Green Steel: A Key Player in India’s Climate Goals

Q: What is the significance of decarbonising the steel sector in India’s climate and economic strategy?

Strategic Importance: The steel sector accounts for around 12% of India’s carbon emissions, largely due to coal-based production. With the sector expected to grow from 125 million tonnes per year to over 400 million tonnes by mid-century, emissions could rise substantially if no interventions are made.Economic Implications: Steel is critical to infrastructure, construction, and industrial growth. Locking in high-carbon technologies today would lead to long-term financial, environmental, and market disadvantages. Decarbonising steel ensures global competitiveness, access to premium markets, and alignment with climate commitments.Climate Leadership: By adopting green steel, India can demonstrate international leadership in sustainable industrialisation, complementing its achievements in renewable energy and climate diplomacy. Early adoption of low-carbon technologies positions India as an active participant in global carbon reduction initiatives, rather than a passive follower.

Q: Why is it urgent for India to transition from coal-based steel production to low-carbon alternatives?

Climate and Policy Pressures: Global markets, such as the European Union, are increasingly implementing mechanisms like the Carbon Border Adjustment Mechanism (CBAM) to penalise high-carbon steel imports. Delays in transitioning could result in border tariffs, reduced market access, and reputational risks.Technological Lock-In: Continued investment in traditional blast furnaces locks in high-emission infrastructure, raising the cost of future decarbonisation. Early adoption of green technologies, including hydrogen-based production, scrap-based secondary steel, and carbon capture, avoids long-term environmental and financial liabilities.Competitive Advantage: Early movers in green steel can secure preferential access to international markets, attract sustainable investment, and benefit from innovation-led cost reductions. Companies like Tata Steel and JSW Steel are already piloting low-carbon technologies to gain this advantage, demonstrating that urgency translates into actionable competitiveness.

Q: How is India planning to achieve decarbonisation in the steel sector?

Policy Framework: India has released a Greening Steel Roadmap and the Green Steel Taxonomy to define low-carbon steel and provide a structured pathway for decarbonisation. These initiatives guide investment decisions and industrial planning.Technological Measures: Steel companies are integrating hydrogen in blast furnaces, adopting renewable power purchase agreements, exploring carbon capture, and scaling secondary steel production using scrap. Natural gas is being considered as a transitional fuel.Market and Fiscal Measures: The government is expected to implement a carbon pricing mechanism, provide fiscal incentives for green steel, and establish hubs for shared infrastructure such as green electricity, hydrogen pipelines, and CO2 evacuation systems. These measures ensure that the transition is economically viable and scalable across the sector.

Q: What are the main barriers to green steel adoption in India?

High Costs: Green steel production involves 30–50% higher capital intensity, largely due to the cost of green hydrogen, renewable energy infrastructure, and carbon capture systems.Energy and Raw Material Constraints: Limited renewable energy dedicated to industry, inadequate supply of natural gas as a transition fuel, and informal scrap markets make scaling green steel difficult.Policy and Workforce Challenges: Lack of long-term, low-cost financing, uncertain carbon pricing, need for workforce upskilling, and delayed policy incentives hinder adoption. These barriers are significant but not insurmountable; lessons from India’s renewable energy sector demonstrate that targeted fiscal support, regulatory clarity, and innovation-driven solutions can overcome these challenges.

Q: Critically evaluate India’s current policy measures to promote green steel.

Strengths: India has formalised low-carbon steel standards via the Green Steel Taxonomy, released the Greening Steel Roadmap, and included 253 steel units under the Carbon Credit Trading Scheme (CCTS). These measures provide clarity, encourage innovation, and signal government commitment.Limitations: Policy incentives to shift investments away from coal-based blast furnaces are yet to fully materialise. Without early deployment of carbon pricing and dedicated fiscal support, companies may continue investing in conventional technologies.Recommendations: The government should ensure Carbon price mechanisms are operational at an early stageGreen steel procurement policies create domestic demandShared infrastructure hubs reduce capital costs for small- and medium-sized enterprises Such measures would accelerate adoption, reduce investment risk, and establish India as a leader in sustainable steel production.

Q: Provide examples of Indian steel companies taking steps toward decarbonisation.

