Germany’s proposed Low Emission Steel Standard (LESS) could present new challenges for the Indian steel industry, Global Trade Research Initiative (GTRI) said Friday. LESS, which is a voluntary labelling programme that classifies steel based on the carbon dioxide emissions released during pre-production and production stages of steel, could add to Indian steel industry’s woes which is already struggling with lower exports, higher imports, and the EU’s Carbon Border Adjustment Mechanism.
“The Indian steel industry is not legally bound to follow the LESS but ignoring it could hurt exports,” said GTRI co-founder Ajay Srivastava.
LESS categorizes steel products into five classes based on their carbon footprint and scrap content, ranging from ultra-low emission Class A to high emission Class E.
Category A has the least carbon dioxide emissions, while Category E has the most, with B, C, and D in between.
CBAM makes foreign firms pay carbon costs at the EU’s border and allows trade in high-emission steel whereas LESS is a voluntary labeling programme imports of high-emission steel maybe restricted or banned.
“This could pose challenges for Indian steel producers, as much of their steel is likely to be categorized in the lower three grades (C, D, and E),” Srivastava said, adding that
this categorization might lead buyers to easily identify and avoid purchasing from these companies, potentially causing more harm than the CBAM tax on high-carbon steel.
Unlike CBAM, which is complicated and doesn’t clearly label firms, LESS creates a perception problem for Indian firms. A list showing companies and their steel categories may soon be available, potentially affecting their ability to secure orders from developed countries, he cautioned.
India’s iron, steel and related exports fell 31.2% to $21.8 billion in FY24 from $31.7 billion in FY22 while imports rose 37% to $23.7 billion from $17.3 billion, making the country a net importer.
GTRI suggested Indian steel firms to invest in low-carbon technologies that reduce carbon emissions, such as electric arc furnaces, hydrogen-based steelmaking, and carbon capture and storage, collaborate with suppliers and stakeholders to reduce emissions throughout the supply chain and enhance overall sustainability. Conducting comprehensive carbon footprint assessments to identify reduction opportunities is another important step. Finally, obtaining LESS certification will help gain market access and demonstrate a commitment to sustainability.
The government, as per the report, should develop policies to encourage low-carbon steel production, such as tax incentives, PLI incentives, and research funding.