IMPRI Impact And Policy Research Institute

Policy Update
Saachi Saxena

Background

India’s steel story is closely tied to its development story. Steel is an essential input into infrastructure, construction, automobiles and manufacturing, which means that it is a significant part of a growing Indian economy. The challenge is that traditional steelmaking is still heavily dependent on carbon-intensive processes. This leaves India with a difficult but important economic choice: how can the country expand steel production to support growth and industrialisation without locking itself into a high-carbon model of development?

The scale of this challenge becomes clearer when we look at how rapidly steel demand is expected to grow. NITI Aayog estimates that India’s steel production could rise from about 144 million tonnes (Mt) in 2024 to 820 Mt by 2070, nearly a six-fold increase. At the same time, India is targeting a developed economy by 2047 and net-zero emissions by 2070. Industry currently accounts for nearly 24% of India’s greenhouse gas emissions, excluding emissions from electricity use, while around 83% of industrial energy continues to come from fossil fuels (NITI Aayog, 2026).

The steel sector therefore has to balance two goals that may seem to be overlapping: expanding industrial capacity while cutting emissions. The Green Steel Taxonomy attempts to bridge this gap by setting a clear and measurable standard for what qualifies as lower-emission steel.

One of the technologies being explored for this transition is hydrogen-based steel production. Hydrogen can be used as an alternative to coal in certain steelmaking processes, particularly in direct reduced iron (DRI), and can significantly reduce carbon emissions when the hydrogen used is produced from low-carbon sources. Other pathways, such as greater use of scrap, renewable electricity, energy efficiency and carbon capture, utilisation and storage (CCUS), can also contribute to reducing emissions.

India released its Green Steel Taxonomy in December 2024, marking the country as the first to establish a national framework for defining and classifying green steel. The taxonomy was notified by the Ministry of Steel on December 23, 2024, and was developed alongside its broader roadmap for greening the steel sector (Ministry of Steel, 2025).

The value of the taxonomy lies less in the label itself and more in what it makes possible. By creating a common and credible definition of green steel, it can help buyers distinguish lower-emission steel from conventional products, while giving producers a clearer basis to compete on environmental performance. It can also support green procurement, attract financing for cleaner technologies and make international trade in low-carbon steel easier. In this sense, the Ministry’s roadmap sees the taxonomy as an important enabler of both the demand and supply sides of decarbonisation (Ministry of Steel, 2025).

Functioning

The taxonomy turns the broad idea of green steel into a clear, measurable standard based on carbon intensity. Steel qualifies as green when its emissions are below 2.2 tonnes of CO₂ equivalent per tonne of finished steel (t-CO₂e/tfs). The extent to which it qualifies as green is then measured by how far its emissions fall below this benchmark, giving buyers and producers a more concrete way to assess environmental performance.

The taxonomy classifies green steel into three levels based on its emission intensity. Steel below 1.6 t-CO₂e/tfs receives a five-star rating, while steel in the 1.6–2.0 t-CO₂e/tfs range receives four stars and steel between 2.0 and 2.2 t-CO₂e/tfs receives three stars. Steel exceeding the 2.2 t-CO₂e/tfs threshold does not qualify for a green rating. These thresholds are not fixed and will be reviewed every three years, allowing the standards to keep pace with improvements in technology and the broader decarbonisation of the sector (Ministry of Steel, 2025).

The taxonomy does not limit itself to emissions generated directly during steelmaking. Its assessment covers Scope 1, Scope 2 and selected Scope 3 emissions up to the production of finished steel.

Scope 1 emissions are direct emissions from sources owned or controlled by the steel plant. For a steel producer, this mainly includes emissions from fuel combustion and industrial processes within the plant, such as burning coal, coke, natural gas or other fuels.
Scope 2 emissions are indirect emissions from the electricity, steam, heat or cooling purchased and consumed by the steel plant. The emissions occur at the power plant that generates the electricity, rather than physically at the steel plant.
Scope 3 emissions are other indirect emissions occurring along the value chain. Under India’s taxonomy, only specific upstream emissions up to finished steel production are included, such as emissions embodied in purchased raw materials and intermediate products, as well as emissions from activities like sintering, pelletisation and coke-making.

