Manufacturing industries account for up to 40% of the global CO2 emissions. Therefore, climate objectives cannot be achieved without significant progress in emission reduction in industry. Although industries themselves are taking significant steps to reduce their carbon footprint – for instance, 88% of the major steel companies around the world have introduced net-zero targets – further efforts are needed, including by policy makers.
Decarbonising industry
Industrial decarbonisation is pivotal to achieving net-zero emission targets. In 2022, manufacturing industries accounted for as much as 40% of global carbon dioxide (CO2) emissions, equivalent to around 16 gigatonnes (Gt) annually. Effective decarbonisation pathways require swift and bold action from both industry stakeholders and governments worldwide. The OECD provides data-driven, factual analyses and policy recommendations to assist governments and industries in this crucial transition to net zero.
![Photo of a chimney spewing smoke against blue sky background](/https/www.oecd.org/adobe/dynamicmedia/deliver/dm-aid--a353a547-f16c-432d-9abc-9b2eb4125789/shutterstock-1734673265.jpg?preferwebp=true&quality=80)
Key messages
Reaching net-zero in industry extends beyond simply translating climate objectives into decarbonisation pathways. It entails a comprehensive industrial transformation encompassing labour and skills, research and development (R&D), finance, and trade. OECD analysis underscores the need for an industry perspective - next to an energy and climate perspective - to achieve this goal. This approach demands consideration of the specificities of industries across countries, engagement with industry stakeholders, and awareness of the diversity of circumstances. It also highlights the need for a just and inclusive transition in meeting these objectives.
While industries are making strides towards net-zero, the current rate of progress is insufficient. This lag can partly be attributed to barriers hindering industrial advancement. Achieving industrial decarbonisation requires an enabling environment that offers access to finance and skills, to resources such as clean hydrogen and renewable energy, and support for developing new technologies and scaling-up of existing clean technologies.
Policy makers play a crucial role in fostering an environment that facilitates industrial decarbonisation. Effective policies must be both comprehensive, combining different drivers of decarbonisation, and tailor-made to address the unique circumstances of individual countries.
Many industries operate on a global scale through trade and investment. That means that progress (or the lack thereof) in decarbonising in one country can affect other countries as well. International co-operation is therefore essential to ensure progress and avoid unnecessary distortions to open markets and free trade. This co-operation is also essential for scaling the transition, to establish new trade routes, create regional markets for green products, develop new standards, and support technology transfer and capacity building through which good practices can be shared.
Context
Current levels of innovation are insufficient to meet net-zero challenges
Science, technology, and innovation will be critical to achieving climate change mitigation targets in the industrial sector. While utilising existing technologies more effectively across industries and countries is necessary for industrial decarbonisation, advancing the technology frontier is crucial to realising the long-term 2050 strategies outlined in the Paris Agreement.
OECD analysis suggests that the current level of innovation is insufficient to meet the challenge, primarily due to a policy emphasis on deployment rather than R&D support. Recent trends show a decline in the share of patents in climate-related mitigation and adaptation (CCMA) technologies after strong growth from 2006 to 2012, although trademarks trends are more encouraging.
Workers displaced in high carbon-intensity sectors tend to suffer more lasting and significant losses in earnings
The green transition is transforming jobs, skills requirements, and local economies. This transformation necessitates a reallocation of labour across sectors and firms, potentially exacerbating inequalities. Workers in in high carbon intensity sectors, for instance, often face more severe and prolonged earnings losses when displaced. The shift in job and skill demand frequently exhibits a strong regional dimension, as energy-intensive industries are typically concentrated in specific areas. At the same time, successful decarbonisation has distinct implications for different sectors and occupations. Anticipating these distributional implications is crucial for crafting effective skills policies that facilitate the transition of workers from declining sectors to expanding ones.
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oecd-opsi.org6 April 2023
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