What is industrial decarbonization and why does it matter?
Industrial decarbonization is the process of structurally reducing greenhouse gas emissions associated with the production of goods, materials, and industrial inputs. This includes emissions from energy use as well as those generated by the chemical reactions involved in certain industrial processes, the use of raw materials, supply chains, and, in some cases, the use and disposal of manufactured products.
The scale of the challenge helps explain why industry has become increasingly important in climate policy. The industry-focused Chapter 11 of the IPCC Sixth Assessment Report, published in 2022, estimates that direct industrial emissions reached approximately 14.1 billion metric tons of CO2 equivalent in 2019. When indirect energy-related emissions and other components associated with industrial activity are also included, the total approaches 20 billion metric tons of CO2 equivalent.
These figures show that reducing industrial emissions cannot be achieved through a single technology. A plant may reduce its natural gas consumption by installing more efficient equipment, procure renewable electricity, and replace some of the fuels it uses, while still generating significant emissions because the chemical process required for production itself releases carbon dioxide.
Cement production is one of the best-known examples. Part of its emissions comes from the energy required to reach the high temperatures used in kilns, while another portion results from limestone calcination, the chemical reaction required to produce clinker. In conventional steelmaking, coal can simultaneously perform both energy-related and chemical functions in the reduction of iron ore. In the chemical industry, fossil-based molecules may be used as feedstocks rather than simply as fuels.
For this reason, an industrial decarbonization strategy begins with a detailed understanding of where emissions originate. Only after this assessment is it possible to determine which emissions can be reduced through energy efficiency, which processes can be electrified, where renewable fuels can replace fossil alternatives, and which emissions will require deeper technological changes.
The industries that are hardest to decarbonize
The greatest challenges are concentrated primarily in basic materials industries and energy-intensive sectors. The IPCC estimates that heavy industrial activities account for approximately 65% of industrial greenhouse gas emissions and more than 70% of industrial CO2 emissions, excluding waste.
High energy requirements, the extreme temperatures needed for some processes, chemical emissions, the value of installed assets, and the long operating life of industrial equipment make this transformation particularly complex.
In Brazil, the study Industrial Decarbonization: Analysis of International Experiences and Recommendations for Brazil, published by the Brazilian National Confederation of Industry in November 2024 in partnership with the Ministry of Development, Industry, Trade and Services, examined sectors including steel, cement, glass, aluminum, pulp and paper, and the chemical industry.
The level of difficulty is not the same across all of these sectors. Industrial processes that use relatively low-temperature heat may have greater opportunities for electrification. Others depend on furnaces operating at much higher temperatures and must maintain specific characteristics related to flame performance, thermal stability, atmosphere, or chemical reactions.
There are also processes in which replacing the energy source does not eliminate the primary source of emissions. This characteristic explains why steel, cement, chemicals, and other industries are frequently classified internationally as hard-to-abate sectors.
IRENA assessed these sectors in a report published in April 2024 and emphasized that reducing emissions requires a combination of efficiency, renewable energy, electrification, changes in production processes, new fuels, and other technologies suited to the characteristics of each industrial activity.
This means that comparing companies solely on the basis of their absolute emissions can lead to incomplete conclusions. Carbon intensity per unit of output, the technology used, regional energy availability, the age of industrial assets, and the characteristics of raw materials all directly influence the alternatives available.
Direct and indirect emissions: what Scopes 1, 2, and 3 mean
A company seeking to establish a consistent emissions reduction policy must first understand its own carbon footprint. One of the most widely used international methodologies divides corporate emissions into three categories known as Scope 1, Scope 2, and Scope 3.
Scope 1 covers direct emissions from sources owned or controlled by the organization. At an industrial facility, these may include natural gas combustion in boilers and furnaces, diesel used in company-owned equipment, and emissions released during certain chemical processes.
