With most modern steel-making reliant on coking coal-based production routes, the industry needs to adapt and make critical decisions to avoid carbon lock-ins. Demand for crude steel in India is projected to rise to ~430 MT (million tonnes) by 2050, from ~103 MT in 2021. As the steel sector alone contributes to nearly 12% of India’s overall greenhouse gas (GHG) emissions, research shows that a business-as-usual steel production scenario will result in over 1 billion tonnes of CO2 emissions annually from the sector by 2050. The industry will need abundant electricity, hydrogen, and scrap, to produce green steel, and requires commitments to procure green steel. Hence, actions will need to extend beyond the steel production sector.

India’s mitigation goals for 2030 and 2050, and net zero goals for 2070, will rely heavily on the decarbonisation of its steel sector, and the collective purchasing and demand power of steel buying organisations.

With this understanding, the Climate Group, in partnership with ResponsibleSteel, and supported by the ICC-EdelGive Foundation Alliance, Stichting SED Fund, and the We Mean Business Coalition, launched the India Net Zero Steel Demand Outlook Report in January 2023, as part of their SteelZero initiative.

Businesses that join SteelZero make a public commitment to use, procure, and specify 100% net zero steel by 2050. This Demand Outlook Report details the criteria for buyer-side companies that join SteelZero, and broadly interprets the standards of ResponsibleSteel for steel producers. A few key findings from this report are excerpted below.

Analysis of sectoral demand and potential for emissions reduction.

Construction and infrastructure, automobiles, and capital goods constitute more than 85% of the total steel demand in India.

Through the procurement of green steel, large developers and asset owners have the potential to reduce 204 MT CO2 from their upstream Scope 3 emissions. Furthermore, 70% of India’s 2030 urban infrastructure is yet to be built, signalling a huge emission risk if low-carbon steel does not address this demand

Four-wheeler automobiles constitute the largest steel user segment within the auto sector, with an estimated annual demand of 38 MT by 2050. Through the procurement of green steel,

automakers have the potential to reduce 27 MT CO2 from their upstream Scope 3 emissions, based on emissions from India’s road transport in 2021.

Steel demand from capital goods manufactured domestically is projected at 35 MT by 2030. The use of green steel should be a key priority for capital goods manufacturers as well, because Scope 3 emissions form 90% of their net emissions.

Pathways to decarbonisation of the Indian steel industry

Key levers of decarbonisation include energy and fuel mix optimisation, process/material efficiency, scrap utilisation, etc. Early investments in R&D and pilot projects on Carbon Capture Utilisation and Storage (CCUS), Green H2-DRI (Hydrogen-based Direct Reduced Ironmaking) will also be critical in eliminating a majority of the emissions

An increase in domestic scrap will reduce carbon intensity of steel, and bring down India’s import dependence by 2030. To note, scrap-based steel production emits only around 0.5t (tonnes) CO2, as compared to 2.5t CO2 through production from iron ore

Ship recycling is well positioned to address India’s growing scrap deficit, by potentially contributing up to 10 MT of high-grade scrap steel by 2030

Multi-stakeholder collaboration can realise steel’s decarbonisation potential

Key stakeholders in the steel ecosystem must collaborate early to identify, develop and seize opportunities for decarbonisation without disruption. These include steel consumers, producers, regulators, investors, and civil society.

Steel consumers must demonstrate climate leadership and commit to procuring low carbon steel providing a line of sight to producers, since embodied emissions in steel are of material interest today to companies that include Scope 3 emissions in their net zero targets.

In short to medium term, steel producers must collaborate with their supply chain partners to deploy existing decarbonisation technologies. They must engage with their customers, end users, policy makers, and investors to co-build an economic case to support their early R&D and to pilot new transformative technologies.

Regulators can borrow best practices from progressive policy (current trends and future direction) measures implemented in other markets, such as the carbon border adjustment mechanism (CBAM) and emissions trading schemes in the EU and China. Policymakers need to account for interactions and dependencies between steel producers and end-use consumers for holistic emissions reduction policies.

Investors must align capital expenditure with net zero goals, and build internal capacity and capability to invest in decarbonisation projects.

Civil society organisations can hold the sector accountable to meet the highest sustainability standards. They can work towards encouraging and mobilising voluntary emissions reduction commitments and action by key stakeholders.