition and carbon leakage and the harmonisation of standards for near-zero emission basic materials. The analysis provides priorities and ‘feasible’ steps towards a better exploitation of the potential of global governance for the decarbonisation of EIIs that can drive forward the sector's transition to climate neutrality.