TSP Ventures|27 January 2026
A closer look at the hard-to-abate sectors; the challenges associated with decarbonising and the vital role new technologies can play.
The ‘hard-to-abate’ sectors cover activities where reducing greenhouse gas emissions is especially challenging due to technical, economic or process-driven barriers.
These sectors account for 28% of global emissions (estimates range between 20-40% depending on scope and what sectors are included) and represent a major challenge in the path toward achieving climate goals such as those outlined by the Paris Agreement.
The sector is broadly divided into 2 groups of industries:
- Heavy Industries consisting of Iron and Steel (8% of global emissions), Cement (7%), Chemicals & Petrochemicals (4%) and Aluminium (1%)
- Transport consisting of Heavy Trucking (4% of global emissions), Aviation (2% ) and Shipping (2%)
Each activity has its own set of problems to overcome, but one thing they all have in common is that significant impetus to change will take a combination of the right economic incentives and targeted regulation.
HEAVY INDUSTRY
The two main reasons for the classification as ‘hard-to-abate’ are:
- The unavoidable energy intensity of these processes e.g. high temperature requirements with low heat recoverability
- These processes inherently produce CO2 e.g. CO2 produced from the addition of coke in a blast furnace
In addition, industrial plants in this sector tend to be large and expensive, and consequently they have long-term investment horizons. This leads to greater inertia. As a result, transitioning can be slow and often faces inherent scepticism; especially as some proposals are not so much transitions as complete rebuilds.
This inertia is exacerbated if the replacement process is only viable with a so-called ‘green premium’ (i.e. it costs more than the incumbent). Technoeconomic analyses are a crucial piece of the puzzle but there is almost always some degree of uncertainty in the numbers as a technology scales and the final results may take years to determine. In most cases, companies and societies have been unwilling to support such sustained green premiums, especially if they perceive doing so would disadvantage them versus others. To have the greatest chance of commercial roll-out, new technologies must be able to compete or beat the incumbent on price and at least match on performance.
It is also why we believe cost-effective point-source carbon capture has a role to play; in decarbonising emissions from existing large-scale operations that are well within their useful life. Note, we need to find ways to bring down the cost of not just the capturing, but also the transporting and storing of the CO2.
So what options do we have to address the hard-to-abate sectors within heavy industry?
The principle pathways to decarbonisation fall into the following broad buckets:
- Direct use of clean electricity
- Indirect use of clean electricity
- Direct use of renewable heat and biomass
- CO2 capture, and utilisation or removal
- Demand reduction and process efficiency improvements
CASE STUDY: Iron & Steel
The big picture plan is to:
- Use electric arc furnaces (powered by green electricity) to recycle scrap metal; and
- For the production of pig iron from iron ore (direct reduction), use green energy for heating and replace coke with a lower emission reduction agent, such as green hydrogen or syngas from pyrolysing biomass
In this plan, as electricity becomes cleaner, the CO2 footprint reduces and the use of hydrogen instead of carbon means that your by-product is water rather than CO2.
Whilst EAFs are now cost-competitive with traditional blast furnaces (and lower capex), green direct reduction currently still necessitates a green premium of 20% – 50%. We need to find innovative ways to close this gap.
However it should be noted, that if we are serious about reducing emissions, we must attribute some negative value to the carbon and this is where regulatory drivers must play a part. Carbon taxes will over time make traditional blast furnaces less and less economical and drive producers to switch technology. It will likely take the carrot and the stick to reshape the hard-to-abate sectors.
Another challenge is that heavy industries are often interconnected; and so changes in one industry can have a knock-on effect. For example, the slag from existing blast furnaces is used as a cementitious material. As it would no longer be produced, this may result in more cement needing to be manufactured. This highlights the importance of taking a holistic view.
As we look across other industries, it is a mixed picture. Activities that already use electricity will transition more readily. Finding ways to generate (and recover) green industrial heat is key as this covers a large number of applications. Promising solutions include biomass combustion or single / multi-stage industrial heat pumps (which can now go to 300°C+)
However, in other areas, innovation is still badly needed if cost-effective change can be implemented at scale.
