Practical steps to reduce carbon in steel

The steel industry is one of the largest sources of carbon dioxide emissions globally, and India’s steel sector is no exception. As the world’s second-largest steel producer, India faces growing pressure to reduce emissions while meeting rising demand. The country has committed to achieving net-zero emissions by 2070 and to cutting emissions intensity by 45% by 2030.

Global climate policies are also reshaping trade. Measures such as the European Union’s Carbon Border Adjustment Mechanism (CBAM) will directly affect Indian steel exports. As a result, reducing the carbon footprint of steel production has become essential for competitiveness, compliance, and long-term sustainability.

How steelmaking generates greenhouse gases

Steel production is an energy-intensive process. Most greenhouse gas emissions from steelmaking come from the way iron ore is converted into iron and steel, and from the energy used during production. In India, most steel is still produced using coal-based technologies, which increases emissions.

Process emissions from ironmaking

• Iron ore must be chemically reduced to produce iron.
• In blast furnace operations, carbon from coke reacts with oxygen in the ore.
• This reaction releases carbon dioxide as a direct process emission.
• These emissions occur regardless of energy efficiency improvements.

Fuel-related emissions in blast furnaces

• Coke and coal are used as both fuel and reducing agents.
• Additional coal is often injected to maintain high furnace temperatures.
• Burning these fossil fuels generates large volumes of carbon dioxide.
• Blast Furnace–Basic Oxygen Furnace (BF–BOF) routes dominate Indian steel production and account for most sector emissions.

Electricity-related emissions in electric arc furnaces

• Electric Arc Furnaces (EAFs) rely heavily on electricity.
• When power comes from coal-based grids, indirect emissions remain high.
• In India, electricity generation is still largely dependent on thermal power.
• Emissions vary based on the share of renewable energy in the power mix.

Understanding these emission sources is essential for identifying effective decarbonisation strategies across the steel value chain.

Importance of decarbonising steel in India

Strategic driver	Why it matters for India’s steel sector
National climate commitments	India has committed to achieving net-zero emissions by 2070 and reducing emissions intensity by 45% by 2030. As one of the largest industrial emitters, the steel sector plays a critical role in meeting these national targets.
Perform, Achieve and Trade (PAT) scheme	The PAT scheme promotes energy efficiency in energy-intensive industries, including steel. Plants that improve efficiency can reduce compliance costs and improve operational performance over time.
National Green Hydrogen Mission	India’s hydrogen mission aims to scale domestic green hydrogen production. This creates long-term opportunities for hydrogen-based steelmaking, especially for direct reduced iron processes.
Infrastructure-led steel demand	Government-led infrastructure projects are driving strong demand for steel. As public procurement increasingly aligns with sustainability goals, low-carbon steel is expected to gain preference.
Global trade and export competitiveness	International climate policies, including carbon-linked trade measures, are reshaping export markets. Indian steel producers must reduce emissions to remain competitive in key global markets.
Investor and lender expectations	Financial institutions are increasingly linking funding to environmental performance. Lower carbon intensity improves access to capital and reduces long-term financial risk.

Decarbonising steel production is therefore both a regulatory necessity and a strategic business decision for India’s steel industry.

Practical pathways to reduce steel emissions

Reducing emissions at the ironmaking stage
Most emissions in steel production are generated during ironmaking. Replacing coal-based reduction with cleaner alternatives can significantly lower carbon output. This is why new ironmaking technologies are central to steel decarbonisation efforts in India.

Lowering fossil fuel use in existing plants
India has a large base of operational blast furnaces. Improving fuel efficiency and reducing coal consumption in these plants is essential to cut emissions in the near term.

Shifting to cleaner energy sources
Electricity-related emissions depend on the power mix. Increasing the use of renewable energy in steel operations can reduce indirect emissions, especially in electric arc furnaces.

Capturing and managing unavoidable emissions
Some emissions cannot be eliminated immediately. Technologies that capture or store carbon dioxide offer a pathway to reduce the climate impact of existing steelmaking processes.

Hydrogen-based ironmaking (DRI/EAF and HYBRIT)

Hydrogen-based ironmaking replaces coal with hydrogen to reduce iron ore into iron. This process is commonly paired with Direct Reduced Iron (DRI) and Electric Arc Furnaces (EAF). When powered by clean electricity, it can significantly reduce carbon dioxide emissions compared to blast furnace routes.

