Decarbonizing Heavy Industry

Heavy industry accounts for around one-third of global greenhouse gas (GHG) emissions.[5] We think there are three overarching strategies for reducing emissions from heavy industry: lower-carbon production processes; carbon capture, utilization and storage (CCUS); and material usage efficiency.[6] Though decarbonization pathways vary substantially by industry, we think making progress on all three strategies is plausible and potentially cost-effective. For the purposes of this analysis, we primarily focus on lower-carbon production processes, since we believe this is the most generally applicable way to substantially reduce GHG emissions across heavy industry products. However, there are certainly industry-specific cases in which CCUS or material usage efficiency can and should be integral components of a decarbonization strategy. We may investigate this further in the future. See below for additional details on decarbonization pathways.

Switch to lower-carbon production processes: These emissions include energy emissions and process emissions, and can be reduced with a variety of strategies. For example, producers can replace carbon-intensive energy inputs (e.g., metallurgical coal) with lower-carbon inputs such as hydrogen or bioenergy, or with direct electrification from lower-carbon electricity.[7] Process emissions result from the manufacturing process itself (e.g., calcination reaction for cement), and could potentially be reduced with different raw materials or chemical processes.[8] For example, a research group at Swiss university Ecole Polytechnique Fédérale de Lausanne is leading a project to develop limestone calcined clay cement, a blend of two materials that it claims reduces up to 40% of CO2 emissions.[9]

Implement carbon capture, utilization, and storage (CCUS): Industries collect and either store or use carbon emissions generated during the manufacturing process. We view CCUS (also loosely referred to as “CCS” or “carbon capture”) as an important potential pathway to reduce emissions. The International Energy Agency (IEA) notes that achieving net-zero emissions for industrial applications without CCUS could be significantly more expensive.[10] However, deployment is in its early stages, can be cost-prohibitive, and is less viable for industries which have many emissions points in their processes. According to the Global CCS Institute, there were 30 CCS projects in operation in 2022, including commercially available CCUS technology used by industrial facilities.[11] CCUS can also decrease facilities’ efficiencies and increase water use, which can make CCUS financially nonviable.[12] Since industrial facilities can sometimes have many decentralized emission points (e.g., small process heaters in a steel plant), CCUS may also be financially nonviable for industries without highly-concentrated sources of emissions.[13]

Increase material usage efficiency: Producers reduce material requirements during the manufacturing process and/or consumers use less of the final product. We think this is a highly certain way to reduce emissions. Additionally, it doesn’t require technological advances and, if feasible, should often be highly cost-effective (since producers or consumers simply use less than they otherwise would have). However, we think material usage efficiency will usually only result in marginal gains because we think industries and consumers are generally only willing or able to reduce consumption by marginal amounts. For example, it is possible that the agricultural sector might reduce fertilizer use by 10%, but we view it as relatively unlikely that the sector would reduce consumption by 50% absent any broader advances in fertilizer technology. If material usage efficiency gains are minimal, this might further encourage inaction in cases where industrial products are a relatively small portion of a product’s cost.[14] Purchase decisions may also be relatively removed from consumers (e.g., an apartment buyer does not make steel procurement decisions), which might make consumer-based material usage efficiency more difficult.[15] It is possible that material usage efficiency could result in substantial GHG emissions reductions for some heavy industry products. For example, overhauling building codes might allow the construction sector to consume substantially less steel or cement per building constructed. We have not investigated material usage efficiency closely, and may look into industry-specific opportunities in the future.

Philanthropic efforts to decarbonize heavy industry

To determine where we should focus our analysis, we broadly considered ways in which philanthropic efforts might be targeted at direct decarbonization efforts, consumer influence, corporate advocacy, and government advocacy. We considered eight overarching strategies and roughly assessed them using the “Importance, Tractability, and Neglectedness” framework, which we define as:[16]

Importance – How many tons of GHGs can the strategy avoid or remove from the atmosphere (in expectation).
Tractability – How likely each strategy is to succeed in avoiding or removing GHGs from the atmosphere. We reviewed evidence for a causal link between the intervention and significantly avoided or removed GHGs, as well as factors that would influence adoption, implementation, and ability to scale.
Neglectedness – Whether the strategy has room for more funding.

See below for a high-level summary of our analysis. We deprioritized strategies with low importance, tractability, or neglectedness. In general, we believe the most promising strategies target corporations/governments and focus on government funding or regulation. We assessed them as a broader theory of change (see section below), and subsequently as unique strategies.

Table 1. Strategies to decarbonize heavy industry

Theory of change for decarbonizing heavy industry

We think it is difficult to summarize a broad theory of change, since industries can vary substantially in terms of GHG emissions, technology, economic model, and regulatory environment. However, our impression is that heavy industry can generally be decarbonized if there is (1) adequate demand for low-carbon products, (2) a supportive regulatory framework, and (3) transition assistance that facilitates a switch to low-carbon production. Examples of transition assistance include R&D funding, demonstration hub funding, tax credits, or direct commercialization co-funding (additional detail below). We developed a high-level theory of change to illustrate how this might play out in practice:

A flowchart with three types of boxes: yellow boxes indicating inputs, blue boxes indicating outputs, and green boxes indicating outcomes. At the top is a yellow box, Government advocacy; at the bottom is another yellow box, Corporate advocacy. Between these boxes, there are three other groups of inputs. On the left side, there are two input boxes in a group labeled "Generate demand": Govt passes low-carbon procurement policies and Corporations commit to low-carbon purchase standards. In the middle, in a group labeled "Establish a supportive regulatory framework", there is one box, Govt. passes domestic and/or import regulation, which also has an arrow leading to the previously mentioned low-carbon purchase standards box to its left. On the right, in a group labeled "Ensure transition assistance", there are two boxes, Govt passes legislation to provide govt funding and Producers use existing govt support. Government advocacy leads to all three, whereas corporate advocacy leads only to the left and right boxes. These three categories of inputs lead to two blue outputs: Low-carbon production costs decrease and Producers switch to low carbon production; an arrow also indicates that these two outputs feed into each other. The last output has an arrow leading to a green outcome box, Avoided GHG emissions.

Figure 1. High-level theory of change for decarbonizing heavy industry

We include “low-carbon production costs decrease” as an output because we believe it is an important pathway for some industries. Additionally, we think it is useful to illustrate the virtuous cycle that can exist between producers switching to low-carbon production and low-carbon production costs declining. However, we think the degree to which cost decreases matters varies substantially by industry. For example, research organization Agora believes low-carbon steel costs are currently palatable for automakers and their consumers.[17]

Though this theory of change describes global decarbonization efforts, we purposefully do not specify a country-specific or global pathway, since we think this varies too much by industry and strategy. As an example, consider aluminum production. In 2021, China produced an estimated 57% of the world’s primary aluminum, so it could make sense to focus decarbonization efforts directly on Chinese governments and corporations.[18] Alternatively, efforts might advance fastest by encouraging the Canadian government to provide additional transition funding in the spirit of their CAD$120M investment in zero-carbon smelting technology.[19] Or it could make sense to apply pressure to the global automotive industry, which accounts for around one-fifth of primarily aluminum consumption.[20] We think each industry’s decarbonization strategy should consider its unique challenges and opportunities to inform its geographical pathway to global decarbonization.

Examining the assumptions behind decarbonizing heavy industry’s theory of change

Below, we discuss and evaluate the main assumptions related to decarbonizing heavy industry’s theory of change. We rank whether we have low, medium, or high certainty about each assumption.[21] Our assessment is based on both primary and secondary evidence, as well as our general impression of the plausibility of the assumption. Importantly, a number of the stages of this theory of change may not be amenable to easy measurement or quantification, are not supported by a robust evidence base, or are expected to occur in the future but have not happened yet. Additionally, we think the importance of each assumption varies on an industry-by-industry basis.

1. Government passes low-carbon procurement policies (high certainty)

Within the US, we have high certainty that this assumption generally holds. We think this because (a) we think philanthropic dollars can be directed to activities that influence government policymaking and (b) there is substantial and growing precedent for low-carbon procurement policies.

The US government is the largest purchaser in the world, and a major infrastructure funder.[22] Advocating for government procurement product standards could directly lower carbon emissions for government-purchased products, and might subsequently shift general production to lower-carbon outputs. We think philanthropic dollars enabling activism and insider advocacy might be especially effective at influencing policymaking. Activism activities could include media campaigns, political endorsements, or demonstrations.[23] Examples of insider advocacy include direct lobbying, drafting legislation, or developing policy talking points.[24] From speaking with heavy industry stakeholders (primarily philanthropic funders, industry representatives, and policy experts), it is our impression that nonprofits are well-placed to advance these efforts. For example, a major climate philanthropy funder (information anonymized) believes that funding non-profit advocacy work to change government procurement standards is the most feasible way to generate enough demand for low-carbon products such that heavy industry shifts its overall production to lower-carbon outputs without needing harder-line regulation.[25] Based on past Giving Green reviews of activism and insider advocacy, we generally consider these to be promising but uncertain strategies for which success is more likely if strategies are contextualized and aligned to a broader theory of change.[26] We expect that organizations recommended by Giving Green would be capable of contextualizing strategies within a robust theory of change.

In general, “Buy Clean” policies are becoming increasingly commonplace, suggesting that this output is generally feasible. This could be especially important for the success of insider advocacy efforts, which may be most effective with already-aligned policymakers.[27] Municipal, state, and federal governments can all make commitments. For example, New Jersey recently passed legislation establishing state and local purchasing requirements for low-carbon concrete, several states have passed general Buy Clean legislation,[28] and the Biden Administration’s Buy Clean Task Force has prioritized low-carbon federal government procurement of steel, concrete, asphalt, and flat glass.[29]

Outside of the US, we have less certainty in this assumption. This is partially based on our own lack of focus on non-US efforts. It is our general impression that this assumption may be likely to hold in other high-income countries, but non-high-income countries may not prioritize spending additional funding to procure lower-carbon heavy industry products. For example, a 2021 UNEP survey on countries’ procurement policies notes the EU’s outsized representation and “long-standing efforts” in implementing green procurement policies.[30] Public procurement accounts for around 12% of GDP in OECD countries, and up to 30% in lower-income countries.[31]

2. Corporations commit to low-carbon purchase standards (low certainty)

We think corporations may generally be reluctant to make low-carbon purchase commitments. It is our impression that corporations are primarily dedicated to profit maximization, and would only make low-carbon purchase commitments in cases where either (a) it already represents the status quo or (b) could increase profit.

As illustrated in our theory of change, low-carbon purchases could become the de facto status quo due to government regulation or low-carbon products generally becoming the market standard. In these cases, advocacy efforts to push corporations to make low-carbon purchase commitments would not have any additional impact.

In some cases, we believe low-carbon purchase commitments could increase profits for corporations. This could be due to increased revenue (e.g., by increased purchases from environmentally-conscious customers) or decreased costs (e.g., by increasing access to environmentally-conscious lenders). For both of these cases, philanthropic dollars could fund direct or indirect efforts to make low-carbon purchases relatively profitable. As with government commitments, corporate advocacy efforts could include activism (e.g., consumer awareness media campaigns) and insider advocacy efforts (e.g., direct engagement with corporate executives). We think corporate advocacy could either cause increased corporate awareness of an already existing profit opportunity, or shift actual economics such that low-carbon commitments become the most profitable path forward. However, we have low certainty in both of these strategies. In general, we believe corporations are relatively aware of existing profit-making opportunities—and as mentioned previously, the economics of many heavy industry products can make it difficult for low-carbon switches to be profitable without transition support.[32] We also think advocacy efforts to shift profitability might be low-promise since the general public is relatively removed from heavy industry products (e.g., private citizens purchase vehicles rather than aluminum to manufacture vehicles).[33]

We think some corporate commitments are likely to be meaningful, and there is some precedent for heavy industry corporations engaging in commitments. For example, around 60 industrial corporations have signed on to reduce GHG emissions by 50% over 10 years via the Biden Administration’s “Better Climate Challenge”.[34] In 2021, the Australian iron and ore company Fortescue Metals Group publicly announced its intentions to produce “green steel”.[35] This gives us some confidence this is a potentially feasible pathway to change. However, we are uncertain about whether corporate advocacy caused these commitments, as well as whether these commitments represent a faster decarbonization shift than would have otherwise occurred.

