Accelerating the transformation

The toolkit maps several enablers that can be put in place to accelerate the decarbonisation of hard-to-abate sectors. These will require decisive action by governments, as well as by the private sector. The enablers also have fundamental implications in terms of national and international policy and regulatory environments, technology and infrastructure planning, global commodity markets, and international supply chains and business models.

Creating an enabling policy environment

Hard-to-abate sectors need a supporting policy environment to accelerate the massive investments in energy technology and infrastructure that are required over the next two to three decades. Project developers and investors need to have sufficiently clear, stable and credible signals of decarbonisation objectives and sufficient economic incentives to make final investment decisions. A suite of policies – adapted to the needs of specific sectors – will be needed. This suite should include both environmental regulations and economic support measures, among other policies.

• Recommendation 1: Establish sector-specific decarbonisation targets. Governments can support the transition by establishing long-term, sector-specific, national objectives with clear intermediate milestones. Beyond national policies, countries can work with other countries towards further international convergence in the decarbonisation objectives for key traded commodities, such as steel, ammonia and methanol, as well as aviation and shipping fuels. These actions are particularly important for the international shipping and aviation sectors.
• Recommendation 2: Take further steps towards creating a level playing field for green technologies. Governments can accelerate the adoption of green technologies in hard-to-abate sectors by implementing national carbon pricing policies that internalise the full value of the negative environmental externalities of fossil energy. Aligning energy taxes with decarbonisation objectives – for example, by reducing the relative taxation of electricity compared with fossil fuels – can also play an important role by driving the electrification of heat and transport applications. Furthermore, countries can work together towards further convergence in international carbon pricing, for example through sector-specific international agreements.

Fast-tracking infrastructure deployment and technology adoption

A key condition for progress in the decarbonisation of hard-to-abate sectors is the development of the required clean energy supply and value chains, at the required pace. Hard-to-abate sectors will need a massive scale-up in power generation capacity, either for direct electrification solutions or to produce hydrogen and synthetic fuels from clean power.

Over the last decade, renewable capacity additions have grown consistently, reaching a record 585 gigawatts (GW) installed in 2024. However, IRENA’s 1.5^°C scenario indicates that the rate of deployment needs to roughly double, to 1 043 GW of new renewable generation capacity installed per year. At COP28, in line with IRENA’s recommendation, more than 130 countries committed to triple installed renewable power capacity, collectively, to at least 11 000 GW by 2030.

• Recommendation 3: Accelerate the deployment of renewable power supply. Governments can support the transition in hard-to-abate sectors by scaling up the deployment of renewable power supply in line with the COP28 pledge of tripling renewable capacity by 2030. This will require additional efforts, including a substantial scaling up of investments and updating of policies and regulations. Examples of the latter include streamlining permitting procedures and adaptations in power market design.

Scaling up bioenergy supply will also be critical. Sectors like aviation and shipping, as well as chemical production, will rely to a significant extent on sustainable bioenergy and bio-feedstocks. The deployment of biomass with carbon capture and utilisation will be increasingly important, too, as the production of synthetic commodities – such as methanol or kerosene – will require a renewable source of carbon.

• Recommendation 4: Scale up sustainable bioenergy production and sustainable carbon sourcing. Governments can support the transition in hard-to-abate sectors by working together to scale up global sustainable biomass supply chains. This can be achieved with policies that provide incentives for the production and/or use of bioenergy, coupled with strict sustainability governance procedures and regulations.

Green hydrogen supply will be key for the decarbonisation of some hard-to-abate sectors like steel and chemicals, as well as to produce synthetic fuels. IRENA estimates that the supply of hydrogen would need to expand about five-fold by 2050, to more than 500 Mt per year. This implies that electrolyser capacity would need to grow by more than three orders of magnitude (from about 3 GW installed today to about 5 700 GW in 2050). While hydrogen can be used directly in some energy applications, in practice most hydrogen will likely be converted into derivative commodities – such as ammonia, methanol and synthetic fuels – or be used to process other products (e.g. in producing low-carbon iron from iron ore).

• Recommendation 5: Kick-start deployment of production capacity for green hydrogen derivatives. Governments can accelerate the transition in hard-to-abate sectors by supporting the first wave of commercial-scale plants to produce low-carbon commodities – such as ammonia, methanol and iron – using green hydrogen.

Timely infrastructure planning and deployment will be key. Investment in power grids at all levels (i.e. transmission and distribution, including EV charging infrastructure) is needed to unlock investments in power generation capacity. If not deployed on time, a lack of grids can be a critical bottleneck in the transformation of power supply and end-use sectors. Smart electrification strategies applied to transport and industry can add flexibility to the power system. These strategies make the power system more efficient, reducing the need for additional capacity in generation, transmission or distribution grids, while also making it possible to integrate more renewable sources and reduce peak loads and grid congestion.

The timely planning and deployment of other infrastructure, such as hydrogen supply networks or sustainable fuel terminals in ports and airports, will also be critical for those sectors relying on fuels. Cross-sectoral, integrative planning – involving authorities from multiple ministries and/or administration levels – will be required to accelerate the planning, permitting and deployment of such critical infrastructure.

• Recommendation 6: Enhance planning to accelerate the deployment of critical infrastructure. Governments can support the transition in hard-to-abate sectors by strengthening cross-sectoral planning and international co ordination in energy, industry, trade, transport and the environment. They can also support the transition by accelerating the permitting and deployment of critical energy infrastructure, including power grids (paired with smart electrification strategies), bioenergy conversion plants, hydrogen networks, and fuel terminals in ports and airports.

