Fast-tracking the green industrial revolution

Among the different mechanisms available, Green Market Makers (GMMs) are revealed as one of the most efficient ways to deploy public funds for scaling up industry transition.

Pointing to green ammonia, sustainable aviation fuels (SAF), green steel, and low-carbon cement, GMMs are deemed a ‘game-changer,’ capable of fast-tracking low-carbon commodity markets - comprising products that are essential building blocks of a decarbonised economy, on which agriculture, green buildings, green manufacturing, and other industries will rely.

The GMM acts as an intermediary between producers and purchasers. Its effectiveness lies in how it absorbs multiple risks and covers the difference between the higher costs of green products and the price that the buyer is willing to pay - obstacles that commonly hold back new clean technologies and block their initial growth. Applying concessional capital is fundamental to a GMM, but for certain commodities in certain jurisdictions, a mixed-capital structure could be applied, infusing market capital (equity and debt) to achieve greater leverage from the concessional capital invested.

The report - which provides a toolbox for policymakers, industrial companies, and financial institutions and was developed by a working group comprising MPP and the Earth Fund alongside RMI, Systemiq, Bain & Co., Centre for Green Market Activation, H2Global, J.P. Morgan, and Morrison Foerster - urges deployment of GMMs with government-backed funds as a critical way to catapult early markets for low-CO₂ solutions to enable them to scale rapidly and reduce their costs, making them more affordable vs their fossil-fuel-based equivalents.

Prioritising GMMs in industrial strategies enables governments to secure early-mover competitive advantages for green industrial products domestically, whilst pushing global green commodity markets toward their positive tipping points.

H2Global is pioneering the GMM. In July it contracted Fertiglobe to supply 397 000 t of green ammonia to Europe from Egypt starting in 2027. Over US$6 billion in public funds from the Australian, Canadian, Dutch, and German governments is dedicated entirely to H2Global tenders.

Harnessing the growing momentum and rapidly deploying GMMs across large economies and those with high demand for industrial products an unleash the exponential growth of green industry worldwide. A series of tipping points are possible within a decade if key economies apply a GMM model, allowing them to transition between one-seventh to one-third of their demand for low-carbon commodities by 2030.

Acceleration of the green ammonia market is a key priority amongst low-carbon commodities. Reaching economies of scale through a global tipping point would unlock cost declines cascading through multiple industrial sectors. Green ammonia production can drive the growth of green hydrogen markets, bringing down costs as they scale, eventually creating a domino effect in other areas reliant on green hydrogen, such as green shipping fuel, green steel, and SAF.

The report urges prompt commitments from governments and sets out practical steps for their implementation alongside other green market interventions for maximum effect. The US alone, for example, could tip the scales for the entire SAF market since around one-quarter of all global aviation demand comes from the US, six of the largest US airlines have SAF commitments of 5 - 10% by 2030, and there is advanced regulatory support. A world-first mixed-capital GMM in US-SAF is possible. In the steel sector, leadership from Japan, Korea, the US, and India can unlock the green steel market.

Faustine Delasalle, Mission Possible Partnership CEO, said: “We are on the edge of one of the most significant economic transitions in history, and governments hold the keys to unlock it. Green Market Makers have emerged as a gamechanger that can accelerate early market growth and precipitate cost reductions for green commodities. Getting green products to as little as a 5% global market share can get us to a tipping point where economies of scale will be unlocked, traditional market forces will be unleashed, and growth in low-carbon commodities will be unstoppable.”

Paul Bodnar, Director of Sustainable Finance, Industry, and Diplomacy, Bezos Earth Fund added: “Overcoming the climate challenge will require looking beyond strictly government-led solutions to embrace market forces. Unfortunately, we don’t have 30 years to wait for the market to go it alone. This report identifies real-world, tangible solutions capable of bringing forward the S-curve of market adoption. Supporting market accelerators that can connect buyers and sellers, bridge the green premium, absorb risk, and overcome inherent market failures is now imperative to reach the tipping point whereby green fuels and commodities can compete."

“A well-capitalised Green Market Maker will unlock pathways to profitability for green commodities, enabling rapid scaling of emerging climate technologies. Introducing market capital into the Green Market Maker to work alongside concessional capital will significantly increase the efficiency and reach of the concessional capital and accelerate the transition to a low-carbon economy.” Said Rama Variankaval, Global Head of Corporate Advisory & Sustainable Solutions, J.P. Morgan.

Read the article online at: https://www.globalhydrogenreview.com/hydrogen/25092024/fast-tracking-the-green-industrial-revolution/