Institute for Energy Economics and Financial Analysis Flags Gap Between Climate Targets and Action in India’s Steel Sector

A widening gap between Indian steel companies’ stated decarbonisation targets and their concrete actions to achieve them risks locking in emissions-intensive technologies for decades, slowing their progress to net zero and undermining the sector’s long-term competitiveness. 

A new report from the Institute for Energy Economics and Financial Analysis (IEEFA), ‘Decarbonisation readiness in India’s steel sector’, reveals that the Indian steel sector has embraced climate targets that align with the Paris Agreement. However, this ambition is not matched by corresponding progress in building the operational, technological and financial infrastructure required. Moreover, the sector faces a critical timeframe over the next decade, in which decisions by companies, investors and government will determine the prospects for steel decarbonisation in India. 

Dr. Saurabh Trivedi, Lead Specialist, Sustainable Finance and Carbon Markets - South Asia at IEEFA, said, “India’s steel industry stands at a crossroads. India is the world’s second-largest steel producer, but while demand has plateaued or is declining among other major steel-producing regions, in India the sector is on a steep growth curve. Therefore, the choices Indian companies make in the next few years will have profound implications for global steel sector emissions trajectories through mid-century.” 

The analysts evaluated the decarbonisation readiness of a sample of ten steel producers — seven Indian and three global peers — assessing the connection between their stated emission reduction targets and their actions in terms of strategic planning, operational capabilities and financial alignment. The Indian companies assessed include JSW Steel, Tata Steel, Steel Authority of India (SAIL), Jindal Steel, Rashtriya Ispat Nigam (RINL), Jindal Stainless and Godawari Power and Ispat (GPIL), while the global companies are ArcelorMittal, POSCO and Nippon Steel.

The findings indicate that climate ambition has outpaced implementation. Five of the seven Indian companies have adopted Paris-aligned net-zero targets for 2050, but they scored comparatively poorly across the five key parameters assessed. In addition, emissions intensity for most Indian steel companies has worsened over the last three years, at a time when global peers have achieved reductions. 

Soni Tiwari, Energy Finance Analyst - South Asia at IEEFA, said, “Companies have set targets, and technology planning is advancing among the leaders, but capital allocation has not moved. Meanwhile, emissions are heading in the wrong direction, and that problem is set to worsen as the sector grows unless technology substitution accelerates.”

A Blast Furnace (BF) typically operates for 20–25 years, with each relining extending its lifespan by another 15–20 years. In India, around 43 million tonnes per annum (MTPA) of existing BF capacity is due for relining before 2030, which would allow these furnaces to continue operating for an additional 15–20 years. Extending and expanding these technologies will lock in emissions for decades, undermining decarbonisation targets. This in turn will expose Indian companies to tightening international controls such as carbon border adjustments, green procurement mandates and investor pressure for credible transition plans.

Overcoming these issues will require coordinated government action. The roughly USD 24 billion (INR 2.25 lakh crore) investments globally in steel decarbonisation to date have been overwhelmingly enabled by public capital, underscoring a basic reality: The economics of green steel do not yet work without substantial public support. For India, targeted public capital deployment through instruments such as credit guarantee facilities, competitive contracts for difference and green public procurement mandates will be needed to shift the risk-reward calculus for producers and unlock private investment at scale.

Tanya Rana, Energy Analyst - South Asia at IEEFA, said, “The window for action is narrowing. The steel sector’s transition will ultimately be determined not by the targets companies announce, but by the investments they make and the assets they build. On that measure, the sector in India has considerable ground to cover.”