Dual Carbon Industries: A Global Perspective on the Industrial Transformation Toward Carbon Neutrality

Introduction

Industry accounts for just over 30% of global greenhouse gas emissions, with heavy sectors such as steel (8%) and cement (7%) responsible for roughly half of those emissions-9. These hard-to-abate sectors have traditionally lagged in climate action, but the landscape is shifting rapidly. The pursuit of carbon peaking and carbon neutrality—the "dual carbon" goals—has catalyzed a profound transformation of global industry, reshaping production processes, supply chains, and competitive dynamics across sectors. This essay examines the dual carbon industrial transformation from a worldwide perspective, analyzing the sectors at the heart of this transition, the policy frameworks driving change, and the emerging pathways toward a net-zero industrial future.

The Hard-to-Abate Sectors: Where the Challenge Lies

Heavy industry presents unique decarbonization challenges due to the high temperatures required for production, the use of fossil fuels as both energy sources and chemical feedstocks, and the long-lived nature of industrial infrastructure. Eight sectors—aviation, shipping, trucking, steel, cement, aluminium, primary chemicals, and oil and gas—together account for nearly 40% of global greenhouse gas emissions-7.

Steel, often called the backbone of modern civilization, has seen global demand double from 2000 to 2020. The sector is responsible for 7-8% of global CO₂ emissions because the high temperatures required to make steel are currently met by fossil fuels, particularly coal, which is also used as a chemical agent in the production process-5. Cement faces similar challenges, with chemical reactions inherent to the production process generating unavoidable emissions alongside those from energy consumption.

The good news is that technologies to reduce emissions are available, though progress is increasingly constrained by the systems needed to scale them-7. Breakthrough direct reduced iron (DRI) technologies, which replace coal with green hydrogen in primary ironmaking, have demonstrated strong technical performance and rising investor confidence. Modelling shows that once DRI technology gains early market share, learning-by-doing quickly reduces costs and accelerates adoption, with cost reduction rates of 18-20% per doubling of output-5.

Policy Frameworks: Building the Enabling Conditions

The transition to low-carbon industry requires supportive policy frameworks that provide clear signals to investors and create demand for clean products. As of 2024, 75 carbon pricing policies have been implemented globally, covering 24% of greenhouse gas emissions-2-3. These mechanisms—carbon taxes, emissions trading systems, and hybrid models—create economic incentives for emission reductions while generating revenue that can be reinvested in clean technologies.

China's National Carbon Market represents one of the most significant developments in this space. Since its launch in 2021, the market has expanded dramatically. In 2024, trading volumes reached 189 million tonnes with a total transaction value of 18.11 billion yuan (US$2.5 billion), a new record-1. The market expanded in 2025 to include steel, cement, and aluminium smelting sectors, bringing more than 1,300 new enterprises under regulation and increasing total market coverage to more than 60% of national CO₂ emissions-1.

The European Union's Emissions Trading System (EU ETS) remains a benchmark case, with carbon prices exceeding €100 per tonne in 2023, driving the power industry to reduce emissions by 43% compared to 2005 levels-3. The EU's Carbon Border Adjustment Mechanism (CBAM) represents a novel approach to preventing carbon leakage by adjusting the price of imports based on their embedded emissions.

International cooperation has also gained momentum. The Belém Declaration of Global Green Industrialization, launched at COP30, saw 13 countries and 22 international organizations commit to a shared agenda for developing cleaner, more competitive industrial sectors-9. Nearly all updated Nationally Determined Contributions (NDCs) now identify industry as a priority mitigation area, with 72% including quantitative targets and 31% featuring specific measures for hard-to-abate sectors-11.

Industrial Clusters: Scaling Through Collaboration

Industrial clusters—geographic concentrations of interconnected industries—represent one of the most promising pathways for accelerating decarbonization. These regions account for some of the world's toughest emissions while offering the greatest opportunities for rapid, shared decarbonization through shared infrastructure and collaborative investment-6.

The World Economic Forum's Transitioning Industrial Clusters (TIC) initiative has become the world's largest community of its kind, engaging more than 70 global corporations and public institutions across 40 industrial clusters in 20 countries-6. Approximate data shows that signatory clusters collectively represent 877 million tonnes of potential emissions reduction, contribute $508 billion to global GDP, and protect or create 4.6 million jobs-6.

Success stories are emerging worldwide. The UK's HyNet North West cluster reached final investment decision in April 2025 for its CO₂ transport and storage system, providing a reference point for financing shared energy infrastructure-6. Malaysia adopted the TIC framework as a national agenda in June 2025, positioning its industrial hubs—including Sarawak, Johor, and Penang—as drivers of green economic growth-6. In Colombia, partners including Ecopetrol and Promigas worked through the TIC framework to merge existing clusters into a joint governance structure with the Cartagena Chamber of Commerce-6.

