Fast‑tracking Net Zero by Building Climate and Economic Resilience

1. Meeting net-zero objectives is still possible

Many of the technologies needed to accelerate greenhouse gas (GHG) emissions reductions already exist and are being rapidly deployed, driven by unprecedented cost declines over the past decade (Figure 1). The levelised cost of electricity (LCOE) from solar and wind is already lower than that of coal and gas in multiple markets. Global deployment of many clean energy technologies accelerated quickly between 2015 and 2022, with solar photovoltaic (PV) capacity and stationary battery storage increasing by more than 400% and 2,500% respectively. Sales of electric vehicles grew by nearly 2,000% during the same period, and sales of residential heat pumps rose by 225% (OECD, 2024[1]). Similarly, clean hydrogen costs could decrease by as much as 60% by 2030, subject to market uptake, electrolyser costs and the availability of low-cost renewable energy. These trends suggest that the pace and scale of change needed to reach net zero is within reach, but not guaranteed.

Policy has been integral to driving developments to date, and governments have a wide array of tools at their disposal to further accelerate progress. Unleashing the potential for “green” industrial policy to accelerate emissions reductions through the triggering of technological tipping points may be necessary, but entails risks and requires careful policy design. Well-designed policy packages and a commitment to implementing cost-effective solutions wherever available (e.g. targeting methane emissions) are essential to accelerating emissions reductions.

Demand-side policies could reduce GHG emissions in key end-use sectors (buildings, land transport, and food) by 40-70% globally by 2050 (Creutzig et al., 2023[7]). Yet, despite their enormous mitigation potential, demand-side policies remain relatively underutilised. Achieving climate objectives will require incorporating demand-side measures into climate strategies to complement supply-side policies as part of a coherent and holistic policy mix. This includes policies that drive behavioural change, supported by key infrastructure and technology.

Figure 1. a) Levelised cost of electricity (LCOE) for solar PV vs coal and gas, and b) share of solar PV in total electricity generation in China, Germany, India, US, Japan, and Viet Nam

Source: (Our World in Data, 2024_[8]; BloombergNEF, 2023_[9]).

Finally, accelerating the net-zero transition will also require governments to reform themselves – e.g. by balancing competing priorities; planning strategically across political cycles; aligning action across sectors, departments, agencies and levels of government; and remaining agile amid rapidly changing circumstances.

Industrial policy can unleash positive tipping points, but careful design is needed

The scale and speed of the transition needed to limit global warming to 1.5^°C means that triggering positive tipping points1 – where a small change past a threshold triggers a self-propelling shift to a new system state – may play a crucial role in rapidly accelerating greenhouse gas emissions reductions. In the context of clean energy technologies, positive tipping dynamics are driven by reinforcing feedback effects such as economies of scale or learning-by-doing. By reinforcing technological development, these feedbacks can lead to self-propelling and accelerating progress: the more a given technology is produced, the better and less expensive it becomes, which further increases demand, leading to more production, and so on.

Given the interconnectedness of systems, positive tipping dynamics can also cascade across technologies. For example, crossing a tipping point in the transport sector through the development of battery electric vehicles can reverberate within renewable energy systems, as increased battery storage capacity helps overcome grid stability issues, which in turn can drive progress in electrifying heavy transport.

Recent positive trends in the development and deployment of key clean energy technologies indicate that these dynamics may already be playing out. Government support has been critical to driving progress so far (OECD, 2025[8]). According to the OECD’s Manufacturing Groups and Industrial Corporation (MAGIC) database, production of solar cells and modules was the most subsidised manufacturing sector from 2005‑2022, with producers receiving 3% of firm revenue in government support on average. Though less heavily subsidised than solar, producers of wind turbines have also received up to 1% of firm revenue in subsidies on average. Market expansion of these technologies was critical for achieving economies of scale and leveraging learning-by-doing effects, and producer subsidies – together with demand-side measures such as feed in tariffs or contracts for difference – have arguably played a role by lowering the price of renewable energy equipment. This is particularly evident in the development of solar PV, costs of which have declined by 80-90% each decade since 1960, with prices falling 20% for every doubling of installed capacity (Nijsse et al., 2023[9]).

