FOREWORD

Over the past year, we have seen an acceleration in the global low-carbon transition, with progress
often happening faster than most realise. This includes record deployment of solar PV, electric cars
and heat pumps, which are all important solutions as countries transition to net zero emissions.
However, it is also clear that the transition is still not going fast enough – and is occurring at very
different speeds across regions and sectors. For example, the record deployment of renewables and
the incredibly rapid growth in sales of electric vehicles that took place in 2022 were both heavily
concentrated in China, Europe and the United States. Stronger international collaboration is urgently needed to accelerate the pace of a just transition, ensuring that clean technologies and sustainable
solutions are accessible to all. This Breakthrough Agenda Report 2023, the second in an annual series, assesses progress on international collaboration in seven major emitting sectors. This includes the five sectors covered in last year’s report – power, hydrogen, road transport, steel and agriculture – as well as buildings and cement. Should countries agree to work together towards breakthrough goals in these new sectors, as is now being considered, the Breakthrough Agenda will cover 60% of global greenhouse gas
emissions. This report is a joint product of the International Energy Agency (IEA), the International Renewable Energy Agency (IRENA) and the UN Climate Change High-Level Champions. Each organisation has brought its own expertise to assess progress in international collaboration, and to deliver clear recommendations for the actions that governments and non-state actors need to take together. It also draws on global expertise generously shared by governments, businesses and civil society organisations active in each of the sectors covered.

Greenhouse gas emissions by sector, 2019

ONLY MODEST PROGRESS HAS BEEN MADE IN STRENGTHENING INTERNATIONAL COLLABORATION ON LOW-CARBON TRANSITIONS IN THE PAST YEAR
In the past year, there has been only modest progress in strengthening international collaboration in the sectors covered in this report. Progress has been made in expanding financial and technical assistance to developing countries in some sectors (including power, road transport, hydrogen and steel) and in converging on standards for measuring emissions and defining low-carbon products (in steel, cement, and hydrogen). There has also been progress in collaborative research and development initiatives across most sectors, although there remains a need to share learning more deeply with a wider set of countries.

This report provides an update on the five sectors that were covered last year – power, hydrogen, road transport, steel and agriculture – in which sectoral Breakthroughs currently exist. It also adds two new sectors, cement and buildings, where countries have expressed a desire to commit to new Breakthroughs, although these are yet to be formally agreed. With these new sectors added, the Breakthrough Agenda would cover more than 60% of global emissions. Under the IEA’s NZE Scenario, these same sectors would need to deliver around 9 Gt CO2 of annual emissions savings by 2030 versus 2022 (excluding agriculture). International collaboration will be vital in helping achieve these emission reductions, alongside strong national actions.

Greenhouse gas emissions by sector, 2019

APPROACH TO THIS REPORT
As the second annual Breakthrough Agenda Report, this is the first time we can track progress against the recommendations for international collaboration that we made the previous year. At COP 27, countries under the Breakthrough Agenda committed to joint actions in that were made in last year’s report. These were put forward in the form of brief ‘action plans’, often with a specific timeframe and one or more nominated initiatives to coordinate the work within that area.

WHAT MORE NEEDS TO BE DONE?
Countries included as members in the initiatives mentioned above cover roughly 17-20% of global coal production and coal-based power generation.While a promising start, there is significant potential for expansion of activity into more coal-using regions. In addition to these individual initiatives, it is imperative to integrate the principles of just transition by setting clearer strategies for the creation of jobs and economic diversification activities into the broader spectrum of financial development assistance offered by the MDBs. Further efforts need to be made to strengthen the co-operation between donor governments and MDBs to effectively align development funding with support for the just transition. A focus on both developing and emerging economies is necessary, given the scale of the challenge. The impacts of the transition will differ depending on a country’s economy and labour market structure, so strategies must be both targeted and holistic.

Share of coal production (left) and coal-based power generation (right) by country, 2022

Many new commitments to mobilise investment in hydrogen projects have been made in the past year, marking a crucial step towards advancing the hydrogen economy worldwide. Since March 2022, around USD 6.4 billion has been committed by major public financial institutions to support hydrogen development in developing countries.10, with India being the main recipient to date, taking in almost half of all commitments. This includes USD 2.9 billion worth of commitment by the European Investment Bank (EIB) to develop renewable hydrogen projects in Brazil, India and Namibia. Additionally, the World Bank is providing USD 1.5 billion to India and USD 150 million to Chile to support earlystage renewable hydrogen projects through the provision of financing, risk-mitigation and capacity building.

