The Pathway to Industrial Decarbonization

This report contains a correction.

Modern society and its infrastructure would look vastly different without steel and cement. Glance around your office or house and notice how fundamental these basic materials are to daily life. Now, consider that future society requires changes in how these materials—and many more—are used and made in the face of the climate crisis.

According to the latest report released by the Intergovernmental Panel on Climate Change, global greenhouse gas (GHG) emissions must peak by 2025 to limit global warming to 1.5 degrees Celsius above preindustrial levels.¹ Every year of continued carbon pollution increases the peak temperatures that will be inflicted on the planet, threatening environmental degradation and social upheaval that can never be undone. The industrial sector is currently responsible for nearly one-third of global carbon emissions and 30 percent of U.S. emissions.² By 2030, it will be the largest source of domestic emissions.³ Just three industries—iron and steel, chemicals, and cement-making—account for roughly 55 percent of global industrial emissions, and the top 10 industries are responsible for roughly 90 percent of global industrial emissions.⁴ Industry also supplies core materials and transformational technologies and supports high-quality, union jobs. Above all, most parts of modern-day society function because of heavy industry. To tackle the climate crisis and reach net-zero emissions by 2050, it is imperative that the United States remove emissions from industrial operations. This is why decarbonization must be a priority.

Decarbonization is the process of significantly reducing or eliminating carbon dioxide and other GHG emissions that result from human activity. The pathway to decarbonization can vary sector by sector due to the differences in processes and materials in different industries, but achieving decarbonization will require a clear vision for what the time frame looks like and what steps are necessary for each industry.

The Department of Energy recently released an “Industrial Decarbonization Roadmap”⁵ that begins to establish this vision for the United States. For example, the steel industry will need to anticipate that the conversion to production processes using green-hydrogen, direct-reduced iron will more than likely require—in some parts of the world at least—utilization of gas-fired, direct-reduced iron or gas-based hydrogen as a requisite step on the pathway toward fully decarbonized steel.⁶ For cement, the multiple stages of production will need to integrate multiple shifts, from changes in inputs to shifts toward cleaner fuels to electrification and incorporation of carbon capture. While pathways to industrial decarbonization will share some similarities across the board, each industry is likely to require unique approaches tailored to its specific processes. Only through focusing on these unique pathways that incorporate various product and process improvements will the United States achieve the large reductions in industrial GHG emissions necessary to reach a decarbonized economy.

Regardless of variable pathways, however, all solutions for decarbonization should incorporate the following recommendations:

• People-focused stakeholder engagement
• Massive direct investments and incentives
• Ambitious administrative action
• Clear and connected trade policy

On August 16, 2022, President Joe Biden signed into law the Inflation Reduction Act, which provides, among other historic achievements, the ambitious administrative action needed to combat carbon pollution from industrial processes. The act provides significant investments in critical manufacturing industries—including core materials such as steel and cement—to support decarbonization efforts and strengthen U.S. industries’ ability to compete globally. The Advanced Industrial Facilities Deployment Program invests nearly $6 billion to adopt transformational technologies to help heavy-manufacturing facilities reduce emissions. The transformational legislation also strengthens the ability of governments to “Buy Clean” by including $250 million in grants to help manufacturers produce and supply Environmental Product Declarations—a best-practice tool for capturing and communicating embodied emissions in final products such as concrete.⁷ The critical extension of clean energy tax credits that support the build-out of solar and wind now includes a bonus 10 percent credit for the inclusion of American-made materials. The passage of the Inflation Reduction Act—taken in conjunction with the previously passed CHIPS and Science Act, the bipartisan Infrastructure Investment and Jobs Act, and President Biden’s work to expand Buy America—establishes a true American industrial policy for the 21st century.

Experts and advocates typically focus discussions surrounding emissions reductions and decarbonization interventions on the electric power, transportation, and buildings sectors. A wide variety of other fossil fuel combustion and process emissions are lumped together in a vague category of “industry” or with a complicated set of definitions.⁸ Solutions are too often obscured behind the problematic “hard to decarbonize” label, but the diversity within industry simply means that some sectors will have clear and rapid pathways to decarbonization, while others will require additional time, investment, and innovation.

