Keeping the global temperature rise below 1.5°C demands immediate, bold and ambitious action to drastically reduce emissions across all sectors, with the industry sector playing a crucial role. Industrial production is responsible for approximately 25% of global energy-related CO₂ emissions. Despite its substantial impact, decarbonising industry remains a formidable challenge due to underdeveloped low-carbon technologies, high costs and the longevity of existing industrial assets. While progress has been made, it remains insufficient on a global scale.

Yet the industry sector also offers significant opportunities for employment, economic growth and the production of green technologies. This dual role underscores the importance of transforming the sector, especially in hard-to-abate industries like steel and cement, which are essential yet highly emission-intensive.

Tackling this challenge is the Climate Club.

Germany’s Federal Chancellor Olaf Scholz and Chilean President Gabriel Boric explained its purpose and ambitions in a June 2024 article translated from German. They said: ‘The goal is improved coordination. Our idea is to act boldly but also pragmatically. Climate policy will only be successful if it combines people’s desire for a good life, inclusive better future for generations to come and limits to global warming, including solutions to halt pollution and biodiversity loss. The world needs not less growth, but sustainable development. This requires determined political leadership, and tireless work on many technical issues.’

‘The Climate Club tackles one of these unsolved challenges – to cut the international industrial sector’s emissions without putting economic development in jeopardy. Achieving our climate goals is not possible without drastically cutting emissions in the industrial sector. Energy-intensive sectors like steel, cement and chemicals are responsible for about 70% of industrial emissions.’

The leaders of Germany and Chile continue: ‘As the speed of the transformation differs between countries, and industrial production operates in highly integrated global supply chains, and with risks such as trade distortions, decarbonisation can be challenging. To this end, in emerging countries such as Chile, we need to transform the existing industry and leapfrog directly into green industries for new developments. In industrialised countries like Germany, we need to renew parts of the industrial base.’

‘We are convinced that the Climate Club can deliver on this goal as it sits at the strategic interface of climate, trade and industrial policy as the first intergovernmental forum of this kind. The Club offers a unique platform to provide common solutions to promote the production and trade of climate-friendly products. Moreover, we tackle the question of how to build lead markets for nearly emission-free materials. For this purpose, starting with steel and cement, we will have to identify verifiable, comparable and interoperable standards for emission intensities and CO₂ footprints. This is the necessary groundwork for building green lead markets.’

‘The goal [of the Climate Club] is improved coordination. Our idea is to act boldly but also pragmatically.’ – Germany’s Federal Chancellor Olaf Scholz and Chilean President Gabriel Boric

What is the Climate Club doing? 
The 42 members of the Climate Club are actively engaged around three core pillars:

1. Advancing ambitious and transparent climate change mitigation policies.
2. Transforming industrial sectors.
3. Strengthening international climate cooperation and partnerships.

These pillars serve as focal points for the initiative’s efforts and activities.

The progress of the Climate Club is demonstrating an ambitious pathway towards international industrial decarbonisation. While governments and industry actors need to take action to increase ambition and dismantle barriers to decarbonisation in steel, cement and other hard-to-abate sectors, they do not operate in silos and rely heavily on one another’s cooperation.

What do the Climate Club pillars involve? 
First, the Climate Club is focusing on making emissions data far more accessible and comparable for companies as part of its Pillar 1 initiatives. This data is crucial not only for tracking decarbonisation progress but also for establishing fair conditions in markets for green and low-carbon materials and products. As the world experiences the introduction of new climate and green industrial policies, the competitiveness of industries and global trade is increasingly impacted. To address the potential risks and impacts arising from policy asymmetries, collaboration between governments and industry actors is essential to foster synergies and minimise disruptions.

Second, as part of the Pillar 2 measures, Climate Club members are engaging in a rigorous exchange to find common ground on definitions for near-zero and low-emissions materials, particularly in the steel and cement sectors. These standards are a fundamental step for advancing industrial decarbonisation policies, including green public procurement, certification schemes, minimum market share regulations (quotas), phase-out regulations, product design standards, and financing and trade programmes. (In June 2024, the Club held morning and afternoon workshop sessions to discuss results of an exercise to map financing and technical assistance programmes for industry decarbonisation.)

Moreover, consensus around international definitions will allow scale-up of lower-emissions production, providing more transparency to the path towards net zero and reducing administrative burdens on the private side. The Club aims to coordinate exchange between governments and the private sector on tools for creating strong market signals that will accelerate the transition to near-zero emissions industrial production. The fostering of green lead markets is crucial for building the market scale needed to reduce risks for early investments and to ensure the successful implementation of industrial decarbonisation strategies.

Finally, as part of the Pillar 3 objectives, Climate Club members are seeking to address the significant investment requirements for low-carbon technologies, particularly in emerging and developing economies. Most of these technologies are in the demonstration phase or early stages of commercialisation and are capital-intensive, posing high risks and costs that could impact industrial competitiveness. In order to help overcome these challenges, the Climate Club is supporting the development of mechanisms for risk-sharing between governments and companies, and scaling up finance from both public and private sources.

The Climate Club aims to enhance multi- and bi-lateral cooperation between members demonstrating solidarity, with a focus on leveraging public and private finance (in particular) and the necessary complementary technical assistance. It will do so by establishing a mechanism, the Global Matchmaking Platform, with a Secretariat at the United Nations Industrial Development Organisation (UNIDO), that matches demand for assistance from emerging markets and developing countries with support from donor countries.

Such cooperation will also be critical to facilitate improving the enabling investment conditions in countries, thereby unlocking and mobilising private capital required for industrial decarbonisation. This comes at a time in the run-up to COP30 in 2025, when countries are also submitting new Nationally Determined Contributions (NDCs) and have an opportunity to include industry decarbonisation targets. Members of the Climate Club will benefit from support for this process.

María Heloísa Juana Rojas Corradi, Minister for the Environment, Chile, says: ‘Witnessing the speedy progress of the development of the Climate Club has been impressive. I believe it is of special importance to fully engage emerging and developing countries as members of the Climate Club if we want to work towards green growth across the globe. Support, such as by the Global Matchmaking Platform, will be an integral part of making the Climate Club a success.’

What is the Climate Club doing next? 
Looking forward, the Climate Club is poised to play a central role in international discussions on industry decarbonisation. As it prepares its 2025–2026 work programme, the Club is organising a series of events, including during New York Climate Week (22–29 September 2024), and is gearing up for major announcements at COP29 (11–22 November 2024) in Baku, Azerbaijan. These efforts will be critical as countries work together to find joint solutions for the rapid and deep decarbonisation of essential sectors like steel and cement.

Robert Habeck, Vice Chancellor and Minister for Economic Affairs and Climate Action in Germany, highlights the importance of these efforts: ‘We hope that the Climate Club, together with other initiatives, will lead the way in spelling out what green steel and green cement mean by 2025.’

In the face of immense challenges, the Climate Club’s progress offers hope that, through collaboration and innovation, the industrial sector can be transformed in time to meet the goals of the Paris Agreement. The journey is far from over, but the path forward is becoming clearer.

• Further reading: ‘Call to pick up pace of financing the energy transition’. Investments in clean energy must double, and in some countries quadruple, within the next two decades, according to a report from the Energy Transitions Commission (ETC). 
• Find more about the views of former UN Secretary General Ban Ki-moon and former Ireland President Mary Robinson on climate change and related issues. Both are now part of global advisory group The Elders, working as, respectively, Deputy Chairman and Chairman.