In this issue: Stimulating demand to unlock $700bn investment potential; Fast-tracking the Green Industrial Revolution; US clean industry hubs

Signal from MPP | Issue No. 16 | October 2024

In this latest issue of Signal, we highlight three areas of our work addressing the economic barriers to the industrial transition. The decarbonisation of heavy industry and transport is underway, but progress is being held back by a lack of investment in green industrial plants.

To help build the business case and get finance flowing, we need to structurally embed demand for low-carbon commodities at a global scale. In September we released new insights, tools and strategies capable of unlocking billions of dollars of untapped green investment.

These include:

• A case to scale up demand for green commodities to unlock a green industrial project pipeline representing an estimated $700bn investment opportunity, as revealed by the Industrial Transition Accelerator (ITA)
• ‘Green Market Makers’ identified as game-changers, capable of fast-tracking the growth of green commodity markets for low carbon fertiliser, fuels and materials
• Practical lessons learnt from work on the ground in clean industrial hubs in California and Texas

Stimulate demand to unlock $700bn investment potential says the Industrial Transition Accelerator

The Industrial Transition Accelerator (ITA) , hosted by MPP, is working directly with governments and private sector corporations to stimulate the demand for low carbon products needed to unlock billions of dollars of decarbonisation project investment in the next 2-3 years. Over 450 large-scale projects form the pipeline.

Its latest analysis outlines practical steps needed to help scale up investment in low carbon projects where firm purchase commitments from the market for green products are insufficient to make proposed projects bankable. The ITA encourages the uptake of policies that can provide market certainty and stimulate green demand vital to decarbonisation projects.

"We need to structurally embed demand at a global scale to seize the opportunity in front of us today,” said Faustine Delasalle , Executive Director of the ITA Secretariat and Chief Executive Officer of the Mission Possible Partnership.

The ITA has identified three critical requirements to accelerate demand and is publishing a series of practical tools to help governments and corporates address these.

1. The Policy Playbook: helping to address the need for clearer policy interventions from government through regulation/mandates to reduce the green premium and drive purchase of low-carbon products, this will be launched ahead of COP29.

2. The Standards Map : published during New York Climate Week, it provides an overview and assessment of existing international emissions accounting methodologies and definitions of low-carbon or zero-carbon products to bring clarity and confidence to buyers.

3. The Green Purchase Toolkit: will bring together tools and instruments that enable and de-risk purchase of green products for buyers, such as buyers’ platforms, market intermediaries and innovative insurance mechanisms.

Recent work by the ITA under a new regional partnership with the government of Brazil is providing targeted support to project developers to explore and accelerate critical project investment in the country, with new country partnerships on the horizon.

Learn more here: https://ita.missionpossiblepartnership.org/news/entry/700bn-of-investment-could-flow-into-green-heavy-industry-pipeline-globally-if-demand-for-low-carbon-products-increases-finds-new-ita-analysis/

Reuters article: https://www.reuters.com/sustainability/climate-energy/scant-green-premium-stalls-over-450-low-carbon-projects-analysis-shows-2024-09-20/

Fast-tracking the Green Industrial Revolution

Mission Possible Partnership (MPP) has published a new report which reveals a toolbox for G20 governments to unlock exponential growth across low-carbon fertilisers, fuels, and essential materials within 10 years.

The report ‘Unleashing market forces to scale green industry: the role of Green Market Makers ’ is published in collaboration with Bezos Earth Fund , Systemiq Ltd. , RMI and others. It is designed to help governments, industry and financial institutions to expedite a green industrial revolution.

The aim is to help green products along the typical development ‘S’ curve – from niche, through slow initial transactions to the point where demand suddenly rises and prices come down – the tipping point.

Green Market Makers (GMMs) are identified as game changers, capable of fast-tracking low-carbon commodity markets so that tipping points are reached earlier. GMMS are innovative models for buying and selling low-carbon commodities, with the GMM acting as an intermediary between low-carbon producers and purchasers. Its effectiveness lies in how it absorbs multiple risks and covers the difference between higher costs of green products and the price that the buyer is willing to pay - obstacles that commonly hold back new clean products.

