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Introduction

India’s steel sector is at a critical juncture, aiming to double its capacity to 300 million tonnes per annum (MTPA) by 2030 while adhering to its Net Zero 2070 commitments. This dual ambition necessitates a move away from traditional, carbon-heavy production methods toward “Green Steel,” ensuring that India’s infrastructure growth does not come at the cost of its climate integrity or global trade competitiveness.

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The Concept of ‘Carbon Lock-in’ in the Steel Sector

Carbon Lock-in occurs when fossil-fuel-intensive systems perpetuate themselves through institutional, technological, and economic inertia, making the transition to cleaner alternatives increasingly expensive and difficult.

• Long Asset Life: Steel plants have a lifespan of 30–40 years; investing in coal-based Blast Furnaces today “locks” India into high emissions for decades.
• Infrastructure Path Dependency: Established supply chains, such as rail links for coking coal, create a bias against transitioning to decentralized renewable energy or hydrogen hubs.
• Technological Inertia: Dominance of the Blast Furnace-Basic Oxygen Furnace (BF-BOF) route, which contributes to nearly 12% of India’s CO2 emissions, limits the appetite for radical innovation.
• Financial Sunk Costs: High capital expenditure in traditional plants makes premature retirement or “re-platforming” financially unviable for debt-laden steel companies.
• Skill-Set Rigidity: The existing workforce is trained primarily in traditional smelting, creating a human capital barrier to adopting Green Hydrogen or Electric Arc Furnace (EAF) technologies.
• Economies of Scale: Existing coal-based plants benefit from decades of optimization, making new green technologies seem uncompetitive in the short term.
  Eg: In 2025, over 70% of India’s steel was still produced via the coal-heavy BF-BOF or coal-gasification routes.

Navigating CBAM and Decarbonization through ‘Green Steel’

Green Steel, produced using renewable energy or green hydrogen instead of coal, serves as a strategic shield against emerging global trade barriers.

• Mitigating CBAM Impact: Transitioning to green steel helps avoid the Carbon Border Adjustment Mechanism (CBAM) “green tariff,” which could tax Indian steel at 20–35% in the EU.
  Eg: The EU began definitive carbon tax collections in January 2026, directly impacting Indian exporters who rely on the European market for 15% of their shipments.
• Adopting Green Hydrogen: Shifting to Hydrogen-based Direct Reduced Iron (H-DRI) can reduce CO2 emissions from 2.5 tonnes per tonne of steel to nearly zero.
  Eg: The National Green Hydrogen Mission provides incentives specifically for pilot projects in the steel sector to achieve commercial viability by 2030.
• Scaling Scrap Usage: Promoting Circular Economy principles through the Steel Scrap Recycling Policy reduces the energy intensity of production by up to 60%.
• Global Market Access: Green steel allows Indian firms to command a “green premium” in markets like the US and EU, where automakers are seeking low-carbon supply chains.
• Financial Mobilization: Decarbonization plans attract Green Bonds and “Sustainability-Linked Loans” from global ESG investors.
  Eg: Major players like Tata Steel and JSW have secured green financing in 2025 to fund their transition to Electric Arc Furnaces.
• Internal Carbon Pricing: Transitioning helps firms prepare for India’s upcoming Carbon Credit Trading Scheme (CCTS), turning carbon efficiency into a profit center.
• Energy Security: Reducing reliance on imported coking coal (mostly from Australia) by switching to domestic renewable energy enhances national energy sovereignty.

Conclusion

Green Steel is not just an environmental choice but an economic necessity. To avoid the trap of Carbon Lock-in, India must integrate “Green Steel” mandates into its National Steel Policy. By aligning fiscal incentives with technological leapfrogging, India can transform the threat of CBAM into an opportunity to lead the global “Green Industrial Revolution,” ensuring its growth is both robust and responsible.

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