Because the report focuses on policy and technology in place today, analysts took a relatively narrow view of industrial decarbonization. They estimated the potential emissions reductions from the two technologies with direct policy support: carbon capture and clean hydrogen.
Carbon capture systems remove CO2 from an existing facility’s waste gases. For instance, in Indiana, U.S. Steel is installing the technology at its Gary Works blast furnace; the $150 million project is expected to capture less than 1 percent of the facility’s annual CO2 emissions. Companies can earn a federal tax credit worth $85 for every metric ton of carbon they capture and permanently sequester underground.
Hydrogen producers, meanwhile, access the 45V tax credit, which is intended to spur investment in clean hydrogen — ideally made by electrolyzers using renewable energy and water. Nationwide, seven “hubs” are set to receive a total $7 billion in federal funding to begin producing clean hydrogen, potentially for use in steelmaking, chemical manufacturing, and other areas.
Analysts estimated the effects of using electrolyzers instead of gas-based steam methane reformers at existing facilities where hydrogen, ammonia, and methanol are made. They also looked at replacing fossil gas with clean hydrogen at “direct reduced iron” facilities for steelmaking. In Ohio, the manufacturer Cleveland-Cliffs says it plans to eventually switch from using gas to hydrogen at the new ironmaking facility it’s building with a $500 million award from the DOE.
In a 2022 analysis, Rhodium Group had estimated deeper emissions reductions from carbon-capture retrofits. But in the ensuing years, analysts saw that projects were more expensive than originally anticipated and faced significant hurdles, such as regulatory challenges and public opposition to CO2 pipelines, which carry the captured carbon away from facilities to be sequestered or turned into commodity products.
However, the rollout of hydrogen electrolyzers helped make up for some of that lost ground in expected emissions reductions in the 2024 report, King said.
He added that a big challenge in carrying out the analysis is just how complex and distinct the industrial sectors are from one another — and how different they can be even within the same category. For example, facilities using industrial heat can require temperatures around water’s boiling point, or as hot as molten lava. The solutions needed to decarbonize those operations can vary significantly.
That complexity, and the lack of tax credits or other incentives, is a key reason why Rhodium Group’s model doesn’t currently factor in emissions reductions from process heat, though analysts hope to change that. “We need more data and more cost characterization,” King said.
Process heating accounts for about one-third of the sector’s emissions today, which primarily comes from burning fossil gas in enormous boilers and water heaters.
Despite the omission, major opportunities do exist to decarbonize industrial heat, and federal funding is similarly flowing into the space. The DOE is allocating about $500 million to projects aiming to generate heat more cleanly to make everything from industrial chemicals to macaroni and cheese. In many facilities, heat pumps and other electricity-powered equipment can replace fossil fuels for heating.
In fact, about 70 percent of industrial process heating can and should be electrified by 2050, according to the nonprofit American Council for an Energy-Efficient Economy. In a recent policy brief, the organization called on policymakers, utility regulators, and grid planners to ramp up the nation’s renewable energy capacity and fortify grid infrastructure to prepare for the surge of new electrical demand coming specifically from industrial facilities.
But King noted that, without clear economic drivers, industrial manufacturers aren’t likely to take on the time-consuming and costly task of revamping their facilities to use cleaner technologies. That’s especially true for companies competing to deliver the lowest-cost commodities, be it cement, steel rods, or aluminum coils.
“You can’t expect an entire industry to clean itself up out of the goodness of its own heart,” he said. “There’s a lot more work that needs to be done.”