The report shows how GMMs could work across different markets, different sectors and different geographies. However, green ammonia, green steel, and green cement all fall into the GMM ‘sweet spot’ – low carbon commodity markets that are ripe for hyper-scaling, with green ammonia highlighted as a priority.

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The report points out that if G20 economies supported the transition of between one-seventh and one-third of their demand through different GMMs, a tipping point could be reached in all green commodity markets to unleash exponential growth of green industry globally.

To date H2Global Stiftung is the only Green Market Maker in operation globally having pioneered a double-sided auction to optimise prices, enable price discovery, provide liquidity and absorb risks. In July it successfully contracted Fertiglobe to supply 397,000t of green ammonia to Europe from Egypt starting in 2027.

Learn more here: https://gmm.missionpossiblepartnership.org/

US clean industry hubs: 5 key takeaways

In collaboration with the Earth Fund, MPP and RMI are supporting clean industrial hubs in California and the US Gulf Coast?in Texas to unlock investment in green industrial projects to help scale production of low-carbon solutions across heavy industry and transport sectors. The work provides direct support to key green industrial projects while bringing together stakeholders to help drive collective action to scale up investment. From our teams on the ground, we have uncovered five critical insights :

1. Technology: An economically viable technology path to decarbonisation is in sight, including in sectors such as aviation and cement. However, these pathways face hurdles and corporates remain dependent on supportive policy to make a compelling business case and pursue deep decarbonisation, rather than incremental solutions.
2. Demand: Although all projects in the US have benefitted from the support of the Inflation Reduction Act, projects in California which rely on mandates have progressed faster due to an even playing field and longer-term demand certainty. Policy measures such as tax credits and regulation create greater visibility on future demand and reduce overall risk for investors.
3. Infrastructure: Achieving decarbonisation goals for industry will require a rapid buildout of industrial assets and infrastructure. Forging industry consortiums to increase dialogue and transparency on permitting or co-ordinated energy planning such as the Houston Energy Transition Initiative, can unlock enabling infrastructure.
4. Community engagement: Sector-specific capacity-building workshops on best practices and strategies have created two-way, inclusive, meaningful community engagement and responsive benefits. Innovative tools like the free first-of-its-kind stakeholder analysis tool (S.A.M ) can elevate this critical factor in project success.
5. Finance: Financiers must explore more innovative deal structuring to efficiently share risks in complex projects. Opportunities are seen in e-methanol for shipping and clean ammonia exports to East Asia with project-on-project risk remaining a key hurdle.

The California hub covers the work of 335 industrial facilities focused on decarbonising aviation, shipping, and trucking. Together these have a $115 billion potential IRA funding opportunity. The Texas-based US Gulf Coast?hub has a bigger industrial footprint, with petrochemicals a significant proportion across the 450+ industrial facilities. These offer a $130 billion potential IRA funding opportunity.

For details of MPP and RMI’s insights and learning from the California and Texas hubs visit https://www.missionpossiblepartnership.org/hubs/

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Upcoming events & partnerships

Hear more from MPP at upcoming events and access tickets on related conferences from our partners.

• Net Zero Festival (22-23 October, Business Design Centre, London)
• World Climate Summit (17 November, Heydar Aliyev Centre, Baku, Alongside COP29)
• Sustainable Innovation Forum 2024 (13-14 November, Baku Marriott Hotel Boulevard, Baku, Alongside COP29) - Use code MPP25OFF for a 25% discount to attend the Forum

Mission Possible Partnership is?a movement of climate leaders in business and civil society driving industrial decarbonisation across the entire value chain of the world’s highest-emitting sectors: aluminium, cement, chemicals, steel; aviation, shipping, and trucking. We’re charting the inventive steps and radical collaboration to enable commercial-scale deep decarbonisation projects in this decisive decade.