India’s steel ministry has directed major steel exporters to prioritise reducing their carbon emissions as the European Union prepares to implement a tax on companies that fail to meet its environmental standards, according to government officials familiar with the matter.
The EU’s proposed carbon border adjustment mechanism (CBAM) aims to levy a tax on imports of carbon-intensive goods, including steel, aluminium, cement, hydrogen, electricity, and fertilisers, starting January 1.
While India explores tariff and non-tariff countermeasures to the CBAM, the government wants domestic steelmakers to develop carbon capture technologies and explore replacing coal with green hydrogen to power their furnaces.
In recent meetings with steel giants like Tata Steel Ltd, Jindal Steel and Power Ltd, and JSW Steel, the ministry has urged them to initiate pilot projects aimed at curbing emissions from existing facilities, said the officials, who requested anonymity.
India’s steel industry is undergoing an unprecedented expansion, poised to witness a record capacity addition of 15.6 million tonnes per annum (mtpa) in the current financial year 2024-25.
However, the industry’s carbon emission intensity remains significantly higher than global benchmarks.
Indian steel producers’ average emission intensity from blast furnaces stands at 2.6 million tonnes of carbon emission per million tonnes of crude steel production, 12 per cent above the global average, according to rating agency ICRA.
The ministry aims to ensure that all new steel capacities comply with emerging emission standards.
From 2026, Indian steel exports to the EU will face an additional tariff of 20-35 per cent under CBAM if non-compliant.