Assessing Progress in Building Clean Energy Supply Chains: The Technical Paper of the U.S. Foreign Policy for Clean Energy Taskforce

Over the past year, the Carnegie Endowment for International Peace convened the U.S. Foreign Policy for Clean Energy Taskforce. This bipartisan group of twenty-three past and potentially future policymakers met monthly to explore how the United States could strengthen clean energy supply chains to enhance its security and prosperity. This paper summarizes for policymakers the key takeaways and recommendations from those taskforce meetings, as well as from the taskforce’s underlying analysis of supply chain and international relations. This summary was written by the Carnegie team, and none of its statements or recommendations may be attributed to any taskforce member.

For more information on the project, please see the project hub, which includes the summary for policymakers with key takeaways and recommendations from the taskforce meetings; the foreign policy mapping paper that gives a detailed overview of U.S. diplomatic and financial engagement on clean energy; the assessment of opportunities for leapfrog technologies; and a paper providing detailed recommendations for American geopolitical strategy. The project hub also includes other publications by Carnegie scholars and taskforce members.

Executive Summary 

To build clean energy supply chains and regain geopolitical advantage, the United States and its partners need to focus strategic investment.¹ This will require a set of targets that help identify where and when investment is needed. This technical paper provides an assessment of the progress that the United States and its partners have made in building de-risked clean energy supply chains to inform such an effort.

Creating supply chain targets is challenging because China continues to build market share in key supply chains. While the United States and its partners have made significant progress since the 2018 European Battery Alliance and the 2022 Inflation Reduction Act, China’s market share has continued to grow.²

Rather than use market share to index progress, this paper introduces “ex-China pathway” targets. Here “pathway” refers to progress toward annual production capacities needed to achieve net-zero goals. For example, the International Energy Agency (IEA) estimates that global annual installations for solar modules must reach 1,333 gigawatts (GW) by 2035 to meet net-zero goals.³ Thus, the world will need factories that can produce 1,333 GW of solar modules, as well as factories to produce all the upstream components and materials, in the year 2035. We want to track progress toward this build out.

But the problem from the U.S. perspective is that China alone will have more than 1,333 GW of production capacity later this decade.⁴ This is good for global net-zero ambitions but creates significant geopolitical risk. To take account of progress toward creating de-risked supply chains, the “ex-China” component of the target removes expected Chinese demand. In short, ex-China targets measure non-Chinese capacity in a technology, relative to the production that the ex-China world would need in 2035 on a net-zero pathway.

On the supply side, we count the entire project pipeline including operational, announced, and under construction projects. Some announced projects will not materialize, some under construction projects will be canceled, and all projects will produce less than their nameplate capacity advertises. Thus, this analysis presents optimistic supply numbers relative to overall progress toward net-zero, de-risked supply chains. Nonetheless, the analysis is well-suited to identifying priorities for strategic investment because it reveals which technologies, components, and materials need the most attention.

We looked at twelve supply chains: solar; wind; batteries; electrolyzers; heat pumps; sustainable aviation fuel (SAF); direct air capture (DAC) and carbon capture, utilization, and storage (CCUS); steel and aluminum; alternative-fuel ships; ammonia; geothermal; and nuclear. To estimate the pipeline capacity, we synthesized all available public sources. For solar, wind, batteries, and nuclear, we assess data for individual supply chain components, so the analyses in these cases are more granular.

To summarize our analysis, we separated the core technologies and their segments into three groups:

• Immediate priorities for strategic investment (table 1)
• Secondary priorities for strategic investment (table 2)
• Existing strengths or good progress (table 3)

The tables present current (2023) production capacity, the project pipeline, and progress toward the ex-China pathway target. We state progress as a percentage of the 2035 goal. The 8 percent figure for wafers, for example, means that if you add together current capacity and the full future pipeline for all projects outside of China, the ex-China world is expected to produce 8 percent of the wafers it needs to achieve net-zero.

The challenge in solar and batteries is that while there are lots of projects for final assembly, projects for upstream supply are simply not there. Ex-China supply chains have decent capacity for final stage module assembly (27 percent of expected ex-China 2035 demand), but there is lower capacity higher upstream in the value chain (16 percent for cells, 8 percent wafers, 12 percent polysilicon). The same is true of the upstream ex-China supply chain for batteries, where capacity is still limited (33 percent for cathode material, 18 percent for anode material, and 34 percent for electrolyte material) compared to downstream cell capacity, which stands at 49 percent.

In other cases, the immediate priorities for investment face ambition or market challenges rather than supply chain challenges upstream. Steel, aluminum, alternative-fuel ships, DAC, and CCUS all need market creation efforts to secure demand so that projects and supply can scale.

Low-carbon ammonia represents another market creation challenge. Clean hydrogen is needed to decarbonize ammonia for use in fertilizer, transportation fuels, and power sector applications. Yet, despite the range of potential use cases, demand for ammonia and its hydrogen precursor is in flux. Given the uncertainty, orders for new electrolyzer units are falling, driving more precipitous declines in manufacturer share prices.⁵ These headwinds lead to delays and cancellations for planned electrolyzer manufacturing capacity, threatening to derail gains made toward both the 2035 ex-China pathway and net-zero target. The good progress demonstrated in the pipeline of announced projects needs to be consolidated and secured.

Table 3 shows some areas of existing strength that could be leaned on to reduce reliance on solar or wind. Nuclear and geothermal have more resilient supply chains, and, well executed industrial policy could help lower costs, providing strong decarbonization options.

Overall, the United States and its partners can be heartened that policy engagements over the last decade have started to build strong ex-China supply chains for the technologies of the future. But a refined approach with quantitative targets to focus strategic investment is needed.

Introduction

The United States and its partners have engaged in bipartisan efforts to build clean energy supply chains.

President Donald Trump’s first administration initiated supply chain diversification by imposing tariffs on China and creating the International Development Finance Corporation (DFC).⁶ President Joe Biden’s administration implemented a 100-day review of global supply chains that identified more detailed vulnerabilities. This review found that the United States and its allies were highly dependent on China for the technologies, components, and processed materials needed for the clean energy transition and critical defense applications.⁷

In 2021 and 2022, the United States passed the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act to address key vulnerabilities in its supply chains. Building on the vision of a U.S. foreign policy for the middle class,⁸ these bills sought to expand economic opportunities for Americans while strengthening the U.S. position in the global industries of the future.

Other countries responded strongly. The EU kickstarted its own Green Deal Industrial Plan,⁹ South Korea invested in a battery plan,¹⁰ Canada established its Made-in-Canada Plan,¹¹ and new governments in Australia, Brazil, Mexico, and the UK are designing new green industrial policy packages.¹² These initiatives are joining existing green industrial strategies such as Indonesia’s battery plan and India’s Production-Linked Incentive scheme.

