Supercharging the decarbonization of scope 3 emissions

Driving demand for electrification

The decarbonization of the global economy requires an energy transition from fossil fuels to electricity. But unless we simultaneously decarbonize the production of the upstream hard-to-abate (HTA) commodities and additional sources of scope 3 emissions that electrification requires, it will be a Pyrrhic victory.

The growth of renewable electricity generation and electric vehicles provide valuable insights in how to fund the rapid transformation of production processes for high-carbon commodities such as nickel, aluminum, cement, and others. Perhaps surprisingly, what we can learn has little to do with technology, and everything to do with market structures and how to change complex systems through focused, high-leverage interventions.

Transforming the industries generating most of our economy’s carbon emissions and creating sustainable supply chains can appear daunting, but difficulty is no reason for delay. Even with the limited time available, it is possible to accelerate the creation of a truly low-carbon economy. We just have to demand better.

The double-edge sword of electrification

Electrification is an indispensable ingredient in the energy transition required to avoid the most harmful impacts of climate change. However, many of the essential ingredients of electrification—e.g., metals and minerals, steel and aluminum, concrete and cement—are currently carbon intensive to produce and resistant to decarbonization efforts; indeed, they are known, collectively, as “hard to abate” (HTA) commodities. Yet, by galvanizing demand for the decarbonization of HTA commodities, companies can make tangible progress on their ambitions to forge sustainable supply chains, cut their scope 3 emissions and advance their reach for net-zero.

This report is the second in the series exploring tools and approaches for mitigating emissions from HTA commodities production. The first report described the relationship between HTA commodities and corporate scope 3 emissions. The planned third will connect these initiatives to the needs and constraints of companies producing HTA commodities.

Supporting green commodity producers

At least initially, lower carbon production typically implies higher costs, which often puts “green” commodities out of reach for most customers. The challenge is mobilizing enough demand in the “early adopter” segment to drive new technologies down their learning curves, drawing the “early majority” into the market. That’s when scale economies can work their magic, enabling mass-market adoption. At least, that’s the theory. Can it work in practice?

Decarbonizing the production of HTA commodities and additional upstream scope 3 emissions in just this way is not unprecedented. Renewable sources of power were once orders of magnitude more expensive than energy from fossil fuels. But now, due in large part to innovations like virtual power purchase agreements, renewable electricity generation is now typically significantly cheaper, and it accounts for more newly installed capacity than coal or gas. Thanks to the success of wind and solar, electricity generation, long the largest source of US-generated greenhouse gas emissions, has recently fallen to second place, behind transportation.

This report explains why business leaders, policymakers, and innovators should more broadly collaborate to replicate this result. By working together, companies, government, and nonprofits can more quickly scale lower-carbon production processes in those industries that drive the lion’s share of economy-wide emissions.

Achieving net-zero

While there are templates to emulate, make no mistake, decarbonizing HTA sectors will be challenging work. Yet, to advance and nurture the growth of a low-carbon future, business leaders cannot wait for costs to fall before making the crucial investments in decarbonizing the HTA commodities that drive almost all upstream scope 3 emissions. In fact, investment is precisely what is needed to drive down costs. It is not possible to tackle sectors one at a time, either, because there are dozens of HTA commodities that must be decarbonized on the same compressed time horizon.

The good news: leaders can create the critical incremental demand to decarbonize the HTA commodities driving most companies’ scope 3 burdens. By galvanizing demand for the decarbonization of the commodities in their carbon footprint, companies can make tangible progress on their ambitions to reach net-zero.