The steel industry accounts for 2% of the country’s GDP, and about 7% of greenhouse gas emissions. Steel production currently contributes approximately 242 Mt of carbon dioxide (CO2) emissions annually and is expected to double by 2030 (and triple by 2050), with production increasing to meet domestic and global demand.

While India’s National Steel Policy projects double steel production by 2030, production processes are still coal-intensive with most of the steel still made using coal to reduce iron ore. This process emits about two tons of CO2 for every ton of steel produced. Evaluated exposure to climate-related risks and opportunities over a timeframe that allows assessment of internal strategies for the transition to a net zero carbon economy. Steel companies disclosing to CDP India (2022 data) have reported climate-related issues such as water scarcity, changing rainfall patterns, increased emissions reporting obligations and increased raw material costs which can all cost approx. IDR 194.4 billion. However, the cost of action for private players to decarbonise is 21% (Rs 161.3 billion) lower than the cost of inaction. This provides a sufficient rationale for urgent action to capitalize on the transition to clean production and energy in operations.

Moreover, the total identified opportunities are estimated at Rs 1334 billion and the estimated cost to realize these opportunities is Rs 186 billion. This means that the financial impact on the sector due to the climate transition is estimated at seven times the cost of realizing the opportunity; indicates that there is a good chance of realizing high returns. A robust climate-related risk assessment process will help companies identify the likely and magnitude of current and future climate-related impacts not only on the environment but also on business performance.

However, steel also goes beyond steel into products, the demand side for the steel sector being driven by other sectors such as the automotive and real estate sectors. Again, according to CDP’s 2022 disclosure data, automobiles and real estate have combined reporting of Rs 570 billion and Rs 230 billion of climate-related risks and opportunities, respectively. Therefore, demand creation from these sectors amplifies the financial impact of the steel sector substantially. Therefore, the steel industry is increasingly conscious of looking back at internal processes for cleaner sources and more environmentally friendly processes. In addition, the Indian government’s steel policy is moving towards decarbonizing the steel industry.

The recent launch of India’s ‘Green Steel Mission’ is an example of an initiative to promote green action articulated by various policy actions and exchanges to decarbonize the sector. This together with the announcement at last year’s COP26 of the Net Zero target, and the ambition to generate 50% of its energy from renewable sources by 2030, is expected to reduce its total projected carbon emissions by one billion tons. Other initiatives such as India joining with the UK to lead the In-Industry Decarbonization Initiative under the banner of the Minister for Clean Energy are expected to stimulate global demand for low-carbon industrial materials, including steel.

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As the government makes a commitment to shift to greener steel, Indian Steel companies are looking for innovative ways to support this commitment. Tata Steel, for example, has become the first Indian company to have a steel production site certified by Responsible Steel. Responsible Steel is an independently verified global standards certification program for low emission steel certification. JSW Steel has committed to reducing emissions by nearly 40% by 2030. Steel buyers are also racing for greener steel by driving cleaner production, with Ford becoming the Netherlands’ Tata Steel’s first customer.

But there is a long way to go to India. Based on disclosure-driven risk and opportunity assessments, it is expected that companies will develop a mix of innovative technology and business solutions to drive the country’s climate goals. However, this will require adequate financing, a lack of access to which could delay the decarbonization process.

Reports state that India will need investment of over $10 trillion to reach its net-zero emissions target by 2070 (Centre for Energy Finance, 2022), and globally, decarbonising the steel industry will cost over $1.4 trillion. Emerging sustainable finance markets have an important role to play in financing the transition. However, both industry and government still need bolder commitments to ‘decarbonize steel’. This could start by adopting common definitions for low- and near-zero emission steel, developing a national investment plan to decarbonize steel, introducing fiscal and non-fiscal policies to optimize the financial risks of ‘early movers’ and integrating green procurement and trade to ensure credibility. and transparency.

Government policies are needed to provide clear directions for firm steps towards more environmentally friendly steel production. Despite efforts to design a national ‘green steel mission/framework’, and position India as a ‘high quality steel production hub’, India does not yet have an ‘implementation and investment plan’ even in the much talked about context. hydrogen project.

What is important is that companies from across the steel supply chain cooperate with ministries, whether directly or indirectly involved in steel production and consumption, to address issues that are not limited to just technology but also consider energy efficiency, green procurement and finance, resource efficiency power, scrappage and recycling. Decarbonization should be a good business mantra for Indian steel besides reducing emissions.

The author led the implementation of India’s CDP strategy.

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