The picture becomes even cloudier when the international trade of goods is considered. One-quarter of all GHG emissions are caused by the manufacture of internationally traded products.⁹ Additionally, national emissions inventories, including the one found on the website of the U.S. Environmental Protection Agency (EPA), only count emissions from industrial processes in the United States, ignoring the emissions that go into producing and shipping the $2.8 trillion in goods imported from other countries every year.¹⁰ The emissions associated with these goods are often referred to as “embodied carbon” and are roughly two times the value of domestically produced goods.¹¹

Breaking down these emissions into easier-to-understand segments is an important first step in planning appropriate decarbonization strategies. For example, the majority of emissions in most definitions of the industrial sector come from the fossil fuel refining, petrochemical, and plastics industries, where reductions in demand will be a major part of strategies. In contrast, the emissions that result from the production of cement, metals, and glass—durable products with limited alternatives—need solutions that can provide a clear path to eliminating emissions while allowing for continued production of these critical materials.

Figure 1

Figure 2

Pathways to decarbonization

Heavy industries have precipitately been described as hard to decarbonize. No matter how well-intended, this broad label can obscure the variety of real solutions that are available and needed. While industrial decarbonization requires significant investments to advance existing infrastructure and technological innovation at scale, the baseline efforts to decarbonize—fuel and process switching, efficiency, and emissions capture—are not fundamentally different from the efforts already underway to decarbonize the electricity and transportation sectors. Obfuscation can also arise from too strong a focus on prioritizing minor efficiency gains. There must be dedication from industry and governments to complete or nearly complete decarbonization of the sector as a whole, and chosen pathways must be representative of that dedication.

Moreover, decarbonizing heavy industry will only succeed if there is a comprehensive approach involving both the private and public sectors, one that attempts to accelerate research, development, and deployment of transformational technologies. These efforts will have similarities across industries, but the intricacies of each industry call for some industry-specific pathways to decarbonization.

For example, a large part of the discussion on decarbonizing plastics and petrochemicals should focus on reducing product use and full-scale substitution of the materials. For other industries, such as electronics and semiconductors, the focus should be on electrification. For still others, such as fertilizer, the solutions are largely in changing feedstocks from natural-gas-based hydrogen to green hydrogen produced by electrolyzers using renewable electricity. Two sectors, steel and cement, are worthy of a deeper dive because they are among the largest emitters and, perhaps more importantly, are irreplaceable materials for many applications.

Finally, any discussion of decarbonization of materials that are trade-exposed global commodities, such as steel, must be intertwined with requisite trade remedies. Restriction of emissions in one nation can lead to increased emissions in another—often referred to as carbon leakage. This typically occurs when domestic heavy polluters relocate to another country to escape strict emissions regulations, thus continuing to pollute in the more lax country and not reducing global GHG emissions. Strong pathways should include methods that support domestic decarbonized and decarbonizing materials, such as government procurement or a carbon border adjustment, not methods that shut down domestic manufacturing and increase reliance on dirty imports. Even for goods that are not trade exposed, such as cement, the United States should look for methods that, through export of technologies and policy harmonization, can be replicated in other countries, advancing global climate benefits.

Eradicating greenhouse gas emissions from the steel industry will require multiple technological changes in how steel is currently made. This will require significant investment from the industry and public sector. Currently, steel is made via two main processes—blast furnace/basic oxygen furnace (BF/BOF) and electric arc furnace (EAF).¹⁵ There are different methods and components within these two overarching processes that are required to achieve the proper chemical composition of the final product at the facility. For example, making basic rebar to hold up a bridge often requires a different process and can utilize different components than making advanced lightweight, high-strength steel that forms the body of a car. Currently, EAF steelmaking accounts for 71 percent of total steel produced in the United States.¹⁶

Before diving into the technical aspects of steelmaking and the potential pathways for decarbonization, consider the steelmaking process. In short, the steelmaking process is that by which iron ore is turned into iron and iron is turned into steel. Decarbonization means changing the source of electricity, changing the fossil-fuel-based feedstocks that are used to make iron and to turn that iron into steel, and integrating an emissions-free method of producing high heat or drastically lowering the heat altogether.