3. Establish a supportive regulatory framework (domestic and/or international) (medium certainty)

As with philanthropic efforts to influence government procurement policies, we think government advocacy can increase the likelihood of a supportive regulatory framework for decarbonizing heavy industry. However, we only have medium certainty in this assumption, since it is our impression that regulatory influence is (a) relatively more complicated to influence and (b) is more likely to face political opposition than procurement policies.

We think regulatory influence is generally more complicated because impactful regulation is more likely to occur at the federal or international level. Whereas state-level procurement policies may take relatively less effort and still have some marginal impact, regulations to decarbonize heavy industry at subnational levels may be more difficult to pass and have less effect. For example, philanthropic funding could be used to solidify legal precedent for the US Environmental Protection Agency’s (EPA) Clean Air Act to reduce heavy industry pollution, which can then be used nationwide.[36] Solidifying precedent for state-level regulation may either be less applicable or inapplicable to other geographies. Local regulation may also cause leakage, whereby stricter decarbonization regulation in one area causes heavy industry to relocate to a different location and continue emitting GHGs. Regulatory efforts such as the EU’s proposed “carbon border adjustments” are intended to prevent such leakage, but it remains to be seen how effective they are.[37]

Regulatory influence can also face political opposition, which can reduce the role and effectiveness of philanthropic funding. Whereas procurement policies reward heavy industry for decarbonizing, it is our impression that regulation is more often perceived to be penalizing and/or market-distorting, and can face substantial opposition. For example, some evidence suggests the private sector may financially support climate policy obstruction, including via trade organizations.[38] At an international level, punitive regulation such as the US’ 2018 25% tariff on imported steel may be opposed by other countries and result in protracted trade arbitration or countervailing tariffs.[39]

4. Ensure transition assistance (ensure government transition funding and/or ensure corporations use existing funding) (high certainty)

As noted above in our assessment of corporations committing to low-carbon purchase standards, we think corporations are primarily dedicated to profit maximization, and would only decarbonize in cases where either (a) it already represents the status quo or (b) could increase profit. We think substantial government transition assistance is an important strategy to increase the likelihood of both of these scenarios. For example, an analysis by the Mission Possible Partnership estimates that transitioning the global steel asset base to net-zero-compliant technologies will require an additional $8 billion to $11 billion annually—equivalent to around 0.6% of philanthropic support for industry, in general.[40] Using philanthropic funding to leverage relatively higher amounts of government funding could be a promising strategy to ensure transition assistance.

One of our main reasons for having high certainty in this assumption is that government transition funding already exists. For example, the IRA includes a $5.8 billion Advanced Industrial Facilities Deployment Program targeting industrial sectors such as steel, cement, and chemicals to use advanced low-carbon technologies.[41] Indirect incentives such as the 45Q tax credit also provide direct payment or tax credit to CCUS implementers on a per-ton basis.[42] Across all IRA provisions, corporations are eligible for around $216 billion in tax credits.[43] We think this provides strong suggestive evidence that there may be additional government transition funding assistance in the longer-term. However, policy stakeholders told us it is highly unlikely that any substantial additional government assistance will be approved in the next few years.[44] Additionally, we have not investigated non-US government transition assistance.

Given that additional transition assistance is uncertain, we think an especially important component of this strategy is helping corporations take advantage of existing funding. Philanthropic efforts could fund organizations to either provide direct technical assistance that helps corporations access funding, or advocate for governments to more explicitly direct existing funds to heavy industry. For example, as part of Industrious Labs’ (see Industrious Labs deep dive) aluminum decarbonization strategy, it plans to encourage members of Congress to direct the US Department of Energy to co-fund commercial applications of zero-carbon inert anode technology (expected to be licensed in 2024).[45] Since funding is already generally allocated towards these efforts, we view this as relatively feasible.

What is the cost-effectiveness of decarbonizing heavy industry?

As a rough plausibility check, we developed a cost-effectiveness analysis (CEA) to estimate the cost-effectiveness of efforts to decarbonize heavy industry (in terms of dollars per metric ton of CO2-equivalent reduced/avoided). As a proxy for these efforts, we estimated the effect that an advocacy campaign might have on increasing the cement emissions reductions targets of US Buy Clean policies (e.g., moving from a “low” reduction target of 10% to a “high” reduction target of 30 percent), as well as these policies’ subsequent impact on cement emissions reductions worldwide. Focusing this CEA on one industry means this CEA is likely not generalizable to decarbonizing heavy industry’s overall cost-effectiveness. Instead, it serves as a high-level sense-check of whether decarbonization efforts might be highly cost-effective. We chose to develop a more specific CEA because we think a CEA of decarbonizing heavy industry, overall, would include too many highly subjective guess parameters for us to have any confidence in its results.

Despite the narrow focus of this CEA, it also includes highly subjective guess parameters and should not be taken literally. In particular, we guessed the campaign cost, the campaign’s impact on US governments’ decisions to increase emissions reductions targets, the effect of target changes on US emissions reductions, and the effect of Buy Clean policies on global emissions reductions. Overall, we think decarbonizing heavy industry efforts could plausibly be within the range of cost-effectiveness we would consider for a top recommendation.[46] This is primarily due to heavy industry’s substantial GHG emissions, the government’s large role as a heavy industry consumer, and the potential effect that government emissions targets might have on reducing the carbon-intensity of global heavy industry products. Though we have low confidence in this CEA to estimate the cost-effectiveness of this specific philanthropic effort, we generally view it as a positive input to our overall assessment of decarbonizing heavy industry.[47] See below for a high-level explanation, and the model itself for additional notes and citations.

Costs: We guessed total campaign costs to be around $15 million, based on five organizations with $1 million annual budgets working on this campaign for three years.
Avoided GHG: We estimated direct avoided GHG based on Buy Clean policies targets, as well as indirect global effects due to these efforts. For Buy Clean policies, we primarily relied on a 2021 Global Efficiency Intelligence report estimating the concrete consumption and emissions of US local, state, and federal governments. We modeled the campaigns’ effects as increasing the likelihood that Buy Clean policies moved from “low” (10% reduction from baseline) to “high” (30% reduction from baseline) targets. For global emissions, we used the IEA’s 2030 net-zero goals for concrete and compared them to present-day tCO2e-intensity to guess that, per unit of concrete, GHG emissions could drop by 12%.
Effectiveness: For both Buy Clean policies and global emissions, we guessed that the campaign increased the likelihood of emissions reductions by 5%. For US local and state governments, we guessed that the campaign only targeted 50% of overall possible emissions. For all effects, we assumed reductions would have otherwise occurred five years later, such that the campaign’s marginal impact is limited to a five-year period.
Results: Our best guess is that this campaign avoids one tCO2e for around $1 (range: $0.40-$21). Within our best guess, we additionally estimated cost-effectiveness if the campaign does not impact non-US government emissions. We use this as a lower-bound stress-test, to see whether this intervention would still be within the range of cost-effectiveness we would consider for a top recommendation if it had no global spillover effects. In this case, we estimate cost-effectiveness declines to $8 per tCO2e (range: $4-$42), which is within this range.[48] We also developed a Guesstimate version of this CEA, which allowed us to assign ranges of values and probability distributions for certain inputs, and found similar results.

