Domestic Climate Policy for the Steel Sector, India

The document analyzes the Indian steel industry's high carbon intensity, driven by a proliferation of inefficient small-scale coal-based direct reduced iron (DRI) units and small blast furnaces. It argues that current project-based mechanisms like the Clean Development Mechanism (CDM) are insufficient for systemic change. The author proposes a combination of a harmonised carbon tax and administered manufacturing standards to incentivize a shift toward larger, more efficient blast furnace-basic oxygen furnace (BF-BOF) units and the long-term substitution of steel with low-carbon materials. The paper emphasizes that international cooperation in technology transfer and capacity building is essential to support these domestic policy shifts.

• The Indian iron and steel sector is highly carbon-intensive, with energy efficiency and CO2 emission intensity levels exceeding the OECD average for primary steel making by 50%.
• A significant driver of high emissions is the rapid growth of the coal-based direct reduced iron (DRI) process, which accounted for 26% of crude steel output in 2007 and grew at over 15% per annum.
• The Clean Development Mechanism (CDM) is criticized for being a project-based approach that fails to limit the proliferation of inefficient small coal DRI and blast furnace units or promote the modernization of entire industrial units.
• A harmonised carbon tax of $5 per tonne of CO2 would increase the internal rate of return (IRR) for low-carbon technologies such as Top Pressure recovery Turbines (TRT), Coke Dry Quenching (CDQ), and Pulverised Coal Injection (PCI), making them more economically attractive.
• The author suggests that the most effective policy approach would combine a harmonised carbon tax (Policy 1) with administered manufacturing standards (Policy 3) to provide both economic incentives and minimum performance guidelines.
• To achieve substantial long-term emission reductions, the paper argues for a process shift from small coal DRI and BF units to large efficient BF units (over 4 million tonnes per annum capacity) and the substitution of steel with low-carbon materials.
• Implementation of climate policies in India faces barriers including political pressure from small-scale firms fearing job losses and a high cost of capital compared to developed countries.
• International cooperation from Annex 1 parties is necessary to facilitate technology transfer, improve industrial machinery standards, and provide financing for capacity building for low-skilled workers.

APA

Sreenivasamurthy, U. (2008). Domestic Climate Policy for the Steel Sector, India. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/sreenivasamurthy-251108-final.pdf

Chicago

Sreenivasamurthy, Umashankar. Domestic Climate Policy for the Steel Sector, India. Climate Strategies, 2008. https://climatestrategies.org/wp-content/uploads/2014/11/sreenivasamurthy-251108-final.pdf.

Wikipedia

{{cite report |last1=Sreenivasamurthy |first1=Umashankar |title=Domestic Climate Policy for the Steel Sector, India |publisher=Climate Strategies |date=25 November 2008 |url=https://climatestrategies.org/wp-content/uploads/2014/11/sreenivasamurthy-251108-final.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sreenivasamurthy2008domestic, author = {Sreenivasamurthy, Umashankar}, title = {{Domestic Climate Policy for the Steel Sector, India}}, institution = {Climate Strategies}, year = {2008}, month = nov, url = {https://climatestrategies.org/wp-content/uploads/2014/11/sreenivasamurthy-251108-final.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }