India’s current emissions while producing steel stand at 2.5 tons of CO₂ per ton, more than two times the European Union’s benchmark of 1.28 tons of CO₂ per ton. The EU’s Carbon Border Adjustment Mechanism (CBAM), therefore, could significantly impact Indian steel exporters, according to an EY study, including facing related taxes or duties of ₹19,277 crore by 2030.
The latest report by the EY Parthenon, India’s demand for green steel (i.e., steel produced with lower pollution and emissions) is set to hit 179 million tons by FY 2050. The report also warned that traditional BF-BOF steel prices were projected to increase by 81 per cent by 2050 due to escalating carbon taxes.
The emission intensity benchmark of green steel is below 0.5 tons CO₂ per ton of crude steel. However, the carbon taxes are expected to flip the demand in favour of the sustainable option, with EY Parthenon estimating green steel demand to rise significantly to 4.49 million tons by FY 2030.
“The construction sector is expected to lead adoption with 2.52 million tons, followed by infrastructure at 1.5 million tons and automobiles at 0.48 million tons. By FY 2040, total demand is projected to nearly triple to 73.44 million tons,” they said.
Currently, the country’s steel consumption is at 136 million metric tons. Out of this, the construction and infrastructure sectors collectively account for 78 per cent of finished steel demand.
“This figure is expected to rise to 390 million tons by FY 2050, driven by rapid urbanisation and infrastructure development,” according to EY Parthenon.
In line with this, the report also suggested the following for the industry.
- Transition to low-emission technologies to reduce emission intensity from 2.5 to 1.21 tons of CO₂ per ton by 2030
- Scale up green steel production using hydrogen-based DRI and other innovative routes.
- Invest in R&D to reduce green steel production costs by 30% by 2040
For end-use sectors, the transition could begin with green steel procurement 10 years ahead of net-zero targets. The report also hinted that they are incurring minor production cost increases (estimated at 3.7-5.2 per cent) in the short term for long-term sustainability benefits. Another way to ensure it would be to collaborate with suppliers to ensure a steady supply of green steel.
However, without urgent scaling of green steel infrastructure and investments, the EY report warned of significant supply-demand gaps for green steel in India.