Tata Steel: Piloted hydrogen injection in blast furnaces, implemented large-scale renewable energy power purchase agreements, and explored carbon capture technologies.JSW Steel and JSPL: Exploring integration of green hydrogen for low-carbon production.SAIL: Modernising traditional blast furnaces and investigating low-carbon production methods.Significance: These examples demonstrate that corporate leadership and strategic investment are crucial for achieving near-zero carbon steel. They also show that policy signals, technological innovation, and corporate governance must work in tandem to drive sector-wide transformation.

Q: How can India leverage green steel to achieve climate goals while remaining globally competitive?

Global Market Context: Countries like the EU and China are already transitioning to green steel. The EU’s CBAM penalises high-carbon steel imports, while China invests in scrap-based production and green hydrogen.Opportunity for India: By moving quickly, India can secure access to premium export markets, attract sustainable investment, and shape international industrial standards. Early adoption of low-carbon technologies also reduces long-term environmental liabilities and enhances energy security.Policy and Corporate Action: Achieving this requires Robust carbon pricing and fiscal incentivesCreation of domestic demand through public procurement of green steelShared infrastructure for green electricity, hydrogen, and CO2 managementSupport for SMEs to ensure equitable transition Coordinated government policy and decisive corporate strategies can enable India to decarbonise steel while achieving economic competitiveness and climate leadership.

Unlocking the potential of green steel is crucial for India's growth and environmental sustainability amidst climate challenges.

Gopi

•January 31, 2026•5 mins read

Building Tomorrow with Green Steel

Not Started

1. India’s Climate Commitments and the Centrality of Steel

India’s renewed pledge at COP30 to submit a more ambitious NDC places the country at a strategic inflection point. This commitment requires credible, economy-wide decarbonisation pathways. Steel becomes the most consequential sector because it is both energy-intensive and foundational to infrastructure growth.

India’s steel demand will rise substantially as the economy expands. Production is expected to increase from the current ~125 million tonnes/yr to over 400 million tonnes by 2050. This scale of growth makes the sector a key determinant of India’s cumulative emissions trajectory. Currently, steel contributes ~12% of national emissions, largely due to the dominance of coal-based blast furnaces.

The policy challenge is a dual one: sustaining development while aligning with long-term climate targets. Investments made today will define lock-ins for decades. Failure to shift from high-carbon assets risks embedding obsolete technology, reducing export competitiveness and weakening India’s climate leadership.

The governance logic is clear: without early transition, the steel sector will accumulate high-carbon assets, raising future retrofit costs and jeopardising India’s NDC credibility.

2. Global Trends and Competitiveness Pressures

Major economies are rapidly transforming their steel sectors. China is increasing scrap-based secondary steel production and investing in green hydrogen, signalling a decisive pivot away from coal. The EU has institutionalised its transition through the Carbon Border Adjustment Mechanism (CBAM), which penalises carbon-intensive imports.

These shifts indicate a global market preference for low-carbon steel. Exporters unable to demonstrate clean production face border taxes, loss of premium markets and reputational disadvantages. Early movers in green steel enjoy competitive gains through technology leadership, investment flows and market access.

Indian steel producers have begun pilot efforts: Tata Steel’s hydrogen injection trials, JSW and JSPL’s hydrogen integration explorations, and SAIL’s furnace modernisation. However, pilots now need rapid scaling into demonstration and commercial plants.

Ignoring these global signals will erode India’s industrial competitiveness and expose exporters to punitive carbon pricing regimes.

3. Need for Transitioning Away from High-Carbon Technologies

India’s steel expansion cannot rely on traditional blast-furnace–basic oxygen furnace (BF-BOF) routes. Continued investment in coal-based plants would lock the country into decades of high emissions and stranded assets. Near-zero technologies—direct reduced iron (DRI) using natural gas or green hydrogen, electric arc furnaces (EAF), and enhanced scrap utilisation—must become the foundation for new capacity.

Small and medium enterprises, which dominate India’s steel ecosystem, must adopt best available technologies in energy efficiency, raw material quality and process optimisation. Their transition is essential for an equitable and sector-wide shift.

If capacity addition continues through coal-based routes, India risks technological obsolescence, higher long-term mitigation costs and diminished global credibility in climate negotiations.

