Green Steel: Can India’s Steel Industry Reduce Carbon Emission Without Cutting Corners?

Today, as it battles to keep its place among fast growing alternative materials in everyday use, it is trying to embrace newer, climate-friendly production methods.

There is no standard definition for green steel, but emission rate of around 0.6-1.0 tonne of CO2 per tonne of crude steel is considered ‘green’. The problem is that very few companies globally are perhaps anywhere near this magic figure.

Indian steel companies have a heavy dependence on Blast Furnace or Basic Oxygen Furnace (BF/BOF)—which has a 65 per cent share in total steel making. They are consequently finding themselves in the middle of a race to adopt climate-friendly technologies that can replace their coal-fired furnaces.

Giants like Tata Steel, SAIL, Arcelor-Mittal, and Jindals have set various targets to lower emissions and move towards an energy sourcing mix that relies on renewables like wind and solar to reduce dependence on coal. The government on its part has taken up a slew of policy initiatives to accelerate the steel industry’s moves while supporting India’s net zero commitment by 2070.

For domestic steel majors, the more immediate push for making cleaner metal could be to mark their presence as responsible producers in developed steel markets in Europe ahead of the ‘carbon border adjustment mechanism’ (CBAM).

This mechanism levies a duty on some products, including steel, for greenhouse gas emissions during their production. The taxation segment of CBAM is slated to start on January 1, 2026.

Indian steel exporters may have to pay 60-80 Euros per tonne of carbon emissions, over and above CBAM standards which stand at 1.8 tonne of CO2 per tonne of crude steel. That's why, depending on the prevailing global steel prices, companies are likely to take a 20-25 per cent hit on margins.

However, exports to Europe are estimated at 4-5 million tonnes (MT) annually, roughly 30 per cent of India's total steel exports of 15 MT.  

While Indian steel majors are keeping one eye on CBAM, the first milestone year for most is 2030, by when India has targeted to produce 300 MT of steel as against the current output of 179 MT.

Beyond CBAM

Unlike Europe, which has aging furnaces, India's blast furnaces are younger and the domestic steel industry will continue to rely on them, given their average age of 50-60 years.

“We have to focus on the sourcing of green energy as the first step towards making cleaner steels,” Jayant Acharya, joint managing director and chief executive of JSW Steel told The Secretariat.

"Technologies like Carbon Capture Utilisation and Storage (CCUS) that involve the capture of CO2, generally from large point sources like power generation or industrial facilities using fossil fuels, will take more time to evolve," he added.

JSW Steel, one of the largest steelmakers in the country, has targeted an emission rate of 1.95 tonne of CO2 per tonne of crude steel by 2030. It is relying on wind and solar power for 1000 MW of energy and adding another 1200 MW. This is in addition to a slew of measures like saving energy by re-using waste gas, process and material efficiency, as well as scrap and solid charges to reduce carbon footprint.

The move finds resonance across the sector. Recent media reports suggest that Tata Steel is mulling the option of going nuclear to produce green steel and is looking at the feasibility of setting up 200 Bharat Small Reactors (BSRs) of 220 MW each to produce a total of 45 GW of energy.

Though the company did not comment on this issue, it said it has already tied up with Tata Power Renewable Energy to set up solar & wind hybrid power to replace about 379 MW of Tata Steel’s fossil fuel-based power consumption, to reduce over 2 MT of CO2 emissions per annum.

State-run SAIL hopes to source 22 per cent of its energy needs from renewables by 2030, while Arcellor-Mittal Nippon Steel (AM/NS) India said it is also ramping up renewables to ensure a 100 per cent green grid by 2030.

SAIL is working towards reducing emissions to 2.2 tonnes of CO2 per tonne of crude steel by 2030 even as its average rate of emissions hovers at around 2.5 tonnes.

"AM/NS India has targeted a reduction in emissions intensity by 20 per cent by 2030" said Arvind Bodhankar, Chief Sustainability Officer, AM/NS India, having reduced its emissions intensity by one-third since 2015. It also aims to decarbonise by raising scrap utilisation from 3-5 per cent to about 10 per cent by 2030.

Government’s Big Push

The government is focusing on reduction of carbon emissions in the steel industry in-line with the country's net zero goals by 2070. This is through promoting efficiency of energy and resources, and pushing renewable energy in the short term (by 2030).

For the medium term (2030-2047), focus will be on utilisation of Green Hydrogen and Carbon Capture. For long term (2047-2070), disruptive alternative technological innovations can help achieve the transition to net-zero.

The National Green Hydrogen Mission, which chalks out steps for production and storage of green hydrogen and the National Solar Mission promoting use of solar energy, aims to help reduce emissions in the steel industry. Besides, the Steel Scrap Recycling Policy 2019 is meant to enhance the availability of domestically generated scrap to reduce coal consumption in steel making.

Financial initiatives to fund green steel projects embracing hydrogen and lower interest rates for upcoming capital-intensive green steel ventures are being considered, along with a consortium-based approach to set up steel projects that use green hydrogen (which are two times costlier than traditional plants).

Investment To Make Low Emission Steel

Steel majors are, in the meantime, adopting a strategy to set up new units to produce green steel. JSW is setting up a 4 MT unit, a lower carbon-emitting facility, using a mix of renewable energy and natural feed through direct reduced iron (DRI) and arc furnace.

"This will help the company supply low-carbon steel both for domestic and international markets," Acharya said. “Here we are targeting an emission rate of 0.6 tonnes of CO2 per tonne of crude steel," he added.

JSW is also setting up a hydrogen electrolyser plant on a pilot basis at Vijaynagar for low-emission steel. Tata Steel is also setting up its first scrap-based 0.75 MT greenfield unit in Ludhiana at a cost of Rs 2,600 crore that will produce lower emission steel and will continue to look at expanding the same process route in other locations in India.

Similarly, AM/NS India is looking at the option to carve out a separate production line for lower emission steels, aiming to achieve an impressive emission rate of 1.6 tonnes of CO2 per tonne of crude steel at its DRI/ electric arc furnace (EAF) line. 

However, steelmakers feel it makes practical and business sense to make fresh investment in green steel, provided the volumes are justified. 

Seeking Government Policy Thrust On Procurement

Steel companies are urging the government to mandate that 20 per cent of steel procured for transportation and infrastructure projects be green steel.

“Indian steel industry has no option but to move towards producing low emission steel. We would request the government to ensure that 20 per cent of green steel is procured for transport and infrastructure segments,” said Alok Sahay, Secretary General at the Indian Steel Association (ISA) which represents most major domestic steel companies.

The government mandate in case of renewable energy has led to a remarkable growth of the sector, particularly in solar capacity. "In case of electric vehicles too, a similar government mandate has helped the growth of the sector," he added.

“We need to identify the levers for generation of demand for low-emission steel,” Sahay said. Since infrastructure accounts for 40 per cent of steel demand, the assured offtake in volumes can justify the investment required to produce green steel.

Sahay added that ISA has appointed A T Kearney as consultants to suggest the pathway for the sector’s transition towards green steel. The report will now be shared with the government.

Given India's low per capita consumption of steel as compared to its vast infrastructure needs, domestic demand for the metal will be more than sufficient to match the production capacity. However, the industry feels that since India remains a net importer of steel, imports of cheaper varieties of steel from China need to be reined in to give a fillip to the domestic steel industry's quest for green steel.