Decarbonizing the industry and manufacturing sector to achieve the global energy transition

Decarbonizing the industry and manufacturing sector to achieve the global energy transition

The global energy transition is accelerating, with countries around the world setting ambitious goals to reach net-zero emissions by 2050. Achieving these targets will require a significant reduction in fossil fuel emissions, which can be made possible through the development and scaling of renewable energy sources such as wind, solar, and modern biofuels.

While much attention has been focused on decarbonizing power generation and transportation, one of the most vital—and often overlooked—areas of this transition is the industrial and manufacturing sector. Given its significant energy demands and carbon emissions, addressing this sector is essential for the success of the global energy transition.

Table of Contents

1.     The Global Energy Transition in Context

2.    Why Industry and Manufacturing Are Critical

3.    The Big Picture: Energy Use and Emissions

4.    Decarbonizing Industry for a Sustainable Future

5.    Conclusion: Industry and Manufacturing as the Next Frontier

6.    References

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1.   The global energy transition in context

Putting the term “energy transition” in context is also important to understand the different nuances of the energy transition that we are going through today. Throughout history, humanity has undergone several “energy transitions”, each reshaping economies and societies.The shift from wood to coal in the 18th century powered the Industrial Revolution, enabling mass production and rapid urbanization. In the late 19th and early 20th centuries, coal gave way to oil and natural gas, fueling transportation, electricity, and modern industry. These transitions were driven by the quest for more efficient and abundant energy sources, often disregarding environmental impacts.

Unlike previous transitions, which sought efficiency and abundance, today's energy shift carries an entirely new imperative. It’s not mainly about finding more powerful fuels, but about defossilizing our energy systems to limit global warming to1,5°C above pre-industrial levels to stave off some of the most devastating and long-lasting effects on the climate crisis. Unlike past transitions, which were primarily about economic growth, this one is driven by a global environmental imperative. The focus now is on renewable energy—like wind, solar, and bioenergy—that can power economies while reducing carbon emissions and safeguarding the planet for future generations.

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2.  Why industry and manufacturing are critical

Industry and manufacturing are cornerstones of modern economies, producing the materials and goods that fuel growth and development. However, these sector is also one of the largest sources of carbon emissions. Energy-intensive processes, such as those used in steel and cement production, rely heavily on fossil fuels, particularly coal and natural gas, to achieve the high temperatures and continuous energy supply required.

Since the early 2000s, global demand for cement and steel has more than doubled, while plastic production—a key component of the chemical industry—has surged by over 90%. As economies continue to grow and develop worldwide, the need for these materials will only increase. This rising demand intensifies the already significant challenges in decarbonizing these energy-intensive industries.

Decarbonizing industry and manufacturing are especially challenging because many of these processes cannot easily switch to renewable energy. Electrification is not yet viable for certain industrial activities due to the enormous energy density required. For example, while renewable electricity can power many applications, producing the extreme heat needed in steelmaking is still a technical barrier for most clean energy solutions.

Despite these challenges, addressing emissions from industry and manufacturing is critical for several reasons. First, these sectors are major direct contributors to global greenhouse gas emissions, responsible for a significant share of global carbon output. Without reducing emissions from these processes, achieving global climate targets will be impossible.

Second, the energy transition in other sectors—such as power generation and transportation—depends on a decarbonized manufacturing sector. Solar panels, wind turbines, and electric vehicles all require materials like steel, cement, plastic, aluminum, and rare metals. If these materials continue to be produced using fossil fuels, the environmental benefits of renewable energy technologies could be undermined.

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3.   The big picture: Energy use and emission

Globally, industrial sector accounts for about 25% of total CO₂ emissions, with sectors like steel, cement, and chemicals being some of the largest energy consumers. This energy consumption is still largely dependent on fossil fuels—especially coal and natural gas—because the processes involved require high temperatures and continuous energy supply. As global energy use shifts toward cleaner sources, the industrial sector stands as one of the last bastions of heavy fossil fuel dependence.

Fossil fuels remain the dominant source of energy for industry, with electrification progressing more slowly than is needed. The industrial sector accounted for 37%(166 EJ) of global energy use in 2022, compared to 34% in 2002. Growth in energy consumption over the past decade has been driven largely by continued rising production in energy-intensive industry subsectors.

In IEA’s Net Zero Emissions scenario for 2050, coal, oil and gas plays a diminished role already in 2030, where bioenergy and electricity plays a pivotal role and needs to get expanded until 2030.

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4.  Decarbonizing Industry for a Sustainable Future

The shift that needs to happen in industrial manufacturing is not only vital for achieving global emissions targets but also offers a chance for innovation and sustainable growth. To enable this transition, significant investment in new technologies and infrastructure will be required. This includes advancements in renewable energy technologies capable of meeting the high energy demands of industries and policy frameworks that incentivize clean energy investments in manufacturing.

One such solution is provided by Jord; producing high energy renewable solid biofuel to accelerate the transition from fossil fuels in industries. So, there are solutions to a lot of environmental challenges in the defossilization of the industry and manufacturing sectors, but how do we get these solutions to scale?

Capital allocators and governments need todo what they should. Capital must be allocated to solutions that needs to exist, instead of solutions that is funded just because they can exist today. Misallocated capital can delay critical advancements, locking industries into a future where fossil fuels persist. Strategic investments today will shape the industries of tomorrow.

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5.  Conclusion: Industry and Manufacturing as the Next Frontier

The global energy transition cannot succeed without the full participation of the industrial and manufacturing sectors. These industries are responsible for a significant portion of global carbon emissions, and without decarbonizing them, the goals of the energy transition will remain out of reach.

Governments and capital allocators need to step up to the task at hand. Governments must provide strong regulatory frameworks, incentives, and policies that encourage industries to adopt cleaner technologies, while capital allocators have the responsibility to direct capital and investments toward sustainable innovations. Without coordinated action and financial support from these key players, the necessary transformation of industry and manufacturing will remain out of reach.

As we push toward a decarbonized world, it is critical that we not overlook the role of industry and manufacturing in this transformation. The success of the energy transition depends not only on the deployment of renewable energy technologies but also on rethinking how we power the very foundations of modern economies.

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Reference

IEA. (n.d.). Industry- Energy System. IEA.https://www.iea.org/energy-system/industry

IEA. (2023),Industrial energy consumption by fuel in the Net Zero Scenario, 2000-2030, IEA, Paris https://www.iea.org/data-and-statistics/charts/industrial-energy-consumption-by-fuel-in-the-net-zero-scenario-2000-2030,Licence:CC BY 4.0

IEF. (2024). How previous energy transitions provide lessons for this one.International Energy Forum.https://www.ief.org/news/how-previous-energy-transitions-provide-lessons-for-this-one

Argus. (2023). Viewpoint: Asian wood pellet demand to diverge. Argus Mediahttps://www.argusmedia.com/en/news-and-insights/latest-market-news/2406850-viewpoint-asian-wood-pellet-demand-to-diverge