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India’s transition to low-carbon green steel is to remain a gradual, long-term process as cost and technological constraints continue to hinder rapid decarbonisation, a report showed on Tuesday. 

Over the long term beyond 2030, green steel demand in India is projected to accelerate and will be driven by tightening ESG compliance norms, large end-user industries (automotive, infrastructure, capital goods, etc) striving to decarbonise their supply chains, and policy measures. 

Indian steelmakers’ carbon emission intensity averages about 2.5 tonnes of carbon di-oxide per tonne of steel, roughly 12 per cent higher than the global average for the blast furnace-basic oxygen furnace (BF-BOF) route, according to rating agency ICRA.

Recent introduction of a Green Steel Taxonomy by the government in December 2024 (under the National Mission on Green Steel) marks a positive step, setting graded emission thresholds to define what qualifies as “green” steel. 

However, most Indian primary producers are currently well above even the upper end of this green range, underscoring the significant decarbonisation gap, which needs to be bridged, said the report.

The domestic steel industry’s near-term decarbonisation will mainly rely on operational efficiency gains and higher renewable energy adoption, which is expected to result in 19 per cent reduction in emission intensity by 2029-30 and would bring the sector average down to roughly 2.0 tCO? per tonne by the end of this decade, explained Girishkumar Kadam, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA.

A major part of this reduction is expected from renewable energy integration and process optimisations, he added.

The report highlights that 9 gigawatts (GW) of captive renewable power capacity has already been announced by domestic steel mills to replace fossil fuel-based electricity in their operations. 

Transitioning to green power alone is expected to cut emissions by 13 per cent for BF-BOF based mills and by up to 22 per cent for DRI-based steelmaking units. 

Other operational levers – such as higher scrap usage in furnaces, energy efficiency measures like waste-heat recovery, and iron ore beneficiation – are expected to further lower CO? per tonne, said the report.