These initiatives produced $2 trillion in global clean energy investments in 2023.¹³ The market for clean energy technology components is growing rapidly. At the same time, China has continued to invest in its industrial base. China has maintained dominance in solar and batteries and built strong positions in electrolyzer, heat pump, and sustainable aviation fuel supply chains.

The goal of this analysis is to create a set of clear production targets for the United States and its allies and to provide an up-to-date report on the progress that has been made in building supply chains outside of China. 

There is a critical need for a tool that will enable the United States and its allies to identify priorities for investment and joint industrial policy. There are a number of emerging forums that seek to do this: the Partnership for Global Infrastructure and Investment, the Minerals Security Partnership, the EU Global Gateway, and more. These forums need to be focused if the United States and its partners are going to successfully de-risk priority technologies and materials. Clear targets are essential to this task.

The analysis here is broader than other, similar exercises in that it provides a comprehensive synthesis of publicly available sources for twelve high priority supply chains (see Table 4).

We present the twelve technologies in three groups for the purposes of the technical analysis. These groups are based on the maturity of each supply chain. They are distinct from the previously discussed prioritization groupings.

• Scaling: Large, mature supply chains with an outsized role in the energy transition likely to experience bottlenecks soon as they scale.
• Emerging: Large, emerging supply chains that are not yet creating bottlenecks, or which are at low risk of experiencing bottlenecks.
• Conversion challenge: Technologies where existing supply chains can be used, but where those supply chains must be converted.

Each group represents a distinct challenge. In the scaling group, bottlenecks need to be identified and addressed now. In the emerging group, there are supply chain and scaling challenges, but they are unique to each supply chain (such as labor shortages for heat pump installation) or technology development for SAF. The last group will not face scaling challenges in the same way as the first two groups.

The Challenge

Each clean energy supply chain represents a unique technological and logistical challenge. Moreover, each technology is at a different stage of development and deployment. To give a sense of the challenge, figures 1 and 2 present the gap to reach 2035 global net-zero targets as a percentage of current capacity for each technology. Put differently, these figures provide a kind of scale factor, contextualizing global gaps in terms of existing capacity. A key finding is that building the manufacturing capacity needed to reach net-zero for solar is achievable. Wind and heat pumps are within reach too, but demand has been weak, so manufacturing capacity has not ramped up.

For example, based on 2023 capacity, silicon-based solar panels production needs to scale only 9 percent in order to meet net-zero production capacity by 2035 (see figure 1). Battery capacity, by contrast, needs to increase about 373 percent from 2023 levels.

This group of “lighter lifts” represents significant yet achievable scaling challenges. To realize a 200 percent increase over ten years, an annual growth rate of just 7 percent is needed. To achieve a 400 percent increase over ten years, a 17 percent rate is needed. This is challenging, but over the past decade, batteries achieved a higher growth rate—so it’s possible.¹⁴

Targets above 1,000 percent present major difficulties (see figure 2). The incredibly high percentages in the case of CCUS and DAC suggest that the technologies remain at the pilot stage of deployment. There simply is not enough capacity operating to get a good sense of the challenge, but if these technologies are going to be commercially available in the 2030s, deployment is required now.

These findings are in line with existing work that benchmarks manufacturing capacity to net-zero goals. The IEA, for example, has recently assessed global production for the big five technologies (solar, wind, batteries, heat pumps, and electrolyzers) against net-zero goals.¹⁵ However, any global assessment will be heavily shaped by China’s capacity. As a result, it is of limited utility to the United States and its allies, which are looking to diversify supply chains away from China. To get a good sense of the strategic picture and assess progress to date, we need to look at the project pipeline outside of China and compare that with what the ex-China world is likely to need in 2035.

The Analysis: Ex-China Pathway Targets

The goal of this analysis is to provide an up-to-date synthesis of publicly available sources on the progress that has been made in building supply chains outside of China. Significant capacity has been built in the United States, Europe, Asia, and elsewhere. Nonetheless, China has continued to rapidly scale production. Thus, China’s global market share has grown in many supply chain segments.

As a result, it may seem that supply chains have not been diversified. The IEA’s most recent assessment of the “scaling” and “emerging” supply chains referenced above suggests this. Drawing from a variety of sources, Carnegie analysis seconds these findings, showing China’s share increased from 2021 in the solar, wind, battery, and electrolyzer supply chains. China’s Inner Mongolia region and coastal shipyards also drove up the country’s share of global low-emissions ammonia and maritime vessel production—with significant additional capacity on the way (see Table 5 below).¹⁶

Indeed, originally we set out to create production targets for the United States and partners based on global market share. However, despite success in creating capacity outside of China, the analysis concluded that very little progress had been achieved. Due to China’s dominance, if we benchmark to a global market share, then every time China increases capacity, the target moves. Chinese overcapacity in solar and batteries would make it difficult to achieve targets in these areas.

We developed what we call the ex-China pathway target, which indexes production to a percentage of what the world outside China will need if deployment is on a net-zero pathway.

In the pathway analysis, we begin with the annual deployment necessary on the International Energy Agency’s net-zero scenario. For some verticals, this is likely to be more than actual demand in 2035. But for others, the net-zero pathway is already business-as-usual or achievable. Solar and battery deployment, for example, is already on the net-zero pathway. Either way, the net-zero scenario is an important benchmark.

Next, we adjust that annual deployment downward to exclude Chinese demand. We are making a target for countries outside China. Any number of groupings would be interesting to consider, but for simplicity’s sake, we just take out China’s demand, which we estimate at China’s share of global gross domestic product (18.5 percent). The ex-China pathway target is then 81.5 percent of the IEA’s global target. We assess progress against this pathway by tallying existing production capacity and the project pipeline for each technology or component. The project pipeline data comes from a variety of sources. The global gap is then the gap that remains between current global production capacity and the net-zero target.

In sum, the figures below present what percentage of their own demand countries outside of China can produce. In a number of cases, that gap can and will be filled by Chinese exports. In others, no one can yet fill the gap.

Group 1—The Big Three: Solar, Wind, and Batteries

The big three are all relatively new supply chains that will have to scale under enormous pressure. Each has complex components that are likely to be subject to bottlenecks, and each has critical minerals upstream that could face scaling problems. China has been the leader in all three technologies (though less so in wind) since its industrial policy staked out strong positions beginning in the early 2000s.¹⁷ To build ex-China supply, the United States and partners need to take sustained action throughout the value chain. Good progress has been made in batteries and onshore wind. Offshore wind has suffered due to demand-side problems, but also faces supply chain constraints on the availability of rare earth magnets, which at present can only come from China at scale. There are a number of successful solar manufacturing efforts outside of China, but in the long run, solar competition will be intense and China has the upper hand.

