Green hydrogen to drive Indian steel decarbonisation only by 2050

IEEFA and JMK Research project that green hydrogen will become the primary route for steelmaking in India only around 2050, given the high cost of the fuel and the absence of a carbon penalty on emissions. India's steel sector emits around 240 million tonnes of CO2 annually, with an emission intensity of 2.55 tCO2 per tonne of crude steel — significantly above the global average of 1.85 tCO2 per tonne.

India's steel industry produced 122.3 million tonnes of finished steel in FY2023, up 7.6% year-on-year, and contributes roughly 12% of the country's total CO2 emissions. The sector accounts for approximately 2% of GDP and is central to national infrastructure ambitions. Annual emissions from steel are expected to double exponentially by 2030 in line with government infrastructure targets. IEEFA and JMK Research estimate the sector will replace 25-30% of grey hydrogen requirements with green hydrogen in the early part of the 2030-2050 period, rising to 80% by 2050, while coal-based blast furnace routes remain dominant in the near term.

The National Green Hydrogen Mission has allocated Rs 14.66 billion (US$177 million) to the Ministry of Steel for pilot projects promoting green hydrogen in steelmaking. Under the mission's SIGHT programme, SECI issued two tenders in July 2023: a 1.5 GW electrolyser manufacturing tender and a 450,000-tonne-per-annum green hydrogen production tender on technology-agnostic and biomass pathways. To make hydrogen economically viable, analysts estimate the price must fall to US$1-2 per kilogram, combined with a carbon penalty of at least US$50 per tonne of emissions on traditionally produced steel.

IEEFA and JMK Research recommend the government establish a legal definition of green steel — defined as steel produced without fossil fuels — to clarify which technology pathways qualify for policy support. Additional recommendations include mandating green steel procurement in public sector purchases, creating tradable Green Steel Certificates linked to the national carbon market, and introducing a green hydrogen purchase obligation for the steel sector. A taxonomy for green steel is under development by a government task force. The analysts also advocate viability gap funding to bridge the cost premium of low-carbon steelmaking technologies during the early deployment phase.

Key figure — US$177 million — Ministry of Steel pilot project allocation under India's National Green Hydrogen Mission