The

drive

todecarboniseindustr

yAhow-toguideforcompaniesNovember

2023AcknowledgementsSustainable

Markets

InitiativeFoundedbyHisMajesty

King

Charles

III

in2020,as

PrinceofWales,the

Sustainable

MarketsInitiative

hasbecome

the

world’s“go-to”private

sector

organisationontransition.

Launchedin2021,

the

TerraCarta

serves

as

the

Sustainable

Markets

Initiative’smandatewith

afocus

onaccelerating

positive

results

forNature,people

andplanetthroughrealeconomy

action.Energy

Transition

TaskForceByinvitation,

executives

from

some

ofthe

world’slargest

andmost

in?uentialindustrial,

energy,and?nancialcompanieshavecometogether

toform

the

EnergyTransitionTask

Force.Thistask

forceis

chargedwith

determininghowcompaniesfrom

across

the

energyvaluechain,individuallyandcollectively,can

playaleadingroleindriving

andaccelerating

the

transition

toasustainable

future.The

Decarbonising

Industry

WorkingGroupis

oneofmultipleEnergyTransitionTask

Forceworking

groupsthat

serve

as

acollaborative

platform

formembercompaniestoidentify

anddevelopcarbon

emissionabatementsolutions.The

Decarbonising

Industry

WorkingGroupis

focused

onthreeofthe

hardest-to-abateindustries

—steel,

aluminium,andmining.Besides

companiesfrom

these

industries,

theworking

groupalsoincludesselected

energyandtechnology

companiesthat

areinterested

insupporting

carbon

emissions

abatementefforts

inthese

industries.Intotal,thereare11

members

inthe

working

group:MiningcompaniesAnglo

American

andRioTinto,aluminiumproducerEmiratesGlobalAluminium(EGA),steelmakerTataSteel,metalsproducerandtrader

Glencore,renewableenergyproducers

Masdar,Orsted,

Octopus

Energy,andReNew,technology

companySiemensEnergy,andglobalenergycorporation

bp.OliverWyman

supported

Masdar

inleadingthisworking

group.WorkinggroupmembersMasdarCEOIntroductionMohamed

Jameel

Al

Ramahi,

Chief

Executive

Of?cer,MasdarAs

the

energytransition

continuestogaintraction,

therestill

remainsanumberofobstaclespreventingit

from

accelerating,

somethingthat

weknow

is

needed

inordertocontain

globalemissionsto1.5

degrees

Celsiusinlinewith

the

goalsofthe

ParisAgreement.One

ofthose

obstacles

is

the

decarbonisation

ofcritical

hard-to-abate

sectors

such

as

steel,aluminium,andmining.Altogether,these

sectors

contribute

approximately12%

ofglobalcarbon

dioxideemissions,

representingatremendousopportunity

tosigni?cantly

drivedownemissions.1,

2With

that

goalinmind,Masdar,aglobalcleanenergypioneer,is

proudtobe

leadingtheDecarbonising

Industry

WorkingGroupas

part

ofthe

Sustainable

Markets

Initiative’sEnergyTransitionTask

Force.After

bringingtogether

leadingcompaniesfrom

across

the

energyandhard-to-abate

sectors,

the

Decarbonising

Industry

WorkingGroupis

nowreadytolaunchour?rst

deliverable“How-to

Guide,”focused

onexploringtangiblesolutions

fordecarbonisation.Iamthankful

tocolleaguesfrom

across

the

working

groupforsharinginsights

andseekingmeaningfulcollaborationopportunities,

the

Sustainable

Markets

Initiative

leadershipforbringingus

together,andOliverWymanfortheirsupport.This

workdemonstrates

the

potentialthat

renewableenergy,energyef?ciency,

carbon

capture,greenhydrogen,andother

solutions

can

offer

ingreeningindustries

across

theirvaluechains.And

it

highlightsthe

obstacles

westill

need

toovercometoget

there.One

thingis

clear:The

decarbonisation

journeycan

onlybe

successful

throughpartnership.