The pivotal role of government support in driving the development and deployment of clean energy technologies highlights the potential for “green” industrial policy to leverage positive tipping point dynamics. Concerns about energy and economic security, supply chain resilience, and, increasingly, economic growth, jobs and competitiveness, are fuelling a resurgence of industrial policies across OECD countries. Although industrial policy encompasses a broader mix of instruments, government support and subsidies remain central. Until recently, solar and wind manufacturers in China were by far the largest recipients of government support, but measures introduced in OECD countries have begun to match this scale. More broadly, OECD governments budgeted an average of 2% of one year’s GDP to low-carbon technologies as part of their COVID-19 stimulus measures (Aulie et al., 2023[10]).

Generous government support packages could significantly accelerate progress towards net zero, but they are not without important risks. Such support can result in overcapacity and artificially low prices propped up by fiscally expensive subsidies, potentially crowding out more innovative or less emissions-intensive suppliers and limiting broader global participation in the production of green goods. There are indications that this is already playing out in solar, wind and battery technologies, calling into question whether their observed cost reductions can truly be labelled as self-propelling.

“Green” industrial policies are also often characterised by trade restrictions, such as local content requirements, which can lead to global fragmentation of open markets and concentration of production capacity in only a few countries. This raises concerns around supply chain resilience, market dominance (affecting innovation and prices over time) and energy security. While international competition to seize the economic opportunities associated with market growth for clean energy technologies can spur innovation and drive progress, open and competitive markets remain crucial to ensure supply chain resilience, cost efficiency, innovation and the global diffusion of technologies.

Managing these risks and unleashing the potential for “green” industrial policy to accelerate emissions reductions will require careful policy design. Not all technologies exhibit the same potential for positive tipping points, and amongst those that do, some technologies may be closer to tipping or easier to tip than others. In general, high levels of modularity and standardisation are more susceptible to the reinforcing feedbacks that characterise tipping dynamics. Which combination of policies is most effective at driving progress is specific to each jurisdiction, sector and technology. Policy combinations will also likely evolve throughout the transition (Figure 2), and sequencing can help ensure that they remain appropriate.

Figure 2. Adjusting policy mixes to transition phases

Note: Individual policies can extend across multiple phases, but the centre of gravity of the policy mix evolves with the transition phase – e.g. support for negatively affected communities begins in mid-acceleration but continues into stabilisation, or phase-out is signalled as acceleration takes off but is fully implemented in stabilisation.

Source: reproduced from (Meadowcroft and Rosenbloom, 2023[11]).

Similarly, not all industrial policies are equally effective or have the same impacts and trade-offs. To mitigate the distortionary risks of government support, establishing clear timelines for policy phase-out, designing measures that promote competition, and implementing strong mechanisms for monitoring, evaluation and reporting of fiscal costs is crucial. However, although well-designed industrial policy is a powerful lever for accelerating the adoption of maturing technologies, government support is of little help if market size is too small for firms to achieve scale. Crossing positive tipping points relies on creating the enabling conditions for rapid technology adoption, including through investment in infrastructure (e.g. grids, charging infrastructure or hydrogen shipping terminals and pipelines); establishing a conducive regulatory environment (e.g. agile and risk-based permitting and clear and predictable policy developments); and a willingness to share risks to encourage investment.

Crossing positive tipping points relies on creating the enabling conditions for rapid technology adoption including through investment in infrastructure.

Policy interactions and sequencing are critical for designing effective policy packages

The potential of “green” industrial policy also needs to be seen within the context of broader policy packages. Well-designed policy packages are crucial to establishing the enabling conditions needed to leverage positive tipping dynamics, for example through setting appropriate standards or scaling up government investment and procurement. Governments have a wide array of policy tools at their disposal, but designing the most effective policy packages will be context dependent, and understanding interactions between policies and their sequencing is critical.

Climate policy instruments can be divided into five categories: economic, regulatory, government investment and consumption, information and voluntary instruments. Policy adoption and stringency across all these categories has increased over the past ten years, but important gaps remain, particularly in areas such as investment in research and development, infrastructure, and reform of environmentally harmful subsidies (Figure 3).

