Hard-to-abate industries are falling short of their net-zero commitments as a $30 trillion funding gap, slow infrastructure development and resistance to green premiums weigh on their progress.

According to the World Economic Forum’s Net Zero Industry Tracker 2024, there was a 0.9 percent reduction in absolute emissions between 2022 and 2023. Still, this pace was “insufficient” to meet the targets required to limit global warming to 1.5 degrees Celsius.

The report further stated that the eight sectors in focus — steel, cement, aluminum, primary chemicals, oil & gas, aviation, shipping and trucking — account for 40 percent of global direct carbon dioxide emissions.

Despite marginal reductions in emissions intensity, significant gaps remain in the readiness of these sectors to decarbonize. The WEF report warned that the 2050 net-zero goals may slip out of reach without accelerated investments, improved infrastructure, and stronger demand-side commitments.

“The physical, macroeconomic, and geopolitical challenges for these sectors are unlike anything we’ve seen in recent history. Supply chain disruptions, elevated energy costs, and inflationary pressures are making it harder for companies to decarbonize at the required pace,” said Roberto Bocca, head of the Centre for Energy and Materials at the WEF, in the report.

$30 Trillion Investment Cliff

Achieving net-zero emissions by 2050 will require a staggering $30 trillion in new capital investments, with 57 percent of that amount needed for shared infrastructure such as clean energy grids, hydrogen production, and carbon capture, utilization and storage capacity.

While companies in these hard-to-abate sectors are responsible for 43 percent of the required investment, the remainder must come from broader public and private sector support.

However, geopolitical instability and higher interest rates are dampening investor appetite, with capital readiness scores across the board showing little progress since 2023.

“With inflation stabilizing but interest rates still elevated, it’s difficult for capital-intensive sectors like steel, aluminum, and shipping to justify the up-front costs for clean energy infrastructure,” said Muqsit Ashraf, group chief executive at Accenture Strategy, who collaborated on the report.

Without external capital, companies cannot retrofit facilities or scale technologies like green hydrogen production, carbon capture, or alternative fuels, all essential for decarbonizing energy-intensive production processes.

Technological Breakthroughs Remain Out of Reach

Despite modest progress in technology readiness, the WEF warned that “nearly half of the required emissions reductions depend on technologies that are not yet commercially viable.”

For instance, while the trucking sector advanced its readiness score from 2 out of 5 to 3 out of 5 thanks to the rollout of hydrogen-electric trucks, key sectors like cement and shipping have seen little progress.

Technologies such as CCUS, green hydrogen, and alternative fuels for aviation and shipping remain expensive and, in many cases, economically unviable without subsidies or government support.

Notably, green hydrogen production costs have risen by 20-40 percent, delaying projected growth in hydrogen capacity by up to 25 percent.

Artificial intelligence, however, has emerged as a bright spot. The report found that AI-driven efficiencies could reduce capital needs by up to $2 trillion, using AI for capital allocation, asset management and real-time carbon tracking. But even AI has its drawbacks.

“While generative AI can cut costs for clean energy projects, it also increases demand for electricity, potentially straining the same renewable energy supply needed for decarbonization,” said Bocca.

Infrastructure Bottlenecks Worsen

While the world debates how to scale clean energy capacity, the infrastructure needed to support it is notably lacking. According to the WEF report, less than 1 percent of the required infrastructure for clean fuels and energy transition technologies is currently in place.

The aviation, shipping, and trucking sectors, in particular, face the most acute challenges.

To achieve the 2050 targets, 42 percent of the world’s clean power, 69 percent of global clean hydrogen production and 55 percent of the world’s CCUS capacity must be developed to serve these eight sectors alone.

For perspective, the current capacity of hydrogen production and CCUS infrastructure is barely 1 percent of the total needed.

Progress has been slow, particularly in hydrogen infrastructure. Hydrogen will be critical for decarbonizing sectors like shipping, where battery-electric solutions are impractical. Yet, hydrogen production and transportation infrastructure are nowhere near the capacity required.

Demand-Side Deadlock

While supply-side challenges are substantial, the demand side of the equation may be the Achilles’ heel. Many companies are reluctant to pay the so-called “green premiums” required for low-emission products.

For example, sustainable aviation fuel carries a 300-400 percent price premium over conventional jet fuel, while hydrogen-based fuels for shipping are 2-6 times more expensive than traditional marine fuel.

The First Movers Coalition, a public-private partnership backed by significant multinationals, aims to stimulate demand for low-emission products like green steel and SAF. However, uptake remains slow, with less than 1 percent of aviation energy currently sourced from sustainable fuels.

Initiatives such as IATA’s TrackZero and the International Maritime Organization’s emissions reduction frameworks are intended to clarify low-carbon standards. But clarity hasn’t translated into large-scale offtake agreements for sustainable aviation fuel, green steel or aluminum.

Sector Breakdown: Winners and Losers

  • Aviation: Emissions intensity fell by 14% in 2023, driven by fuel efficiency measures. But SAF uptake remains below 1% of total aviation fuel use.
  • Trucking: Hydrogen-electric trucks saw technology readiness rise from stage 2 to stage 3, but only 1% of required clean trucks are in service.
  • Shipping: With 100% of its energy still fossil-based, shipping faces the steepest path to decarbonization. Clean fuel use, for example, methanol, is less than 1% of total fuel usage.
  • Steel: The steel sector’s emissions intensity rose 2% in 2023 due to higher reliance on energy-intensive blast furnace-basic oxygen furnace, or BF-BOF, production.
  • Cement: Cement’s shift toward CCUS remains slow, with less than 1% of the required infrastructure capacity in place.
  • Primary Chemicals: Emissions grew due to high reliance on energy-dense feedstocks, with hydrogen-based production methods still prohibitively expensive.

Outlook: Will 2024 Be a Tipping Point?

The WEF report paints a mixed picture of progress. While emissions intensity fell and modest technology improvements were noted, there is growing concern that global decarbonization efforts are “off track” for net-zero targets.

Geopolitical disruptions, financing constraints, and insufficient demand are all stalling momentum.

The report calls for an urgent shift in approach — from piecemeal solutions to holistic, system-wide collaboration between policymakers, businesses and financial institutions. Without such action, the required infrastructure and technologies may arrive too late to achieve climate targets.

“The industry faces a gridlock,” the report noted. “Businesses, policymakers, consumers, energy suppliers, and financiers are all waiting for one another to move first.”

For now, it remains to be seen whether 2024 will be a tipping point for the energy transition or another year of missed opportunities.

Also read:

UN Report Urges Immediate Decarbonization of Emission-Heavy Sectors