Transitioning to Green Steel: India's Decarbonization Roadmap

Context

To align with India’s commitment to achieve Net Zero emissions by 2070, the steel sector, one of the "hard-to-abate" industries, is undergoing a fundamental shift. The government intensified its focus on Green Steel to ensure industrial growth does not derail climate targets while protecting exports from emerging global carbon taxes.

Why Focus on Steel?

Emission Giant: The steel sector is the largest industrial source of CO₂ in India, contributing approximately 12% of the nation’s total emissions.
Global Impact: Globally, steel production accounts for 8–10% of emissions.
Intensity: Traditional blast furnace methods (BF-BOF) remain carbon-heavy, generating roughly 1.5 to 3 tons of CO₂ for every 1 ton of steel produced.

Defining Green Steel

Green Steel refers to steel manufactured with significantly lower or near-zero carbon footprints.

Technologies: Utilization of Green Hydrogen (H₂-DRI), Renewable Energy (Solar/Wind) to power Electric Arc Furnaces (EAF), and Carbon Capture, Utilization, and Storage (CCUS).
India’s Green Steel Taxonomy (First Globally):
- Threshold: Steel qualifies as "Green" only if emission intensity is below 2.2 t-CO2e/tfs (tonnes of CO₂ equivalent per tonne of finished steel).
- Star Rating System:
  - 5-Star: Intensity < 1.6 t-CO2e/tfs.
  - 4-Star: Intensity 1.6 – 2.0 t-CO2e/tfs.
  - 3-Star: Intensity 2.0 – 2.2 t-CO2e/tfs.
- Nodal Agency: The National Institute of Secondary Steel Technology (NISST) handles measurement and certification.

Drivers for Transition

EU’s CBAM (Carbon Border Adjustment Mechanism): As of January 1, 2026, the EU has begun implementing carbon costs on imports. Indian exporters may face price hikes of 15–22% to absorb these taxes, making the transition to low-carbon steel a prerequisite for market access.
Energy Security: India imports over 50 million tons of coking coal annually. Moving to hydrogen and renewables reduces dependency on volatile global fossil fuel markets.
National Green Hydrogen Mission: A strategic push with a specific ₹455 Crore outlay for pilot steel projects to make hydrogen-based steelmaking commercially viable by 2030.

Challenges

The Green Premium: Production costs for green steel are currently 30% to 54% higher than traditional methods due to expensive electrolyzers and hydrogen.
Scrap Quality: Transitioning to Electric Arc Furnaces (EAF) requires high-quality steel scrap, which is currently in short supply domestically and often contaminated with impurities.
Infrastructure Gaps: Massive scaling of renewable energy and hydrogen pipelines is required to support industrial-scale production.

Way Forward

Green Public Procurement (GPP): The government aims to mandate that Public Sector Undertakings (PSUs) procure a minimum percentage of certified green steel for major infrastructure projects (Railways, NHAI) starting FY28.
Demand Aggregation: Following the "UJALA LED model," aggregating demand through government tenders can lower green steel prices by an estimated 15–20% within three years.
Market Diversification: While transitioning, exporters are looking toward less stringent markets in the Middle East and Africa to mitigate the immediate "CBAM shock."

Conclusion

Green Steel is no longer just an environmental choice but a strategic economic imperative. By leveraging the new Green Steel Taxonomy and the National Green Hydrogen Mission, India aims to become a global leader in low-carbon manufacturing, ensuring that "Viksit Bharat 2047" is built on a sustainable foundation.

Transitioning to Green Steel: India's Decarbonization Roadmap