The world’s transition to a low-carbon economy is facing a significant hurdle: a lack of demand for green products. This is the central message of an open letter released by the Industrial Transition Accelerator (ITA), a coalition of over 40 business leaders and 700 financial institutions, representing over 1,000 companies. They argue that governments must act urgently to stimulate demand for green materials, chemicals, and fuels to accelerate the decarbonization of the world’s highest-emitting industries.
The letter highlights the critical role of governments in unlocking the potential of green industrial projects. While the pipeline of planned green industrial facilities is growing, only a small fraction are operational or have secured the necessary funding. Since April 2024, only eight projects globally have reached Final Investment Decision (FID), leaving hundreds of announced projects in limbo. The delay is largely attributed to the lack of policy incentives and the continued availability of cheaper, higher-carbon alternatives. This creates uncertainty for businesses and investors, making them hesitant to commit to long-term investments in green technologies.
The ITA’s open letter emphasizes the need for governments to implement specific policy measures to address this challenge. These include:
*
Supporting global carbon pricing and fuel standard measures:
This would make carbon-intensive products more expensive, encouraging the adoption of cleaner alternatives.*
Setting and enforcing mandatory quotas for low- and near-zero-carbon fuels and products:
This would guarantee a market for green products, providing certainty for businesses and investors.*
Setting mandatory targets for low- and near-zero-carbon materials in public procurement:
Government purchases could significantly boost demand for green products, showcasing their viability and reliability.*
Setting stringent and progressively tightening limits on whole life carbon:
This would encourage companies to reduce their emissions across their entire value chain.*
Implementing mechanisms that help bridge the price gap between green commodities and potential buyers:
Financial assistance and subsidies could make green products more competitive in the short term, paving the way for a wider adoption.To complement the open letter, the ITA has released a Green Demand Policy Playbook. This document provides governments with evidence-based policy measures to increase demand for low- and near-zero-carbon materials, chemicals, and fuels. The goal is to unlock the potential of the green industrial pipeline and accelerate the transition to a sustainable future.
The ITA’s call to action is clear: governments must take decisive action to create a favorable environment for green industries. Only then can we unlock the $1 trillion of investment potential and construct the 500+ green industrial plants needed to reduce emissions from sectors like aluminium, cement, chemicals, steel, aviation, and shipping – aligning with the goal of limiting global warming to 1.5°C. The time for action is now.