Complementary measures that take advantage of synergies and minimise trade-offs can lead to packages that are more than the sum of their parts. Emerging evidence from the OECD Climate Actions and Policies Measurement Framework (CAPMF)2 on the effectiveness of policies implemented to date suggests that, in most cases, combinations of policies are more effective at reducing emissions than individual instruments (Figure 4) (Stechemesser et al., 2024[3]). However, policy interactions also bring the risk of trade-offs, for example if two policies target the same emissions base. Policy sequencing is equally important, with some policies working well in sequence but not in parallel. These interactions play out differently across sectors and jurisdictions, highlighting the need for more evidence on what works and what doesn’t to inform policy package design.

Figure 3. Climate policy instruments and their progress in incentivising emission reduction

Note: Policy stringency is defined as the degree to which climate actions and policies incentivise or enable GHG emissions mitigation at home or abroad. For each policy variable, a stringency level between 0 and 10 is assigned as follows: 0 is assigned if a policy or action is not in place. All other levels are assigned according to the in-sample distribution across all years and countries so that the percentiles constitute the thresholds between the levels. More precisely, a level of 10 is assigned if the value of the policy variable is at or above the 90th percentile after excluding all observations where the policy variable is not in place. Details about methodology to calculate policy stringency can be found in (CAPMF, 2024[12]; Nachtigall et al., 2024[13]). The subsidies category includes only environmentally beneficial subsidies, not fossil fuel subsidies nor other environmentally harmful subsidies.

Source: Adapted from (CAPMF, 2024[12]).

Figure 4. Successful mitigation policies and policy mixes across sectors

Note: The figure reports the results of a large ex-post study identifying instances where large GHG emissions reductions were achieved in different sectors and matches these to associated policy mixes. For non-price-based policies, the thick black line indicates the average effect size of mixing a given policy instrument and pricing (through taxation or reduced fossil fuel subsidies).

Source: (Stechemesser et al., 2024[3]).

Reducing methane emissions is a cost-effective way to buy time

A rapid reduction in methane emissions can be likened to pulling the handbrake on global warming, at least temporarily, buying precious time in the race to net zero. Methane is much more effective at trapping heat in the short term – 80-83 times more potent than CO₂ over a 20-year period3 – but remains in the atmosphere for only about 10-12 years (IPCC, 2023[14]). Thus, methane’s contribution to global warming is primarily a function of recent emissions, meaning that reductions would have a more immediate effect on global average temperature rise. A 30% reduction in global methane emissions by 2030 (from 2020 levels) could cut around 0.2^°C of warming by 2050 – and is thus essential to limiting overshoot beyond 1.5^°C (UNEP, 2021[15]).

Cost-effective technologies already exist to reduce methane emissions across the energy, waste and agriculture sectors, which together account for virtually all current human-caused methane emissions (Figure 5). Recognising this, over 150 countries adopted the Global Methane Pledge (GMP) at COP26 in 2021 and agreed to collectively cut global methane emissions by at least 30% from 2020 levels by 2030. However, direct mitigation policies have only been introduced in a few countries so far.

Figure 5. Methane abatement potential to 2030

Note: IEA estimates. The figure represents the abatement potential of methane emissions (CH₄ tonnes) by 2030. Agriculture and waste emissions are from (UNEP, 2021[15]) and oil, gas and coal emissions from (IEA, 2024[16]).

Source: (IEA, 2024[17]).

The energy sector accounts for 36% of total methane emissions globally and has the highest abatement potential due to the availability of several cost-effective solutions (Figure 6). To stay on track for limiting global warming to 1.5°C, methane emissions from fossil fuel emissions would need to be cut by 75% by 2030, the bulk of which could be achieved through technological and operational improvements (IEA, 2024[18]; IEA, 2024[17]). These emissions reductions would cost and estimated USD 170 billion, less than 5% of revenue of the oil and gas industry in 2023 (IEA, 2024[17]).

Figure 6. Net lifetime cost of selected methane emission mitigation options

Source: (IPCC, 2023[14]).

Regulation is central to reducing methane emissions in the energy sector. Already today, there is a large difference in the methane emissions intensity of oil and gas operations across countries and companies largely due to variations in regulatory frameworks. For example, if all countries matched Norway’s current methane emissions intensity, emissions would fall by 90% (IEA, 2022[19]). Stricter performance and technology standards, robust leak detection and repair requirements, and limits on routine flaring and venting can incentivise the uptake of cost-effective technologies. However, to be effective, such regulatory changes need to be backed up by rigorous measurement, monitoring, reporting and enforcement mechanisms.

