Green steel can shape India’s climate goals trajectory

UPSC Syllabus: Gs Paper 3- Indian economy and Infrastructure

Introduction try

India plans to submit a more ambitious climate pledge under its revised Nationally Determined Contribution. This requires economy-wide decarbonisation. Hard-to-abate sectors will decide the outcome. Steel is the most critical among them. The sector supports growth but also contributes heavily to emissions. The choices made today will shape India’s climate path, industrial competitiveness, and long-term economic sustainability.

Importance of the Steel Sector in India’s Growth Path

1. Backbone of infrastructure and industry: Steel drives construction, transport, housing, and manufacturing. It is central to India’s economic expansion and industrial strength.
2. Massive scale of future demand: Steel production must rise from about 125 million tonnes per year to over 400 million tonnes by mid-century to meet development needs.
3. Major contributor to emissions: The steel sector already accounts for around 12% of India’s total carbon emissions, mainly due to coal-based production routes.
4. Twin national challenge: India must support rapid growth while also meeting long-term climate targets. Steel sits at the centre of this balance.

Risks of Continuing High-Carbon Steel Production

1. Coal dependency locks emissions: Most steel is produced using coal-intensive blast furnaces. New investments in this route can lock emissions for decades.
2. Long-term infrastructure risk: Steel plants have long lifespans. Decisions taken now will define emissions till mid-century.
3. Economic cost of inaction: Lack of ambition can lock in billions of dollars in carbon-inefficient technologies, raising future transition costs.
4. Loss of global competitiveness: High-carbon steel will become unattractive as global markets shift toward cleaner production standards.

Global Pressure and Market Signals

1. International transition underway: Countries are already moving to cleaner steel. China is expanding scrap-based steel and investing in green hydrogen.
2. European Union’s carbon barrier: The EU’s Carbon Border Adjustment Mechanism (CBAM) penalises carbon-intensive imports.
3. Export market risks: Producers unable to prove low-carbon steel face border taxes, loss of premium markets, and reputational damage.
4. First-mover advantage: Early adopters of green steel gain a lasting competitive edge in global supply chains.

Initiative Taken

1. Corporate-level action: Major producers have initiated pilots and technology trials. Tata Steel tested hydrogen injection and carbon capture. JSW Steel and JSPL are exploring green hydrogen integration. SAIL is modernising furnaces and low-carbon pathways.
2. Greening Steel Roadmap: Released in September, it provides a structured decarbonisation pathway for the sector.
3. Green Steel Taxonomy: Issued in December 2024, it made India the first country to formally define green steel.
4. National Green Hydrogen Mission: Supports hydrogen-based industrial transition through capacity expansion.
5. Carbon Credit Trading Scheme: 253 steel units are covered under emission-intensity reduction targets.

Structural Barriers to Green Steel Transition

1. Pilot-scale limitation: Most efforts remain confined to pilot projects. The sector has not yet shifted to demonstration plants or commercial-scale near-zero emission technologies.
2. Green hydrogen cost: Green hydrogen supply is limited and remains expensive, making large-scale steel production financially difficult.
3. Energy constraints: Dedicated renewable power for industrial use is insufficient, slowing the shift away from coal-based processes.
4. Scrap market gaps: Scrap availability is low and the market remains largely informal, restricting expansion of secondary steel production.
5. Transition fuel access: Affordable and reliable natural gas supply is uncertain, despite its importance as a bridge fuel before hydrogen adoption.
6. Finance and skills gap: Projects lack long-maturity, low-cost debt and risk-sharing mechanisms. Workforce upskilling and technology support are also inadequate.

Way Forward

1. Clear emission timelines: Government must set short-, medium-, and long-term emission targets to guide capital investment.
2. Early carbon pricing: A carbon price can distribute transition costs across the value chain. In Europe, green steel became viable when carbon prices reached $90–$100 per tonne of CO₂.
3. Domestic demand creation: Public procurement policies can create assured markets for green steel.
4. Certification and labelling systems: Clear standards can promote consumer trust and encourage low-carbon products.
5. Natural gas as transition fuel: Reliable gas supply must be prioritised until hydrogen-based steel becomes scalable.
6. Shared infrastructure hubs: Government-led clusters can reduce costs for green power, hydrogen supply, pipelines, and CO₂ transport.
7. Targeted fiscal support: Low-carbon steel has 30–50% higher capital cost, requiring temporary financial assistance.
8. Support for smaller producers: Additional help is essential to ensure an equitable transition across the sector.

Conclusion

Green steel is no longer optional for India. It is essential for meeting climate goals, protecting export competitiveness, and sustaining long-term growth. With strong policy signals, shared infrastructure, and targeted financial support, India can replicate its renewable energy success. Decarbonising steel can secure economic resilience and global leadership in sustainable industrialisation.

Question for practice:

Discuss how green steel can support India’s climate goals and what key barriers must be addressed for its large-scale transition.

Source: The Hindu