Emissions associated with intermediate processes such as sintering, pelletisation and coke-making are captured as embodied emissions and incorporated into the carbon-intensity assessment of the final finished steel against the 2.2 t-CO₂e/tfs benchmark.

However, emissions from upstream mining, transportation and downstream activities are outside the boundary of the taxonomy (Ministry of Steel, 2025).

The National Institute of Secondary Steel Technology (NISST) is responsible for measurement, reporting and verification under the framework. The methodology follows the approach developed under the Bureau of Energy Efficiency’s Carbon Credit Trading Scheme compliance mechanism. NISST also issues green steel certificates and maintains the registry of certified steel. A steel plant pays a one-time registration fee of ₹10,000, while certification costs ₹1,000 for every 500 tonnes of finished steel covered (Ministry of Steel, 2025).

This system has an important role. A credible certification process reduces the information gap between producers and buyers. Instead of relying solely on individual claims about how environmentally friendly a product is, buyers can use a common measure of emission intensity. In effect, carbon performance becomes another identifiable characteristic of steel, alongside conventional measures such as quality and grade.

Performance

The taxonomy has moved quickly from a policy framework to actual certification. By 31 December 2025, 58 steel units had received green steel certification, covering 9.1 Mt of certified production (Ministry of Steel, 2026). By 31 March 2026, this had risen to 89 units and 12.34 Mt of certified production (Press Information Bureau, 2026). Against India’s total crude steel production of 168.4 Mt in FY2025–26, certified green steel therefore accounted for approximately 7.3% of the country’s crude steel output, indicating that certification has expanded rapidly but still covers a relatively small share of the overall market.

This expansion has taken place alongside strong growth in India’s overall steel industry. Crude steel production rose from 152.2 Mt in FY2024–25 to 168.4 Mt in FY2025–26, an increase of 10.7%. During the same period, finished steel production reached 160.9 Mt, while steel consumption stood at 163.7 Mt (Press Information Bureau, 2026).

Yet the numbers also put the progress of green steel in perspective. Certified production is increasing, but it still accounts for only a share of India’s much larger and rapidly growing steel market. The real test of the taxonomy, therefore, will not simply be how many certificates are issued. Its significance will depend on whether green certification starts influencing what buyers purchase, where firms invest and how capital is allocated.

The scale of the decarbonisation challenge remains substantial. Under its Current Policy Scenario, NITI Aayog estimates that steel-sector emission intensity could fall by 44% by 2050 and 62% by 2070, from 2.54 tCO₂ per tonne of crude steel in 2025. Under the Net Zero Scenario, the reduction could be much larger, reaching 74% by 2050 and 95% by 2070 (NITI Aayog, 2026).

As illustrated in Figure 3.6 below, steel-sector emission intensity is projected to decline substantially under the Net Zero Scenario, reaching approximately 0.1 tCO₂/t by 2070 compared with around 0.9 tCO₂/t under the Current Policy Scenario.

* Source: NITI Aayog (2026), Scenarios Towards Viksit Bharat and Net Zero – Sectoral Insights: Industry, Figure 3.6, p. 67

In this context, the taxonomy is only the beginning. It provides the measurement and market framework needed to support a much larger technological shift in how India produces steel.

Impact

The first major impact of the taxonomy is that it makes the environmental performance of steel easier to see and compare. For downstream buyers, the carbon intensity of a tonne of steel is not something that can be easily assessed on its own. A standardised rating helps bridge this information gap by making lower-carbon steel more identifiable in the market.

The taxonomy can also change the incentives facing producers. Once carbon intensity can be measured and compared, reducing emissions can become a source of commercial differentiation. Producers can distinguish their products on environmental performance, while buyers can factor carbon intensity into procurement decisions. The Ministry’s roadmap also sees a standardised taxonomy as a way to support financial flows towards greener steel and help create a market for it alongside conventional steel (Ministry of Steel, 2025).

