Competitiveness, economic resilience and environmental protection hinge on one important question: can we successfully transform our industries in time to meet global goals?  

Industry forms the backbone of every modern economy. Industrialisation enables the production of materials like steel, cement and petrochemicals that are needed to build infrastructure, reduce poverty and improve living standards. Industry is also vital for manufacturing essential technologies required in modern energy systems – from batteries to solar panels and heat pumps. 

Investment levels in industry transformation must triple by the end of the century to align with a net-zero pathway. Additionally, more than half of heavy industry’s carbon dioxide emissions reductions on the same pathway rely on technologies that are not yet market-ready. This transformation could create investment opportunities, spur job creation and economic development in emerging markets and developing economies (EMDEs), as well as offer a pathway for improved international co-operation. 

The OECD has long been at the forefront of this debate through its data-driven analysis and policy advice as interest in industry transformation has increased rapidly in recent years – across governments, the private sector and civil society. 

The outcomes of COP 30 that took place in Belém illustrate how far the conversation has come, with several major statements that highlight the global momentum for green industrialisation: 

• The Belém Declaration: Accelerating Green Industrialization in Pursuit of Global Climate and Development Goals

• The COP30 Joint Statement and Roadmap on International Assistance and Partnerships for Green Industry Transition 

• The Climate Club’s Global Pledge to grow near-zero and low-emissions steel and cement markets  

These are not just symbolic announcements. They reflect a broad and growing commitment from governments and industry to transform industrial systems worldwide.

The success of these outcomes hinges on data-driven analysis to finance transformation. The OECD Framework for Industry’s net-zero Transition offers practical solutions to minimise the burden for individual economies whilst scaling up required investment.

In the margins of the final G20 Environment and Climate Sustainability Working Group meeting that took place in October in Cape Town, the OECD launched a new report on Decarbonising the Iron and Steel Sector in South Africa. This report was an outcome of the OECD’s co-operation with the South African government. A techno-economic analysis showed that it would cost at least 40% more in South Africa to produce renewable hydrogen-based iron and steel compared to conventional coal-based processes, with production costs exceeding USD 750 per tonne of crude steel. The audience asked the obvious question: Should South Africa really invest in such expensive technology? The answer is yes – the OECD study shows that the right financing instruments and scaled up international assistance can close the cost gap and result in substantial positive spillovers. 

The OECD report outlines three main solutions to decarbonise the iron and stell sector: 

1. Targeted financing tools to cut down on capital and operational costs. This is especially important while renewable hydrogen remains expensive. 
2. Demand-side mechanisms such as green premiums to create sustainable markets.
3. Valuation of carbon dioxide emitted and avoided through carbon pricing. 

None of these options are easy to implement, which is why the OECD ensured strong stakeholder dialogue in the country during the preparation of the report by regularly convening the line ministries responsible for finance, industry and environment, and the financial sector to jointly develop its policy recommendations. This whole-of-economy collaboration was essential, given what is at stake: the iron and steel sector is essential to South Africa’s job market and economy, and renewable electricity and hydrogen-based steel production have the potential to reduce the sector’s emissions intensity by more than 90%, as well as create opportunities to establish new supply chains in near-zero steel markets. 

Beyond South Africa, each EMDE faces the same question: how to finance industry transformation.

A new OECD report, prepared jointly with the International Energy Agency, outlines where international support for industry transformation in EMDEs stands today, what needs to happen next and how to get there.  

• Where we stand: As OECD data shows, despite progress, financial and technical assistance to industry transformation remains insufficient. There is space to consider a wider range of providers, recipient countries, financing instruments, as well as further targeting transformative projects. 

• Where we need to go: Over the next decade global average annual investment for near-zero emissions technologies in the steel and cement sector must reach at least USD 50 billion in the two sectors combined by comparison with today’s investment levels of only a few billion USD in such technologies. Three quarters of the total investment needed by 2035 is expected to take place in EMDEs, who cannot shoulder this challenge alone.  

• How to get there: Finding the most effective way to combine different sources of finance is key to unlocking and accelerating investment in industry decarbonisation in EMDEs.  Tailored risk mitigation and financing instruments can help to leverage public finance, and could be complemented by technology transfer and capacity building support.  

The OECD is supporting its members and partner EMDEs by generating more data, producing new analysis and knowledge, and sharing best practices. 

Industry transformation is challenging, but the opportunities are significant. As highlighted by a diverse group of global academics, economists and policy experts in a recent report for the Climate Club, these challenges can be overcome through international co-operation and platforms that bring together policymakers, industry and financial institutions. 

With more countries now putting greater emphasis on industry in their updated Nationally Determined Contributions, accelerating the industrial transformation will not only be central to achieving climate goals, but also to boosting competitiveness and driving growth.