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1、Surfacing Supply of Near-Zero Emission Fuels and Materials in IndiaW H I T E P A P E RJ U LY 2 0 2 3ContentsImages:Getty Images,Unsplash 2023 World Economic Forum.All rights reserved.No part of this publication may be reproduced or transmitted in any form or by any means,including photocopying and r

2、ecording,or by any information storage and retrieval system.Disclaimer This document is published by the World Economic Forum as a contribution to a project,insight area or interaction.The findings,interpretations and conclusions expressed herein are a result of a collaborative process facilitated a

3、nd endorsed by the World Economic Forum but whose results do not necessarily represent the views of the World Economic Forum,nor the entirety of its Members,Partners or other stakeholders.Preface 3Executive summary 4Introduction 61.Steel 7 1.1 Overview of steel landscape in India 8 1.2 Status of tec

4、hnologies,supply and demand for near-zero emission steel 8 1.3 Seven key barriers to scaling up near-zero emission steel 9 1.4 Steel sector priorities identified by FMCs India workshop 112.Cement 13 2.1 Overview of cement landscape in India 14 2.2 Status of technologies,supply and demand for near-ze

5、ro emission cement 15 2.3 Five key barriers to scaling up near-zero emission cement 15 2.4 Cement sector priorities identified by FMCs India workshop 173.Aviation 19 3.1 Overview of aviation landscape in India 20 3.2 Status of technologies,supply and demand for near-zero emission aviation 20 3.3 Fiv

6、e key barriers to scaling up near-zero emission aviation 21 3.4 Aviation sector priorities identified by FMCs India workshop 224.Financial measures to accelerate the transition 23 4.1 Overview 24 4.2 Five financial barriers to scaling up near-zero emission technologies 24 4.3 Financial sector priori

7、ties identified by FMCs India workshop 25 4.4 Multilateral cooperation to provide affordable finance and de-risk the transition 275.India-specific policies to accelerate near-zero emission fuels and materials 29 5.1 Invest in critical upstream technologies,using industrial clusters 30 5.2 Put a pric

8、e on carbon 31 5.3 Ease the price of low-carbon alternatives 31 5.4 Invest in pilot projects and infrastructure 32 5.5 Set mandates for public procurement and private sector 33 5.6 Streamline regulatory measures 33Conclusion 35Contributors 36Endnotes 37Surfacing Supply of Near-Zero Emission Fuels an

9、d Materials in India2Surfacing Supply of Near-Zero Emission Fuels and Materials in IndiaJULY 2023Surfacing Supply of Near-Zero Emission Fuels and Materials in India3The goal of the Paris climate agreement to reduce greenhouse gas emissions to net zero by 2050 will only be possible by bringing the ri

10、ght technologies to commercial scale within the next decade.This is especially the case for seven of the hardest-to-abate sectors aluminium,aviation,chemicals,concrete,shipping,steel and trucking responsible for more than one-third of the worlds carbon emissions.Breakthrough technologies to decarbon

11、ize these industries exist from clean hydrogen to sustainable aviation fuel to carbon capture and storage but they remain expensive and niche.Without sufficient demand from the private sector or policy support from the public sector,these technologies will not scale up in time to deliver the decarbo

12、nization the world needs by mid-century.The focus of the First Movers Coalition(FMC)is to leverage the collective purchasing power of the private sector to send a clear demand signal to technology suppliers,enabling them to finance,develop and scale up the climate technologies essential for the net-

13、zero transition.The FMC sets the bar high:the only technologies within its scope are those capable of delivering near-zero emission processes that reduce the carbon footprint of these industrial sectors by 85-100%.Launched jointly by John Kerry,the US Presidents Special Envoy for Climate,and Brge Br

14、ende,President of the World Economic Forum,at COP26 in November 2021,the FMC has to date garnered 106 commitments from 85 member companies totalling more than$12 billion of aggregate demand.Mindful that global challenges often have local solutions,the coalition is holding a number of regional worksh

15、ops in Asia,Africa and South America with the aim of both demonstrating demand for and surfacing supply of critical near-zero emission technologies.These workshops bring together all the key stakeholders,including businesses,banks and financial institutions,technology developers,intermediaries,gover

16、nments,academia and civil society.This white paper reports on the outcomes of the India workshop,which took place on 11-13 July 2023 and focused on three sectors:aviation,cement and concrete,and steel.The workshops aims were threefold:to identify the existing potential within India to scale up the s

17、upply of these technologies;to analyse the challenges and barriers to increasing both demand and supply of these near-zero emission solutions;and to fashion the outcomes of the workshop into recommendations for a way forward.PrefaceExecutive SummarySignificant levels of risk-tolerant international c

18、apital and ambitious domestic policy measures are needed to decarbonize Indias hardest-to-abate industrial sectors.Surfacing Supply of Near-Zero Emission Fuels and Materials in India4Nearly 20%of Indias emissions come from the steel,cement and aviation industries.Decarbonizing these sectors is cruci

19、al to meet the countrys Nationally Determined Contribution(NDC)commitment to reduce GDP emissions intensity by 45%by 2030 and achieve net-zero emissions by 2070 at the latest.In July 2023,the First Movers Coalition(FMC)convened an in-country workshop to encourage domestic suppliers of steel,cement a

20、nd aviation fuel to accelerate their decarbonization efforts by demonstrating demand from FMC members for low-and zero-carbon products.The workshop also engaged with government and financial actors to identify priority actions to accelerate the market for these climate-critical technologies.SteelSur

21、ging domestic demand for steel will triple the industrys CO2 emissions to 800 million tonnes per year(Mtpa)by 2050,without efforts to decarbonize.Barriers to scaling up near-zero emission steel include the uncertain availability of essential upstream technologies,such as renewable energy,clean hydro

22、gen,carbon capture,utilization and storage(CCUS),and efficient scrap recycling.Market dynamics also play a role:Indian buyers are reluctant to pay a green premium,economies of scale favour the traditional and highly carbon-intensive blast furnace method of production,and domestic investors face high

23、 borrowing costs.Nevertheless,three Indian companies Mahindra&Mahindra,ReNew and Bharat Forge in addition to international companies with manufacturing activities in India,have committed to the FMCs steel target to ensure at least 10%of their steel purchases will be near-zero emissions(0.1-0.4 tonne

24、s of CO2e per tonne of crude steel produced)by 2030.CementEmissions from cement are expected to double to around 440 Mtpa by 2040,driven by Indias ever-increasing demand for housing and infrastructure,without efforts to decarbonize.The industry has already reduced its emissions intensity by 36%since

25、 1996 to 720kg CO2e/t.Its plants are more thermally and electrically efficient than in the US.The industry also makes better use of supplementary cementitious materials(SCMs)Surfacing Supply of Near-Zero Emission Fuels and Materials in India5to replace carbon-intensive clinker.But the FMCs threshold

26、 for near-zero emission cement of 184kg CO2e/t is seen as unrealistic by some workshop participants as it is dependent on CCUS technologies.Nevertheless,Indias RMZ has committed to FMCs cement target.Barriers to scaling up near-zero emission cement include uncertain supply of two key technologies to

27、 decarbonize the sector:commercially viable CCUS and sufficient SCMs.The SCMs the industry currently uses are fly ash and blast furnace slag,but as these are by-products of carbon-intensive industrial processes,FMC puts them out of scope after 2035.Nevertheless,workshop participants highlighted that

28、 these by-products are likely to play an important role for the sector beyond 2035,given the country context.Other barriers include lack of demand,inertia around building codes and practices,and the high cost of capital.AviationWhile aviation in India currently emits around 25Mt of CO2 a year,this f

29、igure could soar as the countrys air traffic is set to triple by 2040.Domestic actors including Indian Oil,IndiGo and Vistara airlines,and the Indian Air Force are piloting the use of sustainable aviation fuel(SAF),but none is yet approaching the carbon abatement performance required by FMC,to reduc

30、e lifecycle greenhouse gas emissions by 85%or more(SAF 85).Barriers to scaling up near-zero emission aviation include the high cost of SAF 85 production(two or three times the cost of jet fuel in India today),fragmented supply chains for the feedstocks that SAF needs(e.g.agricultural residues,munici

31、pal solid waste),uncertain access to green hydrogen,limited domestic expertise in SAF 85 production technologies,and lack of demand.Financial measuresDecarbonizing steel,cement and jet fuel entails major upfront capital investment and ongoing production premiums,compared to incumbent fossil-powered

32、alternatives.The International Energy Agency(IEA)estimates that$160 billion per year is needed across Indias energy economy between now and 2030 to hit its net-zero goals.That is three times todays investment levels.Access to low-cost,long-term capital,blended finance and risk management mechanisms

33、from international sources will prove critical.There are five principal barriers to financing near-zero emission technologies:traditional finance is not sufficient,the green premium is a major challenge,the cost of capital is too high for most micro,small and medium-sizedenterprises(MSMEs),India has

34、 no carbon market,and there is a lack of investor confidence.Workshop participants identified several priority actions:Collaboration between public,private and philanthropic actors can provide the blended capital needed to reduce risks and unlock flows of private capital(e.g.the World Banks recent$1

35、.5 billion loan to accelerate Indias low-carbon transition).Third-party financing options(e.g.green bonds,sustainability-linked loans)can provide companies and governments a lower-cost alternative to deploying internal capital.Investors could take a portfolio approach to risk and return by balancing

36、 long-term,high-risk bets in evolving technologies with short-term,lower-risk investments.Risk-sharing mechanisms such as insurance or first-loss loan policies need to be established.Policy measuresThe Indian government has already taken ambitious strides towards a low-carbon future.It has set a tar

37、get to more than double its renewable energy capacity to 450GW by 2030.And it recently announced the National Green Hydrogen Mission,backed by a$2 billion incentive plan,to deliver 5 Mtpa of production by the end of this decade.Workshop participants called on Indias government to accelerate producti

38、on of near-zero emission steel,cement and aviation in four key areas:Support increased availability of essential upstream technologies via clear regulations,subsidies and project approval processes for green hydrogen,CCUS,renewable energy and consolidation of biomass waste feedstocks.Invest in innov

39、ative R&D,competitive pilots and demonstration projects,through collaboration across ministries and with external partners from business,finance and philanthropy.Adopt clear definitions and targets for near-zero emission goods and services,aligned with international standards.Develop a cross-sectora

40、l industrial cluster strategy to support the growth of CCUS and green hydrogen,learning from best practices in other countries such as the US and Norway.Additional policy measures could include:putting a price on carbon(e.g.the forthcoming Indian carbon market could incorporate near-zero emission st

