There are four important components of an effective program for global cooperation on industrial decarbonization that the G7 can lead in designing and promoting. In fact, the G7 may be the only multilateral entity capable of catalyzing such a program to accelerate the progress needed for hard-to-abate industries to meet Paris climate goals. The heads of state and government of the G7 states have agreed on a first statute for a climate club, which is to be open to all countries and will begin its work next year. The club members should agree on common paths to climate neutrality by 2050. The initial focus should be on the decarbonisation of industry. The Organisation for Economic Co-operation and Development, together with the International Energy Agency, is to establish a secretariat for the Climate Club. According to Federal Minister of Economics and Climate Protection Robert Habeck, lead markets for green steel are to be created with the support of the Climate Club.Below are four key steps that the G7 can take to increase coordination on industrial decarbonization.Exert leadership. The G7’s leadership is essential to accelerate general acceptance of the International Energy Agency methodology for measuring embedded carbon in steel and cement, or a version or portion thereof, as one key element in formation of a “climate arrangement” whose focus will be industrial decarbonization in hard-to-abate sectors beginning with steel, cement, and aluminum, on a sectoral basis.Help design a venue and governance framework. The G7 could agree on and help design a venue and governance framework for administering reliable and confirmable labeling of steel and cement facilities (and possibly products) and maintaining access to transparent data to support such a system. This venue and framework should not, however, rest within the G7.Engage India and China. The adoption of standards and establishment of a governance venue should take account of the need for early engagement with India and China, with the expectation that they will eventually become participants, since they will be the two largest future producers of steel and among the largest users. In fact, India will likely increase new installed capacity more than any other country. Key issues in engaging India will include the availability and collection of relevant data across the industry and policies of the Indian government in requiring a new regime of data acquisition and reporting.Develop funding strategies. The G7 will need to develop funding strategies for assisting the transformation of the steel industries in countries where regional private capital is available but large-scale global private investment is likely to be difficult to access, particularly in India but also in Vietnam, South Africa, and others, with an initial focus on the “Just Energy Transition Partnership” approach of G7 partners developed to help decarbonize the power sector in South Africa and elsewhere (Indonesia, Vietnam).Since only ten countries produce approximately 80 percent of world steel, it will be sufficient for even the most inclusive eventual steel decarbonization platform (or even an eventual “world agreement”) to target at the outset only the United States, the EU (Germany and Italy are the only EU countries in the top ten nation-states), India, China, Japan, South Korea, Russia, Turkey, and possibly Brazil. Others that could observe or join later as major producing, importing, or consuming countries include Ukraine, Vietnam, Poland, South Africa, and Indonesia. Canada and Mexico could potentially participate with the United States in a North American partnership. Potential “associate” membership categories that include companies, trade associations, and others are discussed below.
There are four important components of an effective program for global cooperation on industrial decarbonization that the G7 can lead in designing and promoting. In fact, the G7 may be the only multilateral entity capable of catalyzing such a program to accelerate the progress needed for hard-to-abate industries to meet Paris climate goals. The heads of state and government of the G7 states have agreed on a first statute for a climate club, which is to be open to all countries and will begin its work next year. The club members should agree on common paths to climate neutrality by 2050. The initial focus should be on the decarbonisation of industry. The Organisation for Economic Co-operation and Development, together with the International Energy Agency, is to establish a secretariat for the Climate Club. According to Federal Minister of Economics and Climate Protection Robert Habeck, lead markets for green steel are to be created with the support of the Climate Club.Below are four key steps that the G7 can take to increase coordination on industrial decarbonization.Exert leadership. The G7’s leadership is essential to accelerate general acceptance of the International Energy Agency methodology for measuring embedded carbon in steel and cement, or a version or portion thereof, as one key element in formation of a “climate arrangement” whose focus will be industrial decarbonization in hard-to-abate sectors beginning with steel, cement, and aluminum, on a sectoral basis.Help design a venue and governance framework. The G7 could agree on and help design a venue and governance framework for administering reliable and confirmable labeling of steel and cement facilities (and possibly products) and maintaining access to transparent data to support such a system. This venue and framework should not, however, rest within the G7.Engage India and China. The adoption of standards and establishment of a governance venue should take account of the need for early engagement with India and China, with the expectation that they will eventually become participants, since they will be the two largest future producers of steel and among the largest users. In fact, India will likely increase new installed capacity more than any other country. Key issues in engaging India will include the availability and collection of relevant data across the industry and policies of the Indian government in requiring a new regime of data acquisition and reporting.Develop funding strategies. The G7 will need to develop funding strategies for assisting the transformation of the steel industries in countries where regional private capital is available but large-scale global private investment is likely to be difficult to access, particularly in India but also in Vietnam, South Africa, and others, with an initial focus on the “Just Energy Transition Partnership” approach of G7 partners developed to help decarbonize the power sector in South Africa and elsewhere (Indonesia, Vietnam).Since only ten countries produce approximately 80 percent of world steel, it will be sufficient for even the most inclusive eventual steel decarbonization platform (or even an eventual “world agreement”) to target at the outset only the United States, the EU (Germany and Italy are the only EU countries in the top ten nation-states), India, China, Japan, South Korea, Russia, Turkey, and possibly Brazil. Others that could observe or join later as major producing, importing, or consuming countries include Ukraine, Vietnam, Poland, South Africa, and Indonesia. Canada and Mexico could potentially participate with the United States in a North American partnership. Potential “associate” membership categories that include companies, trade associations, and others are discussed below.
