In a historic move to decarbonize the steel industry, the Union Ministry of Steel launched India’s green steel taxonomy on December 12, 2024. The taxonomy is an important milestone, as steel is one of the most carbon-intensive industries. It provides quantifiable standards to direct the manufacture of low-carbon steel and support India’s climate ambitions.

A maximum threshold of 2.2 tCO₂e/tfs is required for steel products to be classified as green steel, with the taxonomy categorizing them based on their carbon emissions per tonne of finished steel (tCO₂e/tfs). Below this cutoff, emission intensity is further divided into three categories:

• Three-Star Green Steel: intensity of emissions ranging from 2 to 2.2 tCO₂e/tfs.
• Four-Star Green Steel: intensity of emissions ranging from 1.6 to 2 tCO₂e/tfs.
• Five-Star Green Steel: intensity of emissions below 1.6 tCO₂e/tfs.

Steel will not be eligible for a green grade if its emissions exceed 2.2 tCO₂e/tfs. These standards will be revised every three years to account for changes in industry practices and technological improvements. The taxonomy includes scope 1, scope 2, and restricted scope 3 emissions to ensure a thorough approach.

The nodal organization in charge of green steel product certification, measuring, reporting, verification (MRV), and star ratings is the National Institute of Secondary Steel Technology (NISST).

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Challenges in Implementation and Demand Creation

The taxonomy has made strides, but there are still a number of obstacles to its effective use. Since India’s definition of green steel could not perfectly match the standards for low-carbon steel in other countries, it is imperative to increase domestic demand for green steel. To increase demand, the government is considering policies such as carbon pricing, tax breaks, and green public procurement.

The use of green technology and fuels is expected to result in a 20–30% rise in the production costs of green steel. The distribution of this cost premium along the value chain remains unresolved. It’s unclear if governmental agencies will be able to afford these extra expenses or pass them on to customers.

Another aim is to strengthen MRV systems. NISST might need to expand its capacity and outsource audits if demand increases. Building confidence in green steel certifications requires transparent and reliable MRV procedures. Despite being a sensible method, the “tonnes of finished steel” standard presents difficulties because the steel sector produces a wide range of goods and procedures.

Another unresolved question is whether imported steel should be included in the Green Steel Star ranking system. In order to recognize low-carbon steel from other nations or to monitor emissions for imports, clear rules are required.

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Support for Smaller Producers and International Alignment

Adopting green practices is extremely difficult for smaller steel manufacturers, who account for more than one-third of India’s crude steel production. These include gaps in technology, expensive capital expenses, and restricted access to funding. The success of the green steel effort depends on providing these manufacturers with focused research, technical advancements, and financial incentives.

India’s steel industry may be able to access foreign markets if the taxonomy is aligned with international practices. Currently, 5–6% of India’s finished steel output is exported. Aligning the taxonomy with global norms might improve its legitimacy and help address issues such as carbon border fees.

A revolutionary move towards sustainable manufacturing processes is India’s green steel taxonomy. To establish India as a leader in the manufacturing of low-carbon steel, its influence will rely on resolving implementation issues, increasing local demand, assisting smaller producers, and aligning with international standards.

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