Editing IPCC:AR6/WGIII/Chapter-11 (section)

=== 11.6.3 Technological Research, Development, and Innovation ===

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Policies for research, development, and innovation (RDI) for industry are present in most countries but it is only recently, and mainly in developed countries, that decarbonisation of emissions-intensive industries has been prioritised ( [[#Åhman--2017|Åhman et al. 2017]] ; [[#Nilsson--2021|Nilsson et al. 2021]] ). Emission-intensive industries are characterised by large dominant actors and mature process technologies with high fixed cost, long payback times and low profit margins on the primary production side of the value chain. Investments in RDI are commonly low and aimed at incremental improvements to processes and products ( [[#Wesseling--2017|Wesseling et al. 2017]] ).

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==== 11.6.3.1 Applied Research ====

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Investing in RDI for low-GHG process emissions is risky and uncompetitive in the absence of convincing climate policy. Research investment should be guided by assessing options, technology readiness levels, and roadmaps towards technology demonstration and commercialisation. The potential GHG and environmental implications need to be assessed early on to assess the sustainability implications and to direct research needs ( [[#Yao--2018|Yao and Masanet 2018]] ; [[#Zimmerman--2020|Zimmerman et al. 2020]] ). Strategic areas for RDI can be focused on a set of possible process options for producing basic materials using fossil-free energy and feedstock, or CCU and CCS (Sections [[#_idTextAnchor014|11.3.5]] and ). Policies to enhance RDI include public funding for applied research, technological and business model experimentation, pilot and demonstration projects, as well as support for education and training – which further have the positive side effect of leading to spill-overs and network effects through labour market mobility and collaboration ( [[#Nemet--2018|Nemet et al. 2018]] ). Innovative business models will not emerge if the transition is not considered along the full value chain with a focus on materials efficiency, circularity, and new roles for industry in a transitioning energy system, including possibly providing demand response for electricity through designed-in flexibility, for example, by combining electrolysis hydrogen production with substantial storage ( [[#Vogl--2018|Vogl et al. 2018]] ).

Fostering collaborative innovation across sectors through the support of knowledge sharing and capabilities building is important as mitigation options involve new or stronger sectoral couplings ( [[#Tönjes--2020|Tönjes et al. 2020]] ). One example is linking chemicals to forestry in the upscaling of forest bio-refineries, although it has proven to be difficult to engage a diverse group of actors in such collaborations ( [[#Karltorp--2012|Karltorp and Sandén 2012]] ; Bauer et al. 2018). Heterogeneous collaboration and knowledge exchange can be encouraged through conscious design of RDI programs and by supporting network initiatives involving diverse actor groups ( [[#Van%20Rijnsoever--2015|Van Rijnsoever et al. 2015]] ; [[#Söderholm--2019|Söderholm et al. 2019]] ).

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==== 11.6.3.2 Policy Support From Demonstration to Market ====

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Applied research is relatively inexpensive compared to piloting, demonstrations, and early commercialisation, and arguably a lot of it has already been done for the key technologies that need to climb the technology readiness ladder (see Table 11.3). This includes electricity and hydrogen-based processes, electro-thermal technologies, high-temperature heat pumps, catalysis, lightweight building construction, low embodied carbon construction materials, etc. Demonstration to market strategies can be particularly successful when the complete supply chain is considered. A prominent example of such an integrated supply chain approach is the UK Offshore Wind Accelerator Project. Coordinated by the UK Carbon Trust and working with wind turbine manufacturers, the project looked across the potential supply chain for floating offshore wind and identified what components manufacturers could innovate and produce by themselves, and where there were gaps beyond the capability of any one firm. This process led to several key areas of work where the government and firms could work together; once the concepts were piloted and proven, the firms went back into a competitive mode. The project illustrates the potential importance of third parties, including government, in creating platforms and opportunities for cross-industry exchange and collaboration ( [[#Tönjes--2020|Tönjes et al. 2020]] ).

Pilot and demonstration projects funded through public-private partnerships contributes to risk mitigation for industries and helps inform on the feasibility, performance, costs and environmental impacts of decarbonisation technologies. Most countries already maintain government research and deployment programs. For example, Horizon Europe has a total budget of 95.5 billion EUR (USD117 billion) for 2021–2027, of which 30% will be directed to green technology research. The EU has conducted several demonstration projects for emission-intensive industries, such as the Ultra-Low Carbon Steel (ULCOS) project ( [[#Abdul%20Quader--2016|Abdul Quader et al. 2016]] ), which led to several small-scale pilots that are now going to larger-scale firm pilots (e.g., HISARNA, HYBRIT and SIDERWIN). Supported by the EU, several cement firms are working together on the cement LEILAC project, where a new form of limestone calciner is being developed to concentrate the process CO 2 emerging from quicklime production (about 60% of cement emissions) for eventual utilisation or geological storage (as one of many options for cement, see for example, [[#Plaza--2020|Plaza et al. 2020]] ). If LEILAC works, it is conceivable that existing cement plants globally that are located near CCS opportunities could have their emissions reduced by 60% with one major retrofit of the kiln.

Once a technology has been demonstrated with scale-up potential, the next stage is commercialisation. This is a very expensive stage, where costs are not yet compensated by revenue (see, e.g., [[#Åhman--2018|Åhman et al. 2018]] and [[#Nemet--2018|Nemet et al. 2018]] ). The H-DRI, SIDERWIN and LEILAC examples are all at the stage of scaling up. Given the resource requirement, a diversified portfolio of investors and support is required to share the risk. LEILAC includes several firms, as did the UK Offshore Wind Accelerator. Government funds are also required and could be refunded in the future through an equity position, royalty or tax. Fast-growing economies, which are adding new industrial capacity, can provide opportunities to pilot, demonstrate and scale up new technologies, as shown by the rapid expansion of electric vehicle and solar panel production in China, which contributed to driving down costs ( [[#Nemet--2019|Nemet 2019]] ; [[#Hsieh--2020|Hsieh et al. 2020]] ; [[#Jackson--2021|Jackson et al. 2021]] ).

Finally, large capital flows towards deployment of low-GHG solutions will not materialise without a growing demand for low-carbon materials and products that allows business opportunities. Policy will thus be needed to support the first niche markets which are essential for refining new decarbonised technologies, troubleshooting, and for building manufacturing economies of scale. Market creation does however go beyond the nurturing, shielding, and empowerment of early niches ( [[#Smith--2012|Smith and Raven 2012]] ; [[#Raven--2016|Raven et al. 2016]] ) and must also consider how to significantly reshape existing markets to create space for decarbonised solutions and crowd out fossil-based ones ( [[#Mazzucato--2016|Mazzucato 2016]] ).

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