India’s Green Steel Transition: The Science

Context

India’s steel industry has become an important area of focus for decarbonisation. Steel production is highly energy intensive and its emissions remain above the global average. At the same time, growing demand from infrastructure, construction and manufacturing makes reducing the sector’s carbon footprint a major policy challenge.

Key Highlights

• Steel is a hard to abate industry because conventional blast furnace based production depends heavily on coal for both generating heat and chemically reducing iron ore. This makes deep emissions reduction more challenging than in many other sectors.
• The steel sector is a significant source of greenhouse gas emissions in India. With steel demand expected to rise alongside infrastructure development, construction and manufacturing, India must balance its industrial growth with its climate commitments.
• Greater adoption of Electric Arc Furnaces (EAFs), steel scrap and Direct Reduced Iron (DRI) can help lower emissions compared with conventional blast furnace and basic oxygen furnace production. The environmental benefits are particularly significant when EAFs are powered by renewable electricity.
• Green hydrogen can provide an alternative to fossil fuel intensive processes in steelmaking. However, large scale adoption will require abundant and affordable renewable electricity, reliable hydrogen supplies and the necessary supporting infrastructure.
• The transition to green steel also has an international trade dimension. The European Union’s Carbon Border Adjustment Mechanism (CBAM) can raise the effective cost of carbon intensive steel entering the European market, encouraging Indian steel producers to reduce the emissions intensity of their production.

Key Concepts

• Green Steel: Steel manufactured with significantly lower greenhouse gas emissions than conventional steel, using approaches such as renewable powered electric furnaces, green hydrogen based iron reduction and increased use of recycled scrap.
• Blast Furnace Basic Oxygen Furnace (BF BOF): The conventional steelmaking route in which iron ore is reduced using coke in a blast furnace and subsequently converted into steel in a basic oxygen furnace. It is highly carbon intensive.
• Electric Arc Furnace (EAF): A steelmaking method that uses electricity to melt steel scrap or other iron bearing materials. Its emissions can be substantially reduced when the electricity comes from renewable sources.
• Green Hydrogen: Hydrogen generated through electrolysis using renewable electricity. It can potentially replace fossil fuels in industrial processes that are difficult to decarbonise, including iron and steel production.
• Carbon Border Adjustment Mechanism (CBAM): An EU policy mechanism that applies a carbon related cost to certain imported goods. It aims to reduce carbon leakage and encourage producers in exporting countries to adopt cleaner production methods.