Subject: Air Pollution and Related Issues

Question (2025): “Write a review on India’s climate commitments under the Paris Agreement (2015) and mention how these have been further strengthened in COP26 (2021). In this direction, how has the first Nationally Determined Contribution (NDC) intended by India been updated in 2022? Linkage: Since steelmaking alone accounts for roughly 12% of India’s national greenhouse gas emissions, the investment choices made during this relining cycle will decide whether India can successfully honor its updated NDCs and progress toward its long-term Net-Zero targets

Mentor Comment

Indian steelmakers are approaching a replacement cycle in which more than 43 million tonnes per annum of blast furnace capacity falls due for relining before 2030. Relining is a capital intensive overhaul carried out roughly every two decades that extends a plant’s working life by another 15 to 20 years. A study published in Nature Climate Change finds that avoiding new blast furnaces, declining to reline young ones, and redirecting that money to electric arc furnaces could almost halve globally committed steel emissions. India’s steelmaking emissions are about 32% above the global average and account for nearly 12% of national greenhouse gas emissions. The tension is that the decision is not a technology problem but a timing problem: the furnaces chosen in this cycle fix the sector’s emissions until the 2040s, well before any of the promised hydrogen supply exists.

How is steel made, and where do the emissions come from?

1. The blast furnace and basic oxygen furnace route: Coking coal is burned in a blast furnace to smelt iron ore and strip its oxygen, producing a carbon rich liquid iron. That liquid is then blown with pure oxygen in a basic oxygen furnace to burn off impurities and yield steel.
2. Why that route is carbon intensive: Coal here is not only the heat source but the chemical agent that removes oxygen from the ore, so the carbon dioxide is produced by the chemistry itself and not merely by combustion.
3. The scrap and electric arc furnace route: An electric arc furnace melts steel scrap using electricity, skipping the ore reduction step entirely. Its emissions intensity is less than half that of the coal route.
4. The direct reduced iron route: Direct reduced iron (DRI) strips oxygen from ore using a gas rather than coal, and the resulting solid iron is then melted in an electric furnace. Run on natural gas it emits around 1.2 tonnes of carbon dioxide per tonne of steel, and run on green hydrogen it is close to zero.

How large is India’s steel emissions problem?

1. Intensity above the world: India’s steelmaking emissions are roughly 32% higher than the global average, meaning each tonne produced here carries more carbon than a tonne produced elsewhere.
2. Share of national emissions: The sector accounts for nearly 12% of India’s total greenhouse gas emissions.
3. Scale and growth: India produced around 160 million tonnes of crude steel in FY 2025-26, the second highest in the world after China. Demand is driven by infrastructure development, construction and automotive manufacturing.
4. Scrap scarcity limits the easy route: A developing economy that has not yet accumulated a large stock of old steel cannot recycle its way to lower emissions, because there is little scrap to feed electric arc furnaces.

What does the National Mission on Green Steel actually promise?

1. The intensity target: The Mission aims to bring steelmaking emissions intensity down from the current 2.55 to 2.65 tonnes of carbon dioxide equivalent (tCO2e) per tonne of crude steel to 2.2 tCO2e by 2029-30.
2. The money behind it: A Rs 5,000 crore scheme to accelerate steel sector decarbonisation was announced last year and is set to launch in the coming months.
3. The certification threshold: A certification scheme launched under the Mission in 2024 treats any steel made below 2.2 tCO2e as green, with the greenest band extending up to 1.6 tCO2e.
4. The threshold sits above the world average: Global steelmaking averages around 1.85 tCO2e, so steel certified as India’s greenest can still be more carbon intensive than the world’s ordinary output.

What does India’s furnace mix look like, and where is it headed?

1. The current split: 43% of India’s crude steel comes from blast furnace and basic oxygen furnace plants, 22% from electric arc furnaces and 35% from electric induction furnaces, which use electromagnetic fields to process small batches of scrap or direct reduced iron.
2. The projected drift: Blast furnace capacity is projected to rise to 56% of the mix by 2030 on the strength of planned new plants.
3. The global picture: 70.4% of world steelmaking still uses the coal based route, with the remainder on electric arc furnaces.
4. India’s mix is unusually heterogeneous: More than half of Indian output already comes from electricity based furnaces, which is a starting position most large producers do not have.

Why does the relining decision lock in emissions for decades?

1. Relining resets the clock: A blast furnace overhauled today keeps operating on coal for another 15 to 20 years, and more than 43 million tonnes per annum of capacity falls due for that overhaul before 2030.
2. The plants are still on paper: The majority of new basic oxygen furnace plants planned in India have not broken ground, so switching them to direct reduced iron and electric arc furnace designs is a redirection of committed money rather than a fresh demand for capital.
3. Sunk cost makes reversal politically hard: Once large sums are invested in a coal based asset, closing it early becomes a fight over stranded value rather than an engineering decision.
4. The abatement is cheap only now: Emissions avoided at the investment stage cost far less than emissions removed later through bioenergy with carbon capture and storage or carbon dioxide removal technologies.

What do the modelled transition pathways show?

