Scaling the Industrial Transition 2025

Verified carbon performance now defines cost, access and competitiveness, but the policy landscape is becoming regionally fragmented rather than uniformly convergent. Incentive- led systems are converging with mandatory compliance frameworks that link product carbon intensity directly to market access and trade. The EU is leading this shift. ETS prices are tightening (projected around €149/tonne of CO2 by 2030)51 while free allocations will end for CBAM sectors from 2026, and the mechanism will move from reporting to full financial obligation. Moreover, ETS2 extends pricing to fuels by 2027, and ReFuelEU Aviation and FuelEU Maritime regulations will require verified emissions data and minimum use of sustainable fuels as conditions for market access. Compliance frameworks are proliferating globally, with major economies expanding carbon markets, disclosure rules and MRV systems (Figure 4). Elsewhere, policy divergence is widening. The US, historically focused on incentive-led policies under the IRA, has seen a rollback of several federal clean- energy provisions in 2025, with select tax credits – such as hydrogen (45V) and sustainable fuels (45Z) – consolidated under the new One Big Beautiful Bill Act (OBBBA). While federal support has narrowed, state-level initiatives such as California’s Cap-and- Trade Program, Clean Fuel Standard and regional hydrogen hubs continue to drive compliance- oriented progress and investment. Asian economies are advancing carbon markets and MRV systems at varied speeds, and emerging regions are building foundational disclosure and taxonomy frameworks. This patchwork creates a multi-speed policy environment in which cross-border trade, financing and carbon accounting remain uneven. Incentives remain vital – from the US IRA (despite rollbacks) and EU Innovation Fund to Germany’s Carbon Contracts for Difference (CfDs) and Japan’s Green Innovation Fund – but execution still lags ambition. CfDs, procurement rules and disclosure mandates, although large in scale globally, remain fragmented, varying in scope, stringency and timelines. Reversals such as the US Securities and Exchange Commission’s (SEC) 2025 rollback of climate disclosure rules52 underscore regulatory volatility. The result is not a single shift from incentives to accountability, but a fragmented transition towards regional policy ecosystems, where competitiveness increasingly depends on verified carbon data and the ability to navigate overlapping standards. In this compliance era, auditable carbon data is the new passport for capital and trade: those who can prove low-carbon performance can secure investment and access, whereas those who cannot face rising costs and shrinking competitiveness. Climate policy is shifting from ambition to accountability, entering a phase where incentives and compliance rules shape readiness together. 2.3 Policy is fragmenting Scaling the Industrial Transition: Hard-to-Abate Sectors and Net-Zero Progress in 2025 17