Why and how industrial clusters can get the United States to net-zero

  • In the United States, industrial emissions comprise nearly a quarter of the total and are notoriously difficult to reduce.
  • While the United States’ industrial clusters are making progress, more can be done to increase the country’s rate of decarbonization.
  • The initiative, Transitioning Industrial Clusters toward Net Zero, helps establishments set and meet their emissions reduction targets.

WEF Zero Emission

Nearly a quarter of all emissions in the United States come from industry. It’s not easy to get rid of them, which makes them even more problematic.

And that’s why the idea of decarbonizing industrial clusters is so enticing. When industries in the same region work together to reach their decarbonization goals, they not only share risks, infrastructure, and natural resources, but they also show a united front on important issues like changing the way people work and making sure the environment is fair.

Collaborating for change

The World Economic Forum, in partnership with Accenture and the Electric Power Research Institute, has launched a project called Transitioning Industrial Clusters towards Net Zero. It is a meeting place for business leaders, academics, and government officials from all over the world to discuss challenges in the industry and ways in which public and private funding can help to alleviate those challenges.

This initiative has helped shape discussions at the Department of Energy’s (DoE) Global Clean Energy Action Forum (GCEAF) and Carbon Management Project Review, as well as informed responses from Signatory US Industrial Clusters to the DoE’s Regional Clean Hydrogen Hub Request for Information (RFI) and Request for Proposal (RFP). Whitepapers on policy enablement for industrial decarbonization across 10 nations and prospects for funding industrial clusters in the US provide two recent public appraisals of the initiative’s progress.

Emerging clusters in the US

To hasten the formation of industrial clusters in the United States (and elsewhere), it is necessary to take a strategy that takes into account the needs and interests of businesses, NGOs, governments, and local communities as well as the social, economic, and environmental benefits that will result from the endeavor. This method encourages governments, suppliers, and stakeholders to work together on capital investments and the growth of ecosystems of decarbonization technology and talent, while also easing financial and operational risk-taking.

The HyNet North West cluster in the United Kingdom, a signatory to the initiative, exemplifies the possibility of such an integrated strategy. Prior to the development of infrastructure, generation, and storage assets for carbon and hydrogen, this cluster has used existing infrastructure and strong federal support to align over 40 memorandums of understanding for future users of these fuels.

Initiative for Net-Zero Energy Use in Industrial Clusters:

  • The H2Houston Hub’s mission is to position the city as a world leader in low-carbon energy by capitalizing on hydrogen. The non-governmental organization Center for Houston’s Future (CHF) will be pivotal as a facilitator of cross-sector collaboration, given its mission to promote the city’s social, environmental, and economic potential.
  • The National Capital Hydrogen Center is a hub for the development of the region’s hydrogen economy. The cluster, led by the nonprofit Connected DMV, is comprised of businesses, factories, governments, and nonprofits with the goal of reducing regional CO2 emissions by 2.7 Mt by 2030.
  • In order to investigate the potential of the hydrogen economy in Ohio and neighboring Pennsylvania, the Ohio Regional Clean Hydrogen Hub Alliance has assembled over 150 members. A clean energy transition that includes all stakeholders will have far-reaching economic and social advantages, thus the cluster is applying for US Department of Energy Hydrogen Hub financing to kickstart it.
  • The Greater St. Louis-Illinois Clean Hydrogen Hub is made up of business and community leaders as well as educational institutions that plan to work together to reduce greenhouse gas emissions in the region by implementing new infrastructure and technologies by 2035.

Clean hydrogen, carbon capture utilization and storage (CCUS), and direct electrification process efficiency were identified as transformational technologies for accelerating industrial decarbonization, and the initiative convened these four US clusters, seven global Signatory Industrial Clusters, and more than 30 representatives of multinational industrials in October 2022 to discuss them. The new clean resource markets necessary to decarbonize industrial processes cannot be established without forums like this one and the actions it spurs.