Solar

Solar: This is a critical future technology and a priority for strategic investment. Yet it faces strong challenges upstream, where ex-China polysilicon, wafer, and cell production are all likely to lag module production. A realistic resilience target for the ex-China world is likely needed, which retains some scope for Chinese imports.

Recent investments in the solar supply chain will push the world outside of China to just under 30 percent of the module capacity needed to reach net-zero. Yet imported cells will be needed to produce many of those modules, and imported wafers will be needed to finish some of the cells, meaning that the upstream supply chain is still dependent on Chinese imports.

Current ex-China manufacturing capacity for modules stands at 219 GW annually, with an additional 58 GW of announced or under construction projects. Ex-China cell capacity is slightly lower—approximately 125 GW—and has a smaller pipeline of projects, creating a cumulative announced annual capacity of 170 GW.

Yet the world, with Chinese production, is on track to exceed the annual production capacity of modules needed for the net-zero scenario. Cells are not far behind, with the current manufacturing capacity falling only 30 GW behind current global module manufacturing capacity. This gap will likely shrink significantly, considering the rate of announcements for new cell manufacturing projects in Europe, India, and the United States.¹⁸

Thus, risk exposure for downstream solar products emerges primarily from limited capacity in precursor components and input materials—namely ingots, wafers, and polysilicon. In 2023, global polysilicon capacity could produce 820 GW of completed solar panels, outpacing global demand in the solar supply chain. However, demand for silicon-based photovoltaic panels is projected to increase to 1,266 GW by 2035, requiring 446 GW of new capacity.¹⁹

Polysilicon’s gap to the 2035 net-zero pathway target is four-times greater than the gap for end-stage module assembly, and its current production is heavily concentrated in China. Over 85 percent of the world’s supply of polysilicon is produced in China—leaving only 113 GW-equivalent of current capacity outside China.

Further, ex-China polysilicon production capacity is currently slated to surpass that of wafers, implying either an oversupply or that some of this polysilicon is designed for alternative demand (like next-generation anodes or perhaps semiconductors).²⁰ Thus, building midstream ingot and wafer capacity in solar is a priority to buttress the solar supply chain outside of China.

A central question is what percentage of the net-zero pathway would be deemed sufficient for de-risking or resilience goals. We began addressing this question in our article, “Focusing Industrial Strategy,” in which we suggested that solar might be lower risk than the battery supply chain.²¹

The Biden administration’s 301 tariff announcement on September 13 gradually increases rates on solar cells and electric vehicle (EV) battery packs—the most recent act in a broader effort to detangle U.S. supply chains from Chinese manufacturers.²²

Wind

Wind: One megawatt of installed offshore wind requires approximately 2.7 tonnes of NdFeB magnet assemblies. At the moment, China controls approximately 92 percent of global NdFeB magnet production, exposing non-Chinese offshore nacelle manufacturers to acute upstream supply chain risk.²³

Wind’s manufacturing base faces a steeper climb than solar—reflecting a broader uncertainty in the technology’s role in the energy transition given the declining pace of annual installations outside of China.²⁴ Factoring out Chinese production, existing and planned capacity for nacelles accounts for less than a third of expected 2035 demand in the ex-China pathway. The sole manufacturing stage exceeding 30 percent is offshore towers—a shallow victory without accompanying capacity for specialized blades and nacelles.

Discounting offshore towers, shortfalls are relatively consistent between components in both onshore and offshore wind supply chains. Offshore nacelles and blades fall between 20 and 30 percent of expected 2035 ex-China demand. The same is true for onshore nacelles, blades, and towers.

The onshore supply chain is relatively well-established compared to its offshore counterparts, with installed ex-China capacity of approximately 56 GW of nacelles, 62 GW of blades, and 77 GW of towers. However, the 2035 ex-China pathway goal for annual onshore capacity additions is seven times greater than offshore installations. Manufacturing capacity for onshore nacelles must increase by over 250 GW to meet that target. Europe’s 20 GW of vertically integrated operational onshore wind capacity is impressive, just shy of one-third of vertically integrated installed Chinese capacity, but the continent lacks a substantial pipeline for nacelles, blades, or towers. North America breached 15 GW in 2023, with a more substantial pipeline of almost 5 GW in announced nacelle assemblies.²⁵

As onshore wind faces down a scalability challenge, offshore wind struggles with liftoff. Outside of Asia, only Europe possesses existing manufacturing capability—with less than 10 GW of offshore nacelle capacity. North American firms have announced planned capacity for offshore blades and towers, without a corresponding pipeline for nacelles.²⁶

Lagging capacity is due, in part, to the difficulty in manufacturing a key input required in the offshore supply chain.²⁷ Given their larger size and maintenance constraints, offshore nacelles require significant quantities of rare earth magnets, particularly neodymium-iron-boron sintered magnets (NdFeB). In terms of supply chain concentration, NdFeB magnets are as vulnerable as solar wafers or battery anodes, with over 92 percent of 2023 global production originating in China. Current and planned production outside of China meets only 9 percent of the ex-China pathway. This bottleneck could severely impact ex-China offshore wind manufacturing capacity, as each megawatt of installed offshore wind requires approximately 2.7 tonnes of NdFeB, which will increase to 3.5 tonnes by 2050 as nacelles increase in size.²⁸

Despite similar topline benchmarks in the 2035 ex-China framework (see Figure 4), the onshore and offshore value chains would have different approaches to expand ex-China manufacturing capacity. For onshore wind, policies should maintain a competitive price environment for domestically produced nacelles, particularly in the United States, where Chinese imports are valued at approximately 110 percent of the final cost of American-made equivalents.²⁹ For offshore wind, attention should turn upstream toward unlocking precursor material production capacity, particularly NdFeB magnets, which would enable greater manufacturing capacity for nacelles, with knock-on increases to blades and towers.

Batteries

Batteries: Good progress has been made in building out cell and module capacity; however, anode, cathode, electrolyte, and upstream critical minerals still need strategic investment to secure an ex-China supply of this economically critical technology.

Outside of China, existing battery cell capacity is minimal at 365 gigawatt hours (GWh).³⁰ However, there is a rich pipeline of investments outside of China: 3,454 GWh, which, if completed, could provide nearly half of 2035 ex-China net-zero demand for cells. Global battery cell diversification is achievable, but the fact that so much capacity is still under construction puts the ex-China project pipeline at risk. Changing economic or policy environments may sink projects before they can be completed. China’s pipeline of approximately 6,900 GWh (2,800 GWh of which is under construction as opposed to announced) in battery cell capacity is likely to meet world demand on its own. While ex-China battery capacity is promising, it may be difficult for non-Chinese projects to compete without support.

