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Green Steel Mission
Context:
Indian Government is set to introduce a procurement policy to boost demand for green steel and promote sustainable manufacturing. This initiative is part of a broader push for decarbonization amid global pressures, including the EU’s 25% carbon tax on steel and aluminium imports.
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- The Ministry of Steel has established 14 task forces, consisting of industry, academia, and government members, to guide this effort. Their findings are detailed in the report titled Greening the Steel Sector in India: Roadmap and Action Plan.
- As an implementation strategy, the steel ministry will launch a green steel mission soon, on the lines of green hydrogen mission, which will have components of policy, incentives and the way forward.
- The first task of the steel ministry moving forward post the presentation of the report based on extensively researched reports given by 14 task forces would be to come out with a definition of green steel.
Green Steel:
- Globally, there is no agreed-upon definition of green steel, though many countries are working on it. Additionally, varying net-zero timelines across countries complicate the development of a global definition.
- Challenges in India include the high cost of producing ‘fossil-free’ or ‘near-zero emissions’ steel and resource disparities like access to natural gas and scrap.
- The task force constituted by the Ministry of Steel is already working on developing a green steel definition for India, considering these design considerations.
Suggestion of the 14 task force for decarbonisation of Steel industry:
- Demand and Supply Side Initiatives & Green Public Procurement (GPP) Policy:Both demand and supply measures are vital for promoting green steel production and consumption. The Ministry aims to create demand by developing a GPP policy for the sector.
- Agency for Green Steel Procurement & Ecosystem for Green Steel Production:A specialised agency, akin to Energy Efficiency Services Ltd, should be set up for bulk procurement of green steel. The development of an MRV (Measurement, Reporting, and Verification) system, a registry for green steel production, and certification tracking are also critical to support green steel initiatives.
- Collaboration with Bureau of Energy Efficiency (BEE):The Ministry should collaborate with BEE to establish a protocol for measuring emissions from steel plants to ensure accurate emissions accounting.
- Government Support for Green Hydrogen Pilot Projects & Extension of Benefits
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- Support should be extended for pilot projects focused on hydrogen uptake in blast furnaces, hydrogen blending in shaft furnaces, and 100% hydrogen-based DRI plants.
- The Ministry should also work with other sectors to extend benefits from existing green hydrogen projects in refineries and fertilisers to the steel industry.
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- Addressing Carbon Tax on Fertilisers: Given that fertilisers are targeted by the EU’s carbon tax, the steel sector should align its green initiatives with decarbonization efforts in this area.
Effects of Overcapacity in Steel
India’s Steel Sector and Expansion Plans
- India, the world’s second-largest steel producer, plans to increase production from 120 million tonnes to 300 million tonnes by 2030, requiring substantial exports. Private players like Tata Steel are optimistic, aiming to double output by 2030.
Challenges Due to China’s Overcapacity
- China’s excess steel supply is flooding global markets, pushing Indian steel producers to seek tariff protection. While input costs like thermal and coking coal remain high, steel prices have dropped, leading to reduced margins.
Demand for Protection
- Indian steel companies are requesting government support through tariffs to protect expansion plans and margins amid global market turbulence caused by China’s overcapacity. The government must balance these demands with the risk of encouraging rent-seeking behaviour.
