Subject: GS 3: Environment
Context: India’s goals of Make in India, Viksit Bharat @2047 and Net-Zero 2070 require industrial decarbonisation to achieve sustainable growth amid rising manufacturing, energy demand and GHG emissions.
- The industrial sector — comprising iron and steel, cement, aluminium, fertilisers, chemicals, and petrochemicals — accounts for nearly 40% of India’s total energy-related CO2 emissions and is one of the hardest segments to decarbonise.
- As India aspires to be a $30-trillion economy by 2047 while honouring its climate commitments, industrial decarbonisation has emerged as the next frontier of climate action.
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What is Industrial Decarbonisation?
- Industrial decarbonisation refers to the process of reducing greenhouse gas (GHG) emissions generated by industrial activities while maintaining economic growth and industrial production.
- Emission Sources
- Manufacturing industries & construction (fuel use) → around 13% of total emissions.
- Industrial processes and product use → around 9% of total emissions.
Why Industrial Decarbonisation Matters?
- Major Source of Greenhouse Gas Emissions: Industry contributes significantly to India’s carbon footprint through energy consumption and industrial processes.
- For Example: First Biennial Transparency Report (BTR1) highlights that industries contributed over 20% of total emissions in 2022.
- Balancing Economic Growth and Climate Goals: Rapid industrialisation under Make in India and Viksit Bharat @2047 will increase energy demand and emissions.
- For Example: Expansion of sectors like steel, cement and chemicals requires cleaner production methods to align growth with Net Zero 2070.
- Decarbonising Energy-Intensive Industries: Heavy industries depend on fossil fuels and contribute high emissions.
- Example: Steel and cement industries require technologies like green hydrogen, renewable energy and energy efficiency measures.
- Reducing Industrial Carbon Footprint: Manufacturing processes release emissions through fuel use and chemical reactions.
- For Example: Cement production emits CO₂ during limestone processing, requiring low-carbon alternatives.
- Enhancing Global Competitiveness: Low-carbon production will help Indian industries compete in global markets.
- Example: Carbon border measures like the EU Carbon Border Adjustment Mechanism (CBAM) increase pressure for cleaner exports.
- Improving Energy Security: Industrial decarbonisation reduces dependence on imported fossil fuels.
- Example: Use of renewable energy and green hydrogen can reduce coal and oil dependence in industries.
- Supporting India’s Net-Zero Commitment: Industrial emission reduction is essential for achieving Net Zero Emissions by 2070.
- For Example: Transitioning sectors like power, steel, cement and transport towards clean technologies.
Key Challenges
- High Dependence on Fossil Fuels: Carbon-intensive energy systems remain dominant in industries due to the widespread use of coal, oil and natural gas for heat and power requirements.
- Example: Steel, cement and chemical industries rely heavily on coal-based energy, making rapid emission reduction challenging.
- Hard-to-Abate Industrial Sectors: Process-related emissions in some industries cannot be eliminated only by switching energy sources and require advanced technological solutions.
- Example: In cement production, CO₂ is released during limestone calcination, requiring solutions like carbon capture and alternative materials.
- High Cost of Green Technologies: Decarbonisation technologies such as green hydrogen, carbon capture and renewable-powered industrial systems involve high initial investment.
- Example: Green hydrogen-based steel production currently has higher costs compared to conventional coal-based production.
- Lack of Sector-Specific Emission Data: Poorly classified industrial emissions make it difficult to identify major polluters and design targeted mitigation strategies.
- Example: The “non-specific industries” category covers a large share of emissions but lacks detailed information about contributing sectors.
- Limited Availability of Clean Technology and Infrastructure: Technology gaps and inadequate infrastructure slow down adoption of low-carbon industrial processes.
- Example: Limited availability of green hydrogen production, storage and transport networks restricts industrial transition.
- Competitiveness and Economic Concerns: Industries face concerns over higher production costs when shifting from conventional methods to cleaner technologies.
- Example: Export-oriented industries may face competitiveness challenges due to global carbon regulations like the EU Carbon Border Adjustment Mechanism (CBAM).
- Challenges for MSMEs in Green Transition: Small and medium enterprises lack financial capacity, technical expertise and access to modern technologies needed for decarbonisation.
- Example: Small manufacturing units may find it difficult to invest in energy-efficient machinery or renewable energy systems.
- Policy and Implementation Gaps: Existing climate policies mainly target large identified industries, leaving several emission sources outside formal regulation.
- Example: Expansion of mechanisms like PAT and CCTS is required to include more industrial sectors and ensure wider emission reduction.
- Limited Industry–Research Collaboration: Weak linkage between industries, research institutions and startups slows innovation and commercialisation of green technologies.
- Example: Scaling technologies like CCUS and green hydrogen requires stronger industry-academia partnerships.
- Balancing Growth and Emission Reduction: India must expand manufacturing for economic development while simultaneously reducing emissions, creating a complex policy challenge.
- Example: Growth of infrastructure sectors like steel and cement is necessary for Viksit Bharat but requires cleaner production methods.
