IEA on demand and supply measures for steel and cement transition

A massive scale-up of markets for transformative near-zero emissions steel and cement is needed to achieve internationally agreed net zero goals. Yet early movers on both the supply- and demand-side – that is, material producers and consumers – face substantial barriers related to high costs and risks, among other factors.

This has led to relatively slow market growth for near-zero emissions materials, at a moment when reinvesting in long-lived high-emissions production could have repercussions for governments to achieve their stated climate goals. Policy makers have the opportunity to play a decisive role in unlocking markets for near-zero emissions materials. Governments are well-positioned to reduce risk during market formation, and targeted policy measures can provide the certainty that is currently lacking in markets.

Furthermore, international collaboration will be vital to make the transition faster and less costly, given the international nature of markets for industrial products, the need for large and capital-intensive technology demonstrations for near-zero emission production, and the larger demand signals that can be created by pooling commitments across borders.

This report – produced at the request of the Climate Club yet generally applicable to policy discussions for industrial decarbonisation – offers considerations and options for governments to scale-up markets for near-zero and low-emissions steel and cement, while concurrently reducing reliance on high-emissions materials.

It makes the case for why both demand-side and supply-side measures are important to kick-start markets for near-zero emissions materials, summarising progress to date and highlighting gaps that rationalise government action. Key policy options are outlined, illustrating the variety of measures available to governments as they implement strategies tailored to their particular circumstances. The value of international coordination on such measures is discussed, and an initial illustrative proposal is elaborated for those governments that may wish to consider coming together around a collective pledge for scaling up the market share of near-zero emissions materials.