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

=== 11.6.6 Policy Coherence and integration ===

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Industrial net zero transitions, while technically feasible, involve not just a shift in production technology but major shifts in demand, material efficiency, circularity, supply chain structure and geographic location, labour training and adaptation, finance, and industrial policy. This transition must also link decarbonisation to larger environmental and social goals (e.g,. air and water quality, low-GHG growth, poverty alleviation, sustainable development goals) ( [[#OECD--2019b|OECD 2019b]] ).

Although there is little evidence of carbon leakage so far it will be ever more important to strive for coherence in climate and trade policies as some countries take the lead in decarbonising internationally traded basic materials ( [[#Jakob--2021b|Jakob 2021b]] ). At the time of writing the previously academic debate on this issue is shifting to real policymaking through debates and negotiations around carbon border adjustment ( [[#11.6.1|Section 11.6.1]] ) and sectoral agreements or climate clubs ( [[#Nordhaus--2015|Nordhaus 2015]] ; [[#Åhman--2017|Åhman et al. 2017]] ; [[#Jakob--2021a|Jakob 2021a]] ; [[#Nilsson--2021|Nilsson et al. 2021]] ). The climate and trade policy integration should also consider what is sometimes called positive leakage, that is that heavy industry production moves to where it is easier to reach zero emissions. As a result, policy should go beyond border measures to include, for example, international technology cooperation and transfer and development of shared lead markets.

Energy-intensive production steps may move where clean resources are most abundant and relatively inexpensive ( [[#Gielen--2020|Gielen et al. 2020]] ; [[#Bataille--2021a|Bataille et al. 2021a]] ). For example, steel-making has historically located itself near iron ore and coal resources whereas in the future it may be located near iron ore and zero-GHG electricity or close to carbon storage sites ( [[#Fischedick--2014|Fischedick et al. 2014]] b; [[#Vogl--2018|Vogl et al. 2018]] ; [[#Bataille--2020a|Bataille 2020a]] ). This indicates large changes in industrial and supply chain structure, with directly associated needs for employment and skills. Some sectors will grow, and some will shrink, with differing skill needs. Each new workforce cohort needs the general specific skill to provide the employment that is needed at each stage in the transition, implicating a need for coordination with policies for education and retraining.

Depending on what mixes of deep decarbonisation strategies are followed in a given region (e.g., material efficiency, electrification, hydrogen, biomass, CCU and CCS), infrastructure will need to be planned, financed and constructed. The UKCCC Net Zero Technical Report describes the infrastructure needs for achieving net zero GHG in the UK by 2050 for every sector of the economy ( [[#UKCCC--2019b|UKCCC 2019b]] ). Transportation would be facilitated with pipelines or ships to allow transfer of captured CO 2 for utilisation and disposal, and associated institutional frameworks ( [[#IEAGHG--2021|IEAGHG 2021]] ). Electrification will require market design and transmission to support increased generation, transmission, and flexible demand. Hydrogen, CCU, and CCS will require significant new or adapted infrastructure. Hydrogen and CO 2 pipelines, and expanded electricity transmission, have natural monopoly characteristics which are normally governed and planned by national and regional grid operators and their regulators. Industrial clustering (also known as eco-parks), such as those planned in Rotterdam (Netherlands) and Teeside (UK), would allow more physical and cost-effective sharing of electricity, CCU, CCS, and hydrogen infrastructure but is dependent on physical planning, permitting, and infrastructure policies.

Costing analysis (Chapter 15) indicates an increased upfront need for financial capital which requires policies to encourage long-term, patient capital that reflects society’s preferences for investment in industrial decarbonisation and the minimum 10 or more years horizon before there are significant new commercially available processes.

All the above indicate the need for general industrial policy as part of a coherent general economic, taxation, investment, employment and social policy for climate change mitigation ( [[#Wesseling--2017|Wesseling et al. 2017]] ; [[#Bataille--2018a|Bataille et al. 2018a]] ; [[#Wyns--2019|Wyns et al. 2019]] ; [[#Nilsson--2021|Nilsson et al. 2021]] ).

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