Is there room for more funding?

Support for decarbonizing heavy industry has increased, but some areas remain neglected.

Although heavy industry has been historically neglected, it has experienced an uptick in philanthropic interest in recent years. For example, ClimateWorks Foundation reported that annualized foundation spending on decarbonizing heavy industry was $55 million between 2017 and 2021, compared to $25 million between 2015 and 2020.[49] We think new philanthropic efforts—such as the Bezos Earth Fund’s commitment to decarbonizing the economy and Microsoft’s Climate Innovation Fund—partly explain this increased spending.[50]

Despite this higher interest, we think efforts focused on decarbonizing heavy industry still have room for more funding, and that some efforts remain especially neglected. For example, a 2021 Founders Pledge report estimates that decarbonizing heavy industry is only about 2% of overall philanthropic climate funding.[51] It also said that despite increased philanthropic funding for heavy industry, philanthropic funding for other sectors such as clean electricity are increasing relatively faster.[52] This suggests that decarbonizing heavy industry may be becoming increasingly neglected relative to other climate funding options.

We think there are promising new opportunities in decarbonizing heavy industry that could absorb more funding.[53] For example, Industrious Labs is in a relatively early stage of its advocacy efforts. It seems likely that philanthropic funding could be especially impactful in putting this organization, and perhaps other fledgling groups, on a different growth trajectory. For more information, please see our deep dive report on Industrious Labs.

Furthermore, we suspect that philanthropic spending may neglect certain geographies. For example, we expect India to ramp up its manufacturing and energy demand, but ClimateWorks Foundation estimates that from 2017 to 2021, foundations only spent about $1.7 million per year (on average) addressing India’s industry emissions.[54] Also, efforts to decarbonize industry in China—the world’s largest producer of steel and cement—received $11 million per year (on average).[55] Given that China produces more than 50% of the world’s steel and cement, this seems like a potential mismatch between philanthropic funding focused on China and China’s role in decarbonizing heavy industry.[56] Therefore, we believe efforts to decarbonize heavy industry in India and China may be relatively neglected. We have not investigated this in detail, and plan to conduct future research on funding opportunities in countries with high future expected emissions (see Bottom line / Next steps). For example, we may investigate Indian policies further in 2023.

Major funders of decarbonizing heavy industry

Foundations that have provided major funding for decarbonizing heavy industry include the Bezos Earth Fund, ClimateWorks, and various foundations in the Global Fertilizer Challenge. The Bezos Earth Fund has spent at least $21.5 million on decarbonizing heavy industry between 2020 and 2021.[57] In 2021, ClimateWorks Foundation granted about $7 million to efforts focused on decarbonizing heavy industry; we are unsure whether this includes any potential regranting from funds it received from the Bezos Earth Fund.[58] The Global Fertilizer Challenge includes various foundations and investors who have committed $21.5 million total to improve how fertilizer is made and used.[59]

Are there major co-benefits or adverse effects?

We think decarbonizing heavy industry could reduce local pollution and have unclear employment effects.

In general, we think a major benefit could include pollution reduction in areas with heavy industry manufacturing or processing facilities (e.g., aluminum smelters). For example, our recommended organization Industrious Labs uses EPA’s Clean Air Act as one strategy to decarbonize the aluminum industry.[60] Absent new pollution laws or increased enforcement of existing laws, decarbonizing heavy industry could generally result in reduced pollution if lower-carbon production is less polluting than high-carbon production.

Decarbonizing heavy industry may also have unclear effects on global employment. For example, if Buy Clean policies expand US heavy industry, this could result in increased US employment (e.g., by allowing a US aluminum smelter to remain open). However, if US import tariffs cause high-carbon production facilities in a foreign country to close, this could negatively impact foreign country employment. We have not looked into whether, overall, we expect decarbonizing heavy industry to increase or decrease global employment.

Key uncertainties and open questions

In general, we are uncertain about the cost-effectiveness of R&D efforts, the efficacy of government funding support, geographic focus, general equilibrium effects, and heavy industry code.

R&D cost-effectiveness: Decarbonization of certain industrial sectors will require substantial R&D to determine alternative processes or materials.[61] We are uncertain whether this research will successfully produce viable alternatives at reasonable costs, if these alternatives can feasibly scale, and how long this R&D might take. We also think there may be some instances in which investing in heavy industry R&D will result in avoided GHG emissions, but that investing those funds in carbon removal R&D or implementation to neutralize emissions may have been relatively more cost-effective.

Efficacy of government funding support: We think it is likely that most low-carbon production switches will make industrial processes and products more expensive, at least in the short term. We are uncertain whether government subsidies and/or market demand will be large enough to incentivize the adoption and scale-up of these new interventions. We think it is quite possible that, for some heavy industry products, government funding support does not cause a “tipping point” whereby the private sector adopts new low-carbon practices at scale.

Geographic focus: We evaluate interventions based on both direct impact and spillover effects. However, measuring spillover effects can be difficult, and may be particularly important for many decarbonization efforts where we expect domestic innovation or regulation to have global impacts. We may be wrong about the degree to which domestic policies have global spillovers, in which case there may be a more optimal strategy that focuses philanthropic efforts directly at sources of GHG emissions (where, as discussed above, philanthropic funding has also been relatively low). For example, in 2019, China produced around half of the world’s cement and steel by volume, and projections indicate India’s infrastructure and many industries will more than double in size by 2050.[62] We are uncertain regarding the relative effectiveness of focusing on particular geographies, but we plan to explore this further in the future.

General equilibrium effects: We think it is likely that decarbonization policies and incentives will differ across regions and countries, resulting in non-uniform adoption of low-carbon industry as well as large variances in demand, supply, and cost. It is possible these differences could normalize into a relatively lower-carbon global heavy industry. However, it is also possible that reduced demand for high-carbon products could cause prices to drop for these products, resulting in dual low-carbon/high-carbon economies.[63] We think the likelihood that this occurs varies substantially by industry and effort and, in general, we are highly uncertain regarding the implications of this potential scenario in terms of GHG emissions, economics, and geopolitics.

Heavy industry regulatory code: For certain heavy industry products and use cases (e.g., cement use in buildings), there exist rigid regulatory codes and standards. Given that often “compliance is a function of the material composition…rather than their engineering performance,” it is unclear if, how much, and how quickly regulatory schemes might change to accommodate alternative low-carbon industrial materials.[64]

Bottom line / next steps

We think efforts to decarbonize heavy industry are within the range of cost-effectiveness we would consider for a top recommendation. Heavy industry is a substantial GHG contributor, and we think there are relatively high-leverage opportunities to affect corporate and government spending and decision-making that can productively absorb additional philanthropic funding. We think cost-effectiveness likely varies substantially by industry and intervention, and are especially uncertain about the cost-effectiveness of R&D efforts, the efficacy of government funding support, geographic focus, general equilibrium effects, and heavy industry code.

As part of our 2022 investigation into decarbonizing heavy industry, we classified Industrious Labs as one of our top recommendations to reduce climate change. We may expand the scope of our investigation in the future by focusing on specific heavy industry products (e.g., chemicals) or interventions that we view as especially promising. We also plan to devote more Giving Green research capacity to non-US funding opportunities, and are especially interested in organizations and initiatives that are based in countries where substantial future heavy industry production will be located (e.g., India or China).

Endnotes

[1] “Heavy industry refers to an industry that produces large industrial products, which requires large and heavy machinery and facilities and involves complex production processes… it is very capital intensive and requires significant investment in heavy equipment, massive buildings, large machine tools, and extensive infrastructure.” Heavy Industry - Overview, Examples, Benefits and Downsides “Energy-intensive industries (EIIs) produce basic materials, such as steel, petrochemicals, aluminum, cement, and fertilizers, that are responsible for around 22 percent of global CO2 emissions (Bataille 2019).” WRI: Unlocking the “Hard to Abate” Sectors. “...more than one-third of emissions come from heavy transport such as trucks and planes and the heat-intensive manufacture of materials such as steel and cement.” MIT: Decarbonizing Our Toughest Sectors — Profitably. 2021.

[2] “You can think of this in four product categories: cement, steel, plastic, and fertilizer. Just making those materials is responsible for two-thirds of all the greenhouse gas emissions from the entire industrial sector.” Volts podcast: Rebecca Dell on decarbonizing heavy industry. 2022.

[3] “Steel, cement, and chemicals are the top three emitting industries and are among the most difficult to decarbonize, owing to technical factors like the need for very high heat and process emissions of carbon dioxide.” Brookings: The Challenge of Decarbonizing Heavy Industry. 2021.

[4] “Steel, cement, and chemicals are the top three emitting industries and are among the most difficult to decarbonize, owing to…economic factors including low profit margins, capital intensity, long asset life, and trade exposure.” Brookings: The Challenge of Decarbonizing Heavy Industry. 2021.

[5] We are unsure of the exact amount, which we think is a reflection of the general lack of clarity around “heavy industry” versus “industry.” We think “around one-third” is likely roughly correct based on (a) Our World in Data estimates of global GHG emissions from the industrial sector, (b) a Brookings report, and (c) GHG emissions by gas. Our World in Data: See “Global greenhouse gas emissions by sector” figure, with categories “Energy use in industry: 24.2%” and “Industry: 5.2%” Emissions by sector - Our World in Data; Brookings: “Heavy industry makes products that are central to our modern way of life but is also responsible for nearly 40% of global carbon dioxide (CO2) emissions.” Brookings: The Challenge of Decarbonizing Heavy Industry. 2021. GHG emissions by gas: “CO2 accounts for about 76 percent of total greenhouse gas emissions.” Center for Climate and Energy Solutions: Global Emissions.

[6] These strategies are loosely based on reviewing several strategic frameworks for decarbonizing heavy industry, including: Brookings: The Challenge of Decarbonizing Heavy Industry. 2021; https://www.energy.gov/eere/doe-industrial-decarbonization-roadmap; https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_chapter10.pdf; “Bucket number one is material efficiency. We can just use less of this material in order to make the products and deliver the services that we want…Bucket number two, carbon capture and storage. You keep doing pretty much what you’re doing now, but you figure out a way to collect all the carbon dioxide and put it underground…Bucket three is hydrogen…Bucket number four is direct electrification…Bucket number five is bioenergy.” Volts podcast: Rebecca Dell on decarbonizing heavy industry. 2022.

[7] “Lower the carbon footprint of energy sources and feedstocks by using lower-carbon fossil energy and introducing low-fossil carbon sources such as nuclear heat and electricity, clean electricity, clean hydrogen, or biofuels.” https://www.energy.gov/eere/doe-industrial-decarbonization-roadmap

[8] “Emissions in cement production arise from…the calcination reaction…the calcination reaction, ~50% of the total [emissions]).” https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_chapter10.pdf; “People do have ideas for alternative raw materials or alternative cement chemistries that might be able to address this process emissions problem without CCS” https://www.volts.wtf/p/volts-podcast-rebecca-dell-on-decarbonizing

[9] “Ecole Polytechnique Fédérale de Lausanne…takes the global lead in this project.” http://lc3.ch/lc3-members/; “[limestone calcined clay cement] is a new blend of two materials which have a synergetic effect. can reduce half of the clinker content and therby [sic] cut up to 40% of the CO2-emissions.” https://lc3.ch/about-lc3/.

[10] “In the [Limited CO2 Storage scenario variant], the limited availability of CO2 storage would result in a doubling of the marginal CO2 abatement cost by 2060 relative to the CTS where CCUS is widely available.” "Transforming Industry through CCUS" 2019.