Challenges emerge for the rest of the world regarding Chinese dependency further up the battery supply chain. While the existing global ex-China industrial base for cathode active materials (CAM) capacity is more extant than cell production, the total sum of existing projects and those in the pipeline (2,571 GWh) is only sufficient to meet 33 percent of 2035 ex-China demand.³¹ Anode capacity is even further behind than both cells and cathodes, with anode active material (AAM) capacity outside of China, both existing and in the pipeline, at 1,411 GWh, or 18 percent of 2035 ex-China demand.

On top of this, battery chemistries remain in flux. Lithium metal, silicon anode, lithium sulfur, and sodium ion chemistries are all in play to take up a growing percentage of battery market share alongside traditional lithium-ion chemistries.³² Lack of existing battery investments outside of China means that emerging battery producers have the opportunity to leapfrog to next-generation investments in battery supply chain infrastructure. However, buildout of a certain amount of current generation upstream battery capacity will be required to develop the necessary technical skills to commercialize novel battery chemistries. Even if it’s noncompetitive initially with existing Chinese production, current generation battery capacity must be supported to create the human capital and supply chains required that will enable subsequent generation battery capacities to be deployed.

Group 2—Emerging Net-Zero Technologies: Heat Pump, Electrolyzer, SAF, and DAC/CCUS

The second group features technologies with complex supply chains that must scale rapidly to achieve net-zero goals. Existing SAF production is limited by the availability of inputs, such as tallow and seed oil.³³ SAF has multiple technology pathways, although many of them have not yet reached commercial viability. The SAF pathways with the greatest opportunity to scale (ATJ, FT, PTL)—that is, those that can convert plentiful forms of biomass or other feedstocks into fuel—have capacity that is still primarily in the project pipeline. Similarly, DAC and CCUS are famously indispensable to net-zero modeling but are still pre-commercial.³⁴ SAF is approaching 40 percent of the net-zero target, but many of these projects are recently announced and could evaporate without demand-side support. CCUS and DAC also have large, announced pipelines, but these are also likely to dissipate without serious market-creation activities.

Heat pumps and electrolyzers, on the other hand, are relatively mature technologies with rapidly scaling production. Heat pump assembly, which involves converting regular air conditioning assets like compressors and expansion valves, is at 50 percent of the ex-China target. Demand-side support is strong, and the technology is already proving itself with consumers.³⁵ Electrolyzers are on the verge of becoming another case like solar, where China dominates production and can set prices low enough to ward off competition. In addition, China’s electrolyzer firms are less likely to be vulnerable to the uncertainties surrounding hydrogen demand than other manufacturers.³⁶ Since China’s firms are embedded within an industrial strategy, they can benefit from structured demand.³⁷

Heat pumps

Heat pumps: These face relatively few supply chain bottlenecks, because they are assembled from largely interchangeable components available globally. However, the current installation workforce in most markets is insufficient to meet the pace of installations required for the IEA’s net-zero models, necessitating training or upskilling programs.³⁸

Heat pumps are on track, both in terms of diversification and production capacity, to meet 2035 net-zero goals without significant risk of global dependencies on any one producer. Current capacity of heat pump manufacturing at 140 GW is split between the rest of the world and China, 61 to 39 percent.³⁹ A pipeline for non-Chinese heat pump manufacturing of 115 GW brings total ex-China capacity within 52 percent of ex-China demand.

Heat pumps also don’t have significant upstream dependencies in the supply chain. Refrigerants used within heat pumps come from a diverse array of firms, with production capacity in China, France, Germany, India, Japan, Mexico, and the United States.⁴⁰ Compressors, the key mechanical component in any heat pump, also come from a diverse array of supplies, with manufacturing capacity in countries such as China, Denmark, Germany, Thailand, the UK, and the United States.⁴¹ Heat pumps are also a well-established technology, with few avenues for innovation other than refrigerants with a lower global warming potential.⁴² While there are few opportunities for leapfrogging in heat pumps, their sizable and diversified pipeline also means that it is unlikely that there will be significant manufacturing challenges to be overcome in their scaleup. However, a sufficient workforce globally needs to be trained to install heat pumps in increasingly large numbers, which presents a human capital challenge.⁴³

Electrolyzers

Electrolyzers: While there is lingering uncertainty about whether hydrogen demand will be sufficient to drive additional electrolyzer capacity, China is currently on track to capture a large share of this growing sector. The electrolyzer supply chain looks likely to replicate the dynamics seen in the solar supply chain, wherein China dominates production and can then set prices low enough to keep competitors out.

At 32 GW, total operational electrolyzer manufacturing capacity is minimal relative to expected IEA estimates for 2035 hydrogen demand. Ninety percent of non-Chinese electrolyzer capacity (98 GW) is in pipeline projects, creating a certain degree of risk. In total however, existing and pipeline electrolyzer capacity could meet over 20 percent of projected 2035 ex-China demand.

Interestingly, the rest of the world has diverged from China in the technological pathway used for electrolyzer manufacturing. According to available data, 93 percent of operational and planned Chinese electrolyzer assembly capacity is for the manufacture of alkaline electrolyzers.⁴⁴ Non-Chinese capacity, meanwhile, has more diversity. Available data has the technological breakdown of non-Chinese electrolysis, current and under construction, as 53 percent in alkaline electrolyzers, 42 percent in proton exchange membranes (PEM) electrolyzers, and 6 percent in solid oxide-based electrolysis (SOE) electrolyzers.⁴⁵ Electrolyzer supply chains are therefore less dependent on China for upstream components than incumbent technologies like solar or batteries. National specialization in different electrolyzer technologies has created a more diversified global production base.

However, PEM electrolyzers, the technology champion increasingly favored by American electrolyzer manufactures, requires niche metals that are vulnerable to unique supply risks. Unlike alkaline models, PEM electrolyzers—which accounted for nearly 80 percent of North American electrolyzer assembly capacity in 2023—require platinum and iridium.⁴⁶ Both materials are included in the U.S. Geological Survey Critical Mineral list, yet receive less attention than base metals or those used in batteries.⁴⁷ Admittedly, a single electrolyzer stack requires only small amounts of platinum group metals, but the materials are difficult to process and current production is concentrated in Russia and South Africa, which accounted for over 70 percent of global production between 2019 and 2022.⁴⁸ If the United States hopes to ramp up its stack assembly capacity, consideration should turn to reducing vulnerabilities in upstream precursors, which threaten relatively secure mid- and downstream manufacturing capabilities.

