India is preparing to revise its climate commitments at a time when its industrial choices will decisively shape both growth and emissions for decades. At the heart of this moment lies steel — the backbone of infrastructure and manufacturing, but also one of the country’s most carbon-intensive sectors. As India moves towards a more ambitious climate pledge, the transition to green steel has emerged not as an option, but as a strategic necessity.
Why steel sits at the centre of India’s climate challenge
India’s steel sector underpins roads, railways, housing, power plants and industrial corridors. To meet its development aspirations, steel production is expected to rise from about 125 million tonnes today to over 400 million tonnes by mid-century. This scale of expansion is unprecedented.
However, steel already contributes nearly 12% of India’s carbon emissions, largely due to coal-based blast furnace technology. Decisions taken now will lock in emissions profiles for 30–40 years. Continued investment in conventional technology risks embedding carbon-intensive infrastructure that will be costly to retrofit or retire prematurely.
Signals from global markets and climate diplomacy
International trends are rapidly reshaping the economics of steelmaking. The European Union’s Carbon Border Adjustment Mechanism (CBAM) is effectively linking market access to carbon intensity, penalising exporters of high-emission steel. Countries unable to demonstrate low-carbon production will face higher costs and shrinking access to premium markets.
China, despite its coal legacy, is expanding scrap-based secondary steel production and investing heavily in hydrogen-based routes. Early movers are positioning themselves to dominate future supply chains for low-carbon materials. In this context, delay carries real economic risks for India’s exporters.
Early corporate shifts within India’s steel sector
Indian steelmakers have begun responding to these signals. Companies such as Tata Steel have piloted hydrogen injection in blast furnaces, expanded renewable power procurement, and explored carbon capture options. JSW Steel and Jindal Steel and Power are examining green hydrogen integration, while Steel Authority of India Limited is modernising facilities and evaluating alternative production routes.
These efforts reflect growing board-level recognition that competitiveness and decarbonisation are now intertwined. Yet most initiatives remain at pilot scale. The challenge ahead is to move decisively towards demonstration plants and commercial deployment of near-zero emission technologies.
Policy architecture India has put in place
The government has begun laying the groundwork for transition. The Greening Steel Roadmap outlines a phased pathway for decarbonisation, while the Green Steel Taxonomy, released in 2024, provides an official definition and classification — a global first. Complementary initiatives such as the National Green Hydrogen Mission, expansion of renewable energy capacity, and emission intensity targets under the Carbon Credit Trading Scheme indicate growing policy coherence.
What remains missing are strong investment-shifting incentives. Without clear disincentives for coal-based expansion, India risks continuing to add high-carbon capacity even as other economies pivot away.
Structural barriers slowing the shift to green steel
Several obstacles continue to constrain rapid decarbonisation:
- High costs and limited availability of green hydrogen
- Insufficient renewable energy dedicated to industrial use
- An underdeveloped and informal steel scrap market
- Uncertain access to affordable natural gas as a transition fuel
- Limited access to long-term, low-cost finance for capital-intensive green technologies
- Skill gaps and limited domestic manufacturing of advanced equipment
Most of these challenges are policy- and investment-related — areas where India has previously demonstrated rapid transformation, particularly in renewable energy.
The case for carbon pricing and industrial hubs
International experience shows that near-zero emission steel becomes commercially viable only when carbon prices reach meaningful levels. Europe’s progress accelerated once prices approached $90–100 per tonne of CO₂. India’s planned carbon market could play a similar role by gradually shifting cost structures across the value chain.
In parallel, shared infrastructure hubs for green steel — covering renewable power, hydrogen supply, gas pipelines and carbon transport — could significantly lower entry barriers. Given that low-carbon steel plants require 30–50% higher capital investment, coordinated public support will be essential, especially for smaller producers.
Why green steel is now a strategic imperative
Green steel lies at the intersection of climate responsibility, economic competitiveness and industrial leadership. India has already demonstrated global credibility in renewable energy deployment and climate diplomacy. Steel represents the next frontier — a test of whether industrial growth can align with long-term sustainability.
By combining clear emission targets, carbon pricing, supportive finance and corporate ambition, India can avoid carbon lock-in, protect its export competitiveness, and help shape global standards for sustainable industrialisation.
What to note for Prelims?
- Green Steel Taxonomy (2024) and its significance
- Carbon Border Adjustment Mechanism (CBAM)
- Role of green hydrogen in steelmaking
- Carbon Credit Trading Scheme (CCTS)
What to note for Mains?
- Steel sector’s role in India’s emissions profile
- Trade-offs between industrial growth and decarbonisation
- Policy instruments for hard-to-abate sectors
- Link between climate action and export competitiveness