[11] “...in 2022 bringing the current total to 30 CCS projects in operation, 11 under construction, and 153 in development.” https://status22.globalccsinstitute.com/; “For pre-combustion capture technologies, there are commercially available technologies used by industrial facilities” https://www.rff.org/publications/explainers/carbon-capture-and-storage-101/

[12] “Capturing the CO₂ can decrease power and industrial plants’ efficiencies and increase their water use, and the additional costs posed by these and other factors can ultimately render a CCS project financially nonviable.” https://www.rff.org/publications/explainers/carbon-capture-and-storage-101/.

[13] “...The rest of [steel facility emissions] is all these small sources — little process heaters here and there — that are distributed by the dozens all over a facility that's the size of a town. Thinking about how you would collect all of the carbon dioxide from all those distributed sources and do that cost effectively is really hard.” https://www.volts.wtf/p/volts-podcast-rebecca-dell-on-decarbonizing#details

[14] For example, if a $30,000 car requires one ton of steel and steel costs $1,500 per ton, 10% material usage efficiency savings are $150, equivalent to 0.5% of the total car price. Calculation: (.1*1500)/30000 = 0.005. Sources: “...a small car containing 1 tonne of steel and priced between 20,000 to 30,000 USD)” Global Steel at a Crossroads 2021; “May [2022 futures] contracts for US Midwest Domestic Hot-Rolled Coil Steel (CRU) are currently trading between $1400 and $1500 per ton” https://www.nasdaq.com/articles/us-steel-confident-on-rising-steel-costs-prices-persisting.

[15] Additional example on chemicals: “[Chemicals] They have also largely escaped public pressure to change their practices, since they operate in the background, removed from the consumer-facing companies that they supply.” https://www.ft.com/content/b7da66dd-83df-421f-9f50-aa580cc6ae76

[16] For a fuller explanation of this framework, see ITN framework - EA Forum. This framework is a commonly-used approach to evaluate which issue areas to work on across a variety of domains, particularly among those using Effective Altruism methods.

[17] Agora, a research organization, estimates low-carbon steel increases car prices by around 1%. “The additional premium for green steel (~200 to 300 USD per tonne of steel) can be passed on to end consumers, only marginally increasing the price of the car (<1% for a small car containing 1 tonne of steel and priced between 20,000 to 30,000 USD)” Global Steel at a Crossroads 2021.

[18] Calculation: 38837/67092=0.578. See “Primary Aluminium Production” interactive graphic, 2021 annual. https://international-aluminium.org/statistics/primary-aluminium-production/

[19] “When fully developed and implemented, it will eliminate direct greenhouse gas emissions from the smelting process…Canada and Quebec are each investing $60 million (CAD)” https://www.elysis.com/en/rio-tinto-and-alcoa-announce-worlds-first-carbon-free-aluminium-smelting-process

[20] Rough estimate based on 23% of aluminum being used by "Automotive and transportation" sector in 2020. We guess that 80% of this sector's use is attributable to the automotive sector, but have not looked into this. “This bar graph shows the major global uses of aluminum in 2020. The largest use was for construction (25%), followed by automotive and transportation (23%)...” Government of Canada, Aluminum facts https://www.nrcan.gc.ca/our-natural-resources/minerals-mining/minerals-metals-facts/aluminum-facts/20510

[21] We describe our certainty as low/medium/high to increase readability and avoid false precision. Since these terms can be interpreted differently, we use rough heuristics to define them as percentage likelihoods the assumption is, on average, correct. Low = 0-70%, medium = 70-90%, high = 90-100%.

[22] “The Federal Government is the largest direct purchaser in the world and a major infrastructure funder.” https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/15/fact-sheet-biden-harris-administration-announces-new-buy-clean-actions-to-ensure-american-manufacturing-leads-in-the-21st-century/

[23] See “Activism’s Theory Change” figure. https://www.givinggreen.earth/us-policy-change-research/activism%3A-overview

[24] “Insider advocates use techniques including: One-on-one lobbying and meetings with decision-makers…Direct policy support through the creation or editing of policy proposals and draft legislation…Policy research and dissemination focused on providing an intellectual basis and talking points to support the creation of policy.” https://www.givinggreen.earth/us-policy-change-research/insider-policy-advocacy%3A-overview

[25] Anonymized conversation, 2022-09-01.

[26] For additional information, see Activism: Overview | Giving Green and Insider Policy Advocacy: Overview | Giving Green. These reports have not been updated recently, and may no longer be fully reflective of our current views.

[27] “The “legislative subsidy” model of insider advocacy, in particular lobbying and policy creation, suggests that much insider advocacy takes place between an interest group and an already sympathetic legislator. This points to the overall importance of underlying political reality in shaping the scope for insider advocacy work.” https://www.givinggreen.earth/us-policy-change-research/insider-policy-advocacy%3A-overview

[28] “Buy Clean got its start in the states and work continues in earnest to adopt Buy Clean policies in statehouses across the nation.” https://www.bluegreenalliance.org/site/buy-clean/buy-clean-in-the-states/; For additional information on local and state-level Buy Clean policies, see: https://carbonleadershipforum.org/what-is-a-buy-clean-policy/.

[29] New Jersey: “New Jersey Senate Bill 3091...establishes…State and local purchasing requirements”; Buy Clean Task Force: “President's Biden charged his Administration through his December 2021 Federal Sustainability Plan and Executive Order 14057 to launch a Buy Clean Task Force…prioritizing the Federal Government’s purchase of steel, concrete, asphalt and flat glass products.” Federal Buy Clean Initiative | Office of the Federal Chief Sustainability Officer.

[30] “The high representation of European national governments…reflects EU’s longstanding efforts in the field of Green Public Procurement (GPP) policy implementation.” https://wedocs.unep.org/bitstream/handle/20.500.11822/37967/SDG.pdf

[31] “Public procurement wields enormous purchasing power, accounting for an average of 12 percent of gross domestic product (GDP) in OECD countries, and up to 30 percent of GDP in many developing countries.” https://www.unep.org/explore-topics/resource-efficiency/what-we-do/sustainable-public-procurement

[32] “Steel, cement, and chemicals are the top three emitting industries and are among the most difficult to decarbonize, owing to…economic factors including low profit margins, capital intensity, long asset life, and trade exposure.” Brookings: The Challenge of Decarbonizing Heavy Industry. 2021.

