1. Incentives, security and competitiveness

The majority of roadmaps highlight the threat of uneven competition and loss of profitability as key barriers to implementing decarbonization measures for heavy industry. For example, the UK’s iron and steel roadmap states that investment in decarbonization efforts should not affect the competitiveness of the UK’s iron and steel sector compared to businesses operating in Europe and the rest of the world.

Roadmaps therefore argue for government interventions to ensure profitability of low-carbon industries. This could take the form of financial incentives for investment in more climate-friendly technologies. For example, governments could implement subsidies to lower the capital costs of major new investments, or offer below-market interest rates to reduce the risk of investment.

2. Investment in research and development

Roadmaps also highlight the need for investments in research and development (R&D), particularly for new technologies such as Carbon Capture and Storage (CCS). The Netherlands National Climate Agreement , for example, estimates government investments of up to €100 million a year for innovation, covering both pilot and demonstration projects of emerging technologies and for exploration of unknown, alternative technologies.

Overall, roadmaps highlight the importance of R&D finance for testing, upscaling and bringing to market mitigation measures such as sustainable building products, climate-friendly cement and concrete, and energy efficiency. This contributes to reducing the risk associated with developing new processes and technologies, and increases the feasibility of wider market deployment.

3. Investment in hydrogen and carbon capture and storage technologies

Beyond R&D, industry transition roadmaps emphasise the need for financing for deploying hydrogen, CCS and carbon capture and utilisation (CCU) technologies to decarbonise key industries such as cement and steel. Investment in CCS could include initial support to pipeline companies to allow them to establish network infrastructure. For hydrogen, investments are needed to develop storage technologies.

According to the UK’s cement roadmap , CCS is essential for the sector to become carbon neutral, but would double the capital and operating costs of a typical cement plant. As such, CCS investments need to be paired with the incentives and financial risk sharing mechanisms highlighted above.

4. Carbon pricing

An additional policy instrument for financing industry transition roadmaps is a carbon price to promote the competitiveness of low-carbon technologies. According to Ireland’s Climate Action Plan , for example, a carbon price of €80 per tonne is needed to meet carbon reduction targets by 2030.

Carbon pricing can take several different forms. For instance, a special surcharge can be levied on carbon-intensive materials such as steel or cement, irrespective of the emissions associated with their production. Alternatively, a carbon price can be applied to end products, based on their carbon content, at the point of sale. This would also generate revenue to finance other instruments, for example to support the emergence and commercialisation of new technologies. The standard EU emissions trading model could also be adopted, perhaps complemented by a carbon levy on imports.

5. Private sector investment

Finally, a number of roadmaps highlight the need to mobilize private sector investment to finance industry transitions. For example, India’s cement roadmap calls for governments to unlock private finance in areas with low likelihood of independent private investment, thereby generating public-private investments to support the sustainable transition of the cement industry.

However, several roadmaps highlight that companies are unlikely to invest in decarbonization if it is linked to long payback periods. As such, mobilizing private sector investment is also linked to government measures to promote competitiveness and profitability, such as through carbon pricing and creating incentives.

Conclusion: collaboration and legitimacy

Our analysis demonstrates that the availability of financial capital alone is insufficient for financing industry transitions. Policy measures and interventions, in the form of carbon pricing, lowered interest rates and subsidies, are also needed to increase the competitiveness of low-carbon technologies and create incentives for public and private sector investment. These measures need to be combined with investments in R&D and new technologies such as CCS and hydrogen to ensure scalability, feasibility and profitability of decarbonizing technologies.

Several roadmaps highlight very similar financial needs and barriers to implementation, demonstrating the potential for joint learning and collaboration. For example, half of the roadmaps we analysed call for governments to support financial incentives through policies and measures that reduce the risk of investment. Dialogue between countries on this topic could help to create a level playing field for competition in international markets. The Indian roadmap emphasises the role of technology transfer and climate finance for facilitating industry transition. International collaboration can therefore also play a role in promoting industry transition in developing countries.

Finally, it is not just finance and policy that will deliver the industry transition. Legitimacy is fundamental to achieving a net zero emission society by the middle of this century. Currently, industry transition roadmaps in the countries assessed do not include any information on how the creation and distribution of financial incentives would affect different sectors of society, or how carbon pricing measures would affect small enterprises compared to large corporations. There is real scope for roadmaps to incorporate principles of a just transition such as avoiding carbon lock-in, supporting workers and affected regions, addressing existing inequalities and promoting inclusive and transparent planning processes. The industry transition must be just and equitable if it is to succeed – and finance needs to play its part too.