Figure 3

Electric arc furnace

The pathway to decarbonization differs depending on the method of steelmaking. For example, many pieces of rebar do not need to be a grade of steel that lacks significant impurities, which means that they can be produced with a lot of scrap steel. Therefore, rebar is often produced by EAF steelmaking, which has significantly less carbon intensity of BF/BOF steelmaking but uses a massive amount of electricity.¹⁷ EAFs, therefore, require investments and innovation in emissions-free electricity production and storage capable of producing the necessary high heat in crude steelmaking. EAFs also currently utilize pig iron, which is often imported and produced in emissions-intensive processes. Eradication of dirty pig iron from EAF steelmaking, alongside integration of emissions-free electricity production, is critical to achieving significant decarbonization. But this only accounts for production of certain types of steel, such as rebar. Making steel with significantly different grades that do not include impurities—such as certain grades of lightweight, high-strength steel used in automobiles—currently requires the complex steelmaking process and will require additional steps toward decarbonization.

Blast furnace and basic oxygen furnace

The primary complex steelmaking process can be condensed into four key steps: 1) raw material preparation, including refining the iron ore into pellets and the coal into coke and/or gathering the scrap steel; 2) ironmaking, or chemically reducing the iron ore in either a blast furnace or through a direct reduction process that requires introducing carbon and carbon monoxide to coal, oil, or natural gas to create pig iron or sponge iron; 3) steelmaking, or running the pig iron in a basic oxygen furnace or an electric arc furnace; and 4) casting, rolling, and finishing processes to convert the crude steel into the final steel products desired.

Pathways to decarbonization

For the United States to achieve deep decarbonization goals—and still provide steel that is used in everything from building materials to automobiles to pots and pans—it will need to integrate or adopt the following methods:

• Green-hydrogen, direct-reduced iron (DRI): In the iron-reducing process in DRI ironmaking, hydrogen—preferably green hydrogen—can be used to replace natural gas. Green hydrogen¹⁸ is produced by the process of electrolysis powered by renewable energy sources.¹⁹ This results in direct-reduced iron, also referred to as sponge iron, which is then melted via electric current in an EAF and turned into crude steel. Save for minimal process emissions and potential hydrogen leaks, the production of crude steel in this manner is effectively free of carbon emissions. Rolling and finishing processes will also need to switch to decarbonized fuels to complete the deep decarbonization process.

There are currently no mills producing steel in this manner commercially, but there are multiple investments and pilots underway. The most notable is HYBRIT,²⁰ an innovative effort led by Swedish manufacturers in coordination with Volkswagen that aims to produce fossil-fuel-free steel over the next decade. A few of the prominent projects are shown in Table 1 below.

Table 1

• Using electricity: Perhaps the most innovative processes in the pilot stage are two distinct efforts that use electricity in very different ways to achieve ironmaking completely without fossil fuels. The first involves the effort to directly reduce and melt iron ore with electricity, referred to as molten oxide electrolysis. If the electricity is produced using renewable energy, then this process eradicates all steps in the crude steelmaking process that involve fossil fuels. Boston Metal is currently piloting this technology and claims it will be able to produce commercially available steel by the second half of this decade.²¹

The second process is one that uses electricity to warm up water laced with acid. Iron ore is then soaked in that mixture, causing a chemical process that dissolves the ore and results in iron. Electra, a Colorado-based company, has pioneered this technology and is planning to move from a lab to initial pilot projects.²²

• Carbon capture utilization and storage (CCUS): Capturing carbon dioxide waste streams for BF/BOF steelmaking can achieve significant emissions reductions, though not full decarbonization, while still utilizing steelmaking processes that produce the highest-grade steel—an area where scrap-based EAF production currently struggles. ArcelorMittal has invested in this process in a few of its facilities in Europe, notably its Carbalyst project in Belgium,²³ where waste carbon will be utilized and turned into fuel. Carbon capture will need to prove its economic viability for the long term, especially on a material as trade exposed as steel. CCUS systems typically only target 90 percent efficiency for carbon dioxide captured from plants and stored.²⁴ The cost of increasing efficiency for CCUS technology and concerns regarding the capture process decreasing the overall efficiency of industrial facilities are important factors to consider. Additionally, issues associated with siting of carbon capture infrastructure will need to be dealt with on the front end of deployment, and a facility’s use of carbon capture technology should not be an excuse to ignore other pollution in which it engages.

