A December 2025 report from the OECD and the International Energy Agency (IEA) delivers a sweeping, urgent assessment of the world’s heaviest-emitting sectors, steel, cement, and chemicals, and the enormous challenge of decarbonising them across emerging markets and developing economies (EMDEs). Produced by the OECD Environment Directorate and the IEA’s energy and climate research divisions, the analysis warns that EMDEs now produce more than 75% of global steel and over 85% of cement, placing them squarely at the centre of the global climate transition. With heavy industry responsible for around 40% of global energy-related CO₂ emissions and industrial plants operating for 30–40 years, decisions made in the 2020s will shape global emissions far beyond mid-century.
The report’s financial mapping exposes a chronic mismatch between ambition and resources. Between 2000 and 2023, total mitigation-related public bilateral and multilateral finance for industrial decarbonisation in EMDEs amounted to just USD 1.5 billion, less than the cost of a single modern near-zero emissions steel plant. Private finance mobilised through official development channels adds only USD 2 billion from 2012 to 2023. While the charts in the report show a notable surge in flows over the past three years, this rise occurs from such a low baseline that the structural deficit remains effectively unchanged. Worse, the OECD projects a 9–17% decline in global Official Development Assistance in 2025, amplifying pressure to prioritise heavy industry mitigation within shrinking aid budgets. The landscape of contributors is also narrow: over 90% of flows originate from multilateral lenders, with the EBRD alone responsible for 80% of public assistance to industry since 2000. Recipient countries historically cluster around Türkiye and Ukraine, though newer flows increasingly reach Bangladesh and African markets such as Egypt.
Momentum Builds, but Gaps Remain
Even with funding gaps, the report identifies clear improvements. Early industrial support mostly financed incremental efficiency upgrades, but recent flows increasingly target deep-decarbonisation technologies such as clean hydrogen and carbon capture, use and storage (CCUS). New global initiatives, including the Climate Investment Funds’ USD 1 billion Industry Decarbonisation Programme and Türkiye’s Industrial Decarbonisation Investment Platform, reflect a growing recognition that industrial emissions require tailored interventions. Yet the economics remain daunting. Near-zero steel production carries a cost premium of 10–75%, while near-zero cement can be 30–125% more expensive. For firms in EMDEs, where capital costs are high, supply chains are underdeveloped, and policy frameworks are inconsistent, these premiums are untenable without external support. The report emphasises that without accelerated deployment of near-zero technologies, EMDEs risk locking in decades of high-carbon industrial capacity.
The forward-looking analysis is among the report’s most consequential contributions. To align EMDE heavy industry with the IEA’s Net Zero Emissions by 2050 Scenario, nearly USD 400 billion must be invested in near-zero steel and cement technologies between 2026 and 2035, out of a global requirement exceeding USD 500 billion. Technologies such as hydrogen-based steelmaking and CCUS for cement are still at demonstration or first-of-a-kind (FOAK) stages, meaning commercial investors will not mobilise at scale without derisking. The IEA estimates that nearly USD 2 billion in international public finance per year will be required by the early 2030s to unlock private capital across EMDEs. Because heavy industrial goods like steel and cement compete in global markets, much of this support must flow through multilateral institutions to avoid violating trade and subsidy rules that restrict bilateral aid from favouring specific producers. The report notes that targeted technical assistance, policy design, feasibility studies, and regulatory strengthening will be as important as direct financing in improving bankability.
Lessons from Real-World Projects
Sixteen case studies offer concrete lessons on how to turn industrial decarbonisation from aspiration to investment reality. They show that early-stage technical assistance frequently determines whether a project reaches a final investment decision. Examples like MIGA’s political risk insurance in Saudi Arabia and the EBRD’s concessional financing for Egypt’s Arabian Cement Company illustrate how due diligence, environmental assessments, and long-tenor loans reduce investor risk. FOAK projects require specialised support, including performance guarantees and milestone-based venture debt, as seen in Sunfire GmbH’s electrolyser expansion. Blended-finance structures, combining concessional and commercial capital, emerge as essential tools; Nigeria’s InfraCredit guarantees and Namibia’s SDG One hydrogen platform demonstrate how layered equity and first-loss protection unlock private participation. Revenue-stabilisation mechanisms, from carbon contracts-for-difference in Germany to results-based payments in Chile, convert volatile returns into predictable cash flows. Above all, the report concludes that financial solutions cannot succeed without strong domestic policy ecosystems, reliable carbon-pricing regimes, and long-term partnerships that build institutional capacity and enable countries to climb the value chain in a low-carbon industrial future.
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