This

is

what

makesthe

roleofthe

Sustainable

Markets

Initiative

so

important.As

weprepareforCOP28inthe

United

Arab

Emirates,wheredevelopingactionable

solutionstoensurethe

worldmeets

its

climatecommitments

willbe

front

andcentre,thisguideoffersatimely

andinformative

viewfrom

industry

leaders

onhowwecan

overcomewhat

is,

inmanyways,oneofthe

“?nalfrontiers”

ofclimatechange:Decarbonising

hard-to-abate

sectors.OliverWymanCEOIntroductionNick

Studer,Chief

Executive

Of?cer,Oliver

Wyman

and

Interim

Chair,Sustainable

Markets

Initiative’sEnergy

TransitionTaskForceSteel,

aluminium,

and

mining

contribute

directly

to

around

12%

of

global

carbon

dioxideemissions.

Business

leaders

in

these

carbon-intense

industries

are

faced

with

a

once-3in-a-generation

opportunity

to

innovate

and

collectively

shape

the

transition

to

a

moresustainable

future.The

Decarbonising

Industry

WorkingGroupwithin

the

Sustainable

Markets

Initiative

bringstogether

marketleaders

inthe

energy,steel,

aluminium,mining,andtechnology

sectors

toworktogether

toaccelerate

the

transition

tonet

zeroacross

hard-to-abate

industries.

Thepremiseofthisgroupis

that

organisationswillmakegreaterandmoreef?cient

strides

towardssustainability

throughcollaborative

efforts

thanbypursuinginitiativesalone.These

hard-to-abate

industries

face

numerouschallengestodecarbonise,

includingsecuring

access

torenewableenergyandgreenhydrogenat

affordable

scale,

navigatinganevolvingglobalmarketplace,andbeingabletorelyonasuf?cient

andconsistent

regulatoryframework

toenact

change.During

2023,the

working

grouphassoughttoovercomethose

challengesbyidentifyingopportunities

todecarbonise

the

steel,

aluminium,andminingindustries.

Throughopendiscourse

andsharingexpertise,

severaldecarbonisation

topics

havebeen

identi?ed

thathavethe

potentialtoreducecarbon

emissionsmateriallyineachofthe

threesectors.

Afterfurther

exploration

andtesting,

the

groupintendstodeveloppilots

that

couldtransformtheirownoperations

andinspiretheirsectors

towardsswifter

progress.To

succeed

inaforum

likethe

Sustainable

Markets

Initiative,allindustry

participants

mustensurestrategic

alignmentwith

counterparties,

bring

the

fullforceoftheirorganisationtothe

table,engagewith

trust

andopenness,

avoidwasting

energyonduplicative

initiatives,andbring

inother

entities

wherepartnerships

provideafaster

paceofexecution.AtOliverWyman,

weareproudtosupport

this“How-to

Guide”andthe

workofthe

SustainableMarkets

Initiative,whichwebelievewillbe

helpfulindeliveringdecarbonisation

acrossindustrial

sectors.Contents1.

Executivesummary1352.

TheDecarbonisingIndustry

WorkingGroup3.Carbon

abatementchallengesandopportunities3.1.

Steel816233.2.

Aluminium3.3.

Mining4.Prioritisingaction5.AcallforactionAcronymtableTable

of?guresEndnotes30374142431.

Executive

summaryAs

part

ofthe

Sustainable

Markets

Initiative'sEnergyTransitionTask

Force,its

DecarbonisingIndustry

WorkingGroupwascreated

tofocus

onthe

decarbonisation

needs

ofthreeindustries—aluminium,steel,

andmining.Its

membershipincludes11

companiesspanningthe

energy,steel,

aluminium,mining,andtechnology

sectors,

with

acollective

mission

toidentify,

develop,andundertake

potentialemissionsabatementpilotprojects

andstudies

within

the

threedesignatedhard-to-abate

industries.Together,the

groupdevelopedamutual

understanding

ofpriority

regions,valuechainsteps,andactivities

fordecarbonisation

within

the

threesectors.

The

most

promisingandrelevantabatementsolutions

werethen

reviewedinexpert

interviews

andworkshops

andassessedbased

ontheirpotentialtoproducesigni?cant

reductions,

givenfactors

such

as

technologicalmaturity

andscalability.The

outcome

wasaseries

ofcollaborationtopics

that

address

critical

sustainabilitychallengeswithin

the

respective

sectors.

