Global Push to Decarbonise Steel and Cement Faces Massive Finance Gap: OECD

A new OECD and Climate Club report warns that financial support for decarbonising heavy industries like steel, cement and chemicals in developing economies remains far below what is needed, despite these sectors being among the world’s largest sources of emissions. While international funding and private investment are beginning to rise, the report says much stronger global action and investment in breakthrough technologies such as clean hydrogen and carbon capture are urgently required.

A major new report by the OECD and the Climate Club warns that the world is still investing far too little in cleaning up heavy industry in emerging markets and developing economies. Prepared with support from organisations including the International Energy Agency (IEA), the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC), the Climate Investment Funds (CIF) and the Green Climate Fund (GCF), the study says industries such as steel, cement and chemicals remain among the biggest climate challenges globally.

Heavy industry is responsible for nearly 70 percent of direct industrial carbon emissions worldwide, while industry overall contributes up to 40 percent of global energy-related emissions. Emerging economies are especially important because industrial production is growing rapidly across Asia, Africa and Latin America. The report argues that without cleaner industrial growth in these countries, global climate goals will be impossible to achieve.

Billions Needed, But Support Remains Limited

The report highlights a huge mismatch between climate finance needs and actual funding. According to the IEA, at least USD 500 billion will be needed over the next decade to deploy near-zero emission technologies in the steel and cement sectors alone, with most of that investment required in developing economies.

Yet between 2000 and 2023, only about USD 1.5 billion in mitigation-related public finance was directed specifically toward steel, cement and chemical industries in emerging economies. The OECD notes that this amount is smaller than the cost of building a single large low-emission steel plant using advanced technologies like hydrogen-based production or carbon capture systems.

The report says industrial decarbonisation has received far less attention than sectors such as renewable energy and transport, even though it is essential for reaching global net-zero targets.

Momentum Is Growing Across Governments and Banks

Despite the funding gap, the report identifies signs of progress in recent years. Public financial support for industrial decarbonisation increased sharply between 2021 and 2023, while private finance mobilised through development finance programmes also rose significantly.

Several international initiatives launched since 2024 are helping push the sector forward. One of the biggest is the Climate Investment Funds' Industry Decarbonization Program, which has committed USD 1 billion to support cleaner industrial projects in countries including Brazil, Egypt, Mexico, South Africa, Türkiye and Uzbekistan.

Türkiye has also launched a large industrial decarbonisation investment platform aiming to mobilise EUR 5 billion by 2030. Meanwhile, the Global Matchmaking Platform created by the Climate Club and UNIDO seeks to connect developing countries with investors, financial institutions and technical experts.

The report says these programmes show that industrial decarbonisation is finally becoming a larger part of the international climate agenda.

Clean Hydrogen and Carbon Capture Gain Attention

The study finds that climate finance is slowly moving beyond traditional energy-efficiency upgrades toward breakthrough technologies capable of deeply cutting industrial emissions.

Until recently, most projects focused on smaller improvements such as recycling, waste reduction and energy savings. Since 2022, however, there has been growing interest in technologies like clean hydrogen and carbon capture, utilisation and storage (CCUS), which are considered essential for producing near-zero emission steel, cement and chemicals.

Still, these technologies remain expensive and risky. Most current financing comes through loans, while concessional finance and blended finance remain limited. The OECD says stronger financial tools are needed to reduce investment risks and attract larger amounts of private capital into industrial transition projects.

Africa Gains Attention, But Big Challenges Remain

The report also points to changing regional trends. Historically, most industrial climate finance went to Türkiye and Ukraine, but more recent funding has increasingly targeted countries in Africa, particularly Egypt. Bangladesh has also emerged as a growing recipient of industrial decarbonisation support.

However, the OECD warns that many rapidly industrialising countries, especially in Southeast Asia, still receive limited support despite their rising emissions and expanding manufacturing sectors.

Another concern is the future of international aid itself. Official development assistance from OECD donor countries declined in 2024 for the first time in six years, raising fears that climate finance for industry could slow down.

The report concludes that industrial decarbonisation is no longer a side issue in climate policy. It is now central to the global clean energy transition. Without much larger investments, stronger international partnerships and wider support for breakthrough technologies, the world risks falling behind in one of the most difficult but important parts of the fight against climate change.