Why India's "build now, decarbonize later" approach to achieving net zero in the steel industry will fail

India is pursuing a "build now, decarbonize later" strategy in its steel industry, focusing on expanding capacity through emissions-intensive blast furnace-basic oxygen furnace (BF-BOF) routes. This approach risks creating stranded assets valued between US$124187 billion and locking in high emissions due to a young fleet of blast furnaces. While the government has introduced roadmaps for green steel and energy efficiency, the document argues that deep decarbonization requires a fundamental shift away from coal toward green hydrogen-based direct reduced iron (DRI) and increased scrap-based secondary production.

• India's steel industry is characterized by a high reliance on coal, with over 87% of operating ironmaking capacity and 90% of capacity under development dependent on coal. This results in a global-high average emissions intensity of 2.55 tonnes of CO2 per tonne of crude steel (tCO2/tcs), which is 38% higher than the global average of 1.85 tCO2/tcs.
• The "build now, decarbonize later" approach, driven by the National Steel Policy's goal to increase crude steel capacity to 300 mtpa by 2030, creates a stranded asset risk estimated between US$124 billion and US$187 billion from new BF-BOF capacity.
• Decarbonization is hindered by a relatively young fleet of blast furnaces, with 72% of operating capacity developed in the last two decades, increasing the risk of fossil lock-in as these units are still recovering investment costs.
• India's direct reduced iron (DRI) production is uniquely dependent on coal-based rotary kilns, which account for approximately 80% of its DRI production. Transitioning these to green hydrogen is challenging due to high production costs and a lack of existing ecosystems, making green hydrogen unlikely to be the primary fuel before 2050.
• Secondary steel production via electric arc furnaces (EAF) and induction furnaces (IF) is limited by low scrap availability, with scrap constituting only 21% of total steel production. Demand for scrap is projected to reach 7080 million tonnes by 2030.
• While energy efficiency measures like the Perform, Achieve and Trade (PAT) scheme have reduced emissions intensity from 3.1 tCO2/tcs in 2005 to 2.55 tCO2/tcs by 2022, further reductions from efficiency alone will be marginal.

APA

Swalec, H. K. C. (2024). Why India's "build now, decarbonize later" approach to achieving net zero in the steel industry will fail. Global Energy Monitor. https://globalenergymonitor.org/research/why-indias-build-now-decarbonize-later-approach-achieving-net-zero-steel-industry-will

Chicago

Swalec, Henna Khadeeja, Caitlin. Why India's "build now, decarbonize later" approach to achieving net zero in the steel industry will fail. Global Energy Monitor, 2024. https://globalenergymonitor.org/research/why-indias-build-now-decarbonize-later-approach-achieving-net-zero-steel-industry-will.

Wikipedia

{{cite report |last1=Swalec |first1=Henna Khadeeja, Caitlin |title=Why India's "build now, decarbonize later" approach to achieving net zero in the steel industry will fail |publisher=Global Energy Monitor |date=29 December 2024 |url=https://globalenergymonitor.org/research/why-indias-build-now-decarbonize-later-approach-achieving-net-zero-steel-industry-will |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{swalec2024why, author = {Swalec, Henna Khadeeja, Caitlin}, title = {{Why India's "build now, decarbonize later" approach to achieving net zero in the steel industry will fail}}, institution = {Global Energy Monitor}, year = {2024}, month = dec, url = {https://globalenergymonitor.org/research/why-indias-build-now-decarbonize-later-approach-achieving-net-zero-steel-industry-will}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }