Key Takeaways:

• Industry plays a significant role in creating materials used in daily life. However, it is the third-highest greenhouse gas emitting sector in the US.
• Decarbonizing this critical sector can provide climate benefits, support American jobs and economic competitiveness, and reduce air pollution.
• Industry has been daunting to decarbonize, given the variety of sectors, types of emissions, and the trade-exposed nature of specific sectors.
• There have been substantial changes to the federal policy landscape supporting industrial decarbonization in the Bipartisan Infrastructure Law and the Inflation Reduction Act.
• The new Federal Policy Blueprint from the Industrial Innovation Initiative lays a path for how to best capitalize on recent investments and deploy the technology and policies needed to decarbonize industry. It focuses on supportive infrastructure for carbon management and hydrogen, industrial energy demand, data and standards for low-carbon products, and market innovation.

Industry Must Decarbonize: Cross-Sector Initiative Shows the Way in New Blueprint

Industry is the backbone of modern daily life and the country’s economy, from manufacturing toothbrushes, clothes, cars, and phones to the materials that make American buildings, roads, and bridges. Industry produces materials such as chemicals, steel, cement, paper, and other essential goods that people and businesses use. The industrial sector is also a critical source of jobs in many small and medium-sized communities.

Industry and other sectors of the US economy face one critical, challenging task ahead: decarbonization. In the US, industry accounts for 30 percent of total greenhouse gas (GHG) emissions, including emissions from the electrical sector, ranking as the country’s third-highest emitting sector. The International Energy Agency has stated that to give the world a chance to limit global temperature rise to 1.5 °C, global carbon dioxide (CO₂) emissions must reach net zero by 2050.

Industrial Decarbonization Can Benefit Everyone

Decarbonization can positively impact individuals, households, communities and the economy, in addition to the planet. Policy and regulatory steps that promote decarbonization will help ensure that American industry can continue to compete internationally. For example, the European Union’s Carbon Border Adjustment Mechanism is scheduled to take effect in 2026, creating additional incentives for American industry to reduce the intensity of its products’ emissions.

Industrial decarbonization can improve Americans’ health. Curtailing greenhouse gas emissions can reduce other types of industrial pollution, especially particulate matter, providing health benefits to communities.

Retooling industrial facilities to curb emissions can create new jobs. Supportive policies have the potential to develop durable markets in new, green technologies that can stimulate the American economy, resulting in substantial job growth. Supporting domestic industries also protects existing high-wage jobs.

Rising to the Challenge

There are several reasons why decarbonizing industry is a daunting task. First, the industrial sector consists of a wide range of subsectors with their own unique challenges. In some sectors, such as cement, it doesn’t matter what type of energy input (i.e., coal vs. wind generation) is used to power the facility, since CO₂ emissions are a byproduct of chemical reactions required to create the final product. These emissions are known as process emissions. These emissions cannot be avoided with renewables or other low-carbon energy.

Second, many facilities run 24 hours a day, every day of the year, without interruption. This can create obstacles to drawing on intermittent energy sources such as solar or wind. Additionally, new low-carbon technologies are expensive, and there is a lack of common standards, making it difficult to introduce changes that would decrease emissions.

Certain industrial sectors are also known as trade exposed. This means that they face high competition on an international scale. If these industries face sudden changes in regulation or costs, they may move their operation to countries with lower operating costs and fewer emission regulations. This leads to emissions leakage, where emissions move from one country to the next but do not decrease globally. These are only some of the barriers to curbing industrial emissions.

Taking Action

However, the US has already taken steps to clean up the industrial sector. More than 70 percent of American steel is manufactured using electric arc furnaces, which have significantly lower emissions than traditional manufacturing methods. Additionally, 2021 and 2022 saw unprecedented investments and federal policy support to address emissions from this sector through the passage of the federal Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA). The implementation of these policies is still in its earliest stages and will help support the build-out of the necessary markets and infrastructure to realize their full potential.

What We’re Doing About It

Putting US industry on a path to net zero by 2050 while protecting and creating high-wage jobs, maintaining competitiveness, and advancing technology leadership requires collaboration. That’s why the Industrial Innovation Initiative (I³) released its 2024 Federal Policy Blueprint to recommend a suite of policies to Congress, the administration, and the broader policymaking landscape in order to help achieve these goals. The Blueprint builds upon the momentum from the passing of BIL and IRA by the federal government and identifies additional policies that will make the most of the investments made in these landmark pieces of legislation.

• Supportive infrastructure, including transportation and storage of CO₂ and hydrogen, is needed for industry to transition to a low-carbon future. The Blueprint includes recommendations that enable the construction of this critical infrastructure. Prioritizing the safety of communities and ensuring the availability of a trained workforce will help ensure the construction of vital infrastructure.
• Decarbonizing industrial energy demand will be critical for reducing emissions. For low- and medium-temperature heat applications, electrification is a core strategy. To address process heat, innovative technologies will need to be deployed widely. The Blueprint makes several recommendations intended to ensure a reliable, affordable, and clean electricity supply.
• The Blueprint also recommends improvements to standards and data for low-carbon products. Standardizing methods and carbon labeling programs for low-carbon products will allow manufacturers to report their emissions consistently and will give governments, corporations, and other large purchasers confidence that their purchases are helping reduce industrial emissions.
• Finally, the Blueprint recognizes the need for market innovation. It recommends several strategies for nurturing the transformational technologies required to slash industrial emissions. Technological innovation will be essential to ensuring that the industrial sector can maintain its competitiveness as it pursues midcentury climate goals.

Achieving net zero industrial emissions by midcentury is an ambitious but achievable goal. The last few years have seen a ramp-up in momentum toward industrial decarbonization in the US. The passage of the BIL, IRA, and other policies has created a strong foundation for greater future action toward decarbonizing our industries. Nonetheless, accelerating industrial decarbonization requires continued work. The 2024 Federal Policy Blueprint from I³ highlights many key next steps needed to make the vision of a more efficient and cleaner industrial sector a reality.

Get Involved with Industrial Decarbonization

To learn more about industrial decarbonization and I³’s policy advocacy work, visit the initiative’s website at industrialinnovation.org.

Find out more information about the recommendations listed above in the 2024 Federal Policy Blueprint and the summary fact sheet on the Blueprint.