Policy Toolbox for Industrial Decarbonisation
About this report
The Policy Toolbox for Industrial Decarbonisation is a repository of policy instruments available to assist governments as they design, develop and implement their strategies for industrial decarbonisation. This work, undertaken as part of the Climate Club's Work Programme, builds on the policy toolbox outlined in IEA’s 2022 Achieving Net Zero Heavy Industry Sectors in G7 Members report, with the addition of further details on the instruments and considerations for implementation.
A robust industrial decarbonisation policy strategy is likely to include multiple different instruments, as governments choose the instruments that are most suited to their individual circumstances and objectives. The report draws on comparative policy analysis to discuss the main considerations and best practices for a wide range of policy instruments, as well as opportunities for international collaboration. It provides examples of relevant policies applied around the world.
The Policy Toolbox is divided into three broad areas with nine categories in total that group policy instruments according to their objectives. These broad areas are: Framework fundamentals, including (1) Establishing plans and policies for long-term GHG emissions reductions and (2) Mobilising finance and investment; Targeted actions for specific technologies and strategies, including (3) Managing existing assets and near-term investment, (4) Creating a market for near-zero emissions materials production, (5) Developing technologies, and (6) Accelerating material efficiency and circularity; and Necessary enabling conditions, including (7) International co-operation and a level playing field, (8) Infrastructure planning and development, and (9) Tracking progress and improving data.
Framework fundamentals
Establishing plans and policy for long-term GHG emission reductions
- Roadmaps, plans and targets (including via NDCs)
- Emissions Trading Systems (ETSs)
- Carbon taxes
- Tradeable Performance Standards (TPSs)
- Just transition planning
Mobilising finance and investment
- Direct public funding
- Direct public equity investment
- Subsidised interest rates and concessional loans
- Public guarantees
- Facilitation to connect financing and funding needs
- Contracts for difference (CfDs)
- Tax credits
- Public Private Partnerships (PPPs) and Blended Finance
- International finance
- Sustainable investment schemes/taxonomies/roadmaps
Targeted actions for specific technologies and strategies
Production technologies
Managing existing assets and near-term investment
- Requirements for retrofit-ready builds
- Sunset clauses
- Measures to reduce excess capacity
- TPSs
- Carbon Product Requirements (CPRs)
Creating a market for near-zero emission materials production
- CfDs
- Public procurement for near-zero emissions
- State-backed intermediaries
- Near-zero emissions private procurement
- Collaborative procurements and buyers' alliances
- Near-zero emission material mandates/ quotas and minimum content regulations
- Embodied carbon limits or taxes on end-use products
- Certifications and product stewardship
Developing earlier-stage technologies
- R&D and demonstration funding
- PPPs
- Programmes and networks for innovation knowledge-sharing, and co-ordination
- Regulatory sandboxes
Demand and recycling
Accelerating material efficiency
- Modified design regulations focused on material efficiency
- Incentives for extended end-use lifetimes and demolition or landfilling fees
- Training programmes in material efficiency for engineers, architects, and construction workers
- Material efficiency awards and certifications
- Embodied carbon limits or taxes on end-use products
Framework fundamentals
International co-operation and a level playing field
- Co-ordination of carbon pricing, regulations, subsidies and other measures
- Carbon border adjustments (CBAs)
- International technology co-development and strategic partnerships
- Multilateral alliances and collaborative fora
- Capacity-building and international best practice sharing
- International finance
Infrastructure planning and development
- Co-ordinated planning and public financing for required supporting infrastructure
- Streamlined and accessible permitting
Infrastructure planning and development
- Improved data collection and reporting
- Standards, definitions, certifications and labelling for low- and near-zero emission materials production
- Work towards common international methodologies and definitions
- Sustainability certifications and product stewardship initiatives