One complicating factor for electrolyzer manufacturing is the uncertainty surrounding global hydrogen demand. Most hydrogen plays compete with alternative technologies that may out-compete hydrogen. Also, unlike solar or batteries, hydrogen is more expensive relative to incumbent energy options in its prospective net-zero markets, making uptake more dependent on a flexible policy environment, as opposed to market forces driving for cost efficiencies.⁴⁹ Uncertainty in hydrogen end-use demand has left its mark on investment. In the second quarter of 2024, global low-carbon hydrogen production, which had found offtake agreements, was 8 percent of proposed production capacity.⁵⁰ There are lots of proposed hydrogen projects, but few buyers are stepping up.

While global hydrogen demand will increase relative to current levels, there is also uncertainty as to the extent electrolysis will be the technology pathway to meet an end market with a large range of demands. CCUS and pyrolysis capacity could be scaled up instead of electrolysis in different hydrogen demand scenarios.

All of this means that future electrolyzer demand is uncertain. Such an environment favors Chinese producers, which are less disciplined by market forces than other manufacturers. Chinese production capacity is expanding despite this uncertainty.⁵¹

Sustainable Aviation Fuel

SAF: Scaling SAF production will require investment in more nascent technology pathways and a significant increase in biomass and waste feedstock collection.⁵²

Sustainable aviation fuel is a catchall term for a variety of low-emissions fuel production methods: primarily hydroprocessed esters and fatty acids (HEFA), alcohol-to-jet (AtJ), Fischer-Tropsch (FT-SPK), and power-to-liquid (PtL). Demonstration facilities for each of these technology pathways are up and running across the United States, Europe, and China. Yet, despite the array of technologies, their production and offtake must accelerate rapidly to meet 2035 targets.

The International Air Transport Association estimates that global SAF production and blending capacity should reach approximately 100 million tonnes per year (Mtpa) between 2035 and 2040.⁵³ Current global capacity for SAF (including all pathways) is just shy of 3 Mtpa, leaving a production gap equal to 3,500 percent of current capacity. That scale factor places SAF in the same ballpark as low-emissions ammonia production or carbon capture; that is, among the most challenging lifts surveyed in this analysis.

Such a gap, however, provides an opportunity for first movers to capture significant shares of the emerging market. In this regard, the United States and Europe have a clear competitive edge. Their operational facilities account for over 80 percent of global SAF capacity.⁵⁴ If fully realized, planned North American and European projects alone could add almost 17 Mtpa of capacity by 2030.

The average start year for planned U.S. facilities is 2026, leaving ample room to expand capacity further by 2035.⁵⁵ So, while the sum of non-Chinese current and planned production meets only 42 percent of the 2035 ex-China pathway goal, U.S. leadership in collaboration with European allies has a significant opportunity with this technology.

Carbon Capture, Utilization, and Storage (CCUS) and Direct Air Capture (DAC)

CCUS and DAC: Continued failure rates for CCUS and DAC construction projects undermine the technologies’ credibility.⁵⁶ Despite substantial roles in IEA net-zero models, both CCUS and DAC will require significant market-creation policies to be commercialized and scaled.

CCUS and DAC present two of the most daunting scale factors to keep pace with the 2035 net-zero pathway. In just ten years’ time, global carbon capture capacity from point source scrubbers must increase by 6,600 percent, while DAC must increase capacity by an astounding 3,400,000 percent.

In line with the IEA’s net-zero pathway, CCUS must capture 1,447 million tonnes of CO₂ annually (MtCO₂) with an additional 203 MtCO₂ from DAC installations by 2035.⁵⁷ While these figures are far from the 21 MtCO₂ and .006 MtCO₂ currently online, they are not out of reach.

The CCUS project pipeline is growing. With 251 MtCO₂ of planned or under construction installations, ex-China capacity could hit 270 MtCO₂ in the next five years, nearly a fourteen-fold increase from current capacity. Admittedly, 270 MtCO₂ represents only 23 percent of the projected 2035 ex-China pathway goal, but the scale of the project pipeline compared to existing capacity is encouraging. To achieve the 2035 ex-China pathway targets, political and financial capital must be leveraged now to ensure the completion of announced projects while continuing to expand the pipeline. However, CCUS suffers from a two-decade history of project failure, with less than 20 percent of proposed projects achieving implementation.⁵⁸ The CCUS project pipeline will need to rapidly improve its ability to survive the sector’s valley of death if it is to play a role in ex-China or global supply chains.

DAC, as a more novel technology, has the advantage of not being burdened with an equivalent history of project failure. With only .006 MtCO₂ of installed capacity, it is the least established technology vertical included in this analysis. Only three sites are operational worldwide: one .004 MtCO₂ project in Iceland and two .001 MtCO₂ facilities in the United States. If announced projects come to fruition, the United States could become the leader on this technology.

Planned U.S. capacity accounts for over half of the global pipeline through 2030 and includes some of the largest facilities worldwide. The STRATOS site in Texas is currently under construction and expected to commence operation as early as mid-2025.⁵⁹ With an initial capture capacity of .25 MtCO₂ and an expected increase to .5 MtCO₂, the installation would dwarf the current fleet and is a sign of larger facilities to come.⁶⁰ Several 1 and 2 MtCO₂ facilities are scheduled for completion between 2027 and 2030.

The viability of these announcements, however, hangs in the balance. Plans for a four-phase, 4 MtCO₂ project in Wyoming were paused in 2024, citing lack of access to clean baseload power.⁶¹ If the project does not resume, the total U.S. pipeline will shrink by 15 percent. As a result, progress toward the 2035 ex-China pathway target would fall from 31 percent to 28 percent. While these sorts of setbacks are commonplace in the infancy of any industry, the United States must deploy significant policy and financial tools to minimize additional project failure or delays. Clean baseload is likely to be a critical bottleneck for DAC. Generally, so much clean firm heat and power is needed across industrial sectors that a concerted effort to drive cost reductions is needed to make DAC and other critical applications viable.

Group 3—Conversion Challenges: Steel, Aluminum, Ammonia, Ships, Nuclear, and Geothermal

This group of technologies does not face the challenges that are associated with scaling new supply chains. Rather, the United States and partners have existing capacity and knowledge that can be used to help convert old technologies into new, cleaner forms of production. Steel, aluminum, ships, and ammonia are all straightforward conversions. We include nuclear and geothermal even though they are not, strictly speaking, conversion opportunities. Nuclear, if really experiencing a renaissance, will involve reviving, scaling, and translating existing expertise into new pathways for project development. Scaling geothermal means converting existing oil and gas supply chains and labor pools. In all of these cases, scaling novel supply chains is less of a problem. Instead, the challenge is demonstrating business cases for known technology pathways and implementing them within existing supply chains.