41、eel,cement and SAF),allowing 100%FDI into low-carbon sectors,and prioritizing low-carbon steel,cement and aviation in public procurement.IntroductionDecarbonizing steel,cement and aviation which contribute nearly 20%of emissions is crucial if India is to meet its NDC commitments to reduce GDP emissi

42、ons intensity by 45%by 2030 and become net zero by 2070.Emerging economies such as India are critical players in the low-carbon transition towards a pathway that can limit global warming to 1.5C,in line with the goal of the Paris climate agreement.As these economies develop,their growth is especiall

43、y dependent on energy-intensive industries like cement,steel and aviation.The challenge facing such countries is to decarbonize these hardest-to-abate industries in ways that meet their greenhouse gas(GHG)reduction targets,while boosting economic growth to support a just transition.The emissions dat

44、a on these industries is daunting.Indias steel sector emitted an estimated 250 million tonnes of CO2 in 2021,accounting for 10%of the countrys total GHG emissions.Given the surging domestic demand for crude steel,by 2050 the industrys CO2 emissions are expected to more than triple to 800 million ton

45、nes per year(Mtpa),without significant attempts at decarbonizing the sector.Carbon dioxide emissions from cement 219Mt in 2019 are expected to double by 2040,driven by the ever-increasing demand for housing and infrastructure.And while aviation accounts for just 25Mt of Indias carbon footprint,domes

46、tic passenger traffic grew at 15%per annum in the five years before the COVID-19 pandemic,fuelled by a rapidly expanding middle class.Decarbonizing these three sectors which together contribute nearly one-fifth of the nations total emissions is crucial if India is to meet its Nationally Determined C

47、ontribution(NDC)commitment of reducing the emissions intensity of its GDP by 45%by 2030(compared to 2005)and its ambition to become a net-zero economy by 2070.The technologies to clean up these industries exist in pilot form,but none are yet available in India at the scale or cost needed to make the

48、m commercially viable.The obstacles to scaling up these clean technologies are complex and interconnected.With a GDP per capita of$2,256 in 2021,1 India sets a high priority on minimizing the cost of its economic development.Reducing the green premiums for near-zero emission steel,cement and aviatio

49、n fuel is therefore critical to decarbonizing these sectors.Concessionary or blended finance tools have a key role to play,as do measures to de-risk private capital.The government has many potential policy levers to hand,including incentives,mandates,procurement and streamlined regulation.To help th

50、e technology gain commercial traction,collaboration between demand-and supply-side actors through advance offtake agreements will prove crucial.In July 2023,the World Economic Forums First Movers Coalition(FMC)convened an in-country workshop with two main objectives:to demonstrate demand from FMCs m

51、ember companies for near-zero emission products showcasing their purchasing commitments to local suppliers;and,through such demand signals,to identify potential local suppliers and accelerate the uptake of clean technologies and production of near zero emission steel,cement and aviation fuel.The wor

52、kshop convened not only FMC member companies,but also domestic suppliers,technology providers,policy-makers,financial institutions and civil society organizations to share knowledge and experiences around the nascent clean technologies available in India,identify best practices and develop shared so

53、lutions.This white paper analyses the India-specific context for these three sectors,summarizes the barriers and opportunities in transitioning each sector towards near-zero emission processes,and concludes with two sections that present cross-cutting financial and policy measures to accelerate the

54、uptake of these climate-critical technologies in India.The report is informed by situation analysis reports on each sector provided by FMCs knowledge partner,Boston Consulting Group(BCG),as well as by the detailed discussions and priorities raised during the FMC workshop.Surfacing Supply of Near-Zer

55、o Emission Fuels and Materials in India6Steel1Indias economic growth will triple demand for steel by 2050,driving up emissions to 800 million tonnes per year,unless the sector can significantly decarbonize.Surfacing Supply of Near-Zero Emission Fuels and Materials in India7India is the second-larges

56、t producer of steel in the world,yet 95%of the sectors 154 Mtpa capacity2 is consumed by the domestic market.3 India has a huge appetite for this most versatile of building materials:by 2050,demand is expected to soar to 500 Mtpa.4 Over the same period,the sectors CO2 emissions currently around 250

57、Mtpa,or 10%of Indias total emissions5 are expected to more than triple to 800 Mtpa,without significant efforts to decarbonize.6 To service this demand,the Indian government has set a goal of 300 Mtpa of steel production capacity by 2030.7 Indian steelmakers have responded with plans for 205 Mtpa of

58、new capacity,of which 85%uses existing blast furnace-basic oxygen furnace(BF-BOF)technology.This method is the most widespread and cost-effective in the country.It is also the most carbon-intensive,generating at least 2.2 tonnes of CO2 for every tonne(t CO2/t)of steel produced.This planned new BF-BO

59、F capacity alone would add nearly 400Mt of carbon dioxide-equivalent(CO2e)to Indias annual greenhouse gas footprint.Indias steel industry is dominated by a handful of major players,most of whom have begun to move towards reducing the emissions intensity of their production.Tata Steel has declared it

60、 will become net zero by 2045;it has already begun to explore decarbonization technologies such as injecting hydrogen into its blast furnace in Jamshedpur.8 Jindal Steel and Power(JSP)has announced a memorandum of understanding(MOU)with renewables developer Greenko Group to deliver 1,000MW of carbon

61、-free energy for its steel facility in Odisha.9 Meanwhile,JSW Steel,Indias second-largest private sector steel company,recently earmarked$1.3 billion for decarbonization initiatives,with an emissions-intensity target of 1.95t CO2/t of crude steel.10 Overview of steel landscape in India 1.1 250 milli

62、on tonnes annual CO2 emissions from Indias steel sector:expected to more than triple to 800Mt by 2050 without efforts to decarbonize.The Energy and Resources Institute(TERI)Surfacing Supply of Near-Zero Emission Fuels and Materials in India8Status of technologies,supply and demand for near-zero emis

63、sion steel The First Movers Coalition(FMC)requires its members to commit to a target that at least 10%(by volume)of all steel purchased per year will be near-zero emissions by 2030.The FMCs benchmark sets a stringent threshold for near-zero emission steel of 0.4t(0%scrap inputs)to 0.1t(100%scrap inp

64、uts)of CO2e per tonne of crude steel produced.1.2FMCs targets for near-zero emission steel and technologiesBOX1:To date,there are no projects in India capable of producing steel that clears this threshold.Indias government policy to promote green steel up to 2030 focuses on energy and resource effic

65、iency,but this will not deliver the level of decarbonization envisaged by the FMC.Although the government plans to focus on green hydrogen and carbon capture from 2030-2047,there are no details available on when near-zero emission steel will begin production in India.11 Capital expense is the major

66、challenge.Whether decarbonized or not,steelmaking is expensive.Building a new BF-BOF plant in India costs$400-At least 10%(by volume)of all steel purchased per year will be near-zero emissions by 2030Emitting 0.4t(0%scrap inputs)to 0.1t CO2e(100%scrap inputs)per tonne of crude steel producedThere ar

67、e two principal technologies capable of delivering near-zero emission steel:1.Carbon capture,utilization and/or storage(CCUS)to capture process-related emissions at source,used in conjunction with existing fossil-fuel-powered processes such as BF-BOF.2.A fossil-free process known as H2-DRI-EAF,which

68、 uses a combination of green hydrogen(H2)for direct reduction of iron ore(DRI),plus an electric arc furnace(EAF)powered by renewables or nuclear to produce the steel.Surfacing Supply of Near-Zero Emission Fuels and Materials in India9There are seven principal barriers to scaling up near-zero emissio

69、n steel supply in India,based on BCGs situation analysis report.Four relate to the uncertain availability of critical upstream technologies:renewable energy,green hydrogen,scrap metal and CCUS.Three relate to market dynamics:uncertain demand,cost-effectiveness of existing processes and the high cost

70、 of capital for new investment.According to the situation analysis report,while any one of these dynamics would create a significant challenge,together they can create a feedback loop of uncertainty and risk that prevents action that might spur market development.Alternatively,momentum in one or two

71、 areas could create a cycle that unlocks the market.Uncertain availability of upstream technologiesRenewable energy Low-carbon steel production needs huge amounts of renewable energy to power its green electrolysers and electric arc furnaces.If India were to use the near-zero emission H2-DRI-EAF pat

72、hway to produce the 300 Mtpa of steel it has targeted for 2030,it would need to double its target of 450GW of installed renewable energy capacity by the end of this decade.13 In October 2022,the capacity of Indias renewables sector stood at 165GW.As an indication of the huge amount of investment req

73、uired,the financing needed to deliver the 250GW of targeted incremental wind and solar development in India totals around$223 billion between 2022 and 2029.14While plans announced by Indian renewable energy developers are broadly aligned with the national ambition,such a massive increase in funding

74、needed before 2030 may prove challenging,especially in a rising interest environment.Green hydrogen Green hydrogen will play a critical role in decarbonizing ironmaking,given its potential to replace coking coal as a reduction agent in the direct reduced iron(DRI)process.But the production of green

75、hydrogen at scale itself requires major investments in renewable energy and electrolyser capacity.On the positive side,Indias government recently announced its National Green Hydrogen Mission,backed by a$2 billion incentive plan to deliver 5Mt of production per year by 2030.15 The question,however,i

76、s whether sufficient green hydrogen will be produced in time to support the decarbonization of steel.One transition technology is to use natural gas instead of hydrogen for DRI facilities.While this approach falls outside the FMCs definition of near-zero emission steel,natural gas can be replaced in

77、 the DRI process by green hydrogen once it is available.That said,the current share of natural gas in Indias energy mix is just 6%.16Scrap metal Scrap metal can reduce the volume pressure on primary iron production.Scrap inputs provide an important alternative transition pathway,by replacing the hig

78、hly carbon-intensive blast furnace phase of producing iron from iron ore.When combined with an EAF process(powered by renewables)to produce steel,the scrap-EAF approach can deliver low-carbon steel.The use of scrap to help solve Indias near-term steel demand could therefore enable the sector to dela

79、y deployment of new capacity until green hydrogen is ready to be used for steelmaking.Seven key barriers to scaling up near-zero emission steel 1.3132$223 billion the financing needed to deliver Indias goal of 250GW of incremental wind and solar power by 2030.Bloomberg NEF Indias government recently

80、 announced its National Green Hydrogen Mission,backed by a$2 billion incentive plan to deliver 5 million tonnes per year by 2030.Ministry of New and Renewable Energy of India670 million per megatonne of annual capacity.However,the cost of converting a large plant to produce near-zero emission steel

81、can run to well over$1 billion,before even considering the cost of additional upstream infrastructure.12 Indian companies that have already committed to the FMCs steel target include Mahindra&Mahindra,ReNew and Bharat Forge.By signing offtake agreements to purchase near-zero emission steel at a prem

82、ium upon delivery in 2030,these companies are providing producers with bankable advance contracts to help them raise the capital required for decarbonized steel production.But far more demand for this kind of steel production in India is needed to drive change.Surfacing Supply of Near-Zero Emission

83、Fuels and Materials in India10However,Indias steel recycling rate is believed to fall significantly below the global average of 85%.17 Despite a National Steel Scrap Recycling Policy published in 2019,significant investment will be required to develop the scrap supply chain.Carbon capture,utilizatio

84、n and/or storage(CCUS)Given the current dominance in India of the highly carbon-intensive BF-BOF production process,CCUS will be critical for decarbonization of any relatively new BF-BOF plants.To date,however,carbon capture technology remains at pilot stage.Government think tank NITI Aayog recently

85、 published a CCUS roadmap for India to reach 750 Mtpa of capacity by 2050,but it remains unclear when the policy changes and substantial investments required to deliver CCUS at scale will materialize.According to the situation analysis report,Indias current regulatory positions are unlikely to provi

86、de operators with the clarity needed for sizeable investments.What is lacking is a clear process for project approvals,long-term liabilities provision and geological storage regulation.Unlike green hydrogen and renewables,there is currently no current government incentive driving CCUS deployment in

87、India.Market dynamicsUncertain demand Indian buyers have yet to demonstrate a clear willingness to pay the green premium required for near-zero emission steel.The emphasis remains on minimizing the cost of economic growth and consequently domestic demand for low-carbon steel is limited.The cost base

88、 for Indian steel producers is already 5-10%higher than the global average,due to high capital,logistics and infrastructure costs.18 This puts Indian steel exports at a disadvantage even before factoring in the green premium.Local demand will therefore prove especially important for developing the n

89、ear-zero emission steel market.The construction and infrastructure sector,which consumes 68%of Indias steel,will be a critical source of demand.Economies of scale favour BF-BOFIndias rapidly growing steel industry is built upon the existing BF-BOF production process.These carbon-intensive plants hav

90、e a greater capacity than the near-zero emission alternatives and therefore bring considerable economies of scale.Building alternative DRI-EAF plants will prove costly.Meanwhile,CCUS requires significant investments not only in the facilities themselves,but also in transportation and storage.These c

91、osts can be too large for any single company to pay.High cost of capital Indias high cost of capital prevents investments that would be viable in other markets.In 2020,its economy-wide cost of debt was around 7%higher than in the US.19 Research by the OECD finds that a 1%change in the cost of debt c

92、an drive a 5%decrease in the levelized cost of energy from offshore wind.20 The government has a key role to play in providing policy support such as incentives,subsidies and coherent regulations,which can both increase capital flows and reduce the cost of that capital.Unlike green hydrogen and rene

93、wables,there is currently no government incentive driving CCUS deployment in India.BCG The construction and infrastructure sector,which consumes 68%of Indias steel,will be a critical source of demand.BCG4576Surfacing Supply of Near-Zero Emission Fuels and Materials in India11Steel sector priorities

94、identified by FMCs India workshop1.4Workshop participants focused on the challenge presented by the green premium for breakthrough technologies capable of producing near-zero emission steel,especially in the Indian context of a developing economy and a steel sector that features many micro,small and

95、 medium-sized enterprises(MSMEs).The FMCs workshop participants identified the following priorities for decarbonizing Indias steel sector:1.CollaborationThe various stakeholders in the steel sector need to create strongercollaborations and partnershipsto develop a pipeline of near-zero emission stee

96、l projects in India.This will take a high degree of willingness on both supply and demand sides.One example of collaboration would be to negotiate forward purchase agreements at an initial premium offer.2.Awareness and demandCollective action is needed across the value chain to raise awareness among

97、 buyers and the public of the need for sustainable materials and to generate demand for decarbonized steel in India.The government,industry players and financial institutions should collaborate,with the government taking the lead in implementing policies and providing incentives.Creating industry cl

98、usters and involving MSMEs would help with the widespread promotion and adoption of low-carbon technology.3.Incentives for MSMEsJoint efforts from both the government and financial institutions are essential to provide comprehensive,affordable financial support for MSMEs in achieving their decarboni

99、zation goals in all sectors,including steel.The government plays a crucial role in creating a supportive policy environment,through implementing measures such as loan interest subvention schemes and tax incentives.Simultaneously,financial institutions can collaborate by offering specialized financin

100、g products and services tailored to the needs of MSMEs,to help them adopt low-carbon technologies and products in the steel sector.4.Innovative pilotsThe government and major steel manufacturers should focus on innovative pilot projects and increasing research and development(R&D)spending to ensure

101、the availability of breakthrough technologies in India for decarbonizing steelmaking.The government can provide support through funding,policy incentives,and creating a conducive environment for research and innovation.At the same time,major steel manufacturers can invest in R&D and collaborate with

102、 research institutions to develop and deploy advanced technologies that enable decarbonization.Joint efforts from the government and industry are important to drive the development and adoption of transformative technologies in the steel sector.5.Policy measuresThe government could support industry

103、decarbonization through the following policy measures:Efficient carbon market Government funding(e.g.for capital expenditures)Tax credits(e.g.for green hydrogen production and CCUS)Public procurement for near-zero emission steel Streamlined permitting(e.g.single-window clearance)and enhanced land av

104、ailability6.Financial sector measuresConsidering the scale and scope of financing required,it is crucial for public,private and multilateral financial institutions to take the lead in developing specific incentives and mechanisms to support the decarbonization of the steel sector in India.These meas

105、ures should include blended finance to lower the cost of capital in India.One example is the World Banks announcement on 29 June 2023 of a$1.5 billion loan to support Indias low-carbon transition.21 Another is the International Monetary Funds long-term financing tool,the Resilience and Sustainabilit

106、y Trust(see section 4.4).Surfacing Supply of Near-Zero Emission Fuels and Materials in India127.Definitions and standardsAs the regulatory authority responsible for setting standards and promoting sustainable practices,the central government,in collaboration with relevant stakeholders,should spearhe

107、ad the effort to establish a clear,comprehensive definition for near-zero emission steel,aligned with the international community.By taking the lead in defining and promoting this standard,the government can provide clarity and guidance to the industry,investors and consumers,facilitating the adopti

108、on and market acceptance of green steel.8.Industrial clustersMajor steel manufacturers,supported by government,should take the initiative to develop an industrial cluster approach that can leverage shared infrastructure and transition the cluster towards near-zero emissions.This collaborative effort

109、 would enable a coordinated and integrated approach across multiple sectors,including steel,cement and aviation fuel.By involving both the government and key industry players,the cluster approach can ensure the alignment of policies,resources and technological advancements necessary to achieve the d

110、esired transition towards near-zero emissions,fostering sustainable development and economic growth in India.9.Scrap steel marketMajor steel manufacturers should take the lead in improving scrap availability and collection,along with support from the government.As scrap plays a crucial role in achie

111、ving low-carbon emissions in the steel industry and reduces the reliance on primary steel production,it is in the best interest of steel manufacturers to prioritize and invest in scrap collection and recycling infrastructure.However,government support is essential in terms of creating favourable pol

112、icies,regulations and incentives that encourage and facilitate efficient scrap collection and supply chain management.Collaboration between industry and government can drive the necessary improvements in scrap availability and collection,contributing to a more sustainable and environmentally friendl

113、y steel production ecosystem.10.RenewablesIndias industrial sectors,especially steel,face a growing need for locally sourced renewable energy.Addressing this demand involves identifying opportunities to enhance renewable energy generation capacity and developing policies,regulations and incentives t

114、hat promote the adoption and integration of renewables within the industrial sector.This requires a collaborative effort between the government and relevant stakeholders,such as renewable energy providers,industry associations and policy-makers to establish a conducive environment for renewable ener

115、gy deployment,facilitate investment in renewable infrastructure,and enable renewable energy production and distribution networks.2Surfacing Supply of Near-Zero Emission Fuels and Materials in India13CementAnnual emissions from Indias cement production could double to 440 million tonnes of CO2 by 204

116、0.Public procurement and private sector leadership are essential to accelerate demand for decarbonization.219 million tonnes annual CO2 emissions from Indias cement sector:expected to double by 2040 without efforts to decarbonize.International Energy Agency Surfacing Supply of Near-Zero Emission Fue

117、ls and Materials in India14Overview of cement landscape in India2.1As it is for steel,India is the second-largest producer of cement in the world,with annual production topping 391 million tonnes in 2022-2023.22 More than half the demand is driven by the countrys burgeoning housing sector.The Intern

118、ational Energy Agency(IEA)notes that most of the buildings that will exist in India in 2040 have yet to be built.So,cement production is expected to grow nearly 150%by 2040.Emissions which were an estimated 219Mt or 8%of Indias total emissions in 2019 will in turn double,without efforts to decarboni

119、ze the sector.23 While the FMCs target is for concrete and cement,this report focuses on the cement industry for two reasons.First,the majority of emissions in concrete come from cement production.Second,the Indian market is uniquely reliant on bagged cement,which accounts for 75-80%of all cement so

120、ld,compared to just 5%in the US.24 Unlike with centrally mixed concrete,bagged cement impacts the industrys ability to optimize cement use.Another key challenge is the localized nature of the cement market a feature of the industry across the world,given the high cost of transporting such a heavy ma

121、terial.Indias cement supply is fragmented across 210 large cement plants,with an average capacity of around 2 Mtpa each.Indias cement industry has already managed to reduce its emissions intensity by 36%between 1996 and 2017,to 720kg CO2 per tonne of cement produced.Its cement plants are more therma

122、lly and electrically efficient than in the US.And the industry makes better use of supplementary cementitious materials(SCMs)to replace the clinker binding agent which is so carbon-intensive to produce.The FMCs threshold for near-zero emission cement is 184kg CO2e/t.However,some industry partners at

123、tending the India workshop felt this target is unrealistic,as it depends on CCUS technologies.Even to drive the carbon intensity of Indian cement down to 350kg CO2e/t by 2050,for example,would take$29-50 billion of investment,according to the Reserve Bank of India.25Indias cement industry is dominat

