Green steel and India’s climate goals

Why in news

• India has committed to submit a revised and more ambitious Nationally Determined Contribution (NDC).
• Green steel is emerging as a critical lever for economy-wide decarbonisation, especially in hard-to-abate sectors.
• Steel sector choices made today will determine India’s long-term climate and economic trajectory.

Context

• At COP30 in Belém, Brazil, India committed to enhancing its NDC.
• India has an opportunity to position itself as a global leader by combining climate ambition with clear decarbonisation plans.
• Steel is central to infrastructure, industrial development and economic growth.

Importance of the steel sector

• India’s steel production is about 125 million tonnes per year.
• To realise latent economic potential, production may need to exceed 400 million tonnes by mid-century.
• The steel sector contributes around 12% of India’s total carbon emissions.
• Emissions are largely due to reliance on coal-based blast furnace technology.

Key challenge

• India faces a twin challenge:
– Ensuring continued development
– Meeting long-term climate targets
• Risk of carbon lock-in if new investments continue in high-carbon infrastructure.
• Lock-in would:
– Be environmentally damaging
– Reduce India’s attractiveness in global markets
– Create stranded assets in the medium to long term

Global developments influencing steel

• China is expanding scrap-based secondary steel production and investing in green hydrogen.
• European Union has been decarbonising steel for two decades.
• Carbon Border Adjustment Mechanism (CBAM) penalises carbon-intensive steel imports.
• Countries unable to demonstrate low-carbon production face:
– Border charges
– Loss of access to premium markets
– Reputational risks in energy transition

India’s industry response

• Indian steel companies have initiated steps such as:
– Hydrogen injection in blast furnaces
– Renewable power procurement
– Carbon capture exploration
– Green hydrogen integration
• Indicates growing awareness, but progress remains largely at pilot scale.

What more is required

• Move from:
– Pilots → demonstration plants → full-scale near-zero technologies
• Stop investment in business-as-usual coal-based blast furnaces.
• All new steel capacity must be low to near-zero carbon.
• Small and medium steel producers must adopt best available technologies.

Policy progress so far

• Greening Steel Roadmap released in September last year.
• Green Steel Taxonomy published in December 2024, making India the first country to formalise such a definition.
• National Green Hydrogen Mission supports hydrogen-based steelmaking.
• Carbon emission intensity targets set for 253 steel units under the Carbon Credit Trading Scheme (CCTS).

Policy gaps and risks

• Policy incentives to shift investment away from coal-based blast furnaces remain limited.
• Risk of India continuing to add expensive, carbon-intensive technologies.
• Absence of strong carbon pricing reduces investment certainty.

Barriers to green steel transition

• High cost and limited supply of green hydrogen
• Insufficient renewable energy dedicated to industry
• Limited and informal scrap market
• Inconsistent availability of affordable natural gas as transition fuel
• Lack of identified natural carbon sinks
• Absence of long-maturity, low-cost finance
• Workforce skill gaps and technology constraints

Role of government

• Act as a fair regulator and provide clear policy signals.
• Set stringent short-, medium- and long-term emission targets.
• Roll out a carbon pricing regime at the earliest.
• Learn from Europe where near-zero steel became viable after carbon prices reached $90–100 per tonne of CO₂.
• Promote domestic demand through public procurement of green steel.
• Establish certification and labelling mechanisms.

Transition fuels and infrastructure

• Natural gas to act as a transition fuel towards hydrogen-based steel.
• Government to prioritise gas availability for steel sector.
• Creation of green steel hubs to share infrastructure costs such as:
– Renewable power
– Hydrogen production
– Gas pipelines
– CO₂ transport and storage

Financial and equity considerations

• Low-carbon steel has 30–50% higher capital intensity.
• Fiscal support may be required during transition.
• Smaller producers need additional support to ensure an equitable transition.

Prelims Practice MCQs

Q. Under India’s Green Steel Taxonomy, steel is eligible to be classified as “Green Steel” only if its CO₂ equivalent emission intensity is:

a) Less than 3.0 tonnes per tonne of finished steel
b) Less than 2.5 tonnes per tonne of finished steel
c) Less than 2.2 tonnes per tonne of finished steel
d) Less than 1.6 tonnes per tonne of finished steel

Correct answer: c

Explanation:
Green Steel is defined as steel produced with CO₂ equivalent emission intensity below 2.2 t-CO₂e per tonne of finished steel (tfs). Steel above this threshold is not eligible for green rating.

Q. The “greenness” of steel under the Green Steel Taxonomy is expressed as:

a) Absolute reduction in emissions from baseline year
b) Percentage share of renewable energy used
c) Percentage by which emission intensity is lower than the threshold
d) Percentage of scrap used in steelmaking

Correct answer: c

Explanation:
Greenness is expressed as a percentage based on how much the plant’s emission intensity is lower than the 2.2 t-CO₂e/tfs threshold, not on energy source or scrap usage alone.