Annual installations of new nuclear reactors outside of U.S. adversaries is currently only 22 percent of that needed to meet ex-China 2035 targets; however, the expertise exists to scale up what are known technologies (with some potential improvements).⁶² Existing low-carbon steel and aluminum ex-China production, while small relative to 2035 ex-China demand, has substantial existing industrial capacity that can be net-zero aligned based on the carbon intensity of power sourced. Ex-China capacity of net-zero ammonia is about 60 percent of the 2035 ex-China demand, but more deployment of methanol and ammonia-based ships is needed, making this primarily a demand-side problem.

Nuclear

Nuclear: U.S. reactor construction has stalled, and strategic policy action is needed to restart the drive for deployment at home and abroad. Nuclear faces its greatest current bottlenecks in enrichment and UF₆ processing, both essential steps in the nuclear fuel supply chain. Depending on if producers pursue a strategy of overfeeding or underfeeding centrifuges, ex-China capacity additions could prioritize either greater UF₆ production, centrifuge capacity, or both.

The nuclear renaissance has arrived—for some. The competitive edge that U.S. nuclear developers once enjoyed has largely eroded, which is reflected in a global pipeline now dominated by Chinese and Russian buildouts. Based on a forward-looking, five-year annual average for new reactor grid connections, U.S. installations account for less than 4 percent of needed global additions and just 9 percent of ex-China/Russia additions.⁶³

Total ex-China and -Russia figures are healthier, averaging 4.2 GW of new grid connections annually, with 31.4 GW in the pipeline through 2030. However, this represents less than half the global average (at 9.9 GW of annual installations) and includes capacities for Russian VVER reactor models under development in Bangladesh, Egypt, and Türkiye. Planned 2025 reactor installations meet only 22 percent of the projected annual installation necessary to meet the 2035 ex-China pathway. Simply put, Chinese and Russian reactors account for a larger share of announced capacity, setting the stage for a nonaligned nuclear renaissance.

Beyond new reactor buildout, the non-Chinese or Russian nuclear industry faces gaps throughout its value chain for nuclear fuel supply relative to 2035 demand in a net-zero scenario. There are five main steps in the nuclear fuel supply chain; uranium mining and milling into uranium oxide (U₃O₈), conversion of uranium oxide to uranium hexafluoride (UF₆), uranium enrichment, deconversion of uranium hexafluoride back into uranium oxide (UO₂), and fuel fabrication and assembly. The last step of the nuclear fuel supply chain—fuel fabrication and assembly—does not produce interchangeable commodities and output must be tailored to specific nuclear reactor types and customer needs. Correspondingly, reactor developers or fuel providers will scale fuel fabrication and assembly capacity in line with new reactor construction to ensure customer demands are met. Alternatively, capacity in the first four steps of the nuclear supply chain outside of China and Russia is more interchangeable as a commodity and service market, and faces gaps relative to expected ex-China demand in 2035 of 611 GW of nuclear capacity.⁶⁴

The vast majority of the world’s uranium ore, approximately 91 percent, is extracted from countries other than China, Russia, or Iran.⁶⁵ However, if the world is to meet ex-China nuclear demand growth, then U₃O₈ mining from non-adversaries must grow by 82 percent from the current output of both existing and pipeline projects.⁶⁶ After mining and milling, the next step of the nuclear fuel supply chain is processing capacity to convert uranium oxide (U₃O₈) into uranium hexafluoride gas (UF₆), the chemical composition that can be fed into centrifuges for enrichment. UF₆ conversion capacity is more balanced with roughly half (45 percent) of current capacity in China or Russia, with the remaining in Canada, the United States, or France.⁶⁷ To meet ex-China nuclear demand growth, our model assumes that HF₆ conversion capacity outside of China and Russia must grow by 182 percent.

Current centrifuge capacity is also relatively balanced between U.S. adversaries and the rest of the world, with a slight majority (59 percent) conducted by Chinese and Russian firms.⁶⁸ Under the assumptions of our model, existing and pipeline centrifuge capacity not owned by Chinese or Russian firms would need to grow by 150 percent to meet 611 GW of reactor capacity. Finally, industrial capacity for the conversion of enriched UF₆ gas into UO₂ powder, for use in nuclear fuel pellets and then rod assemblies, is primarily done today outside of Russia and China with 76 percent of global capacity outside of these countries.⁶⁹ UO₂ deconversion capacity outside of China and Russia must increase by the least of any step of the nuclear fuel supply chain: by only 45 percent to meet 611 GW of reactor capacity. 

It is also worth noting that the nuclear fuel supply chain, unlike other technologies, can be variable in its inputs. Centrifuges can turn out an equivalent amount of enriched fuel whether they load with greater amounts of UF₆ (overfeeding) or undertake more work with lesser amounts of inputs (underfeeding). Depending on the availability of enrichment capacity or ore, other necessary capacity in the supply chain can be dynamic. Given that all aspects of the ex-China supply chain face some sort of gap relative to net-zero targets though, all components will need to scale up.

Geothermal

Geothermal: This presents significant opportunities, and strategic efforts are making headway to drive down drilling costs while exploiting higher heat gradients. Geothermal can convert existing oil and gas supply chain assets easily and so is not likely to face scaling challenges. If cost reductions continue, geothermal can alleviate pressure on solar and wind deployment.

Geothermal buildout as modeled by the IEA is relatively low compared to other energy technologies. From a five-year average of .59 GW of connections annually, the IEA’s net-zero scenario has this figure rising to only 5.2 GW by 2035.⁷⁰ The geothermal installation pipeline outside of China is 11.73 GW. Geothermal’s ability to meet or potentially exceed IEA targets will be based around the potential for breakout of novel geothermal technologies. Technologies such as enhanced geothermal drilling (EGS) and advanced geothermal drilling (AGS) expand the range and capacity of economically extractable geothermal resources.

EGS technologies open up geothermal resources in existing hot rocks that are not permeable to traditional drilling through fracking technologies. AGS technologies use organic rankine cycle (ORC) with a lower boiling point than water to convert subsurface heat of temperatures previously too low to be viable into working energy. Industrial capacity bottlenecks for both technologies therefore are the availability of drillings rigs, tubulars, and casings. When considering either geothermal technology, we need to add both drilling rigs and the manufacturing capacity for ORC turbines. At the peak of the fracking boom in 2008, over 1,500 gas rigs were operational within the United States. As of November 2024, less than 100 gas rigs remained in operation domestically.⁷¹ The unused gas rigs didn’t disappear but are primarily in warehouses, waiting for market conditions to change sufficiently to justify their usage. There is thus significant surplus capacity in drilling rigs that could be directed to support a geothermal breakout. What determines the availability of gas drilling rigs toward geothermal deployment, however, is the economic conditions of the gas market. If gas prices substantially rise and make gas drilling more economically attractive, capital assets will be directed toward gas extraction and away from geothermal drilling.

