If there’s no silver bullet, can green tech hit the target?

Breakthrough technologies are still needed to reach net zero by 2050, but costs can be prohibitive. “The private sector plays a crucial role in driving the energy transition. It will ultimately create markets and sustainable economic growth that we can all benefit from,” suggests Amy Brachio, EY Global Vice Chair – Sustainability. “To get there, governments need to strike a balance between regulating and incentivizing investment through policy, giving investors confidence for the long term, enabling solutions to be scaled, to ensure an equitable impact for all.”

The power and fuels sector will still be the major emitter in 2050 (61%), followed by manufacturing (15%), transport (10%), and construction (10%), and technology can drive decarbonization in these sectors.

Power and fuels

The real game changer in future power generation will be how governments can encourage low-carbon energy transitions at pace and scale while “keeping the lights on” and improving the lives of their citizens.

Established technology will play an essential role in smoothing out this transition. One example: natural gas can be seen as a transition path to fully renewable energy. Along the way, the Internet of Things can help reduce the risk of methane leakage in natural gas processing. Methane is far more potent in driving atmospheric global warming than CO₂.

The end goal will require a rapid increase in wind, solar and geothermal power supply. Progress is happening at pace; the world is on course to add as much renewable power in the next five years as it did in the past 20.³ But the real game changer will be being able to store and distribute that renewable energy when needed.

Technology also could power a consumer-driven decentralization of energy production, but governments face challenges in helping create a future where citizens are not reliant on a central power grid.

Small-scale, demand-driven technologies like solar capture, wind harnessing, and battery storage will play a role, as will distributed energy resources and smart grids. In addition, car batteries in vehicle-to-grid (V2G) mode can absorb excess renewable energy and increase power grid flexibility.

But more than technology will be required. The EY Renewable Energy Country Attractiveness Index indicates that stronger regulatory support with subsidies and tax credits is needed to improve grid flexibility and predictability for future price realization.

Manufacturing

Manufacturing companies will require innovative approaches across the value chain to achieve sustainability goals. While several green technologies are available, specific incentives will be required to make them more economically viable.

Waste sorting and identification are crucial for industrial companies to reduce environmental pollution. Leading companies need to take accountability for their environmental impact over the product lifecycle and establish circular manufacturing ecosystems. Repurposing old equipment with new components or processes can help reduce equipment wastage and costs, while offering take-back services can extend product lifecycles and build customer loyalty. Material passports, which document all the materials used in a product or construction, can aid manufacturers in achieving circularity.

Chemical companies are setting carbon-neutrality goals and prioritizing decarbonization through the efficient use of materials. They also are increasing the use of alternative energy sources (e.g., hydrogen, renewable energy), as well as investing in biorefining technologies such as H2ACE, which can capture carbon.

Sustainable sourcing can help companies reduce their indirect emissions by focusing on renewable materials in the chemical industry. Advanced materials and chemicals such as polymeric materials, biomaterials, composites and nanomaterials are becoming more critical for long-term environmental protection, cost and sustainability. Companies can replace existing input materials with less toxic and renewable materials, such as bio-based raw materials, which have a longer service life in production. Sustainable plastics can be either biodegradable or made from biological materials, such as bio-PET, which uses fermented leftovers from sugar manufacturing to produce soft drink bottles.

Digital manufacturing is the quickest potential path to impacting sustainability efforts significantly. By leveraging technologies such as Industrial IoT, additive manufacturing, and artificial intelligence, manufacturers can optimize their production processes, reduce material waste, and improve product sustainability. Craig Coulter, EY Global Advanced Manufacturing & Mobility, Strategy & Operations and Sustainability Leader, said, “How we use data will play a big role in helping shape new green economies. It will involve a better use of the data to create better products and services.”

Additionally, digital twin modeling can help improve sustainability across the product lifecycle, from design to end-of-life management.

