Decarbonizing U.S. industry: Progress and opportunities 

Nearly one-third of U.S. greenhouse gas emissions come from the industrial sector, including from cement and concrete, chemicals, and iron and steel manufacturing. These industries are hard to electrify and are likely to require a diverse suite of solutions like zero- and low-carbon fuels and other low-carbon technologies.  Fortunately, because of federal investments from the Energy Act of 2020, Infrastructure Investment and Jobs Act, Inflation Reduction Act, and CHIPS and Science Act, we are already seeing progress in the industrial sector that is driving economic, climate, and community benefits across the country.  

These investments have catalyzed growth in American manufacturing supply chains, investments in lower emission materials and technologies, and jobs and economic opportunity. But the work is not yet done. Read on to learn about the current momentum to accelerate industrial decarbonization and what must happen next to reach U.S. climate goals. 

How is the U.S. doing in decarbonizing its industrial sector? 

Emissions from the industrial sector account for roughly 23% of domestic greenhouse gas (GHG) emissions, or roughly 30% accounting for electricity. With recent federal investments and policies aimed at industrial decarbonization, the U.S. has demonstrated significant progress toward addressing these emissions, which electrification alone cannot address, through recent targeted federal investments and policies.  

Federal activities 

There is unprecedented interest in driving industrial decarbonization through recent federal policies and funding aimed at fostering the necessary demonstrations and shared learnings. This work includes: 

• The Department of Energy’s (DOE) Industrial Decarbonization Roadmap, pathways to reduce industrial emissions. 

• The DOE Industrial Heat and Clean Fuels & Products Energy Earthshots™, which will accelerate cost-effective and lower-emission industrial heat processes and fuels and chemicals.  

• The DOE Pathway to Industrial Decarbonization Commercial Liftoff Report, providing up-to-date information about pathways to decarbonize across industrial sectors, including cement, chemical, and refining.  

• “Buy clean” policies to spur America’s industrial capacity by federal procurement of lower-carbon infrastructure materials. 

• Grant programs, loans, and tax credits dedicated to industrial decarbonization to support innovative technologies.  

While recent investment has been significant, demand from industry is outpacing these resources. Industrial decarbonization funding programs, like the Industrial Demonstrations Program, are oversubscribed; more funding is needed to advance many promising and necessary projects in the pipeline.  

The chart below depicts some of the key federal grant programs aimed at industrial decarbonization, their total funding amounts (“Funds Allocated”), and funds remaining to be spent (“Funds Remaining”). As shown in the chart, programs are at various stages of implementation. Programs like the Industrial Demonstrations Program have been overprescribed with applications funding has been allocated in full, while others, like the Carbon Dioxide Transportation Infrastructure Finance and Innovation Act program, have yet to see movement. Others like the Regional Direct Air Capture Hubs Program have been making steady progress.  

Figure 1. Federal funding for industrial decarbonization 

The federal government is simultaneously investing in clean energy manufacturing supply chains and the creation of good-paying jobs, especially in areas where jobs have been lost over time, as well as the decarbonization of the industrial sector. According to the Interagency Working Group on Coal & Power Plant Communities & Economic Revitalization, coal mining employment in the U.S. fell from >175,000 in 1985 to ~40,000 in 2020.¹ Through the Qualifying Advanced Energy Project Credit (48C), billions of dollars are going toward projects located in designated energy communities,² which includes those with coal mines or power plants that have been shut down, spurring economic development and creating quality employment opportunities in these hard-hit areas.  

Since the passage of the IRA, the U.S. Department of Treasury (Treasury) has been soliciting comments and developing regulations and guidance on eligibility requirements for federal clean energy tax incentives within the industrial sector (ex., 45X, 45Y/48E, 45V, 45Q) to provide accessibility and clarity to eligible taxpayers. In addition to incentivizing clean energy production, the regulations and guidance are also meant to ensure the clean energy transition is centered around workers and good-paying jobs. For example, in June 2024, Treasury released final rules on prevailing wage and apprenticeship requirements for clean energy tax credits that allow taxpayers to claim 5x the amount of the base incentive if they pay their employees prevailing wages and hire registered apprentices. Climate Power analysis cited by Treasury found that these investments have already created more than 270,000 new clean energy jobs across the country for electricians, mechanics, construction workers, technicians, support staff, and more. Energy Futures Initiative and AFL-CIO estimate that number will increase to nearly 1.5 million by 2030.

Federally funded projects in states and communities 

States and communities across the U.S. are leveraging federal funding and tax credits to advance industrial decarbonization goals. For example, in grant funding alone: 

• West Coast/Western U.S.: California and the Pacific Northwest have announced projects to advance low-carbon manufacturing, hydrogen, and carbon capture and sequestration for industrial decarbonization, especially in the cement and glass sectors. In California, for example, by reducing natural gas use by 70% and increasing recycled content by 30% in its glass bottle production process, Gallo Glass plans to contribute to the decarbonization of a large portion of glass used in the state’s wine and spirits industry. 