Methane emissions from agriculture – primarily from livestock and rice cultivation – account for 43% of total methane emissions and increased by around 13% globally between 1990 and 2022. While methane emissions from agriculture are more difficult to control due to their biological nature and large number of emitting agents, only a 20-25% reduction by 2030 relative to 2020 is needed to align with a 1.5°C warming pathway (United Nations Environment Programme and Climate and Clean Air Coalition, 2021[20]). This is feasible, with many technologies and practices already available to accelerate methane emissions reductions from agriculture. For example, livestock emissions can be mitigated through enhanced feed management, methane inhibiting feed-additives, improved long-term livestock management efficiency and breeding, and advanced manure management practices. Methane reduction in rice cultivation can be achieved by adopting advanced rice varieties and intermittent irrigation management techniques.

Methane emissions from agriculture– primarily from livestock and rice cultivation – account for 43% of total methane emissions and increased by around 13% globally between 1990 and 2022.

Policies can mandate or incentivise the adoption of such practices, for example through regulating manure storage and use or providing incentives for intermittent irrigation of rice. A few countries, including Denmark and New Zealand, have announced or are considering plans to include agriculture within carbon pricing schemes. Supporting agricultural research and development is essential to identify ways to reduce enteric fermentation emissions and improve manure management. Policymakers should consider how policies targeting agricultural methane emissions interact with other environmental and social goals, including efforts to cut other GHGs in the sector. Reorienting government support for agriculture is also needed, for example by further decoupling payments from production and reorienting them towards targeted innovation efforts and suitable agri-environmental practices.

Methane emissions from the waste sector – stemming primarily from food and other organic waste such as paper, cardboard, and wood – account for 21% of total anthropogenic methane emissions. Reducing food loss and improving waste management are critical to reducing methane emissions and can have significant co-benefits, resulting in cost savings, reduced hunger, and lower pollution. Globally, around 24% of the world’s food supply is squandered or lost. Decreasing consumer food waste by 20-25% could yield savings of USD 120-300 billion annually (Goodwin, 2023[21]).

Households, particularly in high-income countries, are major contributors to food waste. As such, demand‑side policies such as awareness campaigns, labelling or landfill charges could make a large contribution to reducing methane emissions from waste, alongside regulatory reform and investment in infrastructure. Collaboration across the supply chain is crucial to reduce food loss and waste, but better waste management can also significantly reduce emissions from landfills and unmanaged sites. Emerging satellite data, if confirmed, indicates that significant low-cost mitigation opportunities exist in landfill management.

Demand-side action can speed up the transition

Climate change is a significant concern for the public, but not the top one. According to the 2022 OECD Environmental Policies and Individual Behaviour Change (EPIC) survey, 35% of respondents identify climate change or other environmental issues as a key concern – ranking behind personal safety (42%) and economic concerns (41%). Nonetheless, households show willingness to adopt some sustainable behaviours. For instance, 76% of households are willing to pay a premium for more sustainable packaging options, while across the nine OECD countries surveyed, households are willing to pay a premium of 1‑9% for electricity that generates 10% lower greenhouse gas emissions. Improving household access to charging infrastructure for battery electric vehicles (BEVs) at key locations could double their rate of adoption.

Governments can support and encourage sustainable choices by considering the main factors that influence end-user decisions: affordability, availability, and convenience. For instance, promoting energy conservation through support for investment in energy efficiency can drive demand-side change by leveraging affordability concerns. Investing in infrastructure can shift transport towards greener options by improving the availability and convenience of low-carbon alternatives.

Additionally, governments can incorporate behavioural science insights to improve the design of demand‑side policies, better evaluate and measure their impact, and develop effective communication strategies to encourage behavioural change. Utilising behavioural tools such as green defaults, social influences and choice architecture can increase public engagement and contribute to motivating more sustainable behaviours.