Ideally, decarbonizing steel would occur through electrification powered by renewable energy. However, unlike the transportation sector—where direct electrification is both technologically feasible now and economically advantageous—electrifying the industrial sector has technological and economic barriers that make it the most difficult sector to fully electrify. Although carbon capture is not a silver bullet for addressing decarbonization in all sectors, in the case of cement and steel production, it currently offers a scalable alternative for existing production to decarbonize processes in the short term.²⁵

Cement is one of the most widely used products in the world, most often as the binding agent in concrete. Cement manufacturing produces nearly 6 percent of global carbon dioxide emissions.²⁶ Almost 40 percent of those emissions are produced from the use of coal in the cement-making process.²⁷ In order for cement to be a sustainable choice of building material, it is important to reduce its carbon intensity to near-zero levels as soon as is technically feasible.

Portland cement and clinker

Portland cement accounts for more than 95 percent of cement used,²⁸ and it is made by crushing raw materials²⁹—such as limestone and clay—down to a small size, then mixing and grinding it with materials such as fly ash. That product is then fed into a cement kiln and exposed to a massive amount of heat, roughly 2,700 degrees Fahrenheit, intended to burn off gases. The directed surge of heat in the kiln is created by controlled burning of fuels such as powdered coal or gas, and the finished product is often referred to as clinker. The clinker is combined with ground limestone or gypsum and ground down into a fine powder that is ready to be sent to a ready-mix concrete facility. The chemical reaction in the kiln, called the calcination process, is the source of roughly half of carbon dioxide emissions in cement manufacturing, with the other half a result of energy usage.³⁰

Pathways to decarbonization

There are three clear pathways to reducing emissions from cement production: drive down the use of clinker, capture additional heat and process emissions, and decarbonize the fuel sources.³¹ The Global Cement and Concrete Association laid out a road map toward a decarbonized industry by 2050 that tracks with these core pathways but also provides additional details on the need for continual efficiency gains and ongoing innovation.³² The road map includes the following:

1. Reducing the use of clinker to make cement—or finding an alternative that will still result in the binding nature needed to create varying types of concrete products—is a heavily researched pathway. There are products, such as fly ash (the waste product from burning coal) or blast-furnace slag (the waste product from making steel via blast furnace), that can be directly substituted for a portion of clinker. Additionally, ground limestone, as well as clay that has gone through a calcination process similar to clinker’s but with potentially significantly lower emissions, can serve as substitutions. These alternative cements show the processes for and possibility of moving away from Portland cement. An example of this can be seen in the joint Swiss and Cuban LC3 Project.³³
2. Carbon capture, and either storage or utilization, currently is necessary to achieve a decarbonized cement sector, since more than half of carbon dioxide emissions are from chemical reaction in the process and have nothing to do with the energy used. In the precalcinating process, limestone is split into lime and carbon dioxide. Unless this part of the process is eradicated, the carbon dioxide will need to be captured. Similarly, there are massive heat production elements in cement-making. Efforts will need to be made to either electrify these elements or capture the carbon dioxide. Capturing carbon dioxide in cement-making can be directly beneficial, as it can act as a strengthening agent in the concrete curing process, thereby improving the product and permanently sequestering the pollution. CarbonCure is currently utilizing this method.³⁴
3. Cement-making requires intense heat, which necessitates the usage of large amounts of energy both for electricity and via a fuel source. Decarbonizing electricity is straightforward, but eradicating emissions from fuels will require utilizing a source such as green hydrogen to produce the necessary heat required.

Impacts on labor

The pathways to decarbonizing steel and cement-making will affect labor forces and front-line communities. It is essential that any innovations aimed at achieving net-zero emissions in the industrial sector meet the needs of diverse stakeholders and provide benefits to these communities. In 2022, the U.S. steel and iron industry is estimated to employ nearly 131,000 individuals,³⁵ and cement manufacturing is projected to have employed nearly 219,000 people. This only considers direct employment, and durable manufacturing such as these two industries is known to support many indirect jobs, upward of eight times as many.³⁶

To understand how decarbonization might affect employment, the differences in labor within steel and cement-making processes, especially the difference in employment between BF/BOF and EAF steelmaking, must be examined. This will provide a better understanding of the different scenarios available to decarbonize these industries. Below are key questions that the federal government should address through collaborative research.

Answering these questions will be critical to establishing a worker-friendly approach to industrial decarbonization. The transition to decarbonization in the electricity sector did not have an understanding of its impacts on employment—or a fully planned response to those impacts. Many lessons were learned because of this that are only recently being addressed, including through the incorporation of labor standards in the Inflation Reduction Act and in state-level actions such as the creation of Colorado’s Just Transition Office.