Government Initiatives for Industrial Emission Reduction: Market-Based & Policy Mechanisms
- Perform, Achieve and Trade (PAT) Scheme: Energy efficiency-based mechanism under NMEEE to reduce specific energy consumption in energy-intensive industries through targets and trading of Energy Saving Certificates (ESCerts)
- Covers sectors like:
- Thermal power
- Railways
- DISCOMs
- Commercial buildings
- Carbon Credit Trading Scheme (CCTS): Carbon market framework to reduce emission intensity by allowing industries to earn and trade carbon credits for achieving emission reduction targets.
- Green Hydrogen Mission: Clean fuel transition initiative aimed at replacing fossil fuels in hard-to-abate sectors like steel, fertilizers and refineries through green hydrogen.
- Renewable Energy Adoption in Industries: Clean energy integration strategy promoting solar, wind and renewable power use to reduce industrial dependence on fossil fuels.
- National Mission for Enhanced Energy Efficiency (NMEEE): Energy conservation programme promoting efficient technologies and reducing energy consumption across industrial sectors.
- Bureau of Energy Efficiency (BEE) Standards: Efficiency improvement mechanism that promotes energy-efficient equipment, benchmarking and sustainable industrial practices.
- Carbon Capture, Utilisation and Storage (CCUS): Emission reduction technology aimed at capturing industrial CO₂ emissions, especially from sectors like cement and steel.
- Green Manufacturing Initiatives: Low-carbon production approach encouraging cleaner technologies, circular economy practices and sustainable industrial processes.
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| Country/Initiative |
Key Measures |
Example/Significance |
| European Union (EU) |
Carbon pricing, Emission Trading System (ETS), and CBAM to reduce industrial emissions and prevent carbon leakage. |
EU Carbon Border Adjustment Mechanism (CBAM) encourages exporters to adopt cleaner production methods. |
| United States |
Focus on clean energy transition, industrial innovation and carbon capture technologies through policy incentives. |
Inflation Reduction Act (IRA) supports green hydrogen, renewable energy and industrial decarbonisation. |
| Japan |
Promotes Green Transformation (GX) strategy combining economic growth with emission reduction. |
Investment in hydrogen, ammonia and clean steel technologies for industrial transition. |
| Germany |
Focus on green manufacturing and renewable energy-based industries. |
Development of green hydrogen projects to decarbonise steel production. |
| China |
Promotes energy efficiency, renewable energy expansion and industrial upgrading. |
Large-scale deployment of renewable energy and electric technologies in manufacturing. |
| South Korea |
Implements Green New Deal and industrial emission reduction strategies. |
Supports low-carbon technologies in steel, batteries and advanced manufacturing. |
| United Kingdom |
Focuses on industrial clusters and carbon capture infrastructure. |
Development of Carbon Capture, Usage and Storage (CCUS) hubs for industrial regions. |
| International Energy Agency (IEA) |
Provides a global roadmap for net-zero industry transition through clean technologies and efficiency improvements. |
Promotes solutions like green hydrogen, electrification and CCUS for hard-to-abate sectors. |
Way Forward
- Improve Data Transparency: Disaggregate “non-specific industries” into clearly identified sub-sectors to understand actual emission contributors and design targeted policies.
- For Example: Detailed emission mapping can identify whether emissions come from small manufacturing units, processing industries or specific production activities.
- Develop Targeted Mitigation Planning: Sector-specific decarbonisation strategies are needed by identifying major emission sources, energy-intensive processes and suitable solutions.
- For Example: Steel industry can adopt green hydrogen, while cement industry can focus on alternative materials and carbon capture technologies.
- Expand Green Transition Beyond Heavy Industries: Current policies focus mainly on sectors like steel, cement and refineries, but emissions from other industries also require attention.
- For Example: Extending carbon reduction measures to MSMEs, food processing, textiles and small manufacturing units can widen the green transition.
- Promote Clean Energy Adoption: Replacing fossil fuel-based energy with renewable sources can significantly reduce industrial carbon emissions and energy costs.
- For Example: Industries can use solar power, wind energy and renewable electricity for manufacturing operations.
- Accelerate Green Technology Adoption: Low-carbon technologies are essential for reducing emissions from industries where complete elimination of fossil fuels is difficult.
- Example: Green hydrogen in steel production, CCUS in cement plants and energy-efficient machinery can reduce industrial emissions.
- Strengthen Carbon Market Mechanisms: Expanding PAT and CCTS frameworks can create economic incentives for industries to reduce emissions and improve efficiency.
- For Example: Companies achieving emission reductions can generate carbon credits and trade them in the carbon market.
- Support MSMEs in Green Transition: Small and medium industries need financial support, technology access and capacity building to adopt sustainable practices.
- For Example: Providing low-interest loans and incentives for energy-efficient equipment can help MSMEs reduce their carbon footprint.
- Strengthen Climate Governance: Transparent monitoring, reporting and verification systems are necessary to track progress and improve climate policies.
- For Example: Better industrial emission data will help policymakers identify gaps and align strategies with India’s Net Zero 2070 target.
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Conclusion
Industrial decarbonisation is central to achieving India’s Net-Zero 2070 target. While schemes like PAT and CCTS provide a framework for emission reduction, the large “non-specific industries” category represents a major policy gap. Accurate data, sector-wise identification and targeted interventions are essential to ensure that industrial growth becomes compatible with India’s climate commitments.
24 Jun 2026