4. Policy Landscape and Gaps

India has initiated several key frameworks. The Greening Steel Roadmap (2023) provides a stepwise decarbonisation pathway. The Green Steel Taxonomy (2024) positions India as the first country to standardise green steel definitions. The National Green Hydrogen Mission and renewable energy expansions strengthen supply-side readiness. Additionally, 253 steel units are subject to emission-intensity targets under the Carbon Credit Trading Scheme (CCTS).

However, crucial market-shaping incentives are still missing. Clear policy signals that shift investments away from BF-BOF routes have not fully materialised. As a result, India risks continuing to add carbon-intensive, capital-heavy technologies that may soon be globally uncompetitive.

Without strong policy signals, private players cannot plan long-term capital investments, slowing down technology adoption and undermining sectoral transformation.

5. Barriers to Green Steel: Key Challenges

Supply and cost constraints:

High cost and limited supply of green hydrogen
Insufficient renewable energy dedicated to industry
Irregular and informal scrap market limiting EAF expansion

Infrastructure and resource bottlenecks:

Absence of reliable, affordable natural gas as transitional fuel
Lack of carbon capture, utilisation and storage (CCUS) networks
No shared industrial hubs for hydrogen, green power or CO₂ evacuation

Financial and capacity challenges:

Low-maturity, high-cost debt for green steel
High capital intensity (30–50% higher) for low-carbon technologies
Need for workforce upskilling and technology support

These constraints make the transition complex, but they are solvable through coordinated policy, investment mobilisation and institutional reform.

6. Policy Measures Required for Accelerated Transition

Clear targets and pricing:

Stringent short-, medium- and long-term emission standards
Early rollout of a carbon pricing regime
Lessons from Europe: near-zero steel becomes viable at $90–100/tonne CO₂

Market creation:

Public procurement policy for green steel
Certification and labelling mechanisms
Scaling adoption of the Green Steel Taxonomy

Infrastructure and fuel access:

Prioritised natural gas access for steel
Industrial hubs for green hydrogen, renewable energy and CO₂ transport
Shared infrastructure to reduce individual firm costs

Financial and institutional support:

Fiscal incentives for green steel investments
De-risking mechanisms for long-maturity industrial loans
Special support for MSMEs in the steel value chain

Without these measures, private sector initiatives will remain fragmented, and transition costs will remain prohibitively high for most producers.

7. Strategic Importance of Green Steel for India

Green steel is now a strategic imperative aligned with India’s climate ambitions, export competitiveness and industrial modernisation. India has already demonstrated global leadership in renewable energy expansion and climate diplomacy. Steel is the next frontier where India can influence global industrial norms and secure its long-term economic resilience.

"We do not inherit the earth from our ancestors; we borrow it from our children." — Native American Proverb
(Aids recall in Essay/GS3 on sustainability)

A coordinated approach—combining decisive corporate investments with an enabling policy ecosystem—will position India as a global leader in low-carbon industrialisation.

If this opportunity is missed, India risks technological lock-in, loss of global competitiveness and reduced credibility in climate negotiations.

Conclusion

India’s steel sector stands at a pivotal crossroads. Decarbonisation is no longer optional but central to climate commitments, industrial competitiveness and sustainable growth. By fostering a coherent policy environment, enabling technology adoption and supporting industry-wide transition, India can define global standards for green industrialisation and secure long-term economic and environmental resilience.

Quick Q&A

Everything you need to know

Strategic Importance: The steel sector accounts for around 12% of India’s carbon emissions, largely due to coal-based production. With the sector expected to grow from 125 million tonnes per year to over 400 million tonnes by mid-century, emissions could rise substantially if no interventions are made.
Economic Implications: Steel is critical to infrastructure, construction, and industrial growth. Locking in high-carbon technologies today would lead to long-term financial, environmental, and market disadvantages. Decarbonising steel ensures global competitiveness, access to premium markets, and alignment with climate commitments.
Climate Leadership: By adopting green steel, India can demonstrate international leadership in sustainable industrialisation, complementing its achievements in renewable energy and climate diplomacy. Early adoption of low-carbon technologies positions India as an active participant in global carbon reduction initiatives, rather than a passive follower.