Questions for the steel industry:

• What will the employment impact be if the nine BF/BOF facilities in the United States complete a full-scale conversion to green hydrogen DRI-EAF, thus shuttering the blast furnaces and subsequent coking operations? What can be done to mitigate or offset losses? What impact will the growth and integration of a green hydrogen industry have?
• What will the employment impact be if those nine facilities fully close and domestic steelmaking shifts to existing domestic EAFs and production from new direct electrolysis facilities (not withstanding pressure to increase imports)?
• What will the employment impact be if those nine facilities integrate carbon capture?

Questions for the cement industry:

• What is the domestic employment impact of a substantial shift away from clinker? What is the impact of switching from polluting fuels to clean fuels?
• What are the employment impacts of integrating CCUS in the majority of domestic cement operations?
• How can the integration of CCUS and electrification be balanced to include an understanding of potential employment impacts?

Importantly, the quality of jobs in these facilities is a critical consideration that cannot be overlooked. Currently, only 8.5 percent of manufacturing workers in the United States are represented by a union.³⁷ The differential in unionization at steel and cement is hard to tease out given the lack of publicly available data, but workers at each of the nine BF/BOF facilities in the United States are represented by a union. While there are many EAF facilities that operate under a collective bargaining agreement, many do not, including all the facilities owned by Nucor, the largest EAF steelmaker in the United States.³⁸ There are similar stories in cement-making. Decarbonizing the steel and cement industry must not come at the cost of the quality of jobs that were hard fought and won by the women and men of the United Steelworkers and other unions over nearly a century of organizing.

Governments must ensure that workers at facilities have free and fair opportunities to form or join a union, as well as that their jobs are safe and provide family-supporting wages and benefits. It is imperative that decarbonization efforts support the good jobs at integrated facilities by helping them decarbonize, while at the same time demanding that EAF or direct electrolysis facilities provide high-quality union jobs. Similarly, efforts to decarbonize should support good jobs at cement facilities and not result in losing domestic production to competing companies that do not have a unionized workforce.

Impacts on front-line communities

Front-line communities include, but are not limited to, low-income communities, communities of color, and communities wherein residents bear the first and worst consequences of the climate crisis and are directly affected by the pollutants coming from industrial processes.³⁹ Particulate matter, nitrogen oxide, sulfur dioxide, and nonmethane volatile organic compounds (NMVOCS) are the criteria air pollutants most commonly emitted by the steel industry. A recent report released by Global Efficiency Intelligence found that sulfur dioxide emissions were the highest-emitted criteria air pollutant from the steel industry.⁴⁰ The air pollutants emitted from steel production come from onsite emissions, particularly in the coke oven and blast furnace portions of the steelmaking process.⁴¹ For the cement industry, Global Efficiency Intelligence found that nitrogen oxide was the highest-emitted criteria air pollutant, with the majority of emissions produced during coal combustion in the kiln.⁴²

According to the EPA, criteria air pollutants can lead to a variety of respiratory complications, including inflammation of the lining of the lungs, reduced lung function, and respiratory infection; premature mortality, cardiovascular disease, exacerbation of allergic symptoms, lowered IQ and behavioral problems, and decreased supply of oxygen to tissues and major organs, among a host of other negative health issues.⁴³ Among individuals with asthma, short-term exposure to sulfur dioxide, especially among children and older adults, can lead to increased respiratory-related emergency department visits and hospital admissions.⁴⁴ Long-term exposure to air pollution, specifically high concentrations of particulate matter, also increases the severity of COVID-19 health outcomes, including death.⁴⁵ In addition, cement production emits small quantities of heavy metals such as arsenic, cadmium, chromium, and nickel—all of which are known carcinogens.⁴⁶ Unfortunately, many of these overburdened communities have come to depend on these same polluting facilities as economic ladders into the middle class.

Industries such as steel and aluminum are trade-exposed commodities. Increases in prices and changes in demand, among other factors, can lead to a geographical shift in production. Efforts to decarbonize these industries will influence many, if not all, of those factors, and there are currently limited barriers to offshoring. This could more than likely increase the risk of production simply moving from one country to another and continuing to emit similar levels of pollution—a situation often referred to as carbon leakage. This partially explains the unwillingness by some in industry to make major commitments to decarbonization.