124、ed by 10 producers who control two-thirds of capacity.Many have made net-zero commitments by 2050,though most pledges are in line with a 2-degree Celsius rather than 1.5-degree Celsius scenario.Dalmia,for example,has pledged to become carbon negative by 2040,with supporting commitments to achieve 10

125、0%renewable energy by 2030,100%fuel substitution by 2035,and adoption of CCU and other technologies by 2035.26 Meanwhile,leading supplier UltraTech,which controls 22%of all production,has implemented an internal carbon price of$10/t CO2 and is targeting SCMs to get its clinker ratio down to 70%.The

126、FMCs threshold for near-zero emission cement is 184kg CO2e/t.To drive down the carbon intensity of Indias cement industry to 350kg CO2e/t by 2050 would take$29-50 billion of investment.Reserve Bank of IndiaIndian cement producers are on the right decarbonization path,through their initial focus on i

127、mproving operating efficiency and using supplementary cementitious materials(SCMs).Boston Consulting GroupSurfacing Supply of Near-Zero Emission Fuels and Materials in India15At least 10%(by volume)of all cement purchased per year will be near-zero emissions by 2030Emitting 0.184t CO2e per tonne of

128、cement producedExcludes fossil-based SCMs by 2035There are two principal technologies capable of delivering near-zero emission cement:1.Carbon capture,utilization and/or storage(CCUS)to capture process-related emissions at source2.Clinker substitution using non-fossil-based SCMs(i.e.not fly ash or g

129、round granulated blast furnace slag)Status of technologies,supply and demand for near-zero emission cement2.1The FMC requires its members to commit to a target that at least 10%(by volume)of all cement/concrete purchased or procured per year will be near-zero emissions by 2030.The FMCs threshold of

130、184kg of CO2e per tonne of cement requires an 80%reduction in embodied carbon compared to the industry average in the US.FMCs targets for near-zero emission cement and technologiesBOX2:Indian cement producers are on the right decarbonization path,through their initial focus on improving operating ef

131、ficiency and using supplementary cementitious materials.Despite Indias leadership in driving down emissions intensity in cement production,it will be tough for local producers to achieve the FMC threshold,for a number of reasons.The sector is localized,commoditized and capital-intensive.Concrete use

132、 is highly regulated by building codes that still favour clinker-based Portland cement.And more than half of cements carbon footprint comes from emissions associated with producing that clinker.That means electrification or switching energy sources cannot prevent these emissions.They have to be capt

133、ured with CCUS or avoided through finding alternatives to clinker.Nevertheless,Indian cement producers are on the right decarbonization path,through their initial focus on improving operating efficiency and using SCMs.Meanwhile,several companies have committed to purchase near-zero emission cement,i

134、ncluding Indias RMZ and multinationals such as Consolidated Contractors,ETEX,GM,Orsted and Vattenfall.However,more localized Indian demand will be needed to accelerate the commercialization of the market.2.3 Five key barriers to scaling up near-zero emission cementThere are five principal barriers t

135、o scaling up near-zero emission cement supply in India.Unlike with steel,the challenge to decarbonize cement does not directly depend on scaling up renewables or green hydrogen.However,it does depend on the availability of two critical upstream technologies:CCUS and SCMs.The three other barriers rel

136、ate to market dynamics and regulation:uncertain demand,building codes and practices and the high cost of capital.Uncertain availability of upstream technologiesCarbon capture,utilization and/or storage(CCUS)Decarbonizing traditional cement production relies principally on using CCUS to capture the p

137、rocess emissions inherent in producing clinker the critical binding agent in Portland cement.Greater detail on the availability of CCUS in India can be found 1Surfacing Supply of Near-Zero Emission Fuels and Materials in India16in the preceding section on steel.India does have some strategic advanta

138、ges when it comes to scaling up CCUS.Its offshore oil and gas industry can provide carbon storage capacity.And its non-fossil energy industry,which is expected to grow to around 450GW by 2030,remains relatively low-cost.Meanwhile,the Global Cement and Concrete Association(GCCA),whose members have co

139、mmitted to achieve net zero by 2050,is trying to pull forward CCUS with its Innovandi programme;27 but it remains far from commercially viable on a global basis.Supplementary cementitious materials(SCMs)The only other technologically proven process to decarbonize cement production is to replace carb

140、on-intensive clinker with alternative binding agents.The two most common SCMs are fly ash or ground and granulated blast furnace slag(GGBS).Fly ash is a by-product of coal-fired power plants,while GGBS is waste from the blast furnaces that make iron.Consequently,supply of both these SCMs is expected

141、 to decline in the long term as blast furnaces and coal-fired power plants phase out.To ensure that its commitment leads to pulling forward new technology,FMC puts fly ash and GGBS technologies out of scope after 2035.FMC clearly recognizes the critical role that these fossil-based SCMs will play in

142、 the broader decarbonization path,in India particularly.However,their wider role is to accelerate the adoption of other near-zero emission technologies.The most promising alternative SCM is calcined clay,derived from a naturally occurring material found across the Global South.Cement and concrete ma

143、nufacturing is a very localized process,given the expense of transporting such a heavy material.So being able to source an abundant,alternative feedstock like calcined clay in the geographies where concrete consumption is predicted to peak could be a game-changer.Some estimates suggest that if this

144、material became the dominant way to make cement,it could reduce the sectors emissions by 30-40%.28Market dynamicsUncertain demand There is no avoiding the fact that,under current market conditions,most near-zero emission cement is going to cost more than regular Portland cement.The purpose of the FM

145、C is to encourage buyers to send tangible demand signals that acknowledge the price premium producers need to make their investments economically viable.Three factors hamper the markets capacity to aggregate demand across India for decarbonized cement that is sufficiently strong and bankable to supp

146、ort the major investments necessary.First,cement production is a very localized industry.Second,the Indian market is highly fragmented,due to its high dependence on bagged cement.Third,the majority of demand is coming from housing projects for lower income citizens.The best opportunity to build dema

147、nd is through public procurement,which is responsible for 40-60%of global concrete sales and can leverage policy to ensure a broad application of decarbonization targets.Leading private companies should also send demand signals this will not only encourage producers to invest,but may also prompt gov

148、ernment agencies to make the necessary reforms to regulation.Building codes and practicesThe Bureau of Indian Standards clearly specifies which types of cement are appropriate for which applications,as well as defining maximum permissible proportions for the different types of SCMs.To reduce the car

149、bon footprint of cement production,in the absence of CCUS,would require the agency to either raise the proportion of SCMs permitted or expand the approved uses of different cement types.However,inertia around updating building codes to embrace new carbon-free technologies is hampering investment and

150、 progress.Architects,engineers and building contractors are often slow to adopt new products and processes,which is appropriate when safety is a factor.Contractors may struggle to embrace the different approaches and timescales needed to ensure that cement made using SCMs cures to the appropriate st

151、rength.Indias highly variable climate adds to the complications.High cost of capitalAs seen in the section on steel above,the high cost of capital in India roughly 7%higher than in the US in 2020 acts as a significant brake on the investments needed to decarbonize the cement sector.2345 If limestone

152、 calcined clay became the dominant way to make cement,it could reduce the sectors emissions by 30-40%.LC3.chSurfacing Supply of Near-Zero Emission Fuels and Materials in India17Cement sector priorities identified by FMCs India workshop2.4The cement and concrete sector in India is facing the challeng

153、e of decarbonizing its operations while ensuring a just transition that takes into account the countrys economic and social context.The sector has already achieved significant improvements in efficiency,clinker factor optimization and SCM utilization,andhas the potential to lead the global transitio

154、n with innovative technologies and practices.The FMCs workshop participants identified the following priorities for decarbonizing Indias cement and concrete sector:1.Cost-effective abatement optionsBoth cement suppliers and demand-side actors or off-takers(e.g.real estate developers,construction com

155、panies)need to identify and implement the most cost-effective measures to reduce its emissions,such as renewable energy,alternative fuels and raw materials,low-clinker cements and nature-based solutions.The workshop discussed the trade-offs and synergies between these options and their implications

156、for the sectors competitiveness and profitability.2.Collaboration for demonstrationThe larger suppliers and off-takers need to enhance their business-to-business collaboration and develop stronger partnerships.For example,cement and concrete producers could work with construction and real estate com

157、panies to demonstrate the use of low-carbon cement and concrete in real-life projects.Workshop participants emphasized the need for collaboration from project inception to execution and demonstration,as well as the role of design and construction standards in enabling the adoption of low-carbon prod

158、ucts.3.Criteria for green financeThe sector must be able to access adequate and affordable financing sources to support its decarbonization efforts,such as green bonds,loans,grants and subsidies.The workshop explored the opportunities and challenges of green finance for the sector.An important prior

159、ity for the finance sector and policy-makers is to clarify the criteria and indicators that could be used to assess the environmental performance of cement and concrete projects and how these criteria influence access to green finance.4.Awareness and demandCement sector actors need to increase the d

160、emand as well as the willingness to pay for low-carbon cement and concrete,by raising awareness among customers and stakeholders about the benefits and value proposition of these products.The workshop highlighted the need for communication and education campaigns,as well as tools such as environment

161、al product declarations(EPDs),labels and certifications to help customers make informed choices.Currently,the use of such tools does not lead to increased sales.5.Diversification of SCMsWorkshop participants highlighted that a one-size-fits-all approach will not work.Local cement and concrete produc

162、ers will continue to rely on the use of fossil fuel-based SCMs(e.g.GGBS,fly ash),but this does not compromise the environmental integrity of their products.The process also prevents the creation of additional waste streams from other sectors.The workshop underlined the importance of the sector as a

163、best practice example when it comes to waste management and recyclability of these materials,as well as their potential contribution to circular economy principles.Nevertheless,the sector needs to increase investment into non-fossil-based SCMs,such as calcined clay,and alternative cement chemistries

164、.6.Nature-based solutions(NBS)The sector needs to consider the role of NBS(e.g.afforestation,reforestation,soil carbon sequestration,etc.)in its decarbonization pathway.The workshop examined the potential co-benefits and trade-offs of these solutions for the sectors emissions reduction,biodiversity

165、conservation,water management and so on.Surfacing Supply of Near-Zero Emission Fuels and Materials in India187.CCUS feasibility and monetizationCement sector actors need to explore the technical and economic viability of CCUS technologies,which are essential to achieve net-zero cement and concrete.W