Financial commitments by bilateral and multilateral development finance institutions for hydrogen projects in developing countries by agency (left) and country (right), August 2023

STEEL
The steel sector is not on track to meet net zero by mid-century, with total emissions still rising and less than 1 Mt of near-zero emission steel currently being produced. A significant number of new high-emission blast furnaces are anticipated, with nearly 90 Mt either planned or underway before 2025. However, announcements for new near-zero emission steel projects are also increasing, more than doubling since last year.

Since COP 27, the WTO has undertaken new activity on steel sector decarbonisation, including publishing an information note on steel standards in December 2022 and hosting a Trade Forum on steel in March 2023, which brought together representatives from major markets to discuss how the WTO can help reduce potential trade fragmentation in the sector. Other relevant discussions are continuing under the Trade and Environmental Sustainability Structure Discussions (TESSD), the Technical Barriers to Trade (TBT) Committee and the Committee on Trade and Environment (CTE). While this was an important step forward for a more inclusive dialogue on trade and the steel sector’s transition, such events do not yet represent the level of strategic dialogue recommended in last year’s report. The OECD Steel Committee has continued its work to support its member countries with analysis of major trends in the global steel industry, with a growing focus on decarbonisation. This has included work to assess the state of decarbonisation in the steel sector and a report for the G7 on the heterogeneity of steel decarbonisation pathways.

Similar to the WTO discussions, the membership of this Committee does not include all major producers, with notable absence of senior government representation from China.

Steel production by groups of countries by region

The GASSA represents the first potential joint agreement on steel decarbonisation, with an agreement between the United States and the European Union targeted for October 2023. Such an agreement is likely to focus on a joint methodology for assessing emissions from the steel sector, which can better inform future agreements in which trade terms could be linked to emissions standards. This is currently only a bilateral agreement, although there may be potential to extend it to a broader set of countries, depending on the negotiated outcome. The European Union has also continued making progress on the implementation of its Carbon Border Adjustment Mechanism (CBAM), with a transition period starting on the 1st of October 2023, running until the end of 2025. From 2026, the CBAM will come into effect, requiring steelmakers to purchase certificates and report on their emissions. During the transition period, companies will be required to undertake quarterly reporting of embedded emissions in the products covered by the CBAM, which includes iron and steel.

In each area, many national (and local) actions will be required, as well as international collaboration. Figure 8.2 shows the four (updated) principles, which are the desired outcomes of the agricultural breakthrough; the five pathways, which are ways in which these desired outcomes can be achieved; and the seven technological areas and approaches on which concrete actions need to be taken in order to achieve the desired outcomes. These seven technological areas and approaches are by no means comprehensive, and we also identify a few other technological areas and approaches for inclusion in future reports. Our updated recommendations are based on the priorities emerging from a detailed science-based analysis of the seven technological areas and approaches in an underlying report by the CGIAR titled “Achieving agricultural breakthroughs: A deep dive into seven technological areas and approaches”, henceforward called the CGIAR report.

Principles and pathways for achieving breakthrough in the agriculture sector

In last year’s report, we called for increased levels of climate finance directed at agriculture; a long-term process to share learning on policy reforms; a strategic dialogue on international trade in relation to the agriculture transition; development of agreed standards for monitoring the state of natural resources on which agriculture depends; and higher investment in agricultural RD&D. Metrics to track year-on-year action on these broad recommendations are high level at best, but our latest analysis supports the view that these five broad areas continue to represent the priorities for international collaboration in the sector. In this chapter we respond to a request from countries under the Agriculture Breakthrough for deeper analysis of the seven technology areas, and increasingly specific recommendations on international collaboration. In each section below, we make a brief assessment of progress against last year’s recommendation, followed by new and targeted recommendations for 2023.

In alignment with the UN High-Level Expert Group, ISO launched its own guidelines at COP 27 last year, which go some way towards providing this guidance. The guidelines provide recommendations to enable a common approach with a high level of ambition, to drive organisations to achieve net zero as soon as possible, and by 2050 at the latest. They are intended as a common reference for governance of organisations (including voluntary initiatives, adoption of standards, policy and national and international regulation), and can help organisations taking action to contribute to achieving global net zero. These represent a major and positive step forward in improving guidance around net zero standards, although stop short of providing the function to conduct that assessment themselves. Such a function would require credible international experts, with detailed knowledge of each sector. In summary, there would be a clear co-ordination benefit to countries clarifying and agreeing on the standards in each sector that are sufficiently ambitious to align with international climate goals. This could reduce complexity and confusion, and increase the rate of adoption of the most appropriate standards. Through delivering co-ordination on standards at a cross-sectoral level, as well as within sectors, experts can ensure that different fuels, materials and products are being treated with equivalent approaches. This is particularly important in cases where products can provide substitutes for one another, such as steel and cement in construction.

Source:IEA