Scaling transition finance for green industrial transition of the Indian iron & steel sector

The paper argues that for India to achieve net-zero emissions by 2070, the iron and steel sector—responsible for 10-12% of national GHG emissions—must shift to low-carbon production. It proposes a comprehensive 'Green Steel Mission' and a national sustainable finance taxonomy to bridge the gap between conventional and green technologies. The authors emphasize the need for differentiated strategies for primary steel (BF-BOF route) and secondary steel (DRI-IF/EAF route), noting that secondary producers face higher financing barriers despite having high near-term abatement potential. Key recommendations include mandating corporate transition plans, developing a detailed sectoral technology roadmap, and adopting innovative financial instruments like Carbon Contracts for Difference (CCfD) to support low-TRL technologies.

• The Indian iron and steel sector is the country's largest carbon-emitting industrial sector, contributing approximately 10-12% of India's total greenhouse gas emissions. Without a shift to low-carbon production, sectoral emissions could triple by 2050.
• There is a critical need for a 'Green Steel Mission' and a comprehensive green industrial policy that balances economic output, competitiveness, and decarbonisation through a mix of technology-push (subsidies, tax credits) and demand-pull (green public procurement) instruments.
• Decarbonisation pathways must differ between primary and secondary steel sectors. Primary steel requires switching to hydrogen-DRI or installing carbon capture, while the secondary sector—which accounts for 40% of production—must shift to renewable electricity, increase scrap use, and transition to hydrogen-based DRI.
• Secondary steel producers (SSPs) face distinct financing barriers compared to large corporations, including higher perceived risks, lack of collateral, and low credit scores, necessitating risk-sharing facilities and concessional lending.
• A quantitative threshold-based approach for determining eligible transition activities is recommended for India, as the high cost of green hydrogen and lack of natural gas make a direct jump to technologies like hydrogen-DRI difficult.
• Financial institutions should adopt a 'fixed scope and boundary' approach for emissions accounting and use emission-intensity-based targets to align with reference technology pathways.
• To support technologies with low Technology Readiness Levels (TRLs), such as hydrogen-based DRI, innovative financing mechanisms like Carbon Contracts for Difference (CCfD) and carbon finance are essential.

APA

Kashyap, Y., Farhan, Z., Habib, M. T., Khurana, S., & Hickson, E. (n.d.). Scaling transition finance for green industrial transition of the Indian iron & steel sector. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/02/Discussion-paper-Scaling-transition-finance-for-green-industrial-transition-of-the-Indian-iron-steel-sector.pdf

Chicago

Kashyap, Yash, Zeya Farhan, Md Tariq Habib, Saarthak Khurana, and Emily Hickson. Scaling transition finance for green industrial transition of the Indian iron & steel sector. Climate Policy Initiative, n.d. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/02/Discussion-paper-Scaling-transition-finance-for-green-industrial-transition-of-the-Indian-iron-steel-sector.pdf.

Wikipedia

{{cite report |last1=Kashyap |first1=Yash |last2=Farhan |first2=Zeya |last3=Habib |first3=Md Tariq |last4=Khurana |first4=Saarthak |last5=Hickson |first5=Emily |title=Scaling transition finance for green industrial transition of the Indian iron & steel sector |publisher=Climate Policy Initiative |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2025/02/Discussion-paper-Scaling-transition-finance-for-green-industrial-transition-of-the-Indian-iron-steel-sector.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kashyapndscaling, author = {Kashyap, Yash and Farhan, Zeya and Habib, Md Tariq and Khurana, Saarthak and Hickson, Emily}, title = {{Scaling transition finance for green industrial transition of the Indian iron \& steel sector}}, institution = {Climate Policy Initiative}, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2025/02/Discussion-paper-Scaling-transition-finance-for-green-industrial-transition-of-the-Indian-iron-steel-sector.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }