Government Support for Deep Decarbonization. The FMC emerged as a public-private partnership in recognition of the power that comes from enlisting governments and companies to act in concert. In addition to the FMC’s private sector members, governments that collectively account for half of the world’s GDP have joined the organization as government partners and are working to help FMC members meet their commitments.
Governments can play a comprehensive role in creating an enabling environment for deep decarbonization—for example, by establishing policies that incentivize innovative technologies. Real policy progress has occurred in recent years, most notably in the form of the US’s 2022 Inflation Reduction Act, but further action is essential to stay on track with Paris goals. The FMC is well positioned to illuminate the obstacles that companies face as they work to decarbonize, thereby providing a basis for governments to effectively target policy action.
Direct procurement by government agencies can make a difference, too. Their sourcing decisions often carry significant purchasing power, particularly in the steel, concrete, and trucking sectors. Government leaders can also call for companies in their markets to join the FMC. In all these ways, a country’s public sector can help drive deep decarbonization and set up its industrial sectors for long-term success.
Access to Financing Solutions to Catalyze Supply Development. Converting industrial production to green pathways capable of meeting FMC commitments demands a significant level of investment. A greenfield or retrofit project leveraging these technological pathways may require hundreds of millions or even billions of dollars of capital over the space of a few years. Typically, investments in these breakthrough technologies rarely occur at commercial scale. Often, they require multiple years of planning and construction before producing cashflow, and the resulting product is usually sold at a premium relative to conventional alternatives, at least at first. This context calls for a unique set of investors that have access to substantial capital, expertise in managing unique risks, and long investment time horizons.
To address this need, the FMC is identifying financing partners that are able and willing to bring the necessary capital to these projects. These partners will also help members structure offtake agreements in ways that make them bankable, thereby creating access to additional financing pools. In addition, the FMC is partnering with government entities such as the US Development Finance Corporation to unlock concessionary funds for building green economies in developing markets, fulfilling opportunities for deep decarbonization that might be less likely to receive investments from private funding sources.
Development of Critical Infrastructure. Some FMC sectors face obstacles related to underlying infrastructure. For example, ships cannot rely on zero-emission shipping fuels such as e-ammonia and e-methanol unless seaports have installed the appropriate bunkering facilities. And electric trucks are of little use to freight companies if they cannot access fast charging to keep their assets operating on the road. Recognizing the challenges faced by members seeking to meet their commitments in these sectors, the FMC has launched an infrastructure pillar to secure commitments from key infrastructure providers. For example, seaports may agree to bunker zero-emission shipping fuels, and highway stakeholders may commit to installing charging infrastructure along key green corridors.
A Collaborative Community of First Movers. The FMC is establishing a collaborative community of first movers across sectors because, even when all of the supporting elements are in place, meeting an FMC commitment is no small task.
FMC members must learn about new technological pathways, understand the expected cost premiums associated with these technologies, vet and catalogue potential suppliers across geographies, and recognize the impact of policy frameworks on the availability and economics of green products. Furthermore, in many instances, members must drive innovation in their own procurement departments, shifting the focus from price improvement to strategic sourcing. In some cases, they may even have to create joint ventures to stimulate supply. To help members navigate these challenges, the FMC holds regular member calls and hosts working groups. Members share information, identify obstacles, and highlight best practices from their experience in pursuing offtake for innovative goods and services.
Expanding the Power of Demand
The FMC is demonstrating that governments and companies can harness purchasing power to build a more sustainable world. Furthermore, there is reason to believe that supply will emerge to meet demonstrated demand. Delta has signed an offtake agreement for approximately half the sustainable aviation fuel it needs to meet its FMC commitment. Scania is on track to shift to near-zero-emission steel for all of its European truck production by 2030. And CEMEX is collaborating with Volvo to develop the first full-size, fully electric concrete mixer. As companies voice their desire to lead in the climate transition, they find suppliers that are willing to accompany them on the journey.
These early signs demonstrate that the FMC model is likely to be a winning one. By harnessing purchasing power and directing it narrowly at breakthrough solutions, we have the potential to accelerate the climate transition at a critical juncture. Augmenting this approach with support from governments, the finance community, and critical infrastructure operators has the potential to remove obstacles to progress that demand alone might not be able to overcome.
The climate transition will pose many challenges, and demand-focused approaches like the one that the FMC employs may have a role to play in solving them. How can we build a more sustainable food system based on decarbonized fertilizers and sustainable agriculture practices? How can we drive circularity to reduce waste and lessen the need for resource extraction and energy-intensive primary production? In real time, we are observing the power that buyers can have when they stand together, and we should carefully consider how to leverage that power to tackle the problems of tomorrow.
Over the next 30 years, our industrial and transportation systems must undergo a fundamental transformation if we are to maintain a climate resembling the one we know today. The FMC is working to help navigate that transition by harnessing the power of demand and by supporting companies that choose to stand at the forefront of the fight. Come join us.