UNIDO's Framework: Five Building Blocks for Industrial Decarbonization

The United Nations Industrial Development Organization (UNIDO) has developed a practical framework to guide countries in designing and implementing tailored emissions reduction strategies. The NDC 3.0 Guidebook for Industrial Decarbonization identifies five essential "building blocks" that serve as the foundation for net-zero industry-10:

1. Material efficiency: Reducing overall demand for carbon-intensive materials through better design, improved manufacturing processes, and extending the life of industrial assets.

2. Energy efficiency: Optimizing equipment and processes to achieve the same work with less energy, making it one of the most accessible levers for industry everywhere.

3. Low-carbon energy and feedstocks: Switching to renewable electricity, hydrogen, bio-based inputs, and other low-carbon alternatives, especially for sectors that rely on high-temperature heat or fossil feedstocks.

4. Electrification and process change: Replacing fossil-fueled systems with electric ones and fundamentally rethinking how materials are made.

5. Carbon Capture, Utilization and/or Storage (CCU/CCUS): Managing emissions that cannot yet be fully addressed through other solutions.

This framework is being applied in diverse contexts. In Kenya, where the industrial sector is poised for rapid growth, the building blocks helped frame a national dialogue on getting ahead of emissions, with stakeholders prioritizing energy efficiency, clinker replacement with volcanic ash, alternative fuels, carbon capture, and green public procurement-10. In Indonesia, discussions have focused on shifting to low-carbon feedstocks and electricity while maintaining competitiveness in the global steel market-10.

Digital Transformation: The Role of Carbon Management Systems

The digital dimension of industrial decarbonization is increasingly important. The global Dual Carbon Management System market—digital, intelligent platforms that integrate carbon emissions accounting, carbon reduction consulting, and carbon asset management—was valued at US$1.604 billion in 2025 and is forecast to reach US$4.391 billion by 2032, growing at 15.7% annually-4. Key players include Carbonstop, CarbonSense, Persefoni, Alibaba Cloud, and SGS, among others-4.

China has embedded advanced digital tools into every layer of its carbon market. AI and big data analytics are used to validate emissions data, identify anomalies, and support real-time compliance monitoring. For instance, the number of parameters in emissions accounting for aluminium smelting has been reduced from 11 to two, simplifying reporting while maintaining accuracy-1. Capacity-building efforts have trained more than 4,500 technical personnel and certified 139 verification institutions, ensuring that third-party oversight keeps pace with market growth-1.

Challenges and the Path Forward

Despite progress, significant challenges remain. The cost of clean technologies continues to be a barrier, particularly for emerging economies that face resource, capacity, and technology constraints. Access to finance was highlighted as the most consistent challenge across conversations with countries like Brazil, Costa Rica, and several emerging economies-9. Low-carbon industrial technologies require large upfront investments, and many countries are concerned about competitiveness and market volatility, including implications of mechanisms such as the EU's Carbon Border Adjustment Mechanism-9.

Data gaps and institutional capacity also constrain progress. Only 1% of carbon pricing tools currently comply with the Paris Agreement's 1.5°C pathway, and developing countries face challenges including insufficient monitoring capabilities-3.

UNIDO identifies three priority areas for accelerating the industrial transition-8:

1. Policymakers: Set net-zero targets,      leverage green public procurement to boost demand for sustainable      materials, adopt low-carbon standards and incentives, and strengthen data      and transparency systems.

2. Financiers: Align investment strategies      with climate goals, leverage public funding to unlock private capital, and      build a pipeline of investable decarbonization projects.

3. Industry leaders: Draw clear decarbonization      pathways, invest in future-ready technologies, strengthen workforce      skills, and collaborate across the value chain.

Conclusion

The dual carbon industrial transformation represents one of the most consequential shifts in the global economy. The hard-to-abate sectors that have long been considered resistant to change are now demonstrating that decarbonization is not only possible but increasingly economically viable. Carbon pricing mechanisms, industrial cluster collaboration, digital management systems, and international cooperation are converging to accelerate the transition.

As UNIDO experts emphasize, industrial decarbonization took center stage at COP30 for the first time, reflecting a growing understanding that global climate goals cannot be met without transforming the factories, materials, and production systems that underpin modern civilization-9. The next five years will be critical for determining whether clean industrial technologies move from early demonstration to global diffusion-5.

