India’s ‘build now, decarbonise later’ approach to achieving a net-zero steel industry will backfire in the long run: GEM report

By Pune Media On Jan 5, 2025

India’s ‘build now, decarbonise later’ approach to achieving a net-zero steel industry will backfire in the long run, according to new findings of Global Energy Monitor (GEM).

Khadeeja Henna, Heavy Industry researcher at GEM, who has worked on the report told businessline that the 2024 roadmap and action plan for greening the steel sector is a positive step forward, but transitioning away from coal-based production is more urgent. She said that substantial investments are needed to build a robust green steel eco-system, not betting on emerging decarbonisation technologies that have yet to prove their mettle.

The report states that India’s ongoing investments in new coal-based steelmaking, coupled with a young fleet of emissions-intensive blast furnaces that is set to have its operations extended, jeopardise the country’s Net Zero by 2070 target and risk saddling the country with upwards of $187 billion in stranded assets.

Also read: PLI scheme: Government to launch another round for steel sector on January 6

Asked the basis of these findings, Henna said, “We develop and analyse data on global energy infrastructure. All GEM trackers are open source. We update the tracker every year and the latest GSPT release was in April 2024. The report was developed based on the information from the tracker. All the information that goes into the tracker is verified and corroborated with sources. Our sources include company reports, government databases and reports, reports from technology manufacturers and news reports.”

The Ministry of Steel released its roadmap to greening steel in September and the Green Steel taxonomy in December, 2024. “These are really welcome and wonderful initiatives. It is a great starting point, especially considering that India has one of the highest emissions intensities across production routes globally,” she said adding that “therefore the steps to decrease emissions intensity is crucial for India.”

The roadmap relies mostly on increasing material and energy efficiency, on various emerging technologies, Henna said adding “The reliance on CCUS for decarbonisation is particularly concerning given the growing criticism over the technology which has been here for decades but has failed to show any significant impact. The roadmap does not consider stepping away from the emissions intensive coal-based blast furnace-basic oxygen furnace production.”

“The Taxonomy brings in three level star ratings starting from a threshold of 2.2tCO2e/t of steel. Many countries already produce steel at much lower rates, in fact the global average emissions intensity is around 1.85 tCO2e/t of steel. The emissions calculation made in the taxonomy also ignores scope 3 emissions resulting from transportation of raw materials, when a significant portion of coking coal used in the country is imported from Australia, Brazil, South Africa and Mozambique,” she pointed out.

These steps are mostly looking at reducing emissions retroactively once the capacity outlined in the National Steel Policy 2017 is developed. Betting on emerging technologies could put India in the backfoot, Henna said.

Also read: Steel Ministry mulls taking up financing options for decarbonisation projects

Data in the Global Steel Plant Tracker show that India has the world’s largest pipeline of steelmaking capacity in development, with projects that have been announced or are in the construction phases totalling around 258 million tonnes per annum (mtpa). “Emissions-intensive basic oxygen furnaces total over two-thirds of in-development capacity, and less emissions-intensive electric arc furnaces sit at a marginal 13 per cent,” it showed.

In addition, over 75 mtpa of operating blast furnace capacity was developed in the last two decades, meaning over 43 mtpa is due for relining before 2030. This relatively young fleet of blast furnaces increases the risk of emissions lock-in and poses a challenge to transitioning India’s coal-based steelmaking fleet, as many of these units may still be recovering initial investment costs.

The widespread adoption of coal as the reducing agent in direct reduced iron production is another barrier to cutting emissions in India’s steel sector. Of the direct reduced iron capacity tracked by the Global Steel Plant Tracker, more than half uses coal as the reducing agent and is sourced from domestic high-ash coal, which, while less expensive, comes with a higher emissions intensity.

Published on January 5, 2025

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