India launches INR 5,000 cr initiative to decarbonise steel industry

• 80% of total outlay for secondary steel sector
• Financial incentives linked to direct CO2 reductions

India’s steel industry is pivotal to its economy, but it significantly contributes to greenhouse gas emissions. With growing global pressure to reduce carbon footprint, India is pushing for ‘green steel’ production, aligning with its climate goals and international trade competitiveness like coping with the EU’s Carbon Border Adjustment Mechanism (CBAM).

Policy framework for sustainable steel

The Indian government has introduced the ‘National Mission of Sustainable Steel’, an INR 5,000 crore initiative targeting emission reductions, particularly focusing on smaller steel producers for whom 80% of the total funds will be allocated. This mission is part of broader efforts to meet India’s commitment to achieving net zero emissions by this decade and net zero by 2070.

India’s steel sector emissions 

The domestic steel sector contributes 12% of India’s greenhouse gas emissions with an emission intensity of 2.55 tonnes (t) CO2 per tonne of crude steel, exceeding the global average of 1.9 t CO2. India has defined ‘green steel’ with categories based on CO2 emission intensity, aiming to encourage lower emissions in production processes.

Decarbonization strategies include adopting clean technologies like Electric Arc Furnaces (EAFs) for lower emissions compared to coal-fired blast furnaces.

Market dynamics and consumption

India’s steel consumption is projected to grow, expecting 225-240 million tonnes (mnt) by the end of this decade, requiring about 300 million tonnes of capacity. Per capita steel consumption has crossed 100 kg, indicating substantial growth. However, exports face hurdles like Europe’s Carbon Border Adjustment Mechanism (CBAM).

Transitioning poses challenges including high costs of green technologies and a limited scrap market affecting EAF adoption in India. Policy support through incentives and regulations is vital for driving the steel sector’s decarbonization.

Outlook

India’s new programme signals a proactive push towards a greener steel industry. By incentivizing emission reductions, particularly among smaller producers, the country aims to align its steel sector with global climate goals. This initiative not only supports India’s long-term sustainability commitments but also enhances its competitiveness in international trade, especially with regions imposing carbon tariffs.