• Midwest/Plains: Federal funding to decarbonize manufacturing of aluminum, iron, glass, and cement is contributing to supply chains across Indiana, Missouri, Ohio, and Michigan. For example, the Cleveland-Cliffs Steel Corporation is planning a project to install a hydrogen-ready flex-fuel Direct Reduced Iron (DRI) plant and two electric melting furnaces at Cleveland-Cliffs’ Middletown Works mill in Ohio, leading to an estimated 1 million tons of GHG emission reductions per year. 

• Gulf Coast: Numerous projects have been proposed and awarded in Texas and Louisiana toward decarbonizing chemicals, refining, steel, iron, and pulp and paper manufacturing. Projects include electrification, clean hydrogen, and carbon capture and sequestration. This includes Calpine’s plans to build the Baytown Carbon Capture and Storage Project, which would capture up to 2 million metric tons of CO2 annually and would be the first full-scale implementation of CCS technology at a natural gas combined cycle power plant in the US. 

• East Coast: Projects in development include improvements in cement, glass, steel, and aluminum manufacturing or recycling, heat processes, and more. Many of these projects are proximal to emerging hydrogen projects that can further advance industrial decarbonization. For example, in Virginia, the Roanoke Cement Company plans to demonstrate the ability to utilize widely available clay types to minimize the most carbon-intensive component in cement as part of their Limestone Calcined Clay Cement Production project. 

In addition to this project-specific funding, DOE just announced $44.5 million in funding for nine university and industry-led regional partnerships to advance commercial-scale carbon capture, transport, and storage across the US through the Regional Initiative for Technical Assistance Partnerships (RITAP) program. Each of the partnerships will provide technical assistance to project developers, regulators, community advocacy groups, labor organizations, and other stakeholders in particular regions to enable the permanent storage of carbon dioxide emissions from industrial operations and power plants and legacy emissions from the atmosphere.  

The map shown in the image below highlights recent project announcements across the U.S. from some of the key federal funding programs aimed at decarbonizing the industrial sector. 

Figure 2. Federally funded projects for industrial decarbonization as shown on CATF’s Built to last: Climate progress near you map

Additional federal resources are available to increase community capacity to engage with industrial projects, such as the new Regional Energy Democracy Initiative (REDI), a $5 million pilot program designed to provide capacity building and technical assistance for communities in the Gulf Coast to help them maximize the benefits from DOE’s clean energy investments.

2025 and beyond: What happens next? 

The industrial sector requires continued support and the certainty that current funding and tax incentives will persist. The strong demand from industry for funding to support decarbonization proves broad support and appetite. 

Federal actions 

The industrial sector needs continued federal strategy and leadership, such as the DOE Upcoming Pathways for U.S. Industrial Transformations: Unlocking American Innovation, an upcoming vision study to identify industry-specific pathways to decarbonization. Continued investments in research, development, and demonstration will enable industry to lower the emissions cost of new technologies, opening the door to private sector investment. Treasury needs to issue remaining guidance for tax credits that ensures they truly advance decarbonization goals, remain consistent with legislation, and are accessible to a broad range of stakeholders. As EPA implements its new power plant CO2 control rules, it should explore additional policies to drive decarbonization across other industries with feasible decarbonization pathways.  

Leadership across the federal government must be coordinated and unified to advance industrial decarbonization swiftly and effectively. Federal agencies must break down silos and coordinate their resources to better serve on-the-ground deployment and address remaining barriers to utilizing federal resources at the state and local level. This includes modernizing procurement and application processes and emphasizing support and coordination with state and regional stakeholders.  

State and local actions 

Ideally, states will maintain momentum and leadership in the industrial sector by seeking out and organizing stakeholders to access federal funding. CATF recently published a resource guide for states on how to leverage these opportunities. State and local governments can unite to address siting and permitting concerns and support the necessary supply chains for clean industrial deployment. To achieve an equitable transition, communities also need more devoted resources and to have a say in project benefits. States assist in aligning resources across state agencies and with local stakeholders to aid in planning, technical assistance, and capacity building. States can also lead in workforce development, ensuring that local stakeholders benefit from local projects. 

Project clusters should take advantage of shared infrastructure and learnings where practicable, and industry leaders should demonstrate the value of decarbonization. See the CATF CCS activity map to view developing clusters. Projects and companies should place an increased focus on community engagement and transparency, ensuring prioritization of projects and investments where they will have maximum impact. 

There is a lot to do to reach U.S. industrial decarbonization goals, and the next few years are critical for capturing the additive benefits of IIJA funding and IRA tax credits. We must work harder than ever to demonstrate the benefits these resources are creating for local communities, industry, and our economy.

To learn more about opportunities to decarbonize industrial sectors, and where investments are landing in states, visit CATF’s U.S. Implementation Resource Hub.