1. What was modelled: Two global steel sector pathways consistent with 1.5 degrees Celsius of warming by the end of the century, allowing an overshoot of up to 1.7 degrees Celsius.
2. Who drives the outcome: China and India dominate the dynamics of the fast transition scenario, because their near term coal based investments far exceed those of every other region.
3. The cost of moving slowly: In the slow transition scenario young blast furnaces are relined and announced plants are built as planned, which forces heavier reliance on carbon dioxide removal technologies that remain immature, plus deeper cuts in other sectors.
4. The fuel sequence India would follow: The model has India running direct reduced iron and electric arc furnace plants mainly on natural gas until 2040 to 2045, switching to hydrogen once it becomes cost competitive.
5. The reframing: Steel is described less as a hard to abate sector than as a sector facing a hard to abate investment barrier, since the technology already exists and only the green premium stands in the way.

Is India’s certified green steel actually green?

1. The brackets are wide: The certification bands are broad enough that steel qualifying as green can still be more carbon intensive than ordinary steel made elsewhere, which weakens the label as a signal.
2. India defined the term first: No other country has set out a formal definition of green steel, so the taxonomy itself is an initiative rather than a copy.
3. The demand side was never built: Certification creates a supply of labelled steel without creating any buyer obliged to prefer it, so the premium has no market to be recovered in.
4. Uptake so far: ArcelorMittal Nippon Steel India became the first integrated steel producer to receive green steel certification in February this year, and 89 steel units held the certification as of 31 March, covering 12.34 million tonnes of production.

What is pushing steelmakers to move now?

1. The export penalty: The European Union’s Carbon Border Adjustment Mechanism came into effect in January, imposing steep penalties on carbon intensive imports including India’s high emission steel.
2. The commercial response: India has been seeking alternative markets and boosting domestic consumption, while compliance obligations push producers to reconsider which furnace technology to invest in.
3. Public money for hydrogen: The Union Ministry of New and Renewable Energy funded three pilot green hydrogen projects in March totalling more than Rs 400 crore, to validate the technical feasibility of using 100% green hydrogen in furnaces.
4. The first commercial link: JSW Energy commissioned India’s largest commercial scale green hydrogen plant at Vijayanagar in Karnataka last year to supply 100% green hydrogen to the adjoining JSW Steel direct reduced iron unit.

Challenges to steel decarbonisation in India

1. The bridge fuel carries its own lock in: Natural gas based direct reduction substitutes an imported fuel for a domestic one, exposing the sector to supply shortages, price shocks and gas infrastructure that is stranded once hydrogen arrives. Eg. India imports roughly half its natural gas, and delivered prices swung sharply through the European supply crisis.
2. The thermal power precedent: Once heavy capital sits in a coal asset, the owner resists closure in order to recover the investment, which is how India acquired thermal plants that are uneconomic yet politically impossible to retire. Eg. Several state generating stations continue running below viable plant load factors rather than shutting down.
3. Electricity based steel is only as clean as the grid: An electric arc furnace shifts emissions from the furnace to the power station, so in a coal heavy grid the accounting gain outruns the physical one. Eg. Coal still supplies the majority of India’s generation, so an induction furnace running at night draws largely thermal power.
4. Green hydrogen is not yet affordable at steel scale: Running a direct reduction plant on hydrogen today costs far more than running it on gas, and a steel plant needs hydrogen in volumes no pilot has demonstrated. Eg. Existing Indian projects supply a single adjoining unit rather than a cluster of plants.
5. Iron ore quality constrains the switch: Direct reduction needs high grade iron ore or pellets, and much of India’s ore is not of that grade, so the route requires beneficiation capacity that does not yet exist. Eg. Indian producers rely on lower grade ore fines that suit blast furnaces but not shaft furnaces.

Way Forward

1. Make gas based DRI hydrogen ready: Design gas based direct reduction plants as hydrogen ready at the outset, so the shaft furnace does not need replacing at the point of switching.
2. Plan for coal asset retirement: Attach a stated retirement date and a transition financing package to every new coal based approval, so the exit is priced when the asset is sanctioned.
3. Link steel decarbonisation with clean electricity: Tie decarbonisation scheme support to a round the clock renewable supply contract for the plant rather than to the furnace type alone.
4. Aggregate green hydrogen demand: Aggregate demand across neighbouring plants into a single hydrogen offtake contract, so an electrolyser project can be financed against assured volume.
5. Build beneficiation and pelletisation capacity: Include ore beneficiation and pelletisation capacity within the decarbonisation scheme’s eligible expenditure, not only the furnace itself.

Conclusion

The steel sector’s emissions are being decided by a maintenance schedule rather than by a climate policy. Every furnace relined in this cycle removes a plant from the reachable set for two decades, and every plant still on paper can be redirected at no extra cost. The unresolved tension is that India has defined green steel and funded the technology without creating a single buyer obliged to pay for it, so the supply side moves while the demand side does not. The measurable thing to watch is how much of the 43 million tonnes per annum falling due before 2030 is relined rather than replaced.

Back2Basics: Carbon Border Adjustment Mechanism

1. What it is: A levy charged by an importing jurisdiction on the greenhouse gases embedded in an imported good, set at the carbon price the importing jurisdiction’s own producers already pay.
2. Why it exists: It is intended to prevent carbon leakage, meaning the shifting of production to countries with weaker climate rules rather than an actual reduction in emissions.
3. What it covers: The European Union’s version applies to iron and steel, aluminium, cement, fertilisers, electricity and hydrogen, the goods with the highest embedded emissions per unit of trade value.
4. How it is contested: Developing country exporters argue the levy shifts the cost of the importing country’s climate policy onto producers who bear no comparable historical responsibility.