How industrial clusters can help the US reach its net-zero targets

Industrial emissions account for almost a quarter of total emissions in the US. They are also some of the most difficult to abate.

That makes decarbonization of industrial clusters such an appealing concept. Industries in the same general location that collaborate to meet decarbonization goals benefit not only from sharing risk, infrastructure and natural resources, but also from a united approach to tackle pressing topics such as workforce transformation or environmental justice.

Transitioning Industrial Clusters towards Net Zero – an initiative of the World Economic Forum in collaboration with Accenture and EPRI – aims to accelerate the value of cross-sector collaborations. It brings together global industrialists, researchers and policy-makers to examine barriers facing participants and how public and private finance can help overcome them.

Insights from this initiative have identified how successful industrial decarbonization efforts outside the US can be modified to address the US market, informed Signatory US Industrial Clusters’ responses to the Department of Energy’s (DoE) Regional Clean Hydrogen Hub RFI and RFP and helped shape discussions at the DoE’s Global Clean Energy Action Forum (GCEAF) and Carbon Management Project Review. Two public reviews of the initiative’s work can be found in recent whitepapers on policy enablement for industrial decarbonization across 10 nations and opportunities for financing industrial clusters in the US.

Accelerating industrial cluster development in the US (as elsewhere) calls for an approach that balances social, economic and environmental benefits with the needs and interests of corporations, non-governmental organizations (NGOs), governments and communities. Such an approach facilitates financial and operational risk-taking and encourages governments, suppliers and stakeholders to collaborate on capital investments and the development of ecosystems of decarbonization technologies and talent.

The potential of such an integrated approach is demonstrated in the initiative’s Signatory HyNet North West cluster in the UK. This cluster has leveraged existing infrastructure and strong federal support to align over 40 memorandums of understanding for future users of carbon and hydrogen, long before those infrastructure, generation and storage assets have been developed.

The following four US industrial clusters have now joined Europe and Asia-Pacific Signatories of the Transitioning Industrial Clusters toward Net Zero initiative:

In October 2022, the initiative brought together these four US clusters along with seven global Signatory Industrial Clusters and more than 30 representatives of multinational industrials to discuss four technologies identified as transformational for advancing industrial decarbonization: clean hydrogen, carbon capture utilization and storage (CCUS), direct electrification process efficiency. Forums like this – and the actions they prompted – are critical to laying the groundwork for the new clean resource markets needed to decarbonize industrial processes.

Financing is critical to scaling industrial decarbonization. In the US, the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) may unlock billions of federal dollars to stimulate action on this front.

Importantly, these government funds can be leveraged to attract additional private sector capital. This has been demonstrated many times before. In the UK, for example, public investment made up approximately 70% of funding for the offshore wind fleet in 2010; public investment is now about 25% and heading towards zero.

Public financiers identified the target transition point to private investment and deployed mechanisms such as Renewable Obligation Certificates (ROCs) and auction-based Contracts for Differences (CFDs) to enable this maturation. Additionally, the UK’s Department for Business, Energy and Industrial Strategy (BEIS) actively promoted offshore wind seeding and scaling, as well as an active and strong industrial cluster programme.

Such examples are informing our insights for US policy-makers and the cluster community on how to optimize public funds. A key question for us is: what creative funding mechanisms would most effectively mobilize $100 of private sector financing for every $1 of Infrastructure Investment and Jobs Act (IIJA) funding?

Our teams are dedicated to answering this question with globally informed, locally tailored actions plans – such as the one demonstrated by the National Capital Hydrogen Center’s Hydrogen Green Print – that drive collective value.

While every industrial cluster’s approach must be carefully tailored to the local industrial profile, political climate, geology, etc., US industrials must act now to capture federal funding and seed institutional investment. These ecosystems must:

As the industrial cluster concept continues to gain momentum, the Transitioning Industrial Clusters towards Net Zero initiative will continue to support the formation of international technology and supply-demand partnerships, share insights about decarbonization roadmaps across sectors and organize public-private roundtables to facilitate collaboration among policymakers, financiers and industries. We also look forward to expanding the initiative to include more stakeholders in the US, Europe and Asia-Pacific.

We believe that an integrated approach to industrial cluster decarbonization – one that incorporates social, economic and environmental concerns and delivers social, economic and environmental benefits – is the only way to realize sustainable change. Working together and sharing best practices is how we will accelerate our journey to a net-zero world.