The scale of the opportunity becomes clearer when we look at how much India’s steel industry is expected to grow. NITI Aayog projects steel production to reach 624 Mt by 2050 and 820 Mt by 2070. At the same time, under the Net Zero Scenario, the share of scrap in steelmaking is expected to rise from around 20% in 2025 to 30% in 2050 and 40% by 2070. Even with this large increase in production, final energy demand from the steel sector in 2070 is projected to be 155 Mtoe under the Net Zero Scenario, compared with 251 Mtoe under the Current Policy Scenario (NITI Aayog, 2026).

As illustrated in the figure below, the projected growth in steel production is accompanied by a shift towards hydrogen-based direct reduced iron and greater scrap utilisation under the Net Zero Scenario.

*Source: NITI Aayog. (2026). Scenarios Towards Viksit Bharat and Net Zero – Sectoral Insights: Industry (Vol. 4). Government of India, p. 67.

These figures show that more industrial growth does not necessarily have to mean more energy use. Better technology, greater use of scrap and cleaner production methods can help India produce more steel while using energy and resources more efficiently. Decarbonisation, therefore, does not have to come at the cost of growth. The aim is to make industrial growth cleaner while continuing to expand production.

There is also an export dimension. As global markets pay greater attention to the carbon content of industrial products, Indian steelmakers will increasingly need a credible way to demonstrate their environmental performance. A domestic certification system gives producers a common and verifiable basis for doing so, helping India pursue greater steel production without losing sight of its competitiveness in international markets.

Emerging Issues

The first challenge is cost. Hydrogen-based production involves a cost differential relative to conventional coal-based processes. The Ministry of Steel’s roadmap estimates that, at an average coking coal price of USD 220 per tonne, hydrogen injection into blast furnaces would increase steel production costs by 10.3% in 2024–25. The roadmap projects that this differential could decline by 2030–31 to 2.7% under the conservative scenario, 1.6% under the base scenario and 0.1% under the ambitious scenario (Ministry of Steel, 2025).

The cost of green hydrogen is another factor affecting the economic feasibility of hydrogen-based steel production. The Ministry of Steel’s roadmap estimates that hydrogen would need to be priced at approximately USD 0.48 – 0.88 per kg to achieve cost competitiveness with coking coal, depending on the prevailing coking coal price (Ministry of Steel, 2025).

The second challenge is technology readiness. Hydrogen-based direct reduced iron (DRI) is still at an early stage of development, and India’s existing shaft furnaces cannot simply be converted to run entirely on hydrogen. A shift to this technology will therefore require new investment in production facilities. The Ministry estimates that green hydrogen use in the steel sector could increase from 1.8 MTPA in 2023–24 to 3.5 MTPA by 2030–31. However, large-scale production of steel using hydrogen is likely to remain a longer-term transition (Ministry of Steel, 2025).

The availability and utilisation of steel scrap is another factor relevant to the transition pathway. Scrap from sources such as end-of-life vehicles, buildings and machinery can be collected, processed and recycled for steel production. NITI Aayog projects that the share of scrap in steelmaking could increase from around 20% in 2025 to 30% in 2050 and 40% by 2070 under the Net Zero Scenario. This pathway would require improvements in the collection, sorting, processing and recycling of scrap (NITI Aayog, 2026).

The final challenge is demand. Green steel is likely to cost more than conventional steel, while Indian buyers remain sensitive to price. If customers are not willing to pay a higher price for lower-carbon steel, producers may have little reason to make the large investments needed for cleaner technologies. The transition will therefore depend not only on increasing the supply of green steel, but also on creating enough demand for it (Ministry of Steel, 2025).

Way Forward

The next step should be to create a market for green steel. The taxonomy tells us what qualifies as green steel, but there also needs to be enough demand for it. Government procurement can help create this initial demand, especially because large public infrastructure projects use significant amounts of steel.

The taxonomy should also keep pace with technological progress. Its three-year review cycle is important because standards that stay unchanged may become outdated as cleaner technologies improve. Over time, the focus should not just be on increasing the amount of certified green steel, but also on increasing the share of higher-rated, lower-emission steel in overall production.