Transport

Governments worldwide are wrestling with the challenge of rapidly decarbonizing our transportation systems. Some cities, like Paris, plan to ban all vehicles from their city center. Others are planning comprehensive restrictions on internal combustion engine vehicles while investing in new mass transit infrastructure.

In addition, governments are targeting large corporate and commercial fleet owners through incentive policies to trigger the transition to electric vehicles. And logistics and large freight players are announcing ambitious decarbonization targets: FedEx has committed to carbon-neutral operations by 2040,⁴ while Maersk aims to decarbonize its ocean transport through a 50% carbon intensity reduction by 2030, targeting net zero by 2040.⁵

Transportation is changing due to EVs, charging infrastructure, shared mobility, and autonomous driving. EV adoption will be rapid in Europe and China, but gradual elsewhere. The charging infrastructure and clean batteries are key for success, and governments must incentivize their development for all areas.

“The chicken-and-egg scenario right now is that people are not buying EVs because there isn’t the charging infrastructure,” says Marc Cotelli, EY Americas eMobility Energy Leader. “Yet infrastructure is not being installed because there are not enough EVs.”

Given the size of the task in achieving a green transition that reaches net zero, governments must play a leadership role in supporting and subsidizing technological innovation and incentivizing private financing and fostering public-private cooperation to deliver a decarbonized, sustainable economy that creates measurable long-term value for everybody. “No single government can afford all the funding needed to tackle climate change,” says George Atalla, EY Global Government & Public Sector Leader. “Governments must work to encourage the flow of private capital into green energy and technology projects.”

The appropriate levels and types of support differ depending on the growth path, market penetration, and energy impact of each technology. Governments can help by regulating established or soon-to-be-deployed technologies, such as renewable energy and fuel-efficient vehicles. These regulations have driven the success of wind and solar power and improved ICEV performance in the energy and automobile sectors.

Governments can use various approaches to support technological progress. Tax incentives and user subsidies, such as government efforts to encourage EV adoption, home energy efficiency, and recycling, can help make established technologies commercially viable. Funding R&D and creating connections between business and academia can support promising yet underdeveloped technologies like CCUS, tidal and oceanic energy, and green hydrogen.

Direct public ownership, oversight and management of some technologies is necessary, as it is for sensitive or hazardous operations that are yet to be commercially feasible and need to remain under government oversight, like next-generation nuclear and large-scale hydroelectric power.

Essentially, green technologies will be highly influential in helping the world dramatically reduce GHG emissions. Still, their effectiveness will depend on how they are supported, funded and deployed.

Governments have a pivotal role in developing and promoting green technologies for a just transition to a world no longer dependent on fossil fuels.

To help bridge the ambition gap, we believe they can take the following five actions now:

1. Increase funding for green technology innovation and create policies that incentivize private investment while lowering risk. This can be achieved through a mix of incentives and penalties such as green taxes, support for tech R&D clusters and startups, which will set the pace of the transition.
2. Develop integrated policies that promote public-private cooperation across industry sectors to achieve comprehensive decarbonization. Transformation is needed beyond just the power sector; all sectors of the economy must be included, acknowledging that some industries may have limited options for improvement with current technologies.
3. Adopt a technology-neutral perspective that relies on the specific capacity and cost of each technology to contribute to the transition. This approach can also help couple different technological needs.
   
4. Embrace science-informed policymaking. To foster technological innovation and leverage data, governments should use an evidence-based policymaking approach and tools (consultations, multilateral dialogue, policy briefing) within a broader science diplomacy framework.
   
5. Advance behavioral change at individual group and societal levels. As a direct consequence of governments’ awareness campaigns, incentives and innovative solutions, the impact of behavioral change may bring a significant contribution toward decarbonization.

Summary

Given the immediate need to address the climate emergency, governments must look to the proven potential of existing technology in reducing carbon emissions rather than hoping for some breakthrough new solution that will take decades of research and development to bring to market. Those existing technologies, if supported through policymaking and government investment, could yet prove game changers in transitioning to a green economy.