FM announces policy shift to tackle industrial emissions from heavy polluters

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In a first of its kind move, the Centre plans to introduce a policy for industries such as iron and steel, cement, chemicals, aluminum and oil and gas, which have a higher carbon footprint, to nudge them to lower emissions.

The government will focus on moving the “hard to abate” industries from “energy efficiency” targets to “emission targets”, Finance Minister Nirmala Sitharaman said in her budget speech on July 23.

India has committed to achieve “net zero” by 2070 and has pledged reducing carbon emissions but the role that private sector needs to play has not be clear.

"A roadmap for moving the ‘hard to abate’ industries from ‘energy efficiency’ targets to ‘emission targets’ will be formulated," Sitharaman said. Appropriate regulations for transition of these industries from the current “Perform, Achieve and Trade” mode to “Indian Carbon Market” mode would be put in place.

The transition would mean that sectors such as steel and cement would move from merely enhancing energy efficiency to achieving concrete emission reduction targets.

Consequently, major players such as Tata Steel, JSW Steel, UltraTech Cement, and Adani Cement may face increased pressure to align with these environmental goals.

As much as 67 per cent of emissions would need to be reduced through carbon management techniques such as carbon capture, usage and storage (CCUS) and carbon offsetting.

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The cost of pivoting to these options is much higher than other traditional alternatives, according to a report from Council of Energy, Environment and Water (CEEW).

Emission-intensive heavy industries are the hardest climb for the country’s industrial decarbonisation journey. The complex infrastructure they use, their huge demand for energy and their vulnerability to commodity cycles pose as a challenge for these companies in energy transition.