For any serious decarbonization effort to succeed, global leadership and international coordination will be required. Global standard-setting, such as ResponsibleSteel⁴⁷—a multistakeholder standard and certification effort—can provide a common pathway for production that is adopted, and adhered to, across the whole industry. Additionally, bilateral and multilateral cooperation on investments and incentives—such as the burgeoning global arrangement on sustainable steel and aluminum,⁴⁸ which is a carbon-based sectoral arrangement between the United States and the European Union to establish collaborative pathways to support and deploy decarbonized steel and aluminum—may provide a framework for how countries can move toward decarbonization while creating necessary backstops and barriers to unfair trade situations that would result in leakage. Another mechanism to ensure fair competition in carbon-intensive traded products is carbon border adjustment, or carbon tariffs, which seeks to internalize the cost of embedded carbon through import fees or surcharges. The European Union is in the process of implementing a carbon border adjustment mechanism,⁴⁹ and comparable legislation has been introduced in Congress.⁵⁰

For the first time, however, these trade considerations will unfold in the context of major new federal investments to decarbonize industry. The Inflation Reduction Act provides $5 billion for federal procurement of clean building materials for use in federal projects (see Sections 60503 and 60506), major tax incentives for carbon capture (Section 13104) and clean hydrogen production (Section 13204); $5.8 billion for retrofitting industrial facilities to make progress toward net-zero emissions (Section 50161); and more.⁵¹ These investments will not drive offshoring or carbon leakage; indeed, they may even increase opportunities for the export of clean products.

Based on the analysis presented above on emissions, technological pathways, labor, and environmental justice and trade, this report recommends four priorities for the development and deployment of industrial decarbonization solutions for steel and cement.

The pathways will not be uniform and will certainly include multiple processes, from green hydrogen iron and steelmaking to carbon capture on cement kilns and blast furnaces. Industry is not hard to decarbonize, but success will require investments in and dedication to fighting the climate crisis and ensuring that the nation’s core manufacturing industries stay strong and produce the goods needed for a 21st century economy.

People-focused solutions

To transition toward decarbonizing steel and cement, policymakers, companies, and other stakeholders need to ensure that labor and front-line communities are at the center of decision-making. Decarbonization will require policymakers to provide adequate time frames for industrial transition and ensure that workers and community advocates are represented early and throughout all stages of policy development and implementation.

A fair and equitable process will also require the implementation of new investments and technologies to support new and existing workforces. Where gaps remain, governments should ensure social safety nets, such as unemployment insurance and worker training programs, and provide direct support for any dislocated workers.

In addition, state and local governments should consider the placement of clean manufacturing and green hydrogen facilities to ensure that the pathway to decarbonization does not continue overburdening communities that are already facing the consequences of past energy injustices. Front-line communities should not be forced to disproportionately endure the negative externalities of even the cleanest industry, such as increased traffic from trucking, noise from industrial machinery, or the overall negative impact of industrial sites on residential property values. Equitable decarbonization means early and meaningful engagement with local community stakeholders throughout the decision-making process when deciding on retrofitting, replacing, and building new facilities and infrastructure. Front-line communities should not have to make false choices between clean air, quality jobs, and living in a vibrant, pollution-free community.

Massive, smart investments in innovative clean technology

Governments should focus significant investments on direct support, such as grants, for existing steel and cement production facilities to integrate deep decarbonization technologies and processes (such as converting steel production to hydrogen direct-reduced iron). Additionally, direct public support should go toward deploying innovative technologies (such as Boston Metal), and supporting new facilities and whole portions of the industries to help achieve the decarbonization goal. Specific steps include the following:

• Federal and state governments must successfully deploy billions of dollars in investments from the Inflation Reduction Act from the U.S. Department of Energy’s Office of Clean Energy Demonstrations to support deep decarbonization projects at heavy industrial facilities, including steel and cement facilities.
• Congress should explore utilization of the tax code to incentivize production and utilization of clean materials, such as a production tax credit for clean steel and cement.
• Congress and the Department of Energy should monitor investments targeted specifically at increasing green hydrogen production (such as the production tax credit formula advantage for green hydrogen in the Inflation Reduction Act and the hydrogen hubs created by the Infrastructure Investment and Jobs Act) and making electrolysis more cost effective.
• Federal and state governments should prevent greenwashing by ensuring that investments are targeted toward full decarbonization and not used to perpetually sustain fossil fuel production using gray hydrogen. Marginal efficiency improvements do not constitute meaningful progress toward full decarbonization, nor do vague promises of eventual partial carbon capture.