Scope 2 relates to indirect emissions from energy purchased by the company, primarily electricity. An industrial company may not operate a thermal power plant at its own facility, but the electricity it consumes may have been generated from fossil fuels. These emissions are accounted for under Scope 2.
Scope 3 includes other indirect emissions distributed throughout the value chain. They may arise from the production of purchased raw materials, third-party transportation, capital goods, waste, product distribution, and even the use and end-of-life treatment of products sold.
The relevance of each scope varies significantly from one company to another. A company may use low-carbon electricity and have relatively low Scope 2 emissions while still generating substantial Scope 1 emissions because its thermal processes depend on fossil fuels. Another organization may reduce emissions at its own facilities only to find that most of its carbon footprint is embedded in the materials and services it purchases.
This mapping is essential because industrial decarbonization must address the actual sources of emissions. Replacing a fuel, for example, requires consideration of its production, transportation, potential losses, and life-cycle characteristics. The objective is not simply to shift emissions to another part of the value chain.
Industrial energy efficiency is one of the first steps toward decarbonization
Before completely replacing an industry’s energy source, there is a fundamental question to answer: how much of that energy actually needs to be consumed?
Industrial energy efficiency directly addresses this issue. Higher-efficiency motors, heat recovery, thermal insulation, improvements to steam systems, compressed air optimization, automation, appropriate maintenance, monitoring, and equipment modernization can reduce the amount of energy required to produce the same volume of goods.
In December 2025, Brazil’s Energy Research Office published the Brazil Energy Efficiency Atlas 2025, updated with data through 2024. The document tracks the development of energy efficiency indicators in the country and analyzes policies and programs designed to reduce energy waste.
Efficiency has two functions within a climate strategy. The first is direct. When equipment uses less fossil fuel to perform the same task, emissions decline. The second is related to the scale of the subsequent stages of the transition.
A plant that reduces consumption before electrifying its processes will require less electrical capacity. Similarly, a facility that recovers waste heat may later require a smaller volume of renewable fuel. This reduces investment requirements and can improve the economic viability of other technologies.
For this reason, energy efficiency should not be viewed merely as a collection of one-off projects. Digital systems, sensors, and management tools allow companies to continuously monitor plant performance and identify losses that would be difficult to detect by analyzing overall energy consumption alone.
The CNI Technology Roadmap for Industrial Decarbonization, published in December 2025, also identifies thermal and energy efficiency, process optimization, new inputs, and carbon capture among the main technology pathways associated with reducing industrial emissions.
Electrification of industrial processes and its limitations
Electrification is one of the main decarbonization technologies available to industry, particularly when the electricity used has a low carbon intensity.
Across different processes, fuel-burning equipment can be replaced by electric alternatives. Electric boilers, resistance heating systems, induction heating, electric furnaces, and industrial heat pumps are examples of solutions already used in a range of applications.
Their viability, however, depends on the temperature required by the process, the operating profile, the relative cost of electricity and fuels, grid availability, and the ability to adapt existing equipment.
In September 2026, the International Energy Agency published the report Electrification, which identifies the expansion of industrial electrification as one of the forces expected to drive global electricity demand. The IEA emphasizes that the climate benefits of electrification depend simultaneously on the expansion of low-emission power generation and the electrical infrastructure required to serve new loads.
For low and medium-temperature applications, electrification options tend to be more accessible. High-temperature processes may require specialized technologies and more extensive engineering modifications.
There is also an infrastructure challenge. A large industrial facility that replaces a significant portion of its gas consumption with electricity may substantially increase its power demand. This requires an assessment of substations, supply lines, power quality, protection systems, and grid connection capacity.
Industrial electrification therefore depends on more than simply purchasing new equipment. In many cases, it requires the simultaneous modernization of electrical infrastructure both inside and outside the plant.
Biogas and biomethane as alternatives to fossil fuels
Not all industrial processes will be electrified at the same pace. For facilities that depend on gaseous fuels, biogas and biomethane can provide a lower-carbon alternative for certain applications.
