Smoke from industrial site in front of blue sky

Pushing boundaries of industrial decarbonization

Unlock the next frontier of climate progress

Innovate in hard-to-abate sectors to unlock the next frontier of climate progress. These industries, responsible for a third of global CO₂ emissions, cannot rely on off-the-shelf solutions. Breakthrough technologies, large-scale pilots, and coordinated value chains are essential to move beyond incremental improvements. Accelerating innovation in these sectors will be pivotal for making net-zero pathways credible, competitive – and within reach.

Criticality of the topic

Hard-to-abate sectors, such as steel, cement, aviation, shipping, and parts of the chemical industry, account for over 30% of global CO₂ emissions and face major technological and economic hurdles to decarbonization. Many lack scalable, cost-competitive solutions today. Without targeted innovation, these sectors risk locking in emissions for decades and undermining global climate targets. Accelerated R&D, industrial-scale pilots, and demonstration projects are urgently needed to bridge the gap from lab to market. Innovation must be aligned with transition goals and supported by policy, finance, and infrastructure to enable timely deployment and cost reduction at scale.

Latest developments

Innovation in hard-to-abate sectors is gaining momentum, with several pilot projects advancing from feasibility to demonstration. Key examples include HYBRIT for fossil-free steel, LEILAC1 for low-emission cement, and sustainable aviation fuel (SAF) hubs moving toward early commercial scale. In shipping, ammonia is emerging as a promising zero-carbon fuel, with pilot vessels and bunkering infrastructure now under development. Many cross-sector initiatives, such as Mission Innovation, the First Movers Coalition (FMC), and the Clean Energy Ministerial’s Industrial Deep Decarbonization Initiative (IDDI), are enabling joint action across value chains. While global climate tech venture capital funding reached €70 billion in 2023, only a small fraction supports hard-to-abate sectors, reflecting their long lead times and high capital intensity. Policy is beginning to create demand signals through instruments like green public procurement, product-level CO₂ labelling, and expanded ETS coverage for shipping and aviation. On the finance side, Carbon Contracts for Difference (CCfDs), public-private partnerships, and blended finance mechanisms are increasingly used to de-risk early-stage innovation and accelerate the pathway to market readiness.

Graph over Hard-to-abate sectors and possible solution pathways

Trends and outlook

The next 5–10 years will see a surge in large-scale pilots and early commercial deployment in hard-to-abate sectors. Key areas include hydrogen-based fuels for steel and shipping, CCUS for cement and chemicals, and electrification of high-temperature industrial heat. However, high costs, infrastructure gaps, and fragmented value chains continue to constrain progress. Public de-risking tools and first-mover alliances, such as long-term offtake agreements and innovation consortia, will be essential to unlock private capital. Success will depend on aligning technology, policy, and supply chain development to move from isolated pilots to scalable, system-wide decarbonization solutions.

Governments and other policymakers

Policymakers should align national innovation agendas with net-zero pathways for hard-to-abate sectors, embedding them in industrial, research, and infrastructure strategies. Funding for first-of-a-kind and demonstration projects should be scaled up through instruments like Carbon Contracts for Difference (CCfDs), innovation funds, and targeted Important Projects of Common European Interest (IPCEIs). To stimulate market uptake, governments must create demand signals via green public procurement, product standards, and carbon performance labelling. Critically, planning for enabling infrastructure, such as CO₂ and hydrogen transport networks and SAF supply chains, must be synchronised with innovation deployment to avoid delays and stranded assets.

The next 5–10 years will see a surge in large-scale pilots and early commercial deployment in hard-to-abate sectors.

Companies and industrial players

Companies in hard-to-abate sectors should develop technology roadmaps aligned with net-zero targets, identifying key innovation levers such
as electrification, alternative cement binders, sustainable aviation fuels (SAF), and e-methanol. Joining or leading industrial clusters and consortia can help pool risk, share infrastructure, and accelerate learning across the value chain. To support market creation, firms should commit to offtake agreements or anchor investments for emerging low-carbon products, such as through green steel buyers' alliances for example. Building internal R&D capacity and partnering with academia, startups, and public institutions will also be critical to sustain innovation and ensure competitiveness through the transition.

Investors

Investors should allocate patient capital to first-of-a kind (first commercial-scale deployment) and scale-up projects in hard-to-abate sectors with high decarbonization potential. Forward-looking KPIs and climate scenario analysis should be used to assess the long-term competitiveness and transition readiness of exposed assets. Supporting climate venture and infrastructure funds that focus on deep industrial decarbonization is
critical to bridging the financing gap. Investors can also play a key role in blended finance structures, helping to de-risk early-stage innovation and align public and private capital toward commercially viable, low-carbon solutions.

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