The Group of Seven (G7) industrial economies can set an example for international climate action by slashing emissions from their heavy industry sectors, with the potential to stop annual direct CO2 emissions of some six billion tonnes – over one-sixth of the total currently released by the global energy system, according to a new calculations from the International Energy Agency (IEA).

The report found that Canada, France, Germany, Italy, Japan, the UK, the US and the EU, which together account for 30% of global energy demand and 25% of energy system emissions, will need to achieve a 27% reduction in industrial CO2 by 2030 relative to today, compared to 18% for ‘the rest of the world’, to reach Intergovernmental Panel on Climate Change net zero targets.

“There is no way to reach net zero without dramatic reductions in emissions from heavy industry, and G7 economies have both a responsibility and an opportunity to take a leadership role in driving that forward,” said IEA executive director Fatih Birol, launching Achieving Net Zero Heavy Industry Sectors in G7 Members.

“Emissions from heavy industry are among the most stubborn [to abate], making it essential that countries with significant financial and technological resources use them to scale up practical solutions in a coordinated way.”

Robert Habeck, federal minister for economic affairs and climate action in the government of Germany, which commissioned the report as part of its 2022 Presidency of the G7, said: “To achieve our goal to limit the global temperature rise to 1.5°C, we have to decarbonise our industries.

“This decade is key to set the tracks to climate neutrality. Especially in sectors where emissions are high but hard-to-abate like steel and cement, we have to fundamentally shift production methods.

“The IEA report… shows us pathways and advances our understanding of the tools and definitions we need. It brings us a big step further to jointly create an international economic and political environment that incentivises investments in green and low carbon production facilities,” he said.

The G7 nations produce 17% of the world’s steel, 8% of its cement and 28% of its primary chemicals – the three largest sources of industrial CO2. By IEA calculations, heavy industry’s direct emissions are currently around 9 gigatons a year, equal to about one quarter of total energy system emissions.

According to IEA data heavy industry is responsible for more than 15% of coal use and about 10% of oil and gas use in G7 members, making the net zero transition in these sectors “an important pillar for reducing the reliance on fossil fuel”, said the report authors.

“However, many of the technologies for significantly reducing emissions from heavy industry are still at large prototype or demonstration stage, and competitive international markets for heavy industrial products often result in profit margins that are too thin to cover the higher up-front costs of integrating low emission processes.”

The IEA report provides a “toolbox” for G7 members designed to “set out ambitious long-term energy transition targets for heavy industry while supporting demonstration and early commercial projects through targeted finance and other risks mitigation measures”.

Such supply-side efforts would leverage “essential private investment”, said the authors, while on the demand side, carbon contracts for difference, public procurement rules, mandates, quotas and other related measures could be employed to create “differentiated markets” for near-zero emission steel and cement.

Birol also called on G7 governments to enshrine “stable, absolute and ambitious thresholds for material production with near zero emissions”, noting the report set out definitions and “relevant thresholds” for the group of countries to adopt “as a starting point that are compatible with a global pathway to net zero emissions by 2050”.

Last week, the IEA said the next six months will be crucial to shaping the outlook for the energy transition beyond 2023, warning growth of clean power production was set to flatline unless governments strengthen policy measures, negatively impacting the momentum of the shift away from fossil fuel production and consumption.