Biogas is produced through the anaerobic decomposition of organic matter. Agricultural, agro-industrial, sanitation, and municipal waste can be used as feedstock. After treatment and upgrading, biogas can be converted into biomethane that meets specifications compatible with different energy applications.
The EPE Biofuels Market Analysis 2025, published in August 2026 and covering the 2025 reference year, records the expansion of biogas and biomethane plants in Brazil and links this growth to waste utilization, regulatory developments, and broader decarbonization policies.
One of the potential advantages of biomethane in industry is its ability to replace fossil natural gas in certain equipment and processes, provided the required technical and economic specifications are met.
However, viability depends on more than the availability of the fuel itself. The location of the production plant, distance to the consumer, transportation infrastructure, connection to the gas grid, compression, liquefaction, and long-term contracts all directly affect the final cost.
Its climate performance must also be assessed carefully. Biomass origin, emissions during production, methane leakage control, energy consumption during upgrading, and transportation all affect the fuel’s overall carbon footprint.
Brazil’s policy environment advanced in 2026 with new regulatory instruments related to biomethane. ABiogás highlighted in June 2026 the progress of the National Decarbonization Program for Natural Gas Producers and Importers and the certification mechanisms associated with biomethane.
This process increases the importance of issues such as traceability, fuel origin, and verification of environmental attributes.
Low-emission hydrogen and its industrial applications
Hydrogen has been used in industry for many decades. Refineries, ammonia production, fertilizers, methanol, and other processes consume large volumes of the molecule. The climate challenge is that most hydrogen is still produced from fossil fuels.
The IEA Global Hydrogen Review 2026 reports that global hydrogen demand exceeded 100 million metric tons in 2025 and remained concentrated primarily in traditional industrial and refining applications.
Low-emission hydrogen production has increased but still represents a small share of the global market. This is important context when assessing the pace of the transition and avoiding overly optimistic expectations.
One of the most direct applications is replacing fossil-based hydrogen already used by industry. There are also prospects for new steelmaking routes, low-carbon fertilizers, and synthetic fuel production.
Producing hydrogen through electrolysis powered by renewable electricity is one possible pathway, but it involves conversion losses and requires significant volumes of electricity. Hydrogen should therefore not be treated as an automatic substitute for direct electrification.
When a process can use electricity efficiently, converting electricity into hydrogen simply to generate heat at a later stage may increase both energy consumption and costs. Hydrogen tends to provide greater value where its chemical properties are required or where direct electrification faces technical limitations.
The IEA continues to identify high costs, demand uncertainty, infrastructure, and regulatory frameworks among the main barriers to the expansion of low-emission hydrogen.
In Brazil, regulation of the National Low-Carbon Hydrogen Policy advanced in 2026, strengthening the legal framework for certification, project development, and incentive mechanisms.
Carbon capture, utilization, and storage
Some industrial emissions remain even when fossil fuels are replaced. This occurs primarily when carbon is released by the chemical reaction inherent in the production process.
Carbon capture, utilization, and storage, commonly referred to as CCUS, is intended to address these emissions.
The process involves separating CO2 from a gas stream, compressing it, and transporting it. Depending on the project, the captured carbon may be used in specific applications or sent for geological storage in suitable formations.
In cement production, for example, replacing kiln fuels can reduce the energy-related portion of emissions but does not eliminate the CO2 released during limestone calcination. For this reason, the IPCC includes carbon capture and storage technologies among the alternatives considered for hard-to-decarbonize industrial activities.
In Brazil, the Ministry of Mines and Energy released a new EPE study on carbon capture and storage in May 2026, expanding the mapping of areas with potential for geological storage and examining regional opportunities.
The regulatory framework has also advanced. The Fuel of the Future Act assigned the National Agency of Petroleum, Natural Gas and Biofuels responsibilities related to geological CO2 storage. In August 2026, federal regulations established a framework for capture, pipeline transportation, storage, authorization, oversight, and monitoring of these activities.