Scaling up demand-side action will also rely on overcoming informational barriers faced by consumers. Consumers often lack access to clear, accurate and easy-to-understand information that could enhance their ability to consider the climate and environmental impacts of their decisions. For instance, growing concerns have been raised about greenwashing. Studies have indicated that nearly 40% of e-commerce websites may use tactics that could be perceived as misleading (ICPEN, 2021[22]), and one-third of consumers report difficulty distinguishing between genuine “green” claims and false or unverified ones (BEUC, 2023[23]). Empowering consumers to make informed, sustainable decisions requires improving provision of information on their options. For instance, more and better information on carbon footprints can facilitate better decisions, driving demand and growing the market for low-carbon products and services.

Impactful actions are available to governments across several key sectors. In the energy sector, behavioural change plays a critical role in decarbonisation. According to the IEA, reaching net zero by 2050 will require energy savings per capita from behavioural changes to increase more than 15 times compared to currently announced pledges (Figure 7). In the IEA’s Net-Zero Emissions by 2050 Scenario, these behavioural changes come mostly from developed countries, reflecting how demand-side action can be supportive of equitable outcomes at the international level. In the buildings sector, demand-side measures involve shifting to low‑carbon technologies and improving energy efficiency (e.g. better insulation, low-carbon heating and cooling). To encourage such shifts, governments could consider implementing policy packages that combine financial incentives, information provision, regulation, and mandatory standards.

Figure 7. Energy savings per capita from behavioural changes by measure and IEA scenario, 2035

Note: NZE = Net-Zero Emissions by 2050 Scenario. APS = Announced Pledges Scenario. GJ = gigajoule. Eco-household measures include: line-drying clothes instead of using a dryer; reducing laundry temperatures; switching off lights in unoccupied rooms; unplugging appliances when not in use; and reducing water heating temperatures. See (IEA, 2022[24]; IEA, 2021[25]) for details of other measures.

Source: (IEA, 2023[26]).

In the transport sector, transformative policies are needed to reduce dependency on cars, including road space reallocation to make active modes of transport more attractive, along with investment in public transit systems to enhance their accessibility and appeal. To incentivise the adoption of battery electric vehicles, governments can offer consumer subsidies and improve infrastructure such as the availability of public charging stations.

Regarding diets, increasing the affordability of plant-based proteins relative to meat is likely to be effective in reducing emissions, although achieving dietary shifts is complex, in part due to socio-cultural norms. Public communication emphasising the co-benefits of such shifts, including health-related advantages, can be a useful tool for policymakers.

Regarding waste, demand-side mitigation objectives include reducing waste generation and diverting more waste to recycling services. Providing recycling collection services and implementing waste charging schemes can help to achieve these goals. Both of these measures have also been associated with increased demand for sustainable consumption.

Reforming public governance to drive progress

Successful implementation of the policies needed to drive change will require governments themselves to reform. The pervasive and urgent nature of climate change means that governments will need to balance competing policy priorities and resources – managing synergies but also potentially difficult trade-offs between meeting climate targets and other objectives such as protecting biodiversity, ensuring economic growth and addressing social inequalities. Achieving net zero is a long-term goal that requires strategic planning across political cycles. At the same time, the pace of the transition must be swift and governments need to remain agile and adapt to changing circumstances. Achieving net zero is also an economy-wide endeavour, requiring effective co-ordination across sectors and policy domains. Finally, although the net‑zero transition is necessarily policy-driven, successful climate action calls for a whole-of-society approach bringing together government, business and civil society efforts.

Governments can adjust their public governance arrangements to better facilitate climate policy implementation and accelerate action. This includes strengthening their commitment to long-term and well‑co-ordinated climate policy, developing their capabilities to implement the necessary policy tools, and building consensus across society for ambitious climate action.

Strengthening governments’ commitment to long-term and well-co-ordinated climate policy relies on setting clear strategies and goals with sufficient legal and political backing. While most countries have set net‑zero pledges, only 27 countries and the EU, representing 16% of global GHG emissions, have codified these into national law (Figure 8) (OECD, 2024[2]), and their collective action is insufficient to meet the 1.5^°C goal. Aligning Nationally Determined Contributions with long-term net-zero and Paris Agreement temperature goals is essential, as is making them implementable and attractive to investors (OECD, 2025[5]). For this, whole-of-government policy co-ordination is imperative, with centres of government (CoG) playing an integral role. However, fewer than half of OECD countries have reported climate action as a priority area for their CoG (OECD, 2023[27]).

