Industry, responsible for nearly 30 percent of global emissions, is often labeled “hard-to-abate” due to its energy-intensive processes and reliance on fossil fuels. The diverse sub-sectors—steel, aluminum, cement, chemicals, etc.—further complicate efforts to create a universal industrial decarbonization strategy.
However, many experts believe that the “hard-to-abate” label should be retired. Technological advancements, innovative policies, and increased corporate commitments to net-zero emissions have propelled the sector toward a pathway to decarbonization. Instead of discouraging action with an intimidating narrative, we must view industrial decarbonization as a challenge that is not insurmountable.
With industry projected to become the largest emissions source in the U.S. by the early 2030s, necessary climate action can’t afford to wait. A major step toward decarbonization lies in increasing demand for industrial products labeled as “green.”
The Need for Buyers to Pay the ‘Green Premium’
At Climate Week NYC, discussions around industrial decarbonization highlighted the need for more buyers of green industrial products, even if they come at higher prices. Yet, industrial companies need clearer demand signals to justify investments in producing green products. Without buyers willing to pay the “green premium,” companies lack the incentive to retrofit or build the necessary infrastructure.
Cleveland Cliffs, a steel mill in Ohio, provides a vivid example. The company was awarded $500 million by the U.S. Department of Energy (DOE) to overhaul its facility to produce green steel. Yet, its CEO initially hesitated to accept the funds, concerned about a lack of buyers for green steel in the future. Though Cleveland Cliffs eventually accepted the DOE investment, the company’s concerns are common across the industry. For companies to move forward with available solutions, confidence in a growing and lasting market for green industrial goods is vital.
Solutions to Build Greener Markets and Accelerate Industrial Decarbonization
Three key strategies can accelerate industrial decarbonization by boosting demand for green industrial products.
1 – Enact Policies That Build Demand for Industrial Decarbonization
Policymakers to date have mainly focused on supply-side solutions, such as investing in lower-emission industrial production. By developing new solutions that reduce the energy demand of industrial activities, these efforts provided the double benefit of reducing energy sector emissions as well.
We have seen policies to lower emissions in the production process through programs in the Inflation Reduction Act and the Bipartisan Infrastructure Law. For instance, the $6 billion Department of Energy’s Office of Clean Energy Demonstrations program (which supported the Cleveland Cliffs project) is providing funding for demonstration projects that can de-risk next-generation technologies in key industrial sectors such as steel, cement, chemicals, and aluminum.
With energy sector emissions falling or at least seeing slower growth, policymakers need to complement these efforts with demand-side initiatives that would spur the adoption of industrial decarbonization solutions. Policies must incentivize buyers to choose green products. Otherwise, the new supply-side solutions will not gain widespread adoption.
As part of their demand-side strategies, governments can use public procurement practices to create demand for green products. By signaling their commitment to buy green industrial goods, governments – a the federal, state, and local levels — can provide additional market stability and encourage private-sector buyers and producers to pursue green industrial investments. A paper from the Consortium for Climate-Aligned Trade, “The Importance of Green Public Procurement in Decarbonizing Industry,” explores how this can be put into practice.
2 – Improve Data Systems to Track Industrial Decarbonization Progress
Developing transparent data systems is crucial for tracking emissions reductions and guiding future investments. These systems enhance dialogue, support information sharing, and allow for a deeper understanding of the industrial sector’s emissions. Additionally, accurate data helps stakeholders evaluate the impact of policies and corporate actions.
The DOE recently announced a pilot project to improve data tracking for industrial products’ emissions. Moreover, the PROVE IT Act, which is currently moving through Congress, calls for the DOE to study the carbon intensity of over 20 industrial products. This data could demonstrate the U.S.’s “carbon advantage” in international trade.
Globally, alignment on data systems is essential. The Consortium for Climate-Aligned Trade has emphasized the importance of global cooperation on emissions data. By providing adequate data that is high in quality for global green industrial products, we can grow the market for these goods.
3 – Develop Platforms for Easier Purchases of Green Products
Platforms connecting buyers with sellers of green products can help develop a vibrant marketplace and deepen relationships between companies committed to reducing emissions. These platforms facilitate collaboration on best practices, joint initiatives, and knowledge sharing.
For example, the Rocky Mountain Institute’s sustainable steel buyers platform connects buyers with steelmakers reducing coal usage. Major companies like Amazon and Microsoft participate in this initiative. SteelZero led by the Climate Group and the First Movers Coalition led by the World Economic Forum are also building platforms to grow green markets.
Governments could take similar steps by forming coalitions focused on green public procurement. With public procurement accounting for 15 percent of global greenhouse gas emissions, a unified commitment from governments could significantly reduce emissions and stimulate the global economy.
The Future: From ‘Hard-to-Abate’ to ‘Demand-to-Abate’ for Industrial Decarbonization
Recent developments in industrial decarbonization—collaboration among industry players, increased focus from policymakers, new technologies, and greater data transparency—show that industrial challenges can be overcome. Moving forward, stakeholders must prioritize demand-side solutions, alongside better data and collaboration to monitor and verify emissions.
While industrial decarbonization may progress more slowly than in other sectors, we no longer need the “hard-to-abate” label. By advancing solutions available today we can accelerate progress and create a sustainable future for the industrial sector.
