In February, a paper mill in Finland switched on a huge new piece of machinery called a heat pump, to produce steam for the plant with no greenhouse emissions. It is the largest steam-producing heat pump in the world, but probably not for long. In Cambridge, an American town near Boston, another heat pump is under construction to create steam for heating a large cluster of buildings. It will suck heat out of the Charles River, producing steam even during Boston’s icy winters. And in Germany, construction is under way on a massive heat pump at the BASF chemicals complex in Ludwigshafen, allowing that company to clean up its production line for a compound called formic acid.

These are all signs of progress in what has been one of the toughest nuts to crack in the energy transition. Buildings, factories and industrial activities produce more than a quarter of the world’s emissions, but the cleanup of these sectors has barely begun. Heat pumps, ranging in size from small ones that can warm or cool an apartment to large ones that can replace boilers in factories, will be one of the fundamental technologies to get it done. The technology is finally scaling, as every week or two brings announcements of ever-larger heat pumps tackling ever-larger problems.

What is a heat pump?

It is, in essence, a reversible air conditioner. Instead of creating heat, the way a gas boiler does, a heat pump sucks heat from one place and moves it to another. To cool an interior space or to chill water, the device ejects heat to the outside. To warm a space or to heat water, it runs in the opposite direction, pulling heat from the outside environment and moving it indoors. You can think of a heat pump as the overgrown cousin of a refrigerator, which cools its interior compartment by pumping heat out the back. The surprising thing is that these devices can pull heat from the environment even when it is freezing outside, like the one that is going to pull heat from the iced-over Charles River.¹

Because they can run on clean electricity, heat pumps offer a path to eliminate burning fossil fuels to create steam or hot air. They have been available for decades in sizes suitable for heating and cooling buildings, but are now reaching a scale to be able to tackle large needs in industrial plants. This is one of the great frontiers of innovation in the energy transition, and we expect in the coming years to see heat pumps have a material effect on cutting emissions.

The problem with heat pumps is that they can cost more to run than boilers burning fossil gas. This is not always the case; it depends on the relative cost of gas and electricity in a particular market, as well as whether the government in that area has imposed a price on emissions. Lowering power prices, as the energy transition aims to do by flooding the grid with renewable electricity, will make heat pumps more economically competitive, as will improving the efficiency of the devices themselves. This is where a great deal of technical work is being done.

While heat pumps will be a critical future technology, they are by no means the only one we need to clean up the world’s buildings and industry. Production lines for steel, cement and chemicals are all big sources of emissions, and tentative approaches are under development to cut emissions in all of them. Regarding steel, see the sidebar in this chapter about the huge Stegra ‘green steel’ plant under construction in Sweden. (Just Climate, which is a subsidiary of Generation, is an investor in alternative production methods for both steel and cement.)

The cost and workability of these alternative methods have yet to be proven at scale. A different approach is to capture the emissions coming from the smokestack of a plant, separate the carbon dioxide, and pump it into long-term underground storage to keep it out of the atmosphere. This technology, known as carbon capture and storage, has been under development for decades, but progress has been achingly slow. The history is vexatious: the fossil-fuel industry has long talked up this approach while investing very little in it, essentially trying to distract people from the emissions the industry keeps pouring into the air. However, investment in the technology is increasing, with much of it coming from public coffers, not the oil industry. According to the Global CCS Institute, 77 commercial projects were operating worldwide in 2025, nearly three times the number five years earlier.² To make a material difference, thousands of them will be needed, and they are simply not scaling at the required rate.

The missing ingredient in the transformation of industry is public policy. Whereas many governments are finally pushing to clean up the electric grid and to clean up cars, they are still not pushing very hard at all on industrial clean-up. A slew of policy tools are available, and they are all being underused. Governments buy a large fraction of the world’s cement for road and bridge projects, so they could specify cleaner options in their own procurement.³ So far, though, only a handful of jurisdictions, notably California, are demanding that the products they buy be produced with lower emissions. Governments could also impose gradually tightening standards on all sales of steel, cement and other commodities.

The chemical industry is another major source of industrial emissions, and the dirtiest sub-sectors are the plants producing ammonia for agricultural use, and the factories producing plastics. Some headway is being made to clean up ammonia production, responsible by itself for almost 2 percent of all global emissions.⁴ In the US, certain subsidies that survived Donald Trump’s budget axe are spurring the construction of cleaner ammonia factories. We continue to hold out hope for a global treaty to control the ever-rising production of plastics, but negotiations for such a treaty have stalled. The fossil-fuel industry, which supplies the chemical feedstocks for plastic production, has enlisted the Trump administration to try to prevent any formal caps on the amount of plastic that can be produced. However, ambitious nations want binding caps. New negotiations appear likely in 2027, but a formal deal may have to wait until Mr Trump is out of office.⁵

One of the most gaping holes in public policy relates to new buildings. The International Energy Agency estimates that around half the buildings that will exist in the world in 2050 have yet to be built,⁶ and if current public policy is allowed to stand, many of the ones that go up in the coming decades will be energy hogs. Few governments in the world have adopted building codes that we would consider sufficiently stringent, although slow progress is being made to tighten them up. Even worse, more than half the world’s construction still takes place in countries with no building codes in place or no energy requirements within their codes. The situation is gradually improving, with approximately a 30 percent increase since 2015 in the number of countries adopting energy codes, but this is not nearly fast enough to meet climate goals.⁷ It is a remarkable level of dereliction on one of the most important issues of the transition. As they struggle to pay the import bill this year for more expensive fossil fuels, we hope the neglectful governments will wake up and pull one of the best levers they have to cut future energy use.

New buildings are not the only problem, of course; we also need to fix the old ones. Three things need to happen: the shells of draughty buildings must be made tighter, gas boilers need to be swapped for heat pumps, and as buildings wean themselves from gas, the distribution system for fossil gas needs to be shut down. None of this is happening at remotely the pace required to achieve the world’s climate goals.

The industrial sector must carry much of the burden of meeting the goals that countries have set for themselves relating to energy efficiency. The International Energy Agency calculates that to meet the world’s climate goals, the energy efficiency of the entire global economy needs to improve at a pace of about 4 percent a year. However, the pace of improvement averaged only 1.3 percent between 2019 and 2024, the agency reported. It forecasts a slightly better result this year, but the situation demands far more focus and attention from governments than it is getting. Many of those governments pledged in 2023 to double the pace of improvement, but have done little to redeem their own pledges. They will not be able to do so unless they get industry moving at least as fast as the transportation and power sectors are now moving.

While improvements in sectors like steel, cement and chemicals have been slow to take hold, we are seeing one encouraging note: a rising pace of investments. Mission Possible Partnership, an organisation tracking progress, recently reported that 19 commercial-scale industrial decarbonisation projects had secured final investment over a six-month period, more than twice the rate recorded a year earlier.⁸ The pressure on industry to clean up its act is intensifying. Starting this year, certain imports into the European Union will be judged on their ‘embedded emissions’ and taxed accordingly, a system designed to create an incentive for exporting countries to adopt meaningful climate policies.