Advance market commitments to decarbonize heavy industry

On the Catalyst with Shayle Kann podcast this week:

A coalition of companies organized by the U.S. government is promising to purchase low-carbon versions of commodities from ​“hard to abate” heavy industries. This sort of policy is called an advance market commitment, which the U.S. has used in the past to accelerate the development of new technologies. With guaranteed revenue from the government, manufacturers are able to take risks to create products that they otherwise might not have.

In the lead-up to COP26 last year, John Kerry, U.S. special presidential envoy for climate, announced the First Movers Coalition (FMC), a group formed in collaboration with the World Economic Forum. It now involves 65 companies — including Delta, Maersk and Rio Tinto — that will buy or supply a specified percentage of low-carbon products by 2030. India, Norway and eight other countries have signed on as well. The coalition has also committed to purchase carbon removal solutions, adding to the wave of similar pledges like the $1 billion Frontier Fund.

So how will the FMC work?

In this episode, Shayle talks to Varun Sivaram, who played a key part in the creation of the FMC concept. Sivaram is managing director and senior advisor for clean energy and innovation in Kerry’s office.

They cover topics including:

• Why advance market commitments are not silver bullets.

• The FMC’s ability to make companies uphold their commitments.

• How the FMC is developing standards for low-carbon products.

• How much progress coalition members have made toward their targets.

• How the Inflation Reduction Act and the FMC support each other.

• The FMC’s ability to endure changes in administration.

• When we will be able to stop calling these sectors ​“hard to abate.”

Recommended resources:

• Bloomberg: Companies commit to buying super-green cement in corporate climate club

• Columbia University: To bring emissions-slashing technologies to market, the United States needs targeted demand-pull innovation policies

• Harvard University: Using advance market commitments for public purpose technology development

• Catalyst: Growing the carbon dioxide removal market

Catalyst is a co-production of Post Script Media and Canary Media.

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