CCUS still faces high costs and requires dedicated infrastructure. Carbon capture consumes energy, CO2 must be transported, and storage requires long-term monitoring. As a result, this option tends to be most relevant in processes where reducing emissions directly at the source is technically difficult.
The role of renewable energy in industrial decarbonization
Industrial electrification delivers greater climate benefits when the electricity used has a low carbon intensity. This characteristic puts Brazil in a relatively favorable position.
According to the EPE 2026 Brazilian Energy Balance Summary Report, published in June 2026 with data for 2025, renewable sources accounted for 86.8% of Brazil’s electricity mix.
Within industry’s own energy mix, renewables accounted for 65.1% in 2025, supported by the use of electricity, sugarcane bagasse, black liquor, and other renewable energy sources. Final industrial energy consumption increased by 1% compared with 2024.
This composition provides an advantage for the energy transition in industry, but it does not mean that every company has the same carbon footprint.
Large consumers can use self-generation, long-term power purchase agreements, participation in the free electricity market, and different procurement mechanisms. Emissions accounting requires careful attention to traceability criteria and the methodologies adopted in corporate greenhouse gas inventories.
There is also an important distinction between acquiring environmental attributes and physically reducing a plant’s energy consumption or emissions. Certificates and contracts can be relevant instruments, but they do not replace technically viable measures involving efficiency, electrification, and direct emissions reductions.
The IRENA World Energy Transitions Outlook 2024 identifies energy efficiency and electrification as key drivers of the global transition, supported by the expansion of renewable energy, low-emission hydrogen, and the sustainable use of biomass.
Decarbonization technologies need to work together
Energy efficiency, electrification, biomethane, hydrogen, renewable energy, and carbon capture are often presented side by side in discussions about reducing industrial emissions. This can create the impression that a company needs to select a single solution.
In practice, effective strategies tend to combine multiple technologies.
An industrial facility may begin by reducing heat losses and improving equipment performance. Processes for which electrification is technically efficient may then gradually move away from direct combustion. Additional electricity demand can be supplied by lower-carbon sources.
Processes that continue to require gaseous fuels may consider biomethane. An industry that already uses hydrogen as a feedstock may assess the gradual replacement of conventional hydrogen with low-emission production routes. Process emissions that remain after these changes may justify the evaluation of carbon capture.
The sequence of decisions matters because it directly affects costs.
Installing a carbon capture system before reducing energy waste may result in an oversized project. Using hydrogen for applications that could be electrified directly may require more electricity. Procuring new generation without examining the hourly load profile may fail to address challenges involving capacity, flexibility, and grid connection.
Industrial decarbonization therefore requires engineering, data, and long-term planning.
Economic, technological, and regulatory barriers
Much of today’s industrial infrastructure was built to operate for decades. Furnaces, boilers, chemical plants, steelmaking equipment, and utility systems are high-value assets. Replacing them before the end of their economic life can generate significant losses.
This creates a timing challenge for emissions reduction. A company that installs carbon-intensive equipment today with a useful life of 20 or 30 years may create a dependency that becomes difficult to reconcile with future climate targets. At the same time, prematurely retiring equipment that is still productive also carries costs.
The timing of asset replacement therefore becomes strategically important. Decarbonization decisions need to be incorporated into capital planning before new investments have already been defined.
There are also barriers outside the factory itself. Electrification depends on grid availability and power capacity. Hydrogen requires production and infrastructure. Biomethane requires supply, logistics, and contracts. Carbon capture and storage depends on transportation, suitable storage sites, and long-term responsibilities.
Financing also influences the pace of the transition. Some energy efficiency measures have relatively short payback periods. Other technologies still cost more than conventional alternatives.
