Geopolitical considerations are increasingly influencing industrial policies across the globe, reflecting the complex interplay between national security, economic development and environmental sustainability. ²² The diverse nature of industries presents a challenge in crafting renewable energy policies that accommodate the needs and characteristics across different sectors.

Energy-related policies in industry have been driven by the need to decarbonise and have focused mainly on energy efficiency rather than renewable energy requirements. ²³ Policy makers also have explored the use of hydrogen in heavy industry sectors (such as the steel and cement industries) and have pushed for the electrification of industrial processes where possible. Some countries, such as Germany and Poland, continued to subsidise the energy costs of diverse industries in the wake of energy price increases in 2023. ²⁴

Renewable energy targets for heat in the industry sector continued to gain momentum. The EU's New Renewable Energy Directive includes a provision to increase the use of renewables in the total final energy consumption of industry by 1.6% annually. ²⁵ As EU Member States continued to update their National Energy and Climate Plans, they set targets for renewable energy shares in heating and cooling for industry by 2030, including in Latvia (64%), Slovenia (30%) and Italy (27%). ²⁶ Spain set a target to increase the renewable energy share in industry by 5.1% annually. ²⁷

As of 2023, a total of 10 countries had fiscal and financial policies supporting renewable energy uptake in industry, with 9 countries introducing new or updated policies during the year. ²⁸ To accelerate decarbonisation, Germany announced funding for energy-intensive industries through carbon “contracts for difference”, which will cover the additional costs for decarbonising industrial production, including through renewable energy technologies. ²⁹ Estonia is providing grants to manufacturers to improve the security of their energy supply, including through the purchase and installation of thermal energy storage systems and connections to district heating systems. ³⁰

Countries continued to publish national strategies or roadmaps for renewables in the industrial sector. The United Kingdom released its Net Zero Growth Plan, which includes strategies to deliver on commitments to net zero emissions through investments in renewables in industry. ³¹ In the EU, the Carbon Border Adjustment Mechanism enacted in late 2023, which puts a carbon price on certain products sold in the region, has already spurred industries worldwide to decarbonise their production. ³² (See Sidebar 3.) Japan amended its Energy Conservation Act to require large energy consumers to submit plans for transitioning to non-fossil fuel sources by 2030. ³³ In early 2024, Brazil launched its new industrial policy, Nova Industria Brasil, with a pillar focused on decarbonising the industrial sector through the deployment of renewables. ³⁴

Sidebar 3. The Effects of Europe's Carbon Border Adjustment Mechanism on Global Industry

The EU's Carbon Border Adjustment Mechanism (CBAM) started its transition (reporting-only) period in October 2023 and will enter into full force in January 2026. Under the CBAM, the region is placing a CO₂ tax (equal to the EU's carbon price) on imports of certain manufactured goods from non-EU countries – including cement, fertilisers, electricity, iron and steel, aluminium and hydrogen. The mechanism is intended to ensure the competitiveness of EU and other exporters that engage in “cleaner” practices, and thereby to incentivise manufacturers to increase their use of renewable energy.

The CBAM will have a direct impact on the competitiveness of countries that are large exporters of these goods to the EU. For example, India and Zimbabwe are both leading exporters of iron and steel to Europe (with 23.5% and 91.7% of these countries' exports going to the EU, respectively) and could be highly affected. Ukraine could be one of the countries most affected by the CBAM, as the EU is the destination for 34% of Ukraine's iron and steel exports, 36% of its fertilisers, 100% of its electricity exports and 90% of its cement.

The CBAM is intended to prevent the offshoring of greenhouse gas emissions to non-EU countries. The EU wants to ensure that investments in emissions reduction efforts by European steel making companies will not be undercut by low-cost competitors that use dirtier energy sources. The EU's decision could prompt countries to enforce similar measures, and on a wider variety of products. In December 2023, the United Kingdom announced that it would introduce its own carbon import tax by 2027.

Source: See endnote 32 for this module.

Renewable hydrogen policies for the industry sector increased in 2023. The steel, cement and chemicals industries – deemed “hard-to-abate” due to their high emissions and energy intensity – are exploring the use of renewable hydrogen as a potential pathway to decarbonisation. The EU's New Renewable Energy Directive states that at least 42% of the hydrogen used in industry should come from renewable fuels of non-biological origin by 2030, and 60% by 2035. ³⁵ The EU Clean Hydrogen Partnership issued a call for proposals to stimulate the use of renewable hydrogen in energy-intensive industries and other hard-to-abate sectors. ³⁶ Estonia allocated subsidies for renewable hydrogen use in the chemical industry. ³⁷ In the United States and as part of the Inflation Reduction Act (IRA), tax credits of up to USD 3 per kilogram of hydrogen are offered to projects with low life-cycle greenhouse gas emissions. ³⁸ The US Department of Energy's Clean Energy Hubs is set to invest USD 7 billion aiming to catalyse a total of USD 50 billion in hydrogen investment. ³⁹

Energy efficiency measures in the industry sector are sometimes paired with renewable energy solutions to enhance the overall efficiency. Hungary extended its grant programmes to cover up to 15% of the investment in energy efficiency for energy-intensive small and medium-sized manufacturers. ⁴⁰ Austria enacted a new financial package that includes provisions for decarbonising energy-intensive industries. ⁴¹ Under the New Energy Efficiency Directive, the EU has nearly doubled the energy savings obligations for Member States, driving energy savings in end-use sectors such as industry. ⁴²