Steel Industry Decarbonisation: From Blast Furnaces to Green Steel in India

India is the world's second largest steel producer, and the sector is responsible for approximately 12% of India's total CO2 emissions. With binding CCTS emission intensity targets now in force for iron and steel, and CBAM applying to Indian steel exports to the EU from 2026, the decarbonisation imperative for Indian steel companies has moved from strategic aspiration to regulatory and commercial necessity.

Why Steel Is One of the Hardest Sectors to Decarbonise

Steel is difficult to decarbonise because the dominant production route — the Blast Furnace-Basic Oxygen Furnace (BF-BOF) process — uses coking coal not just as a fuel but as a chemical reducing agent that is integral to the iron-making chemistry. You cannot simply switch the fuel without fundamentally changing the process. The alternative route — Electric Arc Furnace (EAF) with Direct Reduced Iron (DRI) — can use natural gas or, in future, green hydrogen as the reductant, and runs on electricity rather than coal. India already has a significant EAF and DRI capacity, which gives it a structural advantage over blast furnace-heavy producers like Japan and Korea in the decarbonisation transition.

The CCTS Position for Indian Steel Companies

Under India's CCTS, steel companies with facilities above a certain production threshold are assigned emission intensity targets. Companies whose actual emission intensity is below the target earn Carbon Credit Certificates that can be sold. Those above the target must purchase credits. The distribution of CCTS positions across India's steel industry is highly uneven — EAF producers using renewable electricity are likely to be significant credit generators, while older BF-BOF plants with limited efficiency measures may need to purchase. This creates a within-sector carbon market that will incentivise the faster transition of lagging facilities.

Carbon Credits as a Bridge for Steel Decarbonisation

For steel companies that cannot immediately reduce their emission intensity to below CCTS targets — because the capital investment required for DRI-EAF conversion is substantial and takes years to plan and execute — carbon credits provide a compliance bridge. Purchasing high-quality credits from CCTS-compliant projects allows companies to meet their compliance obligations while their longer-term capital investment programme is underway. Csquare advises Indian steel companies on CCTS position assessment, credit procurement strategy, and CBAM exposure calculation.