166、orkshop participants called for more collaborative research and development of CCUS technologies,especially on the utilization of captured CO2 and the monetization of the molecule that could offset the large capex-related costs of this technology.8.Public procurement and policyThe workshop highlight

167、ed the importance of green public procurement,and the role policy could play in building consensus around the definition of low-carbon cement across different regions and markets.The sector needs to engage with policy-makers and regulators to create a conducive environment for its decarbonization,su

168、ch as setting clear targets,standards,incentives and penalties that could drive innovation and investment in low-carbon products.9.Building code reformMore funding is needed for research to support safe building code reform,such as adopting more efficient building techniques and alternatives to Port

169、land cement.In turn,the Bureau of Indian Standards could raise the proportion of SCMs permitted in cement or expand the approved uses of different cement types.3Surfacing Supply of Near-Zero Emission Fuels and Materials in India19AviationBy 2040,Indias air traffic could triple and set emissions soar

170、ing.The technology to cut aviations carbon footprint is unlikely to take off without major policy support.By 2040,Indian aviation will cater for 430 million additional air passenger journeys to,from and within India,compared to 2019.International Air Transport Association3.2Surfacing Supply of Near-

171、Zero Emission Fuels and Materials in India20Overview of aviation landscape in India3.1In 2022,India carried around 123 million passengers on internal flights,making its domestic civil aviation sector the third-largest in the world.Meanwhile,Indian carriers flew a further 43 million passengers on int

172、ernational routes.29 Asia will experience the highest air traffic growth in the coming decades and,as the worlds most populated country,India will play a critical role.By 2040,the International Air Transport Association(IATA)expects Indian aviation to cater for 430 million additional air passenger j

173、ourneys to,from and within India,compared to 2019.Both Boeing and Airbus predict that India will be the worlds fastest-growing aviation market,with 7%annual growth until 2040.30Indias aviation market faces several key challenges.Jet fuel produced mainly by domestic public sector refiners costs 40%mo

174、re than the global average.Fuel accounts for 30-40%of operating costs for domestic airlines their single biggest expense.Meanwhile,the industry has come under financial stress recently from low fares,high fuel taxes and intense competition,exacerbated by the COVID-19 pandemic.Aviation in India emits

175、 around 25 million tonnes of CO2e per year,accounting for roughly 1%of the countrys total emissions(2018 data).31 However,given the sectors predicted growth,these emissions could reach alarming levels if left unabated.Status of technologies,supply and demand for near-zero emission aviationIndian avi

176、ations decarbonization efforts to date have focused mainly on efficiency measures to reduce consumption,which will reduce operating expenses but will not deliver more than around 30%of emissions reductions.By contrast,FMCs target is to accelerate the commercial viability of technologies that can del

177、iver 85-100%abatement.Alternative propulsion technologies,such as battery-electric or hydrogen-powered aircraft,can deliver this level of decarbonization but remain nascent.However,the FMCs aviation demand commitment also embraces scaling up sustainable aviation fuels,especially those that can reduc

178、e lifecycle emissions by 85%or more known as SAF 85.If India met FMCs 2030 target to replace 5%of all jet fuel consumption with SAF 85,that would reduce the industrys footprint by around 2 million tonnes of CO2e every year.FMCs targets for near-zero emission aviation and technologiesBOX3:If India me

179、t FMCs target to replace 5%of all jet fuel consumption with SAF 85,it would reduce aviations emissions by 2 million tonnes of CO2e a year.By 2030,replace at least 5%of conventional jet fuel with SAF that reduces lifecycle greenhouse gas emissions by 85%or more Zero-carbon alternative propulsion tech

180、nologies also in scopeThere are three principal propulsion technologies capable of delivering near-zero emission aviation:1.SAF 85 made through the Gasification Fischer-Tropsch(GFT)or Power-to-Liquid(PtL)processes,both of which require green hydrogen and renewable electricity to be near-zero emissio

181、ns 2.Battery-electric power if generated by non-fossil means3.Green hydrogen direct combustion in turbine or hydrogen fuel cellSurfacing Supply of Near-Zero Emission Fuels and Materials in India21India already exhibits ahigh level of technology readinessin the field of SAF,with significant advanceme

182、nts in biofuel production techniques,conversion technologies and refining processes,contributing to the feasibility of establishing a robust and domestic SAF industry.Not all existing SAF processes are sustainable especially those that rely on processing crops like rapeseed,soy,palm oil,sugarcane,or

183、 corn to create jet fuel,as that can bring the industry into conflict with other land uses,including food production.Two sustainable,near-zero emission SAF technologies are the Gasification Fischer-Tropsch(GFT)and Power-to-Liquid(PtL)processes.PtL combines green hydrogen(produced by renewable power)

184、with CO2 from direct air capture(DAC)air to create a synthetic fuel also known as“e-kerosene”a virtually fossil-free power source that requires no arable land or biological feedstocks.But given the low maturity of the DAC sector,PtL is likely to be a longer-term option.Meanwhile,GFT can turn a wide

185、range of non-food feedstocks municipal solid waste,switchgrass,residues of forestry and agriculture into jet fuel that delivers 90-100%CO2 abatement.Given the abundance in India of both agricultural residues and municipal solid waste,the GFT process could potentially yield 16-20 Mtpa of SAF more tha

186、n enough to meet the entire jet fuel needs of the sector by 2030.32 This makes GFT the most promising of the SAF technologies to help India decarbonize its aviation sector and deliver on the FMCs 2030 target.SAF production could also bring India significant co-benefits.FMCs target of 5%SAF blending

187、by 2030 could potentially create 60,000-80,000 new jobs across the supply chain,improve farmers incomes by 10-15%,open up new export opportunities,and reduce local air pollution by providing incentives for managing waste that is otherwise disposed of by open-air burning.33 In addition,a SAF industry

188、 based on domestically available feedstocks would reduce Indias reliance on crude oil imports,helping address concerns around energy security.In terms of supply,SAF production in India is still at a nascent stage.Domestic actors including Indian Oil,IndiGo and Vistara airlines,and the Indian Air For

189、ce are piloting projects to demonstrate the viability of SAF,but none is yet approaching the carbon abatement performance of SAF 85.From a demand perspective,IndiGo is so far the only Indian airline with a stated ambition of using SAF(up to a 10%blend)in their operations by 2030.Five key barriers to

190、 scaling up near-zero emission aviation3.3There are five principal barriers to scaling up near-zero emission aviation in India:four are related to the complexity and cost of manufacturing SAF 85,while the fifth is a lack of demand for SAF.High cost of SAF 85 productionThe production costs of SAF opt

191、ions most likely to meet FMCs 85%carbon abatement target such as GFT and PtL range between$1,400 and$3,000 per tonne.This is two or three times the average cost of jet fuel in India today.34 The purpose of the FMC is to demonstrate demand for the purchase of high-performing SAF at the green premium

192、currently required to produce it.Nevertheless,given the commercial realities of Indias domestic aviation market,the introduction of government mandates or incentives could accelerate demand for SAF and reduce that premium.Fragmented supply chains and limited feedstock accessWhile the feedstocks for

193、the GFT approach to producing SAF 85 are plentiful in India,the infrastructure needed to collect,sort,transport and store these materials in a cost-effective way remains underdeveloped.For agricultural residues,India lacks supply chain that can account for crop seasonality,coordinate with thousands

194、of farmers,transport bulky residues and store them without deterioration.For municipal solid waste,more work is needed to remove the impurities(metals,stones,packaging)from the useful components(bio-waste and plastic).Uncertain access to green hydrogenAll SAF production pathways typically require la

195、rge amounts of green hydrogen to minimize their climate footprints.35 Although India is working on scaling up its green hydrogen capacity to at least 5 Mtpa by 2030,it is not yet known which sectors will be prioritized for the end use of this much in-demand resource.36Limited access to SAF 85 produc

196、tion technologiesIndia currently lacks domestic suppliers able to produce SAF 85.A key goal of the FMCs in-country workshop is to stimulate supply by inviting existing Indian fuel producers to participate along with demand-side players.One solution may be for domestic companies to collaborate with i

197、nternational project developers or licensors with expertise in SAF 85 production.1234Surfacing Supply of Near-Zero Emission Fuels and Materials in India22Lack of demandSAF production and consumption remain in their infancy in India.There is some progress:IndiGo airlines has pledged to use SAF by 203

198、0,while the national fuel producer Indian Oil has trialled SAF manufacture.An important goal of the FMCs in-country workshop is to encourage more domestic companies to demonstrate stronger demand-side commitments to purchasing SAF.5Aviation sector priorities identified by FMCs India workshop3.4Works

199、hop participants agreed that the SAF industry in India is gaining prominence due to the growing pressure to decarbonize and the projected growth of the aviation market in India.However,to date there are just two pilot SAF plants being built in India.The workshop identified the following priorities f

200、or decarbonizing Indias aviation sector:1.Domestic SAF mandateA domestic SAF mandate(starting at 1%blending)could play a crucial role in accelerating the establishment of a SAF industry in India.Such a mandate would providea clear and strong market signal,encouraging investment and industry growth.I

201、t would incentivize the establishment of SAF production facilities,infrastructure and supply chains across the country,leading to the creation of a robust domestic SAF industry.2.Policies to secure feedstocksIndia is blessed with abundant sustainable feedstock sources,such as agricultural residues,m

202、unicipal solid waste and other organic waste materials,providing a reliable resource base for the production of SAF.It is in Indias interest to have policies in place to ensure that the feedstocks necessary to scale up industrial production of SAF remain in the country and are not exported to other

203、countries that have feedstock incentives.The government could ensure this through,for example,across-border tax mechanismthat levels out the costs of feedstock,avoiding market disruptions.In the near future,policy-makers will also need to agree a framework to determine how feedstocks are allocated a

204、cross hard-to-abate sectors.3.Differential tax structuresThe government should offer tax reductions for SAF,especially given that value-added tax currently constitutes 45%of airlines operating costs.More broadly,there is an urgent need to rationalize taxes(e.g.value-added tax,incentives,excise dutie

205、s)to encourage SAF production across India.4.Emphasize co-benefits of SAF industryWorkshop participants highlighted that having a domestic SAF industry would not only contribute to reducing emissions,but also generate numerous co-benefits,including economic growth,waste reduction and creation of gre

206、en jobs.In addition,Indias aviation industry relies heavily on imported jet fuel,which is often expensive and subject to price fluctuations.Developing a domestic SAF industry could enhance energy security and reduce the sectors exposure to imports and volatile global markets.This would also contribu

