Securing the Future of U.S. Industries with Decarbonization

With carbon border adjustments like in European Union taking effect and gaining traction globally, industries around the world will be expected to produce lower-carbon products or pay import fees to recipient countries based on their emissions. While this trend is in its infancy, it is likely to grow as countries increase efforts to mitigate climate change.

The United States must leverage existing federal provisions and implement innovative policies to reduce emissions from its industrial sector, ensuring American industries remain competitive in global markets.

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The Emissions Challenge in Heavy Industry

The heavy industries producing concrete, steel, and chemicals account for 23% of the country’s greenhouse gas (GHG) emissions. According to the Rhodium Group, the industrial sector is projected to become the highest-emitting sector in the U.S. by the early 2030s.

While the power sector has reduced emissions by 36% since 2005, emissions from heavy industry have remained stagnant, with only a 7% reduction by 2023. Rhodium’s modeling suggests GHG emissions in this sector will remain flat or increase slightly by 2035, with a minimal reduction of 5–10% below 2022 levels by 2040. In contrast, emissions from the transport and power sectors are expected to decline consistently through 2040.

Momentum in U.S. Climate Legislation

In recent years, Congress has passed significant climate change legislation. Through the Bipartisan Infrastructure Law (BIL), the Inflation Reduction Act (IRA), and the CHIPS and Science Act (CHIPS), approximately $133 billion has been directed to industrial-related programs. This includes funding for the Industrial Demonstrations Program, aimed at industrial decarbonization, as well as broader initiatives like the Hydrogen Hubs program and the 45Q Carbon Oxide Capture and Sequestration tax credit.

Of this funding, around $18 billion will be dedicated to decarbonizing heavy industry through grants and loans, with additional support via tax incentives.

Job Creation and Community Revitalization

These policies not only reduce emissions but also create jobs and revitalize communities. The BIL, IRA, and CHIPS are estimated to generate 336,000 manufacturing jobs annually over the duration of these programs.

The Industrial Demonstrations Program alone is expected to create at least 7,000 permanent manufacturing jobs, upskill 4,000 jobs, and generate over 20,000 temporary construction jobs across 31 major manufacturing projects. Much of this investment targets historical manufacturing communities in states like Indiana, Pennsylvania, Ohio, Louisiana, and Texas. These policies also position U.S. manufacturing to compete more effectively in international markets prioritizing climate considerations.

More Momentum Is Needed to Decarbonize the Industrial Sector

Despite unprecedented funding for industrial decarbonization, the sector requires significantly more investment. The U.S. Department of Energy estimates that between $700 billion and $1.1 trillion will be needed in public and private investments to achieve net-zero emissions in heavy industry by 2050.

The grants, tax credits, and procurement policies in the BIL, IRA, and CHIPS represent a starting point, but deeper decarbonization will require additional measures. Policies such as advance market commitments, market-based strategies like a low-carbon product standard, and enhanced industrial-focused tax credits can help accelerate progress. These initiatives should form the basis for the next generation of federal industrial policies.

Bipartisan Opportunities in Industrial Decarbonization

Recent bipartisan efforts demonstrate the potential for cross-party cooperation. Examples include the Concrete and Asphalt Innovation Act, the IMPACT Act, and IMPACT Act 2.0, which focus on decarbonizing the asphalt, cement, and concrete sectors. The PROVE IT Act, endorsed by a diverse coalition of senators, aims to collect emissions data on various products.

Securing a Competitive, Sustainable Future

To keep the U.S. on track for a net-zero economy by 2050, it is essential to continue existing programs, allocate funding efficiently, and develop policies that accelerate progress. This approach will drive innovation, create green manufacturing jobs, and ensure U.S. industries remain competitive in global markets increasingly focused on sustainability.