Scaling the Industrial Transition 2025

The following trends highlight where technological progress is accelerating – and where system, cost and policy barriers continue to hold it back. –Efficiency gains remain essential but transitional. While operational and digital improvements deliver near-term emissions reductions and competitiveness gains – with energy efficiency alone reducing cumulative emissions by only 16% through 2050 – industrial electrification and hydrogen mandates achieve a 42% reduction. This demonstrates that deeper transformation of processes and fuel systems is essential.33 –Bio-based fuels are crucial in the near to medium-term. Policy support continues to drive expansion, but with about 95% of biodiesel still derived from edible oils, feedstock and food security constraints, as well as technical barriers, limit its long-term scalability.34 In aviation, despite strong policy backing such as ReFuelEU, SAF supplied less than 1% of total jet fuel demand in 2025, highlighting the difficulty of scaling new biofuel pathways even in well-supported sectors.35 –Material innovation accelerates transformation. Breakthroughs in steel, cement and aluminium point to a shift from efficiency-driven progress to the redesign of industrial chemistry – the core of true decarbonization. In cement, using low-clinker limestone calcined clay cement (LC³) blends can cut emissions by up to 40%, while CCUS offers an additional 36% reduction, making these the sector’s most powerful decarbonization levers.36 –Electrification defines the next frontier of scale. Expanding clean power access and electrified technologies is reshaping industrial energy demand, but slow permitting and grid constraints remain major barriers. Although building transmission lines takes only 1–2 years, projects often require a decade to complete due to planning and approval delays.37 –Supply chains emerge as differentiators. Competitive advantage increasingly depends on secure access to critical minerals, components and skilled labour; regions that can align energy, materials and logistics will scale faster and at lower cost. Persistent bottlenecks in nickel, silicon and rare-earth elements could leave the US short by over 730 gigawatts (GW) – about one-third of its 2050 clean-energy capacity goal.38 –Hydrogen progress remains uneven. There have been advances in Europe, Japan and the Gulf, but fewer than 10% of announced projects have reached final investment decision due to high costs, slow permitting, uncertain pricing and weak offtake demand.39 –CCUS is entering its proof phase. Deployment is expanding rapidly, with the number of operational CCUS facilities rising 54% YoY and total facilities up by 17%.40 Despite this, system integration remains the key bottleneck to large-scale implementation – particularly in ensuring adequate storage capacity, transport infrastructure and streamlined permitting to connect capture sites with long-term storage solutions.41 The challenge now is synchronizing the enabling systems that make technologies scalable: power generation, hydrogen supply, CO2 transport and storage, ports, and grid infrastructure have become the true bottlenecks of industrial decarbonization. Technology readiness increasingly outpaces system readiness, making coordination, permitting and infrastructure investment the defining factors of the next phase of the transition. Industrial transition is advancing – from efficiency and new materials to CCUS and hydrogen – but uneven progress reveals deep regional and system gaps. Global low-carbon demand is rebounding across sectors, but not yet in a way that drives clean supply. Two distinct dynamics are at play: –Energy demand activity is strong – industrial production, freight and mobility continue to expand. –Low-carbon demand, however, remains thin and fragmented, making it difficult to substantiate systemic, large-scale investment in new supply. Industrial and transport activity continues to expand – air travel rose 10.4% YoY (2024 versus 2023),42 maritime demand increased 5.5% in 2024,43 and trucking activity grew 1.3% YoY (2024 versus 2023)44 – reflecting a strong rebound in trade and mobility. Yet this growth is not translating into cleaner operations: SAF met only 0.3% of global jet fuel demand,45 and low-carbon bunkering remains negligible. Steel and cement output contracted slightly in 2024 (-1.1% YoY for steel46 and -3.9% YoY for cement),47 but largely for cyclical reasons rather than structural decarbonization, indicating limited progress in reducing fossil dependence. However, the carbon intensity of cement production continues to fall YoY (-2.2% decline in CO2/tonne of cement from 2020–202248), according to the Global Cement and Concrete Association’s (GCCA) Net Zero Progress Report, suggesting incremental efficiency and process gains even amid flat or declining output.2.2 Low-carbon demand is growing too slowly Scaling the Industrial Transition: Hard-to-Abate Sectors and Net-Zero Progress in 2025 15