207、te to cost stabilization and potentially make SAF more affordable in the long term.4Surfacing Supply of Near-Zero Emission Fuels and Materials in India23Financial measures to accelerate the transitionInvestments in zero-emission technology are exposed to high capital and operational risks.Public-pri

208、vate cooperation has a vital role to play in de-risking these sectors.To reach net zero by 2070,$160 billion per year is needed across Indias energy economy between now and 2030.Thats three times todays investment levels.Access to low-cost,long-term capital is key.International Energy Agency and NIT

209、I AayogSurfacing Supply of Near-Zero Emission Fuels and Materials in India24Overview4.14.2India is particularly well-placed to become a global leader in low-carbon technologies,including green hydrogen,which could create a market worth up to$80 billion in India by 2030,according to International Ene

210、rgy Agency Executive Director Fatih Birol and NITI Aayog Chief Executive Officer Amitabh Kant.Writing in January 2022,they said:“Support from the international community is essential to help shift Indias development onto a low-carbon path.To reach net-zero emissions by 2070,the IEA estimates that$16

211、0 billion per year is needed,on average,across Indias energy economy between now and 2030.Thats three times todays investment levels.Therefore,access to low-cost,long-term capital is key to achieve net zero.”37The innovative industrial processes required to decarbonize steel,cement and jet fuel enta

212、il both major upfront capital investment and an ongoing production premium,compared to the incumbent fossil fuel-powered alternatives.Financial support is therefore critical in each of these sectors,which are among the hardest-to-abate of all industries.However,in addition to funding at economically

213、 viable rates,another type of financial support is needed:risk management.Five financial barriers to scaling up near-zero emission technologiesThere are five principal financial barriers to scaling up the technologies needed to deliver near-zero emission steel,cement and jet fuel in India:traditiona

214、l finance approaches are not sufficient,the green premium remains a major challenge,the cost of capital is too high for most MSMEs,India does not have a carbon trading market,and there is a lack of investor confidence.Traditional finance is not sufficientOne of the main challenges in financing the c

215、ommercialization of near-zero emission steel,cement and SAF technologies is thatdecarbonization ambitions cannot be funded by traditional finance alone,due to strict payback periods,narrow investment criteria and limited internal capital.Instead,scaling up investments requires blended financial inst

216、ruments and innovative business models that reimagine capital allocation for decarbonization.Paying the green premiumIndia is avery price-sensitive market.Government procurement for steel,cement and concrete does not encompass paying green premium,but instead prefers low-cost high-carbon footprint p

217、roducts.So it is unclearwho should cover the green premium riskin the value chain.Cost of capitalIndias supply chain is fragmented in these industrial sectors.Abating emissions from the cement and concrete sector,or from thebiomass producers of feedstock for SAF,entails working with highly decentral

218、ized production and fragmented regulation.The MSME sector comprises of nearly 63 million enterprises,which contribute 30%to Indias GDP.Many of these MSMEs do not have access to formal credit and are unable to secure the financing they need to decarbonize,despite playing an important role in Indias n

219、et-zero ambitions.No carbon tradingIndia has not,to date,had an explicitcarbon price or a market-based mechanismsuch as cap-and-trade.Carbon markets operate on the key idea that trading carbon emissions will lead to the most effective way of reducing overall emissions.They aim to encourage industrie

220、s and participants facing higher costs in reducing emissions,while providing financial support to those who can do it more efficiently.As a result,carbon markets drive a gradual shift towards greater efficiency in all sectors and among all players involved.In March 2023,Indias Ministry of Power rele

221、ased a draft of the Carbon Credit Trading Scheme(CCTS),which establishes the institutional frameworks and mechanisms of an Indian carbon credit market.If implemented successfully,this carbon market could help lower the cost of achieving Indias NDCs and net-zero goals,while at the same time promoting

222、 innovation and technological advancements.Lack of investor confidence in off-takersA major issue facing foreign investment in India is off-taker risk.This is partly inherited from the renewable energy market,where public sector distribution companies were in some cases unable to make payments on ti

223、me for the procurement of power.Given the short history of renewable energy development in India,investors often lack access to records on the past performance of off-takers.The required data or performance indicators are either not available or only partly available.This increases the perception of

224、 risk among those in the banking system,which in turn pushes up the cost of capital.12345Surfacing Supply of Near-Zero Emission Fuels and Materials in India25Financial sector priorities identified by FMCs India workshopBOX 4:Workshop participants prioritized the following cross-cutting opportunities

225、 and recommendationsfor financing India-based technologies able to produce near-zero emission steel,cement and jet fuel.For additional sector-specific priorities,see the relevant sections 1.4,2.4 and 3.4 on each sector.1.Blended capital to de-risk high-capex transitionThe climate-critical technologi

226、es needed to produce near-zero emission fuels and materials not only have high capital needs,but they are also high risk.Typically,first-of-a-kind projects bring higher technology and delivery risks than most investors are used to.Unlocking capital flows requires overcoming this tension between vent

227、ure-like risk and infrastructure-sized cheques.Concessional capital and de-risking mechanisms are needed to open the way for private capital to enter and scale up this market.Collaboration is needed to bring different sources ofpublic,private and philanthropic capitaltogether.Capital providers must

228、each play a unique role,consistent with their risk-return frameworks and financing objectives.Ultimately,the greatest returns both in terms of carbon reductions,operational risk mitigation and financial management often require external financing or partnerships between anchor investors,multilateral

229、 development banks and institutional investors to unlock capital more quickly and de-risk investments.The recent approval of a major loan by the World Bank to India demonstrates the role of multilateral finance in de-risking the transition (see Box 4).Taking part in the FMCs workshop was Surbhi Goya

230、l,Senior Energy Specialist at the bank,who said:“The World Bank is supporting Indias energy transition towards meeting global climate mitigation efforts through a multi-pronged strategy.The recently approved$1.5 billion development policy operation will support the country in decoupling its economic

231、 growth from emissions by accelerating development of low-carbon energy solutions,including green hydrogen.”4.3 The World Bank is supporting Indias energy transition.The recently approved$1.5 billion development policy operation will support the country in decoupling its economic growth from emissio

232、ns by accelerating development of low-carbon energy solutions,including green hydrogen.Surbhi Goyal,Senior Energy Specialist,World BankWorld Bank loan stimulates investment into low-carbon energy in IndiaOn 29 June 2023,the World Bank approved a$1.5 billion loan to the Government of India to acceler

233、ate the countrys low-carbon transition.The financing is focused on helping India to scale up renewable energy,develop its green hydrogen sector and encourage climate finance for low-carbon energy investments.The programme will support the successful implementation of the National Green Hydrogen Miss

234、ion that aims to stimulate$100 billion in private sector investment by 2030.The loan will also support the government in its work to:Harmonize standards and regulations Issue policies on energy storage obligations and guidelines to offshore wind Create a Production Linked Incentive(PLI)scheme for so

235、lar manufacturing Initiate a carbon credit trading scheme (CCTS)to value the externalities of fossil fuel-based products Identify the demand sectors(e.g.steel,export products)Introduce incentive schemes and tenders Work on carbon capture and the just transition in relation to the coal industrySource

236、:World Bank38Surfacing Supply of Near-Zero Emission Fuels and Materials in India262.Sustainability-linked bonds and loansSuch third-party financing optionscould includegreen bondsorsustainability-linked loans.These instruments may offer companies a lower-cost alternative to deploying internal capita

237、l,while aligning their corporate finance activities with their sustainability goals.InIndia there has been a substantial uptake in these products in the past two years(see Boxes 5 and 6).The space still needs clarity.The International Capital Market Association(ICMA)recently published some sustainab

238、ility-linked bond principles.39 Targets need to be very ambitious,verifiable and measurable.First from India:JSW Steels$500m sustainability-linked bondBOX 5:BOX 6:In September 2021,JSW Steel,one of Indias leading steel producers,raised$1 billion on the capital markets,split equally between a$500 mil

239、lion five-year bond priced to yield 3.95%and a$500 million 10-year sustainability-linked bond(SLB)priced to yield 5.05%.The transaction was the first SLB to be sold by the global steel industry as well as the first from a high-yield Indian company.The company will pay a 37.5bp coupon step-up if it f

240、ails to meet its performance target to reduce its CO2 emissions intensity by 23%by 2030,from a 2020 baseline.First from India:Governments 80-billion-rupee green bond issueIn January 2023,the Indian government issued its first pair of green bonds,joining a growing list of countries to issue sovereign

241、 thematic bonds.The Reserve Bank of India sold 40 billion rupees of five-year bonds at a coupon rate of 7.10%,five basis points below the sovereign yield of similar tenure.Another 40 billion rupees of 10-year bonds were sold at 7.29%,six basis points below comparable government securities.Taken toge

242、ther,the bonds raised approximately$980 million for the government to fund green investments such as solar power,wind and small hydro projects,as well as other public sector projects to help reduce the economys carbon footprint.3.Transformative business modelsTransformative business models are essen

243、tial to enable industry participants and capital providers to work together in ways that establish new contracts and collaborations to increase the probability of commercial success.For example,companies may need tointroduce demand and supply-side contracts,with some sectorsmoving away from spot pri

244、cing.Business models will need to proactively de-risk the areas of greatest innovation risk and co-develop solutions with stakeholders across the climate ecosystem.4.Portfolio approach to risk and paybackInvestors should calculatethe least-cost pathways to achieve full potential.Private capital must

245、 redefine its appetite for risk andcreate a balanced portfoliowith investments that entail the right balance of long-term,high-risk bets in evolving technologies and short-term,lower-risk decarbonization levers.From the point of view of returns,a portfolio approachto evaluating investments in decarb

246、onization projects seeks to blend projects with short and long payback periods to unlock funding for projects that might otherwise not meet the investment criteria on a standalone basis.For example,investors should consider extending thepayback period of projects to five years or more.5.Strategic po

247、licy interventionThe following policy interventions by the public sector would create an enabling environment and energize private capital flows:Carbon pricing with revenue recycling:the proceeds generated from a carbon tax could be earmarked to steer funds towards green spending initiatives.This re

248、quires close collaboration between federal and state governments.In India,for example,individual states own their natural resources,but pricing and taxation are decided by the central government.Government procurement of near-zero emission fuels and materials,plus collaborative requests for proposal

249、s(RFPs),could create economies of scale and absorb some of the green premium.Source:IFR Extra40Source:Reuters41Surfacing Supply of Near-Zero Emission Fuels and Materials in India27Multilateral cooperation to provide affordable finance and de-risk the transition4.4International governments,multilater

