Thank you for your continued support of Ara Insights as our subscriber base has grown more than 10x over its inaugural six months—we’re grateful for the engagement, feedback, and dialogue from this community. In 2026, we look forward to continuing to publish clear, data‑driven perspectives across the decarbonization landscape, with a particular focus on the practical intersection of markets, policy, technology, and industrial execution.
In that spirit, we’re highlighting our top 10 themes for 2026, which we believe will be especially important for investors and operators navigating the next phase of the energy and industrial transition.
Tuan Tran
Senior Managing Director
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1. Diverging policies, converging megawatts: the paradox powering the 2026 transition
A paradox defines 2026: geopolitical fragmentation alongside system‑level progress. Major economies are no longer running the same race:
- US: the race for clean energy leadership has been subordinated to the race for AI dominance, which is supercharging demand for both clean and fossil energy.
- China: aligning energy security and clean energy leadership with its broader industrial growth strategy.
- Europe: leaning on electrification and renewables to bolster energy security and competitiveness.
Despite disparate regional goals, global wind and solar installations exceeded 800GW last year—tripling annual additions since 2021—and are forecast to keep growing, with 4.5TW of new wind and solar expected over the next five years, a 67% increase on the prior five-year period. For investors, this means regional policy divergence will drive dispersion and volatility, but the underlying economics of the energy transition remain robust.
2. China’s anti-involution pivot will have a profound impact on industrial decarbonization
China’s pivot from “involution” to “anti‑involution” in clean tech will reset global cost curves and fragment supply chains over time. For years, China’s cleantech juggernaut has relied on chronic overcapacity, brutal price wars and a willingness to sacrifice profits for global market share. As a result, China has flooded the world with cheap solar panels, batteries, EVs and other hardware that effectively subsidized Western decarbonization. Beijing is now signaling a turn: the State Council and MIIT have introduced sector specific measures to “regulate disorderly low-price competition,” “enhance product quality,” and “resolve outdated capacity in an orderly manner,” while industry associations coordinate voluntary production cuts and minimum prices. In polysilicon, for example, output fell 30% year-on-year in 2025 and the number of operating producers dropped from 13 to 9, with prices jumping over 40% in 2025 after calls for price discipline. China still exported clean energy products to 191 of 192 UN member states in 2024, with those exports expected to avoid 4 billion tons of CO₂ over their lifetimes. However, it faces a record wave of trade actions—over 200 anti-dumping and anti-subsidy cases in 2025. As Beijing pivots from “more and cheaper” to “better and stronger,” and moves up the value chain under stricter standards, the era of limitless, ultracheap Chinese supply is gradually drawing to a close, raising global decarbonization costs longer-term and creating space for both Chinese consolidators and Western “domestic champions.”
3. The rise of carbon borders
Sharp policy divergence—and the emergence of carbon border regimes—will reshape industrial competitiveness. The EU is implementing its long awaited carbon border adjustment mechanism (CBAM) in 2026 alongside a new decarbonization bank and the phaseout of free Emissions Trading Scheme (ETS) allowances, a package described as the final piece of the puzzle to spur net zero-aligned industrial production without sacrificing competitiveness. China is expanding the scope of its carbon market, preparing absolute emissions caps, and ramping up policies to scale low carbon technologies. Japan’s GXETS carbon market will launch in 2026, further embedding emissions pricing into industrial decision making in Asia. In stark contrast, the US National Determined Contributions (NDC) filed at the end of the Biden administration is effectively null and void as it exits the Paris Agreement. The net result is a multi-speed policy landscape in which Europe and parts of Asia are integrating carbon pricing, border adjustments and industrial support into a coherent decarbonization framework, while the US becomes more episodic and project driven.
4. AI, data centers, and the power super-cycle
AI‑driven data centers are triggering a baseload power super‑cycle. The surge in AI workloads is materially reshaping power-demand expectations. Models point to substantial incremental capacity and generation needed to serve data center electricity demand, drawing on wind, solar, battery energy storage systems (BESS), nuclear, gas, and gas-fired plants equipped with carbon capture and storage (CCS) for cleaner baseload. Baseload technologies—including combined‑cycle gas turbines, aeroderivative turbines, reciprocating engines, fuel cells, large‑scale BESS, geothermal and natural‑gas‑fired power plants with CCS—will experience accelerating order activity in 2026, driven by data centers, industrial electrification and US and European manufacturing onshoring. Hyperscalers such as Meta, Amazon, Google and Microsoft now lead US corporate energy procurement and account for 75% of total capacity, and are showing growing interest in nuclear for large, reliable, low‑carbon supply. Where new plants cannot be built fast enough, “virtual power plants” that orchestrate distributed resources—including behind‑the‑meter BESS—are emerging as a key reliability tool. This load‑growth narrative favors integrated platforms that combine firm low‑carbon generation (including natural gas with CCS) with BESS, demand response and grid‑edge software.
5. EVs: China leads, Europe holds, US pivots to hybrids
EV adoption is splitting into three speeds: China’s dominance, Europe’s resilience, and a US pivot to hybrids. Global passenger EV sales are expected to reach 24.3 million units in 2026, with growth slowing to 12% over 2025 and EVs accounting for roughly 28% of global car sales.
- China remains the center of gravity, representing 64% of global EV sales with just over 15.6 million units and EVs reaching 61% of new car sales.
- Europe is still on an upward trajectory, with EV sales projected to grow by 20% to 4.6 million units, supported by CO₂ standards and a wave of sub-€20,000 models such as Renault’s Twingo E Tech.
- North America, by contrast, is forecast to see EV sales fall 13% to just under 1.6 million units, representing around 9% of new car sales, amid weaker federal fuel economy standards, the removal of EV tax credits, contested California waivers and higher tariffs.
In this weaker policy and demand environment, US and some European automakers are leaning harder into conventional and plug-in hybrids as a political and consumer friendly “bridge technology,” effectively stretching the ICE–EV transition period. Technologically, lithium iron phosphate batteries continue to gain share and are expected to reach 56% of the EV market in 2026, reinforcing China’s chemistry and cost leadership. At the same time, megawatt scale truck charging in China, the US and Europe, and vehicle to grid tariffs in Europe, are beginning to create new flexibility and grid service revenue streams that benefit not just pure EVs but increasingly electrified hybrid fleets.
6. Hard to abate sectors like aviation, steel, cement, and maritime ramp decarbonization efforts
Hard‑to‑abate sectors are moving from pilots to tangible scaling across aviation, steel, cement and maritime. Global carbon‑capture capacity is expected to increase more than fourfold by 2030, exceeding 200 million tons per year.
- Sustainable aviation fuels (SAF) are projected to grow over fivefold from 2024 to 2030, reaching over 2% of global jet‑fuel demand. SAF derived from HEFA, alcohol‑to‑jet and e‑fuel pathways are gaining traction, albeit at different adoption speeds and price premiums to conventional jet fuel.
- In shipping, LNG, bio‑LNG and green methanol (particularly biomethanol) are gradually moving to the fore as favored lower-carbon bunkering options under tightening EU and yet-to-be ratified IMO rules.
- In steel, producers are increasingly turning to hydrogen‑based direct reduction and CCS as pathways to lower‑carbon primary steel.
- Cement, one of the most challenging sectors to decarbonize due to process emissions from clinker production, is beginning to see activity around CCUS‑equipped kilns, novel clinker‑substitution chemistries and low‑carbon binders, with early industrial‑scale pilots now being announced and financed.
Across these sectors, we are seeing proactive engagement along the full value chain—from policymakers setting standards and pricing frameworks, to producers investing in first‑of‑a‑kind assets, to offtakers signing medium‑term contracts—to accelerate the rollout of low‑carbon solutions. The EU’s CBAM‑driven industrial package and the US’s role as the leading host of CCUS projects through 2030 further underscore that industrial decarbonization in steel, cement and other heavy industries is shifting from pilot to commercial‑scale phase.