[33] Additional example on chemicals: “[Chemicals] have also largely escaped public pressure to change their practices, since they operate in the background, removed from the consumer-facing companies that they supply.” https://www.ft.com/content/b7da66dd-83df-421f-9f50-aa580cc6ae76

[34] “Across the industrial sector, 60 companies have joined the Better Climate Challenge where they’ve committed to reducing portfolio-wide greenhouse gas (GHG) emissions by at least 50% by 2030.” Biden-Harris Administration Rallies States, Cities, and Companies to Boost Clean American Manufacturing - The White House; “Through the Better Climate Challenge, organizations can partner with DOE to reduce portfolio-wide GHG emissions (scope 1 & 2) by at least 50% within 10 years….Ford Motor Company…General Motors…Mitsubishi Electric Automotive America…Nissan North America…Toyota Motor North America…” Better Climate Challenge.

[35] “[Fortescue Metals Group] would zero out its own carbon emissions and become a renewable energy powerhouse…[Fortescue Metals Group founder] gave his speech two months ago…Green steel, formed entirely with renewable energy, is the Fortescue moonshot.” https://www.nytimes.com/2021/10/16/business/energy-environment/green-energy-fortescue-andrew-forrest.html

[36] For example: Chevron Phillips Chemical Company LP has agreed to make upgrades and perform compliance measures estimated to cost $118 million to resolve allegations that it violated the Clean Air Act…Once fully implemented, the pollution controls are estimated to reduce emissions of climate-change-causing greenhouse gases, including carbon dioxide, methane and ethane, by over 75,000 tons per year.” https://www.justice.gov/opa/pr/chevron-phillips-chemical-company-agrees-reduce-harmful-air-pollution-three-us-chemical

[37] “Carbon border adjustments, also referred to as ‘carbon border adjustment mechanisms’ (CBAM), are an emerging set of trade policy tools that aim to prevent carbon-intensive economic activity from moving out of jurisdictions with relatively stringent climate policies and into those with relatively less stringent policies…The European Union (EU) is pursuing a CBAM that would make the region the first in the world to enact such a policy” Center for Climate and Energy Solutions: Carbon Border Adjustments.

[38] “A lurking climate denial apparatus, funded with anonymous money, shifted into high gear. Outside spending in 2010’s congressional races increased by more than $200 million over the previous midterm elections…” Mueller, Jennifer, and Whitehouse, Senator Sheldon. The Scheme: How the Right Wing Used Dark Money to Capture the Supreme Court. 2022; “The U.S. Chamber of Commerce has been fighting climate-change legislation and is now opposing federal efforts to regulate CO2 emissions.” https://e360.yale.edu/features/the_us_chamber_a_record_of_obstruction_on_climate_action

[39] “Trump imposed 25% tariffs on imported steel and 10% on imported aluminum from most countries in 2018, arguing that these protections were necessary for U.S. national security to maintain healthy domestic production.” U.S. court upholds Trump's national security tariffs on steel imports | Reuters.

[40] Calculation: 55,000,000 [annual philanthropic support for industry] / 9,500,000,000 [estimate of additional annual steel transition investment requirement] =0.006. Steel transition: “According to an analysis by the Mission Possible Partnership, transitioning the global steel asset base to net-zero-compliant technologies will require an additional $8 billion to $11 billion in investment annually…” https://rmi.org/sustainable-steel-principles-forging-new-paradigm/; Industry philanthropy: “Figure 4. Known foundation support to regions, sectors, and strategies, annual average, 2017-2021, USD Millions. Industry: $55M” "Funding trends 2022: Climate change mitigation philanthropy" 2022.

[41] “The Inflation Reduction Act’s $5.8 billion Advanced Industrial Facilities Deployment Program plays a significant role, providing financial assistance for facilities to use advanced industrial technologies…s in key, emission-intensive industrial sectors, such as iron and steel, cement, and chemicals.” The Inflation Reduction Act Drives Significant Emissions Reductions and Positions America to Reach Our Climate Goals.

[42] “The major [IRA] changes to 45Q are…Raising the credit values to $85 and $180 for both point source and direct air capture respectively; Providing a direct pay and transferability option for developers who claim the credit” https://www.catf.us/2022/08/the-inflation-reduction-act-creates-a-whole-new-market-for-carbon-capture/.

[43] “The majority of the $394 billion in energy and climate funding is in the form of tax credits. Corporations are the biggest recipient, with an estimated $216 billion worth of tax credits.” https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it

[44] This is primarily based on 10+ conversations with policy stakeholders, among whom there was broad consensus that no major climate change legislation will pass until 2025 at the earliest; Inflation Reduction Act: https://www.congress.gov/bill/117th-congress/house-bill/5376/text; Infrastructure Investment and Jobs Act: https://www.congress.gov/bill/117th-congress/house-bill/3684/text.

[45] “under discussion in Congress is to task DOE with co-funding…inert anodes in primary aluminum manufacturing” Memo provided by Industrious Labs, 2022-09-29.; “ Apple…made early investments years ago in the then-unproven technology of inert anodes. Those investments are now poised to bear fruit when ELYSIS begins commercial licensing in 2024.” Memo provided by Industrious Labs, 2022-09-29; “ELYSIS is a joint venture company led by Alcoa and Rio Tinto that is developing a new breakthrough technology, known as inert anode, that eliminates all direct greenhouse gases (GHGs) from the traditional smelting process and instead produces oxygen.” Start of construction of commercial-scale inert anode cells | ELYSIS.

[46] As a heuristic, we consider something to plausibly be within the range of cost-effectiveness we would consider for a top recommendation if its estimated cost-effectiveness is within an order of magnitude of $1/tCO2e (i.e., less than $10/tCO2e).

[47] We describe our confidence as low/medium/high to increase readability and avoid false precision. Since these terms can be interpreted differently, we use rough heuristics to define them as percentage likelihoods our takeaway (i.e., [not] plausibly within the range of cost-effectiveness we would consider recommending) is correct. Low = 0-70%, medium = 70-90%, high = 90-100%.

[48] As a heuristic, we consider something to plausibly be within the range of cost-effectiveness we would consider for a top recommendation if its estimated cost-effectiveness is within an order of magnitude of $1/tCO2e (i.e., less than $10/tCO2e).

[49] 2015: 2020: “Figure 5: Known foundation support to regions and sectors, annual average, 2015-2020. Industry: $25M.” ”Funding trends 2021: Climate change mitigation philanthropy” 2021.

