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India, the world’s second-largest steel producer, is on an ambitious path to nearly double its steel production capacity by 2030. While this expansion is central to the country’s economic development and infrastructure goals, it raises serious concerns about its environmental impact and alignment with global climate commitments.
The Scope of the Expansion
India aims to increase its annual steel production capacity from approximately 200 million tonnes to over 330 million tonnes by 2030. This massive expansion, driven by the country’s growing demand for construction and manufacturing materials, could potentially double greenhouse gas emissions from the steel sector — which already contributes around 12% of India’s total emissions.
The expansion largely depends on coal-based technologies, particularly blast furnaces, which are among the most carbon-intensive steelmaking methods. If this trend continues, it would significantly undermine international efforts to reduce industrial emissions, including those outlined by the International Energy Agency (IEA), which recommends that at least 37% of global steel production should be from electric arc furnaces (EAFs) by 2030 — a cleaner alternative that allows the use of recycled scrap and renewable electricity.
Reliance on Coal: A Structural Challenge
India’s dependence on coal for steelmaking is rooted in multiple structural factors. The country has abundant domestic coal reserves, making coal a readily available and economically viable energy source. In addition, most of India’s current blast furnaces are relatively new, with remaining operational lifespans of 20 to 25 years, discouraging the early transition to alternative technologies.
Further compounding the problem is the limited availability of natural gas and high-quality steel scrap, which are essential for scaling up EAFs. India’s informal scrap recycling sector and inconsistent supply chains also hinder the development of a robust green steel ecosystem.
A Window for Transformation
Despite these challenges, the current phase of expansion offers a rare opportunity for change. According to recent research, 92% of the steel production capacity India plans to build is not yet under construction. This means the country can still pivot toward cleaner technologies before new infrastructure locks in decades of additional emissions.
Shifting investment toward electric arc furnaces, powered by renewable energy, and increasing the use of recycled materials could significantly reduce the industry’s carbon footprint. However, the prevailing approach appears to be one of “build now, decarbonize later,” which risks creating stranded assets and economic inefficiencies in the future.
Global Market Risks
India’s steel industry’s high emissions profile also poses trade risks. With markets like the European Union moving forward with carbon border taxes — which penalize imports based on their carbon content — Indian steel could face reduced competitiveness abroad. This makes it even more imperative for India to align its industrial growth strategies with sustainable and low-carbon technologies.
Government and Industry Initiatives
Recognizing the urgency, the Indian government has outlined a decarbonization roadmap for the steel sector. The plan includes emissions monitoring, incentives for green steel production using hydrogen and other alternative fuels, and pilot projects for carbon capture and storage technologies.
Additionally, collaborative efforts are underway. India has partnered with countries like Sweden to explore hydrogen-based steelmaking, and companies such as ArcelorMittal Nippon Steel India are investing in carbon capture solutions. Programs like the ‘XCarb India Accelerator Programme’ are also promoting innovation in low-carbon steel technologies.
India’s steel industry stands at a critical crossroads. The country must balance its infrastructure needs and economic growth with the urgency of climate action. With most of its future steel capacity still in the planning phase, India has a strategic opportunity to lead in sustainable steel production. By investing in clean technologies now, it can avoid long-term environmental and economic setbacks, and play a meaningful role in the global transition to a low-carbon future.
References
https://apnews.com/article/steel-industry-india-climate-change-e940582596c6e32da61b70a0e027e7eb
https://steel.gov.in/sites/default/files/2025-03/GSI%20Report.pdf
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