250、al financial institutions and development banks,philanthropists,business leaders and international NGOs need to collaborate to de-risk the financing of near-zero emission steel,cement and aviation in India.Speaking to workshop participants,Shubhashis Dey,Director of Climate Policy and Climate Financ

251、e at the Shakti Sustainable Energy Foundation,said:“In order to mainstream climate finance,a new approach towards financial risk rating,climate risk reporting and collaboration between economies is required.Philanthropies can play a catalytical role by creating evidence,developing cross-border partn

252、erships and supporting the formation of cleantech unicorns.”Philanthropies can play a catalytical role by creating evidence,developing cross-border partnerships and supporting the formation of cleantech unicorns.Shubhashis Dey,Director of Climate Policy and Climate Finance,Shakti Sustainable Energy

253、Foundation6.Financial support for MSMEsMicro,small and medium-sized enterprises need financial support to help them with the low-carbon transition.The barriers to MSMEs accessing commercially available finance include stiff lending policies with high collateral security requirements,small project ti

254、cket sizes and high transaction costs.This is particularly relevant for suppliers of cement.In the absence of immediate and viable financial solutions,MSMEs need government intervention to get sustainable debt at a reasonable rate.A way forward would be to establish a platform where MSMEs could acce

255、ss green bonds.The proceeds of green bonds could pass through financial institutions that would lend to eligible MSMEs with clear environmental KPIs.These loans could be structured as term loans,revolving lines of credit or any other type of debt instrument.Some options to de-risk the transition to

256、near-zero technologies include the following:Finance feasibility studies in the green hydrogen,steel,cement and jet fuel value chains.Provide more blended financing to lower the cost of capital.Provide access to cheap debt for green projects with guaranteed off-takes.Provide loan guarantees through

257、export credit agencies.Establish risk-sharing mechanisms such as insurance or first-loss loan policies the political risk insurance offered by the World Banks Multilateral Investment Guarantee Agency(MIGA)is one example Set up a programme for government-backed green bonds.Consider issuing“green masa

258、la bonds”denominated in the Indian rupee,thereby reducing currency risks and making it easier to pay back debt.42For example,the International Monetary Fund(IMF)has established a long-term financing tool,the Resilience and Sustainability Trust(RST),43 to finance green public-private frameworks for C

259、osta Rica,Barbados,Rwanda,Bangladesh and Jamaica.By seeking long-term financing at concessional rates,these countries are making progress in addressing the challenge posed by climate change.Access under RST is limited to 150%of a countrys IMF quota or up to SDR 1 billion.44 The loans have a long mat

260、urity of 20 years with a grace period of 10.5 years and are provided on highly concessional terms.Lower middle-income countries pay a higher interest margin than lower-income countries.The RST is funded through voluntary contributions of Special Drawing Rights(SDRs)by developed countries.It can also

261、 be funded by loans and grants provided in SDRs or any freely usable currency.As the global financial community becomes more active in climate finance,a growing number of sources are making pools of capital available.Some are listed in Box 7.Surfacing Supply of Near-Zero Emission Fuels and Materials

262、 in India28Global funding sourcesLegislative/international European Commissions Global Gateway(300 billion by 2027)45 Funds from the Japan International Cooperation Agency(JICA)US governments Development Finance Corporation ($60 billion investment limit)46 Multilateral/development banks Asian Develo

263、pment Bank($100 billion from 2019-2030)47 Climate Investment Funds(CIF)($11.1 billion committed)48 Industry Decarbonization Program49 European Hydrogen Bank international pillar50 International Monetary Fund(IMF)Resilience and Sustainability Trust(RST)Partnership for Global Infrastructure&Investment

264、($600 billion)51 World Banks Climate Change Action Plan($32 billion in 2022)52Private sector Glasgow Financial Alliance for Net Zero(GFANZ)members($7.1 trillion assets under management)53 Private equity funds(e.g.BlackRock,TPG Rise Climate,Brookfield,KKR)and pension funds(e.g.CPP)Philanthropic Bezos

265、 Earth Fund($10 billion by 2030)Bloomberg,Breakthrough Energy54 Hewlett Foundation Laurene Powell Jobs MacArthur Foundation Packard Foundation ResnickBOX 7:5Surfacing Supply of Near-Zero Emission Fuels and Materials in India29India-specific policies to accelerate near-zero emission fuels and materia

266、lsTechnologies essential for Indias net-zero goal are held back by huge cost disparities with incumbent carbon-intensive processes government measures to bring down the green premium are an urgent priority.Surfacing Supply of Near-Zero Emission Fuels and Materials in India30The priority in India for

267、 cost-efficient growth to meet the burgeoning needs of the worlds most populous nation makes the economics of near-zero emission steel,cement and jet fuel extremely challenging.Through its India workshop,the FMC brought together private sector actors from both demand and supply sides,along with poli

268、cy-makers and financiers,to identify barriers and drive the change needed.Host governments can play a key role in accelerating the market for these climate-critical technologies by introducing supportive policies and mandates.While many of the challenges to the development,financing and adoption of

269、climate technologies are shared across continents and industries,the policy solutions are typically country-specific.The FMC in-country workshop discussed a number of potential policy measures that could help accelerate the development and supply of near-zero emission solutions for Indias steel,ceme

270、nt and aviation sectors.For additional sector-specific priorities,see the relevant sections 1.4,2.4 and 3.4 on each sector.Potential policy measures,cutting across the steel,cement and aviation sectors,fall into six broad areas:1.Invest in critical upstream technologies2.Put a price on carbon3.Ease

271、the price of low-carbon alternatives4.Invest in pilot projects and infrastructure5.Set mandates for public procurement and for the private sector6.Streamline regulatory measures Invest in critical upstream technologies,using industrial clusters5.1Carbon capture,utilization and/or storage(CCUS)CCUS i

272、s an essential technology for decarbonizing both steel and cement production.It is used to capture emissions from existing highly carbon-intensive processes,such as blast furnaces to extract iron from iron ore and roasting limestone to extract clinker,the key binding agent for cement.The top priorit

273、y policy action discussed at the workshop in relation to accelerating the commercial viability of critical upstream technologies was to develop and implement a cross-sectoral industrial cluster strategy to support the growth of CCUS and green hydrogen in a way that facilitates collective action.An i

274、ndustrial cluster approach can learn from best practices in other countries such as the US,Sweden and Norway,which also offer insights for Indias biomass and waste management supply chains.Green hydrogenGreen hydrogen is an essential technology for the zero-emissions process of decarbonizing steel p

275、roduction known as H2-DRI-EAF,which uses green hydrogen instead of coking coal for the direct reduction of iron ore.Green hydrogen is equally essential for the industrial manufacture of sustainable aviation fuels that can reduce lifecycle GHG emissions by 85%or more(SAF 85).The Indian government has

276、 launched a$2 billion incentive plan to deliver 5Mt of green hydrogen production per year by 2030.A lack of green hydrogen availability for either near-zero emission steel or SAF production could severely limit their technical and economic feasibility.However,any decision on reserving green hydrogen

277、 for specific end uses needs to be weighed against other demands for the limited supply of green hydrogen,such as for fertilizer production or shipping.Policy actions discussed at the workshop included the following:Incorporate explicit steel demand for green hydrogen into the National Hydrogen Miss

278、ion.Incorporate explicit SAF production demand for green hydrogen into the National Hydrogen Mission.Develop and implement an industrial cluster strategy to support growth of CCUS and green hydrogen(as noted above).Renewable energyAs highlighted in a previous section,the impact of the renewables fin

279、ancing challenge on steel decarbonization should not be understated.The more the Indian government invests in developing its renewable energy capacity,the lower the risk becomes for the private sector looking to invest in decarbonization technologies that are dependent on concurrent renewables devel

280、opment.Surfacing Supply of Near-Zero Emission Fuels and Materials in India31Indian policies support green foreign direct investment(FDI)into renewable energy,including 100%FDI under the automatic route,production incentives and waivers of inter-state transmission charges.55 International finance is

281、available for example,in May 2022,Germany committed 10 billion euros to help India meets its ambitious goal of generating 500GW of power from non-fossil fuel sources by 2030.However,given that in April 2022 renewable sources accounted for roughly 165GW of Indias 393GW of power-generation capacity,fa

282、r more international finance will be needed.It will take about$223 billion to reach Indias ambitious 2030 goal for renewables three times the amount of investment over the last seven years.56 Policy actions discussed at the workshop included the following:Focus on massive investment into the renewab

283、les industry before 2030,to ensure low-cost carbon-free power is available to produce the green hydrogen needed to decarbonize the hardest-to-abate industrial sectors.Put a price on carbon5.25.3Fossil-fuel intensive industries to manufacture steel,cement and jet fuel remain cost-competitive across t

284、he world for the simple reason that their impacts on climate and nature so-called “negative externalities”are not priced into their production.This puts more innovative,climate-friendly technologies at a clear cost disadvantage.FMC member companies have highlighted that it would help them meet their

285、 demand commitments if government partners adopted a price on carbon.The 2022 amendment to Indias Energy Conservation Act allows the near-term establishment of a domestic carbon market.The governments proposed Indian Carbon Market(ICM)will be a national framework with the objective of decarbonizing

286、the Indian economy by pricing greenhouse gas emissions through the trading of carbon credit certificates.“The ICM will enable the creation of a competitive market that can provide incentives to climate actors to adopt low-cost options by attracting technology and finance towards sustainable projects

287、 that generate carbon credits.It can be a vehicle for mobilizing a significant portion of investments required by the Indian economy to transition towards low-carbon pathways,”according to a speech by Abhay Bakre,Director-General of the Indian Bureau of Energy Efficiency,in May 2023.57 As well as em

288、phasizing the need for rigorous monitoring,reporting and verification(MRV)guidelines,Bakre envisaged the parallel development of a voluntary carbon market to encourage GHG reductions from“non-obligated sectors”.Carbon markets can create additional revenue streams for producers and end users of low-c

289、arbon commodities including steel,cement and SAF.Such mechanisms can also enable,for example,aviation stakeholders to offset their emissions by investing in SAF projects,thereby creating market demand.58 Policy actions discussed at the workshop included the following:Consider incorporating near-zero

290、 emission steel,cement and SAF into the forthcoming Indian Carbon Market.Carbon pricing with revenue recycling with the proceeds generated from a carbon tax earmarked for green spending initiatives.Ease the price of low-carbon alternativesTax incentives and subsidiesAlong with imposing a price on ca

