As industries and governments accelerate efforts to meet net-zero targets, they face daunting challenges in decarbonizing hard-to-abate sectors like steel, chemicals, cement, aviation, shipping, and trucking. These sectors represent about 40% of global greenhouse gas emissions and are critical to economic output and jobs. Despite growing clean energy investment, a persistent gap remains between ambitious climate goals and the completion of projects that would get the global economy there.
The creation of industrial clusters — where companies and institutions co-locate to share energy infrastructure and align investments — offers a proven pathway to close this gap. By pooling demand, sharing costs, and streamlining coordination, clusters make industrial transformation more bankable and commercially viable, protecting jobs while accelerating low-carbon innovation.
Our report, “From Blueprint To Reality — A Stronger Business Case For Shared Energy Infrastructure,” a collaboration with World Economic Forum, aims to capture and share emerging success stories. It distills lessons on organizing clusters, structuring risk-sharing, and financing shared infrastructure to align policy and private investment. The intention is to offer a practical resource for policymakers, financiers, and industry leaders seeking to turn meeting targets into a competitive advantage and deliver industrial transformation that is both economically robust and environmentally sustainable.
How industrial clusters reduce costs and scale decarbonization
Industrial clusters are becoming engines of transformation for sectors traditionally considered hard to decarbonize. These clusters organize companies and public institutions situated near each other around shared infrastructure investments, such as hydrogen pipelines and carbon capture and storage hubs.
This model reduces capital expenditure and operational costs by enabling economies of scale and joint procurement. For instance, the United Kingdom’s HyNet North West cluster exemplifies how shared infrastructure, combined with regulatory certainty, can attract diverse financing and accelerate project delivery. It recently reached a final investment decision on a £2.5 billion transport and storage system.
Cluster-wide governance reduces risk and mobilizes large-scale capital
The Humber cluster, the UK’s largest industrial carbon dioxide emitter, also illustrates financing through collaboration. Under the centralized governance of the Humber Energy Board, the cluster coordinates multiple carbon capture and storage efforts and hydrogen projects, supported by public and private capital. Early grants and risk-sharing mechanisms have helped secure an £8 billion commercial loan syndicate from 21 banks.
This comprehensive governance and financing approach mitigates fragmented investment risks while aligning stakeholder interests and accelerating permitting and construction efficiencies.
The central role of cluster administrators and public capital
The key to cluster success lies with the cluster administrator, who coordinates permitting, financing, and stakeholder engagement to streamline development pathways. Cluster administrators may be public authorities or lead developers with sufficient technical expertise, authority, and capital.
Public capital remains indispensable, especially in early project phases, by deploying tailored financial instruments — such as guarantees, grants, and contracts for difference — to reduce investor risk and catalyze private sector involvement. This phased financing approach aligns government support with project maturity, unlocking scalable investment portfolios.
Four key drivers of financing success in industrial cluster transitions
Success in scaling industrial cluster transitions hinges on four main drivers:
- Cluster administration: Centralizing governance and coordination to manage permitting, finance, and stakeholder commitments efficiently.
- Pooling resources: Joint investment in shared and future-proofed infrastructure like pipelines and storage networks optimizes capital use and flexibility.
- Durable offtake agreements: Long-term contracts with credible companies create predictable revenue streams, boosting lender confidence.
- Phase-appropriate public financial support: Sequencing public instruments — from development grants to operational revenue stabilization — de-risks investments and attracts private capital.
Six benefits of industrial clusters for investment and delivery
Industrial clusters deliver a distinct set of advantages that improve project viability, coordination, and long-term competitiveness. These six key benefits explain why clusters are increasingly used to support large-scale industrial transitions.
- Government and institutional support: Public policy frameworks, funding programs, and regulatory alignment within clusters support growth, competitiveness, and long-term investment certainty.
- Shared infrastructure: Access to common facilities, transport links, utilities, and specialized services reduces duplication, lowers costs, and improves operational efficiency.
- Centralized project coordination: Close collaboration among stakeholders enables faster decision-making, streamlined delivery, and more efficient allocation of capital across projects.
- Aggregated demand and supply: Geographic proximity concentrates on markets, making it easier for suppliers and buyers to connect and scale commercial activity.
- Cost reduction through scale: Shared resources, bulk procurement, and shorter transport distances deliver economies of scale and lower operating expenses.
- Innovation and knowledge sharing: Frequent interaction between companies, research institutions, and skilled workers accelerates learning, technology development, and innovation.
The transition from pilot projects to scaled industrial decarbonization
The aggregate effect of these drivers is turning isolated project pilots into bankable, scalable portfolios that accelerate the industrial decarbonization journey. Industrial clusters provide commercially competitive frameworks that not only enable emissions reduction but also foster resilient economies, drive innovation, and generate skilled jobs. The HyNet North West and Humber clusters serve as replicable examples of how clear regulation, strong governance, coordinated financing, and public-private collaboration unlock the potential of the energy transition — making net-zero industrial transformation a tangible reality.
Industrial clusters and the path to a resilient, low-carbon industry
The global industrial transformation required to meet climate goals demands innovative business models, robust public-private partnerships, and risk-sharing frameworks. Industrial clusters embody this approach, breaking down barriers to capital and coordination through shared infrastructure and governance. There is no single pathway to success; diverse regulatory contexts enable multiple financing archetypes, from government-enabled to private-developer-led projects.
However, the consistent lesson is clear: With strategic policy support, ambitious coordination, and phased financial innovation, industrial clusters make decarbonization investable. Building on early successes, scaling clusters will drive economic value, job creation, and environmental sustainability, securing industrial competitiveness in a low-carbon future.
