Global markets are increasingly demanding low-carbon products, presenting both a challenge and an opportunity for Indian companies. The Indian steel industry, a major carbon emitter, is expected to be significantly impacted by this trend. According to the Ministry of Steel, in 2023-24, India produced 179.5 million tonnes of crude steel, with the sector accounting for 10-12 per cent of the country’s total emissions.
Traditional coal-based steel production, which dominates the industry, is under scrutiny for its high carbon emissions. International regulations, such as the European Union’s Carbon Border Adjustment Mechanism, further underscore the need to decarbonise steel production, as India risks losing competitiveness in export markets. While India has made significant efforts in deploying renewable energy and greening its grid, decarbonising the industrial sector, especially steel, will be key to achieving its net zero target
by 2070.
A look at the key industry and government initiatives in the Indian green steel sector, and the challenges and opportunities in this space…
Key developments and progress
The green steel sector in India is witnessing significant industry developments and government initiatives. In February 2024, the government introduced guidelines for pilot projects using green hydrogen in the steel sector. These guidelines, part of the National Green Hydrogen Mission (NGHM), focus on three key areas: the use of hydrogen in direct reduced iron (DRI) production, hydrogen application in blast furnace operations and the gradual replacement of fossil fuels with green hydrogen. The NGHM has allocated specific budgetary support of Rs 4,550 million for this endeavour until 2029-30.
In March 2024, India’s first green hydrogen plant in the stainless steel sector was inaugurated, commissioned by Hygenco at the Jindal Stainless Hisar facility. In June 2024, MECON Limited issued a tender, inviting bidders to use hydrogen in DRI steel pilot plants, existing blast furnaces and existing DRI vertical shafts. Recently, in October 2024, Suzlon and Jindal Renewables signed a 400 MW captive wind power deal to decarbonise steel production. The power generated will be used for captive consumption in steel plants in Chhattisgarh and Odisha.
The government has taken several steps to promote decarbonisation in the steel industry apart from the launch of the NGHM. The Ministry of Steel has released a roadmap and action plan for green steel, a steel scrap recycling policy that promotes a circular economy in the steel sector, and vehicle scrapping regulations to increase scrap availability for steel production. The Perform, Achieve and Trade (PAT) scheme has also incentivised energy efficiency improvements in steel plants. The country’s collaboration with Japan’s NEDO has facilitated the implementation of four energy efficiency improvement projects across major steel plants. In the 2024-25 budget speech, the finance minister announced plans for the transition of hard-to-abate sectors from the current PAT scheme to the Indian carbon market. In 2023, the government introduced a Carbon Credit Trading Scheme, creating a framework for carbon market operations that could benefit green steel producers.
Key challenges and opportunities
While government initiatives and initial industry efforts have been positive, the structure of India’s steel industry presents unique challenges that may hinder the uptake of green steel. Unlike many developed countries, where steel production relies heavily on scrap recycling and natural gas-based methods, India’s dependence on coal-based processes, such as blast furnaces and rotary kilns, results in higher carbon emissions. The reliance is reflected in the emission intensity of India’s steel production, which stands at 2.54 tonnes of CO2 per tonne of crude steel, significantly higher than the global average of 1.91 tCO2 per tonne of crude steel, according to the Ministry of Steel.
Several factors contribute to this gap. Indian steel production often uses low-grade iron ore and coal, requiring energy-intensive processing. The limited availability of high quality scrap metal in India restricts the potential for recycling-based production methods. Furthermore, the high cost of natural gas in India makes it a less viable alternative to coal in steel production.
A challenge in promoting green steel is developing a clear, comprehensive definition of the term. Globally, there is no consensus on what constitutes green steel, as each country has different resources, timelines and emission reduction targets. For India, the definition of green steel must take into account the country’s specific challenges and opportunities. Key considerations for defining green steel in India include setting emission intensity targets, which could be route-agnostic (applicable across all production methods) or route-specific, accounting for differences in production techniques. India must also decide whether the focus should be on near-zero or fossil-free steel production or on incentivising gradual decarbonisation efforts across existing production pathways. Furthermore, the definition of green steel must align with the broader national climate agenda and the upcoming carbon trading system. A clear, legally binding definition of green steel is required to guide industry investments and ensure that decarbonisation efforts are measurable and verifiable.
The transition to green steel also requires comprehensive carbon emissions monitoring systems across India’s steel plants. Currently, integrated steel plants voluntarily disclose their emissions based on methodologies developed by the World Steel Association. However, these efforts primarily cover direct (Scope 1) and indirect (Scope 2) emissions, while Scope 3 emissions – those from the broader supply chain – remain largely unaccounted for, due to the complexities of data collection and verification.
The introduction of the Indian carbon market will make emissions monitoring mandatory, requiring companies to track and report emissions across their entire operations. This shift will involve developing robust protocols for measuring emissions across all scopes, establishing a system for third-party verification to ensure accuracy and transparency, and creating an ecosystem for monitoring, reporting and verification that supports both regulatory compliance and market-based incentives for emissions reduction. Accurate emissions data will enable steel companies to identify the most effective decarbonisation opportunities, track their progress, and demonstrate their environmental performance to increasingly conscious customers and investors.
Creating demand for green steel is critical to ensuring its widespread adoption, but several challenges hinder this process in India. To stimulate demand, the Ministry of Steel is considering introducing a Green Public Procurement Policy for steel, which would incentivise the use of green steel in public infrastructure projects. In addition, developing a robust system for certifying and tracking green steel will facilitate its adoption by ensuring that emission reductions are both verifiable and marketable.
A report titled “Decarbonising the Indian Steel Industry: Roadmap Towards a Green Steel Economy” by RMI identifies five key levers for decarbonising the sector – the use of green hydrogen in steel production; a greater share of renewable electricity in captive electricity consumption; carbon capture, utilisation and storage (CCUS) to decarbonise existing carbon-intensive steel production processes; increased use of scrap to make steel; and enhanced energy efficiency across steel production processes.
Green hydrogen is emerging as a transformative solution for steel decarbonisation and the NGHM is expected to increase its uptake in the steel sector. Green hydrogen provides a clean reducing agent for converting iron ore into iron, replacing coal in the steelmaking process. CCUS is another essential technology for achieving deep decarbonisation in the steel sector. While India’s steel industry has some experience with carbon capture, the costs remain prohibitively high due to the low concentration of carbon in steel plant emissions. Key challenges for CCUS implementation include reducing the cost of carbon capture technologies, developing a comprehensive carbon storage and utilisation ecosystem, and integrating CCUS with existing steel production processes without significant efficiency losses.
The PAT scheme has already demonstrated success in the area of energy efficiency, reducing energy consumption in the steel sector by 6.137 million tonnes of oil equivalent, exceeding the targeted savings. Despite this progress, there is significant potential for further reductions as the energy consumption of Indian steel plants is significntly higher than the global average. Meanwhile, by 2030, the sector’s electricity consumption is expected to double. Ensuring that a substantial share of this comes from renewable sources will be critical for sustainable growth going forward.
Conclusion
India’s steel industry has reached a stage where decarbonisation is no longer optional but a necessity. The uptake of green steel requires an approach that addresses both demand- and supply-side barriers. With the right policies, investments and technological innovations, India’s steel industry can play a crucial role in achieving the country’s climate goals. By addressing these challenges, India’s steel sector has the potential to establish itself as a global leader in green steel production by 2070.
