US industrial decarbonization accelerates amid federal setbacks and global competition

Under the leadership of former President Joe Biden, the United States made significant strides in industrial decarbonization, aiming to transform one of the nation’s most emission-intensive sectors into a driver of clean innovation and sustainable economic growth. The industrial sector, which includes production of chemicals, steel, machinery, and textiles, accounts for roughly one-third of domestic greenhouse gas emissions, making its decarbonization both crucial and challenging.

Central to the Biden administration’s approach was the adoption of bold policies and financial incentives, anchored by the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law. These measures catalysed investments in cleantech solutions such as carbon capture and storage (CCS), clean energy integration, industrial electrification, and energy efficiency improvements. The U.S. Department of Energy (DoE) actively promoted these initiatives, launching funding opportunities that invested hundreds of millions of dollars into projects targeting the hardest-to-abate industrial subsectors.

For instance, in early 2024, the DoE allocated $171 million across 49 projects in 21 states focused on reducing industrial greenhouse gas emissions. This included an $83 million funding opportunity specifically aimed at sectors responsible for around 30% of U.S. carbon emissions. Such funding sought to accelerate technologies for decarbonising industrial heat and expand CCS deployment, key pillars outlined in the DoE’s 2022 Industrial Decarbonization Roadmap.

Moreover, in March 2023, the Biden-Harris administration announced a landmark $6 billion investment supporting 33 projects nationwide in heavy industries like metals, chemicals, and cement. Expected to reduce 14 million metric tons of carbon emissions annually, equivalent to removing 3 million cars from U.S. roads, this funding represented the largest-ever federal commitment to industrial decarbonization.

These federal efforts were complemented by advances in clean hydrogen technology, a vital low-carbon fuel for hard-to-electrify industrial processes. In November 2024, the Department of Energy awarded up to $2.2 billion to hydrogen production hubs in the Gulf Coast and Midwest, enabling projects that employ water electrolysis, natural gas with CCS, wind power, and nuclear energy to produce clean hydrogen for steelmaking, cement, and transportation sectors.

However, this momentum has faced significant headwinds. Under the subsequent Trump administration, there has been a marked retreat from these aggressive decarbonization goals. Federal support for clean energy projects has been curtailed drastically. Notably, over $3.7 billion in previously awarded DoE funds for industrial emissions reduction projects were cancelled, largely citing concerns about economic viability and return on investment. Critics argue that this rollback risks undermining the economic benefits and international competitiveness fostered by clean technology investments, especially as global demand for sustainable products rises.

In response to slowing federal action, states have begun taking more proactive roles. A report by Evergreen Action recommended that states encourage industries to adopt cost-effective technologies such as industrial heat pumps and electric boilers and suggested mechanisms for states to levy fees on polluting entities to fund decarbonization. California exemplifies this approach with its proposal to use greenhouse gas reduction funds to promote factory electrification and thermal energy storage, a strategy supported by local advocates highlighting the necessity of state-level leadership amid federal withdrawal.

The risk of U.S. industrial stagnation is underscored by surging global competition. Over 1,000 cleaner fuel, chemical, and building material production plants are under development worldwide, with China leading at over 200 projects. Although a minority of these are operational, the global project pipeline has surged by approximately 300 since early 2024, reflecting intensified climate commitments made at annual COP summits.

Despite recent setbacks, the Biden-Harris administration continues to underscore its commitment to industrial decarbonization and broader clean energy goals. In December 2024, it announced more than $12 billion in investments supporting electric vehicles, clean construction materials, and energy-efficient buildings powered by clean electricity. These initiatives aim for net-zero greenhouse gas emissions by 2050, promote domestic manufacturing growth, and have already resulted in a 38% reduction in emissions from federal operations since 2008.

Further evidence of progress includes over $270 billion in private investments spurred by the administration’s policies, creating jobs and modernising factories across the industrial Midwest, the South, and beyond. This reflects a broader strategy not only to reduce emissions but to revitalise American manufacturing in alignment with the global green economy.

For industrial sector professionals grappling with decarbonization, the landscape remains complex and dynamic. Federal policy shifts, state-level initiatives, and intensifying international competition all shape the pace and direction of emissions reduction efforts. While early Biden-era policies laid critical groundwork for transforming U.S. industry, sustaining progress will require consistent investment, regulatory clarity, and innovation to ensure the nation remains competitive in a rapidly evolving global industrial ecosystem.