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

==== 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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