Examples include:
- Nitrogen fertiliser: the Haber-Bosch process is so interwoven, with heat, mass and pressure loops, that reorganising it to use say green hydrogen usually results in a significant drop in efficiency. This is a challenge that needs to be overcome
- Many bulk chemicals (e.g. salt, ethylene, bitumen) unfortunately have no viable alternative to their current production process, which involve rock mining or fossil fuels. Note, there are specific cases where there are friendlier alternatives; e.g. natural dyes, ethanol (and other fermentation products), vanillin, and there is potential for some bioplastics
- Cement was long considered to be the most challenging of the heavy industries and it remains one of the biggest emitting sectors. A promising route is Limestone Calcined Clay Cement (LC3), which reduces the carbon footprint by reducing the inherent CO2 produced (calcining clay produces water), and requires a lower temperature.
TRANSPORT
The main reason transport is considered ‘hard-to-abate’ is simple: the need to replace high-energy density hydrocarbon fuels (mostly produced from fossil fuels) with greener alternatives.
This chemical energy is quite efficiently converted into kinetic energy by internal combustion engines (25% – 40%, in the case of turbo-diesel) and jet engines (20% – 40%, in the case of high bypass turbofan).
In battery-powered vehicles, the motor efficiency is higher (up to 90%) and regenerative braking further enhances overall efficiency. The resulting combination means that for light transport, batteries (currently mostly lithium-ion) are viable and allow the transition away from ICEs. So, as electricity generation goes green, light transport can also go green.
However, for heavy transport like aviation, shipping and heavy trucking, lithium-ion batteries don’t and probably won’t have the energy density required. Diesel is up to 50x more energy dense than lithium-ion batteries.
That’s why alternative approaches like synthetic hydrocarbons are being looked at. The issues are scale and cost. Biodiesel made from old vegetable oil is one example. The issue is that heavy trucking uses about 800 million tonnes of diesel annually, but the global annual production of vegetable oils is 230 million tonnes, which is converted into biodiesel at about a 10:9 ratio.
HEFA-derived Sustainable Aviation Fuel (SAF) is another example utilising old cooking oils (HEFA stands for Hydroprocessed Esters and Fatty Acids). The issue is that this approach currently costs 2-3x fossil-fuel derived jet fuel.
REFLECTIONS:
The hard-to-abate sectors are so-called for a reason. Transitioning these sectors entirely will take many decades and trillions of dollars of capital investment. New approaches and technologies hold the key, but they need sufficient time and investment to scale to the point of proving the unit economics. And then further investment to deploy at scale. Lithium-ion batteries took many decades of R&D before they were rolled out commercially. With the right economic incentives, technologies can get to market quicker, however, widespread change won’t happen overnight. We should pick our battles wisely and prioritise the areas which represent most bang for the buck.
At TSP, we are on the look out for these technologies. For us, they can’t just be more sustainable (i.e. less emissive and less pollutive), they also need to make compelling economic sense and increasingly, they should be geo-secure. Get this right and the hardest 28% of global emissions can be addressed. And the opportunity to make a meaningful impact on emissions and make meaningful returns are, and should be considered, two sides of the same coin.
Sources:
Boston Consulting Group Analysis: https://www.theclimatedrive.org/guidebook/reduce/step-1-understand-decarbonization-approaches-from-a-macro-perspective/apply-abatement-approaches-in-hard-to-abate-sectors
IEA: https://www.iea.org/articles/the-challenge-of-reaching-zero-emissions-in-heavy-industry
https://eureka.patsnap.com/report-hydrogen-powered-direct-reduction-in-green-steelmaking-technologies
https://www.sciencedirect.com/science/article/pii/S1364032122006827
https://green-alliance.org.uk/wp-content/uploads/2024/04/The-last-use-of-fossil-fuels.pdf
https://www.edfenergy.com/energywise/why-EVs-are-efficient
https://www.iea.org/news/iea-study-unveils-key-role-for-trucks-in-global-oil-demand-growth