Coal-based steelmaking a risk to India’s net-zero target: Report

Experts say that India’s ‘build now, decarbonise later’ approach to achieving a net-zero steel industry could backfire in the long run

According to a new report, India’s continued investments in new coal-based steelmaking, along with a young fleet of emissions-intensive blast furnaces that are scheduled to have their operations extended, put the nation’s goal of Net Zero by 2070 in jeopardy. This also runs the risk of leaving it with stranded assets worth up to US$187 billion, the report from Global Energy Monitor has found. 

With plans to increase its capacity by 2030, India currently holds the second-largest operating steelmaking capacity in the world, after China. Given that India’s economy is expected to expand to become the third largest in the world by 2032, the report said that  the country’s steel sector will be under tremendous pressure to boost output.

This growth reinforces India’s status as the second-largest steel-producing economy, with the emissions-intensive blast furnace-basic oxygen furnace continuing to be the dominant production route for the foreseeable future. As a result, the report estimated, the annual steel demand within the country is expected to grow from 136 million tonnes in 2024 to 221–275 million tonnes by 2034, with a global steel demand rise of 1.2% in 2025.

Challenges to green steelmaking in India

The report pointed out that India already hosts one of the world’s most emissions-intensive steel sectors. Over 87% of India’s operating ironmaking capacity and 90% of capacity in development is dependent on coal. The steel industry in India currently accounts for over 240 million tonnes of CO2 emissions annually, about 12% of the country’s total carbon emissions, and that number is expected to double by 2030. The average emissions intensity of crude steel production in India is the highest in the world at 2.55 tonnes of CO2 per tonne of crude steel (tCO2/tcs), 38% higher than the global average of 1.85 tCO2/tcs. India’s high emissions intensity stems largely from its reliance on coal-based production routes.

In September 2024, India’s Ministry of Steel published a roadmap and action plan for greening the nation’s steel sector in an effort to support the national goal of reducing emissions by 45% from 2005 levels across the economy by 2030.

While India’s short-term solutions to reduce emissions without significant modifications to existing production may lower emissions intensities, India will need to make the grand switch away from coal to fully decarbonise the industry and sustain its production in the long run.

Khadeeja Henna, heavy industry researcher at Global Energy Monitor, said, “India’s ‘build now, decarbonise later’ approach to achieving a net-zero steel industry will backfire in the long run. While the 2024 roadmap and action plan for greening the steel sector is a positive step forward, transitioning away from coal-based production is more urgent. Substantial investments are needed to build a robust green steel ecosystem, not betting on emerging decarbonisation technologies that have yet to prove their mettle.”

The report also mentioned that over 75 million tonnes per annum (72%) of operating blast furnace capacity was developed in the last two decades and over 43 million tonnes per annum is estimated to be due for relining before 2030. 

Given that many of these units may still be repaying their initial investment costs, this relatively young fleet of blast furnaces raises the potential of fossil lock-ins and presents a barrier to India’s blast furnace transition. This impedes the steel industry’s decarbonisation and jeopardises the achievement of climate goals.

Need to switch to green steel making tech

The report said that for deep decarbonisation of the steel sector, switching energy dependence from thermal power plants to renewable sources of energy is crucial. The Ministry of Steel has an ambitious renewable energy penetration target of 43% by 2030 from the current level of 7.2%, which is expected to reduce the average emissions intensity of crude steel production in India by 8%.

With energy constituting 20–40% of steel manufacturing cost, the implementation of effective energy efficiency measures is vital for the steel sector. A Perform, Achieve and Trade (PAT) scheme introduced in 2012 to incentivise steel producers to reduce their energy consumption has been instrumental in driving energy efficiency in the industry 

While further emissions reductions may be possible from energy efficiency measures, these will be marginal. Ultimately, the report concluded, decarbonising India’s iron and steel sector will require a full transition to green steelmaking technologies.

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