The World Ahead Globe Icon
The World Ahead | Business in 2024

Decarbonisation of industrial activities is beginning

Technology is improving, and policy is starting to shift

A smokey factory surrounded by green tech elements
image: Mariano Pascual

By Vijay Vaitheeswaran

Listen to this story.
Enjoy more audio and podcasts on iOS or Android.

The first shots of the nascent “brown-to-green” revolution will be fired in 2024. In the global effort to tackle climate change, governments have focused on cleaning up the generation of electricity by promoting renewables, and greening transportation by boosting electric cars. So far, industrial sectors such as steel, cement, manufacturing and petrochemicals have escaped serious scrutiny.

That is because it can be difficult and costly to tackle emissions from industrial activities. Many involve high-temperature heat or chemical processes (such as steelmaking in blast furnaces) for which fossil-fuel inputs, like coal and natural gas, are not easily replaced by electricity. The only viable alternative for many industrial firms today is to use carbon-capture equipment bolted onto existing kit, but this is expensive and cumbersome. Fossil inputs can be replaced by hydrogen and ammonia made with clean energy, but these have been slow to take off.

That is why these sectors are called “hard to abate”. But the dirty little secret is that heavy industry is the biggest global emitter of net greenhouse gases (GHGs), on a par with the much more visible, coal-guzzling electricity sector. Cement- and steelmaking each contribute 5% of global emissions, compared with 1% for aviation, which attracts far more criticism.

In its baseline scenario for 2050, BloombergNEF, a research firm, predicts there will be “almost no emissions abatement from industry” without significant technological and policy changes. The challenge is compounded by the industrial boom to come in India and other emerging economies.

But the wheels are turning at last. For example, the First Movers Coalition, a group of multinational companies, has agreed to buy clean technologies in seven hard-to-abate sectors, including cement and steel, to seed the market and drive down prices. Other public-private partnerships, focused on trade corridors, ports and shipping, are in the works.

The technology itself is also improving. Areas to watch include new cement-making methods that do not require “clinker” (a carbon-intensive input); the production of low-GHG steel through the application of electrified methods; and energy-storage technologies that can store intermittent renewable power cheaply and release it on demand as high-temperature heat. With the right support, reckons Bill Gates, an early investor in numerous decarbonisation startups, “we will see the beginning of real industrial change”.

That points to policy. The coming year will reveal if the EU’s pioneering effort to impose carbon border-adjustment taxes will take hold. If it does, several American senators stand ready with matching proposals. This approach would, albeit more clumsily than co-ordinated carbon pricing, encourage manufacturers and exporters around the world to decarbonise in order to retain access to big markets.

Investment in carbon capture and hydrogen in America slowed in 2023 thanks to uncertainties about how the Inflation Reduction Act, its landmark climate law, will be implemented. As the regulations around its generous subsidies are clarified, expect press releases promising green infrastructure to give way in 2024 to lots of real shovels in the ground.

The final big force is a shift in global finance. Recoiling from the excesses of “ESG” activism, which called for spurning legacy industries, many investors are shifting to a more pragmatic approach. BlackRock, the world’s biggest asset manager, has even launched an explicitly brown-to-green materials fund. Look for other investors to follow suit.

The coming year will show how much the decarbonisation of heavy industry is really hotting up. Given its sheer scale, it will require the eventual redirection of trillions of dollars, which would have otherwise gone into carbon-spewing infrastructure for legacy industries, into greener capital stock instead. This shift will spark renovation and decarbonisation in the rich world, and leapfrogging to cleaner industries in the emerging world.

As Larry Fink, BlackRock’s boss, puts it, “We need to pass through shades of brown to shades of green.” As this happens, profit-minded climate investors may see that sectors considered hard to abate today will in time become hard to resist.

Vijay Vaitheeswaran, Global energy and climate-innovation editor, The Economist

This article appeared in the Business section of the print edition of The World Ahead 2024 under the headline “Now for the hard part”

More from The World Ahead

The World Ahead The World Ahead

The World Ahead 2024

Future-gazing analysis, predictions and speculation

The World Ahead The World Ahead

The World Ahead 2024

Future-gazing analysis, predictions and speculation


The World Ahead The World Ahead

The World Ahead 2024

Future-gazing analysis, predictions and speculation