Indian steelmakers eye policy aid for green steelmaking

The Indian Steel Association (ISA) has called for "policy enablers" from the government to fuel production and adoption of green steel in the country.

These enablers include mandating government-funded construction projects to source a portion of their steel from low-carbon-emitting producers, introducing standards for green steel, having a carbon credit mechanism and taking up the European Union (EU) Carbon Border Adjustment Mechanism (CBAM) at various international platforms.

The industry body also called for research and development in the use of hydrogen to transition towards green steel, saying that "if hydrogen prices reduce from the present $5-10/kg to $1-2/kg, it can provide a huge push to low-carbon growth. Focus on development of a hydrogen ecosystem is essential".

The Indian steel sector is required to achieve a CO2 emission intensity reduction to 2.4t of CO2 per tonnes of crude steel (tcs) by 2030 so as to align with the already fixed nationally determined contributions (NDC), ISA said. The average CO2 emission intensity of the industry stood at around 2.6t/tcs during 2020.

The European Commission proposed a carbon border tax on imports of steel and other commodities last year to achieve its climate goal.

The CBAM is a mechanism intended to mitigate the competitive disadvantage suffered by European industries as a result of the EU's green policies of taxing the carbon content of imports into the region. Non-EU companies exporting to Europe need to pay the same price for their carbon footprint in Europe as European companies. Importers are required to purchase a certificate for the difference between the carbon content of the imported product and the same product produced in the EU as an adjustment amount. The mechanism is slated to be rolled out in a transition phase from 2023 and fully from 2026.

India's finished steel exports stood at 10.33mn t in April-December 2021, up 24.2pc on the year, on strong international prices.

"The government may appropriately take up the issue related to CBAM at various international platforms until the time the sector and country is ready with adopting a carbon pricing mechanism at an appropriate time," the ISA said.

Earlier this month, Mohammed Chahim, member of the European Parliament charged with drawing up a legal report on the CBAM, said that hydrogen, organic chemicals and polymers should fall under the EU's proposed CBAM.

Decarbonisation of the steel industry will hinge on availability of sufficient green hydrogen and renewable energy at competitive pricing, and will incur high initial capital costs for technological enhancements, AM/NS India's chief executive officer Dilip Oommen said. The industry needs government's assistance with research and development support, long-term finance availability at competitive rates, cross-sector collaboration and other policy incentives to achieve this, he added.

Hydrogen's role in steelmaking is widely seen as a metallurgical coke replacement, by developing the use of the gas to reduce iron oxides into purer iron. Hydrogen is often attributed a colour, depending on the mode of production.

India is making slow progress in producing and commercialising green hydrogen.

Some steps have been taken by domestic producers to manage their carbon footprint. Tata Steel operates a 5 t/d carbon capture facility at its 10mn t/yr Jamshedpur plant, while JSW Steel runs a 100 t/d carbon capture and utilisation project in Salav, Maharashtra.

"For exports to remain globally competitive and address the growing concerns around climate change, Indian steel producers will need to decarbonise," Tata Steel's CEO and managing director TV Narendran said.

The companies reducing their CO2 emission intensity below a set baseline/sectoral target should be incentivised in terms of either subsidisation of new technology or tax incentives, the ISA said, calling for a carbon credit mechanism.

China's emissions trading scheme (ETS) started operations in July last year, while the EU ETS was set up in 2005.

By Sumita Layek and Deepali Sharma