Green Steel & India’s Climate Goals Trajectory

Syllabus: GS3/Economy; Infrastructure; Environment

Context

• India pledged and committed to submitting a revised and more ambitious Nationally Determined Contribution (NDC) at COP30 in Belém with a clear plan for economy-wide decarbonisation, especially in the steel sector.

Why Steel Matters?

• Steel is a critical component of India’s eight core infrastructure industries, holding a significant weight of 17.92% in the Index of Eight Core Industries (ICI).
• Steel production in India currently is about 125 million tonnes and accounts for nearly 12% of India’s carbon emissions, with an emission intensity of 2.55 tonnes CO2 per tonne of crude steel, higher than the global average of 1.9 tonnes CO2, largely due to coal-based production.
• India needs to increase its production by over 400 million tonnes by mid-century to unlock its full economic potential.

What Is the Green Steel Taxonomy?

• It is a classification framework (notified by the Ministry of Steel in December 2024) that categorises steel based on its carbon emission intensity (measured as tonnes of CO₂ per tonne of crude steel).
• It is outcome-based, allowing multiple production routes as long as they meet defined emission thresholds, instead of focusing on a single technology.
• Its core objective is to differentiate steel products by their climate impact and enable credible claims of ‘green steel’.

Key Features of India’s Green Steel Taxonomy

• Emissions-Based Classification: Steel is classified into graded categories based on lifecycle greenhouse gas emissions.
  • Lower emission intensity corresponds to higher ‘greenness’, creating a clear transition pathway rather than a binary green/non-green label.
• Technology-Neutral Design: The taxonomy does not mandate a specific technology. It accommodates hydrogen-based DRI routes, scrap-based electric arc furnaces, natural gas as a transition fuel, and Carbon Capture, Utilisation and Storage (CCUS).
• Alignment with MRV Frameworks: The taxonomy is designed to work alongside robust Monitoring, Reporting and Verification (MRV) systems, ensuring emissions claims are measurable, comparable and auditable.

Why Is the Green Steel Taxonomy Important?

• Investment Clarity: Low-carbon steel projects require 30–50% higher capital investment.
  • The taxonomy reduces uncertainty for lenders and investors by clearly identifying which projects qualify as green and therefore deserve preferential finance.
• Market Creation: By enabling certification and labelling, the taxonomy lays the foundation for public procurement of green steel, green product premiums, and corporate demand from climate-conscious buyers.
  • Markets for green steel cannot function without a definition.
• Global Trade Readiness: International mechanisms such as the EU’s Carbon Border Adjustment Mechanism (CBAM) assess steel based on embedded emissions.
  • China is expanding scrap-based steel production and investing heavily in green hydrogen to reduce coal dependence.
  • India’s taxonomy helps domestic producers measure, disclose and reduce emissions in line with global norms, protecting export competitiveness.
• Policy Coordination: The taxonomy acts as a bridge between industrial policy, climate policy, and climate finance and disclosure frameworks.
  • It enables alignment across ministries and financial regulators, a key requirement for scaling the green industry.

Barriers to Green Steel

• High cost and limited availability of green hydrogen;
• Insufficient renewable energy dedicated to industry;
• Fragmented and informal scrap markets;
• Uncertain access to affordable natural gas as a transition fuel;
• Limited carbon sequestration infrastructure;
• Lack of long-term, low-cost financing;
• Need for workforce upskilling and technology support;
  • Many of these barriers are policy-driven.
  • India’s rapid transformation in renewable energy over the past decade shows what is possible when ambition, regulation, and investment align.

What India Needs Now?

• Firm carbon emission targets across short, medium, and long-term horizons;
• Early rollout of a carbon pricing mechanism to internalise emissions costs across the value chain;
• Public procurement policies to create domestic demand for green steel;
• Clear certification and labelling frameworks to build market trust;
• Strategic green steel hubs, where shared infrastructure for renewable power, hydrogen, gas, and CO₂ transport reduces costs;
• Targeted fiscal and financial support, especially for smaller producers;
  • International experience shows that near-zero steel technologies become viable only with robust carbon pricing.
  • India can learn from this while designing a framework suited to its own economic context.
• However, the Greening Steel Roadmap, National Green Hydrogen Mission, and emissions intensity targets under the Carbon Credit Trading Scheme (CCTS) signal intent and momentum.

Source: TH