291、rbon,the government can also work in a different,complementary direction by easing the cost of low-carbon alternatives.For example,policy incentives such as tax breaks and subsidies have proved to be game-changing for the zero-emissions technology sector in the US,following the introduction of US Pr

292、esident Joe Bidens Inflation Reduction Act in August 2022.There are precedents for this in India.The government has a successful track record in incentivizing climate technologies such as solar PV and semiconductor manufacturing under the Production Linked Incentive(PLI)scheme.59 Extending the schem

293、e to incorporate the manufacturing of near-zero emission steel,cement and SAF could boost those sectors while reducing Indias heavy reliance on crude oil imports.Such an approach also aligns with the Indian governments“AatmaNirbharBharatAbhiyan”initiative to strengthen the countrys self-reliance in

294、the aftermath of the COVID-19 pandemic.60Surfacing Supply of Near-Zero Emission Fuels and Materials in India325.4Policy actions discussed at the workshop included the following:Establish and increase tax incentives such as accelerated depreciation,carbon tax revenue recycling and preferential fundin

295、g for near-zero emission initiatives.Explore providing tax benefits or subsidies for domestic production of near-zero emission steel,cement and SAF under the PLI scheme.Cheap debt and concessional lending The government and the Reserve Bank of India(RBI)have other policy options around easing the pr

296、ice of low-carbon technologies,including the following:Increase bank loan limits associated with the Priority Sector Lending policy to facilitate funding of larger renewable energy projects.Provide access to cheap debt for green projects with guaranteed off-takes;RBI could provide credit guarantees

297、to de-risk this debt.Set up a programme for government-backed green bonds(discussed more in the previous section).The capital costs for establishing near-zero emission production of steel,cement or jet fuel are often too significant for any one company to bear and require government support.The gove

298、rnment can help finance the critical early-stage development of new technologies from piloting through to commercial viability.One suggestion from BCGs situation analysis report is that the government could open up 100%foreign direct investment(FDI)into near-zero emission technologies,as it already

299、does for the renewable energy sector.For example,foreign companies with expertise in producing SAF 85 or PtL fuels could invest in India via 100%FDI under the automatic route.This is already permitted for foreign investment in aviation projects to develop greenfield and brownfield airports,as well a

300、s for ground handling services,maintenance,repair and training institutes.The co-benefits of investment in new climate technologies reach beyond the abatement of carbon dioxide.Such investment would create many thousands of new jobs in the emerging energy transition economy.It would generate incenti

301、ves to reduce the health impacts of environmental and air pollution through,for example,the efficient processing of municipal waste and agriculture residues for sustainable aviation fuels.It would reduce Indias reliance on crude oil imports and instead open up new export opportunities.Policy actions

302、 discussed at the workshop included the following:Invest in pilot projects to develop the feasibility of GFT and PtL processes for the production of SAF 85.Invest in pilot projects for CCUS and hydrogen-reduced iron technologies.Provide financial support in the form of grants,subsidies or low-intere

303、st loans to help develop the infrastructure required for SAF,such as agricultural residue and municipal solid waste collection facilities,downstream production plants and distribution networks.Provide financial support for infrastructure needed for the collection and sorting of scrap iron and steel.

304、Government financial support to incentivize production of green cement could include waiving electricity tax on the power used during production and reducing GST(goods and services tax)on the final product.Invest in pilot projects and infrastructureSurfacing Supply of Near-Zero Emission Fuels and Ma

305、terials in India335.55.6Set mandates for public procurement and private sector One of the best opportunities to accelerate decarbonization of the cement and concrete sector,for example,is through public procurement,which is responsible for 40-60%of all global concrete sales.The government can set ma

306、ndates for the public procurement of near-zero emission steel and jet fuel,as well as for cement.As shown in the section on finance,government procurement of these low-carbon fuels and materials,plus collaborative RFPs,could create economies of scale and absorb some of the green premium.The governme

307、nt could also set mandates for the private sector something it is already considering in the aviation sector.A successful example of policies helping in this regard is Indias 2025 ethanol mandate,which has strengthened the overall biofuels value chain and created new opportunities for suppliers.Draf

308、ted by NITI Aayog,the mandate states that the target of 20%blending of petrol in the country by 2025 appears feasible and within reach.61One multilateral initiative,known as the Clean Energy Ministerial Industrial Deep Decarbonisation Initiative(IDDI),is a collaboration of public and private sector

309、players to stimulate demand for low-carbon industrial materials.One of IDDIs key goals is to encourage a minimum of 10 governments to make public procurement commitments for low-carbon steel and cement within the next three years.According to the host organization,the United Nations Industrial Devel

310、opment Organization(UNIDO),green public procurement commitments are essential in signalling to the market:“If you make it,we will buy it,”62 FMC is proud to support IDDIs efforts.Given that an estimated 80%of cement and 90%of steel is produced in around 10 key countries,the adoption of green public

311、procurement commitments in even a handful of these countries would make a significant impact on reducing emissions.63Policy actions discussed during the workshop included the following:Make a level four IDDI commitment(the most ambitious level possible)to procure near-zero emission steel and cement.

312、Mandate usage of near-zero emission cement and concrete by key players in the public sector(similar to the green H2 mandate in the National Hydrogen Mission).Prioritize the use of SAF in the Indian Air Force(IAF),building on the flight of the IAFs AN-32 aircraft,carrying mixed bio-jet fuel,over Raj

313、Path in New Delhi during the 2019 Republic Day celebrations.Mandate the use of SAF in domestic aviation,which progressively increases over time.The Indian government is currently in the exploratory phase of putting together an advisory to blend 1%SAF by 2025,2%by 2026,and 5%by 2030.64 Formalizing th

314、is as soon as possible will help create demand which in turn will incentivize SAF producers to strengthen supply.Streamline regulatory measures Green public procurement commitments are essential in signalling to the market:“If you make it,we will buy it.”UN Industrial Development OrganizationPermiss

315、ions and licensingAs discussed in the section on steel,Indias current regulatory positions around CCUS are unlikely to provide operators with the certainty needed for sizeable investments.Clear regulations on carbon capture could make it more worthwhile for international capital and expertise to com

316、e to India.Among other things,there needs to be a clear process for streamlined CCUS project approvals.In addition,licensing of buildings can be made contingent on environmental performance.By leveraging platforms like the Quad and the Indo-Pacific Economic Framework(IPEF),India can enhance collabor

317、ation on H2 standards,infrastructure development,and H2 trading,which will not only attract international investments but also bolster the countrys efforts towards sustainable and cleaner energy solutions.Policy actions discussed during the workshop included the following:Encourage state-wide adopti

318、on of single-window clearance systems (e.g.the Tamil Nadu system)to expedite green development projects.Expand on programmes requiring environmental performance(e.g.around the carbon footprint of cement or steel)as an essential indicator impacting permitting and licensing for building development.Th

319、ere is a need to define green products to help buyers make informed choices.Ruchika Drall,Deputy Secretary,Climate Change,Ministry of Environment,Forests and Climate Change of IndiaSurfacing Supply of Near-Zero Emission Fuels and Materials in India34Definitions and standardsThe unambiguous definitio

320、n of what constitutes near-zero emission materials is important for sending a clear signal to the market.Alignment between Indian and global standards is essential.Speaking to workshop participants,Ruchika Drall,Deputy Secretary,Climate Change,at the Ministry of Environment,Forests and Climate Chang

321、e of India,said:“There is a need to define green products to help buyers make informed choices.The establishment of a domestic carbon market can facilitate investment in the industrial sector supporting required transitions.”One area in need of alignment is“book and claim”in the aviation industry.A

322、major challenge is that supplies of SAF are not yet available in many airports,leaving carriers that want to refuel their aircraft in a bind.Book and claim is an innovative approach that permits an aircraft that cannot refuel with SAF to pay for another equivalent flight to fuel up from an airport t

323、hat does have SAF.The airline paying for the sustainable fuel can then claim the CO2 reduction it brings against its net-zero pledges.Book and claim is a very promising solution,but it needs international standardization to harmonize approaches.Policy actions discussed at the workshop included the f

324、ollowing:Adopt clear definitions and targets for near-zero emission steel,cement and jet fuel,aligned with the international community.Align with global standards around book and claim for SAF,to mitigate near-term logistical constraints and catalyse market development.Update building codes and prac

325、tices to allow for the use of SCMs in low-carbon cement and concrete.Top government policy priorities highlighted by FMCs India workshopBOX 8:Support increased availability of essential upstream technologies via clear regulations,subsidies and project approval processes for green hydrogen,CCUS,renew

326、able energy and consolidation of biomass waste feedstocks.Invest in innovative R&D,competitive pilots and demonstration projects,through collaboration across ministries and with external partners from business,finance and philanthropy.Adopt clear definitions and targets for near-zero emission goods

327、and services,aligned with international standards.Develop a cross-sectoral industrial cluster strategy to support the growth of CCUS and green hydrogen,learning from best practices in other countries such as the US and Norway.Surfacing Supply of Near-Zero Emission Fuels and Materials in India35Concl

328、usionThe technologies to clean up Indias carbon-intensive steel,cement and aviation sectors exist,but they remain nascent and expensive.It will take an urgent and collaborative effort to develop the financial tools and policy measures needed to make these low-carbon processes commercially viable esp

329、ecially in an emerging,price-sensitive economy such as Indias.Incremental measures taken by individual actors will not deliver the near-zero emission processes these sectors need in time for them to make a difference.Bold collective action by public and private stakeholders is essential.In July 2023

330、,the First Movers Coalition(FMC)convened an in-country workshop that aimed to demonstrate demand from FMCs member companies for near-zero emission steel,cement and aviation fuel in India and,through such demand signals,to identify and encourage domestic suppliers of those materials and fuels.The wor

331、kshop also provided a chance for demand-and supply-side actors to interact with representatives from government and finance to discuss the barriers,opportunities and solutions these three sectors face in decarbonizing in India.This white paper presents the outcomes from the FMCs India workshop,suppo

332、rted by situation analysis from the Boston Consulting Group.Financial solutions discussed at the workshop gravitate around ways to reduce the green premium through incentives and carbon pricing,as well as strategies to address the risk-reward imbalance through blended finance and risk management.Pol

333、icy solutions include measures to increase the availability of upstream technologies essential for the transition,such as carbon capture,green hydrogen and renewable energy,as well as developing a cross-sector industrial cluster strategy to promote collaboration and economies of scale.The FMC is planning similar workshops in South-East Asia,Africa and South America over the next 12 months,which wi