Indian steelmakers must match ambition with action on decarbonisation: IEEFA

According to a press statement, Indian companies are showing proactive intent despite the absence of effective carbon pricing or large-scale public financial support.

Mumbai: There is a widening gap between the headline climate commitments made by India’s major steel companies and their actual progress in building the operational, technological and financial infrastructure required to meet decarbonisation goals, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).

While global peers have achieved reductions, emissions intensity for most Indian steel companies has worsened over the past three years despite ambitious targets, exposing a credibility gap between stated commitments and actual performance, the IEEFA report titled ‘Decarbonisation Readiness in India’s Steel Sector’ said.

According to an IEEFA press statement, Indian companies are showing proactive intent despite the absence of effective carbon pricing or large-scale public financial support. However, international experience suggests that the economics of green steel will not work without coordinated government intervention, making initiatives such as the Green Steel Mission and targeted fiscal instruments crucial to translating corporate intent into action.

With a looming spike in blast furnace capacity due for relining before 2030, and over two-thirds of planned additions relying on conventional, emissions-intensive technology, each year of delayed action deepens carbon lock-in and narrows the window for cost-effective technological transition.

“India’s steel industry stands at a crossroads. India is the world’s second-largest steel producer, and while demand has plateaued or declined in other major regions, it continues to grow steeply in India. The choices Indian companies make in the next few years will have profound implications for global steel sector emissions through mid-century,” said Dr Saurabh Trivedi, Lead Specialist, Sustainable Finance and Carbon Markets – South Asia at IEEFA.

The analysts evaluated the decarbonisation readiness of 10 steel producers — seven Indian and three global peers — examining the link between emission reduction targets and actual actions in terms of strategy, operations and financial alignment.

“Companies have set targets and technology planning is advancing among leaders, but capital allocation has not kept pace. Meanwhile, emissions are moving in the wrong direction, and this trend could worsen as the sector grows unless technology substitution accelerates,” said Soni Tiwari, Energy Finance Analyst – South Asia at IEEFA.

The roughly $24 billion (₹2.25 lakh crore) invested globally in steel decarbonisation so far has been largely enabled by public capital, highlighting a key challenge: the economics of green steel remain unviable without significant government support. “For India, targeted public funding through mechanisms such as credit guarantee facilities, contracts for difference and green public procurement mandates will be essential to shift the risk-reward balance and unlock private investment at scale,” she said.

“The window for action is narrowing. The sector’s transition will ultimately be determined not by the targets companies announce, but by the investments they make and the assets they build. On that measure, India’s steel sector still has considerable ground to cover,” said Tanya Rana, Energy Analyst – South Asia at IEEFA.