Net zero: the evidence that business is getting a grip

Just a few months on from COP26, when a slew of announcements engendered a sense of optimism that governments and businesses were getting to grips with the climate emergency, the mood music in the deep midwinter is very different.

Soaring natural gas prices are, somewhat counterintuitively, providing the diminishing number of climate sceptics with the ammunition to push back against the net zero agenda, their views amplified by newspaper proprietors who still don’t understand what’s at stake – or how much has changed in the world of clean energy. 

Legislative packages such as President Biden’s Build Back Better initiative are bogged down in political infighting, and the use of coal continues to revive. 

But behind the headlines, there is much encouraging progress. Indeed, many areas – including some of the most challenging to decarbonise – are seeing faster progress than expected and showing how technological breakthroughs, a strong pull from the demand side and the prospect of tighter regulation are coming together to spur innovation and accelerate the timescales of change. 

When you have one of the world’s biggest shipping companies, for example, setting a target to be carbon neutral by mid-century, that gives suppliers the confidence to commit to providing the solutions that the company – and by extension the rest of the sector, too – needs to wean itself off the bunker fuel that makes the industry so polluting. 

That has enabled shipping giant Maersk to bring forward its target to be carbon neutral by a full decade, from 2050 to 2040, and to extend it from its ocean fleet to its entire business. 

“When we set the target back in 2018, it was truly a moon-shot target, where truth be told we really didn't have a lot of very specific plans,” Maersk’s chief executive of fleet and strategic brands, Henriette Hallberg Thygesen, told Reuters. Maersk has been able to increase its ambitions due to a combination of advances in technologies that still barely exist at the moment, such as sustainable aviation fuels and carbon-neutral methanol, and the demands of customers such as Ikea and Amazon for decarbonised supply chains – which give the shipper the confidence that its plans will not be wasted.

Something similar appears to be happening in steel, another sector seen as one of the hardest to abate because carbon is an essential part of the production process rather than just part of the fuel steelmaking uses.

Yet, having delivered the world’s first fossil free steel to its customer Volvo only in August 2021, Swedish steelmaker SSAB recently announced that it would bring forward its plans to go completely fossil-free by 15 years to 2030, rather than 2045, investing almost $5bn in the process.

Volvo and Mercedes-Benz have both committed to buy SSAB’s fossil-free steel, while BMW has signed a deal for low-carbon steel from German steelmaker Salzgitter. These commitments will increase the availability of low-carbon steel for all users, and European success has also prompted Indian steelmakers to call for government support to make their own operations zero carbon so they don’t fall behind in the race to scale up this new technology.

In turn, the success of low-carbon steel depends on a plentiful supply of green hydrogen, which replaces coal in the steelmaking process to make the metal zero-carbon. The green hydrogen sector barely existed a year ago, but sales of electrolysers – which are needed to separate hydrogen from water – doubled in 2021 and are set to grow four or five-fold this year, according to BloombergNEF. 

Ten industrial projects are due to come online in 2022, making low-carbon hydrogen a reality and reinforcing the confidence of sectors such as steel that their own decarbonisation plans are viable.

In turn, the plans of steelmakers to remove fossil fuels from their production processes – which will contribute to green hydrogen demand of 600,000 tonnes by 2026, up from 9,200 tonnes according to consultancy Delta-EE – gives the clean hydrogen supply chain the confidence to make the investments required to scale up. With similar progress starting to be made in cement, future demand looks robust.

A potential pathway for decarbonised products comes from the automotive sector, where sales of electric vehicles continue to accelerate faster than predicted, as costs fall, more models become available and charging infrastructure is rolled out. 

According to UBS, electric vehicle sales rose 115% last year, bucking the broader weakness in auto sales due to supply chain disruptions. “But despite last year’s impressive growth rate, we believe the electric vehicle market is still in its infancy,” it added.

There’s no doubt that more needs to be done, but there is much to celebrate, too.