[50] Bezos Earth Fund: The Bezos Earth Fund made its first grants to “Decarbonizing the Economy” in November 2020. “Bezos Earth Fund, Our Programs” n.d. Example of Bezos Earth Fund grant: “Rocky Mountain Institute (RMI) today announced that it has received a $10 million grant from the Bezos Earth Fund to help significantly reduce greenhouse gas (GHG) emissions in both U.S. buildings and in energy-intensive industrial and transport sectors.” "RMI Awarded $10 Million from The Bezos Earth Fund to Accelerate Decarbonization of Buildings and Industry" 2020. Microsoft Climate Innovation Fund: “We’ll focus on areas such as direct carbon removal, digital optimization, advanced energy systems, industrial materials, circular economy, water technologies, sustainable agriculture, and business strategies for nature-based markets.” "Climate Innovation Fund" n.d. Giving Green note: We note that ClimateWorks Foundation’s reported annual average spending may have increased simply because ClimateWorks learned of more foundations already donating to decarbonizing heavy industry. However, we do not think this is the case.

[51] “Our best guess including new 2021 commitments shows that 2x more money is going into industry compared to 2020 (making it around 2 percent of total philanthropic climate spending).” “A guide to the changing landscape of high-impact climate philanthropy” 2021.

[52] “Philanthropic funding heavily skews towards clean electricity rather than other sectors, in particular it continues to pay little attention to hard-to-decarbonize sectors. While there is some uptick in philanthropic funding for those sectors such as industry and heavy-duty transport through Bezos Earth Fund commitments, these are dwarfed by other increases.” “A guide to the changing landscape of high-impact climate philanthropy” 2021.

[53] Anonymized conversation, 2022-09-01.

[54] Foundation spending in India: “Figure 5. Annual average foundation funding by regions, sectors, and strategies, 2017-2021, USD millions. Industry, India, $1.9.” “Funding trends 2022: Climate change mitigation philanthropy” 2022. Note on spending: ClimateWorks’ tracking of worldwide philanthropic giving is based on “funding data from foundations with major climate programs, publicly available data on official development assistance flows, and, more recently, data on donations from individuals to climate-relevant causes.” It seems likely that this report undercount philanthropic giving from small individual donors, a group that is harder to track. “Funding trends 2022: Climate change mitigation philanthropy” 2022

[55] China production: “China is the world’s largest producer of steel and cement, accounting for more than 50% of both.” “The Challenge of Decarbonizing Heavy Industry” 2021. Foundation spending in China: “Figure 5. Annual average foundation funding by regions, sectors, and strategies, 2017-2021, USD millions. Industry, China, $11.” “Funding trends 2022: Climate change mitigation philanthropy” 2022.

[56] “China is the world’s largest producer of steel and cement, accounting for more than 50% of both.” “The Challenge of Decarbonizing Heavy Industry” 2021.

[57] Bezos Earth Fund spent $12.5M on creating markets for climate-safe cement and steel in 2020 and $9M on accelerating industrial decarbonization in 2021. Some of its other grants include a partial focus on decarbonizing heavy industry (e.g., using low-carbon building materials), but we did not include these in our calculations. “Bezos Earth Fund, Our Programs” n.d.

[58] ClimateWorks spending: “Total: $7 million” ClimateWorks Grant Database 2021. Collaboration with Bezos Earth Fund: ClimateWorks Foundation is listed as a partner on a $12.5M grant for creating markets for climate-safe cement and steel. “Partners: ClimateWorks Foundation, BlueGreen Alliance, Center for Carbon Removal, Great Plains Institute for Sustainable Development ($12.5M).” “Bezos Earth Fund, Our Programs” n.d.

[59] “As the United States and other partners announced funding commitments to the Global Fertilizer Challenge (GFC), a group of leading philanthropies and investors, including ClimateWorks Foundation, the Grantham Foundation, S2G Ventures, the Walton Family Foundation, and the William and Flora Hewlett Foundation, among others, announced a commitment of $21.5 million to improve how fertilizer is made and used.” “Philanthropy & Investors Commit $21.5 Million to Suport Global Action on Fertilizer” 2022.

[60] “It would be relatively straightforward for EPA to address the first two sources of carbon through conventional Clean Air Act rulemaking” Memo provided by Industrious Labs, 2022-09-29. Steel example: “...blast furnaces and the coke batteries that convert metallurgical coal to coke produce tremendous amounts of local air pollution…The strategy…Complementary strategies including confronting pollution from steel and coke production” Memo provided by Industrious Labs, 2022-10-11; Aluminum example: “Many of the existing aluminum smelters are operating in violation of their air, water or waste permits, and contributing to ambient air quality violations…Inadequately maintained equipment is more likely to malfunction, resulting in air and water pollution in excess of permitted levels. Enforcement actions can put significant pressure on facilities to retrofit with cleaner technologies.” Memo provided by Industrious Labs, 2022-09-29..

[61] “Expand advanced reactions, catalysts, and reactor systems to improve reaction performance in addition to reducing carbon emissions and improving energy efficiency…” https://www.energy.gov/eere/doe-industrial-decarbonization-roadmap

[62] See Figure 2. Brookings: The Challenge of Decarbonizing Heavy Industry. 2021; “Over three-fourths of the India of 2050 (and 80-plus percent of the India of 2070) is yet to be built. Developing this robust infrastructure in India will multiply demand across sectors: power (eightfold), steel (eightfold), cement (threefold), auto (threefold), and food (twofold).” https://www.mckinsey.com/capabilities/sustainability/our-insights/decarbonising-india-charting-a-pathway-for-sustainable-growth

[63] “However, unlike for technology, policy mechanisms with the same goals can work at cross purposes. For example, carbon border adjustment mechanisms can penalize low-carbon products that do not face carbon prices at home. Conversely, the technology subsidy in one country can exceed the carbon price benefit offered in another. Both of these possibilities are barriers to trade in low-carbon products.” https://www.brookings.edu/wp-content/uploads/2021/06/FP_20210623_industrial_gross_v2.pdf

[64] “...restrictive building codes and standards wherein compliance is often a function of the material composition (e.g., OPC-based chemistries) rather than their engineering performance…” National Academies of Sciences, Engineering, and Medicine. 2019. Gaseous Carbon Waste Streams Utilization: Status and Research Needs

Decarbonizing Heavy Industry

Table of contents

Executive Summary

What is heavy industry?

How could efforts to decarbonize heavy industry reduce greenhouse gases?