At the same time, policy should focus on making the shift to cleaner steel more affordable, rather than forcing every producer to follow the same technology. India’s steel plants use different production methods, raw materials and energy sources. The best combination of energy efficiency, scrap, renewable power, hydrogen, process improvements and (Carbon Capture, Utilisation and Storage) CCUS will therefore depend on the needs and conditions of each plant.

The transition to greener steel will also require significant financial support. NITI Aayog estimates that achieving the Net Zero pathway across Indian industry would require around USD 6.1 trillion between 2026 and 2070, compared with USD 4.5 trillion under the Current Policy Scenario (NITI Aayog, 2026). The taxonomy can help financial institutions identify and assess greener projects, but where cleaner technologies are still more expensive, concessional finance, risk-sharing support and long-term investment will be needed to make these projects financially viable.

Finally, India should work towards making its green steel standards compatible with international ones. A common domestic framework helps Indian producers show how much carbon their steel generates, but differences in measurement and certification could make it harder to sell Indian steel in overseas markets. Greater alignment with international standards would therefore help Indian steelmakers remain competitive as carbon emissions become an increasingly important consideration in global trade.

Conclusion

The Green Steel Taxonomy should be seen as more than just an environmental label. It creates a clear way to measure the carbon intensity of steel and, in doing so, brings emissions into the economic decisions made by producers and buyers.

India’s challenge is not whether steel production will grow, but how that growth will happen. Steel production is projected to rise from 144 Mt in 2024 to around 820 Mt by 2070. Such a large increase will be central to India’s industrialisation. The question is whether this expansion will continue to rely on the carbon-intensive methods of the past.

The taxonomy provides a starting point for changing this trajectory, but certification alone cannot deliver the transition. Its success will depend on whether there is enough demand for green steel, whether cleaner technologies become more affordable, whether the supply of scrap improves, whether adequate finance reaches green projects and whether Indian standards are recognised internationally.

The larger goal is: India needs to produce more steel and build greater industrial capacity, but with less carbon attached to each tonne produced. That is what a low-carbon industrial economy should ultimately aim for.

References

Ministry of Steel. (2025a). Greening the steel sector in India: Roadmap and action plan. Government of India.

GSI Report.pdf

Ministry of Steel. (2025b). Taxonomy for green steel: Brochure. Government of India.

brochure.cdr

Ministry of Steel. (2026). Annual report 2025–26. Government of India.

Steel__Cover_2025-26_AR_Eng_chang.cdr

NITI Aayog. (2026). Scenarios towards Viksit Bharat and net zero: Sectoral insights – Industry. Government of India.

Scenarios-Towards-Viksit-Bharat-and-Net-Zero-Sectoral-Insights-Industry.pdf

Press Information Bureau. (2024, December 12). Union Minister of Steel and Heavy Industries, Shri H.D. Kumaraswamy, releases India’s Green Steel Taxonomy. Government of India.

Press Release:Press Information Bureau

Press Information Bureau. (2026, May 5). India’s steel sector advances towards self-reliance. Government of India.

Press Release Page | Press Information Bureau

Rajya Sabha. (2026, March 20). Unstarred Question No. 3350: Green steel plant in Salav, Raigarh. Ministry of Steel, Government of India.

Microsoft Word – ru 3350

About the Contributor

Saachi Saxena is an undergraduate student pursuing B.A. (Hons.) Economics at Gargi College, University of Delhi. Her research interests include climate economics, public policy, sustainable development, healthcare economics, and development policy. She has actively contributed to policy research and social impact initiatives and is passionate about evidence-based policymaking for inclusive and resilient development.

Acknowledgements

The author is grateful to IMPRI – Impact and Policy Research Institute for providing the opportunity to prepare this policy update. The author sincerely acknowledges the guidance, valuable feedback, and constructive suggestions received from Vibha Sethi and Amrutha Kolluru during the review process, which significantly strengthened the quality and analytical depth of this article.