How India plans to push green steel with production, purchase mandates

New Delhi: The Centre is working on green steel mandates for the local steel industry, supported by government procurement and financial incentives, as the world's second-largest maker of the alloy works to prepare the sector for the future.

The upcoming National Green Steel Mission is likely to mandate steelmakers to make a fixed share of their overall output green, the people cited above said on the condition of anonymity. The government will also support green steel with a public procurement policy, as well as interest subventions and production-linked incentives (PLIs).

Green steel broadly refers to steelmaking with renewable energy, using technologies and equipment that emit less. The emission intensity of steel produced in India, at 2.54 tonnes of carbon dioxide per tonne of crude steel, is significantly higher than the global average of 1.91 tonnes, pointing to the need for decarbonisation to meet India's climate goals. India's move to green steel also comes in the backdrop of several developed economies preparing levies on goods using carbon-spewing methods.

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The second person cited above said the green steel mission will be similar to the green hydrogen mission, with components of policy, incentives and a roadmap for the future. The mission is likely to be launched in the next couple of months.

Queries emailed to the Union steel ministry remained unanswered.

“Green steel has to be defined properly," said A.S. Firoz, a steel industry expert. "At this moment, it is still a loose category and can be interpreted in multiple ways. Not just India, the world has to go quite a distance to produce green steel in large commercial plants, and that too economically for long-term sustenance," Firoz said.

While the government expects a procurement policy to spark demand and encourage green steel production, Firoz was sceptical. "Given the fact that government procurement is small compared to the country’s overall steel consumption, a small percentage of that will not be adequately attractive for the steelmakers to go out of their investment plans to earmark a portion of their production to be put in the green route. Government action is a small step forward at this point, and is more symbolic. This is welcome, nevertheless," said Firoz, who was earlier chief economist at the steel ministry.

Reducing emissions

Steelmakers have already taken steps to reduce emissions.

Tata Steel, which is targeting net zero emissions by 2045, has shut its UK blast furnace and is building an electric arc furnace (EAF) with government support. It is also in talks with the Dutch government for support, a company spokesperson said. Its 0.85 mtpa EAF-based Ludhiana steel plant, to be operational by early 2026, will use a significant proportion green power., and have nearly 80% lower emissions compared to the traditional method. The company is also implementing various technologies at its blast furnace-based steel plants in east India to reduce emissions.

The spokesperson also pointed out some of the limitations in greening steel. “EAF is a well-established route of steel making. While it reduces emissions significantly, the ability to produce all grades of steel especially flat products and shortage of scrap globally restricts the use of EAF. Technologies to reduce emissions in the blast furnace route are still evolving and not available at a commercially viable scale. Thus, the greening of steel production will come at higher cost till decarbonization technologies mature. These incremental costs could be as high as 20-30%," the spokesperson said.

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India’s steel industry is responsible for about 12% of the country’s carbon emissions, said Aditya Shrivastava, general manager, Jindal Steel and Power Ltd. "Shifting to green steel, which uses hydrogen and renewable energy in place of traditional coal, can significantly cut down emissions... As countries and industries push for carbon-neutral supply chains, India’s ability to produce low-carbon steel will become a key competitive advantage. This green transition could help India capture a share of the growing global green steel market, estimated to be worth $60 billion by 2030," Shrivastava added.

Worldwide, there is no single standard for what counts as green steel, though it is often referred to the alloy made using electric furnaces, renewable power, scrap and carbon capture processes.

The International Energy Agency (IEA) defines green steel as steel produced by a plant with a higher scrap share. ArcelorMittal identifies six bands of steel based on the targetted emissions intensity and scrap share. Hybrit, a Swedish joint venture, focuses on steelmaking using green hydrogen and renewable energy. US metals firm Kloeckner Metals Corp. defines six categories of steel based on absolute carbon emissions intensity. The World Steel Association has multiple definitions of decarbonised steel, such as low-carbon, near-zero, carbon neutral, fossil-free, clean and carbon-free steel.

Defining green steel

For India's green steel mission, the first task will be to come up with a definition for green steel.

A government task force report has suggested that India needs both demand and supply side initiatives to help the steel sector go green. It said that steel ministry is keen to create demand for green steel by developing the framework for a green public procurement policy, which could then be taken up by the finance ministry for development and action.

The report also suggested setting up an agency along the lines of Energy Efficiency Services Ltd (EESL) for bulk procurements. The steel ministry may also prioritize developing an ecosystem for green steel production and consumption by creating a robust MRV (measurement, reporting, and verification) system for emissions accounting, a registry of green steel production and consumption, and tracking of green steel certification, the report said, adding the ministry should coordinate with the Bureau of Energy Efficiency to develop a protocol for measuring emissions from all the sector steel plants.

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The report has also called for government support to pilot projects using green hydrogen. It also said that the steel ministry may coordinate with other ministries to extend benefits provided to green hydrogen projects in the refinery and fertiliser sector to the steel industry as well.

The report builds upon the work of 14 task forces on decarbonization, which covered crucial areas such as energy efficiency, renewable energy, green hydrogen, biochar and carbon capture on technology side, while delving with policy levers of green steel taxonomy, CO2 monitoring, and green steel demand generation.

India is the world's second-largest crude steel producer, with a capacity to produce 179.5 mt (143.6 mt produced in FY24). Its finished steel production stood at 138.5 mt and exports at 7.5 mt during FY24. However, per capita steel consumption in India was only 97.7 kg in FY24, compared with the global average per capita consumption of 219 kg in calendar year 2023. The National Steel Policy 2017 aims to increase the per capita consumption to 160 kg by 2030. Therefore, given India’s lower per capita steel consumption, it is expected that India’s steel sector will continue to grow rapidly even beyond 2030, by when production is expected to reach 300 mt.