The transition in hard-to-abate sectors requires fundamental shifts, rather than gradual steps. The window of opportunity for action to counter the global climate threat is closing fast. Given the long duration of industrial and transport assets, reaching net zero by 2050 requires that the bulk of investments need to be redirected towards net-zero compatible technologies within the next five to ten years. Solutions that deliver only partial emission reductions, such as replacing oil or coal with natural gas, will not be sufficient and will increase the risk of assets becoming stranded.

• Recommendation 7: Drive the adoption of innovative technologies to avoid lock-in. Governments can accelerate the global transition in hard-to-abate sectors by prioritising and promoting the deployment of technologies that are consistent with net-zero emissions, such as battery electric trucks, hydrogen-based steel, and SAF. Countries can also work together towards the widespread adoption of such new solutions, particularly in developing regions. This can be done through technology co operation programmes, the exchange of best practices, and coordinated policy efforts to help prevent long-term dependence on traditional high-emission technologies that could delay climate goals.

Driving markets and financial flows

The international markets for industrial commodities like steel, chemicals and transport fuels are characterised by strong international competition and low margins. As the production of low-carbon commodities comes at a cost premium, industry players facing international competition are disincentivised from investing in assets for the production of these commodities, as this would put them at a commercial disadvantage.

In the absence of a sufficiently high and widespread carbon price, there is a need to kick-start markets for low-carbon commodities. The private sector can contribute to such market creation through voluntary schemes that leverage the willingness of some end consumers to pay a premium. However, these voluntary markets have limited scalability. Public sector support will be needed to create demand at scale and establish the necessary regulatory framework for those markets to operate.

• Recommendation 8: Create initial markets for low-carbon commodities. Governments can support the transition in hard-to-abate sectors by establishing green public procurement programmes or mandates for low-carbon commodities. Countries can also work together to accelerate international convergence in definitions, standards, thresholds and certification procedures to enable the international trade of these low-carbon commodities (IRENA, 2024f).

Today, hard-to-abate sectors receive a disproportionately low share of global climate finance. Although climate finance flows have nearly doubled since 2020 – reaching USD 1.4 trillion in 2022 – they are significantly below the levels needed to avoid the worst impacts of climate change. This situation is starker when looking at the hard-to-abate sectors in isolation. The industrial sector only received USD 14 billion of climate finance in 2022 (roughly 1% of total climate finance), despite being responsible for almost a third of all CO₂ emissions. In that same year, shipping and aviation received just over USD 6 billion, or 0.4% of all climate finance, despite being responsible for roughly 5% of global CO₂ emissions (Buchner et al., 2023).

• Recommendation 9: Bridge the finance gap. Governments can drive an increase in global investment flows towards hard-to-abate sectors by working with the private sector and financial institutions to de-risk projects. Government support for project bankability can be implemented through several mechanisms, such as via technical and financial assistance as well as via de-risking instruments, including the provision of guarantees, concessional loans and blended finance.

Developing a skilled workforce

The deployment of new technologies in hard-to-abate sectors will require a workforce with a new set of skills compared with those needed for legacy fossil-based technologies. Supporting the current workforce through the transition, and building a new workforce with the right skills, will be essential. This will require the implementation of new educational programmes for the next generation of workers, as well as reskilling or upskilling programmes for today’s workforce.

• Recommendation 10: Support the development of a skilled workforce. Governments can play a significant role in developing the skills needed for the transition in hard-to-abate sectors. Potential measures include exchanging information on innovative technologies and best practices and providing financial support to specialised educational programmes and trainings. Countries can also work closely with other countries to foster multilateral collaboration among national governments, international organisations, industry stakeholders and educational institutions. This collaboration can also help developing and emerging economies to build the right set of skills and capacity for the transition in hard-to-abate sectors.

Leveraging international co operation

To a great extent, the decarbonisation of hard-to-abate sectors is a multilateral challenge. Industrial commodities like steel, chemicals or fuels for shipping and aviation are internationally traded. Similarly, the supply chains for the technologies that hold the key to reducing emissions in those sectors are also international. Multilateral co operation will be critical if the world is to accelerate the adoption of those technologies and bring sectors that are hard to abate closer to net zero by 2050. A large fraction of the projected growth in activity from hard-to-abate sectors is expected to come from developing economies. While action within the advanced economies is critical, it will not be sufficient alone to steer the world on track to net zero by mid-century.

The increasing cost-competitiveness of renewable power technologies may reshuffle the geographical footprint of some hard-to-abate industries. Regions with inexpensive, abundant and high-quality renewable energy resources may be in the best position to produce the lowest cost, low-carbon commodities. This creates an opportunity for international co operation to reduce the costs of the transition in hard-to-abate sectors globally. Commodity exporters with abundant and low-cost renewables could capture more value in the supply chain by exporting processed products rather than raw materials. They could, for example, export iron processed with renewable hydrogen, rather than exporting iron ore. Importing countries could reduce the overall costs of decarbonising their national industries while retaining some downstream, high added-value processes within their borders.

• Recommendation 11: Foster international co operation. Governments can work together towards mutually beneficial partnerships to decarbonise supply chains for industrial commodities. This can be done through co operative long-term investment planning that results in a lower cost of decarbonisation for all.