India's Steel Sector Pursues Decarbonisation for a Greener Future

India's steel industry, accounting for 11% of the country's emissions, is set to undergo a significant expansion as the economy grows. However, the planned coking coal-based steel-making capacity additions pose a challenge due to their long-term emissions impact. To address this, experts suggest accelerated decarbonisation of the steel sector, leveraging alternative technologies and policies to reduce emissions and build a sustainable industry.

Decarbonisation through CO2 Pricing

Introducing CO2 pricing and creating an environment conducive to hydrogen-based steel-making can stimulate investments in low-carbon technologies. By calibrating CO2 pricing in the coming years, India can encourage the adoption of hydrogen-based steel-making, green hydrogen production, and renewable electricity in the steel value chain. A carbon price of $50 per tonne by 2030 can facilitate a 150 mt shift from coal-based to hydrogen-based steel-making.

Promoting Material Efficiency

Scrap-based steel-making offers the lowest carbon emissions among current technologies. To scale up domestic scrap-based steel-making, India needs policies that incentivize scrap collection and recycling, along with the establishment of dismantling, collection, and processing centres. 

Relying less on imported scrap will enhance the economic viability and sustainability of steel production.

Encouraging Green Steel Consumption

The government can drive the use of green steel by setting targets for embodied carbon in public and private construction and automotive sectors. By supporting the creation of a domestic market for green steel, steel-makers can tap into export markets where green steel commands a premium. This approach promotes sustainable practices while boosting the competitiveness of Indian steel manufacturers.

Incremental Levers for Existing Assets

Steel-makers can implement energy-efficiency and process improvement measures to achieve significant emissions abatement of up to 25-30%. Strategies may include increased usage of scrap in the BF-BOF process, sourcing green power, adopting biomass, and implementing process control systems. Incremental efforts to reduce emissions from existing assets will contribute to the overall decarbonisation of the steel sector.

Investing in Carbon Capture, Utilisation, and Storage (CCUS)

Although currently expensive, CCUS holds promise as a lever for emissions reduction. Investing in research and development efforts to lower capture costs is essential for making CCUS a viable solution for the steel industry. Establishing CCUS hubs in key steel-producing regions like Odisha and Jharkhand can further enhance the industry's decarbonisation efforts.

Challenges and Benefits

Implementing these decarbonisation actions will result in increased production costs, which may lead to higher prices for housing and automobiles. The steel industry will need to allocate additional capital expenditure, approximately $135 billion, for green power and hydrogen, representing a 40% increase compared to the current capex for the steel value chain.

Nevertheless, an accelerated decarbonisation scenario offers numerous benefits. By 2050, cumulative emissions can be reduced by five billion tonnes compared to the business-as-usual scenario. Additionally, reduced spending on coking coal alone can result in forex savings of approximately $500 billion by 2050. A greener steel industry will position India as a global hub for sustainable steel manufacturing.

India's steel sector faces the challenge of reconciling its growth ambitions with the urgent need for decarbonisation. Embracing hydrogen-based steel-making, CO2 pricing, promoting material efficiency, encouraging green steel consumption, and investing in CCUS can pave the way for a sustainable and globally competitive steel industry. An accelerated decarbonisation strategy not only mitigates emissions but also yields significant economic and environmental benefits for India in the long run.