For countries that align their strategies with the emerging dynamics of declining clean-tech costs, growing market demand, supportive policies, and international cooperation, the rewards are significant: new industrial opportunities, supply-chain resilience, green jobs, and competitive advantage in the global green economy. The dual carbon industrial transformation is not merely an environmental imperative—it is a strategic opportunity for nations and industries to build a prosperous, sustainable, and equitable future.

References

Books and Edited Volumes

1. Shi, D. et al. (2024). Studies on Tackling      Climate Change and Low-carbon Economic Development. Beijing: Economic      Management Press. -1

2. Wu, D. S. (Ed.). (2024). Industrial Markets      and Digital-Intelligent Technologies Under the Dual Carbon Background.      Beijing: Qunyan Press. -4

3. Xu, J. T. (Ed.). (2025). China's Dual Carbon      Report: An Economic Perspective. Beijing: Peking University      Press. -2

4. Various Authors. (2025). Industrial      Decarbonization and the Energy Transition: Innovative Solutions for a      Carbon-Free, Sustainable, and Clean Environment. Elsevier. -9

Journal Articles

Carbon Markets and Policy Mechanisms

1. Du, K., et al. (2025). "Coupling effects of RPS      and CET policies on the low-carbon transformation of the Chinese power      industry: a combined perspective based on tripartite evolutionary game and      system dynamics." Energy. -5

2. Feng, W., Liu, Y., & Liu, Z. (2025). "Policy      Coordination and Green Transformation of STAR Market Enterprises Under      'Dual Carbon' Goals." Sustainability, 17(19), 8790. -6

3. Han, W., Wang, W., Yang, X., & Yang, Y. (2025).      "Dynamic multidimensional optimization of carbon trading mechanisms      in energy-intensive industries: Economic modeling, performance evaluation,      and policy design." Journal of Cleaner Production. -7

4. Hong, Y., Jiang, X., Xu, H., & Yu, C. (2024).      "The impacts of China's dual carbon policy on green innovation:      Evidence from Chinese heavy-polluting enterprises." Journal      of Environmental Management, 119620. -8

5. Sun, L., Zhou, H., & Huang, F. (2025). "How      the introduction of the 'Dual Carbon' targets drives ESG disclosure in      manufacturing enterprises?" International Review of Economics      & Finance, 104242. -6

Industrial Decarbonization Pathways

1. Gailani, A., Cooper, S., Allen, S., Pimm, A., Taylor,      P., & Gross, R. (2024). "Assessing the potential of      decarbonization options for industrial sectors." Joule,      8(3), 576-603. -10

2. Raillard-Cazanove, Q., Rogeau, A., & Girard, R.      (2025). "Decarbonisation modelling for key industrial sectors      focusing on process changes in a cost-optimised pathway." Applied      Energy, 125206. -12

3. Sovacool, B. K., et al. (2024). "Beyond the      factory: Ten interdisciplinary lessons for industrial decarbonisation      practice and policy." Energy Reports, 11,      5935-5946. -11

4. Sovacool, B. K., et al. (2022). "Industrial      clusters for deep decarbonisation." Science, 378(6620),      601. -11

Sector-Specific Studies

1. Bataille, C., et al. (2018). "A review of      technology and policy deep decarbonization pathway options for making      energy-intensive industry production consistent with the Paris      Agreement." Journal of Cleaner Production, 187,      960. -10-11

2. Griffiths, S., et al. (2023). "Decarbonizing the      cement and concrete industry: a systematic review of socio-technical      systems, technological innovations, and policy options." Renewable      and Sustainable Energy Reviews, 180, 113291. -11

3. Rissman, J., et al. (2020). "Technologies and      policies to decarbonize global industry: Review and assessment of      mitigation drivers through 2070." Applied Energy, 266,      114848. -10

Research and Policy Briefs

1. Department for Energy Security and Net Zero (UK).      (2023). CCUS Net Zero Investment Roadmap: Capturing Carbon and a      Global Opportunity. -11

2. IDRIC (Industrial Decarbonisation Research and      Innovation Centre). (2022). Next Steps for Decarbonising UK      Industry: Policy Synthesis Report. -11

3. Rattle, I., et al. (2024). Decarbonising      industry through industrial clusters: lessons from international      experience. IDRIC. -11

Key Reference Works for Further Reading

1. IPCC. (2023). Climate Change 2023: Synthesis      Report. Intergovernmental Panel on Climate Change.

2. IEA. (2024). World Energy Outlook 2024.      International Energy Agency.

3. UNIDO. (2024). NDC 3.0 Guidebook for      Industrial Decarbonization. United Nations Industrial Development      Organization.