The Indian government has developed a framework for defining green steel to help decarbonize the hard-to-abate steel industry and make it globally competitive.

The Taxonomy of Green Steel, unveiled by the Ministry of Steel (Steel Ministry) and touted as a global first, has set the emissions intensity at 2.2 tons of CO2 equivalent per ton of finished steel. Only steel conforming to this standard will be given a green rating.

Based on the ‘greenness,’ steel will now be rated as follows:

• Five-star green-rated steel: Steel with an emission intensity lower than 1.6 tons of CO2 per ton.
• Four-star green-rated steel: Steel with an emission intensity between 1.6 and 2.0 tons per ton.
• Three-star green-rated steel: Steel with an emission intensity between 2 and 2.2 tons of CO2 per ton.

The threshold limit for defining the star rating of green steel will be reviewed every three years, and the scope of emissions will include Scope 1, Scope 2, and a limited Scope 3 up to finished steel production.

Scope 3 emissions will include agglomeration (including sintering, pellet making, and coke making), beneficiation, and embodied emissions in purchased raw materials and intermediary products, but excludes upstream mining, downstream emissions, and transportation emissions, both within and outside the gates of a steel plant.

The Steel Ministry has designated the National Institute of Secondary Steel Technology (NISST) as the nodal agency for measurement, reporting, and verification (MRV) and for issuing greenness certificates and star ratings for steel.

Green-rated steel certificates will specify the plant name, embodied emissions at the finished steel level, greenness percentage at the finished steel level, star rating of the steel, and quantity.

The methodology for emissions MRV, as published by the Bureau of Energy Efficiency, under the Carbon Credit Trading Scheme, will apply.

Steel plants will have to register with NISST to obtain greenness certificates and star ratings for their products.

The green-rated steel certificates will be issued every financial year. If steel plants opt for MRV more frequently, these certificates can be issued more than once a year.

The NISST will maintain a registry of green-rated steel.

Indian Steel Sector’s Emissions

India is the world’s second-largest crude steel producer after China, with a capacity to produce 179.5 million tons of crude steel and the largest production capacity of sponge iron at 55 million tons in the financial year (FY) 2024.

The emissions intensity of steel produced in India is 2.54 tons of CO2/ ton, significantly higher than the global average of 1.91. The steel industry accounts for 10-12% of India’s total emissions.

India has been taking several initiatives to cut emissions in the steel industry, which has set a target of achieving net zero by 2070. However, this is the first time the government has clearly defined what constitutes green steel.

In the short term, the government has been promoting using renewable energy and energy efficiency measures in the steel-making process to minimize emissions by 2030. As of FY 2022, renewable energy penetration is estimated to be 7.2% of the total electricity requirement in the steel sector.

The Ministry of Power has notified a renewable purchase obligation of 43.33% for steel producers by 2030. The renewable energy penetration in the steel sector is projected to rise to 16.3% from the current 7.2%.

The green steel taxonomy is expected to help the Indian industry navigate the challenges posed by measures like the European Union’s Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon tariff on imported products.

India has voiced concerns about CBAM in international forums like the World Trade Organization. However, the domestic steel sector is rapidly transitioning to using renewable energy sources like solar and wind to cut emissions and become globally competitive.

In the first nine months of the calendar year 2024, India added an unprecedented 4.8 GW of solar open access capacity, driven by demand from commercial and industrial entities, including those in the steel sector, according to the Q3 2024 India Solar Open Access Market Report.