Ambitious administrative action

The Biden administration has taken steps to instigate industrial decarbonization through administrative action at the Department of Energy. However, more action is needed, including strategic, well-designed procurement policies, such as Buy Clean, and incentivizing adoption of low- to no-carbon manufacturing technology while making investments in cleaner processes more profitable. Further development and enhancement of policies to drive demand for decarbonized steel and cement will be vital to achieving net-zero emissions by midcentury.

The federal government should establish its own Buy Clean standard on large, federally funded infrastructure projects, as proposed in President Biden’s executive order.⁵² Buy Clean leverages the government’s massive purchasing power to push pollution reduction in the private sector throughout supply chains while creating high-quality jobs. Additionally, the government should provide guidance and incentives for states to initiate their own Buy Clean standards.

The government must also effectively implement resources dedicated in the Inflation Reduction Act to support the development and assist with the standardization and transparency of Environmental Product Declarations.⁵³ It should also disclose significant purchases of embodied carbon—the carbon pollution associated with the materials that make up a product—such as transport fleets and for large defense projects.⁵⁴ Where possible, it should favor products with low embodied carbon. The Inflation Reduction Act provides significant resources for reducing embodied carbon—including $2 billion for the General Services Administration—and use of these resources should strive to set a standard for innovation and advancement in carbon pollution reduction in core manufacturing industries that have significant emissions footprints.

Finally, the Department of Energy must continue to invest in its research, development, and demonstration programs for industry, but it should also consider utilizing programs such as those offered in its Loan Programs Office to target deep decarbonization for the steel and cement industries, among others.

Prioritize research efforts from implementing agencies on labor impacts

Congress should fund—and the Biden administration should implement—a collaborative research effort to answer questions about the economic impact of industrial decarbonization. Specifically, it should establish an interagency effort, spearheaded by the Department of Labor and including the departments of Energy and Commerce, the EPA, and the Office of the U.S. Trade Representative, to run a collaborative research process on the economic impacts of industrial decarbonization.

Prevent leakage and establish global leadership

The United States must use all its diplomatic, trade, and financial influence to drive global decarbonization efforts. Few other countries have the same capacity and responsibility to lead as the United States. This will require establishing barriers for carbon leakage, such as a border adjustment mechanism and emissions-focused trade agreements (such as GASA) and green procurement alignment. In addition:

• The United States, via the Department of Energy, recently joined the Industrial Deep Decarbonisation Initiative⁵⁵ (IDDI)—a global coalition that includes the United Kingdom, India, Germany, and Canada and is focused on stimulating demand for low-carbon materials. It is imperative that the United States’ membership in a multilateral effort such as the IDDI serves to bolster U.S. leadership on global industrial decarbonization efforts and leverage concrete, collaborative actions across nations.
• The United States should support global standard-setting efforts such as ResponsibleSteel.
• The United States should incorporate industrial decarbonization into multilateral discussions within processes such as the U.N. Framework Convention on Climate Change and the G-7 and G-20, raising the profile of the issue within the State Department and the National Security Council.

The transition to a decarbonized industry will be an iterative process, but it must be accelerated to meet the urgency of the world’s climate challenges. Although the industrial sector is large and diverse, the goal of decarbonizing global industrial production to reach net-zero emissions by 2050 is achievable. A road map to a decarbonized industry is available, with known technology and policy options. More opportunities will arise, as low-emissions industrial technologies become cheaper and more widespread, but that means there will need to be continued dedication and investment from industry and governments across the world focused unrelentingly on the fair and equitable path to decarbonization.

The authors would like to thank Ali Hasanbeigi (Global Efficiency Intelligence); Anna Fendley (United Steelworkers); Jason Walsh (BlueGreen Alliance); Evan Gillespie, Molly Dozorenski, and Hilary Lewis (Industrious Labs); Julie McNamara (Union of Concerned Scientists); and Whitney Berry (Ocean Conservancy) for their feedback on this report. The views expressed in this report are solely attributable to the authors.