What is India’s green steel taxonomy?

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India’s ambitious low-carbon transition has turned the spotlight on 'green steel', a critical pillar of its de-carbonisation strategy. To bring clarity and credibility to this emerging space, the government recently unveiled  green steel draft taxonomy, a framework to define and standardise what qualifies as green steel. What does this entail for steelmakers, and how could it reshape one of India’s most energy-intensive sectors? MC explains.

What is green steel?

Green steel refers to the manufacturing of steel without using fossil fuels, employing renewable energy in production, to reduce carbon emission. It is manufactured using hydrogen, instead of coke.

What is the traditional method and how will green hydrogen help?  

In the steel industry, coke, derived from coal, is traditionally used as the primary reducing agent to extract iron from its ore during the steelmaking process. This method relies on carbon's chemical properties to remove oxygen from iron oxide, resulting in the emission of significant amounts of carbon dioxide (CO2). However, hydrogen (H2) can be used as an alternative reducing agent, effectively replacing carbon in the reduction reaction. H2-DRI (Direct Reduced Iron)  can reduce emissions by up to 97 percent, while renewable-powered Scrap-EAF achieves up to 88 percent emission reductions, according to a study by consulting firm Ernst & Young (E&Y).

How does the draft taxonomy policy define green steel and what specific benchmarks are steelmakers required to meet ?

Green steel is classified based on its "percentage greenness." This measures how much a steel plant's emissions fall below the defined threshold of 2.2 tonnes of CO2 equivalent per tonne of finished steel (tfs).

Steel with emissions exceeding this threshold does not qualify as green. The taxonomy uses a star rating system to benchmark emission levels. Steel with an emission intensity below 1.6 t-CO2e/tfs earns a five-star rating, indicating the highest level of sustainability. Four-star green steel falls within an emission range of 1.6 to 2.0 t-CO2e/tfs, while three-star green steel is assigned to emission intensities between 2.0 and 2.2 t-CO2e/tfs.

What are the potential financial and operational challenges for Indian steelmakers in transitioning to green steel production?

Investments in advanced technologies, such as hydrogen-based processes and renewable energy integration, demand substantial capital. Managing emissions across Scope 1 (direct operations), Scope 2 (purchased electricity), and limited Scope 3 (intermediate processes like coke and pellet production) requires extensive supply chain restructuring. With the demand for green steel yet to pick up in India, as opposed to developed nations, incentivising green steel manufacturing remains a key factor.

"There should be an adoption mandate requiring a specific percentage of green steel usage by domestic consumers. The government can facilitate this by providing tax incentives, capital subsidies, and grants for decarbonisation projects," E&Y said in its energy transition report in October.

The ministry of steel is preparing a 'Green Steel Mission' draft with an estimated cost of Rs 15,000 crore for helping the steel industry to reduce carbon emission.

Currently, India's steel industry is dominated by the blast furnace-basic oxygen furnace (BF-BOF) emissions, which rely heavily on virgin iron and coking coal. This method accounts for 43 percent of the country's steel output, making it the most carbon-intensive production pathway, according to a E&Y study.

What is the role of NISST?

The National Institute of Secondary Steel Technology (NISST) is the nodal agency overseeing the implementation of India’s green steel taxonomy. Its responsibilities include measurement, reporting, and verification (MRV) of emissions, issuing greenness certificates and star ratings, and maintaining a registry of certified plants. By providing accurate data and certifications, NISST will help steelmakers align with sustainability goals while bolstering India's climate commitments.