Carbon emissions from steel

The Indian steel industry, one of the world’s largest and also one of the biggest drivers of India’s growth, is faced with an achillean paradox. Being one of the fastest growing sectors in the country, it is also one of the most carbon intensive sectors. Amidst the global push to cut down emissions, it faces a unique challenge and opportunity to significantly cut the emissions in coming years. India is the largest carbon emitter after the United States and China and has pledged to go carbon neutral by 2070, and to increase the share of renewable energy to 50% by 2030.In 2015, the steel industry accounted for 6% of the global greenhouse emissions, if it were a country it would have been the 5th largest polluter in the world after the USA, China, the European Union and India. Even with such a large footprint, it's largely been exempted because of its importance in driving India's growth and economy.

In a steel plant, emission happens across the entire process from the sinter plant to blast furnace and finishing mills. India has one of the largest reserves of iron ore of about 30 billion tons and as the country grows towards a 5 trillion dollar GDP economy. It will try to capitalize on that reserve by using coking coal to reduce the iron ore into iron and thereafter steel. Unlike other industries, non-polluting reducing agents are not economically viable in the coal industry as a number of furnaces and equipment need to be replaced to use hydrogen as a reducing agent  and that needs large capital investment. Also the cost of producing hydrogen in a sustainable way is very high to be adopted by the whole industry.

According to the World Steel Association, every ton of steel produced releases an average 1.85 tons of carbon dioxide into the atmosphere, which is almost twice the mass of steel. Steel based pollution is inevitable because nearly everything that counts as development involves steel. Building bridges, railways, skyscrapers, automobiles and what not. In the year 2021, India had 977 functional steel plants producing 118 million tons of steel as of last year’s records, making it the second largest producer in the world after China, which produced 1032 metric tons. It also produced 242 million tons of carbon dioxide in the same year, which translates to about 12% of the carbon emissions in India, also the emissions are expected to jump to more than 800 million tons per year in the coming three decades according to The Energy and Resources Institute’s (TERI) report. The Indian steel industry’s 50% of a typically integrated facility’s energy input comes from coal, 35% from electricity, 5% from natural gas and 5% from other gases.

India has also pledged to become carbon neutral by 2070, and by 2030, it is aiming at the reduction in India’s emissions per unit of Gross Domestic Product (GDP) by 45% from 2005 levels.

So every move towards decarbonization by the Indian steel making companies and the policy makers will be scrutinised because it’ll be a hard balance to maintain for the next three decades.The steel sector in India is huge, in the context of resource consumption and in its ability to pollute the environment. How it manages its carbon footprint matters not just to India but to the world and how the world does business with India. The Greenhouse Gas (GHG) and Environmental, Social and Governance (ESG) metrics of the Indian steel industry will be closely monitored by potential investors which include other countries and financial institutions. As the businesses that are less carbon intensive, are proactively cutting their emission and mitigating any damage done to the environment, are being seen as more resilient to systemic market risks, and are seen as better long term business partners and with a lower cost of debt.

“If India is serious about mitigating carbon dioxide emissions to prevent the worst effects of climate change, then serious action needs to be taken in the iron and steel sector,” said Will Hall, associate fellow at TERI.

The Indian government plans to invest about 1.5 trillion U.S. dollars in the next five years towards making the steel industry more sustainable and to raise the production of steel to 300 million tons in order to meet the domestic demand. Government has also made it mandatory for government projects to procure steel from low carbon emitting companies.Something positive worth noting here is that there has been a 60% decline in overall energy consumption in steel manufacturing over the last 50 years due to technological advancements. By 2050 India will be one of the few countries that will still have a demand for iron and steel along with some other African countries. Rest of the world’s  steel demand would have already peaked  and in order to keep growing and still be consistent with the climate goals of limiting warming to less than 2  degree celsius rise in temperature, India needs to invest heavily into decarbonization of its steel sector.