The central problem industries face in the mid-2020s is coming to terms with the fact that going green is costing more money than previously anticipated. The price difference between a cleaner technology and the fossil fuel alternative it is meant to replace is labelled the “green premium.” As of now, that premium is so large that companies are hesitating, stalling, or abandoning their climate commitments altogether.
To exacerbate the situation, AI has emerged with an insatiable energy demand. That is taking a toll on the world’s energy grids, which were never really designed to handle such a scenario. On the bright side, renewable energy capacity is tripling globally. However, when you look at industries that are hardest to clean, like steel, shipping, aviation, and hydrogen production, things don’t look so good.
The World Economic Forum found that average emissions intensity in heavy industry fell by just 4.1% between 2019 and 2023. At this pace, the world is not going to reach net-zero targets anytime soon.
Where the gap is widest
Aviation is where the gap is the widest. Sustainable aviation fuel (SAF) is the most realistic way to reduce carbon emissions from flying; however, SAF costs approximately $5.35 per gallon, compared to $2.22 per gallon for conventional jet fuel.
It is a 140% price premium, which means an average customer would be paying more than double. Global SAF production is expected to reach 1.9 million tons in 2025, but it still only covers about 0.6% of total jet fuel demand globally.
The European Union and the United Kingdom have responded by mandating that airlines use at least 2% SAF in their fuel supply in 2025. That is a good start, but the gap remains in the aviation industry, as it would mean that players would face an additional $4.5 billion in fuel costs by 2026 to meet these early mandates.
Shipping is another sector that struggles to meet green premiums. While cleaner fuels exist to replace heavy fuel oil, such as those mixed with green ammonia and biomethanol, they remain far more expensive than conventional fuel. In Northwest Europe, the 2025 pricing illustrates this gap clearly, with green ammonia priced at $2,830 per ton on an equivalent energy basis and biomethanol priced at $2,318 per ton.
The challenge is that these green alternatives still cannot compete financially with conventional options such as BioLNG or GreyLNG. Even with the International Maritime Organisation imposing carbon penalties of up to $380 per ton of CO2 equivalent on ships that continue burning the dirtiest fuels, many players are willing to pay the penalty because it remains cheaper than paying the green premium.
Green steel and the hydrogen problem
Steel production remains one of the world’s most polluting industries. The standard blast furnace-basic oxygen furnace (BF-BOF) method generates approximately 2.3 tons of carbon dioxide per ton of steel produced.
A cleaner alternative exists in hydrogen-based direct reduced iron paired with electric arc furnaces (H2-DRI-EAF), which could potentially reduce emissions by 65%-83%. However, scaling this technology is challenging due to the massive investment required for new infrastructure and the current lack of an affordable, industrial-scale supply of green hydrogen.
The mixed signal in the market, with projects that mix natural gas and transitional fuel struggling to find buyers, highlights a complex landscape. However, fully green hydrogen-based steel products are actually managing to charge 20%-30% premiums from large manufacturers who need verified low-carbon materials to meet their own climate commitments.
While the public bears the cost of this transition, the specific impact depends on the project. For example, supporting green steel development through government subsidies or carbon pricing can cost anywhere between $110 to $1,160 per tonne of carbon dioxide avoided. This price range indicates that the technology still requires significant maturation and demonstrates that carbon pricing alone is insufficient to drive the green industry’s transition.
Hydrogen is one of the most important aspects and problems of the decarbonisation challenge. Green hydrogen is produced by splitting water using renewable electricity, but it remains currently more expensive than grey hydrogen, which is derived from natural gas without capturing carbon dioxide emissions.
To address this price disparity, the US Inflation Reduction Act (IRA) introduced the 45V tax credit, offering up to $3 per kilogram. The effectiveness of this credit depends heavily on “matching,” a technical requirement that dictates how closely an electrolyser must be tied to specific renewable energy generation.
The stringency of these matching rules will have significant financial consequences for the industry. Under a lenient matching rule, the levelized cost of hydrogen (LCOH) could fall to $2 per kilogram by 2025 and reach $1.50 per kilogram by 2030, making green hydrogen highly competitive with its grey counterpart.
The decarbonisation trap
They call it the decarbonisation trap for a reason. Between 2019 and 2021, hundreds of large companies proclaimed that they would cut emissions by 50% by 2030. They even pledged a Scope 3 emission where everything from raw material sourcing to the point after the customer has bought it would be included in the cuts. Scope 3 emissions are 11.4 times larger than the company’s own emissions. This requires granular data and constant tracking to meet commitments.
New regulations aren’t making things easier for enterprises. The European Union’s “Corporate Sustainability Reporting Directive” and “California’s Climate Corporate Data Accountability Act” now require companies to report their emissions with a level of precision that spend-based estimates, which essentially guess emissions from invoices, can no longer satisfy.
Companies are realising that the 2019 targets, made at a time before supply chain fractures and energy price spikes, are impossible to meet.
Parties are retreating from the Paris Agreement by pivoting to cap and invest models, which set a ceiling on emissions while continuously investing in reductions, rather than chasing a fixed target that may no longer be realistic.
All of this is happening despite record spending. Global energy transition investment reached $2.3 trillion in 2025. The money is flowing, but without stronger international coordination and mechanisms to reduce the financial risk of pioneering new technologies, the green premium will continue to slow the deployment of the solutions the world needs.
Where AI and climate policy collide
AI is the new biggest issue that industries have to deal with. It makes business easier, but its thirst for energy is insatiable. Hyperscalers like Amazon, Meta, and Google account for 49% of all corporate clean energy purchase agreements globally, with many of those contracts specifically targeting nuclear and geothermal power to guarantee firm supply in 2025.
In regions where electricity demand is growing faster than the grid can handle, companies are being forced to install natural gas backup generators, directly undermining the climate progress being made elsewhere.
The age of electricity is poised to be an era of productivity, as energy will be more efficient than ever. In 2024, the US economy grew by 2.8% while energy consumption rose by only 0.5%. It’s the highest energy productivity ratio ever recorded.
Some companies are beginning to treat the green premium not as a tax, but as an investment in market leadership. The €75 million raised by Rondo Energy and the growth of book and claim accounting systems in shipping are early signs of this shift in thinking.
It will take some time to resolve both the green premium issue and the energy-compute crisis, as cheap digital growth and cheap fossil fuel are coming to an end in the mid-2020s. To address this, data centres must maximise efficiency through liquid cooling, model compression, and smarter workload scheduling to measure and cut overhead energy use by 84%.
Simultaneously, governments should track public capital, harmonised carbon pricing standards, and international risk-sharing agreements to make first-of-a-kind green hydrogen and steel projects financially viable.
While a net-zero powered economy is still possible, it requires deep coordination between technology sectors, energy producers, heavy industry, and governments. Ultimately, the countries and governments that establish this coordination first will define the industrial and technology landscape of 2030 and beyond.