Aspect	Explanation
Grey hydrogen	Grey hydrogen is produced using natural gas without capturing emissions. While it can reduce coal use, it still results in high carbon emissions and offers limited climate benefits for steelmaking.
Blue hydrogen	Blue hydrogen is produced from natural gas with carbon capture and storage. Emissions are lower than grey hydrogen, but effectiveness depends on capture rates and storage availability. It is often seen as a transitional option.
Green hydrogen	Green hydrogen is produced using renewable electricity through electrolysis. It offers the greatest emissions reduction potential and is the preferred option for long-term decarbonisation of steel production.
India’s renewable power constraints	Green hydrogen requires large volumes of low-cost renewable electricity. In India, challenges include intermittent renewable supply, grid stability, land availability, and high upfront costs for electrolysers and storage infrastructure.
Cost considerations in India	Green hydrogen remains more expensive than coal-based alternatives. However, costs are expected to fall as renewable capacity expands and domestic manufacturing under the National Green Hydrogen Mission increases.
Global project examples	HYBRIT in Sweden has successfully produced fossil-free steel at pilot scale. H2 Green Steel is building a large hydrogen-based steel plant in Europe. In the Middle East, hydrogen DRI projects are being developed using low-cost renewable energy. These projects demonstrate technical feasibility at scale.
Relevance for Indian steelmakers	Hydrogen-based ironmaking is likely to be adopted in phases. Early pilots, blending hydrogen with natural gas, and long-term green hydrogen integration are expected pathways for India.

Carbon capture: A practical option for existing steel plants

Most steel capacity in India is based on blast furnace technology. Replacing these assets overnight is not practical. Carbon Capture, Utilisation and Storage (CCUS) offers a way to reduce emissions from existing plants while maintaining production volumes. For producers, this helps extend asset life. For buyers, it supports lower-emission supply without major disruption.

How CCUS works in blast furnace operations
In blast furnace steelmaking, carbon dioxide is released through exhaust gases. CCUS systems capture carbon dioxide before it enters the atmosphere. The captured gas is then processed for either storage or reuse. This approach targets emissions at source and can be integrated with operating plants.

Storage versus utilisation of captured carbon

• Carbon storage involves injecting carbon dioxide into deep geological formations, such as depleted oil and gas reservoirs. This provides long-term emissions reduction but requires suitable storage sites.
• Carbon utilisation uses captured carbon dioxide in products such as chemicals, fuels, or building materials. While utilisation volumes are smaller, it can improve project economics.

Economics and readiness in India
CCUS remains capital-intensive and increases operating costs. In India, challenges include limited storage infrastructure, regulatory clarity, and high capture costs. However, CCUS is increasingly viewed as a transitional solution for high-emission plants, especially where hydrogen or electrification is not yet viable.

For Indian steel producers and buyers, CCUS represents a near-term pathway to lower emissions while long-term decarbonisation technologies continue to scale.

Using biomass to cut emissions in steel production

Biomass offers a practical way to reduce fossil fuel use in steel production. India generates large volumes of agricultural residue from crops such as sugarcane, rice, and groundnuts. This makes biomass a locally available and potentially cost-effective option for lowering emissions in existing steel plants.

How biomass and biochar are used in steelmaking
Biomass can be converted into biochar through a process called pyrolysis. Biochar can partially replace coke or coal used in blast furnaces. By reducing the use of fossil fuels, steel producers can lower carbon dioxide emissions from energy and fuel consumption.

Industry example: Tata Steel’s biochar initiative
Tata Steel has introduced biomass-based charcoal as a partial replacement for fossil fuels in its blast furnace operations. This initiative has helped reduce approximately 50,000 tonnes of carbon dioxide emissions per year. The project demonstrates how biochar can be integrated into existing steelmaking processes without major changes to plant design.

What biomass can and cannot do
It is important to note that biomass use reduces emissions linked to fuel and energy sources. It does not change the carbon content or mechanical properties of the steel product. Biomass should therefore be viewed as an emissions reduction measure, not a change in steel grade or composition.

Limits and challenges
Scaling biomass use requires reliable supply chains, sustainability certification, and competition management with other biomass users such as power and fertiliser producers.

Improving efficiency and using scrap to lower steel emissions

Waste heat recovery: This is important because steel plants generate large amounts of unused heat. Capturing this heat reduces fuel consumption and lowers overall emissions.

Energy-efficient equipment: This matters because modern furnaces and machinery use less power. Upgrading equipment cuts emissions while improving operating efficiency.

Digital optimisation: This is important because digital tools improve process control. Better monitoring reduces energy losses and avoids unnecessary fuel use.

Scrap-based steelmaking: This is critical because scrap does not require iron ore reduction. Electric Arc Furnaces melt scrap using electricity, resulting in much lower emissions than coal-based routes.

Procurement relevance: These measures help steel producers reduce emissions quickly and at lower cost. For buyers, they support circular economy goals and lower supply chain emissions without changing steel specifications.