These

topics,

whichareoutlined

inthisdocument,havethe

potentialtobe

further

developedintopilotprojects

that

accomplishkeydecarbonisation

milestones.Enablingandaccelerating

decarbonisation

requiresenhancedcollaborationandactionbetween

multiplestakeholders:

Governments,

?nancialinstitutions,

investors,

thetarget

industries

andenterprises

that

support

theiroperations,

technology

developers,andcustomers.1.

Globalframeworks

forregulationandpolicy

onemissionsabatementmust

be

developedtoensurealevelplaying?eldacross

regionsandindustries.

Morealignmentoncarbonaccountingpractices

across

industries

andcountries

is

needed.2.

Demandforgreenproducts

is

pickingupbut

needs

tobe

supported

with

policiesandincentives.

Policymakersneed

toimplementincentives

andregulationsthat

encouragesustainable

procurementpractices

across

industries

andcountries.13.

Energyinfrastructure

andcapacities

need

tobe

scaled

uprapidly.Policymakersneed

toensuresubsidies,incentives,

andregulatory

frameworks

inplacearesupportive

ofsuchanambition.4.

Transformationalinvestments

areneeded

tomovetowardslow-carbon

practices

at

scale.Policymakersmust

establish

fundingprograms,

grants,

subsidies,andlow-interest

loansspeci?cally

targeted

at

supporting

the

adoptionoflow-carbon

solutions

across

sectors.5.

Morefundingofresearchanddevelopmentis

needed.Governments

can

support

theadoptionandadvancementoflow-carbon

technologiesbyfurther

increasingthe

fundingandincentives

forgreentechnology-related

research,patents,

andpiloting.The

simplebottom

line:The

paceoftransformation

inhard-to-abate

industries

needs

toaccelerate

tocomplywith

the

2015

ParisAgreement’starget

ofnet

zeroby2050tokeepthe

planet’s

temperature

increasetoaround1.5

degrees

Celsius.

Heavy

industry

facesauniquechallengeas

demandforits

products

—manyfundamental

tothe

globalgreentransformation

—continuestorise.

Platforms

likethe

Sustainable

Markets

Initiative

areworking

toprovidethe

strategies

andtechnologiestoaccelerate

industrial

progress,eveninhard-to-abate

sectors.The

aimofthisguideis

toprovidearoadmapforallindustries

andcompaniesonhowtostepuptothe

decarbonisation

challengeandprovidesuf?cient

resourcestobuildtowardsamoresustainable

future.22.

TheDecarbonisingIndustry

Working

Group3GroupobjectivesAs

part

ofthe

EnergyTransitionTask

Force,the

Decarbonising

Industry

WorkingGroup’sobjective

is

toaccelerate

emissionsreduction

efforts

andprovidestrategic

breakthroughsforhard-to-abate

industries.

Achievingnet-zerotargets

insteel,

aluminium,andminingrequiressigni?cant

process

andbusiness

modeltransformations,

andthisworking

groupaimstodrive

thiseffort

bycultivating

collaborationamongkeyindustrial,

energy,?nance,andtechnologyplayers.This

working

groupset

out

todeterminefeasiblealternative

technologies,processes,

andrawmaterialsthat

wouldaccelerate

decarbonisation

pathwaysandidentify

collaborative

initiativesandstudies

that

mightfoster

faster

decarbonisation

throughpotentialpilotprojects.The

guideis

intendedtoserve

as

auseful

resourceforstakeholders

inhard-to-abate

industries.It

providesdetails

onthe

emissionspro?les,technical,andgeographical

challenges,keyabatementpathways,andpressing

topics

foreachofthe

threepro?ledindustries.

It

alsodemonstrates

anapproachtocross-company

collaborationforleaders

with

similarambitionstofollowandcaptures

lessons

learned

from

earlierefforts.Additionally,the

guidehighlightsthe

need

formultiplestakeholders

toget

involvedindecarbonisation

discussions

toaccelerate

innovationandpartnerships.

Collaboration

iscrucial

forachievingthe

necessary

transformation,

andthe

guideemphasisesthat

nosinglecompanycan

achievethistransformationalone.The

working

groupplanstocontinuethisengagementafter

the

releaseofthisguidewiththe

goalofdevelopingthe

collaborationagreements

further

andconducting

feasibility

andpilotstudies.43.

Carbonabatementchallengesandopportunities5Steel,aluminium,andminingcollectively

contribute

toaround12%

ofglobalcarbon

dioxideemissions.4,

5

These

industries

werespeci?cally

prioritised

bythe

Sustainable

Markets

Initiativebecause

oftheirpotentialtosigni?cantly

reduceglobalemissions,

theirimportance

totheglobaleconomy,andthe

relativedif?culty

ofcurbingthe

carbon

intensity

oftheiroperationsandprocesses.

This

section

outlines

the

emissionabatementchallengesandopportunities

ineachindustry

andshowswhytheyareconsideredhardtoabate.Exhibit

1:

Direct

global

carbon

dioxideemissions

in2022Inpercentage

ofglobalcarbon

dioxideemissionsSteel8%Mining2%Aluminium2%Globalcarbondioxideemissions36.8

GtNote:

Mined

materials

in

scope

include

coal,

copper

ore,usable

iron

ore,nickel,

zinc,

and

bauxite

and

?gures

excludefugitive

methane

emissions.Sources:

IEA

(2023),Net

Zero

Roadmap:AGlobal

Pathway

to

Keep

the

1.5°C

Goal

in

Reach,

IEA,

Paris

License:

CCBY4.0,Oliver

Wyman

analysis6DeepDiveThebiggestemissions

challengesWhat

makesthe

steel,

aluminium,andminingindustries

hardtoabate?Sevenprevalenteconomic,regulatory,andtechnical

themes

across

the

threesectorsunderscore

the

magnitudeofthe

challengeincurtailing

carbon

emissions.12The

inherent

carbon

intensity

of

the

processesKeyprocesses

and

activities

inhard-to-abate

industries

often

entail

carbon

dioxidegeneration

through

essential

chemical

reactions

and

high-temperature

operations

thatdemand

substantial

energy

input,

necessitating

transformational

technology

to

addressthem

effectively.Increasing

production

volumes

along

with

economic

growthThe

industries

inscope

arefoundational

for

economic

growth

and

development

—whetherit

involvesconsumers

such

as

construction,

automotive,

energy

infrastructure,

or

consumergoods.

With

future

economic

growth

and

increased

demand

ofthese

building-blockcomponents

for

the

energy

transition,

production

volumes

and

subsequent

carbonemissions

willonly

increase

if

nothing

changes.34Lack

of

easy

alternativesAlthough

low-carbon

alternatives

mayexist,

these

sustainable

technologies

maynot

havereached

commercial

scale

or

arenot

yet

cost

competitive

inaglobal

marketplace

makingswift

decarbonisation

across

hard-to-abate

industries

dif?cult.Reliance

on

other

industries

to

decarboniseHard-to-abate

industries

cannot

decarbonise

alone.To

eliminate

emissions

fromoperations,

they

depend

on

the

availability

ofreliable

and

scalable

renewable

power,supporting

infrastructure

such

as

the

grid

and

energy

storage,

and

access

to

critical

inputmaterials

such

as

green

hydrogenand

high-quality

ironore.5Long

investment

cycles

and

high

investment

requirementsThe

complexity,

scale,

and

global

interdependence

of

hard-to-abate

industries

leads

tolarge

upfront

capital

investment.

Companies

are

reluctant

to

alter

their

technologies

andinfrastructure

before

they

haverealised

returns

on

their

past

investments

unless

they

arecon?dent

it

willresult

insigni?cant

emissions

reduction,

cost

savings,

or

higherprices

forgreen

products.67Competitive

dynamicsHard-to-abate

industries

requireclear

market

demand

signals

for

green

products

to

informinvestment

decisions.

However,these

industries

today

arelacking

the

necessary

offtakeagreements

from

customers

for

green

products,

especially

those

that

come

at

apremium.Regulatory

uncertaintyHard-to-abate

industries

willrely

on

governments

inthe

short-

to

medium-term

to

maketheir

net

zerotransition

possible.

Negative

sentiment

around

regulatory

uncertainty

putsexisting

or

potential

sustainable

investments

at

risk,

especially

if

companies

arecompetinginaglobal

marketplace

with

anunevenplaying

?eld.73

.1.

Steel1.9

billion~8%ofglobalcarbondioxideemissionsattributabletosteelproduction>2

tonnesofcarbondioxideproducedpertonneofsteelKey

?gurestonnesofprimaryandsecondarysteelproducedannuallyKey

technicalchallengesAccesstogreenhydrogenandrenewablepowerforcrudeandsecondarysteelproductionReducingemissionsfromblastfurnacesinthemedium-termImprovingscraprecycling,collecting,andsortinginfrastructureSteel’sdirect

carbon

footprint

(Scope1and2)

comprises

around8%ofglobalcarbon

dioxideemissions,

andforeachtonneofsteel

produced,nearly

two

tonnesofcarbon

dioxide(CO2)

areemitted

onaverage.6Over

the

last

fewyears,

just

undertwo

billionmetric

tonnesofsteel

havebeen

producedannually—with

emergingmarkets

leadingthe

growth

indemand.

These

projections7underscore

the

need

forgreaterefforts

bythe

industry

toadoptsustainable

practices

andminimisesteel’s

environmentalimpact,

givenits

current

emissions-intensive

pro?le.Exhibit

2:Global

steel

demand

growth

byregionInbilliontonnes1.92.02.01.91.90.10.10.10.11.80.10.10.10.10.10.10.20.20.20.20.20.40.50.40.40.41.11.01.01.00.9201820192020202120222030SouthAmericaChinaNorthAmericaMiddleEastandAfricaWorld

forecast2030EuropeAsiaPacificAfricaSources:

World

Steel

Association

(2022),Totalproduction

ofcrude

steel,

World

total

2022,Oliver

Wyman

analysis8Carbondioxideemissionspro?leBlast

furnace

—

basic

oxygen

furnaceThe

steel

production

industry

primarily

followsthreesteel

production

pathways,with

the

mostprevalentbeingthe

blast

furnace-basic

oxygen

furnace

(BF-BOF)route,accountingfor63%ofglobalsteel

production

capacity

andemitting

2.2

tonnesofcarbon

dioxideper

tonneofsteelproducedonaverage.8The

primary

energyinputforthe

BF-BOF

process

is

coking

coal,whichis

used

togenerate

theheatinsideofthe

blast

furnace

andchemically

react

with

the

ironore.Coking

coal,as

apureform

ofcarbon,

is

used

rather

thanregularcoalbecause

ofits

strength

whichis

needed

inablast

furnace

operation

as

wellas

its

highcarbon

contentwhichaidsinthe

reduction

oftheironore.The

process

ofmakingcoking

coal,whichinvolvesbakingcoalinanovenfor12

to36hoursat

almost

1,100

degrees

Celsius,alsoproducesemissions.

This

process

reducesimpurities,but

it

alsocreates

CO2andmethane,anothergreenhousegaswith

as

muchas

80

times

thewarmingpotentialofCO2over20years.

AdditionalCO2emissionsarereleasedwhenpureoxygen

is

injected

intothe

basicoxygen

furnace

toconvert

the

pigironintosteel

byreducingits

carbon

content.Scrap-based

electric

arc

furnaceScrap-based

electric

arcfurnaces

(EAF)

arethe

second

most

prevalentsteel

productionmethod.

InanEAF

whereheatis

generated

from

anelectric

arcbetween

two

graphiteelectrodes

whichmelts

the

scrap

steel

andironore.The

graphite

alsoacts

as

areducingagent,whichliberates

the

oxygen

atomsfrom

the

ironore.Averageemissionsfrom

electric

arcfurnaces

areconsiderablylowerthanthe

BF-BOF

routeat

0.4tonnesofCO2per

tonneofsteel

(tCO2/tofsteel)

as

seen

inthe

chart

belowsincetherecycled

scrap

just

needs

tobe

remelted

andpuri?ed.

Pertonneemissionsfrom

electric

arc9furnaces

can

reachas

lowas

0.1

tCO2/t

ofsteel

if

poweredbyrenewableenergy;however,EAF’s

typically

relyheavilyonon-site

powergeneration

andlocal

electricity

grids.

Dependingonthe

energymixofthe

powergeneration,carbon

emissionsfrom

these

sourcescanbe

signi?cant.Direct

reduced

iron

—

electric

arc

furnace

and

electric

smelting

furnaceProcesses

usingdirect

reducediron(DRI)accountforsevenper

cent

ofglobalsteelcapacity.10

The

DRI

process

reduceshighquality

ironorepellets

directly

insolidform

at

lowertemperatures

toproducehotbriquetted

iron(HBI)without

the

need

forblast

furnaces

andcoking

coal.Dependingonthe

HBI

quality,the

materialis

transferred

toanEAF

orelectricsmelting

furnace

formelting

andsteel

production.9If

the

DRI

shaft

utilises

greenhydrogen,emissionsfrom

the

production

ofthe

ironcan

be

nearzero.However,most

ofDRI

facilities

inuse

todayarepoweredbynatural

gasorcoal,whichemit

CO2throughthe

reduction

ofthe

DR

ironoregrade

inthe

shaft

furnace.

Totalemissionsfrom

DRI-based

processes

can

rangefrom1.3

tonnesofCO2per

tonneofsteel

producedwhenusingnatural

gastoover2.5tonnesofCO2inthe

case

ofcoal-based

DRI.11Exhibit

3:Principal

steel

production

pathwaysPre-processingIronmakingCokeSteelmakingProcessing0.2ScrapO1.20.2~0.2CoalCokeplant2.20.2<0.1BF-BOFtonnesofCO2pertonneofsteelBlastfurnacePigironBOFCrudesteelprocessingElectricityIronoreSinterplantPelletplantIronsinterpellets0.2~0.20.4EAFScrap-basedtonnesofCO2pertonneofsteelScrapEAFCrudesteelprocessingNaturalgas0.2<0.10.60.2~0.2DRI-1.3EAF/ESFwithnaturalgastonnesofCO2pertonneofsteel>67%SinterplantPelletplantIronsinterpelletsShaftfurnaceHBIEAF/ESFCrudesteelprocessingIronoreNotes:

EAF,sintering,

pelletising,

and

crude

steel

processing

emissions

depend

on

the

energy

mix

of

the

electricity

supply,estimates

based

on

global

averages,

total

emissions

per

production

route

maydiffer

from

sum

shown

because

of

rounding.Sources:

European

Commission

(2022),Technologiesto

decarbonise

the

EUsteel

industry,Oliver

Wyman

analysis10Geographic

diversityThe

con?icting

challengesofful?llingrising

globaldemandandreducingemissionsarefurtherexacerbated

bythe

diversity

ofsteelmaking

techniquesandlandscapes

aroundthe

world.Eachregion’suniqueasset

mix,

energyinputs,

production

feedstocks,

andregulatory

environmentnecessitates

atailored

steel

decarbonisation

pathway.Aregion’sshareofsecondary

steelmaking

throughEAF

andthe

ageofexisting

BF-BOF

assetsset

abaselineforemissionsreduction

targets

andpathways.

Giventhe

signi?cant

decreaseinemissionsper

tonneofsteel

producedvia

EAF,regionswith

highersharesofsecondaryproduction

often

fare

far

better

interms

ofaveragecarbon

intensity.

However,EAFs

dependonthe

availability

andpricing

ofscrap

steel

tooperate,andregionswith

historically

lowsteelusage

and/orproduction

face

afurther

decarbonisation

challengebecause

ofthe

lowscrapsupplyandhighimport

costs.Exhibit

4:Regional

overview

of

steel

production

mix

2023Inpercentage

oftotal

productionSources:

Global

Energy

Monitor

(2023),Count

ofIron

&Steel

Plants

byProduction

Method

in

Each

Country,Oliver

Wyman

analysisThe

ageofsteel

production

assets

alsoaffects

decarbonisation

pathwaysandinvestments.Steelproduction

assets

typically

havealifespan

overfourdecades,

andyoungersteel

marketsareless

likelytomovetowardslow-carbon

technologiesbecause

ofthe

need

torealiseareturn

onthe

infrastructure

investment.

Strategies

fordecarbonising

younger,emissions-heavy

assets

mayincludeacombinationoffuel

switching,

retro?tting

existing

steel

plants,

anddecommissioningorincentivising

the

switch

throughforeignaidorinvestment

tocompensateforlost

return

oninvestment

(ROI).11Achievingadecarbonised

steel

industry

is

keyforasustainable

future

andreachingnet

zero.It

requiresthe

diverse

anduniqueconstraints

present

ineachregiontobe

understood

andaddressed

throughindustry

commitment

andgovernmentpoliciessuch

as

tax

credits,

ordecarbonisationsubsidies.Exhibit

5:Primary

emissions

from

steelmaking

byregion

in