Coherence across policy domains is also critical, yet only 3 of 24 OECD countries (13%) have established mandates for mitigating or managing divergence among priorities in different sectors (OECD, 2023[28]). At the same time, governments need to ensure that climate goals are cascaded to, and policies aligned with, subnational governments, which are responsible for around 63% of climate-related government expenditure and 69% of climate-related government investment. This suggests that governments could take a more innovative approach to co-ordinating climate action, for example through mission governance.

Figure 8. Global GHG emissions, by legal status of net-zero pledges

Note: Net-zero targets, climate neutrality, carbon neutrality and zero carbon are all considered net-zero pledges. The European Union commits to net zero by 2050 for the whole EU region. To avoid double counting, emissions for individual EU countries that have adopted net‑zero commitments are not considered; these are covered by total EU emissions identified as “In law”.

Source: IPAC Net Zero Tracker; OECD (2024), IPAC Dashboard, www.oecd.org/climate-action/ipac/dashboard.

To build capacity to implement effective climate policies, governments will need to ensure that civil servants and policymakers at all levels have the necessary skills. These include scientific and technical knowledge about climate change and climate policy design, analytical and data skills to monitor and evaluate progress, and foresight and planning capabilities to span the wide breadth of climate policy and its interlinkages with other policy issues. Leadership skills are also needed to ensure that policies are ambitious and well‑co‑ordinated. As countries design and implement climate policy packages, regulatory impact assessments and ex-post review will be critical to maintain effectiveness and efficiency, avoid unnecessary burdens, and reflect changing circumstances. This also includes mandating economic regulators to factor in environmental objectives.

Public expenditure represents on average about 50% of GDP in OECD countries, making its alignment with climate goals imperative to scaling up the investments needed to reach net zero. Many OECD countries are increasingly implementing green budgeting practices (Figure 9) but need to move beyond tagging to assessing and measuring the impacts of budget proposals on emissions across all levels of government. The same is true of infrastructure planning and delivery: although 69% of OECD countries (20 out of 29 for which data is available) provide infrastructure guidelines for climate change adaptation, and 66% (19 countries) for climate change mitigation (OECD, 2023[29]), countries could better integrate climate considerations into project prioritisation, appraisal, monitoring and reporting. Finally, public procurement represents 13% of GDP on average across the OECD (OECD, 2023[29]) and most OECD countries have adopted green public procurement policies or frameworks. Still, procurement policy could better engage with markets and plan for future developments.

Figure 9. Implementation of green budgeting across policy areas

OECD Green Budgeting Index 2022

Note: Index ranges from 0 (not implementing) to 1 (high level of green budgeting practices). Data for Costa Rica and Slovenia unavailable.

Source: (OECD, 2024[30]).

More could be done across the OECD to address the risk of particular interest groups unduly influencing or undermining climate policy. Only 45% of OECD countries have defined what constitutes lobbying in legislation (OECD, 2024[31]). Access to justice can also ensure government accountability for climate commitments. The number of environmental courts and tribunals has risen significantly, from 350 in 2009 to 2,115 across at least 44 countries in 2021. Climate change litigation cases have also risen in recent years, with more than 2,600 cases recorded globally and a 20% increase in cases recorded from 2022‑2023 (UNEP, 2021[32]).

Finally, governments can lead by example by greening their own operations. Progress is being made across the OECD to green key parts of public administrations, notably mobility and public procurement (Figure 10).

Figure 10. Priority areas for greening public administration in OECD countries

Note: n=21 identified OECD member countries that work on the greening of their public administration.

Source: (OECD, Forthcoming[33]).

Notes

← 1.  Tipping points are mostly associated with harmful systemic change in the natural world – e.g. the collapse of ice sheets, coral reefs or rain forests – that threaten climate and ecological stability. However, tipping point dynamics can also be used to describe positive change in the natural world (e.g. ecosystem restoration) and positive or negative change in human or social systems.

← 2.  https://www.oecd.org/en/data/dashboards/climate-action-dashboard/actions-opportunities.html.

← 3.  The global warming potential (or GWP) of methane varies according to the source of emissions and timeframe considered. The GWP for fossil CH₄ is estimated to be 82.5 and 29.8 over a 20- and 100‑year period respectively. The GWP for non-fossil CH₄ is 79.7 and 27.0 over a 20- and 100-year period respectively (IPCC, 2023[14]).