Incentives and market expectations for low-carbon steel

Area	What it means for steel producers and buyers in India
Government climate policy	India’s commitment to net-zero by 2070 and lower emissions intensity is driving policy support for industrial decarbonisation. Steel is a priority sector due to its high emissions and economic importance.
Incentives for green steel	Incentives may include tax benefits, concessional finance, and support under clean energy and hydrogen programmes. While a formal carbon price is still evolving, future carbon costs are expected to influence production decisions.
Carbon markets and pricing signals	Voluntary carbon markets and proposed compliance mechanisms are creating early price signals. Over time, these are likely to reward lower-emission steel production.
Procurement standards	Buyers are increasingly asking for emissions transparency. Standards such as ISO 14067 help measure product carbon footprints across the value chain.
Environmental Product Declarations (EPDs)	EPDs provide verified emissions data for steel products. They are becoming important in infrastructure, automotive, and export-oriented procurement.
Global market signals	Trade measures linked to carbon emissions are reshaping global steel markets. Indian producers supplying international customers must align with emerging sustainability requirements.
Implications for Indian steelmakers	Early adoption of decarbonisation improves access to finance, strengthens export competitiveness, and positions producers ahead of future regulations.
Implications for steel buyers	Buyers gain better emissions visibility, reduced supply chain risk, and improved alignment with corporate sustainability goals.

2026 outlook for low-carbon steel

Hydrogen-based DRI moves towards commercial scale
From 2026 onwards, pilot hydrogen DRI projects are expected to transition into early commercial operations globally. In India, adoption is likely to begin with hydrogen blending and natural gas-based DRI, followed by gradual integration of green hydrogen as costs fall and renewable power capacity expands.

Falling costs of green hydrogen over time
The cost of green hydrogen is projected to decline due to increased renewable energy capacity, domestic electrolyser manufacturing, and government support. This will improve the long-term viability of hydrogen-based steelmaking in India.

CCUS cost curves improve with deployment
Carbon capture costs are expected to decrease as technology matures and more projects are deployed. By the late 2020s, CCUS may become a more viable option for high-emission blast furnace plants that cannot switch technologies quickly.

Carbon pricing and Scope 3 pressure increases
Carbon pricing mechanisms and buyer-led emissions reporting will increase focus on Scope 3 emissions. Steel buyers will increasingly factor emissions into sourcing decisions, affecting supplier selection.

Impact on India’s export competitiveness
Markets such as the European Union are linking carbon emissions to trade costs. Indian steel producers that invest early in low-carbon technologies will be better positioned to protect exports and avoid carbon-related penalties.

Shift from compliance to value creation
Low-carbon steel is expected to evolve from a compliance requirement into a value differentiator, supporting long-term growth and resilience for Indian steel companies.

Conclusion

Reducing the carbon footprint of steel is becoming a business necessity for India’s steel sector. Decarbonisation technologies help producers cut emissions while maintaining competitiveness in domestic and export markets. Policy support and buyer expectations are accelerating the shift towards low-carbon steel. Early action will position Indian steelmakers and buyers ahead of future regulations and market changes.

FAQs

Why is decarbonising steel important in India?

Steel production is energy-intensive and a major source of emissions. Reducing carbon supports national climate goals, export competitiveness, and buyer demand for low-carbon steel. 

What are the main sources of emissions in steelmaking?

Emissions come from chemical reduction of iron ore, burning fossil fuels in blast furnaces, and electricity use in electric arc furnaces. 

How can hydrogen reduce emissions in steel production?

Hydrogen can replace coal in Direct Reduced Iron (DRI) processes. Green hydrogen from renewable electricity offers the largest emission reductions. 

What is CCUS and how is it used?

Carbon Capture, Utilisation and Storage captures CO₂ from existing plants. It can be stored underground or used in products like chemicals or building materials. 

How can biomass help lower emissions?

Biomass or biochar can partially replace fossil fuels in blast furnaces, reducing energy-related CO₂ emissions without changing steel properties. 

What operational improvements reduce emissions?

Waste heat recovery, energy-efficient equipment, digital optimisation, and scrap-based Electric Arc Furnaces lower fuel and electricity use. 

What incentives support low-carbon steel in India?

Tax benefits, concessional financing, and government programmes like the National Green Hydrogen Mission encourage decarbonisation. 

What standards ensure low-carbon steel transparency?

ISO 14067 and Environmental Product Declarations (EPDs) provide verified emissions data for steel products. 

How do carbon pricing and Scope 3 reporting affect steel producers?

Carbon costs and buyer-led reporting influence sourcing and investment decisions, making low-carbon production more valuable. 

What is the outlook for Indian steel in 2026 and beyond?

Hydrogen DRI, CCUS deployment, and circular economy practices will scale, helping producers meet climate targets and maintain global competitiveness.