An industrial policy framework for transforming energy and emissions intensive industries towards zero emissions

The target of zero emissions sets a new standard for industry and industrial policy. Industrial policy in the twenty-first century must aim to achieve zero emissions in the energy and emissions intensive industries. Sectors such as steel, cement, and chemicals have so far largely been sheltered from the effects of climate policy. A major shift is needed, from contemporary industrial policy that mainly protects industry to policy strategies that transform the industry. For this purpose, we draw on a wide range of literatures including engineering, economics, policy, governance, and innovation studies to propose a comprehensive industrial policy framework. The policy framework relies on six pillars: directionality, knowledge creation and innovation, creating and reshaping markets, building capacity for governance and change, international coherence, and sensitivity to socio-economic implications of phase-outs. Complementary solutions relying on technological, organizational, and behavioural change must be pursued in parallel and throughout whole value chains. Current policy is limited to supporting mainly some options, e.g. energy efficiency and recycling, with some regions also adopting carbon pricing, although most often exempting the energy and emissions intensive industries. An extended range of options, such as demand management, materials efficiency, and electrification, must also be pursued to reach zero emissions. New policy research and evaluation approaches are needed to support and assess progress as these industries have hitherto largely been overlooked in domestic climate policy as well as international negotiations.