7. The importance of RNG and ethanol as bridge fuels to a lower-carbon economy
RNG and ethanol are emerging as pragmatic bridge fuels where existing infrastructure and hard‑to‑electrify uses dominate. RNG from dairy manure and other livestock operations is increasingly recognized as a “double benefit” solution: it captures methane that would otherwise leak into the atmosphere while displacing fossil gas in pipelines, industrial heat, and heavy-duty transport. At the same time, RNG from food waste feedstock offers cities and regions a circular waste strategy that aligns landfill diversion goals with measurable emissions reductions. Conventional ethanol remains an important liquid fuel decarbonization tool by lowering the carbon intensity of gasoline through blending, leveraging mature production and distribution systems to deliver immediate, scalable emissions savings. Together, these RNG and ethanol pathways do not replace the long-term need for electrification and lower-carbon fuels, but they extend the decarbonization frontier into agriculture, waste management, and legacy fuel systems, creating a credible bridge from today’s fossil-based infrastructure to a 2030–2040 net-zero trajectory.
8. The critical minerals arms race
A critical‑minerals arms race is accelerating as governments and companies secure the raw materials underpinning electrification and clean tech. China is shifting its export strategy away from low‑end, commoditized products toward higher‑quality, higher‑margin cleantech, driven by tighter standards that extend across upstream value chains. Behind that shift sits China’s entrenched dominance in refining and processing many critical minerals—rare earths for permanent magnets, as well as lithium, cobalt, nickel and other key inputs for batteries, and copper and aluminum for grid and electrification infrastructure. The US and EU are responding with a wave of industrial policies and tariffs designed to foster domestic or allied‑bloc supply chains in solar, batteries, EVs and clean materials, with the explicit goal of reducing reliance on Chinese‑controlled value chains from mine through magnet and cell. There will be a continued shift in focus from end‑use technologies to the lithium, cobalt, nickel, rare earths, copper and related materials—and the processing and magnet/cell manufacturing steps—that make those technologies possible. As ore grades fall and permitting timelines lengthen, critical‑metals recycling (batteries, magnets, spent Inconel metals, etc.) becomes an increasingly important “secondary mine,” offering both security of supply and lower lifecycle emissions. In this environment, the most advantaged businesses are those that secure or process these strategic minerals, produce permanent magnets and advanced battery materials, or operate manufacturing and recycling/upcycling footprints that meet domestic‑content and energy‑security criteria in key end markets.
9. Climate adaptation infrastructure as an asset class
Physical climate risk and adaptation elevate from a side note to a central thesis. The top 10 most affected countries are estimated to have suffered over $120 billion in climate related damages in 2025 alone, with economic losses expected to grow in the coming decades and likely understated due to data gaps. Recent years have seen devastating storms and floods in Southeast Asia, deadly heatwaves in Europe, extreme storms and tornadoes across the US, and high profile wildfires, including those around Los Angeles. These concerning trends underscore that adaptation investment—water infrastructure, flood and coastal defenses, grid hardening, fire management—is becoming a core part of the decarbonization opportunity set. Investors will increasingly need to embed physical risk analytics into underwriting, recognizing that insurance availability, repair capex and business interruption risk will separate resilient assets from future stranded ones.
10. 2026 is all about execution and cost-competitive decarbonization
2026 demands disciplined execution and cost‑competitive decarbonization. Coming out of 2025, the core question from investors and industrial customers alike is no longer “Is this green?” but “Can you build it on time, on budget, and at a cost that competes with fossil equivalents?” In a market where the average plant still arrives materially over budget and behind schedule, being able to deliver industrial projects on time and on budget has become a true differentiator and mission-critical to achieving attractive returns. Demonstrated track record across full‑scale plant builds, expansions and first‑of‑a‑kind assets is now a gating criterion for capital, especially after several high‑profile failures in the broader climate space. At the same time, the bar for economics has risen: investors and offtakers are demanding that low‑carbon solutions stand on their own legs, with unit costs and product quality that can compete toe‑to‑toe with incumbent fossil solutions. Strategies that rely on perpetual policy subsidies or speculative technology roadmaps are giving way to those built around proven industrial technologies, deep operating know‑how, repeatable project delivery and clear cost paths that match or beat legacy emissions‑intensive assets. In this environment, the most attractive decarbonization platforms are the ones that treat project execution as a core capability, not an afterthought, and that can consistently bring steel‑in‑the‑ground assets online at competitive cost. Put more bluntly, in 2026 and beyond, climate solutions that cannot beat fossil incumbents on reliability, price and delivery will not scale.
