India's push to decarbonise its steel sector has hit a temporary roadblock. The finance ministry is holding back on green steel incentives, citing high costs of green hydrogen and potential inflationary effects. According to sources familiar with the matter, the government is unwilling to commit public funds until clean energy becomes more affordable, a stance that may delay India’s broader energy transition and net-zero ambitions for 2070.
India, the world’s second-largest steel producer, has been formulating a green steel policy that mandates cleaner production for public projects. However, the steel ministry’s appeal for decarbonisation subsidies has met resistance from the finance ministry, which warns that the current price premium for green steel could harm industrial competitiveness and consumer prices.
Green Hydrogen at the Heart of the Debate
The cost of green hydrogen, a cleaner alternative to coal for blast furnaces, remains a central concern. Most Indian steelmakers still rely on carbon-intensive coal processes, making a swift transition to green hydrogen financially challenging. While the steel ministry promotes green hydrogen as essential for sustainable growth, finance officials argue for a "balanced approach between growth and sustainability," according to one source.
The disagreement reflects a broader tension within India’s climate policy: striking a balance between environmental goals and economic pragmatism.
Steel Industry Awaits Policy Clarity
In December, India defined “green steel” as emitting under 2.2 tonnes of CO₂ per tonne of output. Current emissions average 2.55 tonnes, 38% above the global benchmark. As the steel ministry awaits financial backing, producers are left in a state of limbo. Without clear incentives, India's green steel ambitions could falter, risking delays in climate targets and slowing industrial decarbonisation.
Sustainabilityeconomicsnews