A first step for Steel Sector decarbonisation: CCTS

India's steel industry stands at a crossroads. As the world's second-largest steel producer with projected capacity almost doubling by 2030 and trebling by 2047, there is a buzz of potential and opportunity for the sector. Globally, the Indian steel market is amongst the only markets with rising domestic steel demand fuelled by its infrastructure build-out and growth story. As the steel sector battles global steel overcapacity from China and falling prices, Indian steelmakers have a potential cushion as their capacity expansion feeds the rising domestic demand. However, in this potential growth story for this sector lies the challenge of potentially millions of tons of lock-in of steel sector emissions.

- SANGEETH SELVARAJU

To address this challenge the finance minister in her budget speech in 2024 announced the carbon market will be launched specifically to tackle the challenge of emissions from the hard to abate sectors and to move from energy efficiency targets to emissions intensity targets a vital step in the right direction. The recently unveiled Carbon Credit Trading Scheme (CCTS), with its mandatory emissions intensity targets for 253 steel units, marks a significant shift from the efficiency-based metrics of the past to this end.

The CCTS represents progress. Moving from the Perform, Achieve and Trade (PAT) scheme's energy efficiency goals to greenhouse gas emissions intensity targets per unit of production is a crucial evolution. An analysis from the Grantham Research Institute reveals that the reduction targets, while comprehensive in coverage, lack the ambition necessary to drive technological transformation.

The CCTS has acknowledged the heterogenous nature of the Indian steel industry and given steel units targets based on their baseline emissions. Small and medium steel units often have higher emissions have been given targets to acknowledge the challenges they face in decarbonising.