In 2025, the planet surpassed a symbolic and alarming threshold. Data from the Copernicus Climate Change Service confirmed that, for the first time, the global annual average temperature exceeded 1.5 °C above pre-industrial levels in 2024. Although this does not mean that the Paris Agreement has been officially breached — since the goal considers long-term averages — this milestone has set off alarms in diplomacy, markets, and especially in heavy industry. At the center of this debate is the G7, the group of the seven largest advanced economies (Germany, Canada, United States, France, Italy, Japan, and the United Kingdom), responsible for about 40% of global GDP and a major share of the planet’s industrial and technological innovation.
As the power, automotive, and even parts of the agricultural sectors begin to make concrete progress toward decarbonization, what remains on the table are the challenges of the so-called “last frontier”: the hard-to-abate industrial sectors. Cement, steel, chemicals, aviation, maritime and heavy road transport still account for nearly a third of global CO₂ emissions. How can the transition in these sectors be accelerated? Which pathways, policies, and alliances must the G7 lead to make a green industrial future viable — and, at the same time, competitive and socially just?
The new shape of the climate crisis
In the latest report from the IPCC, scientists reiterated that limiting global warming to 1.5 °C is vital to avoid extreme impacts on ecosystems, health, and the economy. However, record emissions in 2023 and the acceleration of deforestation, combined with the El Niño phenomenon, led the planet to break historic heat records. Current projections suggest that, unless there are drastic and immediate emissions cuts, the average temperature over the next 20 years could stabilize above this critical threshold.
While renewables advance and the electrification of passenger transport consolidates in several countries, decarbonization of the most intensive industrial sectors remains a bottleneck. The dilemma is not just technological — it involves markets, infrastructure, regulation, and diplomacy. For the G7, leading this transition means not only facing the greatest climate challenge of our time, but also ensuring economic competitiveness in a world that is quickly valuing low-carbon products and supply chains.
What are the “hard-to-abate sectors” — and why are they so critical?
Hard-to-abate sectors bring together industrial processes that depend on high temperatures, chemical reactions that inevitably release CO₂, or use high energy density fuels. According to the International Energy Agency (IEA), steel production alone accounts for about 8% of global emissions. Cement, the foundation of the construction industry, is responsible for over 7%. Chemicals, aviation, and maritime transport together complete a picture that, in total, comes close to 30% of global emissions — a share likely to grow proportionally as other sectors are able to reduce their emissions more rapidly.
These sectors are critical not only for their volume, but for their centrality in global supply chains. They provide essential inputs for infrastructure, energy, food, and mobility. Without their decarbonization, national and international net zero targets become unattainable.
Technological pathways for a green industry
What separates the hard-to-abate sectors from others is not a lack of solutions, but rather the maturity and economic feasibility of technologies. The main bets include:
Green hydrogen
Produced by electrolysis of water using renewable energy, green hydrogen is seen as a potential substitute for coal in steelmaking, as well as a clean feedstock for fertilizers and other chemicals. Pilot projects like HYBRIT, in Sweden, are already supplying fossil-free steel to major automotive and construction industry clients. The challenge is to scale up green hydrogen production at competitive prices, with robust investments in renewable electricity and distribution infrastructure.
Carbon capture, utilization and storage (CCUS)
For sectors where emissions are inherent to the chemical process, such as cement, CCUS takes center stage. G7 countries are leading large-scale CO₂ capture projects, such as Net Zero Teesside in the UK, and developing routes for using captured CO₂ in synthetic fuel production or for permanent geological storage. Regulatory advancement and funding for these initiatives are fundamental.
Biofuels and synthetic fuels
In maritime and aviation transport, where fuel energy density is crucial, sustainable alternatives like advanced biofuels and e-fuels are gaining ground. G7 airlines already operate commercial flights with SAF (Sustainable Aviation Fuels) blends and the first cargo ships powered by green methanol are being tested by European shipping companies.
Electrification and energy efficiency
Wherever possible, electrifying industrial processes with renewable energy and implementing efficiency measures — such as electric furnaces, high-performance motors, and heat recovery — reduces emissions and costs. Digital integration and the use of artificial intelligence for industrial process optimization are already showing relevant results in Germany, Japan, and Canada.
Circular economy and new materials
Reducing the consumption of raw materials through recycling, reuse, and product redesign is central to cutting indirect emissions. The concept of circular economy is being consolidated in G7 industrial policies, promoting the reintegration of waste into supply chains and stimulating markets for recycled and lower carbon intensity products.
The strategic role of public policy
Even the best technologies do not scale up without political support, market incentives, and adequate financial instruments. Here, the G7 advances on multiple fronts:
- Smart regulation: Efficiency standards, minimum emission thresholds, certification of “green” materials and carbon taxation have accelerated demand for clean solutions. Notable examples include the Inflation Reduction Act in the USA, which allocated hundreds of billions of dollars for green innovation, and Buy Clean standards in the UK and Canada, prioritizing public procurement of low-carbon steel and cement.
- Stimulating demand: State purchasing power can create markets for green products before they are economically competitive. Major infrastructure projects, government contracts, and mandatory environmental labeling are instruments already applied in France, Germany, and the UK.
- Industrial alliances: The G7 fosters industrial clusters and R&D consortia, accelerating innovation and risk-sharing. The Industrial Deep Decarbonisation Initiative (IDDI) and the Mission Possible Partnership are examples of large-scale international cooperation.
- Financing and risk mitigation: With investments needed on the order of trillions of dollars by 2050, according to IRENA, public banks and G7 investment funds are expanding guarantee instruments, green credit, and blended finance to make high-risk, long-return projects viable.
- Just transition: Policies for retraining, social protection, and support for regions and workers affected by decarbonization ensure political legitimacy and inclusion. The concept of Just Transition, promoted by the ILO and adopted by G7 countries, is already being translated into concrete programs.
Success stories and persistent challenges
The “Decarbonising Hard-to-Abate Sectors: The G7’s Path to Net Zero” report by IRENA, published in April 2024, highlights pioneering initiatives:
- Germany and the UK are expanding regional hydrogen hubs and industrial clusters integrated with CCUS and renewables.
- Japan is advancing synthetic fuels for aviation and investing in electrification of the chemical industry.
- Canada and the USA are leading large-scale carbon capture and storage tests, with strong tax incentives.
- Italy and France are developing circular industrial policies and promoting public procurement of green materials.
Despite the progress, challenges remain: the high cost of emerging technologies, the need for international regulatory harmonization, and the risk of industry relocation to countries with weaker environmental regulation. To avoid so-called “carbon leakage,” the G7 is studying border carbon adjustment mechanisms and incentives for low-carbon global supply chains.
Opportunities for Brazil and the Global South
The advance of green industrial sectors in the G7 creates opportunities for exporters of commodities and low-carbon products — such as Brazil, with its potential in renewable hydrogen, bioenergy, and sustainable mining. Cleaner value chains tend to benefit those who invest in innovation and environmental traceability. However, there is a risk of technical barriers if the Global South does not keep pace with the technological and regulatory race of rich countries.
A call for leadership — and urgency
The path to a heavy industry compatible with 21st-century climate is mapped out, but time is short. The G7 has a unique role: financial capacity, geopolitical weight, and the power to set global standards. Leading the transition of hard-to-abate sectors is imperative not only for meeting climate targets, but for ensuring resilience, competitiveness, and social justice in a world already feeling the effects of warming beyond 1.5 °C.
The industrial future will be green — and whoever leads this transition will shape the economic directions of the coming decades.
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