Navigating Business and Financial Challenges for Industry Transition in the Global South.
Productive capacity in some of the most polluting industrial sectors, such as steel and chemicals, is expected to see the most growth in developing and emerging countries in the coming decades. To avoid committing the world to long-lived and high-emitting industrial capacities, investments in industrial emissions reductions will need to accelerate quickly in these countries. However, high-emitting industries in the Global South currently face significant challenges in attracting investments for low-carbon industrial production.
This perspective explores the business case and financial hurdles to mobilizing investments for low-carbon industrial production in the Global South, making four key points:
- Policy interventions are needed to enhance energy efficiency without impeding low-carbon production. Industrial energy efficiency in the Global South faces underinvestment due to perceived risks and financial constraints. To improve this, policy interventions compatible with a post-2030 low-carbon solutions timeline are required.
- High costs of low-carbon solutions necessitate innovative business models. Measures to improve the basic business case for green industrial production in the Global South must be in place before financial risk mitigation at a commercial scale can help solve issues related to access to finance
- Investment conditions for industrial decarbonization are more challenging compared to renewable energy. Industrial decarbonization faces challenges like higher market risk in a competitive global market, a lack of risk management structures, and considerable technology uncertainties.
- Enabling industry transition in the Global South requires custom solutions. Developed markets that are now moving to transition their industrial production are driven by clear policy directives, robust decarbonization roadmaps, and financial incentives. Replicating this success in developing and emerging markets will require custom solutions and mobilization of international finance, as these conditions might not readily exist in the Global South.