International evidence on the industrial affordability of deep decarbonization

In connection to public policy design for achieving net zero, we assess the industrial affordability of deep decarbonization in the International Energy Agency (IEA) member countries. Our international assessment employs a newly developed formula to calculate an industry-specific index A, equivalent to the incremental energy cost due to deep decarbonization divided by the value added. If A ≤ α, where ˛ is a user-defined fractional threshold, industrial affordability is said to exist. Using carbon intensity data purchased from the IEA and effective carbon rates published by the Organisation for Economic Co-operation and Development, we find that industrial affordability declines with an industry’s carbon intensity, a country’s effective carbon rate and its deep decarbonization target. Further, mandating net zero sans mitigation is unaffordable at a relatively low α, such as 0.1, for the carbon-intensive industries of chemical products, coke and petroleum products, and basic metals. Hence, our recommendation in pursuance of the call for net zero by the United Nations is a politically feasible deep decarbonization strategy with public support enabled by gradual implementation, exemptions and subsidies.