Another important issue is the market for lower-carbon products. Producing steel, cement, fertilizers, or other materials with lower emissions may require additional investment. If buyers do not recognize this difference, achieving an adequate economic return becomes more difficult.
Procurement policies, climate regulations, product standards, financing mechanisms, and requirements imposed by international value chains may gradually alter this equation.
Prospects for industrial decarbonization in Brazil
Brazilian industry starts from an energy structure that differs from that of many developed economies. The 65.1% share of renewable sources in the industrial energy mix in 2025 shows that a significant portion of the energy used by the sector already comes from renewable sources.
The electricity system, with an 86.8% renewable share in the same year, provides another advantage for processes that can be electrified.
Brazil also has significant biomass and biofuel production, potential for biogas and biomethane, experience with large-scale renewable energy systems, and favorable conditions for the development of new low-emission hydrogen value chains.
These advantages, however, do not mean that industrial emissions reduction has already been achieved.
Industry continues to use mineral coal, coke, natural gas, and other fossil fuels in activities where substitution can be technically complex. Some processes will continue to generate chemical emissions even when powered by renewable energy.
Brazil’s pathway will likely be defined by a combination of solutions. Renewable electricity can support electrification. Sustainable biomass and biomethane can meet certain thermal energy requirements. Low-emission hydrogen may find applications in specific sectors. Carbon capture and storage can address residual emissions that are difficult to eliminate.
Regulatory developments are also beginning to create new conditions. Between 2024 and 2026, Brazil made progress in regulating low-emission hydrogen, mechanisms associated with biomethane, and carbon capture and storage activities.
The challenge now is to convert natural resources, energy infrastructure, and public policy into economically competitive projects.
Competitiveness needs to remain central to this discussion. Industrial companies allocate capital across production modernization, digitalization, expansion, and efficiency. Low-carbon projects must compete with these priorities while delivering measurable results.
Carbon is also beginning to influence commercial decisions. Exporting companies increasingly face buyers that establish climate targets for suppliers, request product carbon footprint information, and examine value-chain emissions more closely.
In this environment, understanding the emissions associated with each metric ton of output is likely to become increasingly important from an economic perspective.
Industrial decarbonization starts with measurement and requires process transformation
There is no single answer to the question of which technology should be used to decarbonize an industrial operation.
The first step is to understand where emissions are generated, which energy sources are used, which chemical reactions are part of the production process, the age of the assets, and what infrastructure is available both inside and outside the facility.
Energy efficiency often plays an early role because it reduces the amount of energy that later stages of the transition need to replace. Electrification can eliminate direct combustion in many applications where electrical infrastructure and low-emission electricity are available.
Biogas and biomethane can expand the range of alternatives for thermal processes and gaseous fuel applications. Low-emission hydrogen can perform important functions where the molecule itself is required or where direct electrification faces limitations. Carbon capture addresses a different part of the problem, particularly in processes where emissions do not disappear simply by changing the energy source.
Renewable energy connects many of these strategies. It can power industrial facilities, reduce the carbon intensity of electricity, and supply energy for new technology pathways. Its expansion, however, must be accompanied by grids, contracts, storage, flexibility, and sufficient connection capacity.
For Brazilian industry, the high share of renewable energy represents an important advantage, but each company will need to develop its own decarbonization pathway based on concrete data.
Some technologies are already mature and economically viable. Others still need to reduce costs, scale up, or develop supporting infrastructure. In hard-to-abate sectors, transformation is likely to occur in stages and through a combination of different solutions.
Industrial decarbonization is therefore a process involving engineering, investment, and economic transformation. The objective is not simply to change the origin of a unit of energy. It is to reorganize production processes so that they use less energy, depend less on fossil carbon, reduce process emissions where possible, and reliably measure what cannot yet be eliminated.
For companies, the key issue goes beyond the emissions recorded today. The equipment, contracts, energy sources, and projects approved now will determine a significant part of industry’s carbon profile for decades to come.
