Sustainability goals have become a critical component of corporate strategy and have led industrial manufacturers to reevaluate how they approach site selection. The need for reliable access to skilled labor, logistical infrastructure, and utilities remains crucial, but a new factor has taken precedence: decarbonization.

In response to ambitious carbon reduction commitments, manufacturers are increasingly focused on selecting sites that provide pathways for industrial decarbonization—a trend that has far-reaching implications for companies and communities alike.

At Strategic Development Group, we’ve observed a shift in site selection priorities for process manufacturers. Land, labor, logistics, and utilities remain key, but our heavy industrial clients are now prioritizing sites and regions that provide pathways for industrial decarbonization, both in the short and long term. This dynamic and evolving landscape is reshaping the way we evaluate sites and assess risk during site selection engagements. What follows is an analysis of the current state of industrial decarbonization in the U.S. and its impact on companies considering location and expansion initiatives.

State of Industrial Decarbonization
The industrial sector is responsible for 1.41 billion metric tons of energy-related carbon dioxide emissions annually—about 30% of the U.S. total. More than half of these emissions come from hard-to-abate sectors like iron, steel, chemical, and cement manufacturing. Through legislation like the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL), the U.S. government is directing significant capital to decarbonize these sectors.

Recently, the Department of Energy awarded up to $6 billion in direct project support for decarbonization technologies within energy-intensive industries. The Rocky Mountain Institute estimates that by 2030, public funding from the IRA could reach $1 trillion. As of mid-2024, business and consumer investment in clean technologies since the IRA’s enactment totals $493 billion—an impressive 71% increase over the previous two years, according to a report by the Rhodium Group in partnership with the MIT Center for Energy and Policy Research.

This surge in attention—and funding—has had a noticeable impact on site selection among heavy industries. The ability of a site to provide decarbonization options has become a critical factor in many capital-intensive manufacturing location decisions.

Sustainability Trends and Location Strategy
Decarbonization options vary greatly by region, and these disparities are driving site selection strategies. Several trends have emerged over the past 24 months:

• End-of-life material feedstock: Projects that utilize end-of-life materials as feedstock instead of virgin material are gaining traction. These processes often result in fewer emissions by reducing waste and are typically less energy-intensive. This trend is expected to continue as technologies for reusing materials reach commercial scale.
• Availability of low-carbon fuels: The market for commercial-scale low-carbon hydrogen, particularly blue and green hydrogen, is still emerging. Currently, there’s an imbalance between supply and demand as industries rapidly seek low-carbon hydrogen, both as an energy source and feedstock. Sites near proposed blue and green hydrogen projects, or with pipeline access to them, will be highly valued.

Automation is more about job evolution than job displacement.

• Carbon capture and sequestration (CCS): Not all regions of the U.S. are equally suited for CCS. Permanent underground CO2 storage requires specific geological conditions, as well as regulatory approval. Currently, only four federally permitted Class VI wells exist in Illinois and Indiana, with a backlog of permit applications. States pursuing Class VI primacy, like Louisiana, North Dakota, and Wyoming, are better positioned to implement CCS in the near term.
• Renewable and carbon-neutral electricity: Electrification of manufacturing, along with a shift away from combustible energy sources, is driving the demand for renewable power. Sites that can offer multiple pathways to competitively priced renewable energy are increasingly attractive to manufacturers with decarbonization goals.

Site Selection and Economic Development Considerations
For organizations considering a pivot toward decarbonized manufacturing, the key takeaway is that the cost of decarbonization technologies will continue to decline, and industry standards will eventually stabilize around technologies like green hydrogen and electrolysis. In the interim, we are witnessing a significant industrial energy transition.

From a corporate executive’s perspective, the most important factors are cost optimization and flexibility when it comes to decarbonization pathways. For economic development practitioners, communities that recognize and adapt to this transition—by preparing sites for decarbonization and ensuring readiness—will be best positioned to attract manufacturing capital investment and job creation in the years ahead.