ORC turbine manufacturing, unlike drilling rigs, is limited not by economic conditions but by existing industrial capacity. Ex-China ORC turbine manufacturing capacity, according to most recent available data, is 1.6 GW of turbine output, and 99 percent of global capacity.⁷² Instead, ORC turbine capacity simply needs to be further expanded if near-term geothermal technologies are to be able to achieve a breakout, with Israel, Italy, and the United States the current manufacturing leaders.

Steel

Steel: Decarbonization in the steel industry is unlikely to face major supply chain challenges, but significant investment is needed in direct-reduced iron pathways, which produce primary steel, and the clean electricity needed to decarbonize electric arc furnaces, which produce low-carbon steel. Efforts should focus on creating secure markets for low-carbon steel that will drive decarbonization throughout the world.

There are two main pathways that will convert steel to low-carbon production.⁷³ First, recycling scrap with electric arc furnaces (EAF) can produce low-carbon steel. Second, primary steel can be produced through the direct-reduced iron to electric arc furnace (DRI-EAF) route. CCUS may play a role in decarbonizing some existing blast furnaces, as well as mitigating emissions from DRI-EAF that uses gas instead of hydrogen. The challenge is to make low-carbon steel cost competitive with existing pathways either through subsidies, pricing, or tariffs.

Decarbonizing steel also presents an opportunity to defend steel production from Chinese dumping by linking new technology pathways and high environmental standards through a carbon border adjustment mechanism (CBAM). This was the promise of the failed Global Arrangement on Sustainable Steel and Aluminum: the EU and the United States sought to create a low-carbon steel club that would address Chinese steel dumping.⁷⁴ The goal of such efforts is to create secure markets for clean steel that will drive demand for clean products.

The EU’s efforts to create a market for clean steel with a carbon price and CBAM have spurred action. Major European steelmakers and a few startups have plans to make net-zero primary steel within Europe.⁷⁵ Barring planned investments in Vietnam, China, the United States, and the Gulf states, beyond Europe, the absence of strong global market creation efforts means that there are not many new steel projects specifically designated as net-zero or net-zero compatible. Nonetheless, a significant amount of steel capacity could be transitioned to net-zero. Electric arc furnace (EAF) steel uses electricity as the means of generating heat. The carbon intensity of EAF steelmaking is determined by its electricity inputs.⁷⁶ Global EAF capacity will be converted as input electricity is decarbonized. Outside of China and Russia, there are 419 million tonnes of EAF steel capacity with 191 million tonnes of capacity in the pipeline.⁷⁷ If carbon intensity of all current and pipeline EAF capacity outside of China and Russia switched to clean power, then about 611 tonnes, or 59 percent, of ex-China 2035 net-zero steel demand could be decarbonized.

While more work is needed to incentivize clean steel production, steel does not have significant supply chain challenges in converting secondary steel production, though increasing primary net-zero steel production will be a greater challenge. The focus should be on global market creation efforts that will drive the decarbonization of steelmaking in places like South Africa, Brazil, and India. The EU CBAM is designed to do that, but the absence of strong consultations with countries in the Global South has hampered the legitimacy of these efforts. More dialogue and technology cooperation are needed.⁷⁸

Aluminum

Aluminum: Final production of aluminum is already electrified, so it will decarbonize as electricity grids shift to low-carbon sources. But policy is needed to ensure that aluminum production creates demand for accelerated deployment of cheap clean power. And the thermal demands of converting bauxite to alumina (an upstream step of aluminum production) via net-zero sources is also a challenge.

The decarbonization pathway for aluminum smelting primarily depends on reducing the carbon intensity of the electric grid. In the final step of aluminum production, an electric current is run through molten liquid alumina, which removes oxygen and produces pure aluminum. Some emissions in this process are produced by the use of carbon-based anodes during smelting. Anode emissions in aluminum smelting are, however, minimal compared to emissions from source electricity, and non-emitting anodes are being researched and deployed. 

Geographic variation in existing aluminum smelting capacity may produce challenges in transitioning existing aluminum smelting capacity to net-zero sources, but it may also provide opportunities. Existing clusters of aluminum production have been located in regions with significant availability of cheap power. Countries like Brazil and Canada with abundant hydropower have large concentrations of aluminum smelting, but so do countries such as India and China with abundant cheap coal power.⁷⁹ In fact, China and India have the largest and third-largest concentrations of aluminum smelting capacity at 57 percent and 5 percent of 2023 global capacity.⁸⁰ Decarbonization therefore provides a significant opportunity to reshift global production volumes of aluminum smelting capacity based both on the ability to deploy cheap low carbon electricity, and utilization of policy tools that set carbon intensities for aluminum markets.

The conversion of bauxite ore into alumina presents another challenge to aluminum decarbonization—one that cannot immediately be resolved by electrification. The primary aluminum supply chain is divided into three parts: bauxite mining, alumina production, and then aluminum smelting. Alumina is produced via the 4-step Bayer process, the first step of which is the heating of bauxite at high temperatures. The majority of emissions from alumina production, and one-third of the entirety of global emissions from the aluminum industry, come from this step.⁸¹ Heating of bauxite is currently non-electricity based, so decarbonizing will be an industrial heat problem, for which pathways include CCUS, hydrogen, and industrial heat pumps. Fifty-eight percent of current alumina production is based in China, though significant capacity is also co-located close to bauxite production, such as in Australia (14 percent), or near aluminum smelting such as in Brazil (7 percent) and India (5 percent).⁸² Just as with downstream emissions, demand-side tools such as a CBAM and supply-side constraints like the ability to deploy large supplies of low-carbon energy will factor heavily in how alumina production is redistributed under a net-zero pathway.