New funding for industrial clusters

When applied on a larger scale, decarbonization in industry requires substantial funding. In the United States, legislation such as the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) might free up billions of dollars in federal funding, speeding up progress in this area.

It is crucial that these public dollars be used as leverage to bring in even more private investment. This has been shown to be the case numerous times. By way of illustration, in the UK, public investment accounted for over 70% of funding for the offshore wind fleet in 2010; today, it accounts for approximately 25% and is trending towards zero.

Public financiers determined the optimal time for a shift to private investment and put in place instruments like Renewable Obligation Certificates (ROCs) and auction-based Contracts for Differences (CFDs) to facilitate the change. The UK’s Department of Business, Energy, and Industrial Strategy (BEIS) also spearheaded an aggressive industrial cluster initiative and supported the development of offshore wind farms.

We are using cases like these to inform our recommendations for the US government and the cluster community on how to best allocate public funds. We need to know how to best leverage the $100 of private sector financing for every $1 of Infrastructure Investment and Jobs Act (IIJA) funding, so this is a major question for us.

What steps is the World Economic Forum taking to facilitate the shift to renewable energy sources?

The energy transition has stalled in recent years, despite the fact that it is crucial to fighting climate change.

Two-thirds of all emissions come from the energy sector, and although while 81% of the world’s energy system is reliant on fossil fuels, that number hasn’t changed in the last 30 years. Additionally, progress in reducing the energy intensity of the global economy (i.e., the amount of energy used per unit of economic activity) is leveling off. The 1.2% increase in energy intensity shown in 2018 was the lowest annual rate of improvement since 2010.

Developing a global energy infrastructure that meets the needs of all people while remaining sustainable, affordable, and secure will require effective policies, private sector action, and public-private cooperation.

Success in making the change requires regular check-ins on progress. According to the World Economic Forum’s Energy Transition Index, which evaluates 115 economies on their ability to strike a balance between energy security and access, environmental sustainability, and affordability, the unpreparedness of the world’s largest emitters (the United States, China, India, and Russia) is the biggest obstacle to the energy transition. The 10 countries that score the highest in terms of preparation account for only 2.6% of total annual emissions.

It is the goal of the Forum’s Shaping the Future of Energy and Materials Platform to stimulate and enable innovative energy investments, technologies, and solutions in order to future-proof the global energy system.

Furthering the transition of heavy industry and the mobility sectors toward net-zero emissions is a priority for the Mission Possible Platform (MPP), which is aiming to collect public and commercial partners to accelerate this process. The World Economic Forum and the Energy Transitions Commission developed MPP as a joint endeavor.

Accelerating the value of industrial clusters

US industrials need to take action immediately to capture federal funds and seed institutional investment, but every industrial cluster needs to take a different approach depending on the local industrial character, political climate, geology, etc. It is imperative that these ecosystems:

  • Create institutional frameworks and legal agreements that encourage all emitting organizations in a region to join in, and keep your collective action commitment even when government funds have run out.
  • Involve regional and national authorities in a discussion of the challenges and opportunities presented by carbon and hydrogen markets for the development of assets and infrastructure.
  • Hold discussions with influential business people, government officials, and community advocates from around the world to identify success factors and brainstorm local applications.
  • The concept of industrial clusters is growing in popularity, and the Transitioning Industrial Clusters towards US emission Net Zero initiative is working to facilitate collaboration among policymakers, financiers, and industries by encouraging the development of international technology and supply-demand partnerships. Further expansion of the project to other regions, such as the United States, Europe, and Asia-Pacific, is something we’re looking forward to as well.

We believe that the only way to achieve lasting change is to take a comprehensive approach to decarbonizing industrial clusters, one that takes into account social, economic, and environmental problems while also providing social, economic, and environmental advantages. We can speed up our transition to a net-zero planet if we collaborate and share successful strategies.

Credits: World Economic Forum

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