Climate and Policy Pressures: Global markets, such as the European Union, are increasingly implementing mechanisms like the Carbon Border Adjustment Mechanism (CBAM) to penalise high-carbon steel imports. Delays in transitioning could result in border tariffs, reduced market access, and reputational risks.
Technological Lock-In: Continued investment in traditional blast furnaces locks in high-emission infrastructure, raising the cost of future decarbonisation. Early adoption of green technologies, including hydrogen-based production, scrap-based secondary steel, and carbon capture, avoids long-term environmental and financial liabilities.
Competitive Advantage: Early movers in green steel can secure preferential access to international markets, attract sustainable investment, and benefit from innovation-led cost reductions. Companies like Tata Steel and JSW Steel are already piloting low-carbon technologies to gain this advantage, demonstrating that urgency translates into actionable competitiveness.

Policy Framework: India has released a Greening Steel Roadmap and the Green Steel Taxonomy to define low-carbon steel and provide a structured pathway for decarbonisation. These initiatives guide investment decisions and industrial planning.
Technological Measures: Steel companies are integrating hydrogen in blast furnaces, adopting renewable power purchase agreements, exploring carbon capture, and scaling secondary steel production using scrap. Natural gas is being considered as a transitional fuel.
Market and Fiscal Measures: The government is expected to implement a carbon pricing mechanism, provide fiscal incentives for green steel, and establish hubs for shared infrastructure such as green electricity, hydrogen pipelines, and CO2 evacuation systems. These measures ensure that the transition is economically viable and scalable across the sector.

High Costs: Green steel production involves 30–50% higher capital intensity, largely due to the cost of green hydrogen, renewable energy infrastructure, and carbon capture systems.
Energy and Raw Material Constraints: Limited renewable energy dedicated to industry, inadequate supply of natural gas as a transition fuel, and informal scrap markets make scaling green steel difficult.
Policy and Workforce Challenges: Lack of long-term, low-cost financing, uncertain carbon pricing, need for workforce upskilling, and delayed policy incentives hinder adoption. These barriers are significant but not insurmountable; lessons from India’s renewable energy sector demonstrate that targeted fiscal support, regulatory clarity, and innovation-driven solutions can overcome these challenges.

Strengths: India has formalised low-carbon steel standards via the Green Steel Taxonomy, released the Greening Steel Roadmap, and included 253 steel units under the Carbon Credit Trading Scheme (CCTS). These measures provide clarity, encourage innovation, and signal government commitment.
Limitations: Policy incentives to shift investments away from coal-based blast furnaces are yet to fully materialise. Without early deployment of carbon pricing and dedicated fiscal support, companies may continue investing in conventional technologies.
Recommendations: The government should ensure

Carbon price mechanisms are operational at an early stage
Green steel procurement policies create domestic demand
Shared infrastructure hubs reduce capital costs for small- and medium-sized enterprises

Such measures would accelerate adoption, reduce investment risk, and establish India as a leader in sustainable steel production.

Tata Steel: Piloted hydrogen injection in blast furnaces, implemented large-scale renewable energy power purchase agreements, and explored carbon capture technologies.
JSW Steel and JSPL: Exploring integration of green hydrogen for low-carbon production.
SAIL: Modernising traditional blast furnaces and investigating low-carbon production methods.
Significance: These examples demonstrate that corporate leadership and strategic investment are crucial for achieving near-zero carbon steel. They also show that policy signals, technological innovation, and corporate governance must work in tandem to drive sector-wide transformation.

Global Market Context: Countries like the EU and China are already transitioning to green steel. The EU’s CBAM penalises high-carbon steel imports, while China invests in scrap-based production and green hydrogen.
Opportunity for India: By moving quickly, India can secure access to premium export markets, attract sustainable investment, and shape international industrial standards. Early adoption of low-carbon technologies also reduces long-term environmental liabilities and enhances energy security.
Policy and Corporate Action: Achieving this requires

Robust carbon pricing and fiscal incentives
Creation of domestic demand through public procurement of green steel
Shared infrastructure for green electricity, hydrogen, and CO2 management
Support for SMEs to ensure equitable transition

Coordinated government policy and decisive corporate strategies can enable India to decarbonise steel while achieving economic competitiveness and climate leadership.