Ammonia

Ammonia: Clean ammonia faces supply chain vulnerabilities as all production requires low-carbon hydrogen, production of which remains highly uncertain. Ammonia also faces a demand-side challenge common among scaling technologies, given that over half of projected 2035 demand is slated for green shipping—a truly nascent sector.⁸³

Conventional ammonia production is among the most emission intensive of all industrial processes. For each tonne of ammonia output, an average of 2.4 tonnes of CO₂ are released—double the emissions profile of steel and four times that of cement. Energy demand is equally pronounced, requiring 42.6 gigajoules (GJ) per tonne, compared to steel’s 19.4 GJ per tonne and cement’s 2.9 GJ per tonne.⁸⁴

Fully decarbonizing current production (whether by incorporating CCUS technology, electrolysis-produced green hydrogen, or pyrolysis-produced turquoise hydrogen) could avoid 450 MtCO₂ of direct annual emissions.⁸⁵ However, ammonia demand is expected to increase significantly as its use cases expand over the course of the energy transition. Nearly 70 percent of the 150 Mt of ammonia produced in 2023 was used as feedstock for fertilizer production; by 2050, new energy and fuel applications could stimulate an additional 300 Mt of ammonia demand in a net-zero scenario, requiring new infrastructure and significant production increases.⁸⁶

The ammonia industry, therefore, faces not only a conversion challenge but also an expansion mandate. Global capacity of low-emissions ammonia currently stands at 2.15 Mt, mainly from three CCUS-equipped facilities in the United States and Canada. To keep pace with the ramp up without further straining carbon budgets, existing ammonia production must increase by over 10,000 percent to close the gap to the 2035 net-zero target–on par with CCUS and SAF scale factors.

Fortunately, pipelines for green ammonia production are emerging both within and without China. The U.S. pipeline alone is approaching 16 Mt of nameplate capacity, with a near-even split between CCUS and electrolysis technologies. The total ex-China pipeline includes 107 Mt of announced projects. However, only 6 percent of these projects have reached FID, based on analysis of tracked projects from Mission Possible Partnership.⁸⁷

Ensuring the viability of the ex-China project pipeline for ammonia is critical, similar to DAC, CCUS, and SAF. If fully realized, non-Chinese producers could meet over 60 percent of the 2035 ex-China pathway goal from operational and announced capacity. But given the share of noncommitted projects, policymakers should remain wary of competition from China.

State-owned and private Chinese ammonia producers are ramping up green ammonia production, which could severely disrupt the market if supply comes online fast enough. As the world’s largest producer of grey ammonia, China has the infrastructure for large-scale development and has 9 Mt of green capacity planned or under construction.⁸⁸

Shipping

Shipping: The challenge for non-Chinese shipyards is one of competitiveness rather than technology risk. China’s conventional shipbuilding capacity grew rapidly over the last two decades, and China is now translating that dominance into a significant share of the orderbook for low-emissions capable ships.⁸⁹

One of the primary demand drivers for future ammonia production comes from the maritime shipping industry. Ammonia and methanol are two of the most promising options for alternative shipping fuels yet confront two central challenges: building engines that are capable of running on alternative fuels and deploying the accompanying land-side transportation and storage infrastructure at ports around the world.

Chinese, Korean, and Japanese shipyards hold a majority of the global orderbook for container ships, tankers, and bulk carriers. While Korean and Japanese shipbuilders maintain large legacy shares in the shipbuilding industry,⁹⁰ Chinese yards are relative newcomers—ballooning from 5 percent of total merchant tonnage launched in 1999 to over 50 percent in 2020.⁹¹ As buyers recognize the trends and increase orders for alternative fuel capable vessels, Chinese shipyards are leveraging their recent growth to dominate the next generation of maritime vessels. The Ministry of Industry and Information Technology recently published figures indicating Chinese shipyards received 70 percent of alternative-fuel orders in the first three quarters of 2024.⁹²

Korean and Japanese producers account for virtually all of the remaining non-Chinese alternative fuel orderbook. As of 2023, at least twenty-three methanol-capable vessels launched from Korean and Japanese shipyards, with over 100 vessels in the orderbook.⁹³ Methanol fuel is best suited for container ships, which are the smallest of the three large blue-water maritime commerce categories by deadweight tonnage. Ammonia vessels are facing slower uptake but will account for more significant shares of the orderbook for the larger bulk carrier and tanker vessels beginning in 2030. Based on concentrated annual growth rates calculations projected to 2035, analysis suggests that non-Chinese orderbooks meet only 6 and 7 percent of the ex-China pathway target for ammonia and methanol, respectively.

Unfortunately, the United States and its European allies are not well-suited to compete in shipbuilding. However, the United States is well positioned to leverage port infrastructure expertise and production of alternative fuels. Over fifty ammonia and methanol terminals are in operation at ports in the United States, with at least fifty more in Europe.⁹⁴ Nearly twenty of the largest ports on each side of the Atlantic have expressed an ambition to provide bunkering infrastructure for low-emissions capable ships.⁹⁵ As ports establish expertise, technical and financial knowledge should be shared with port authorities in emerging markets along major maritime routes, particularly in East Africa, South America, and South Asia.

Conclusion

This analysis provides a progress report and presents priorities for strategic investment and policy action. The ex-China pathway methodology introduced here could be used to create a set of targets for a global effort to drive investment in critical technologies and segments. The United States could lead such an effort through an expanded and focused Partnership for Global Infrastructure and Investment (PGI).⁹⁶

Immediate priorities for such an effort include expanding the production of: solar cells, wafers, and polysilicon; rare earth magnets for wind turbines and electric vehicles; battery anode active material; and electrolyzers. In addition, more low-emissions steel and aluminum projects are needed, and the order book for low-emissions ships must be built. DAC and CCUS are still in their infancy; if the United States and its partners want to maintain their leads in these technologies, they need to create secure markets to drive deployment now. To support a potential nuclear build out, UF₆ processing and enrichment capacity is needed.

Secondary priorities include solar module manufacturing, cathode active material and electrolytes for batteries, and wind turbine nacelles and blades.

In many cases, market creation efforts are needed to activate existing capabilities. For example, the problem in wind, steel, and ammonia is weak demand. Policy can intervene to help such technologies scale.

The next step would be for a technical committee of the PGI or another international partnership to translate the ex-China pathway targets into more refined supply chain resilience goals. This analysis has assumed that the ex-China world should produce 100 percent of its net-zero needs in all verticals. But the United States and partners may want to pursue higher or lower targets based on a variety of economic, national security, and geopolitical measures.

Other work from the U.S. Foreign Policy for Clean Energy Taskforce has begun to lay out the foundations of such an approach.⁹⁷ Our supply chain resilience framework suggests solar could be subject to a lower top line target than batteries. Where a 30 percent module and full supply chain target for solar may be optimal, batteries are more integral to the economy overall, through links to the automotive sector, and this could justify a higher target such as 65 percent of the ex-China pathway. In both instances, upstream investments to fill out the whole supply chain would be badly needed.

Ongoing monitoring of progress toward ex-China pathway targets is a critical piece of evaluating the effectiveness of national and international industrial policy efforts. This paper synthesizes existing public efforts to map supply chains, but more granular data on all of these supply chains is also needed.